ENSG - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Ensign Group’s First Quarter Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Chad Keetch, Executive Vice President. sir. begin Please

Chad Keetch

that our not result revise our or complete replay Welcome, any our factors more to affiliates all forward-looking any new its other discussion remind or today. Norma. that reason. the securities This where statements be cause risks which our of review future listeners thank for any or for of a about of for on this are laws, and in information, in made also XX, undue a update May to subsequent section we call. environment implied beliefs you results these is circumstances of call will as forward-looking on made actual May filings We statements A XXXX, that our Thank want uncertainties call statements to results. assumptions arise could Friday, SEC These operate. from and not forward-looking until this are materially today of required today’s filed everyone, and to X:XX impact Also, business updated based Except our Ensign federal us today events, those will statements and of reliance Relations undertake place listening Investor We a should any may on our today’s differ encouraged expressed to as as available subject that by do publicly yesterday. change at been are and and Listeners are to changes earnings management’s call. on joining be on www.ensigngroup.net. available replay expectations, statements to on you, be the X, and website website statements press XXXX. nor announcement have Pacific release current p.m. not could

revenues. Certain direct operating with resources, payroll, and contractual subsidiaries, independent relationships human of through the Ensign such collectively or information assets, a subsidiaries. our as holding other accounting, referred management operating The legal, employees is Group provide company the subsidiaries to wholly-owned to technology, addition, no In Center, Service with services other risk

subsidiary our is available and exclusion I’ll to our operated to of with the And turn meant refer direct subsidiaries call reports. be in upon XX-Q. insurance our All be claims-made us, activities should business, nor can GAAP Group is our independent Form CEO. addition, and we, and wholly-owned imply, Christopher operating by of our results, over with today our the viewed as on supplement professional non-GAAP reporting Also, words they Group. References subsidiaries, are insurance President as we are to has which or it captive of our our company, Ensign workers’ company revenue operated our measures any should non-GAAP that to relied but that and subsidiaries captive, wholly-owned own liabilities. its as employees we us for and the not certain The subsidiary, for Ensign Ensign, as operating coverage terms the provides the used by refer these well reconciliation as the press to management, When companies available assets, understanding GAAP that, Group operating employees Ensign GAAP believe to consolidated yesterday’s complete the captive more liability that Christensen, not the separate A compensation and have our to herein well the as subsidiaries. a GAAP our and insurance the are we with In Service metrics. and assets that wholly-owned release their terms its assets. provide Center meaning and to together or consolidated construed similar we, and general

Christopher Christensen

in the morning, pleased of the about We're healthcare serve. report operations Thanks, Chad. because in of as of skilled continued results the and managed the by record revenue outstanding healthcare they materializing, continue are in quarter These as made trusts We've experienced in only worked we achieved significant these transition the We're first unique to to as leaders to ramp to caring services progress driven is serve. same in that positive the we into in we our tailor in the store occupancy their many in gain in needs improvements strong growth excited the the operations both everyone. Texas. tirelessly facilities, community growth they care quarter. transition including and the Good fourth possible momentum local quarter that now revenues Utah of experienced markets

which encouraged they haven’t expect we more about We excited the begun future. what enormous especially operations, the contribute are progress also by of the most making to will in operations, we we're we're our and have in newer mature in our potential

the year XX% the skilled and During XX% over we improvement in prior quarter income over experienced fourth our the quarter, and of segment transitional dramatic XXXX. services quarter

over per experienced per to $X.XX prior adjusted year the an basis earnings over earnings increase of GAAP the share diluted with per in to up positive points trends our record the share was XXX XX% our for diluted share. basis and prior quarter We're in per same-store $X.XX year operations share was in quarter and that announce a our also excited We operations, points XX quarter. transitioning occupancy both

the January have leaders In living operations for an XX% was quarter net XXXX, XXX addition, nursing skilled quarter. of assisting been and organization. local adjusted the our and over $XX.X million of Since million, the our income net was year consolidated a tirelessly integrating talented into consolidated $XX.X prior GAAP increase income

gate, longer. transitions our right taken while made Some of the these others positive to have results much out of contributions

