GlobeNewswire Inc | Oct 28, 2020 04:07PM EDT

October 28, 2020

Conference Call and Webcast scheduled for tomorrow, October 29, 2020 at 10:00 am PT

SAN JUAN CAPISTRANO, Calif., Oct. 28, 2020 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of companies, which provide skilled nursing services, senior living services, rehabilitative care services and other healthcare services, announced record operating results for the third quarter of 2020, reporting GAAP diluted earnings per share of $0.77 for the quarter with adjusted earnings per share of $0.78 for the quarter(2).

Highlights Include:

-- GAAP diluted earnings per share for the quarter was $0.77, representing an increase of 97.4%(1) over the prior year quarter and adjusted diluted earnings per share for the quarter was $0.78, an increase of 95.0%(1)(2) over the prior year quarter. -- Consolidated GAAP revenues for the quarter were $599.3million, an increase of 17.0%(1) over the prior year quarter and adjusted revenues for the quarter were $598.4million, an increase of $88.8million or 17.4%(1)(2) over the prior year quarter. -- Same store skilled revenue increased by 18.5% over the prior year quarter and by 7.8% sequentially over the second quarter with an increase in Medicare days of 34.3% and 10.2%, respectively. -- Transitioning skilled revenue improved by 26.8% over the prior year quarter with a 20.3% increase in transitioning managed care revenue and a 27.3% increase in Medicare revenue. -- GAAP net income was $43.1million for the current quarter, an increase of 94.4% (1) over the prior year quarter. -- Adjusted net income for the current quarter was $43.7million, an increase of 94.5%(1)(2) over the prior year quarter.

(1) Represents GAAP continued operations which excludes operating results for the October 1, 2019 spin-out of The Pennant Group, Inc. in accordance with discontinued operation guidance in GAAP.(2) See "Reconciliation of GAAP to Non-GAAP Financial Information". All Non-GAAP financial results exclude operating results for the recently spun-out The Pennant Group, Inc. in accordance with discontinued operation guidance.

Operating Results

We are announcing another record quarter despite the continued challenges arising from the global pandemic. With the second surge of COVID-19 that occurred during the third quarter in some of our largest states, including Texas, Arizona and California, our local teams were faced with an incredible challenge and have again demonstrated incredible agility and responsiveness to the evolving landscape. True to form, they remain as committed as ever to the cause of quality outcomes and excellent patient care. As a result of their heroic efforts, our local operators and caregivers have translated their passion into record-breaking results, said Ensigns Chief Executive Officer Barry Port. He emphasized that in early July the company returned all of the CARES Act Provider Relief Funds it received from the Government, and that the quarters results do not include any benefit related to those relief funds. The Company joined other well-capitalized healthcare providers by returning $109 million in provider grants and announced today that it will also be returning approximately $23 million in the latest round of relief funds. He continued, Our local leadership teams continue to make clinical and operational improvements that are tailored to conditions they face in their local market and, with the continued support of a world-class Service Center, we remind you again that our local leaders and dedicated front-line staff are the reason we were able to report such a strong quarter."

Port noted that the strong results came from quarter over quarter improvements in skilled mix across the portfolio, improved admissions trends, availability of more frequent and broader COVID testing, increased managed care revenues, cost saving initiatives, improved collections, sequestration suspension and improved Medicaid rates in certain states. He added, Our operations have continued to see an increase in the number of higher acuity patients, including some COVID-19 positive patients and an increasing number of managed care patients. With the surge of COVID-19 patients in many of the surrounding communities we serve, we continue to see state and county health leaders and local hospital systems turn to Ensign-affiliated operations to care for all varieties of high acuity patients that can safely be admitted to, or remain under our care. As we expected, when positivity rates for COVID-19 occur in the surrounding community, we see occupancy decline and skilled mix increase. He noted that in July, the Company saw overall occupancy decline, particularly in areas of high COVID positivity rates like Texas, Arizona and California, while skilled mix remained strong. When COVID-19 cases began to stabilize in August, occupancy began to recover, which continued in September and again in October. If there is another surge in COVID during fourth quarter or in 2021, we are confident that lower occupancies will be offset by higher skilled mix, highlighting the pivotal role that our post-acute operations play in the fluctuating healthcare landscape, Port said.

Chief Financial Officer, Suzanne Snapper, reported that the companys liquidity remains strong with approximately $175.4million of cash on hand and $342.4million of available capacity under its line-of-credit facility, which also has a built-in expansion option, both as of September30, 2020. She also indicated that the company received approximately $104 million of Medicare advance payments from the Centers for Medicare and Medicaid Services (CMS) and approximately $132 million of the provider relief funds of rounds one, two, three and four of the CARES Act. The Company has, or plans to return, all of the provider relief funds received to date. She also noted that the company also has 94 owned assets, 74 of which are unlevered and add additional liquidity. Ms. Snapper also indicated that the Company expects to continue incurring COVID-19-related expenses in the fourth quarter and into 2021, including higher labor costs, the ongoing acquisition of unprecedented levels of PPE and other infection prevention equipment, especially costs related to more and more testing.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR, adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net income and adjusted net earnings per share appear in the financial data portion of this release. More complete information is contained in the companys Quarterly Report on Form 10-Q for the quarter ended September30, 2020 which is expected to be filed with the SEC today and can be viewed on the companys website at http://www.ensigngroup.net.

