What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-29 · 469 added, 193 removed, 908 unchanged (42% of the section changed)

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We are a provider of health care services across the post-acute care continuum.

We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in Alabama, Alaska, Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, Oregon, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin.

We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in 17 states.

Our independent subsidiaries, each of which strive to be the operation of choice in the communities they serve, provide a broad spectrum of services.

As of March 31, 2025, we offered skilled nursing, long term acute care, senior living and rehabilitative care services through 340 skilled nursing and senior living facilities.

As of June 30, 2025, we offered skilled nursing, long term acute care, senior living and rehabilitative care services through 347 skilled nursing and senior living facilities.

Our real estate portfolio includes 144 owned real estate properties, which includes 109 facilities operated and managed by us, 35 operations leased to and operated by third-party operators and the Service Center location.

Of the 35 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.

The following table summarizes our independent subsidiaries and operational skilled nursing beds and senior living units by ownership status as of March 31, 2025:

The following table summarizes our independent subsidiaries and operational skilled nursing beds and senior living units by ownership status as of June 30, 2025:

Owned and Operated Leased (with a Purchase Option) Leased (without a Purchase Option) Total for Facilities Operated

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has direct operating assets, employees or revenue, or that any of the subsidiaries are operated by The Ensign Group, Inc.

Our acquisition strategy has been focused on identifying both opportunistic and strategic acquisitions within our target markets that offer strong opportunities for return.

The operations added by us are frequently underperforming financially and can have regulatory and clinical challenges to overcome.

Financial information, especially with underperforming operations, is often inadequate, inaccurate or unavailable.

Consequently, we believe that prior operating results are not a meaningful representation of our current operating results or indicative of the integration potential of our newly acquired independent subsidiaries.

Recent Activities

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Refer to Results of Operations for further discussion.

Operational Expansions — During the three months ended March 31, 2025, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases, with the addition of 11 stand-alone skilled nursing operations, one stand-alone senior living and one campus operation.

Of these additions, Standard Bearer acquired the real estate of seven of these operations, which were leased back to Ensign affiliated entities.

These new operations added a total of 1,365 operational skilled nursing beds and 132 operational senior living units to be operated by our affiliated operating subsidiaries.

Subsequent to March 31, 2025, we expanded our operations through a combination of long-term leases and real estate purchases , with the addition of two stand-alone skilled nursing operations and one stand-alone senior living operation.

Of these additions, Standard Bearer acquired the real estate of one stand-alone skilled nursing operation, which was leased back to Ensign affiliated entities.

This new operation added 241 operational skilled nursing beds and 68 operational senior living units to be operated by our affiliated operating subsidiaries.

Additionally, we added one stand-alone senior living facility to our real estate portfolio, which is leased to a third-party operator.

For further discussion of our real estate properties and expansions, see Note 6 and 7, Standard Bearer and Operation Expansions in the Notes to the Interim Financial Statements.

Expansion into New States — In the first quarter of 2025, we expanded our operations into the states of Alabama, Alaska and Oregon with the addition of three stand-alone skilled nursing operations and one campus operation.

Operational Expansions — During the six months ended June 30, 2025, we expanded our operations with the addition of 17 stand-alone skilled nursing operations, two stand-alone senior living and one campus operation.

These new operations added a total of 1,955 operational skilled nursing beds and 204 operational senior living units operated by our independent operating subsidiaries.

Subsequent to June 30, 2025, we expanded our operations with the addition of one stand-alone skilled nursing operation which added 120 operational skilled nursing beds operated by one of the Company's independent subsidiary.

For further discussion of expansions, see Note 6 and Operation Expansions in the Notes to the Interim Financial Statements.

Expansion into New States — In the first quarter of 2025, we expanded our operations into the states of Alabama, Alaska and Oregon.

These expansions are part of our strategic vision to further strengthen our growing national presence in both existing and new attractive markets.

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This structure gives us new pathways to growth with transactions we would not have considered in the past.

During the three months ended March 31, 2025, Standard Bearer added $147.8 million of real estate associated with eight stand-alone skilled nursing operations, one stand-alone senior living operation and two campus operations.

During the six months ended June 30, 2025, Standard Bearer added $195.0 million of real estate associated with 11 stand-alone skilled nursing operations, one stand-alone senior living operation and two campus operations.

Four of the acquisitions were related to exercising purchase options from CareTrust REIT, Inc.

(CareTrust) lease arrangements, our independent subsidiaries were already operating and managing these locations.

The remaining real estate acquisitions were leased back to our independent subsidiaries.