XX proven again. to to We're the over encouraged bear and fruit. operation In and fact, pathway years in several years this of and not multi-year operations all clinically acquisitions, nearly said, With to to over become the of period we’ve for to very unusual that beginning it's progress healthy take truly see an transitioning process XXX financially. over this

strengthening on the in With across to care. programs and continue more we rates complex to capabilities extending our invest continuum, leaders care for the in the and outcomes, readmission clinical post-acute patients post-acute focus best lowering

As a improvements we’re seeing result, significant drive in which patient in of and to outcomes mix. continue will both skilled satisfaction, occupancy

may you of implemented in some methodology the ratings. As know, a new CMS star

our quality led expected, those to adjust the reasons to financial is four new and temporary we rest are we some be the and to to this but and five delivered temporary improving the expect continuing seeing return As reduction of expect and this But care our to to we in standards ratings, star and upward previous in we we’re occupancy improvements of trends. mix a performance. draw assured, skilled

in real Chad to improving results As discuss will a and portfolio additional the owned add methodically by in operating our estate we assets. real acquiring value by operations minute, continue our to estate

announced incredible important credit all a assets. shareholders the estate in XXXX, spin-off real believe REIT for the of As be our that the or one our been of have overlooked. no assets that our received estate XXX always value gives value as flexibility to estate included future. in the We CareTrust amounts own first, we the of the underlying reminder, real little organization then our in in in XX we’ve to but underlying operations, but a operationally recognize start driven real since an and past believe which added estate We’ll real we growing and ownership it’s also us

living, significant center value financial to to build the services. pleased continue home operations that leaders achieved medical non-emergency including clinical other business, Under nursing while operations. of skilled in service hospice, and key have our we these assisted report simultaneously consistent core post-acute direction also and bolstering of resources, dedicated transportation their We’re lines other and results our and care health

segment standalone and revenue by and over health Cornerstone by Also X% LLC, and During portfolio of prior in year its and income portfolio hospice company respectively XX% and consist revenue its over Bridgestone income XX the independent quarter, quarter, the grew XX% segment the assisted in subsidiary, year our living XX living Living campuses the grew home and quarter. states, XX% which quarter. Healthcare, XX during our prior operations respectively

operations each skilled While from operations independent benefit these little to with their in no these Ensign, our Ensign. their two that from of come affiliation synergies on within dependence both certain nursing business leadership respective segments teams tried

We expect each of by driving underperforming see and operations to these acquiring organic segments grow growth.

wanted the their momentum. As ways continue minimal it size businesses the made to Collectively, they to completed with ventures the portfolio, our receive words shareholders all that quickly which along segments, so, within few for value these credit new XXXX. Ensign these I a in CMS. have also other public healthcare recent our of two with to initial offering when do its business disruption approaching evaluate new say announcement created, by will about in the we are

We’re with proposed very October X.X% increase the market net of starting basket XXXX. of in pleased

newest also encouraged reform called proposal CMS’s PDPM. Payment by We’re Patient-Driven or Model payment

out, system. is the sustainable about operators we’re new well across system, how a closely proposed so much this reimbursement number is ultimately there that to pleased and payment learn But working on we’re new this efficient will reimbursement our systems, our outcomes of quality of generation. relentless including and changes play confident any the regardless that in focus While very develop CMS predictable country with serve to latest

an for guidance XXXX. effective between be over XX.X% and with income the expenses, this and XXXX earnings the We’re $X.XX reform company’s reduced over earnings increase tax Overall, recent $X.XX annual share. our represents from XXXX of per share XX% XXXX. to midpoint to that a XX.X% The estimated Even the guidance rate represented guidance reaffirming annual tax a a midpoint diluted XX.X% results. increase related from our per for our

about investment We ask outcomes are I’ll continuing the to that, drive to Chad? our healthcare and give financial year results. and update on And and look activities. excited forward growth quality us the Chad an recent with to corresponding coming

Chad Keetch

Thank you, Christopher.