2020 and 2021 Guidance

We are increasing our 2020 annual earnings guidance to $3.04 to $3.12 per diluted share and maintaining annual revenue guidance of $2.42 billion to $2.45 billion, Port said. He noted that the company has seen, and expects to continue to see, a significant impact from the pandemic on the fourth quarter and beyond, but that the company is confident that it can continue to perform well in the context of additional COVID-19 surges and he remains optimistic that occupancies will begin to recover once community spread begins to slow.

Management also provided guidance for 2021, with annual earnings per share guidance of $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion. We are confident that we can provide this guidance for several reasons. We are excited about the enormous upside that still exists in all of our newly acquired operations, which have seen delays in the transformation that we typically see in our newly acquired bucket, coupled with the great acquisitions on the horizon. But more importantly, we believe, when this pandemic is behind us, that our operations are primed to rebuild occupancies and gain additional market share as a result of the deepened relationships with acute care providers and other healthcare partners that developed because of our response to the pandemic, Port said. The midpoint of this 2021 guidance represents an increase of approximately 14% over the midpoint of Ensigns new 2020 guidance.

Managements guidance is based on diluted weighted average common shares outstanding of approximately 55.7 and 57.7 million for 2020 and 2021, respectively, and a 25% tax rate. In addition, the guidance assumes, among other things, normalized health insurance costs, normal anticipated Medicare and Medicaid reimbursement rate increases, net of provider taxes, acquisitions closed in 2020 and the first six months of 2021 and recovery of the COVID-19 pandemic. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, share-based compensation and start-up losses.

COVID-19 Update

Port reported that each locally-led operation continues to manage patient needs during this pandemic. The third quarter presented continued challenges as we experienced a significant surge in cases in some of our largest states. We are grateful that we were able to apply many of the lessons we learned in the second quarter to prevent and treat COVID in our operations in these geographies in addition to expanding the number of operations capable of safely admitting and treating COVID positive patients from the community. We also continue to focus on reducing the pressure on local hospitals by keeping patients in the skilled setting in a cost effective manner to further benefit the overall cost to Medicare and Medicaid programs, he added.

Port also reported that early in the quarter the companys portfolio experienced an increase in COVID-19 cases in its buildings in correlation with the trends occurring in the local community, noting that as the number of cases increases in the community overall, such as in parts of Texas, Arizona and California, those trends also impact skilled nursing operations in those areas. As of October 14, 2020, the companys 217 affiliated skilled nursing operations across 13 states had 207 confirmed COVID-19 patients in-house. Also, as of October 14, 2020, 8 operations had over 20 COVID-19 positive cases, 48 operations had less than 20 cases and 161 operations had no confirmed cases of COVID-19 in-house. The vast majority of COVID positive patients in the Ensign portfolio have recovered and returned to home.

The company reported that during the quarter combined same store and transitioning occupancy declined by 2.4% and skilled mix increased by 2.9%, both from second quarter as the pandemic worsened in many of its key states. However, from Mid-July to Mid-September, the Companys census remained flat with a slight decrease in skilled mix days. Towards the end of the quarter and into October, as elective care procedures picked up and the number of COVID-19 cases in the communities stabilized, the Company saw an increase in our occupancy and skilled mix days. Between mid-September to mid-October, combined same store and transitioning occupancy increased by approximately 1.0% and skilled mix increased by 4.0%, respectively. Port also indicated that the number of admissions continued to progressively increase through the quarter, demonstrating that the flow of patients has improved as certain markets have begun to loosen restrictions on admissions and as the sentiment towards high quality post-acute care providers has continued to improve.

Port continued, While the future of this pandemic remains unclear, we are confident that our local leaders, caregivers and other front-line staff will continue to provide amazing service to their patients, families and our society as a whole. Their endurance and strength is truly inspiring and we cant thank them enough for all their selfless service as they continue to earn the trust of acute care providers, physicians, managed care payors and most importantly, their patients and their families. They truly are heroes and are doing some of the hardest work during one of the most challenging times in our industrys history. We hope our communities will join us in recognizing and thanking them for all they do.

Other Highlights

During the quarter, the company paid a quarterly cash dividend of $0.05 per share of Ensign common stock. Due to our strong liquidity, we were pleased to continue our long-standing practice of paying a dividend to shareholders, said Chad Keetch, Ensigns Chief Investment Officer. He noted that the company has been a dividend paying company since 2002 and has increased the dividend every year since. The company indicated that there are no current plans to suspend future dividends.

