The Ensign Group, Inc.

Thank you for standing by. My name is Jessica and I will be your conference operator today. At this time, I would like to welcome everyone to the Ensign Q4 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mr. Keech. 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, March 1, 2024. We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, February 2, 2024, 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 FCC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Enzyme 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 Enzyme 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 the other independent subsidiaries through contractual relationships with such subsidiaries. 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 Bear Healthcare REIT, Inc., which is a captive real estate investment trust that invests in healthcare properties and enters into lease arrangements 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 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 words we, us, and our in similar terms, 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-K. And with that, I'll turn the call over to Barry Port, our CEO.

Barry? Thank you, Chad, and thank you everyone for joining us today. Our local teams have once again posted impressive clinical and financial results and continue to build remarkable momentum in each market across our portfolio. Our success is entirely due to the efforts and commitment of those leadership teams, caregivers, field resources, and service center partners. One of our most important priorities is to support those that care for our patients every day. After another record quarter, we're excited about the many opportunities to continue to capture the enormous potential inherent in our portfolio as we relentlessly focus on our operational fundamentals, both in existing operations and the growing number of new acquisitions. We are pleased to see same store occupancy of 79.9%, which grew by 240 basis points over the prior year quarter. In addition, we saw an improvement in occupancy on a sequential basis of 40 basis points over the third quarter. We saw increased volume in our combined same store and transitioning managed care revenue and managed care census, which increased during the quarter by 12.3% and 3.5% respectively over the prior year quarter as a result of strengthened relationships with our managed care partners and quality outcomes. As expected, we saw an increase in our skilled mix during the quarter as our same-store days for the quarter increased by 110 basis points sequentially over the third quarter. We are encouraged by the continued strength in our skilled mix as it demonstrates the continuously increasing demand for skilled post-acute services. By applying proven cultural and operational principles, our local leaders continue to retain and recruit high-caliber individuals which then go on to achieve tremendous success across our growing footprint. We continue to be encouraged by the reduction in our use of third-party nursing agencies, which improved again for the fourth quarter in a row, representing a reduction in agency usage of 58% since its peak in December 2022. We're also thrilled to see lower turnover for the third year in a row, which is a result of our local leaders' focus on our customer second philosophy, which has and will continue to result in better patient care and outcomes. Likewise, we are also encouraged to see the pace of wage inflation continue to slow along with improvement in our ability to successfully recruit new talent. As of the end of the quarter, we saw net new hires increased by approximately 6,000 employees over the course of the year, which is particularly impressive given that from the start of the pandemic in 2020, until December 2023, there's been a 9% reduction in employment for the skilled nursing sector. We are confident that by being true to our cultural values, strong clinical results, and proven operating principles, that the near and long-term future is bright. We are humbled by what we were able to accomplish in 2023, but we are eager to continue to drive improvements in our existing portfolio and take advantage of the acquisition opportunities that we see on the horizon. We are issuing our 2024 earnings guidance of $5.29 to $5.47 per diluted share and annual revenue guidance of 4.13 billion to 4.17 billion. The midpoint of this 2024 earnings guidance represents an increase of 13% over our 2023 results and is 30% higher than our 2022 results. The annual guidance comes on top of the extraordinary 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 168% with a compound annual growth rate of 28%. The performance is not due to some large event or single transformative transaction, but instead, is the result of consistent growth and performance quarter after quarter, which comes from following the proven InSign principles. We are excited about the upcoming year and confident that our partners will continue to apply our proven locally driven healthcare model. As we evaluate our expanding portfolio, we continue to see enormous organic growth potential within our existing portfolio and are very excited about the continued growth and occupancies that we experienced during the fourth quarter and that continues so far in the first quarter of this year. There are so many opportunities in front of us to improve in expense management and drive occupancy and skilled mix as we continue to successfully unlock value in the dozens of recently acquired operations. We are poised to again showcase our ability to find, acquire, and transition performing and underperforming operations by applying proven inside principles developed over two decades. When we consider the health of our organization, combined with our culture and proven local leadership strategy, we are well positioned to have another outstanding year in 2024. Next, I'll ask Chad to provide some additional insights regarding our recent growth. Chad?