Ensign Group (ENSG) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Chief Executive Officer-Barry R. Port
• Chief Investment Officer and Executive Vice President-Chad A. Keetch
• Chief Operating Officer-Spencer W. Burton
• Executive Vice President and Chief Financial Officer-Suzanne D. Snapper

TAKEAWAYS

• Adjusted Diluted EPS -- $2.03, representing a 23.8% increase versus the prior-year quarter.
• Total Revenue -- $1.48 billion, an increase of 14.5% year over year driven by occupancy growth and acquisition contributions.
• 2026 EPS Guidance -- $7.94 to $8.02 per diluted share, raised from the previous range of $7.75 to $7.85 due to third-quarter performance and operational momentum.
• 2026 Revenue Guidance -- $5.89 billion to $5.92 billion, with management raising the lower end from $5.85 billion.
• Same-store Occupancy -- 84.1%, a 1.3 percentage point increase year over year reflecting continued recovery and patient choice.
• Transitioning Occupancy -- 86.1%, representing an increase of 3.2 percentage points from the prior year quarter.
• Standard Bearer Revenue -- $47.7 million, a 46.3% increase following the addition of eight real estate assets during and since the quarter.
• Same-store Skilled Mix Revenue -- increased 10.7% over the prior year quarter, supported by growth across all skilled payer categories.
• Medicare Revenue -- rose 11.1% in same-store facilities and 7.8% in transitioning facilities due to increased patient complexity and volume.
• Managed Care Revenue -- grew 9.1% for same-store operations, reflecting improved relationships with healthcare plans.
• Net Income -- $104.3 million, an increase of 24.4% compared to the third quarter of 2025.
• Cash and Equivalents -- $337.6 million, following $675 million in strategic growth investments during the first nine months of the year.
• Credit Facility Capacity -- $731.6 million, providing approximately $1 billion in total liquidity when combined with cash on hand.
• Lease-Adjusted Net Debt to EBITDAR -- 2.0x, demonstrating maintained low leverage even during periods of significant acquisition activity.
• Standard Bearer FFO -- $27.3 million, an increase of 41.3% over the prior-year quarter.
• RN Retention Rate -- 11% better than the average across the company's 18-state footprint, contributing to clinical stability.
• Acquisition Activity -- 22 new operations added during and since the quarter, including the company's initial entry into the Florida market.
• Administrator Turnover -- 45% lower than the state average in operating markets, supporting operational continuity.
• Same-store Quality Measure Ratings -- 21% above the state average, with over 80% of operations earning a four- or five-star rating from CMS.
• Real Estate Ownership -- 189 owned assets, including 165 facilities owned completely debt-free, providing significant balance sheet flexibility.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Port stated, "The litigation environment is really busy, and that makes it sort of a deterrent for operators to come into the state," in reference to specific risks associated with the company's recent expansion into Florida.
• Keetch noted that turnaround operations, such as those recently acquired in Florida and Washington, often present substantial clinical and operational challenges and can take more than a year to become significant financial contributors.

SUMMARY

The Ensign Group, Inc. (NASDAQ:ENSG) reported significant growth in the third quarter, led by record revenue and earnings that prompted management to raise full-year 2026 guidance. Management reported that the company's clinical operating model, specifically the integration of therapy and nursing disciplines, continues to drive occupancy and skilled mix gains that outperform industry averages. The company completed a strategic entry into the Florida market, adding nine operations in the state as part of a larger 22-facility acquisition cycle since the previous quarter. The company stated that its capital structure remains flexible, with approximately $1 billion in available liquidity to fund a pipeline that includes larger portfolios, nonprofit divestitures, and traditional single-facility acquisitions. Management indicated that clinical outcomes remains the primary driver of referral behavior and managed care trust, supporting occupancy growth even in a dynamic regulatory environment.

• The company's expansion into Florida was led by a seasoned administrator who moved to the state earlier in the year to evaluate market dynamics and recruit talent.
• Management is trialing artificial intelligence tools for clinical documentation support and real-time decision support in collaboration with its electronic medical record provider.
• Keetch stated, "Over the last year, we have had an average of approximately 52 AITs at various stages of the program actively training and obtaining the hours necessary to obtain their license."
• The company's captive real estate investment trust, Standard Bearer, now owns 183 properties, of which 38 are leased to third-party operators.
• Management noted that recent acquisitions in Texas are performing ahead of pro forma expectations, though they remain in the turnaround phase.
• The company reported functional improvement rates for short-stay residents that are 30% better than industry peers in its operating states.

INDUSTRY GLOSSARY

• CAPLICO: An acronym representing Ensign's core values: Compassion, Accountability, Passion, Leadership, Intelligent Risk Taking, Customer Second, and Ownership.
• Standard Bearer: The company's captive real estate investment trust (REIT) that invests in healthcare properties.
• Same-store Facilities: Healthcare operations that have been operated by the company for the full period in both the current and prior year (currently defined as those acquired prior to Jan. 1, 2023).
• Transitioning Facilities: Operations acquired between Jan. 1, 2023, and Dec. 31, 2024.
• AIT: Administrator in Training program, the company's internal leadership development pipeline for future facility CEOs.
• EBITDAR: A non-GAAP financial measure representing earnings before interest, taxes, depreciation, amortization, and rent.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us and welcome to the Ensign Group Q3 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now pass the call over to Mr. Keetch. Please go ahead.

