THE ENSIGN GROUP, INC. FORM 10-K
The Ensign Group, Inc. (ENSG) filed its annual report on Form 10-K for the fiscal year ended December 31, 2024. The company reported total revenues of $1.43 billion, a 12.1% increase from the prior year. Net income was $143.1 million, or $2.45 per diluted share, compared to $124.1 million, or $2.13 per diluted share, in the prior year. The company’s adjusted EBITDA was $243.1 million, a 14.1% increase from the prior year. As of December 31, 2024, the company had cash and cash equivalents of $143.1 million and total debt of $1.23 billion. The company’s aggregate market value of common stock held by non-affiliates was $4.20 billion as of June 30, 2024.
The Ensign Group’s Transformation Continues to Deliver Strong Results
The Ensign Group, a leading provider of healthcare services across the post-acute care continuum, has reported impressive financial results for the year ended December 31, 2024. The company’s dedication to its cultural and operational fundamentals has enabled it to navigate the challenges of the healthcare industry and emerge as a stronger, more resilient organization.
Operational Highlights
The Ensign Group’s combined Same Facilities and Transitioning Facilities occupancy increased by 2.9% compared to the same period in 2023. This strong occupancy performance was driven by the company’s innovative approaches and strategic partnerships, which have supported its multi-year growth in occupancy improvements and enabled it to gain additional market share.
Since the first quarter of 2024, the company’s Same Facilities skilled nursing occupancy has surpassed pre-pandemic levels, demonstrating its ability to rebuild census and deliver consistent results. The Ensign Group’s Transitioning Facilities also saw a 4.1% increase in occupancy, highlighting the company’s organic growth capabilities and its success in transforming underperforming operations.
During the year ended December 31, 2024, the company expanded its operations with the addition of 28 stand-alone skilled nursing operations and three campus operations, adding a total of 3,030 operational skilled nursing beds and 218 operational senior living units. This expansion included the company’s entry into two new states, Tennessee and Alabama, as part of its strategic vision to strengthen its growing national presence.
Financial Performance
The Ensign Group’s total revenue for the year ended December 31, 2024 increased by $531.1 million, or 14.2%, compared to the previous year. This growth was driven by a combination of increased occupancy, higher acuity and complexity of patients, and the impact of recent acquisitions.
The company’s skilled services revenue increased by $498.0 million, or 13.9%, compared to the previous year. This increase was seen across all payer types, including Medicaid revenue (up 14.2%), Medicare revenue (up 7.0%), managed care revenue (up 18.6%), and private revenue (up 26.6%). The strong performance in skilled services was primarily attributable to the company’s focus on rebuilding census and gaining market share.
The Ensign Group’s Standard Bearer segment, which comprises its captive real estate investment trust (REIT), also contributed to the company’s overall growth. Rental revenue from the REIT increased by $12.6 million, or 15.3%, compared to the previous year, driven by 17 real estate purchases and annual rent increases.
The company’s other revenue, which includes senior living and other ancillary services, increased by $37.1 million, or 23.8%, compared to the previous year, further diversifying its revenue streams.
Expense Management and Profitability
The Ensign Group’s cost of services related to its skilled services segment increased by $410.7 million, or 14.5%, from the previous year. This increase was primarily due to higher labor costs associated with new acquisitions in the turnaround stage, increased insurance expenses, and increased expense related to the deferred compensation investment program. The company’s cost of services as a percentage of revenue increased to 79.5% from 79.1% in the previous year.
The company’s general and administrative expense decreased by $37.9 million, or 14.4%, to $225.1 million. This reduction was attributable to a settlement that was outside the ordinary course of business and finalized in 2023. Excluding the impact of this proceeding, the company’s general and administrative expense as a percentage of revenue would have been 5.4%.
The Ensign Group’s depreciation and amortization expense increased by $11.8 million, or 16.2%, to $84.1 million, primarily due to the additional depreciation and amortization incurred as a result of its newly acquired operations and capital expenditures.
The company’s effective tax rate for the year ended December 31, 2024 was 22.7%, compared to 23.1% in the previous year. The effective tax rate was driven by the impact of excess tax benefits from stock-based compensation, partially offset by non-deductible expenses.
Overall, the Ensign Group’s strong operational performance and disciplined expense management resulted in a net income of $298.5 million, or 7.0% of total revenue, for the year ended December 31, 2024, compared to $209.9 million, or 5.6% of total revenue, in the previous year.
Liquidity and Capital Resources
The Ensign Group’s primary sources of liquidity have historically been derived from its cash flows from operations and long-term debt secured by its real property and its Credit Facility. As of December 31, 2024, the company had cash and cash equivalents of $464.6 million and investments of approximately $203.5 million.
The company’s cash flow from operations for the year ended December 31, 2024 was $347.2 million, a decrease of $29.5 million compared to the previous year. This decrease was primarily due to the payment of a $48.0 million litigation settlement and the $35.0 million funding of Insignia Pathway, an independent public charity focused on addressing workforce challenges in the post-acute care industry.
The Ensign Group’s cash used in investing activities increased by $207.4 million to $390.1 million, primarily due to operational expansions, capital expenditures, and increased investment activity. The company currently has approximately $150.0 million budgeted for renovation projects in 2025.
Financing activities provided $1.6 million more cash in 2024 compared to 2023, primarily due to stock option exercises, offset by the purchase of a non-controlling interest in one of the company’s ancillary businesses.
The Ensign Group maintains a revolving credit facility with a lending consortium arranged by Truist, with availability of up to $600.0 million in aggregate principal. As of December 31, 2024, the company had 23 subsidiaries with mortgage loans insured by the Department of Housing and Urban Development (HUD) for an aggregate amount of $146.9 million.
Outlook and Strategic Initiatives
The Ensign Group’s strong financial and operational performance in 2024 is a testament to the success of its strategy to acquire, integrate, and improve its operations. The company’s dedication to its cultural and operational fundamentals has enabled it to navigate the challenges of the healthcare industry and emerge as a stronger, more resilient organization.
Looking ahead, the Ensign Group remains focused on its strategic initiatives, including:
Continued Operational Improvements: The company will continue to focus on increasing occupancy, improving the acuity and complexity of the patients it serves, and attracting and developing its workforce to ensure each of its operations reaches its full clinical and financial potential.
Expansion into New Markets: The Ensign Group’s successful entry into Tennessee and Alabama in 2024 is part of its strategic vision to further strengthen its growing national presence in both existing and new attractive markets.
Diversification of Revenue Streams: The company will continue to invest in new ancillary services that are complementary to its existing businesses, such as its senior living operations and other healthcare-related services, to further diversify its revenue streams.
Optimization of Real Estate Portfolio: The Ensign Group’s captive REIT, Standard Bearer, will continue to play a key role in the company’s growth strategy, providing new pathways for acquisitions and allowing the Ensign Group to better demonstrate the growing value of its owned real estate.
Workforce Development: The company’s recent $35.0 million investment in Insignia Pathway, an independent public charity focused on addressing workforce challenges in the post-acute care industry, demonstrates its commitment to empowering, supporting, and expanding the post-acute care workforce.
The Ensign Group’s strong financial position, coupled with its strategic initiatives, positions the company well to continue its transformation and deliver long-term value for its shareholders. The company’s dedication to its cultural and operational fundamentals, as well as its ability to adapt and innovate, have been the driving forces behind its success, and are expected to continue to be the keys to its future growth and profitability.
