The Ensign Group (Nasdaq: ENSG) closed a strong first quarter, marked by wage and labor stability, as the company looks ahead to a steady pace of investments.

“We are thrilled to announce another record setting quarter achieved by our local teams. In spite of all the industry noise,” CEO Barry Port said during the company’s first quarter conference call. “Our results this quarter demonstrate that we’ve never been stronger, showing yet again, that sound fundamentals coupled with an incredible passion can forge consistency even in an ever changing environment.”

Ensign reported record-high occupancy for same-store and transitioning properties, with rates reaching 82.6% and 83.5%, respectively. Skilled nursing census rose 7.6% and 9.9%, while managed care census grew 8.9% and 15.6% year-over-year, Port said.

“When we consider the current health of our organization combined with our culture and proven local leadership strategy, we are well positioned to continue executing our operational model,” he said.

Still, Port said there was room for further improvement.

“[W]e continue to optimize operational efficiencies, expand services and create new partnerships, all of which will provide further improvements in occupancy and skilled mix,” he said.

Ensign reported non-GAAP earnings per share for the first quarter of $1.52, beating Wall Street estimates by $0.03. It posted quarterly revenue of $1.17 billion, in line with analyst expectations.

Ensign continued its growth trajectory by adding 19 new operations – including eight real estate assets – across eight states in the first quarter, totaling 1,906 skilled nursing beds and 200 senior living units. This brings Ensign’s 2024 acquisition total to 47 operations. New additions include first-time entry with facilities in Alabama and Alaska, as well as expansion in Tennessee, Oregon, and Arizona. The company is particularly excited about deepening its presence in the Southeast and sees further opportunity for growth in newly entered states like Tennessee, Oregon, and Alaska.

​​“We’re very excited to add density to one of our newest markets in Tennessee, and to add our first operation in Alabama,” said Chief Investment Officer Chad Keetch. “When we enter into new states, we tend to see an uptick in opportunities in those geographies. We are seeing more opportunities to deepen our presence in the Southeast, and expect to do so over time.”

Ensign raised its 2025 revenue guidance to $4.94 billion, which executives said underlined improving profits through delivering clinical excellence, including by a focus on value-based care.

Port said he was confident that Ensign’s earnings would be bolstered by its business model’s focus on prioritizing clinical results.

“[We have] the relationships, the drive, the understanding of the market and the environment with a sophisticated back office that allows leaders to see real time metrics and share some of those metrics with their partners and work in collaboration with them to achieve the outcomes,” he said. “[This] creates an opportunity where you have a partnership between local leaders and those managed care plans that ultimately drives volume because of their ability to take a sicker patient profile and achieve what’s expected.”

In issuing the guidance, Ensign leaders were optimistic about proposed federal Medicaid cuts not impacting skilled nursing or post-acute care, but rather affecting Medicaid expansion coverage for younger population groups.

Port shared that he and his team have met with Congressional leaders to educate them on Medicaid funding mechanisms, including provider taxes and directed payments. These meetings have led to greater awareness among lawmakers about longstanding, CMS-approved programs. While there’s openness to Medicaid reform, Ensign’s current focus is on ensuring that policymakers understand which changes support or harm the industry.

On Wednesday, Ensign shares closed at $128.99, up 87 cents, or 0.68%.

Investment pipeline

In terms of whether the current pace of investments is sustainable over the course of the year, and if Ensign is seeing changes to deal volume, marketing dynamics and seller mentality changes, Port said the transactions could be slowed by macroeconomic factors and availability of staff for skilled nursing facilities.

Port, who expects a mixture of all deal types from acquisition of real estate to leasing of properties, noted the post-acute care sector workforce hasn’t completely recovered to levels before the Covid-19 pandemic, but Ensign has done better than its counterparts

“Some said we’re probably an anomaly when it comes to our [workforce] recovery,” Port said, adding, “We’re somewhere near pre-pandemic levels in agency staffing, our turnover is consistently improving. Our pace of wage inflation has moderated to pre-pandemic levels and we – [I am] referring to our operators and leaders in the field – have been very successful at staying ahead of the curve.”

Ensign has consistently filled positions without relying on agency staff, maintaining growth without compromise, as agency staffing declines and overall operational performance continues to improve, executives said.

“The demand is there [and] I wouldn’t say we’re limiting admissions because of staffing because our leaders have found ways to fill positions and keep the flywheel moving,” he said.

That said, Ensign executives said that there wasn’t a “sweet spot” for optimal occupancy level in skilled nursing that unlocked operating leverage.

Ensign is still looking for long-term growth potential, Port said, noting that many facilities still have significant upside, even without acquisitions. Historically, these facilities have shown a consistent trajectory toward higher occupancy, reinforcing confidence in sustained growth.

The nursing home giant is currently in a phase of wage and staffing stability following Covid-related disruptions, such as reliance on agency staff and wage inflation. With this stability, Port expects Ensign to begin leveraging more effectively.

Additionally, economic downturn may further support leverage, he said.

“Right now we’re in the stability phase. And then I think there’s an ability for us to continue to leverage, especially if there’s recession, right? One of the things that happens for us is when there’s recession, we definitely see more opportunity on the nursing front and other things where people come back into the workforce, which creates even more leverage ability,” Port said.

Ideal deals

Executives remained optimistic about Ensign’s deal pipeline. The deals are numerous – still largely involving private equity and family-based funds, they noted.

Keetch highlighted the recent Providence deal as an example of the kind of deal that Ensign hopes to scoop up.

At the end of 2024, Ensign was involved in a deal with Providence, a not-for-profit health system serving the Western U.S., which sold 10 skilled nursing and assisted living care facilities, operating in eight locations across Alaska, Oregon, Washington and California.

“Providence Health System was very, very selective in choosing who the buyer would be [and] they selected us as the buyer because of our operational history and reputation, and our track record on closing successfully,” Keetch said. “[W]e tend to win the deals that we want, that we think are fair.”

Regarding expansion into new markets like the Southeast, where Medicaid rates are low but labor costs are also less, Keetch said he was confident that Ensign would successfully be able to transition newly acquired facilities in such regions to achieve results.

In the end, the main drivers of success in a particular market are local operators with deep market knowledge, especially for labor and real estate dynamics, he said. This type of decentralized approach at Ensign continues to allow it to evaluate and perform well in new regions as effectively as in its more established markets.

“Having local operators or boots on the ground in those markets, having their input and their heavy involvement in underwriting all these acquisitions is really a key to how we evaluate these dynamics of the labor environment and read the environment,” he said. “I fully expect that we can accomplish [in Southeast] what we have in some of our most mature states.