Chad A. Keetch: Thank you, operator, and welcome, everyone. We filed our earnings press release yesterday, and it is available on the Investor Relations section of our website at ensigngroup.net. A replay of this call will also be available on our website until 5 p.m. Pacific on 11/27/2026. We want to remind anyone that might be listening to a replay of this call that all statements made are as of today, 10/28/2026, these statements have not been nor will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate.

These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, The Ensign Group, Inc. is a holding company with no direct operating assets, employees, or revenues.

Certain of our independent subsidiaries collectively referred to as the Service Center provide accounting, payroll, human resources, information technology, legal, risk management, and other services to other independent subsidiaries through contractual relationships. In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims made coverage to our operating companies for general and professional liability as well as for workers' compensation insurance liabilities. Ensign also owns Standard Bear Healthcare REIT Inc. Which is a captive real estate investment trust that invests in healthcare properties and enters into lease agreements with certain independent subsidiaries of Ensign, as well as third party tenants that are unaffiliated with the Ensign Group.

The words Ensign, Company, we, our, and us refer to the Ensign Group Inc. And its consolidated subsidiaries. All of our independent subsidiaries, the Service Center, Standard Bear Healthcare REIT, and the insurance captive are operated by separate independent companies that have their own management employees, and assets. References herein to the consolidated company and its assets and activities as well as the use of the words we, us and our and similar terms are not meant to imply nor should it be construed as meaning that the Ensign Group has direct operating assets, employees or revenue or that any of its subsidiaries are operated by the Ensign Group. Also, we supplement our GAAP reporting with non GAAP metrics.

When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business. They should not be relied upon at the exclusion of GAAP reports. A GAAP to non GAAP reconciliation is available in Tuesday's press release And is available in our Form 10 Q. And with that, I will turn the call over to Barry R. Port, our CEO. Barry?

Barry R. Port: Thanks, Chad. We are thrilled to report another outstanding quarter. Our teams continue to demonstrate their unwavering commitment to dignified post acute care in the eyes of the world through moments of truth. Our mission is not just a catchphrase. it is the guiding motivation behind nearly every decision made across our organization. As we have said before, we believe we achieve our mission by consistently delivering exceptional outcomes and experiences that redefine what residents, families, and healthcare partners expect from skilled nursing. Additionally, our core values, our teams refer to using the acronym CAPLICO, creates a shared culture that empowers nearly 60 thousand partners to lead with compassion, accountability, ownership, a relentless commitment to excellence.

While CAPLICO May have begun as a simple set of shared beliefs, over time, it has become part of our operating DNA that determines hiring decisions, leadership development, employee retention, clinical execution, and ultimately the experience of our residents and their families. Together, our mission and values inspire local teams to strengthen each other and elevate care. We believe culture is not separate from performance. It is the foundation that makes sustainable clinical, operational, and financial performance possible. At the center of our clinical strategy is an integrated care model that we call 1 CLINICAL that empowers every healthcare discipline including nursing and therapy, to participate fully in making our residents' lives better.

While most of the industry outsources therapy or treats therapy as a separate department to fulfill a singular purpose, our therapists work alongside nursing as equal partners. Bringing their expertise into every aspect of resident care. Together with our physician partners, and our interdisciplinary team members, there is a continuous evaluation of emerging clinical evidence. Sharing of best practices, and development of advanced clinical protocols that improve outcomes across our operations. Rather than treating diagnoses in isolation, they coordinate every discipline around a common set of goals, restoring function, improving quality of life, reducing avoidable complications, and helping residents achieve the best possible. It is the clinical operating model that guides how our affiliated operations deliver care every day.

We believe it is 1 of the most important differentiators of our organization that has been developed over decades. We believe this clinical patient centric model is a compounding competitive advantage that is uniquely perpetuated and refined through pure accountability in our cluster model. And the proof of all this expertise and efficiency is evidenced in the outcomes. According to the most recently published Centers for Medicare and Medicaid Services data, for our same store facilities, we achieved quality measure ratings that were 21% above the average of the states we operate in.

Likewise, these operations achieved CMS Cycle 1 Survey and Spectrum results that outperformed the average of facilities in our operating states by 15% and exceeded county-level averages by 28%. In addition, short stay residents achieved functional improvement rates 30% better than industry peers in our operating states and long stay residents had antipsychotic medication rates 28% better than industry peers in our operating states. Reflecting our focus on appropriate medication management and resident centered care. We ended the quarter with over 80% of our skilled nursing operations earning a CMS quality measure rating of 4 or 5 stars. Exceeding national averages in every single 1 of the 15 quality measurement categories including all 5 claims based measurements.

This is also especially notable given that many of our acquisitions were 1- and 2-star buildings when we took them over. In addition, 12% of all our eligible operations comprised of 40 buildings in 8 different states earned the CMS high performing designation under its new risk Based Survey Program, placing them among a select group of facilities recognized by CMS for consistently strong performance. Importantly, all these measures are supported by a variety of objective sources, including CMS measures, claims based metrics, regulatory surveys, occupancy trends and referral behavior.

Whether viewed through quality ratings, survey performance, occupancy growth, referral trends, rehospitalization rates, emergency department utilization, or managed care relationships, we believe the consistency of these outcomes provides compelling evidence that our operating model is delivering meaningful results for our residents and healthcare partners alike, and the reason why we continue to enjoy census growth that is outpacing the industry. These results are the cumulative impact of our operating model, our 1 CLINICAL approach, the integration of therapy and nursing, investments in technology, and clinical tools, and the culture that drives accountability and execution at the bedside every day. The strength of our clinical model ultimately depends on the quality and stability of our people.