Subsequent to March 31, 2025, Standard Bearer added $24.8 million of real estate associated with two stand-alone skilled nursing operations, where one stand-alone skilled nursing facility was leased back to our independent subsidiaries and the remaining one real estate acquisition was leased to a third-party operator.

(CareTrust) lease arrangements where our independent subsidiaries have been operating and managing these locations.

Of these additions, one stand-alone skilled nursing operation is leased to a third-party operator and the remaining additions are operated by our independent subsidiaries.

Subsequent to June 30, 2025, Standard Bearer added $20.8 million of real estate associated with two stand-alone skilled nursing operations, where one stand-alone skilled nursing facility was leased back to our independent operating subsidiary and the remaining real estate acquisition was leased to a third-party operator.

Our existing relationships with third-party operators within our industry have allowed us to expand our growing REIT structure to operators outside of our organization.

Common Stock Repurchase Program — On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from March 26, 2025.

During the three months ended March 31, 2025 and subsequently, we purchased 157 shares of our common stock for $20.0 million.

During the first quarter of 2025, we purchased 84 shares of our common stock for $10.8 million.

During the second quarter of 2025, we purchased 73 shares of our common stock for $9.2 million.

This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

On May 15, 2025, the Board of Directors approved a stock repurchase program pursuant to which we can repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from June 16, 2025.

During the second quarter of 2025, we did not repurchase any shares pursuant to this stock repurchase program.

Facility Information

The following table sets forth the location of our facilities and the number of operational beds and units located at our skilled nursing, senior living and campus facilities as of March 31, 2025:

The following table sets forth the location of our facilities and the number of operational beds and units located at our skilled nursing, senior living and campus facilities as of June 30, 2025:

Facility Counts Bed / Unit Counts

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(1) Campuses represent facilities that offer both skilled nursing and senior living services.

The following table provides summary information regarding the location of our owned and operated real estate properties as of March 31, 2025:

The following table provides summary information regarding the location of our owned and operated real estate properties as of June 30, 2025:

Facility Counts Bed / Unit Counts

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(1) Campuses represent facilities that offer both skilled nursing and senior living services.

The following table provides summary information regarding the location of our owned real estate properties as of March 31, 2025:

The following table provides summary information regarding the location of our owned real estate properties as of June 30, 2025:

Owned and Operated by Ensign (1)

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The following table summarizes our overall skilled mix from our skilled nursing services for the periods indicated as a percentage of our total skilled nursing routine revenue and as a percentage of total skilled nursing patient days:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Days 30.8 % 29.9 % 31.1 % 30.4 %

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The following table summarizes our overall occupancy statistics for skilled nursing operations for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Occupancy for skilled services:

2025 2024 2025 2024

Operational beds at end of period 35,545 31,813 35,545 31,813

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The following tables set forth our total service revenue by payor source generated by our skilled services segment and our "All Other" category and as a percentage of total revenue for the periods indicated (dollars in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Skilled Services All Other (3)

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TOTAL SERVICE REVENUE $ 1,173,576 $ 991,285 $ 47,838 $ 39,289 $ 1,221,414 $ 1,030,574

Three Months Ended March 31,

Three Months Ended June 30,

Skilled Services All Other (3)

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(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other in our "all other" category includes revenue from senior living operations and all revenue generated in our other ancillary operations.

(2) Private and other in skilled services includes private, Veteran Affairs and hospice payors.

In addition, private and other in the "all other" category includes revenue from senior living and ancillary operations.

(3) All Other incorporates intercompany eliminations.

Six Months Ended June 30,

Skilled Services All Other (3)

Total Service Revenue

2025 2024 2025 2024 2025 2024

$ 917,315 $ 785,245 $ 22,373 $ 16,678 $ 939,688 $ 801,923

Medicare 578,868 524,452 — — 578,868 524,452

Medicaid-skilled 144,758 126,278 — — 144,758 126,278

Subtotal $ 1,640,941 $ 1,435,975 $ 22,373 $ 16,678 $ 1,663,314 $ 1,452,653

Managed care 456,712 379,126 — — 456,712 379,126

Private and other (2)

199,477 145,786 68,951 57,494 268,428 203,280

TOTAL SERVICE REVENUE $ 2,297,130 $ 1,960,887 $ 91,324 $ 74,172 $ 2,388,454 $ 2,035,059

Six Months Ended June 30,

Skilled Services All Other (3)

Total Service Revenue

2025 2024 2025 2024 2025 2024

39.9 % 40.0 % 24.5 % 22.5 % 39.3 % 39.4 %

Medicare 25.2 26.7 — — 24.2 25.8

Medicaid-skilled 6.3 6.5 — — 6.1 6.2

Subtotal 71.4 % 73.2 % 24.5 % 22.5 % 69.6 % 71.4 %

Managed care 19.9 19.3 — — 19.1 18.6

Private and other (3)

8.7 7.5 75.5 77.5 11.3 10.0

TOTAL SERVICE REVENUE 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other in skilled services includes private, Veteran Affairs and hospice payors.

