It is all about culture, and handing down responsibility, accountability, and providing financial incentives that makes The Ensign Group tick, and rock every quarter. It is also something some seniors housing providers can learn from. Some companies are doing it, but many founders and CEOs are still not ready to hand over the tools to succeed.
The nursing home industry is difficult, but Ensign continues to outperform. Same-facility occupancy was up 240 basis points year over year, and it was up 40 basis points sequentially. The skilled mix increased by 110 basis points sequentially. Other nursing home operators only dream of this.
In addition, Ensign’s 2024 earnings guidance is now 13% higher than earnings in 2023, and 30% higher than in 2022. Agency labor is way down as is staff turnover. In the fourth quarter, net debt to EBITDAR was a very low 1.98x. At the end of the year, the company had over $500 million of cash on the balance sheet, plus another $500 million of available credit, so it has more than $1.0 billion of dry powder to play with this year.
Ensign has been one of the busiest buyers over the years, but the fourth quarter saw a decline in activity, with the acquisition of just three operations plus one involving the real estate as well, for a total of 528 beds. They did enter a new state for the first time in years (Tennessee), and they plan to acquire more in the state to build out a cluster, and then more clusters. This is their strategy. And they moved over one of their stars from California to see the entire process through from start to finish.
Actual net earnings were down significantly because of a $58 million legal settlement that had nothing to do with care. In fact, the Department of Justice declined to intervene in the False Claims Act and/or Anti-Kickback lawsuit, but it went ahead anyway. This was old news, but the settlement was just recently agreed to. Good thing they have over $500 million of cash!
Investors ignored the settlement and focused on the operating results and the 2024 forecast. The shares jumped by more than 6% and hit a new 52-week high. Not too shabby.