We are especially proud of the continued improvement in employee and leadership stability. In particular, our director of nursing turnover continues to improve, and according to CMS reported data, our overall RN retention rate is 11% better than the average across our 18 state footprint. Similarly, administrator turnover is an impressive 45% lower than the CMS measured state average. This level of leadership stability creates continuity for our caregivers and residents reinforces accountability at the local level, and allows the investments we make in our clinical programs, technology and resources to translate into consistently superior quality outcomes, care efficiency, regulatory performance, and financial results. All of these clinical achievements directly impact our operating metrics.

Like occupancy and skilled mix, and the corresponding financial results are a direct reflection of a relentless patient focused culture. As each operation solidifies its reputation in its respective market, they are not only being chosen to care for more and more patients, but they are also being entrusted to care for increasingly complex cases, including a larger share of Medicare, managed care, and other skilled patients. To highlight this point, on the census front, our same-store and transitioning occupancy for the third quarter are 84.1%, 86.1%, respectively.

Also, same-store facilities and transitioning facilities' skilled mix revenue for the quarter increased by 10.7%, 10.5% respectively over the prior year quarter and skilled days for the quarter increased by 7.2%, 7.9% respectively over the prior year quarter. Importantly, we experienced year over year growth across all skilled payer categories during the quarter. Medicare was particularly strong with same store days increasing 7.6% and transitioning days increased 6.3%. Driving Medicare revenue growth of 11.1%, 7.8% respectively. Likewise, managed care revenue increased by 9.1%, 7.2% respectively, for same store and transitioning operations over the prior year quarter.

These operating statistics clearly demonstrate that patients, families, hospital systems, physicians, and managed care organizations continue to choose Ensign affiliated operations because of the outcomes our teams achieve and the distinctive culture and experience our local teams create every day. This cannot, and will not happen especially consistently and over a long period of time without consistently achieving these industry leading high quality clinical outcomes. In healthcare, trust is ultimately expressed through patient choice and referral behavior. Hospitals, physicians, managed care organizations, patients and families make decisions every day about where care will be delivered.

Occupancy growth, therefore, is more than a financial metric. it is 1 of the clearest validations that an operation consistently delivers the outcomes and experience that stakeholders value. We also continue to benefit from powerful demographic tailwinds. which we expect will further support the census momentum we are seeing across our portfolio. While we are pleased with our current same store occupancy, we are equally excited about the remaining organic growth story as we clinically and culturally transform these operations. At 84% occupancy, we still have meaningful runway. With many of our most mature operations consistently achieving occupancy in the mid 90% range. Organic growth remains 1 of the most compelling drivers of our long term performance.

In addition, we continue to acquire new operations with significant long term upside. And expect to maintain a healthy pace of growth as we expand our mission driven approach to transform and dignify post acute care. Since 2024, we have successfully sourced, underwritten, closed and transitioned 122 new operations across several markets many of which are already performing at or above expectations both clinically and financially. Due to our strong quarter and our confidence in what is ahead, we are increasing our annual 2026 earnings guidance to $7.94 to $8.02 per diluted share up from our previous guidance of $7.75 to $7.85 that we increased last quarter.

We are also raising the lower end of our annual revenue guidance to $5.89 billion while maintaining the upper end at $5.92 billion. The midpoint of our earnings guidance represents an impressive 21.5% increase over 2025 and 45.1% growth over 2024. Obviously, this pace of growth and execution makes us highly confident not only in our 2026 performance, but into 2027. We fully expect our local teams to continue executing, innovating and integrating new operations while delivering strong results. While we are proud of these results, we also recognize there is always more to learn and much to improve.

We remain focused on helping our local leaders find better ways to care for residents support caregivers, and strengthen the operations they serve. Next, I will turn it over to Chad to discuss more about our ongoing growth and acquisitions.

Chad A. Keetch: Thank you, Barry. We continue to acquire new operations with significant long term upside and expect to maintain a healthy pace of growth as we expand our mission driven approach to transform and dignify post acute care. During the quarter and since, we added 22 new operations. Including 3 real estate assets and 19 leased operations. These recent additions include 9 in Florida, 7 in Colorado, 4 in Washington, and 2 in Texas. In total, we added 2.37 thousand new skilled nursing beds, and 113 independent living beds across 4 states. This growth brings the number of operations in our recently acquired group of operations to 22% of our entire portfolio.

Since 2024, we have successfully sourced underwritten, closed, and transitioned 122 new operations across several markets, many of which are already performing at or above expectations, both clinically and financially. We are thrilled to enter Florida, and are very excited about the opportunity we have to bring our clinically focused operating model to the local communities there. Throughout our history, we have been thoughtful and deliberate when entering new states. Seeking opportunities where exceptional local leadership strong community ties, long term growth potential align with our operating philosophy.

In this case, 1 of our most seasoned leaders presented a plan to plant the Ensign flag in Florida, ensured that he was leaving his previous role in an outstanding hands, and moved to Florida to learn the dynamics in the state recruit talent, and evaluate and select our first deal. After passing on several opportunities, and finally landing on these recent additions, we are excited to make this investment into 1 of the largest and most dynamic healthcare markets in the country. And we believe these operations provide an outstanding first step into the state. These operations are almost all lower than average occupancies for these geographies, and all present substantial clinical and operational challenges.