In addition, private and other in our "all other" category includes revenue from senior living and ancillary operations.

(3) All Other incorporates intercompany eliminations.

GOVERNMENT REGULATION

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Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions

The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have released the following proposed or final rulemaking, or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or Assisted Living Facilities (ALFs):

The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have recently released the following proposed or final rulemaking, or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or Assisted Living Facilities (ALFs):

One Big Beautiful Bill (OBBB) — The OBBB was signed into law on July 4, 2025.

The OBBB implements numerous federal reforms targeting Medicaid financing, eligibility, and payment structures.

The following provisions of the OBBB are expected to impact Medicaid reimbursement mechanisms and enrollment dynamics relevant to our business.

Moratorium on New or Increased Provider Taxes — Provider taxes, which are state taxes assessed on healthcare providers or facilities, are a commonly used by states to generate non-federal share of Medicaid payments, including payments to SNFs.

Under the Patient Protection and Affordable Care Act (ACA), provider taxes were capped at 6% of a provider's net patient revenue.

Existing federal law prohibits states Medicaid programs from guaranteeing providers that they will receive their provider taxes paid back - this is known as the hold harmless provision.

The OBBB prohibits states from imposing new provider taxes or increasing existing provider tax rates or tax bases, with specific carve outs for nursing facilities and intermediate care facilities to remain at status quo.

The OBBB reduces the hold harmless threshold in expansion states beginning in fiscal year 2028.

This threshold will decrease by 0.5% per year in ACA expansion states until the safe harbor limit is 3.5% in fiscal year 2032.

While SNFs are exempt from the moratorium, broader limitations on provider taxes could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates.

Medicaid Recertification Changes and Retroactive Eligibility Cut — Beginning in the first quarter of 2027, states must conduct Medicaid eligibility redeterminations every six months, rather than annually, for individuals enrolled under Medicaid.

Additionally, the OBBB includes a provision to reduce Medicaid retroactive eligibility from 90 days to 30 days for most enrollees but is 60 days for long-term care residents and traditional Medicaid enrollees.

We believe that these provisions create the conditions for coverage interruptions, potential delays or denied payments.

Revisions to State-Directed Payments (SDPs) — Prior to the OBBB’s passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods.

These state-mandated payments by MCOs were known as SDPs, the upper limits for which generally were higher than the highest Medicare payment rate for those services, which is used in calculating Medicaid fee-for-service supplemental payments.

The OBBB limits total payments under existing CMS-approved SDPs to current levels and caps future SDPs based on whether the state has expanded its Medicaid program under the ACA.

SDPs approved prior to the OBBB’s implementation are grandfathered by the OBBB, although those grandfathered payments are reduced by 10% per year starting on January 1, 2028, until those SDPs reach the allowable Medicare-related payment limit.

For Medicaid expansion states, new SDPs may not exceed 100% of the Medicare equivalent payment rate;

for non-expansion states, the cap is 110%.

In the absence of published Medicare payment rates, the OBBB limits SDPs to the Medicaid fee-for-service payment rate.

Cap on Home Equity Excluded for Long-Term Care Eligibility Determination — The OBBB establishes a limit of $1.0 million for home equity that can be exempted from calculating an individual’s eligibility for Medicaid in seeking long-term care beginning January 1, 2028.

This threshold is not indexed to inflation.

States may, however, apply different home equity limits for primary residences that are located on farms.

Reduced Federal Contributions to State Medicaid Programs – Beginning in fiscal year 2030, the OBBB requires HHS to reduce federal financial contributions to Medicaid programs in states that identified improper payments to ineligible individuals or overpayments to eligible individuals.

The OBBB expanded the scope of these improper payments to include payments where insufficient information is available to confirm the recipient’s eligibility for payment.

We do not anticipate this provision of the OBBB to impact our revenue.

Home and Community Based Services (HCBS) – The OBBB allows states to obtain waivers from CMS so that Medicaid can be used to pay for HCBS rendered to beneficiaries who do not require an institutional level of care found in a SNF.

The OBBB requires these waiver applications to include a demonstration that the state’s waiver will not increase the average amount of time that beneficiaries who need institutional levels of care will have to wait for services, intending to avoid HCBS being used in lieu of adequate SNF access for Medicaid beneficiaries requiring institutional care.

Overall Impact on State Budgets - It is uncertain at this point how the overall budgets of states will be impacted by the OBBB due to reduced federal Medicaid contributions.