Keetch also noted that on August 1, 2020, the Company acquired the real estate and operations of a post-acute care retirement campus located in Tempe, AZ, including Tempe Post Acute, a 62-bed skilled nursing facility and Desert Marigold Senior Living of Tempe a senior living center with 72 assisted living units and 90 independent living units. This was one of the several acquisitions that we had in the works when COVID appeared on the scene and is the first closing weve had since the pandemic started. The transition has gone very well and we are confident that our clinical and operational transition plans will continue to allow us to selectively acquire in the current environment, Keetch said. He also added that the Company has several acquisitions on the horizon and that the Company expects to close on several in the next few months and early 2021. Our pipeline remains strong and our liquidity provides us with enough dry powder to aggressively pursue opportunities that we expect to come our way, Keetch added.

Conference Call

A live webcast will be held Thursday, October29, 2020 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensigns third quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensigns website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific time on Friday, December 4, 2020.

About Ensign

The Ensign Group, Inc.'s independent operating subsidiaries provide a broad spectrum of skilled nursing and assisted living services, physical, occupational and speech therapies and other rehabilitative and healthcare services at 226 healthcare facilities in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin. Ensigns new business venture operating subsidiaries also offer several other post-acute-related services, including mobile x-ray, lab, non-emergency transportation services and other consulting services also across several states. Each of these operations is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated "company" and "its" assets and activities, as well as the use of the terms "we," "us," "its" and similar verbiage, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the facilities, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on managements current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.

These risks and uncertainties relate to the companys business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Additionally, many of these risks and uncertainties are currently amplified by and in the future may be amplified by, the COVID-19 outbreak. The developments with respect to the spread of COVID-19 and its impacts have been occurring so rapidly and because of the unprecedented nature of the pandemic, we are unable to predict the extent and duration of the adverse financial impact of COVID-19 on our business, financial condition and results of operations. While we are not able to estimate the full impact of the COVID-19 outbreak on our financial condition and future results of operations, the pandemic could have an adverse effect on our reported results in the future. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the companys periodic filings with the Securities and Exchange Commission, including its Form 10-K and Form 10-Q, for a more complete discussion of the risks and other factors that could affect Ensigns business, prospects and any forward-looking statements. Except as required by the federal securities laws, Ensign does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.

Contact Information

Investor/Media Relations, The Ensign Group, Inc., (949) 487-9500, ir@ensigngroup.net.

SOURCE: The Ensign Group, Inc.

THE ENSIGN GROUP, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME

Three Months Ended Nine Months Ended September 30, September 30,(In thousands,except per 2020 2019 2020 2019share data) Revenue $ 599,255 $ 512,109 $ 1,773,567 $ 1,476,333 Expense: Cost of 465,108 410,516 1,371,378 1,177,246 servicesRent?cost of 32,504 31,875 97,318 93,278 servicesGeneral andadministrative 32,817 25,514 96,493 78,622 expenseDepreciationand 13,757 13,405 41,082 37,700 amortizationTotal expenses 544,186 481,310 1,606,271 1,386,846 Income from 55,069 30,799 167,296 89,487 operationsOther income (expense):Interest (1,740 ) (3,900 ) (7,698 ) (11,513 ) expenseInterest and 850 732 2,630 1,857 other incomeOther expense, (890 ) (3,168 ) (5,068 ) (9,656 ) netIncome beforeprovision for 54,179 27,631 162,228 79,831 income taxesProvision for 10,866 5,093 37,026 14,944 income taxesNet incomefrom 43,313 22,538 125,202 64,887 continuingoperationsNet incomefromdiscontinued ? 5,290 ? 19,473 operations,net of taxNet income 43,313 27,828 125,202 84,360 Less: Net incomeattributabletononcontrolling 253 390 1,045 591 interests incontinuingoperationsNet incomeattributabletononcontrolling ? 279 ? 629 interests indiscontinuedoperationsNet incomeattributableto 253 669 1,045 1,220 noncontrollinginterestsNet incomeattributable $ 43,060 $ 27,159 $ 124,157 $ 83,140 to The EnsignGroup, Inc. Amountsattributable to The EnsignGroup, Inc.:Income fromcontinuingoperations $ 43,060 $ 22,148 $ 124,157 $ 64,296 attributableto The EnsignGroup, Inc.Income fromdiscontinuedoperations, ? 5,011 ? 18,844 net of incometaxNet incomeattributable $ 43,060 $ 27,159 $ 124,157 $ 83,140 to The EnsignGroup, Inc.Net income pershareattributable to The EnsignGroup, Inc.:Basic: Continuing $ 0.81 $ 0.41 $ 2.33 $ 1.20 operationsDiscontinued ? 0.09 ? 0.35 operationsBasic incomeper shareattributable $ 0.81 $ 0.50 $ 2.33 $ 1.55 to The EnsignGroup, Inc.Diluted: Continuing $ 0.77 $ 0.39 $ 2.23 $ 1.15 operationsDiscontinued ? 0.09 ? 0.33 operationsDiluted incomeper shareattributable $ 0.77 $ 0.48 $ 2.23 $ 1.48 to The EnsignGroup, Inc.Weightedaverage common sharesoutstanding:Basic 53,328 53,941 53,299 53,470 Diluted 55,713 56,364 55,585 56,054