But these campuses also possess tremendous long term upside. We have been grateful for the warm welcome from the dedicated team of caregivers already serving the community. We are anxious to work together to improve the clinical quality of these turnaround operations and to live by the proven clinical and operational principles have transformed hundreds of operations over several decades. We are also excited to complete these acquisitions and to expand our presence in Colorado. Our Colorado based subsidiary, Endura Healthcare, has served the communities across Colorado for many years. And these operations fit well within the existing footprint while expanding our presence on the Western Slope. In addition, we are very excited to expand our existing footprint in Washington.

These facilities serve vibrant communities throughout the Seattle area, and we have tremendous confidence in our local leadership teams and their ability to support strong clinical programs while maintaining a resident centered approach to care. Each of these turnaround operations present us with significant opportunities to strengthen clinical programs and quality outcomes. And we expect these operations to take some time to contribute to our overall performance. We continue to learn from and improve our transition process and believe that those lessons are showing through in the performance. As we continue to scale, we are able to lean on our talented resources that spread across many geographies.

Enhancing our ability to digest larger deals, by breaking them into bite sized pieces, transitioning in the traditional Ensign way but with a local cluster driven plan gives each operation the time and attention they deserve. We continue to see opportunities that include everything from larger portfolios landlords looking to replace current tenants, nonprofits looking to divest to their post acute assets, and a steady flow of traditional 1 offs. We have several new additions lining up for next year, and our local leadership teams and their partners at the service center work together to source, underwrite, and carefully select the right opportunities.

Our local leaders continue to recruit future CEOs for Ensign affiliated and we have a deep bench of CEOs in training that are eagerly preparing for their opportunity to lead. Over the last year, we have had an average of approximately 52 AITs at various stages of the program actively training and obtaining the hours necessary to obtain their license. This number is particularly impressive when you consider we have added 94 operators in just the last year and a half. We see a high demand from qualified applicants and can be very selective. Our local clusters drive the recruiting efforts for AITs and carefully scrutinize who they will admit into the program. We are constantly refilling the AIT ranks.

In addition, we have found success in retaining existing leadership in some of the higher performing acquisitions. In some recent portfolio deals, for example, we identified several impressive administrators that had seen success at achieving consistent clinical and financial results at their respective operations. And were a great fit for our culture. We have become much better at onboarding existing talent into our local clusters and are continuously refining that process. As a result, many of the talented leaders we have kept not only have done well, but have earned the CEO designation from their peers.

This high-quality influx of leadership talent, our continued focus on onboarding existing leadership, and our decentralized transition model, allow us to grow without being limited by typical corporate bottlenecks. In the face of all of this growth, we continue to maintain enough cash and available capacity under our line of credit to fund a significant amount of growth. Including adding even more real estate assets to our portfolio. We believe the continued strength of our balance sheet, even after all this growth demonstrates that our acquisition formula which includes a locally driven underwriting and transition process provides a scalable growth model that can carry us well into the future.

We look forward to continuing to grow the way we have over the last few years. With lots of transactions across many states. Including small deals and larger portfolios, and where it makes sense, price strategic assets. Lastly, we are also pleased with the continued growth of Standard Bear. Which added 8 new assets during the quarter and since, including 5 previously leased facilities that have been and will continue to be operated by an Ensign affiliate. Standard Bear is now comprised of 183 owned properties, of which 146 are leased to an Ensign affiliated operator. And 38 which are leased to third party operators.

Collectively, Standard Bear generated rental revenue of $47.7 million for the quarter, of which $42.1 million was derived from Ensign affiliated operations. For the quarter, Standard Bear reported $27.3 million in FFO and as of the end of the quarter had an EBITDAR-to-rent coverage ratio of 2.6x. And with that, I will turn the call to Spencer, our COO, to add more color around operations. Spencer?

Spencer W. Burton: Thanks, and hello, everyone. Today, I would like to highlight 2 examples that demonstrate the continued progress and momentum we are seeing across our entire portfolio. The first example is a recently acquired operation that shows how industry experienced leaders can raise performance when they have strong resource support and are empowered to make decisions locally. Both core elements of the Ensign operating model. Decatur County Healthcare a 115 bed skilled nursing facility located in Parsons, Tennessee was acquired in January 2025. Along with 8 other Southeast operations. A key element of any successful transition is ensuring that the right leaders are in place.

So during the due diligence period prior to transition, our Tennessee interdisciplinary team met with and evaluated the existing leadership at each operation. At Decatur, what they found were clinical and operational leaders with deep community ties and a commitment to excellence. Executive director Kyle Smith was born and raised in Parsons. As a boy, he volunteered at the facility. In college, worked there as a CNA. And he has now led it for 19 years. Kyle understands that in rural Tennessee, healthcare is all about caring for people as family. In fact, all 4 of his grandparents have been residents of the facility at some point.

His partner, director of nursing Kelly Watson, is a registered nurse who has served in the facility for 28 years. And has worked in nearly every department. She knows what it takes to attract and retain clinical staff. The facility is the county's second largest employer, and nearly every employee and resident is a neighbor, friend, or family member. Because Kyle, Kelly, and the leadership team were stable, and fully bought into the transition, and integrating into their new cluster of Ensign affiliated partners, They help their frontline staff and caregivers to quickly implement the new systems, act on feedback, and use the tools and new direction to help their already good facility quickly become even better.