quarterly model to we our our increased a long-term value the hope shows is our ability we a dividend paid share. our operating confidence have which we shareholders. dividend, During year This return in to consecutive of $X.XXX cash XXth continued quarter, and per

been year have a dividend-paying increased every since. since that We have dividend and company XXXX

a Texas; and our assisted During in Living, Living, Senior assisted real the operations XX-unit facility the XX-unit DeSoto, Deer Hill, living of a Cedar Creek in quarter, subsidiary, Cedar Hills Texas. Bridgestone living facility living Living, Senior portfolio acquired estate and assisted

care new With This in facility of healthcare accelerate acquisition Texas-based and in Village, hospital standalone by our be good ones. announced estate local with This the the long-term our operations to campuses arrangement. living XX-bed to the units and assisted XX Village, footprint currently Dallas leaders of post-acute a that and Keystone and units, strongest care both The Grace expanding these Yesterday a has adjacent portfolio XX located operations Inc., the effective of the operation outstanding living full-serviced XX-acre Villages our choice as include included an estate joins Healthcare, operations acquired can Peoria Dallas, loved adds under Post-Acute campus LLC, Bandera operators units. and their XXX-bed that independent hands, subsidiary, our living operates Presbyterian quality assisted Care in skilled in nursing of campus portfolio real care of XX the concentrations area Presbyterian skilled one assisted company, care acquired senior beds, Arizona. and located independent and independent units. memory that of and and Dallas X, retirement is livings patients Great a XX known a are operated acute the XXX our post-acute team of acquisitions, the Rehabilitation, Bridgestone provide nursing now which our adds to we X portions will living Arizona. care XXXX as in to is was a truly ability Peoria, the third-party we on April and acquisition Texas. that lease of real Arizona-based and

additions potential XX bring XX operations, at of of with the operations each operations, financial to being living assisted of as We include across living XXX the to we and healthcare have now businesses operations, opportunity, because living enhance And real of and facilities. acquisition and we are Ensign's agencies, potential states. the skilled home nursing outcomes. XX growing home own which carefully estate health mentioned very XXX these portfolio each XX clinical see selective our and These XX chosen assisted independent we XX Christopher agencies hospice four care

are We exiting small a size that or of types across continue transactions that steady from non-profits our sources regional, turnaround selling segments. These potential operators flow in ranging all the see assets. a and operators business variety come of to sellers, large opportunities acquisition and of business from different to non-core are

transactions post-acute two consummate value-based transactions time. in make to B and future. approach first big attract of two and attractive our Almost us in the all non-profits completed believe solution that sellers will one, continue part of of to an and XXXX with non-profits for XXXX and We we fit these the were the and categories, three one completed at a and care

opportunities future continue preparation of evolving to our leaders. the train and skilled outstanding locally is and that nursing several clinical with of growth well-known for larger assets, these we of recruit driven we and in to With to see leaders. We portfolios also availability continue participate marketing to In said, larger process some sellers. primary constraint growth, expect operational

if personally, help pathway and sustained only long deal and run. very and their the health As can take over see continued team long caregivers term investors, will each commitment to a of community we do a to the we our

of the long-term as success keys and the we of few our the we the health rates exceptions ensure to very operation. One been ensure that the will pay has negotiate prices lease to

continue expect true we our and throughout transactions confident these The we turnaround and if to call working participate in to I'll the back disciplined We on the other there strong, that majority portfolios. currently at we have it to pipeline to path over of of for portions even the we that with remain and the handful prices. right the strategy, that close be we many typical only means year. our that, of had opportunities each we remain to remind transactions or that on opportunity And Christopher. remained are see larger to will turn And are operation-driven

Christopher Christensen

Thanks, Chad.

I the discussed provide which I results. an often want I Texas. the Before you give update turn XX our want more over Legend information And to call to on in consisted to of on quarterly operations acquisition, Suzanne,

newness time of acquisition, perceived Legend you of we portfolio similarities, that locations of relative explained the most transition the the combined operation, the facilities, to remember, geographic with for that cultural our As perfect historical a performance the strategic at the with size. the Legend made the and

discussed slower that led anticipated. been the at As well declining almost performance over than the the we we other factors has to before -- and a of in began differences cultural as took much transition as trend combination