THE ENSIGN GROUP, INC.UNAUDITED CONDENSEDCONSOLIDATED BALANCE SHEETS

September 30, December 31, 2020 2019 (In thousands, except par values)Assets Current assets: Cash and cash equivalents $ 175,380 $ 59,175 Accounts receivable?less allowance for doubtfulaccounts of $6,053 and $2,472 at September 30, 294,151 308,985 2020 and December 31, 2019, respectivelyInvestments?current 17,577 17,754 Prepaid income taxes 13,550 739 Prepaid expenses and other current assets 25,969 24,428 Total current assets 526,627 411,081 Property and equipment, net 783,187 767,565 Right-of-use assets 1,027,434 1,046,901 Insurance subsidiary deposits and investments 31,768 30,571 Escrow deposits 35 14,050 Deferred tax assets 3,435 4,615 Restricted and other assets 31,777 26,207 Intangible assets, net 2,959 3,382 Goodwill 54,469 54,469 Other indefinite-lived intangibles 3,299 3,068 Total assets $ 2,464,990 $ 2,361,909 Liabilities and equity Current liabilities: Accounts payable $ 50,971 $ 44,973 Accrued wages and related liabilities 177,115 151,009 Lease liabilities?current 47,342 44,964 Accrued self-insurance liabilities?current 33,022 29,252 CARES Act Provider Relief Fund and advance 123,988 ? payments liabilitiesOther accrued liabilities 89,625 70,273 Current maturities of long-term debt 3,139 2,702 Total current liabilities 525,202 343,173 Long-term debt?less current maturities 113,222 325,217 Long-term lease liabilities?less current portion 952,866 973,983 Accrued self-insurance liabilities?less current 62,016 58,114 portionOther long-term liabilities 46,140 5,278 Total equity 765,544 656,144 Total liabilities and equity $ 2,464,990 $ 2,361,909

THE ENSIGN GROUP, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:

Nine Months Ended September 30, 2020 2019 (In thousands)Net cash provided by/(used in): Continuing operating activities $ 282,161 $ 109,077 Continuing investing activities (48,485 ) (121,183 ) Continuing financing activities (117,471 ) 25,502 Net decrease in cash and cash equivalents from ? (83 ) discontinued operationsNet increase in cash and cash equivalents 116,205 13,313 Cash and cash equivalents beginning of period, 59,175 31,083 including cash of discontinued operationsCash and cash equivalents end of period, 175,380 44,396 including cash of discontinued operationsLess cash of discontinued operations at end of ? 47 periodCash and cash equivalents at end of period $ 175,380 $ 44,349

THE ENSIGN GROUP, INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION(In thousands, except per share data)(Unaudited)

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

The following table reconciles net income to Non-GAAP net income for the periods presented:

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Net income fromcontinuing $ 43,060 $ 22,148 $ 124,157 $ 64,296 operationsNet income fromdiscontinued ? 5,011 ? 18,844 operations, net oftaxNet incomeattributable to $ 43,060 $ 27,159 $ 124,157 $ 83,140 The Ensign Group,Inc. Non-GAAP adjustmentsStock-basedcompensation 4,173 2,829 10,936 8,215 expense(a)Results related tooperations not at 159 1,219 852 2,194 full capacity(b)Acquisition 20 69 104 144 related costs(c)Depreciation andamortization - 7 104 240 261 patient base(d)COS - gain on saleof fixed assets, ? (1,402 ) ? (1,402 ) net of impairmentcharges(e)Provision forincome taxes on (3,769 ) (2,520 ) (6,564 ) (7,368 ) Non-GAAPadjustments(f)Non-GAAP incomefrom continuing $ 43,650 $ 22,447 $ 129,725 $ 66,340 operationsNon-GAAP incomefrom discontinued ? 8,496 ? 25,688 operations(g)Non-GAAP net $ 43,650 $ 30,943 $ 129,725 $ 92,028 income Average number ofdiluted shares 55,713 56,364 55,585 56,054 outstanding Diluted EarningsPer Share As ReportedContinuing $ 0.77 $ 0.39 $ 2.23 $ 1.15 operationsDiscontinued ? 0.09 ? 0.33 operationsDiluted income pershare attributable $ 0.77 $ 0.48 $ 2.23 $ 1.48 to The EnsignGroup, Inc. Adjusted Diluted Earnings Per ShareContinuing $ 0.78 $ 0.40 $ 2.33 $ 1.18 operationsDiscontinued ? 0.15 ? 0.46 operationsDiluted income pershare attributable $ 0.78 $ 0.55 $ 2.33 $ 1.64 to The EnsignGroup, Inc. Footnotes: (a) Represents stock-based compensation expense incurred. Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Cost of services $ 2,972 $ 1,740 $ 7,409 $ 5,035 General and 1,201 1,089 3,527 3,180 administrativeTotal Non-GAAP $ 4,173 $ 2,829 $ 10,936 $ 8,215 adjustment

