Ladies and gentlemen, thank you for joining us, and welcome to the Ensign Group, Inc. Fourth Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Mr. Keetch. Please go ahead.

Thank you, operator, and welcome, everyone. We filed our earnings press release yesterday, and it is available on the Investor Relations section of our website at ensigngroup.net. A replay of this call will also be available on our website until 5:00 p.m. Pacific on February 27, 2026. We want to remind anyone that might be listening to a replay of this call that all the statements made are as of today, February 5, 2026, and these statements have not been nor will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to the risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review the SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, the Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our independent subsidiaries, collectively referred to as a service center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to the other independent subsidiaries through contractual relationships. In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims made coverage to our operating companies for general and professional liability as well as for workers' compensation insurance liabilities. Ensign also owns Standard…

Thanks, Chad, and thank you all for joining us today. We're excited to report another record year and record quarter in several key areas. To start, I want to highlight the extraordinary clinical outcomes achieved by our dedicated and talented caregivers. None of the results, which we will discuss today are possible without the outstanding work being done by these amazing nurses, therapists, dietitians, food service professionals, activities coordinators and the many others whose unwavering commitment shapes the daily care experience for thousands of patients across our portfolio. It's difficult to convey in words how so many individuals work so hard to achieve such amazing outcomes through so many small moments of selfless service. Having a front row seat to these amazing people is humbling to say the least. And while the point of these quarterly calls is to provide investors a financial update, let there be no mistake that our consistent financial results would not be possible without a relentless patient-focused culture that drives our frontline partners to deliver the highest quality clinical outcomes supported by a family-like atmosphere where everyone genuinely cares about one another. There are several measurements that showcase our clinical excellence. For example, according to the most recently published CMS data, same-store Ensign-related operations outperformed their peers in their annual survey results by an impressive 24% at the state level and 33% at the county level. This exceptional performance is only possible by achieving sustained clinical performance over time. In that same data set, Ensign affiliated operations also maintained a 19% advantage in overall 4- and 5-star rated buildings when compared to their peers. This is particularly noteworthy given that the majority of these communities were 1- and 2-star facilities at the time of acquisition. In addition, our same-store operations continue to outperform their industry…

Thank you, Barry. We had another significant few months on the acquisition front, adding 17 new operations, which includes 12 real estate assets during the quarter and since. These include a 7-building portfolio in Utah, 3 in Texas, 2 in Arizona, 2 in Colorado and 1 in each of Alabama, Kansas and Wisconsin. In total, we added 1,371 new skilled nursing beds across 7 states. This growth brings the number of operations in our recently acquired group of operations to 21.7% of our entire portfolio. We were thrilled to complete these acquisitions that span across so many distinct health care markets. In each case, our local clusters are prepared to execute on their specialized building-by-building transition plans several months in advance. Overall, our growth this quarter continues to demonstrate our ability to take on multi-facility portfolios as well as our traditional singles and doubles. We continue to learn from and perfect our transition process and believe that those lessons are showing through in the performance of our recently acquired operations. As we've shown during the quarter and the last few years, our building-by-building approach transition works for single operations, small portfolios and larger portfolios, particularly when a large deal spans several markets and geographies. We've also shown that in certain strategic situations, paying higher prices can be justified for performing assets that have newer physical plants. And while some of those deals may take a bit longer to generate the returns we expect, we've seen these deals pay off over time as our operators implement the proper clinical systems and cultural changes. In the Stonehenge acquisition, for example, the purchase price represented a premium over our historical acquisitions in Utah. However, the high quality of the assets, the strong clinical and financial performance as well as the synergies with our…

Thanks, Chad, and hello, everyone. I wanted to share 2 outstanding operations that have achieved sustained financial growth due to their consistent emphasis on clinical outcomes and staff development. South Bay Post Acute located near San Diego, California is a 98-bed skilled nursing operation that has been an Ensign affiliate since 2014. Like many of our same-store operations, the South Bay team, led by CEO, Lisa Simmons; and COO, [ Connie Narvaez, ] maintains a consistent focus on improving both clinical and financial performance year after year. The facility has long been recognized for strong quality outcomes as reflected in its 5-star CMS ratings for quality measures, health inspections and overall performance. Over the past year, the team identified an opportunity to expand its community impact by developing specialized capabilities to care for bariatric patients, a growing but historically underserved population in post-acute care. Successfully serving this population required a disciplined clinical and operational strategy. The facility leadership team started by visiting a highly successful Ensign affiliate that has become the top-performing bariatric operation in Arizona. Building on what they learned, South Bay remodeled rooms, invested in specialized equipment and engaged both external experts and its in-house therapy team to develop protocols and provide staff training to safely and effectively treat bariatric patients. The team also expanded behavioral health support and implemented both group and individual therapies tailored to this population. By addressing the clinical and operational challenges that hospitals face when placing bariatric patients, South Bay positioned itself as a reliable solution for complex discharges. These efforts contributed to both improved patient outcomes and measurable reputational improvement. Health plans and referring acute partners have taken note, and South Bay has recently been awarded additional high reimbursement contracts. These clinical accomplishments have inevitably resulted in financial growth. In the fourth…