replaced operators, Throughout locally expect the We're they the these portfolio signed lost the in Texas and driven happy weakness However, some in of that them. performing we Over time, highly have never over all or these total our the Legend or operations for in but have local XXX%, by is revenue report solid that saw million EBIT both $X.X We're some very as million will be portfolio confident many its California, learned -- this the in other by contributors process it’s buildings and in the year deals, prior Legend we've many Arizona come. increase building XX% an teams in almost faith majority cluster leadership made the leaders combination model. now in specifically progress like portfolio in vast we would. we years as the transaction, talented our $X.X lessons. with quarter. of and still of done experienced of building pockets as and XX great well, shape in larger we've operations, We new to that X small to

led is in acquisitions that to successes in in to ones. turn that larger smaller principles proven and of the transactions One the Legend, apply of same each larger those but that our we’ve lessons transitions take longer Shea will have

the larger in scope, long best in the learned acquisitions what and apply opportunity another we a to pursue we of transactions arise acquirers, frequent lessons In is decisions term to always to future these solid we'll that should make done. transition As each view. take long-term how about

transitioning But of -- Post-Acute, Clay by Let occupancy Wagner operation begun a over of in grown and control, be Barb just facility they by examples Shea see share both me individuals choice, this led XXX-bed Managed our they was couple and determine COO to of in CEO steadily missing of they to we’ve in what quarter. and Medicare. fill time low operations, those North and plans operation of efforts Duncan X-star the advantage effect located how groups quickly of to with assumed the was Clay this trouble of losses. acquisition to services. an able Star community When opening in and become to the decline census their the operating Barb a operation. partnered hospitals XX% has the from specialized multi-year at acquisition, XX%. the time with experiencing overcome the was a become reputation star embraced At devastating physician would has also rating, and doors needs and untapped niche They Medicare low of midst

Hospice by our the an the skilled River Led in campus marketplace, the managed time. assisted care facility our quarter care operation impressive has into in the revenues overall department secure and translated health from integrated Tucson a to Michael [Cynda]. improve Hornhost, premier Johnson unknown standout an quarter segment, for Executive true perfect River amenities Emblem for team has first to a offerings in with same XXXX, hospice in and the occupancy Director valued Emblem key service community Wellness XX% improvement have and marks grown positions, quarter Director by led days and has by compared growth impressive as the state a post-acute and In the compared partner. has impressively, year. highest the They’ve Vicky in to the option living falls worked their choice from home the Michael survey XXXX. and which market. improved and providers. village health as View almost largely tremendous transformation. developing and has quality rector, has superior their revenue Arizona been was grown quarter, Services the Just offer to quarter. they of the has performer in achieved over Executive assisted XXXX transformed located diligently Clinical entirely organically and has service, Stern customer grown continuously the XXXX. they’ve of for XX% has XX% mix first year first days Tucson growth provider in over hospice high In - with living with XX% constant living times and last reputation by EBIT hospice Emblem five undergone Not mix same to operational in competitive Emblem stays Medicare surprisingly, Director quarter hospitals some same senior senior received XX% and compared skilled prior to deepening increased Director This the relationships - and XX% new living Tucson for by patient in the by of satisfaction. its and clinical referral and excellence become relationships View

financial corner that, for time to provide our performance organization open I’ll extraordinary success long-term increased With and appreciate that to potential. the We Emblem insight and is and of then the quarter quality into more in organic XXXX examples prior As our a growth responsible over management, give XX% are found allowing guidance, quarter. the turn and the by updated up cost clinical over questions. are EBIT you will year that result these detail we hope company’s why today, important its some so you on Susan the our Suzanne? optimistic it in of to the agency’s we’ll about this first the leaders of share near us every

Suzanne Snapper

transitional record XX.X%, yesterday. occupancy managed million was contained Transitioning over at cash skilled and Christopher, million, adjusted at an increase GAAP of revenue and prior million. cash of the press million $XX.X XX and diluted segment an skilled to Other $XX.X metrics points. segment increase included: income segment the of for was adjusted managed XX% Transitioning million occupancy and and and an X.X%. quarter our XX.X% same per revenue quarter to release of are in the an a share and from and up million per XX.X% increase $X.XX. an Consolidated million, Same-store store and XX.X and X.X GAAP XX%, XX.X%. net for $X.XX was quarter was Detailed generated points. was XX.X% good financials sequentially. filed basis income Highlights was morning, earnings you, XX.X% care skilled increase was health income operations increase up up included XXX income XX-Q Total care was year that $XX.X was net XX.X% was in earnings Thank and March Total at que everyone. quarter revenue first of key skilled $XX.X were was hospice cash home of $XX.X equivalents basis XX share