However, one potential risk to our revenue is due to the fact that the states will simply have less money in general.

Therefore, we anticipate states being forced to make difficult decisions in the future about where those funds are directed.

We will continue to monitor any such developments and advocate accordingly at the federal, state and local levels.

Medicare Annual Payment Rule — On April 11, 2025, CMS issued the SNF Prospective Payment System (PPS) Fiscal Year (FY) 2026 Proposed Rule with the following proposed impacts:

Impact to payment rates — CMS is required to calculate an annual Medicare market-basket update to the payment rates.

For fiscal year 2026, starting on October 1, 2025 and will run through September 30, 2026, CMS proposes to increase the SNF PPS rate by 2.8%.

The net increase is based on a 3.0% market basket adjustment to account for inflation, plus a 0.6% forecast error adjustment and a negative 0.8% productivity adjustment.

This increase does not include the SNF Value-Based Purchasing (VBP) Program reductions for certain SNFs subject to the net reduction in payments under the SNF VBP.

The SNF PPS FY 2026 Proposed Rule also includes updates to the PDPM, with CMS proposing revisions to ICD-10 code mappings to ensure alignment with current clinical guidance and support more accurate assignment of clinical categories.

These updates are intended to improve coding accuracy and better reflect patients’ primary diagnoses during SNF stays, potentially impacting reimbursement levels and case-mix classifications for the skilled nursing facilities operated by our independent subsidiaries.

Impact to the SNF VBP Program — Proposed changes to the SNF VBP Program within the SNF PPS FY 2026 Proposed Rule seek to finalize scoring methodology for the SNF Within-Stay Potentially Preventable Readmission (SNF WS PPR) measure, establish performance standards for fiscal years 2028 and 2029, and adopt a reconsideration process for review and correction disputes.

CMS also proposes to eliminate the Health Equity Adjustment to simplify the program’s incentive structure.

Impact to the SNF Quality Reporting Program (QRP) — With respect to the SNF QRP, CMS proposes to remove four standardized patient assessment data elements related to Social Determinants of Health (SDOH) from the Minimum Data Set (MDS), including those for living situation, food, and utilities, effective October 1, 2025.

The SNF PPS FY 2026 Proposed Rule also proposes to expand the QRP reconsideration process by allowing SNFs to request deadline extension and expanding the bases for CMS to grant such extension requests.

Other Proposed Impacts — Finally, the SNF PPS FY 2026 Proposed Rule includes a Request for Information seeking public comment on approaches to streamline Medicare regulations and reduce provider administrative burden.

Any material changes resulting from this rule could directly affect our SNF operations, particularly in areas such as reimbursement methodology, compliance reporting, and quality-based performance evaluations.

Medicare Part B Fee Schedule — On July 14, 2025, CMS issued the 2026 Medicare Physician Fee Schedule (PFS) Proposed Rule, which outlines significant changes aimed at modernizing Medicare, improving care quality, and reducing unnecessary spending.

Two Payment Rates Based on Advanced Alternative Payment Model (AAPM) Participation — For the first time, there are two separate conversion factors for all Medicare-participating providers which impacts reimbursement for therapeutic services (including occupational therapy, speech language therapy, and physical therapy), evaluation and management services, and other services furnished in SNFs covered by Medicare Part B.

This is required under the Medicare Access and CHIP Reauthorization Act (MACRA) depending on whether a provider qualifies as a participant in an AAPM.

CMS proposes a qualifying AAPM participant conversion factor of $33.59, representing a 3.83% increase over the 2025 conversion factor of $32.35.

The non-AAPM participant conversion factor is $33.42, a 3.62% increase over the 2025 conversion factor.

Payment Adjustments — CMS plans to reduce payments by 2.5% for certain services that aren’t based on time (like some therapy services), assuming providers are becoming more efficient.

This cut is meant to balance out other Medicare spending increases.

CMS’s proposed changes may influence how SNFs deliver and bill for physician and ancillary services.

The scope of reimbursable therapy and remote care services may increase, but payment levels may be affected in the future, whether positively or negatively, by broader efficiency and practice cost assumptions.

SNFs offering telehealth-based care or participating in care coordination models may benefit from expanded flexibility and new billing pathways.

The cumulative impact of these changes may also introduce operational complexity and compliance requirements.

We are actively evaluating the proposal and its potential operational and financial implications.

Improving Care and Access to Nurses Act (I CAN Act) – I CAN Act was introduced to the Senate on February 13, 2025 and expands the role of nurse practitioners (NPs) in SNFs and nursing homes by allowing them to certify, oversee, and supervise care under Medicare and Medicaid without requiring physician oversight, subject to state law.