Therapy moved from being a contracted vendor to becoming an in house partner at transition. Together, this 1 CLINICAL team has broken down silos, and found synergies that have significantly improved outcomes for all of their residents. Today, as the facility nears the end of its second year as an Ensign affiliate, the results speak for themselves. Decatur holds a 5-star overall CMS rating. with a 5-star for quality measures. For example, when looking at their claims based quality measures, looking at both emergency department visits and long stay hospitalizations, outperformed national averages by over 30%. And for short stay antipsychotic utilization, they come in at less than half the national rate. Financial metrics are also following suit.

And compared to the same period last year, third quarter occupancy has risen from about 65% to 79%. Revenue is up 29%, and EBIT has improved by over 400%. Our second example, Bainbridge Island Health and Rehabilitation, shows what excellence looks like in our same store operations. This 58-bed skilled nursing facility sits across Puget Sound from Seattle. And has been part of Ensign since 2015. Its island location creates significant workforce and occupancy challenges. Bainbridge Island has a small labor pool, and some of the Seattle area's highest living costs, so many caregivers commute more than an hour each way often by ferry.

Unlike Decatur, executive director Paul Waddington, and COO and nursing director Hanan Yaya are both homegrown leaders. Paul worked at an Ensign affiliate as a department head, and later graduated from the Ensign AIT program. Hanan was an assistant director of nursing. And completed her DON training at a high acuity operation with 1 of Ensign's most seasoned nurse mentors. This Ensign upbringing instilled in both a passion for establishing the highest standards of clinical quality and employee experience. And that obsession is demonstrated in the results their operation now consistently achieves. For example, Bainbridge recently received a zero-deficiency annual survey. Doubly impressive given Washington state status as 1 of the nation's most difficult survey environments.

Bainbridge holds a 5-star rating for health inspections, staffing, quality measures, and overall. CMS claims based data ranks the facility significantly better than both state and national averages across a wide spectrum of quality measures, including antipsychotics, ER visits, and short stay rehospitalizations. Staffing is perhaps the most remarkable part of the story. RN hours per patient day at Bainbridge are nearly double the national average. And RN turnover is approximately 1/3 of the state and national average. Those results reflect a sustainable clinical culture built around developing and retaining exceptional nurses. Not simply achieving strong metrics in the short term.

As you would expect, these quality results have led Bainbridge to recently be designated as a CMS high performing facility. This designation is achieved by only about 12% of nursing homes nationwide. And while Bainbridge is exceptional by national and state standards, its clinical excellence is reflected across the whole Washington market. In fact, in September, CMS released its initial high performing facilities list, 59% of eligible Ensign affiliates in Washington were awarded that designation. that is nearly 5x more than the state average. [Inaudible] that quality is carried through to 35% over Q3 of 25. While Bainbridge's year to date revenues have increased by 15%, and EBIT has increased by 21% during that same period.

We are proud of the great culture of clinical excellence that Bainbridge and its sister facilities in Washington have established. And we are confident that with such a strong foundation of quality, we will be able to integrate the new operations that we recently added in that state. We hope that both the Bainbridge Island example and the Decatur County example give you more insight into why we are so excited about the future. And with that, I will turn the time over to Suzanne, our CFO. Suzanne?

Suzanne D. Snapper: Thank you, Spencer, and good morning, everyone. Detailed financials for the quarter are contained in our 10 Q and press release filed yesterday. Some additional highlights for the quarter compared to the prior year quarter include the following. GAAP diluted earnings per share was $1.76, an increase of 23.9%. Adjusted diluted earnings per share was $2.03, an increase of 23.8%. Consolidated GAAP revenue and adjusted revenue were both $1.48 billion, an increase of 14.5%. GAAP net income was $104.3 million, an increase of 24.4%. And adjusted net income $120.5 million, an increase of 24.9%. Other key metrics as of September 30 include cash and cash equivalents, $337.6 million and cash flow from operations of $512.3 million.

During the 9 months ended 09/30/2020, we spent more than $675 million to execute on our strategic growth plan. We made these investments from a position of strength, as shown by the lease adjusted net debt to EBITDAR ratio of approximately 2.0x after taking into consideration these investments. Our continued ability to maintain low leverage even during periods of significant acquisitions is particularly noteworthy and demonstrates our commitment to disciplined growth, as well as our belief that we can continue to achieve sustainable growth in the long run.

In addition, we currently have more than $730 million of available capacity under our line of credit, which when combined with our cash on the balance sheet gives us more than $1 billion in dry powder for future investments. We also own 189 assets, 165 of which are owned completely debt free. They are gaining significant value over time, adding even more liquidity to help with future growth. The company paid a quarterly cash dividend of $0.065 per share on common stock. We have a long history of paying dividends and have increased the annual dividend for 23 consecutive years. As Barry mentioned, we are increasing our annual 2026 earnings guidance to between $7.94 to $8.02 per diluted share.

And are raising the lower end of annual revenue guidance to $5.89 billion while maintaining the upper end at $5.92 billion We have evaluated multiple scenarios and based upon the strength in our performance, and the positive momentum we have seen in occupancy and skilled mix, as well as the continued progress on our newly acquired operations agency management and other operational initiatives have confidence that we can achieve these results. Our 2026 guidance is based on: diluted weighted average common shares outstanding of approximately 59.5 million a tax rate of 25% the inclusion of acquisitions closed and expected to close through the fourth quarter of 26 and the inclusion of management's expectations for the reimbursement rates.

With the primary exclusion coming from stock based compensation and amortization of system implementation cost. Additionally, other factors that could impact the quarterly performance include variations in reimbursement systems, delays and changes in state budgets, seasonality in occupancy and skilled mix, the influence on the general economy and census and staffing. The short term impact of our acquisition activity, variations in insurance, accruals and other factors. And with that, I will turn it back over to Barry. Barry?