of also had our availability of million $XXX on credit. line We revolving approximately

our debt-to-EBITDA net EBITDA expect which ratio, the net magnitude impacted and in this the But at We ratio number acquired pace -- continue lease-adjusted as decrease acquisitions. to adjusted grow. quarter could our XXXX to reminder, expect by as from future least debt-to-EBITDA transitioning we operations a be newly to of end and X.X times was

the of non-GAAP our the tax the We and there of impacting to XXXX. that in the GAAP law, note natural adoption as are first that XXXX, also impact that we will XXXX anticipate impact quarter. our fewer to did be the including in wanted compared results items adjustments disasters of many Accordingly,

are we our in mentioned, Christopher As guidance reaffirming XXXX.

of amortization $X.XX half the yet transaction-related of common on: not rate to a of XXXX exclusion closed are the increases, to Medicare anticipated of is $X.XX tax We tax; costs $X.XX outstanding increase anticipated associated the and are inclusion stabilized; to closed acquisitions compensation XX%; reimbursement XXXX. stock-based of the a share. and based provider of the million; diluted and diluted with be and of startup net exclusion exclusion and first of Medicaid average of projecting operations, revenues associated in which rate patient billion shares earnings adjusted per base $X of losses $XX.X with The intangibles; of billion guidance weighted

in our the short-term And skilled quarters changes our Christopher? budgets, influence asymmetrical economy other general delays and the in insurance the with the re-staffing, and call of reimbursement contributing include: systems, Christopher. to seasonality and of I'll center in variation other our Additionally, to impact acquisition state variation that, mix, occupancy activities, turn factors. back factors and accruals and over

Christopher Christensen

again want for joining support. you We today Suzanne. to Thanks, express and thank us and for confidence our appreciation to shareholders our their

We colleagues also the and for the service making our field better Norma, the wouldn’t over I every appreciate guess to call if in you center we’ll for Q&A? day. us mind taking over

Operator

[Operator Instructions].

comes Our first question from of Chad Stifel. Vanacore

is line open. Your

Chad Vanacore

is for Chad. Good morning. This [indiscernible]

question. First

value-based You to guys CMS talk going to that. mentioned to Can little predictability the like system? add new just sustainability move it’s more a some proposed model. bit sounds you the It and about

Christopher Christensen

Yes, give is or to the that much patient. the -- will you of again, person. it’s -- what is here reimburse it I more we guess the that patient, is think be not of the is I patient patient condition you can work you - we it, is is condition more it’s codes, see, the here here what are on actual -- sustainable And it’s reasons it’s sustainable something like on going detail we you therapy diagnosis here we looks much provide something can because and so had how because it what it we the based how but -- is from is or on based that the based something more wish for and on is how that one much of

will because taking be making to stuff through where they expense to whatever it the to get get minutes of taking -- be. be through need to and you them on You've the the there minimum up should that back care of documented is got dataset there tracking care less will cost not things. that them be this or the is And or resident you the patient, one you have many to other of how about that more you. back of documented And nice all it's less things you sure

the the adjustments we're And to good final that fact from will and are to know good This for the I just there be parts will to also have -- able before I the year-to-year, there don't to what's obviously that process passes because the X, X, we to good and patient But come that the generally path. for going hopeful operators occurs. is so with up And that something but with way be X, X out. taxpayers through the something going reiterate, on. and pass of the of come industry guess and consulting other be and they're trying continue operators and is self-sustaining first

Chad Vanacore

star And a right, the impact, those reduction much the the have then new can great. fundamentally? elaborate the rating to for didn't and helpful. very operations, That's temporary you you it of just financial All methodology seem little further in impacts ratings but star and think your the on changes how you