(b) Represents results to operations not at full capacity Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Revenue $ (877 ) $ (2,567 ) $ (2,141 ) $ (4,397 ) Cost of services 958 3,122 2,761 5,581 Rent 25 295 72 478 Depreciation and 53 369 160 532 amortizationTotal Non-GAAP $ 159 $ 1,219 $ 852 $ 2,194 adjustment (c) Represents costs incurred to acquire an operation which are notcapitalizable. (d) Included in depreciation and amortization are expenses related to patientbase intangible assets at newly acquired skilled nursing and senior livingfacilities. (e) Gain on sale of fixed assets includes impairment charges of $1.5 millionat two of our senior living operations, offset by the gain recognized for thesale of real estate of $2.9 million in the three and nine months endedSeptember 30, 2019. (f) Represents an adjustment to the provision for income tax to our historicalyear to date effective tax rate of 25.0% for the three and nine months endedSeptember 30, 2020 and 2019. (g) Represents results of the home health, hospice and senior living operationswe transferred to the Pennant Group, Inc. as a result of the Spin-Off.

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Revenue $ ? $ 88,327 $ ? $ 248,713 Cost of services ? (66,981 ) ? (185,963 ) General andadministrative ? (2,892 ) ? (8,037 ) expensesRent ? (5,849 ) ? (17,283 ) Depreciation and ? (909 ) ? (2,367 ) amortizationInterest income, net ? 4 ? 26 Provision for income ? (2,925 ) ? (8,772 ) taxesNon-controlling ? (279 ) ? (629 ) interestNon-GAAP net incomefrom discontinued $ ? $ 8,496 $ ? $ 25,688 operations

THE ENSIGN GROUP, INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION(In thousands)(Unaudited)

The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019ConsolidatedStatements of Income Data:Net incomeattributable to $ 43,313 $ 27,828 $ 125,202 $ 84,360 The EnsignGroup, Inc.Less: net incomeattributable tononcontrolling 253 390 1,045 591 interests incontinuingoperationsLess: net incomefrom ? 5,290 ? 19,473 discontinuedoperationsAdd: Interest 890 3,168 5,068 9,656 expense, netProvision for 10,866 5,093 37,026 14,944 income taxesDepreciation and 13,757 13,405 41,082 37,700 amortizationEBITDA fromcontinuing 68,573 43,814 207,333 126,596 operationsEBITDA fromdiscontinued ? 8,781 ? 26,883 operations(d)EBITDA $ 68,573 $ 52,595 $ 207,333 $ 153,479 Adjustments to EBITDA:Results relatedto operations 81 555 620 1,184 not at fullcapacity(a)Stock-basedcompensation 4,173 2,829 10,936 8,215 expenseAcquisition 20 69 104 144 related costs(b)Gain on sale offixed assets,net of ? (1,402 ) ? (1,402 ) impairmentcharges(c)Rent related to 25 295 72 478 items aboveAdjusted EBITDAfrom continuing 72,872 46,160 219,065 135,215 operationsAdjusted EBITDAfrom ? 12,324 ? 36,801 discontinuedoperations(d)Adjusted EBITDA $ 72,872 $ 58,484 $ 219,065 $ 172,016 Rent?cost of 32,504 31,875 97,318 93,278 servicesLess: rentrelated to items (25 ) (295 ) (72 ) (478 ) aboveAdjusted rentfrom continuing 32,479 31,580 97,246 92,800 operationsAdjusted rentincluded in ? 5,849 ? 17,283 discontinuedoperationsAdjusted EBITDARfrom continuing $ 105,351 $ 316,311 operations

(a) Represents results of operations not at full capacity during the period presented.(b) Costs incurred to acquire operations which are not capitalizable.(c) Gain on sale of fixed assets includes impairment charges of $1.5 million at two of our senior living operations, offset by the gain recognized for the sale of real estate of $2.9 million in the three and nine months ended September 30, 2019. (d) All adjustments included in the table below are presented within net income from discontinued operations, net of tax.

Three Months Nine MonthsConsolidated Statements of Income Data: Ended Ended September 30, September 30, 2019 2019 Net income from discontinued operations, net $ 5,290 $ 19,473 of taxLess: net income attributable tononcontrolling interests in discontinued 279 629 operationsAdd: Interest and other income, net (4 ) (26 ) Provision for income taxes 2,860 5,663 Depreciation and amortization 914 2,402 EBITDA from discontinued operations $ 8,781 $ 26,883 Results related to closed operations Losses related to operations in the start-up 59 377 phaseStock-based compensation expense 149 1,018 Spin-Off transaction costs 3,261 7,909 Acquisition related costs 70 603 Rent related to items above 4 11 Adjusted EBITDA from discontinued operations $ 12,324 $ 36,801