If enacted it would grant NPs the authority to certify patient admissions, manage care plans, and provide supervision in SNFs and intermediate care facilities.

These proposed changes could potentially reduce reliance on physicians, streamline patient transitions from hospitals to long-term care, and increase access to care particularly in rural and underserved areas.

Biden-Harris Administration's Nursing Home Care Priorities — Prior to the change in Presidential Administration in 2025, the Biden-Harris Administration sought reform around reimbursement, staffing levels, standards of care, increased transparency and public disclosure of ownership, and enhanced civil remedies as a means of enforcement against those facilities that do not satisfy CMS’s standards.

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For example, the SNF PPS FY 2025 Final Rule granted CMS greater sanctioning authority for ongoing or persistent deficiencies in Medicare-participating SNFs.

These increased sanctioning authorities will take effect in the 2025 federal fiscal year, which began on October 1, 2024.

With the new administration, it currently is unknown whether any of these rules will be reduced in their scope or application, or whether they will be increased in any respects.

The individuals appointed to serve as the Secretary of HHS and Director of CMS, respectively, have not yet provided any indication what their priorities of anticipated future actions would be in this area.

Ownership Transparency Final Rule — CMS' final rule published in November 2023 requires SNFs to publicly disclose certain additional information regarding their ownership and managerial relationships, including the identity of any person or legal entity that:

(1) exercises financial, operational, or managerial control over any facility or part of a facility, or provides services to a facility that include its policies and procedures or cash management services;

(2) leases or subleases real property to the facility, or owns 5% or more of the real property’s total value;

and (3) provides any management or administrative services (or consults regarding the same), or provides accounting or financial services to SNFs.

The rule also expands ownership and control interest disclosures to include information about each member of the facilities governing body, individuals or entities serving as officers, directors, members, partners or managing employees, and a comprehensive breakdown of the organizational structure of any additional disclosable party that is not a natural person along with a description of their relationships with the facility.

As of November of 2024, all SNFs are required to comply with this rule’s requirements, which industry observers have noted have had adverse effects on some SNFs and their Medicare recertification.

Certain states have adopted laws reflecting their concerns regarding ownership transparency.

For example, Iowa adopted laws requiring disclosure of ownership information not previously required for licensure to promote transparency in 2023.

Additionally, in March 2024, the California Department of Health Care Access and Information of the California Health and Human Services Agency issued its notice of approval of regulatory action establishing policies and procedures that implement financial and ownership transparency requirements for California-licensed SNFs that are required by California law passed in 2021.

Federal Legislation — The Home and Community-Based Services (HCBS) Access Act (Access Act) was introduced in 2023 to expand access to and resources available for HCBS.

The Access Act ensures that Medicaid funding is made available to individuals who provide direct home- and community-based care to adults over the age of 60 or people who have disabilities.

This bill also provides financial resources for the training of these direct care providers, who are intended to provide services to the elderly or disabled that range from advocacy and community integration to transportation and daily assistance tasks ranging from bathing and laundry to meal preparation and housekeeping.

No further action was taken on the Access Act during the 118th Congress and that congressional session ended without the Access Act being passed into law.

Comparable legislation has not yet been introduced in the 119th Congress, which began in January of 2025.

In addition, the HCBS Relief Act introduced in 2023, provides additional funds to states to stabilize their HCBS service delivery networks, recruit and retain HCBS direct care workers, and meet long-term service and support needs of people eligible for Medicaid home and community-based services.

To qualify for the enhanced rate, a state must commit to initiatives aimed at improving the provision of services.

No further action was taken on the HCBS Relief Act during the 118th Congress and that congressional session ended without the HCBS Relief Act being passed into law.

Comparable legislation has not yet been introduced in the 119th Congress.

The Improving Care and Access to Nurses Act (I CAN Act) was introduced to the Senate on February 13, 2025.

The I CAN Act expands the role of nurse practitioners (NPs) in SNFs and nursing homes by allowing them to certify, oversee, and supervise care under Medicare and Medicaid without requiring physician oversight, subject to state law.

If enacted it would grant NPs the authority to certify patient admissions, manage care plans, and provide supervision in SNFs and intermediate care facilities.

Under the direction of the Trump Administration, Congress is considering major cuts to federal spending on Medicaid.

One of the options under consideration is to limit the amount of federal Medicaid funding they receive by levying taxes on providers and thereby increasing their reimbursement rates.

Restricting these “provider taxes” would create financing gaps for states which could result in higher state taxes, reductions in Medicaid eligibility, lower provider payment rates, and fewer covered benefits.