Barry R. Port: As we wrap up, I want to take a moment to recognize the extraordinary leaders and caregivers across our organization who continue to make all of this possible. 1 of the things I have come to appreciate most about this is that our people have never needed ideal circumstances to accomplish exceptional things. They faced enormous challenges, navigated uncertainty, and shoulder the responsibility of caring for an increasingly complex and vulnerable patient population.

And through it all, they have remained focused on what matters most. there is something incredibly powerful about that kind of consistency. it is 1 thing to talk about your values, your culture or commitment to excellence. it is quite another to demonstrate those things quarter after quarter across hundreds of operations in ways that can be independently measured and validated. And that is exactly what our local leaders and their teams continue to do. Their clinical outcomes, the trust they are earning in their communities, and the extraordinary momentum they are creating speak far more powerfully than anything we could ever say on a call like this. I hope our leaders and caregivers recognize just how remarkable that is.

We are deeply grateful for them. Incredibly proud of what they are accomplishing, and perhaps most exciting of all, confident that their very best work is still ahead of them. And with that, we will turn it over for questions. Operator, please provide the instructions for Q and A.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Please stand by while we compile the Q&A roster. Your first question comes from the line of Benjamin Hendrix with RBC Capital Markets. Your line is now open. Please go ahead.

Ben Hendrix: Great. Thank you very much, and congratulations on the quarter and the expansion. Just wanted to ask a couple of questions or 1 major question on Florida. it is clearly a dynamic market for providers and just wanted to know as you did your diligence on the on the region and on the platform, any unique challenges that could arise, in this for the. For this ramp up and for this integration? Given the new market, whether it be regarding the network, regulatory environment, labor market, payer backdrop, etc. Anything that you are that you kind of flagged in your diligence as standing out as a particularly, high risk or greater risk than what you normally see in an acquisition?

Thanks.

Barry R. Port: Thanks for the question, Benjamin. Florida is a state we have had our eye on for a long time. Obviously, we have been in the Southeast for a while now, and you have seen us expand there. And Florida, given its demographics and just its sheer size and population, it is a natural state for us to enter into. I think our hesitancy up to this point has been it is. The litigation environment is really busy. and that makes it sort of a deterrent for operators to come into the state. Certainly, 1 of the major red flags that we have looked at over time.

But that all aside, it is a really great rate environment now. it is much more stable than it used to be. it is a good labor environment. From a regulatory standpoint, it is probably middle of the road. it is not easy. it is not, in incredibly uniquely tough either. But most importantly, it is a state where we have had 1 of our longtime leaders, Forrest Peterson, who is been with us for a very long time, who has prepared himself and a team to come with him into that state. He moved out earlier in the year and has been, laying the groundwork for a successful transition there.

Ben Hendrix: And just as a quick follow-up, I noticed, you know, you talked about your ability to disintermediate in some cases, some high level acuity, or higher acuity settings. Kinda given the capabilities that you put into your into your, locations, anything different or any hurdles in that regard in terms of maybe bringing more sniff volume, in Florida into your into the. Your market or into your new facilities? Thanks.

Barry R. Port: Yeah. Yeah. Great question. 1 of the advantages we have because of our track record in other states and particularly in the Southeast We have, obviously, relationships with all the major healthcare plans. that are in Florida, and we have been able to sort of get their kind of buy-in and attention Normally, buildings like these, which are turnarounds, they are significantly challenged clinically and operationally. The road for being able to bring in that higher acuity patient is much longer I think because of our relationship, we are able to do some LOAs and some kind of 1-off arrangements, as we get started to sort of prove ourselves.

These days, outcomes matter more than anything when it comes to gaining the trust of managed care plans. So our teams feel that pressure. To perform quickly and make sure the clinical product is representative of who we are and they are doing that. But it will take some time But given the advantages we have with our relationships, we feel like we can take some of that time off. Great. Thanks, guys.

Operator: Your next question comes from the line of David MacDonald with Truist. Your line is now open. Please go ahead.

David MacDonald: Yeah, good afternoon, and congratulations. Would love to just start with a quick question. On the updated guidance. If we look at the implied Q4 guide, it looks like a pretty strong quarter. And look, realize there is some seasonality. But given the pace of the recent M&A, then Barry, some of your comments about Florida, it sounds like a typical acquisition when you bring it on board. Can you just comment on the performance of the core business? And whether some of the other deals that you have brought on are outperforming? Texas is kind of 1 that comes to mind, just any commentary there would be helpful.

Barry R. Port: Yeah. I think that. that is a great question. David. I think it plays into maybe some of the kind of mis-projections on revenue from some of the analysts and others that are following us Historically, we have been really, really successful with our transitions. But we have also been fortunate that many of the kinda midsized portfolios we have taken in California and other states have not been as challenged as the ones we are used to taking and are currently taking now, which are more of our bread and butter kind of our typical turnaround type operations.

The buildings in Texas are still not accretive, but we expect that they are gonna come in way ahead of pro forma. So, you know, possibly in the fourth quarter, we will see some contribution from those operations. But like those Texas operations, these Florida operations are very, very challenged. In pretty much every aspect clinically, financially, and physical plant. They have not been operated well, and they will take some time to come around certainly financially, but, first and foremost, clinically.