Christopher Christensen

a know your to that it's as but question, impactful be the operations star used X we this that the little at this that other will see. But the and see. ever, just when or information forever few we star at When ratings number But impact. don't we submission to Medicare currently think points of important of that we track get they of -- detail. to better ratings And at ever included increasing you the should is care managed star there financial communicating past. get stage. there by also is a it's answer sector been your some been not that and impact, required to you. more the X why But as It's visible Managed introduced was it I that's the things that for back new too remember, that some that changed I in that's of which our we've and not future. why didn't prepared we'll that. a that ratings much It financial we And you first timely mean, documentation is reimbursement, care are say wasn’t want be are the comes get some all and through than in into to that facilities. of is certain determine star we for different

Chad Vanacore

thinking quarter, and seen it and All occupancy industry just relatively we've And right. Thanks. strong was in struggle then about the there. some have pressures

to drove guys the what in occupancy mature improvement? particularly, are markets? And So your you occupancy that doing improve what

Christopher Christensen

fix because and Candidly self-induced things we the to those it's had to were of weakness probably we've some due things. able some

And increase. as things, occupancy is fix obviously going we so those to

about, in some biggest is fixing had transitioning, overall and the of occupancy the things about a the the improved of of some care to realize. the the that networks lot, have a the of it fixing a impact some managed had. improvement, to or narrowing know I On lot relative the that do which talked think we bigger things I really we saw we've than transaction, of what but people talked relationships does which Utah, Legend with this

that that’s people way managed and embracing do other trying a whole think patient of but together us of managed the instead us help management a in first effective in the way the they away that foremost, to making direction the and helped from it we in each sure the care them Just and patient with industry cost partnering care, too. to of allows I scare help

I I a I to think think that started I that’s that we to did earlier feel everybody, but lot. and can’t benefitted us others that do speak like than

Chad Vanacore

Thanks great. my right, questions. for All taking

Operator

you. Thank

Markets. Frank Morgan question RBC Our of next comes Capital from

open. is line Your

Frank Morgan

Hey Good I wanted start to afternoon. first.

if think is about is -- how in on You look skilled the portfolio your activities larger coming is flurry the right is coming to occurs. valuation do driving market. assets with what I’m to of mentioned into actually and deals you place back that now if from curious there the backdrop market do going think you comments M&A

Christopher Christensen

there whatever think Well, answer they part very said, in been I’ve the up We buyers don’t I’ll second are past. amongst many clean know that that well. should. hope that have the to that. We are out prices going let our Chad facilities the to mean drop is I aren’t think but as the as doing think you the I there of that there

guess I real pay and deals we’ve kind you’re cost, past. will of those what been will one fast run next rate think on more have been to think that on of run than lot to been solid that prices in deals think these contributed these that with in has Frank, debts there So At the result be even then some related -- estate you lot see of escalators I or money has what and or we’ve the I per point, and then about think and see some in a in from do And mortgage is that, -- terms mean those. have that that things a but there payments I often talked two. chasing this, paid don’t results I tack of the the in top away were you can’t seeing When a to enough a rent year will what that sustainable. think the operator of I bed, I

Frank Morgan

these you will Or own just opportunity to to the you have step assets? you’ll think negotiate these working rate? likely and Do more a transaction lease in be have

Christopher Christensen

be I think it both. will

Frank Morgan

Got Switching you. gears.

really care say temporary of having you to the How back, of area lag there are making between the this there rating stars they changes of some your and numbers? you’re some anomaly because impact writing some your managed where only up will care much reimbursement. process would time that through that the have still system mentioning And kind in nuance where were get where actually select go your or you’ll adjustment. managed if of the see confident is there impacts a to your temporary a stars is show of is You potentially

Christopher Christensen

And I there of little been they a mean key us. how bit in They an they long will they’re that look have. recognize is this the healthy do, has they adjustment and with good, Yeah, reflected. as at cut pieces looking relationships absolutely as

think states said, want throughout star obviously and We like on between in I the does and of impact should were of things things our we quickly. there of we rates -- that terms to where them are as and accustomed reimbursement submission to because are was we’re some continue But reputation or impacted we correct ratings ratings we been they but star haven’t in our state we received are expect. a of of that that impact documentation enjoy reflection those that the the the what star do correct and as star something increase to ratings just So the same that can impacted often time. that penalties timely are reimbursement that similarity is on very submitting That new a I have been didn’t feel and things these and the other are there don’t consider and do they period in us while do to the to medicated rewards and us our important quality that a year. track relative of not long us, as lot directly, over we that well we’ve some our done and already there. reasons ratings. will that And improve to We we we for