State Legislation — Many states in which our independent subsidiaries operate have introduced or passed legislation that would create or change laws and regulations related to our business and industry.

In the past, California had discussed issuing proposed regulations on direct care spending requirements that may have affected our business and SNFs operating within that state.

These proposals have included requirements for healthcare facilities certified by CMS, including SNFs, to report all annual revenues to the State of California and certify that a stated percentage of all revenues should be used for direct patient-related services, including staffing and operational costs.

California has also signed into law a bill that impacts the minimum wages of healthcare workers.

Effective October 16, 2024, the law raised the minimum wage for California healthcare employees and set a new wage threshold for those who are considered exempt healthcare employees.

The bill only becomes effective for SNFs if a direct care minimum spending requirement bill is also passed.

While the existing requirement bill has not seen any traction, we anticipate a minimum spending bill could be proposed in the future.

On April 24, 2024, the California Department of Health Care Access and Information (HCAI) announced that the Office of Health Care Affordability’s Board approved a statewide healthcare spending target of 3.0%, which represents a long-term reduction of current levels of statewide healthcare spending.

The spending target will be phased in over time, initially starting at 3.5% for 2025 and 2026, the target will be lowered to 3.2% for 2027 and 2028 before ultimately reaching 3% for 2029 and beyond.

These increased sanctioning authorities took effect in the 2025 federal fiscal year, which began on October 1, 2024.

With the new administration, it is currently unknown whether any of these rules will be reduced in their scope or application, or whether they will be increased in any respects.

The individuals appointed to serve as the Secretary of HHS and Director of CMS, respectively, have not yet provided any indication of what their priorities for anticipated future actions would be in this area.

CMS Minimum Staffing Standards Final Rule — In April 2024, CMS issued its final rule establishing minimum staffing standards for skilled nursing facilities (Staffing Rule).

The Staffing Rule contains three primary staffing requirements and provides for a staggered and phase implementation over the next several years following the Staffing Rule’s publication.

In addition, the Staffing Rule finalized the hardship exemption for the HPRD requirements and also enhanced transparency for the use of Medicaid payments for facility services, referenced as Medicaid Institutional Payment Transparency Reporting provisions (MIPTR).

The Staffing Rule has been met with further opposition and proposed legislation to halt its implementation.

On May 23, 2024, the American Health Care Association (AHCA) filed a lawsuit in the Northern District of Texas against HHS and CMS, alleging that the Staffing Rule exceeds the scope of CMS’s statutory authority and violates the Administrative Procedure Act.

The State of Texas brought suit and was granted consolidation of its lawsuit with AHCA's in the same venue arguing the rule is “arbitrary and capricious” and in violation of the Administrative Procedure Act.

Subsequently, over 20 additional states have filed similar suits in opposition to the rule, as well as industry groups including Leading Age and the South Dakota Association of Healthcare Organizations.

On January 16, 2025, the United States District Court for the Northern District of Iowa rejected a motion for preliminary injunction filed by the plaintiff states and LeadingAge affiliates.

Litigation over the Staffing Rule remains ongoing and no final decision has yet been entered.

The Staffing Rule has been met with opposition and legislation to halt its implementation.

On April 7, 2025, the U.S.

District Court for the Northern District of Texas issued a ruling to vacate the Biden Administration’s federal staffing mandate for nursing homes that was to be phased in starting in 2026.

The court found that CMS lacks authority to issue a regulation that replaces Congress’s preferred minimum staffing hours with its own.

While the Trump Administration can appeal the ruling, as of April 28, 2025, there has been no indication of an intent to do so.

Tariffs — On April 2, 2025, President Trump signed the executive order to impose a variety of tariffs to the global trading partners of the United States.

These tariffs have the potential to increase costs on goods that are imported into the United States.

As it pertains to our independent subsidiaries, tariffs on medical supplies may lead to higher costs to providers and the federal government through the Medicare and Medicaid programs and may impact the formulas used to calculate federal reimbursements.

District Court for the Northern District of Texas issued a ruling to vacate it findings that CMS lacks authority to issue a regulation that replaces Congress’s preferred minimum staffing hours with its own.

On July 4, 2025, the OBBB was signed into law, which prohibits HHS from implementing, administering, or enforcing the Staffing Rule until October 1, 2034.

Medicare presently accounts for approximately 25.2% of our skilled nursing services revenue year-to-date, being our second-largest revenue payor.

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The assessment includes consideration of mobility and self-care, utilizing data from the Minimum Data Set (MDS).

The DC Function will replace the current process and is scheduled to go into effect for the FY 2025 SNF QRP.

The DC Function replaces the current process and is in effect for the FY 2025 SNF QRP.