And when you have situations like that, I think what is normal is that, you know, it takes a year or more for these things to really these operations to, start being a contributor to our overall performance both from a revenue and an earning standpoint. So, yeah, I would classify these recent acquisitions as ones that you kind of expect out of Ensign. Acquisitions that are turnaround in nature and will be slower to contribute.

Suzanne D. Snapper: And then when you kind of flip to the core business, we really expect that our core business will continue to be strong. I mean, when we look at what Q4 historically has done, that is what we have built in, you know, really strong occupancy, strong skilled mix. Continuing to have the growth that we are stepping off of a Q3. Right? Stepping out at 84% on same store and 86% occupancy on same store with elevated skilled mix bodes well for our Q4. And so that is what you see built into our guidance with that good step up.

David MacDonald: Okay. Helpful. Just 1 other quick question. You know, we get a lot of questions, or we hear a lot about, you know, automation, AI, etc. 1 of the areas on the clinical side we hear a lot about is, you know, documentation and some efficiencies around there.

I was wondering if you could just spend a minute on some of the initiatives that you guys have in place and how we should think about the timing in terms of you know, clinical efficiency, in terms of, you know, some of the other areas that you guys are looking at and, you know, how, I guess, just broadly speaking, you are thinking about the timing of the rollout in a more meaningful way of some of those initiatives?

Barry R. Port: Yeah. We are fortunate to have a really, really good team that is that is a mix of newer people and people that have been with us for a long time that have stayed up on the advances in technology. Certainly, I would. We have many, many projects underway. That are leveraging efficiency that we can gain from that. Certainly on an administrative side, on kind of business processes and have Copilot and co-work rolled out. Throughout most of our teams so that they can use that for things as simple as, you know, business reporting and automating some of their daily tasks.

But I think the most exciting projects that we are working on and focused on revolve around clinical documentation support, you know, coding and compliance support. And then, you know, with a particular focus on finding ways to use AI to help our clinicians gather all the information they need on patients, both current and historical, to help them in real time with clinical decision support. And we are we are doing that in a number of ways, 1 primarily in collaboration with our EMR provider They have tools that they are developing that we have been embracing and trialing and helping them to kind of develop into what we need them to be.

But also, on top of that, developing our own tools that will be supportive and helpful for our clinicians to make better and more rapid and accurate decisions. So, you know, a number of projects we are working on with the particular emphasis on the clinical side. Okay. Thanks very much.

Operator: Your next question comes from the line of Raj Kumar with Stephens. Your line is now open. Please go ahead.

Raj Kumar: Hey, good morning. Maybe I want to piggyback off of Ben's question, just kind of thinking about skilled mix, same store skilled mix, kind of firmly above 32% year to date. I guess last time we saw that metric in that kind of ballpark area was, you know, during the COVID waiver era, So 1 would like to just love to kind of hear, what is supported the sustainability of that metric. Post COVID operationally, whether bucketing it between broad based demand, market share gains from other skilled nursing providers, or even kind of thinking higher acuity spectrum in terms of inpatient rehab. So I would be curious on the strength there.

Barry R. Port: Yeah. Raj, I think it is a little bit of all of the above. But, you know, I think 1 thing to point out is that we are doing this in the third quarter, which is typically 1 of our weaker quarters. So having that as a starting point as we go into 2 of our better quarters from a skill mix standpoint is really exciting for us to see and I. Look. Certainly, I think if you listen to our prepared remarks, you can think you can surmise why this is the case.

Our emphasis, in the beginning of the call was to focus on the clinical outcomes that we are achieving because that is the reason behind the trust that we have from our managed care partners and our and our acute partners and physicians and families and residents choosing us in our setting The outcomes generate that kind of decision making when it comes to where you go to handle your complex clinical needs. And when you can have a setting where that is accomplished with consistency, and you earn the trust of that care continuum. So, you know, yes, there are there are some tailwinds with demographics, and certainly that is helpful in terms of the overall volume of patients.

But when it comes to generating the kind of gains we have seen in acuity, it all boils down to the consistency and outcomes that we are able to achieve.

Suzanne D. Snapper: And I think the other thing that you see and that kind of proves that out. What Barry just says, it is all payers. We are not seeing it in 1 payer and not in the other payers, but we are seeing that growth across all the payers.

Raj Kumar: Got it. And as my follow-up, maybe kind of on the M&A component, clearly, 2026 and 2020 have been accelerated So as I kinda think about beyond 2020, and the kind of comfortability around the pacing, maybe just any commentary around that and whether we should be thinking about an M&A baseline that is kind of above the historic maybe 20 facilities per annum. Just any kind of considerations or that we should kinda be thinking about as we think about the out years.

Chad A. Keetch: Yes, great question, Raj. So first of all, you know, we do not set growth goals. We, you know, but we. You know, we are very opportunistic and, you know, we take the deals that makes sense. So I just. I start with that just because you know, in terms of looking forward, we are not in a spot, right, where we say, OK. Well, we wanna grow by 15% to 20%. You know, in terms of bed count per year, and we are gonna do that come hell or high water. Right? So it all depends on, market conditions, pricing, Obviously, our leadership pipeline, we highlight that a lot.

Sure, you know, that is probably the biggest constraint we have is making sure we have leaders in place and, you know, as we mentioned in our prepared remarks, we have got 55 or so AITs that are currently, you know, in the program, and you know, that is after, you know, all this growth that we have had. So we are constantly refilling that pipeline of leaders. Plus, as I think we. As we mentioned, you know, we are we are also getting better and better at integrating, you know, really strong existing leaders that are and buildings we acquire.

