The Ensign Group, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Ensign Group Q4 and fiscal year 2020 earnings conference call. At this time, all participants are on a list and on the road. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, please press star then one on your touchstone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to our host, Mr. Chad Keith, Chief Investment Officer. So you may begin.

Thank you, Operator. Welcome, everyone, and thank you for joining us today. We filed our earnings press release yesterday, and it is available on the investor relations section of our website at EnzymeGroup.net. A replay of this call will also be available on our website until 5 p.m. Pacific on Friday, March 5, 2021. We want to remind any listeners that may be listening to a replay of this call that all statements are made as of today, February 4, 2021. 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 affiliates 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 Enzyme Group, Inc. is a holding company with no direct operating assets, employees, or revenues. Certain of our wholly owned independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to other operating subsidiaries through contractual relationships with such subsidiaries. In addition, our wholly-owned captive insurance subsidiary, which we refer to as the captive, provides certain claims-made coverage to our operating subsidiaries for general and professional liability, as well as for workers' compensation insurance liabilities. The words Ensign, Company, We, Our, and Us refer to the Ensign Group, Inc., and its consolidated subsidiaries. All of our operating subsidiaries, the service center and the captive, are operated by separate, wholly-owned, 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 terms we, us, our, and similar terms used today, are not meant to imply, nor should it be construed as meaning, that the Enzyme Group Inc. has direct operating assets, employees, or revenue, or that any of the subsidiaries are operated by the Enzyme 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 yesterday's press release and is available in our Form 10-K. And with that, I'll turn the call over to Barry Port, our CEO. Barry?

We're happy to report another record quarter as we achieved our highest adjusted earnings per share in our history. in spite of the continued challenges brought on as a result of the ongoing pandemic. I want to emphasize that the work our frontline partners, our field leaders, and our service center folks are doing is awe-inspiring and at the heart of our performance. Their determination to remain indispensable and responsive during this global trial has saved and improved countless lives. These local teams have shown incredible strength and consistency while doing everything in their power to care for their patients, residents, and the health care 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 patients' families have entrusted them to care for their residents with increasingly complex clinical needs. As evidence of that confidence our medical communities have in our local clinical leaders, our operations saw marked improvement in patient volumes, especially with high acuity and skilled patients. On the Medicare front, we saw Medicare days for our same store and transitioning portfolio increased 7.2% from second quarter to third quarter, and increased again by 10.8% between third quarter and fourth quarter. The increase in Medicare census continues to be the result of our operators' efforts to take on higher-acuity patients, including many COVID-positive admissions, in an effort to ensure that hospitals have the needed capacity to deal with the most critically ill patients. During the quarter, we admitted and cared for over 5,000 COVID-positive patients. Not only has this helped preserve hospital capacity, but it has also strengthened our reputation as a partner of choice to hospitals' health plans and senior living communities in our markets, and strengthened our standing in the continuum of care. As we have gained more experience with COVID treatments and greater access to testing, our facility's outcomes and confidence in treating COVID patients have improved. Most importantly, this evolution has also provided a much-needed solution to our vulnerable seniors, allowing them to receive the latest treatments and care and helping them to thrive rather than languish in their existing setting, extending their health and preventing countless others from further infection and spread. Similarly, on the managed care front, we saw managed care days for our same-store and transitioning portfolio increase by 6.2% from second quarter to third quarter and increase again by 5.7% between third and fourth quarter. These increases in our managed care volume are being driven by growing confidence from managed care payers that their patients can be safely cared for in the post-acute setting in a cost-effective way and that it is not always necessary to hospitalize COVID-positive patients. It is also a reflection that certain elective procedures that have been put on hold are beginning to normalize even in the context of the pandemic. While occupancies are still lower than they were a year ago at this time, our results this quarter yet again show the resilience of our model and our local leaders' ability to adapt to changing circumstances in their local healthcare markets. Also, this improvement in our admissions trends not only demonstrates that we can continue to perform well as the pandemic stubbornly persists, but it also gives us insight into the post-pandemic environment and demonstrates that we are in an excellent position to see occupancies normalized to pre-pandemic levels, a pattern that we have noticed in some of our largest markets. We've been working arm-in-arm with our long-time hospital and managed care partners and formed relationships with new partners in several markets to care for complex patients and solidify the critical role we play in the post-acute care continuum as an essential and cost-effective setting for high-acuity patients. Our strong results in the quarter do not come from any one thing, but rather is the aggregation of continued improvements and skilled mix across the portfolio improved admission trends, availability of more frequent and broader COVID testing, increased managed care volumes, cost-saving initiatives, improved cash collections, sequestration suspension, and improved Medicaid funding in certain states. During the latest and most significant surge of COVID-19 positivity rates in states like Texas, Arizona, and California, we saw an accompanying increase in skilled mix, However, unlike prior quarters where COVID surges were accompanied by occupancy declines, during the fourth quarter we saw consolidated occupancies remain flat. Just as COVID positivity rates have varied market to market, so has the impact on our occupancies. Most notably, we have seen some very encouraging trends emerging, particularly in our most mature operations. More specifically, we have seen over 30% of our same store operations improve their occupancies to over 80%, which is at or near consolidated pre-COVID levels. In some markets like Utah, we have seen entire clusters already reach pre-COVID levels. As is true of many things in our business, it's typical to see trends in certain markets act as very reliable indicators for what is to come in our other geographies. And while we have a long way to go, we like where we are and the direction in which we are headed. We are again reaffirming our guidance for 2021 with annual earnings per share guidance of $3.44 to $3.56 for 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 percent over the midpoint of our 2020 guidance, which, as a reminder, we increased twice during 2020. We remain confident that we can achieve this guidance as we begin to see the positive impact of vaccination efforts and begin to realize the enormous upside in our newly acquired operations, coupled with the opportunistic acquisitions that we see on the horizon. But more importantly, we believe, when this pandemic is behind us, that our operations are primed to rebuild occupancies and continue to gain additional market share as a result of these deepened relationships with acute care providers and other health care partners. We again remind you that the results for the quarter and the year do not include any benefit related to CARES Act provider relief funds. We have returned all of the relief funds we have received to date, which included approximately $109 million in provider grants in July, $33 million in the fourth quarter, and an additional $5 million we received in January. We are aware of the ongoing discussions in Washington, D.C. related to additional CARES Act funding. If there is another round of funding, we will reevaluate the purpose and needs of any future grants specifically considering potential costly testing requirements or other newly mandated regulations and the terms and conditions that accompany those funds. However, when we consider our healthy balance sheet and liquidity, which we have taken great care to protect and reflect on our financial performance during the pandemic, we are committed to operate as best we can without CARES Act funding. While this pandemic continues to evolve, we are confident that our local leaders, caregivers, and other frontline staff will continue to provide amazing service to their patients, families, and our society as a whole. We have great hope that as the vaccines continue to become available that we will see significant reductions in infection rates in our operations and the communities at large. We can't even begin to express our love and appreciation for all of our amazing team members. and all that they're doing to help get us through this unprecedented time. We look forward to 2021 and to continue to show our dedication to all those that have entrusted us with the care of their loved ones. And with that, I'll ask Chad to give us an update on our recent investment activity. Chad? Thank you, Barry.