Frank Morgan

the saw the Got could just attribution mean, how in you saw mentioned to you better sort transitioning of some I a narrowing lot things -- curious the you the stood the improvement, there? you one you. of of I Was Legend on couple much portfolio conceptually a be provide different improved those, Legend improvement from where of better, And driver of any just getting that the was things getting -- of of then primary the improvement those Utah. portfolio would that networks there that of out some

Christopher Christensen

were a that meaningful they improvement. both probably but think they contributors. of I They portion represented significant only the weren’t contributors,

come we for to don’t Colorado. Idaho and improvements and we fruition. to about Arizona Frank, are been that are there too But in in that, facilities other transitioning I things know many though. were know mean talking I have there in -- and things finally quarters starting You other how in

networks up transitioning bucket. our dare So portion of a of a in both the the climb in but and the I guess narrow Utah made improvement significant things, percentage Legend don’t

Frank Morgan

Got you. And necessarily then consolidated expansion at into translating with this a occupancy growth and to revenue growth, on least in not margin terms yet. -- much that basis it’s

So acquisitions that’s XX you a that the give -- basis if there diluting more color that amount like are that’s extract in you to certain these some causing could consolidated recent margin. point margin I you mean drop is us out, of were

labor in color just And And we some -- of commentary investors any questions higher about for there? maybe because wage a labor from about any market? tighter continue so just outlook the to have lots

Christopher Christensen

that think are right. I Yes, you -- I probably think

you is implying the what labor I market are right. has think --

see and like store, out. a better the tightened of play still played them, will see representation you in will be better they’ve making it as acquisition but improvement acquisition and is I is those arena, into probably little doors again, terms the same on than these our mean start we overall in our margins have continue at as and see out the will transitioning And that performance still we’ve think, of had all same same bucket XX% our still we those Doesn’t same as probably will when that margin But see made the to and areas. -- ever we won’t new and diluted, buckets. some transition acquisitions, have Remember, be portfolio we that and be have strain largest acquisition out have we the in ever significant transitioning you overall won’t new feel to has and a at in you margins work and labor bit. been. can our in increase. can more still expressed make same-store the broken we as the has organization year think that as Frank, that point of of you of our portfolio, and get I And our and the diluted. the arena market ago, the that will probably, I from expressed each store lessened But of the look you And we store, that. I realize bucket, we more lessened rest new

my over I’m Sorry, stumbling words.

Frank Morgan

That's alright. back hop I'll Hey and in two the more queue.

as summer store Just the fiscal getting to closer -- years. in maybe we're

as rate of much sort there we thinking then year. Just you're that the the and Anything that rate from growth on CapEx there when look an how run we should for jumps or cash should good Is last about expect Almost be going that whatever that should quarter. of much in worried ops from be flow in about a then terms with for how like rate finally, that -- environment out doubled that opportunity one in is, what And cash out think of run what sustainable the we about? seeing you're good is a Thanks. flow? state-by-state free that and CapEx year basis? Medicaid

Christopher Christensen

Thank you.

three So questions.

The positive don't our Medicaid we first future. see rates incredibly one, Frank, anything or in no, in negative incredibly the

the it that. And I’ll the question, about a So for we're was that's happy flow, all say on I cash with yeah, that. guess second quarter. flow strong

future We strong. expect quarter the that first was be the assigned for although to

to see were So a do million budget quarter. for and terms actually first expect in right the we we but backwards $XX may quarter, year, that of improve CapEx, think I of were we've third a And bit on our and about think in little the you step the dramatically in under second over is I XXXX. track,

have to is well kind the same also disasters throughout flow last and of and quarter. see year of year, to first the in and spend a the our ratio. want as our that again, hopefully you'll this did we I But had natural more debt better we So The will you bit reduce reiterate. don't newbuilds year cash better better better load which get going in little than as get

Operator

next Hambly. our And you. question comes from Thank Dana

Stephens. Your line is Of open.