And, you know, certainly in more performing portfolios, that. that is been something we are we are succeeding at doing as well. So but look, I will. I. We are very comfortable growing at the pace we have been growing. You know, 50 to 60 acquisitions a year is totally doable. If not more. You know, as we look forward, you know, we certainly, you know, see the deal flow is strong enough to continue to support that kind of growth. But I guess I just caveat it with, you know, we are also going to be smart about it. Right? So but that said, we are really excited.

I mean, you know, the pathway that we have here, our balance sheet, you know, we have so much dry powder and support of an amazing group of banks that are constantly encouraging us to continue to invest and our investors feel the same. So you know, we are excited about the future, and we already see a healthy, you know, pipeline for next year. And, you know, some deals that we are excited about. I mean, it is. Again, as I mentioned, the prepared remarks, larger portfolios, you know, there is mid size and then there is the 1 offs that we always have.

So you know, obviously, again, those deals have to line up and meet our meet our criteria, but we are excited about, you know, where we sit on several of those opportunities. Thank you.

Operator: Your next question comes from the line of Albert Rice with UBS. Your line is now open. Please go ahead.

AJ Rice: Hi, everybody. Maybe just a follow-up on the deal pipeline. Commentary. In the prepared remarks, you mentioned the sourcing of deals that you have a number of different sources. I think you said nonprofit health systems, REITs looking to transition operators, deals that are sourced in the field. I wonder, are any of those pipelines, and maybe there is some others I did not mention, becoming more plentiful a supply for you? And I know you are looking at a diversity of opportunities, premium properties versus turnaround properties, etcetera. Does, those different sources tend to skew in 1 way or the other? I would be curious.

Chad A. Keetch: Yeah. it is a great question. You know, it is really all of it. I mean, it really is. I would not say we are seeing more from nonprofits than REITs or, you know, it is just kind of, you know, coming from all places and more than we could ever you know, gobble up, I guess, I would say. So, but that said, I guess I do wanna highlight, you know, we. We have mentioned again, a few times, a few quarters in a row that you know, we have had success in acquiring some higher-quality, I guess, physical plant portfolios that cost a little bit more you know, on.

At the outset, but you know, require a whole lot less, you know, capital investment over time. And I think we probably have seen more of that, I would say, lately. And I do not know if that is because, you know, we have done some, and so people are thinking, hey, Ensign will buy not just turnarounds with some of these nicer assets. But that is been encouraging. And that is still something that we are really, you know, interested in doing. You know, we often talk about there is 3 ways that, you know, facility can be challenged, you know, The first 1's a physical plant, and then obviously clinical challenges, and then third are just financial challenges.

And you know, if you can get a nicer quality plant that does not have, you know, you are not sort of swimming against the current on the physical plant side of things, then you can just focus on clinical and financial. it is definitely been a path that is worked for us. But all that said, we will still, as Barry mentioned, you know, lot of the deals we have just announced this quarter are turnarounds in all 3 phases. And we know how to do that really well too. But yeah. So hopefully, that is helpful.

But, you know, we are certainly encouraged by, you know, the frequent and constant stream of opportunities that come from us from all of those sources. Okay.

AJ Rice: And it was also mentioned in the prepared remarks that the strength of your capital structure and balance sheet allows you to look at a variety of opportunities. But 1 you mentioned was as leases mature, the potential that you created value in the property to be able to buy that property out. I wondered if you just comment on what that looks like over the next few years. Is there a bolus of deals that might come available to you that you could take in? Is it probably more of a steady stream over the next few years? How do we think about that?

Chad A. Keetch: it is a great question. This was maybe buried in there a little bit, but we acquired a handful of facilities that we have been leasing from a large public REIT, you know, for nearly 20 years. And, you know, that is. You know, the way that process plays out is you are getting, you know, kinda toward the end of the lease term and so both parties are trying to figure out, OK. Do we renew the lease? what is the plan?

And in that case, you know, our repartner there was you know, interested in maybe redeploying the capital and you know, senior living kind of shop type deals and are not as interested maybe in just triple net SNF stuff. And so we were we were able to close on that during the quarter and you know, that. So that is from a REIT. We also have a lot of kind of private small, family owned operation or, you know, operations that are. That we lease. And those are frequent conversations too.

And, you know, in 1 recent deal we had, we took a lease portfolio that was family-owned essentially and when the parents died, you know, several of the kids all got, you know, ownership in some of these various facilities. And you know, over time, we have bought, you know, those buildings back kind of 1 or 2 at a time. And I think we finally bought the last of 1 of these lease portfolios from 1 of the children that inherited the real estate. So it is definitely an opportunity. it is something we talk about often.

And, you know, certainly, you know, having, you know, 2-thirds of our portfolio will be leased is, you know, that presents an opportunity to us. And look, the other thing too, we have, you know, some of our real estate partners will reach out and say, you guys have done so well in this. In these in these buildings, and you know, maybe there is some equity here for us that we could unlock by having you guys buy it. Right? And so, you know, where it makes sense, we will certainly look at doing that and like you mentioned, we have the balance sheet to do it. We like ownership.

It gives us a lot of flexibility and you know, not just for, you know, financing and balance sheet stuff, but it also operationally when you own it, it is just 1 less thing you have to deal with when you are wanting to do a major renovation or something like that. So not to mention, obviously, the enormous upside we create in the value of the real estate assets. So something we will always look at and value those opportunities. Okay. Thanks so much.

Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.