THE ENSIGN GROUP, INC.SELECT PERFORMANCE INDICATORS (Unaudited)

The following tables summarize our selected performance indicators for our transitional and skilled services segment along with other statistics, for each of the dates or periods indicated:

Three Months Ended September 30, 2020 2019 Change % Change Total Facility Results: (Dollars in thousands) Transitional and skilled $ 570,384 $ 485,973 $ 84,411 17.4 %revenueNumber of facilities at period 193 179 14 7.8 %endNumber of campuses at period 24 22 2 9.1 %end*Actual patient days 1,495,285 1,516,697 (21,412 ) (1.4 ) %Occupancy percentage ? 70.7 % 78.9 % (8.2 )Operational beds %Skilled mix by nursing days 32.8 % 28.5 % 4.3 %Skilled mix by nursing revenue 53.9 % 47.8 % 6.1 %

Three Months Ended September 30, 2020 2019 Change % Change Same Facility Results(1): (Dollars in thousands) Transitional and skilled $ 443,217 $ 411,306 $ 31,911 7.8 %revenueNumber of facilities at 152 152 ? ? %period endNumber of campuses at period 15 15 ? ? %end*Actual patient days 1,138,971 1,267,903 (128,932 ) (10.2 ) %Occupancy percentage ? 71.2 % 79.5 % (8.3 )Operational beds %Skilled mix by nursing days 34.7 % 29.8 % 4.9 %Skilled mix by nursing 56.2 % 49.6 % 6.6 %revenue

Three Months Ended September 30, 2020 2019 Change % Change Transitioning Facility Results (Dollars in thousands) (2):Transitional and skilled revenue $ 52,033 $ 46,350 $ 5,683 12.3 %Number of facilities at period 16 16 ? ? %endNumber of campuses at period 4 4 ? ? %end*Actual patient days 148,732 155,367 (6,635 ) (4.3 ) %Occupancy percentage ? 75.3 % 79.5 % (4.2 )Operational beds %Skilled mix by nursing days 25.1 % 21.2 % 3.9 %Skilled mix by nursing revenue 41.7 % 35.7 % 6.0 %

Three Months Ended September 30, 2020 2019 Change % Change Recently Acquired Facility (Dollars in thousands) Results(3):Transitional and skilled revenue $ 75,134 $ 25,570 $ 49,564 NMNumber of facilities at period 25 11 14 NMendNumber of campuses at period end* 5 3 2 NMActual patient days 207,582 84,554 123,028 NMOccupancy percentage ? 65.6 % 71.4 % NMOperational bedsSkilled mix by nursing days 27.7 % 23.5 % NMSkilled mix by nursing revenue 49.1 % 41.3 % NM

Three Months Ended September 30, 2020 2019 Change % Change Facility Closed Results(4): (Dollars in thousands)Skilled nursing revenue $ ? $ 2,747 $ (2,747 ) NMActual patient days ? 8,873 (8,873 ) NMOccupancy percentage ? Operational ? % 64.7 % NMbedsSkilled mix by nursing days ? % 19.1 % NMSkilled mix by nursing revenue ? % 41.9 % NM

* Campus represents a facility that offers both skilled nursing and senior living services. Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment. (1) Same Facility results represent all facilities purchased prior to January1, 2017. (2) Transitioning Facility results represent all facilities purchased from January1, 2017 to December31, 2018.(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January1, 2019. (4) Facility Closed results represents closed operations during the three months ended September 30, 2019, which were excluded from Same Facilities results for the three months ended September 30, 2019 and 2020 for comparison purposes.



Nine Months Ended September 30, 2020 2019 Change % Change Total Facility Results: (Dollars in thousands) Transitional and skilled $ 1,685,568 $ 1,404,469 $ 281,099 20.0 %revenueNumber of facilities at 193 179 14 7.8 %period endNumber of campuses at 24 22 2 9.1 %period end*Actual patient days 4,668,961 4,395,864 273,097 6.2 %Occupancy percentage ? 74.5 % 79.2 % (4.7 )Operational beds %Skilled mix by nursing 30.6 % 29.1 % 1.5 %daysSkilled mix by nursing 51.8 % 48.7 % 3.1 %revenue

Nine Months Ended September 30, 2020 2019 Change % Change Same Facility Results (Dollars in thousands) (1):Transitional and $ 1,319,620 $ 1,216,841 $ 102,779 8.4 %skilled revenueNumber of facilities at 152 152 ? ? %period endNumber of campuses at 15 15 ? ? %period end*Actual patient days 3,570,174 3,762,109 (191,935 ) (5.1 ) %Occupancy percentage ? 75.0 % 79.7 % (4.7 )Operational beds %Skilled mix by nursing 32.5 % 30.4 % 2.1 %daysSkilled mix by nursing 54.1 % 50.4 % 3.7 %revenue

