The Ensign Group, Inc. (NASDAQ:ENSG) Q4 2022 Earnings Call Transcript

Suzanne Snapper: Yes, great question. Obviously, we have the announcement out there on the end of the PHE with the White House then leaning towards that May date. And so as we kind of look through that, we’re planning on getting some additional funding through that May date from the states that have been supportive. And as we’ve talked on previous calls, just a reminder that was California, Arizona and Texas. I think on the last call, we talked about that California really has broken away from tying anything to the state of emergency. So, they’ve really said that they’re going to be supportive for the remainder of the year. So, I feel great about California. Arizona has really thought through this good and well. And as they look to put the dollars in more into the rate, and so we’ve already started to see some of that come through in Arizona.

And then Texas, I think, is the last one out there. They’ve kind of done a couple of things. They’ve looked at the PHE, but they’ve also done some grants that we’re expecting to see come in through the year. And then as we’ve talked to you guys about there’s that potential that we would have a hole between kind of when the state of emergency and the grants may not cover to the end of — or beginning of September. So, we feel pretty good about how the states are lining up, what it’s going to be a mix of kind of continued funding additional rate funding and then some of these grant programs that we’ve seen in the states put in place. Barry, what did I miss?

Barry Port: I think that’s it, Ben. I mean, ultimately, I think as our guidance indicates, we feel pretty strong about even though there are some small unknowns from state to state. Overall, I think we feel like there’s a pretty clear pathway for us to not have some massive blips on the state reimbursement front as FMAP fades. Like we mentioned earlier, it doesn’t really just go away. It steps down. And so even with that step down, if there were no — like I say, it wasn’t a bridge in Texas, for example, I don’t think that would impact our outlook for the year at all.

Operator: One moment for our next question please. And it comes from the line of Tao Qiu with Stifel. Please proceed.

Tao Qiu: Congrats on closing the North American transaction. So Barry, I really appreciate the comment on the performance of the Legend portfolio. So, on the North American assets, I think Sabra has reported that their EBITDAR rent coverage for these assets have been about 1.1 times. So it sounds like this should be accretive on day one. Are these California assets different from Legend or your typical turnaround opportunities if you look at them from either occupancy, scale mix or cost-saving potential? And how long do you think it would take you to get your stabilization? And as a follow-up, could you also comment on the leadership pipeline and the current capacity to take on more assets?

Barry Port: Yes. That’s great question, Tao. We — so this portfolio is an excellent one. It’s one we’ve — there was an opportunity to look at it a few years back. We’re excited about them. We know these buildings. They are buildings that we have competed with in the past. They are buildings that we have relationships with some of the leaders. And so, we’re really excited about this portfolio. We think it will be a great addition. I will say this, not just about North America, but about transitions we’re seeing in general. Given the labor challenges just globally, most buildings and these are no exception, have high amounts of agency labor usage, and so more than obviously typical, as we’re seeing ourselves. But these, in particular, have quite a bit.