The Ensign Group, Inc.

Good day, and thank you for standing by, and welcome to Ensign Group Incorporated's second quarter fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Chad Keech, Chief Investment Officer. 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 EnzymeGroup.net. A replay of this call will also be available on our website until 5 p.m. Pacific on Friday, August 25, 2023. We want to remind any listeners that may be listening to a replay of this call that that all statements made are as of today, July 28, 2023, 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 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 Ensign Group 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 the other operating subsidiaries through contractual relationships with such subsidiaries. In addition, our wholly owned 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. Enzyme also owns Standard Bear 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 Enzyme, as well as third-party tenants that are unaffiliated with the Enzyme Group. The words Enzyme, Company, We, Our, and Us refer to the Enzyme Group, Inc., and its consolidated subsidiaries. All of our operating subsidiaries, the Service Center, Standard Bear Healthcare REIT, and the insurance 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 use of the words we, us, our, and similar terms we may use today, are not meant to imply, nor should it be construed as meaning that the Enzyme Group 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-Q. And with that, I'll turn the call over to Barry Port, our CEO. Barry?

Thanks, Chad, and thank you everyone for joining us today. We're very happy with the record results we reported this quarter as our local leaders and their teams achieved excellent clinical and financial results, even when the operating environment continues to present challenges. During the quarter, we saw continued improvement in occupancy, skilled revenue, skilled days, and managed care revenues, which is particularly impressive given persistent labor market pressures and the return of more typical seasonality. As we anticipated in our last report, we saw fewer admissions in the second quarter, which is typical in the summer months as seasonal factors impact patient flow. However, our occupancy performance remained strong with same-store occupancy of 78.5% as of the end of the quarter, which was an increase of 3.97% over the prior year quarter. We are confident that we're on a path to reach and eventually exceed our pre-COVID same store occupancy of 80.1% as we move into the hired mission months of fall and winter. In addition, we may never have seen as much potential to drive organic growth across our portfolio than we do right now. There are so many opportunities in front of us to improve labor and drive occupancy and skilled mix as we continue to successfully transition 45 recently acquired operations. We are very excited to see our local field and service center partners share and apply best practices as they respond to the significant labor market challenges. As they instill our customer second culture into each operation, we have seen and will continue to see lower turnover and less usage of third-party nursing agencies, which again improved for the sixth month in a row as of June 30th. We also see the enormous growth opportunities in SAMHSA occupancy and enhancing our ability to care for skilled patients in a way that best serves each unique healthcare market. During the quarter, our SAMHSA operations grew skilled next revenue and skilled next days by 8.8% and 5.6% respectively over the prior year quarter. We also continue to build stronger relationships with our managed care partners due to the better coordination of care increased capabilities, and strong clinical outcomes. As a result, we saw increased volume in our same store and transitioning combined managed care census and managed care revenue, which increased during the quarter by 8.2% and 12.2%, respectively, over the prior year. As we indicated last quarter, we continue to see that our skilled mix for both revenue and census remains elevated when compared to pre-COVID levels. showing just how important high-quality post-acute services are within the continuum of care. We continue to demonstrate our ability to find, transition, and improve our recently acquired operations. We are encouraged to see our ability to transition new operations continue to improve with each and every acquisition, both in larger and smaller deals. Because we've demonstrated a track record for successfully transitioning operations throughout our history, We sometimes worry that we under-emphasize how truly remarkable these transformations are. The process each operation goes through to achieve the clinical and financial results we expect is so complex and varies so much building by building, it's difficult to describe unless you've seen it close up. But this is where our local approach really shines. With the support of local cluster and service center experts, each leadership team is empowered to implement the changes their operation demands down to every aspect of clinical offerings and expense management. So when we see these results in many of these operations across diverse set of locations, all in a relatively short period of time, it shows that we are learning and improving each time we grow. We expect some of these operations to face some transitional growth pains during the year, including some pressures on occupancy that are typical during the summer months, but we can't wait to see how these operations continue to contribute to our results as they mature, and we look forward to many, many more like them in the near and long-term future. Due to our solid skilled mix and occupancy growth, as well as continued strength from our recent acquisitions, we are increasing and narrowing our annual 2023 earnings guidance to between $4.70 and $4.78 per diluted share, up from $4.64 to $4.77 per diluted share. This new midpoint of our 2023 earnings guidance represents an increase of 14.5% over our 2022 results and is 30.2% higher than our 2021 results. We're also raising our annual revenue guidance to between $3.69 billion and $3.73 billion, up from our previous guidance of $3.68 billion to $3.73 billion. This increased guidance comes on top of the enormous growth we experienced in the last few years. To put this performance in perspective, since we spun out the pennant group in 2019, we have seen adjusted EPS grow by 166%, with a compound annual growth rate of 27.7%. This performance is not due to some large event or a single transformative transaction, but instead is the result of consistent growth and performance quarter after quarter that comes from following proven InSign principles. We are excited about the upcoming year and confident that our partners will continue to manage and innovate through all the lingering challenges on the labor front. All of these results we have talked about today are only made possible by the relentless efforts of our leaders, caregivers, and their continued endurance and strength, all while many of them were helping transition 45 recently acquired operations. We look forward to even more clinical and financial success during the remainder of the year as our focus is following and protecting the operational principles that got us here. Now, I'll ask Chad to provide some additional insights regarding our recent growth. Chad?