Nine Months Ended September 30, 2020 2019 Change % Change Transitioning Facility Results (Dollars in thousands) (2):Transitional and skilled $ 154,601 $ 136,155 $ 18,446 13.5 %revenueNumber of facilities at period 16 16 ? ? %endNumber of campuses at period 4 4 ? ? %end*Actual patient days 456,714 458,633 (1,919 ) (0.4 ) %Occupancy percentage ? 78.0 % 79.0 % (1.0 )Operational beds %Skilled mix by nursing days 24.8 % 21.9 % 2.9 %Skilled mix by nursing revenue 41.8 % 36.9 % 4.9 %

Nine Months Ended September 30, 2020 2019 Change % Change Recently Acquired Facility (Dollars in thousands) Results(3):Transitional and skilled revenue $ 211,347 $ 43,334 $ 168,013 NMNumber of facilities at period 25 11 14 NMendNumber of campuses at period 5 3 2 NMend*Actual patient days 642,073 148,385 493,688 NMOccupancy percentage ? 69.5 % 71.6 % NMOperational bedsSkilled mix by nursing days 23.7 % 22.2 % NMSkilled mix by nursing revenue 44.7 % 39.3 % NM

Nine Months Ended September 30, 2020 2019 Change % Change Facility Closed Results(4): (Dollars in thousands)Skilled nursing revenue $ ? $ 8,139 $ (8,139 ) NMActual patient days ? 26,737 (26,737 ) NMOccupancy percentage ? Operational ? % 65.7 % NMbedsSkilled mix by nursing days ? % 17.4 % NMSkilled mix by nursing revenue ? % 37.5 % NM

* Campus represents a facility that offers both skilled nursing and senior living services. Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment.(1) Same Facility results represent all facilities purchased prior to January1, 2017.(2) Transitioning Facility results represent all facilities purchased from January1, 2017 to December31, 2018.(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January1, 2019.(4) Facility Closed results represents closed operations during the nine months ended September 30, 2019, which were excluded from Same Facilities results for the nine months ended September 30, 2019 and 2020 for comparison purposes.

THE ENSIGN GROUP, INC.SKILLED NURSING AVERAGE DAILY REVENUE RATES ANDPERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR(Unaudited)

The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate(1):

Three Months Ended September 30, Same Facility Transitioning Acquisitions Total 2020 2019 2020 2019 2020 2019 2020 2019Skilled Nursing Average DailyRevenue Rates:Medicare $ 664.61 $ 600.96 $ 590.02 $ 530.91 $ 646.90 $ 651.12 $ 656.43 $ 597.82 Managed care 496.14 458.91 477.39 425.49 489.23 432.31 493.78 455.48 Other skilled 542.37 487.87 523.66 472.23 356.09 346.95 535.22 482.68 Total skilled revenue 587.57 519.07 539.37 482.60 587.23 525.84 583.86 517.16 Medicaid 245.99 226.19 257.44 235.48 234.94 229.85 245.54 227.48 Private and other 233.83 226.78 234.44 217.99 218.59 229.67 231.77 225.04 payorsTotal skilled nursing $ 363.39 $ 314.12 $ 324.76 $ 284.74 $ 330.63 $ 299.45 $ 354.99 $ 310.18 revenue

(1) These rates exclude additional FMAP revenue we recognized as part of The Family First Coronavirus Response Act and include sequestration reversal of 2%.



Nine Months Ended September 30, Same Facility Transitioning Acquisitions Total 2020 2019 2020 2019 2020 2019 2020 2019Skilled Nursing Average DailyRevenue Rates:Medicare $ 668.14 $ 599.34 $ 591.32 $ 532.09 $ 643.17 $ 633.93 $ 658.38 $ 594.51 Managed care 489.23 456.95 465.22 425.47 470.43 429.89 485.33 453.94 Other skilled 534.44 490.70 509.31 466.05 341.41 346.85 526.54 487.06 Total skilled revenue 579.53 519.87 532.29 482.40 572.14 515.17 574.99 517.24 Medicaid 237.32 223.83 246.69 232.93 221.48 227.80 235.88 225.10 Private and other 233.18 228.84 237.79 220.85 213.42 214.28 230.81 226.66 payorsTotal skilled nursing $ 348.15 $ 314.75 $ 316.27 $ 285.47 $ 303.66 $ 289.92 $ 338.91 $ 310.71 revenue

(1) These rates exclude additional FMAP revenue we recognized as part of The Family First Coronavirus Response Act. The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three and nine months ended September 30, 2020 and 2019:



Three Months Ended September 30, Same Facility Transitioning Acquisitions Total 2020 2019 2020 2019 2020 2019 2020 2019Percentage of SkilledNursing Revenue:Medicare 31.5 % 22.2 % 22.9 % 19.5 % 35.6 % 24.2 % 31.2 % 22.1 %Managed care 15.8 18.9 14.0 12.7 12.3 13.8 15.2 18.0 Other skilled 8.9 8.5 4.8 3.5 1.2 3.3 7.5 7.7 Skilled mix 56.2 49.6 41.7 35.7 49.1 41.3 53.9 47.8 Private and other 6.5 8.2 10.7 12.3 7.3 7.3 7.1 8.5 payorsMedicaid 37.3 42.2 47.6 52.0 43.6 51.4 39.0 43.7 Total skilled 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %nursing