The SNF PPS FY 2024 Final Rule also modified the SNF QRP’s Healthcare Professional (HCP) Covid Vaccine Measure.

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Also beginning in fiscal year 2027, SNFs participating in the SNF QRP program must participate in a validation program similar to that used for SNFs participating in the SNF VBP Program.

Medicare Annual Payment Rule — CMS is required to calculate an annual Medicare market-basket update to the payment rates.

For fiscal year 2026, CMS proposes updating SNF PPS rate by 2.8%, which will start on October 1, 2025 and will run through September 30, 2026.

The net increase is based on a 3.0% market basket adjustment to account for inflation, plus a 0.6% forecast error adjustment and a negative 0.8% productivity adjustment.

This increase does not include the SNF VBP reductions for certain SNFs subject to the net reduction in payments under the SNF VBP.

In addition, CMS is proposing updates to the SNF VBP and SNF Quality Reporting Program (QRP) to simplify methodology and remove certain patient assessment data elements.

Final Rule Fiscal Year 2025 SNF PPS - CMS' final rule for the SNF PPS for FY 2025 (SNF PPS FY 2025 Final Rule) results in a net 4.2% increase in SNF payments under Medicare Part A in fiscal year 2025, which started on October 1, 2024 and will run through September 30, 2025.

Medicare Annual Payment Rule — Refer to Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions above for additional information on the SNF PPS FY 2026 Proposed Rule.

The net increase was based on the SNF market basket of 3.0%, plus a 1.7% market basket forecast error adjustment, and a negative 0.5% productivity adjustment.

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The SNF rule adopted a policy to select, retain and remove measurements to ensure the VBP Program’s evaluation metrics remain relevant and effective for assessing care quality, as well as policies for updating technical measures and policies for reviewing and correcting data CMS relies upon to calculate its measures.

The rule allows CMS to update the case-mix methodology for the Total Nurse Staffing measure, and its policies to allow the review and revise measures, as well as review and correct data, allow SNFs to review and correct Payroll-Based Journal (PBJ) data from fiscal year 2026 and MDS data from fiscal year 2027, allowing CMS to fashion more accurate measures based on updated data.

The rule allows CMS to update the case-mix methodology for the Total Nurse Staffing measure, and its policies to allow the review and revise measures, as well as review and correct data, allow SNFs to review and correct PBJ data from fiscal year 2026 and MDS data from fiscal year 2027, allowing CMS to fashion more accurate measures based on updated data.

Part B Rehabilitation Requirements — A portion of our revenue is paid by the Medicare Part B program under a fee schedule.

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The threshold for targeted medical review for PT and OT (combined) and SLP is expected to remain at $3,000 through CY 2027.

While the OBBB does not affect the CY 2025 PFS Final Rule, the OBBB did provide a one-year 2.5% increase to the conversion factor for services provided between January 1, 2026 and January 1, 2027.

On July 14, 2027, CMS issued the CY 2026 PFS Proposed Rule (2026 PFS Proposed Rule), which increases Medicare reimbursement for provider services by a 2.5% increase in the conversion factor as set forth in the OBBB.

The 2026 PFS Proposed Rule contains numerous significant changes regarding payment methods and models, encourages care coordination, reduces collection and reporting of data measurements, and continues certain telehealth flexibilities that began during the COVID-19 pandemic.

The 2025 PFS Final Rule also adopts a regulatory change that allows physical therapy assistants and occupational therapy assistants to be generally supervised by physical therapists and occupational therapists, respectively, in private practice, non-institutional settings, allowing greater flexibility in billing for those assistants’ services.

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For a discussion of historic adjustments and recent changes to the Medicare program and other reimbursement rates, see Part II, Item 1A Risk Factors under the headings Risks Related to Our Business and Industry.

Patient Protection and Affordable Care Act

Various healthcare reform provisions became law upon enactment of the Patient Protection and Affordable Care Act (ACA).

Patient Protection and Affordable Care Act (ACA)

Various healthcare reform provisions became law upon enactment of the ACA.

The reforms contained in the ACA have affected our independent subsidiaries in some manner and are directed in large part at increased quality and cost reductions.

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We continually monitor these developments so we can respond to the changing regulatory environment impacting our business.

On July 4, 2025, the OBBB was enacted into law and intends to be a budget reconciliation law that by 2028 may significantly change the automatic reenrollment process for ACA marketplace health plans and impose work requirements as a condition of Medicaid eligibility, among other things.

The OBBB reflects broader legislative efforts to roll back provisions of the ACA, and its enactment along with ongoing executive actions that run counter to the ACA, could reduce the availability of insurance coverage and may affect the population and payer mix of our independent subsidiaries.

