The Ensign Group (ENSG) Tops Q1 EPS by 15c; Maintains Outlook

The Ensign Group (NASDAQ: ENSG) reported Q1 EPS of $0.77, $0.15 better than the analyst estimate of $0.62. Revenue for the quarter came in at $589.6 million versus the consensus estimate of $582.82 million.

GUIDANCE:

Maintains 2020 Guidance and Addresses COVID-19

COVID-19

Port reported that each locally-led operation has been actively managing COVID-19 patient needs and adapting to the rapidly evolving environment as they provide the highest level of care to their patients. He also noted that the company’s portfolio is not being overwhelmed by COVID-19. As of May 8, 2020, the company’s 225 affiliated operations across 13 states had 355 confirmed COVID-19 patients in-house. Also, as of May 8, 2020, seven operations had over twenty COVID-19 positive cases, 25 operations had less than 20 cases and 193 operations had no confirmed cases of COVID-19 in-house. “As testing continues to become more available, we expect the number of known cases to continue to rise during the second quarter, but believe we are prepared to operate in the COVID environment for the foreseeable future,” Port said.

The company has taken numerous actions over the course of the past several weeks to provide the safest possible environment for its employees, affiliated physicians, and patients. “Our local leaders and caregivers, with the assistance of their Service Center resources, responded quickly and have been focused on the safety of our patients and staff while ensuring they were caring for the potential and, in a few cases, an actual surge of COVID patients. This included the successful acquisition of PPE and other supplies and equipment, implementation of staff retention initiatives tailored to the unique elements of various markets, ongoing leadership guidance, training and updates and the establishment of clear clinical protocols and safety measures,” Port said.

The company reported that they started to see occupancies decline in the latter half of March due to governmental stay-at-home orders, a pause on vital procedures and overall lower hospital occupancies, all of which directly impact patient referrals into the post-acute setting. More specifically, between mid-March and mid-April, combined same store and transitioning occupancy was down by 5.2% and skilled mix was down by 11.8%. However, between mid-April and early May, combined same store and transitioning occupancy was down by only 1.7% and skilled mix actually improved by 13.6%. “The rate of decline in occupancy slowed dramatically and we have seen a recent boost in skilled mix over the last several weeks. This recovery in skilled mix, together with the flattening of the occupancy declines, demonstrates continued partnership with the healthcare community. As those that have been following us throughout our history know, when we experience an increase in skilled mix, it is invariably followed by an increase in overall occupancy.” Port said.

The company has also taken steps to enhance its operational and financial flexibility during the COVID-19 pandemic. Port continued, “As we’ve done many times before, whether in the context of RUGS IV or spinning off a REIT, we acted swiftly to mitigate the impact of the pandemic by enhancing our operational and financial flexibility and redirecting resources to critical operations. Simultaneously, we took actions to increase liquidity and defer capital spend and other costs that could be delayed without impacting the delivery of care.” Additionally, the company has implemented certain cost mitigation initiatives, which included the voluntary reduction in base salaries by the Board of Directors, the executive team and other key organizational leaders, selective furloughs for non-clinical workers and other strategic expense reduction activities. The company’s response plan has multiple facets and continues to evolve as the pandemic unfolds.

“We have learned a great deal through this process and our local leaders are now shifting their focus to a comprehensive recovery effort in each of their markets. This includes proactively preparing for and executing on plans to provide care for all patient types, whether COVID positive, negative or unknown. These efforts vary building to building and market to market and are being done in partnership with local and state public health officials to ensure compliance with infection prevention protocols and the comprehensive recommendations provided by the CDC and other public health authorities,” Port said.

Port concluded, “It’s in times like these, where our local model really shines. Rather than attempting to roll out a one-size-fits-all approach across many markets with varying local restrictions, our CEO-caliber leaders and their clinical partners are very carefully working with local governments, hospitals and their managed care partners to be a solution to this pandemic. As hospitals begin to methodically resume vital procedures and to re-open, our teams will be ready to admit the many, many patients that are in need of post-acute care, all while working within the framework of the COVID-19 protocols.

For earnings history and earnings-related data on The Ensign Group (ENSG) click here.

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