Thank you, Spencer, and good morning, everyone. Detailed financials for the year and the quarter are contained in our 10-K and press release filed yesterday. Some additional highlights for the year and the quarter compared to the prior year include the following: for the year, GAAP diluted earnings per share was $5.84, an increase of 14.1%. Adjusted diluted earnings per share was $6.57, an increase of 19.5%. Consolidated revenue was $5.1 billion, an increase of 18.7%. GAAP net income was $344 million, an increase of 15.4% and adjusted net income was $386.6 million, an increase of 20.6%. For the quarter, GAAP diluted earnings per share was $1.61, an increase of 18.4%. Adjusted diluted earnings per share was $1.82, an increase of 22.1%. Consolidated revenue was $1.4 billion, an increase of 20.2%. GAAP net income was $95.5 million, an increase of 19.8%. Adjusted net income was $107.8 million, an increase of 23.2%. Other key metrics as of December 31, 2025, include cash and cash equivalents of $504 million and cash flow from operations of $564 million. During 2025, we spent more than $500 million to execute on our strategic growth plan. We made these investments from a position of strength as shown by our record low lease adjusted net debt-to-EBITDA ratio of 1.77x after taking these investments into consideration. Our continued ability to maintain low leverage even during periods of significant acquisition is particularly noteworthy and demonstrates our commitment to disciplined growth as well as our belief that we can continue to achieve sustainable growth in the long run. In addition, we have more than $590 million available on our line of credit, which when combined with our cash on our balance sheet, gives us over $1 billion in dry powder for future investments. We also own 160 assets, 136 of…

Thanks, Suzanne. As we wrap up, we can't emphasize how -- enough how incredibly honored and grateful we are to work alongside our operational leaders and our service center team here that are behind these record-setting results. We never cease to be amazed by their impressive resiliency as they focus on supporting one another in new and innovative ways. Their commitment has blessed the lives of so many, including our own, and we're excited about our future because of these amazing partners. We have complete faith in them and the culture that they've collectively built. With that, we'll turn it over to our Q&A portion of the call. Operator, will you please provide instructions on the Q&A.

[Operator Instructions] Your first question comes from the line of Clarke Murphy with Truist Securities.

Congrats on the quarter and the guide. Just wanted to start out on M&A. It sounds like you're perhaps seeing some more opportunities to come around with a more diverse group of sellers than you've talked about in the past. So can you guys just talk about what you're seeing in terms of the pipeline, valuations, et cetera? And has anything changed about how you guys are approaching opportunities? And then finally, just are there any markets or geographies in particular, where you're seeing opportunity?

Yes. I appreciate the question. So we certainly are seeing a pretty healthy pipeline. I would probably describe the market as seller-friendly in terms of values have risen. And I think because of that, a lot of people are bringing their stuff for sale. So we're seeing new deals frequently that are opportunities for us. So -- and yes, I would also say that pricing has definitely gone up. All that said, as I said in my prepared remarks, we are seeing tons of our traditional onesie-twosies and smaller portfolios in addition to that, some larger ones. I wouldn't say that the way we've looked at deals has changed. I would just kind of point out, though, is, again, as we talked about in the prepared remarks, when there are high-quality assets that newer construction, have higher occupancies and higher skilled mix, those sometimes deserve a premium. And we've recently shown that we would do that in the Utah acquisition that we closed during the quarter. And so -- and those are performing really well. So for us, when we talk about disciplined growth, we definitely are looking to make sure that there's a pathway both in the short run, medium range and the long term to create shareholder value. But the total cost of the acquisition, it means when you're buying an older asset, sometimes the amount you have to spend to bring it up to current standards and then maintain it over time, the CapEx spend can actually be quite heavy. And so buying newer assets can be something that we're looking to do. And so that's not necessarily new but I just wanted to highlight that as something we're seeing. But certainly excited about the opportunities that we have for 2026.