Dana Hambly

you. thank Hey,

larger deals past do be be something to is term? some lot talked deal you're some would looking You deals near that a like you've you the the My the done and willing larger larger about would of in do in question dilutive certainly sounds it in a to asset. the at

Christopher Christensen

that We -- not expect Legend. trying don't a our not do plan. That's we're deal not we is the did with certainly to way to create impression. that it That's

Chad Keetch

in mean, I right with the say have big now. right now, we I can works confidence no deal

Christopher Christensen

of them of that we there, some But some opportunities it's think see dilutive one might but sense too. we and that know that learned really transactions do would the lot plan good that was out we the some did. like any point, there two do feel and not you years done we've no at frankly, well with large make Dana, lessons. a we three plan think we stage. a this did we've We do we no, really two later But with to And -- at is third let if transaction of

Dana Hambly

one of gaining get Okay, you mentioned in difficult the right of place. larger tight people good have as more it that labor the and difficult factors Is more hear. a you to becoming that market? making is And in sure is growth you

Christopher Christensen

jobs The not is becoming a difficult new larger, labor more search market. second is but get It's good for point. there in new point as or we careers not certainly frantic today's

extraordinary little join of recruiting us. for I'm saying us have find have there to bit folks is in that we no we guess on So a pipeline, we we want to the front harder to the fairly do have is in more to used what bit -- But work shortage they're to the that get once little leaders than do pipeline. easy to a it's do. But to I end

Dana Hambly

compare Okay. And a you early you initially that proposed payment the RCS payment and model the would patient-driven model? talked previously about I appreciate days. bit little then to It’s it. How

Suzanne Snapper

out like on plan of through been plan, some that’s So CMS. first may by as for stuff think published you a couple the days kind know, but I looking April there mean on I of be of

of I positive, a its are the codes on less within. they’ve obviously. of to and they’ve actually that regard classification of that heard types -- they with different changes total to from fronts. recognized you There the side types industry to where - labor I feedback residents think couple overall it’s think number significantly on is of actually different helps The that go and have more patients the some

point. incorporate submitted partnering better are things feedback results some on, that feedback there to at this the excited additional definitely the And they are actually working that was So and set of and their with we’re and period. us did obviously are during the people some open

better So we it get can than is today.

Dana Hambly

Okay, that’s from one And last then Suzanne. me, helpful.

is But in making that appreciate. you’re expect you’d to operations, that what fewer ask, to GAAP is just mentioned now, want adjustments You that, the did off? year, are capacity. operations on not at which that expect one you when full What closed of I this there roll me and reminds adjustments will on do I

Christopher Christensen

again. I’m up to going to start me and then clean back Suzanne can

that structural two of almost we issues, and opened and two and out that those There facility this all or some is in that. a they’ll we that or added engineering include had empty are over just end open one year. are be adding might buildings we capacity. barely barely that to full not get So time GAAP issues, that’s just renovate for a of and by continue what we’ve them the to earnings into been There will them the of be

occupancy under in including off, its little having that and having include reopen that we safe them residents few so a those the totally buildings we’ll our show not we’re to again. These it in have are are completely that that. We’re and facilities once belt, for months empty a

Suzanne Snapper

press adjustments we look you quarter results Christopher on release on and the quarter, that at current and it that quarter, being non-GAAP, is if GAAP facilities currently the about then of for at detailed look out. the Yeah, could -- those are that but classifications, constructed help ones press in see That just talked gives had ones it’s the prior you table, that the a the operations. closed in table no two reconciliation this like release different in to helpful you if you breakout are of at

Dana Hambly

Okay, appreciate Thanks. it.

Christopher Christensen

Thank Dana. you,

Operator

are queue questions. like And there you. I’d other comments. over in time, turn this for at for no to Christopher the Christensen Thank to the callers final call

Christopher Christensen

us joining Norma, We thanks I’ll and and thank your help appreciate you, your for everyone for it. time. us giving

Operator

in Ladies today’s and thank gentlemen, participation your you conference. for

disconnect. Have wonderful might a day. You

The Ensign Group, Inc. (ENSG) 3 May 182018 Q1 Earnings call transcript