Three Months Ended September 30, Same Facility Transitioning Acquisitions Total 2020 2019 2020 2019 2020 2019 2020 2019Percentage of SkilledNursing Days:Medicare 17.2 % 11.5 % 12.6 % 10.5 % 18.2 % 11.2 % 16.9 % 11.4 %Managed care 11.6 12.9 9.5 8.5 8.3 9.6 10.9 12.2 Other skilled 5.9 5.4 3.0 2.2 1.2 2.7 5.0 4.9 Skilled mix 34.7 29.8 25.1 21.2 27.7 23.5 32.8 28.5 Private and other 10.3 11.9 14.8 15.6 10.9 9.5 10.8 12.2 payorsMedicaid 55.0 58.3 60.1 63.2 61.4 67.0 56.4 59.3 Total skilled 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %nursing

Nine Months Ended September 30, Same Facility Transitioning Acquisitions Total 2020 2019 2020 2019 2020 2019 2020 2019Percentage of SkilledNursing Revenue:Medicare 28.8 % 23.3 % 23.0 % 20.3 % 31.4 % 22.4 % 28.6 % 23.0 %Managed care 16.7 18.9 14.7 13.3 11.9 13.9 15.9 18.1 Other skilled 8.6 8.2 4.1 3.3 1.4 3.0 7.3 7.6 Skilled mix 54.1 50.4 41.8 36.9 44.7 39.3 51.8 48.7 Private and other 7.1 8.1 10.8 12.2 8.5 8.0 7.7 8.5 payorsMedicaid 38.8 41.5 47.4 50.9 46.8 52.7 40.5 42.8 Total skilled 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %nursing

Nine Months Ended September 30, Same Facility Transitioning Acquisitions Total 2020 2019 2020 2019 2020 2019 2020 2019Percentage of SkilledNursing Days:Medicare 15.0 % 12.2 % 12.3 % 10.9 % 14.8 % 10.3 % 14.7 % 12.0 %Managed care 11.9 13.0 10.0 8.9 7.7 9.4 11.1 12.4 Other skilled 5.6 5.2 2.5 2.1 1.2 2.5 4.8 4.7 Skilled mix 32.5 30.4 24.8 21.9 23.7 22.2 30.6 29.1 Private and other 10.6 11.5 14.5 15.5 12.2 10.6 11.1 12.0 payorsMedicaid 56.9 58.1 60.7 62.6 64.1 67.2 58.3 58.9 Total skilled 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %nursing

THE ENSIGN GROUP, INC.REVENUE BY PAYOR SOURCE(Unaudited)

The following table sets forth our total revenue by payor source and as a percentage of total revenue for the periods indicated:

Three Months Ended September 30, 2020 2019 Revenue % of Revenue % of Revenue RevenueMedicaid $ 222,192 37.1 % $ 205,945 40.2 %Medicare 189,237 31.6 119,633 23.4 Medicaid ? skilled 38,232 6.4 34,080 6.6 Total Medicaid and 449,661 75.1 359,658 70.2 MedicareManaged care 87,648 14.6 88,542 17.3 Private and other^(1) 61,946 10.3 63,909 12.5 Revenue $ 599,255 100.0 % $ 512,109 100.0 %

(1) Private and other payors also includes revenue from rental income and all payors generated in our other ancillary operations for the three months ended September 30, 2020 and 2019.



Nine Months Ended September 30, 2020 2019 Revenue % of Revenue % of Revenue RevenueMedicaid $ 672,506 37.9 % $ 586,222 39.7 %Medicare 519,865 29.3 355,141 24.1 Medicaid ? skilled 110,626 6.3 96,323 6.5 Total Medicaid and 1,302,997 73.5 1,037,686 70.3 MedicareManaged care 271,993 15.3 258,205 17.5 Private and other^(1) 198,577 11.2 180,442 12.2 Revenue $ 1,773,567 100.0 % $ 1,476,333 100.0 %

(1) Private and other payors also includes revenue from rental income and all payors generated in our other ancillary operations for the nine months ended September 30, 2020 and 2019.

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) share-based compensation expense; (e) results of operations not at full capacity, excluding depreciation, interest and income taxes (f) acquisition related costs and (g) gain on sale of fixed assets, net of impairment charges; Adjusted EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) share-based compensation expense; (f) results of operations not at full capacity, excluding rent, depreciation, interest and income taxes (g) acquisition related costs and (h) gain on sale of fixed assets, net of impairment charges. The company believes that the presentation of EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the companys operating performance. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP. This measure is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring operating expense. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and adjusted EBITDAR has substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The companys periodic filings are available on the SEC's website at www.sec.govor under the "Financial Information" link of the Investor Relations section on Ensigns website at http://www.ensigngroup.net.