Okay. Great. And then just kind of shifting gears a little bit. Can you guys give us some color on things you're doing on the labor environment, specifically your agency labor continues to come down. You guys talked about the director of nurse and the CEOs and training where you continue to have success. Can you just kind of talk about some of the drivers there and how we should think about continued improvement going forward on the labor front?

Yes. Great question. A couple of things. I mean there's -- you've got your macro environmental factors, which can influence. But I'd say the way to think about it is health care, especially for us, is a very locally driven business. And as we do better at things like our initiative to decrease Director of Nursing turnover, what you've got is you've got this stability of leadership. You've got relationships that allow the frontline caregivers to feel like they found a home and they can produce great care outcomes. So we believe that focusing on leadership stability then allows those COO and CEO caliber leaders to create environments where people want to stay. We're very optimistic about both our ability to continue to make progress and have good stability in our labor and also in our ability to, as we acquire facilities, have that same model, have the similar results where with time and with the right people, you're going to see labor numbers get better and better. And I would just say, I guess, the final thing is, with this, you've got agency but you've also got overtime, and we're excited to see that overtime is moving in the same direction.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

Congrats on the quarter. Just wanted to ask a reimbursement question, specifically on Medicare fee-for-service, the Part A piece. We've gotten some questions over the new value-based purchasing program metrics and how those factor in. I would assume that you're pretty well positioned that given some of the nursing turnover and retention commentary you've provided. But then just looking at some of the other measures that have kind of rolled on to the program like the health care associated infections, just wondering kind of how you're faring there and what your outlook is given that you do have a higher acuity patient base versus the rest of the industry. Any comments or observations into the year?

It's a great question, Ben. I think when we kind of look across any time a new program is implemented, we get excited when the state or the federal government looks to quality and looks for us to be measured upon quality. And this is another one where when we can look at the quality metrics and it's clearly outlined, we have an opportunity to showcase how we can do it and have our clinical leaders really lead out on that. And so when we look at these quality metrics, we -- like we always do, have dashboards and other things that allow us then to ensure that we are measuring those outcomes and measuring them and giving that information to our frontline staff and then show that we can do it really, really well.

Yes. And I'd just say with -- I echo what Suzanne said, and with these changes that they make in things like value-based purchasing, the nice thing is we have signals from them years in advance. We know for the most part, where they're going. And so this isn't something that caught us off guard. These are things we've been focused on building foundations to deal with and to be exceptional at for years. And so again, that starts with great quality, local leadership and then having the ability to kind of see around the corner of what's coming, which CMS signals. And so I'm very encouraged that we'll be able to continue to up our quality and do well in these programs.

And because we've got a world-class team of clinicians and data services folks that are able to analyze and package the data and create dashboards and tools that our clinicians on the front lines can use. Our ability to adapt to these changes is probably unlike any other post-acute provider. It's an amazing thing to see how our teams are able to kind of assimilate all these changes and get the information assembled in a really useful kind of ready-to-use way.

Appreciate that commentary. Just a quick follow-up. Is there a risk that these types of programs could steepen the ramp on some of these turnaround acquisition opportunities?

I mean, I think that's more a function of the changes we see in acuity that kind of steepen the ramp. When you take on acquisitions that are historically averse to acuity, that's the bigger kind of challenge that we see rather than these kind of unique nuances in how CMS measures things. So for us, our focus is on improving capabilities first and making sure clinical leadership and all the right tools are implemented so that there's an alignment of the direction we're headed. Our leaders are almost uniformly focused on bringing capabilities up to speed when we go into a building. And then as they do that, everything else kind of falls into place because all of the systems that they're able to lean on through our one clinical program align with kind of what they're already trying to do.

Your next question comes from the line of Raj Kumar with Stephens.

Maybe just one on kind of clicking into the commentary around just further expansion and opportunity with same-store occupancy and that being able to sustain kind of the organic growth momentum you've seen over the past couple of years. Seeing how 2025 showcased 200 basis points of improvement. I'm just kind of curious on what the magnitude in terms of guidance is kind of baked into 2026. And then maybe just any color on seasonality expectations would be helpful as well.

