Revenue and income were up in Ensign Group’s assisted living and independent living services segment in the second quarter compared with the same quarter of 2017, as acquisitions and rent increases helped lessen the effect of an occupancy decline, the Mission Viejo, CA-based company reported in announcing its second-quarter earnings. The company held an earnings call on Friday.
Total revenue for the segment increased 12.6% to $37.2 million, and segment income increased 35.8% to $5 million, over the prior-year quarter, the company said. The revenue increase primarily was due to a 2.3% increase in average monthly revenue per unit of 2.3% and revenue generated from the addition of six assisted and independent living operations in three states between July 1, 2017, and June 30, 2018, partially offset by the decrease in occupancy of 2.2%, Ensign said.
Independent and assisted living occupancy was down compared with the same quarter of last year, decreasing from 77.4% in the second quarter of 2017 to 75.2% in the second quarter of 2018. Average monthly rent per unit increased from $2,799 in the second quarter of 2017 to $2,863 in the second quarter of 2018.
Bridgestone Living LLC, Ensign’s assisted living and independent living portfolio company, now operates 51 stand-alone operations and 22 campuses in 12 states, Ensign President and CEO Christopher Christensen said. Ensign’s portfolio also includes 185 skilled nursing properties, 22 of which also include assisted living operations; 22 hospice agencies; 21 home health agencies; and five home care businesses.
“Each segment’s leadership team has independently driven their respective businesses to achieve outstanding results,” Christensen said. “As they do so, we continue to evaluate ways in which we can enhance operational synergies while also ensuring that all of our affiliated operations will continue to create long-term shareholder value.”
Bridgestone Living had acquired the real estate and operations of Cedar Hills Senior Living, a 37-unit assisted living facility in Cedar Hill, TX, and Deer Creek Senior Living, a 37-unit assisted living facility in DeSoto, TX, in the first quarter, Ensign previously had announced. There were no stand-alone independent living or assisted living acquisitions in the second quarter.
In another previously announced transaction that became effective May 1, Keystone Care LLC, the company’s Texas-based portfolio company, acquired the real estate and operations of Grace Presbyterian Village in Dallas. The 26-acre continuing care retirement community formerly was operated by Presbyterian Communities and Services and now is known as The Villages of Dallas. The CCRC has 81 independent living units, 36 assisted living units, 26 memory care units and 125 skilled nursing beds, Ensign said in May.
“This acquisition adds to our expanding footprint in the Dallas area and adds to our ability to accelerate the quality of care we can provide to our patients and their loved ones,” Christensen said.
“We continue to see very attractive opportunities to work with nonprofit organizations, like the Grace Presbyterian, that are not just interested in the terms of the transaction, but that also place equal value on who the buyer is and how they will honor their legacy,” Ensign Executive Vice President and Secretary Chad Keetch said.
Ensign continues to seek to acquire real estate and lease both well-performing and struggling assisted living, skilled nursing and other healthcare-related businesses in new and existing markets, Christensen said. “We are currently working on a handful of transactions that we expect to close throughout the remainder of the year,” Keetch said.
Overall, the company’s adjusted earnings per share and consolidated adjusted net income increased by 41.9% and 47.3%, respectively, over the prior-year quarter, Christensen said.
“We are pleased to report that the improvements we experienced in the first quarter continued, resulting in a very strong second quarter, especially in our most mature operations,” he said.
Ensign reaffirmed its 2018 annual earnings per share guidance to between $1.80 and $1.87 per diluted share. Overall, the midpoint of this guidance represents a 31.1% increase over 2017 annual earnings, Christensen said. The company’s effective income tax rate was reduced from 35.5% in 2017 to an estimated 25% for 2018, but even so, the midpoint of management’s guidance represents a 15.7% increase over 2017 results, he said.
Also during the quarter, an Ensign subsidiary bought an office building in San Juan Capistrano, CA, to accommodate the Ensign’s expanding service center team. The company’s lease on its current space in nearby Mission Viejo is expiring next year, Christensen said.
“After considering dozens of possibilities over the last one-and-a-half years, we determined that owning the service center made the most sense financially and operationally,” Keetch said. Ensign expects that the transaction will “save millions of dollars in future rental increases for decades to come,” he added.
Ensign also reported on results for its transitional and skilled services segment and home health and hospice services segment. For more information, see the Ensign website.