The Ensign Group (ENSG) Tops Q4 EPS by 2c, Revenues Miss

The Ensign Group (NASDAQ: ENSG) reported Q4 EPS of $0.80, $0.02 better than the analyst estimate of $0.78. Revenue for the quarter came in at $629.03 million versus the consensus estimate of $642.66 million.

Highlights Include:

• GAAP diluted earnings per share for the quarter was $0.82, representing an increase of 67.3% over the prior year quarter. Adjusted diluted earnings per share for the quarter was $0.80, an increase of 33.3%(1)(2) over the prior year quarter.
• GAAP diluted earnings per share for the year was $3.06, representing an increase of 86.6%(1) over the prior year, and adjusted diluted earnings per share for the year was $3.13 (2), an increase of 75.8% over the prior year.
• Consolidated GAAP and adjusted revenues for the year were $2.4 billion, an increase of over 18.0% (1)(2) over the prior year.
• Total transitioning and skilled services revenue was $2.3 billion for the year, an increase of 18.3% over the prior year, and transitioning and skilled services revenue was $603 million for the quarter, an increase of 13.8% over the prior year quarter and 5.7% sequentially over the third quarter.
• Same store skilled revenue improved by 14.7% with an increase in Medicare days of 22.1%, both over the prior year, and same store skilled revenue increased by 18.7% with an increase in Medicare days of 37.7%, both over the prior year quarter.
• Transitioning skilled revenue improved by 24.4% over the prior year with an increase in transitioning managed care revenue of 21.1% and Medicare revenue of 25.8% both over the prior year.
• Real estate segment income(3) was $31.3 million for the year, an increase of 79.2% from prior year, and $8.7 million for the quarter, an increase of 73.5% from the prior year quarter. FFO was $49.5 million for the year, an increase of 51.6% from prior year, and $13.3 million, an increase of 42.5% from the prior year quarter.
• GAAP net income was $170.5 million for the year, an increase of 85.9%(1) over the prior year, and $46.3 million for the quarter, an increase of 69.1% over the prior year quarter.
• Adjusted net income for the year was 174.6 million, an increase of 74.8%(1) over the prior year, and $44.9 million for the quarter, an increase of 33.9% (2) over the prior year quarter.

Operating Results

“In spite of the continued challenges brought on as the result of the ongoing global pandemic, we are very happy to report another record quarter as we achieved our highest adjusted earnings per share in our history,” said Ensign’s Chief Executive Officer Barry Port. “Since the beginning of this unprecedented pandemic, our local teams have shown incredible strength and consistency while doing everything in their power to care for their patients, residents and the healthcare community they serve. Rather than hunkering down and waiting for the storm to pass, they have rolled up their sleeves and worked tirelessly to find ways to make clinical and operational adjustments that are tailored to meet the needs of their existing and potential patients in their local market. As they have done so, the medical community and the patient’s families have entrusted them to care for patients with increasingly complex clinical needs.”

Port noted that as evidence of the medical communities’ confidence in their local operations’ clinical capabilities, the Company saw a marked improvement in patient volumes, especially with high acuity and skilled patients with a 7.2% and 10.8% increase in Medicare census and a 6.2% and 5.7% in managed care census, sequentially from second quarter to third quarter and third quarter to the fourth quarter for same store and transitioning portfolio, respectively. "This improvement in our admissions trends not only gives us great confidence that we can continue to perform well as the pandemic stubbornly persists in many of our largest markets, but it also gives us confidence that we are in an excellent position to see occupancies normalize to pre-pandemic levels even while the pandemic continues to impact us and our patients. Because we have been working arm in arm with our hospital and managed care partners during this pandemic to care for both COVID-19 positive and negative patients with complex medical needs, our operations have solidified the critical role they play in the post-acute care continuum as an essential and cost-effective setting for highly complex patients,” he added.

Ensign also emphasized that the results for the quarter and the year do not include any benefit related to CARES Act Provider Relief Funds and reminded investors that the Company has returned all of the relief funds it received from the Government, which included approximately $109 million in provider grants in July, $33 million in the fourth quarter and $5 million in January. The Company also noted that the strong results in the quarter came from continued improvements in skilled mix across the portfolio, improved admissions trends, availability of more frequent and broader COVID testing, increased managed care revenues, cost saving initiatives, improved cash collections, sequestration suspension and improved Medicaid funding in certain states. Port added, “During this latest and most significant surge in COVID-19 positivity rates we’ve seen to date, especially in Texas, Arizona and California, we saw an increase in skilled mix. However, unlike in prior quarters where COVID surges were accompanied by occupancy declines, during the fourth quarter we saw occupancies remain flat. While we have ground to make up to get back to pre-COVID occupancies, the increase in our skilled mix has more than made up for the temporary decline in occupancy.”

Management also reaffirmed its guidance for 2021, with annual earnings per share guidance of $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion. The midpoint of this 2021 guidance represents an increase of approximately 14% over the midpoint of Ensign’s 2020 guidance, which it increased twice during 2020. “We remain confident that we can achieve this guidance as we begin to see the positive impact of the vaccination efforts and begin to realize the enormous upside in our newly acquired operations, coupled with the opportunistic acquisitions on the horizon. But more importantly, we believe, when this pandemic is behind us, that our operations are primed to rebuild occupancies and to continue to gain additional market share as a result of the deepened relationships with acute care providers and other healthcare partners,” Port said.

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

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