Yes, it's a great question. I think that our expectation is that 2026 will, in many ways, mirror what we saw in 2025. We always kind of caution about seasonality, and it's somewhat of an unpredictable factor when it comes to what the summer months will look like in the end. But we're coming off of a couple of really strong years in those months that -- where seasonality has been much lighter. We'll always see skilled mix decline in the middle of the year. But I think the way we look at our -- we forecast our progress in the future, we kind of see overall occupancy headed in a similar direction to what we saw progress through last year.

Got it. And then maybe just kind of thinking about some of the incremental investments in 2026. I'm just curious on maybe any kind of utilization or integration of AI across different functions of the operations or any build-out of clinical capabilities? And then also maybe just on the one point around some of the construction projects, whether or not that's -- if there's kind of something in the future around that or these are just more opportunistic in nature that you highlighted today and how we should kind of think about that from the longer-term perspective?

Yes. Look, AI is kind of the buzzword of the day for sure. We have been highly involved in looking at opportunities where we can leverage mostly our existing partnerships with a lot of our enterprise providers for our different software systems, ERP, our clinical documentation systems and things like that to kind of leverage the data and information that we have in a more effective way. And we've already achieved a lot of great advances in some of those areas, both on the financial side and also now looking more into the clinical side. I think our inclination will be to kind of leverage what our enterprise partners are doing first but we have also undertaken several projects using more kind of off-the-shelf solutions that AI can provide us that are cost effective and allow us to be a little more nimble. We've got a lot of those projects underway. And we've got a great committee and thought leadership assembled that provides us steering and guidance to make sure that we're choosing the right projects in an effective and again, thoughtful and deliberate way that will be primarily helpful to those that have a lot of kind of mundane administrative things that can be solved with some of that technology. But looking more into the future, we're really excited about how we can leverage the data that we have about our patients and residents and use that information and leverage that information by our caregivers to make better and more nimble clinical decisions. So there's some exciting things that are kind of on the horizon in that area for us that we look forward to.

Yes. On the construction question, we are really excited about the projects that we talked about today, and there's really kind of 2 categories there. One is adding beds to existing operations where there's clearly demand for extra beds but also land and capability to build. So that's something we're looking at doing. And the second was a replacement facility. Building a brand-new building is really time-consuming and expensive, especially when you're starting with an empty operation and going through the Medicare certification process is costly. So where you can do a replacement facility and essentially you start with a new building, but you've moved the staff and the patients over on day 1, it makes for a whole lot quicker return on that significant investment. So those are 2 things we're looking at. We've recently beefed up our kind of construction capabilities, bringing in some experts that do this stuff. And it's always kind of -- anyone that's done any new construction understands that especially COVID and everything, having third parties that are not necessarily aligned with you on how to manage costs and all that can be challenging. And so we've kind of learned some lessons through doing this that having that capability in-house would be really helpful. So we're assessing our portfolio and trying to pick a handful of projects like this that would be sort of the lowest hanging fruit. And it obviously won't ever kind of compare to kind of our overall acquisition strategy but it is an important tool that we have and one that we'll do more and more of, especially in our most mature markets.

Your next question comes from the line of A.J. Rice with UBS.

This is James on for A.J. I just wanted to see if you can provide an update on the traction you're seeing in taking on managed care patients on the behavioral health side as some of these MCOs have had some trouble finding facilities to place these patients? And just any update on up there?

I mean I think a good example of what you're asking about is, again, we referred to this in our highlighted remarks, although we didn't give a lot of detail on what the purpose for the new addition was at Vista Knoll but that new unit we just constructed that's now essentially full after just a couple of months is entirely dedicated to behavioral patient use and highlights the growing need that you're mentioning, James. So there is a need out there, no question. I would say that it's a focus of ours to do it in a deliberate and thoughtful way in markets that make sense. We have -- and we've mentioned this in prior calls but we've got a strategy to do just that in some of our more mature markets like California, Arizona and Texas. With some others that are looking at it closely, too, and we do it certainly in careful partnership with the managed care plans that are having those needs. And so it's something that I think you'll probably hear more about as we go into the future. I wouldn't call it something that's a critical core strategy, rather, it's a strategy that certain markets are focused on implementing based on the needs that they're seeing.

Yes. And I would just add, it's not just behavioral health but really looking at the specialty programs where there's a need. So it's really partnership like we always have of working with the managed care organizations to see what their needs are and then developing with them solutions to meet those needs.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.