The Ensign Group, Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you, operator, and welcome everyone.

We filed our earnings press release yesterday, and it is available on the investor relations section of our website at ensigngroup.net. A replay of this call will also be available on our website until 5:00 P.M. Pacific on November 27, 2026. We want to remind anyone that might be listening to a replay of this call that all statements made are as of today, October 28, 2026, and these statements have not been nor will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.

Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason. In addition, The Ensign Group, Inc. is a holding company with no direct operating assets, employees, or revenues. Certain of our independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to other independent subsidiaries through contractual relationships.

In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims-made coverage to our operating companies for general and professional liability, as well as for workers' compensation insurance liabilities. Ensign also owns Standard Bearer Healthcare REIT, Inc., which is a captive real estate investment trust that invests in healthcare properties and enters into lease agreements with certain independent subsidiaries of Ensign, as well as third-party tenants that are unaffiliated with The Ensign Group. The words Ensign company, we, our, and us refer to The Ensign Group, Inc. and its consolidated subsidiaries. All of our independent subsidiaries, the service center, Standard Bearer Healthcare REIT, and the insurance captive, are operated by separate independent companies that have their own management, employees, and assets.

References herein to the consolidated company and its assets and activities, as well as the use of the words we, us, and our, and similar terms, are not meant to imply, nor should it be construed as meaning, that The Ensign Group has direct operating assets, employees, or revenue, or that any of the subsidiaries are operated by The Ensign Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in Tuesday's press release and is available in our Form 10-Q. With that, I'll turn the call over to Barry Port, our CEO.

Barry? Thanks, Chad. We're thrilled to report another outstanding quarter.

Our teams continue to demonstrate their unwavering commitment to dignify post-acute care in the eyes of the world through moments of truth. Our mission is not just a catchphrase. It's the guiding motivation behind nearly every decision made across our organization. As we've said before, we believe we achieve our mission by consistently delivering exceptional outcomes and experiences that redefine what residents, families, and healthcare partners expect from skilled nursing. Additionally, our core values, which our teams refer to using the acronym CAPLICO, creates a shared culture that empowers nearly 60,000 partners to lead with compassion, accountability, ownership, and a relentless commitment to excellence.

While CAPLICO may have begun as a simple set of shared beliefs, over time, it has become part of our operating DNA that determines hiring decisions, leadership development, employee retention, clinical execution, and ultimately, the experience of our residents and their families. Together, our mission and values inspire local teams to strengthen each other and elevate care. We believe culture is not separate from performance. It is the foundation that makes sustainable clinical, operational, and financial performance possible. At the center of our clinical strategy is an integrated care model that we call ONE CLINICAL that empowers every healthcare discipline, including nursing and therapy, to participate fully in making our residents' lives better. While most of the industry outsources therapy or treats therapy as a separate department to fulfill a singular purpose, our therapists work alongside nursing as equal partners, bringing their expertise into every aspect of resident care.

Together with our physician partners and our interdisciplinary team members, there is a continuous evaluation of emerging clinical evidence, sharing of best practices, and development of advanced clinical pathways that improve outcomes across our operations. Rather than treating diagnoses in isolation, they coordinate every discipline around a common set of goals, restoring function, improving quality of life, reducing avoidable complications, and helping residents achieve the best possible outcome. It is the clinical operating model that guides how our affiliated operations deliver care every day, and we believe it is one of the most important differentiators of our organization that has been developed over decades. We believe this clinical patient-centric model is a compounding competitive advantage that is uniquely perpetuated and refined through pure accountability in our cluster model. The proof of all this expertise and efficiency is evidenced in the outcomes.

According to the most recently published Centers for Medicare and Medicaid Services data for our same-store facilities, we achieved quality measure ratings that were 21% above the average of the states we operate in. Likewise, these operations achieved CMS cycle one survey inspection results that outperformed the average of facilities in our operating states by 15% and exceeded county level averages by 28%. In addition, short stay residents achieved functional improvement rates 30% better than industry peers in our operating states, and long stay residents had antipsychotic medication rates 28% better than industry peers in our operating states, reflecting our focus on appropriate medication management and resident-centered care. We ended the quarter with over 80% of our skilled nursing operations earning a CMS quality measure rating of four or five stars, exceeding national averages in every single one of the 15 quality measurement categories, including all five claims-based measurements.

This is also especially notable given that many of our acquisitions were one and two-star buildings when we took them over. In addition, 12% of all our eligible operations, comprised of 40 buildings in eight different states, earned the CMS High-Performing designation under its new risk-based survey program, placing them among a select group of facilities recognized by CMS for consistently strong performance. Importantly, all these measures are supported by a variety of objective sources, including CMS measures, claims-based metrics, regulatory surveys, occupancy trends, and referral behavior. Whether viewed through quality ratings, survey performance, occupancy growth, referral trends, rehospitalization rates, emergency department utilization, or managed care relationships, we believe the consistency of these outcomes provides compelling evidence that our operating model is delivering meaningful results for our residents and healthcare partners alike, and the reason why we continue to enjoy census growth that is outpacing the industry.

These results are the cumulative impact of our operating model. Our ONE CLINICAL approach, the integration of therapy and nursing, investments in technology and clinical tools, and the culture that drives accountability and execution at the bedside every day. The strength of our clinical model ultimately depends on the quality and stability of our people. We are especially proud of the continued improvement in employee and leadership stability. In particular, our Director of Nursing turnover continues to improve, and according to CMS-reported data, our overall RN retention rate is 11% better than the average across our 18-state footprint. Similarly, administrator turnover is an impressive 45% lower than the CMS-measured state average.

This level of leadership stability creates continuity for our caregivers and residents, reinforces accountability at the local level, and allows the investments we make in our clinical programs, technology, and resources to translate into consistently superior quality outcomes, care efficiency, regulatory performance, and financial results. All of these clinical achievements directly impact our operating metrics, like occupancy and skilled mix, and the corresponding financial results are a direct reflection of a relentless patient-focused culture. As each operation solidifies its reputation in its respective market, they are not only being chosen to care for more and more patients, but they are also being entrusted to care for increasingly complex cases, including a larger share of Medicare, managed care, and other skilled patients. To highlight this point, on the census front, our same-store and transitioning occupancy for the third quarter is 84.1% and 86.1%, respectively.