Perhaps The Ensign Group should hire Britney Spears to perform at its Holiday party this year, and she can sing, “Oops, I did it again.” Because that is exactly what Ensign did. Another profitable quarter notched in its belt when too many skilled nursing operators continue to suffer, and it upped its earnings guidance for the rest of the year, the second time it has done so this year. The skeptic would claim they just give low guidance so they can keep on upping it. We don’t really care, as long as they keep on performing as they do.
The “market,” however, was disappointed because Ensign missed consensus earnings per share estimates by one penny, so the share price dropped by 4%. Ho hum. It was also one of the company’s busiest quarters on record with acquisitions, acquiring the operations of 17 nursing facilities, of which 12 were in Texas, usually not known for its lucrative nursing home market. Ensign’s captive REIT also bought the real estate for seven facilities, with three in California, two in Texas and two in Arizona.
The real story, however, is how Ensign continues to be profitable when half the industry is not. And it is just not “continuing” to generate profits, but increasing them as well as producing EBITDARM margins (21.4%) that many seniors housing providers have yet to achieve as they emerge from the pandemic. And their G&A expense is a healthy 5.1% of service revenue.
While occupancy is lower than we would like to see it, same-facility census grew by 240 basis points year over year to 76.8%, with a 53.7% skilled mix by nursing revenue. The only real negative was that operating margins for the entire company declined a little year over year, probably as a result of all the acquisitions in the third quarter. Typically, Ensign’s acquisitions have been properties that have been underperforming, and then they can work their magic after the acquisition closes. At least, that has been the business plan, and that plan has been working quite well for them.
