We didn’t expect much positive news from the plethora of earnings announcements coming out these two weeks, but The Ensign Group defied expectations by achieving its highest adjusted earnings per share in its history of $0.78, an increase of 100% over the second quarter of 2019 and slightly above the previous record-setting Q1:20. The operator also raised its 2020 annual earnings guidance to $3.00-$3.10 per diluted share, up from the previous guidance of $2.50-$2.58. The news sent its share price soaring from $48.68 at close on August 5 to $57.99 on heavy volume on August 6 and even higher to $58.32 on August 7.
Ensign also announced that it has returned all of the PPP funds it received through the CARES Act, representing approximately $110 million. That must mean that liquidity is currently not an issue for the company, with $201 million of cash on hand and $320 million of available capacity under its credit facility. The company was also able to pay out a quarterly cash dividend of $0.05 per share of common stock.
Ensign’s net income came to $40.24 million in the second quarter of 2020, or 41% higher than the year-ago quarter with $28.61 million. But when excluding the operating results for the October 1, 2019 spin-off of The Pennant Group, adjusted NOI was $43.1 million for the second quarter, or 99.0% higher than the prior-year quarter.
It wasn’t all rosy, as same store occupancy fell 5.9% from the first quarter of 2020 to 73.7%, while transitioning occupancy was 76.1%, or down 3.8% from Q2:19. And after a slight bump in census between mid-May and mid-June, occupancy did fall again by mid-July. However, same store skilled days grew by 100 basis points to 31.4%, with a 16.2% increase in Medicare days too compared with the prior-year quarter. That certainly helped Ensign received about $100 million in advance Medicare payments, which much be repaid out of future reimbursement but helps the company ride out the current storm. The company also benefitted from improved Medicaid rates in a number of states.
We have long been impressed with the way Ensign has been managed, and how effective its decentralized management structure has been. To operate these days, regional managers and Executive Directors have to be nimble and conform quickly to the realities on the ground in their respective localities. That’s what kind of responsibility Ensign entrusts in its lower level executives, and it seems to be paying off.