Requirements of Participation

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One such requirement of participation in the Medicare and Medicaid programs involves limitations around the use of pre-dispute, binding arbitration agreements by SNFs.

CMS has issued guidance and direction around arbitration that must be satisfied for any agreement to be enforceable and which may result in adverse consequences for our business if not followed.

CMS has historically issued guidance and direction around arbitration that must be satisfied for any admission agreement to be enforceable.

Phase 2 and 3 of the Requirements of Participation focuses on:

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These updates provided more information for state surveyors to utilize when evaluating SNFs’ compliance with the Medicare Requirements of Participation, as well as included guidance for facilities on operationalizing compliance with these requirements based on how surveyors would measure and evaluate facility performance.

CMS issued comprehensive updates to the State Operations Manual (Appendix PP) that took effect on April 28, 2025.

These updates revised surveyor guidance across multiple areas, including infection control, staffing, PBJ reporting, psychotropic medication use, and medical director oversight responsibilities.

These revisions are intended to enhance survey consistency and align with CMS’s broader focus on care quality and resident outcomes.

Additionally, CMS issued guidance effective March 24, 2025, which took effect on April 28, 2025, clarifying that SNFs may not include pre-dispute, binding arbitration provisions or third-party financial guarantee requirements in admission agreements.

If these provisions are not removed, they may result in survey citations and potential penalties for non-compliant SNFs.

Civil and Criminal Fraud and Abuse Laws and Enforcement

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and (3) the assessment of the implementation of the Special Focus Facility Program for nursing facilities based on facilities that participated in the program from 2013 through 2022.

The OIG continues to increase its oversight of skilled nursing facility operations through its active Work Plan, with several new audits and studies that may impact SNFs.

In June 2025, OIG announced a new evaluation of whether SNFs are properly engaging medical directors and accurately reporting medical directors’ hours of service in CMS’s PBJ reporting system.

This review will examine whether medical directors are meeting regulatory expectations and whether reported hours reflect actual services provided, with potential implications for regulatory compliance and reimbursement oversight.

Separately, OIG announced an audit assessing whether SNFs are inappropriately billing Medicare Part D for prescription drugs provided during a Medicare Part A stay, as the OIG previously found potential overpayments of more than $465 million in Part D payments for drugs that were already covered under Part A.

OIG is also reviewing state-level enforcement of minimum spending requirements for direct resident care in nursing facilities, which could affect state Medicaid reimbursement mechanisms and facility-level allocation of resources.

In addition, a May 2025 OIG report identified deficiencies in how CMS shares PBJ staffing data with state survey agencies, limiting surveyors’ ability to assess RN staffing compliance and potentially delaying corrective action.

Our business model is based in part on serving higher acuity patients.

Over time our overall patient mix has consistently shifted to higher acuity in most facilities we operate.

Further scrutiny of high-acuity residents and the treatment they receive may affect our business and subject us to increased governmental oversight.

We also use specialized care-delivery software that assists our caregivers in more accurately capturing and recording services in order to, among other things, increase reimbursement to levels appropriate for the care actually delivered.

These efforts may place us under greater scrutiny with the OIG, CMS, our fiscal intermediaries, recovery audit contractors and others.

Federal Healthcare Reform

Other Federal Legislation and Healthcare Reform

Five-Star Quality Reporting Metrics — The Quality Payment Program (QPP) was created under the Medicare Access and Children's Health Insurance Program (CHIP) Reauthorization Act of 2015.

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The Five Star Quality Ratings incorporated staffing data such as staff tenure and SNF weekend staffing beginning with the October 2022 refresh of the Nursing Home Compare website.

In June 2025, CMS announced changes to Nursing Home Care Compare and the Five Star Quality Rating system that will take effect on July 30, 2025.

Under these changes, CMS will no longer include the third most recent standard health survey in calculating the health inspection rating, and instead use only the two most recent surveys going forward.

The most recent survey will be weighted at 75% of the total score, with the second most recent survey result constituting the remaining 25% of the score.

CMS will also begin publishing aggregated five-star performance metrics for nursing home chains and will remove COVID-19 vaccination measures from facility profile pages.

Additionally, CMS is updating the long-stay antipsychotic measure to incorporate Medicare and Medicaid claims and Medicare Advantage encounter data, with the updated measure taking effect October 29, 2025, likely increasing national antipsychotic rates from approximately 14.6% to 17.0%.

We expect that this change will result in varying changes to individual facilities' ratings.

In January of 2025, CMS unfroze four of its quality measures that it previously froze with its April 2024 refresh.

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Under these guidelines, only 10% of nursing facilities can receive a five-star rating in the state where it operates, with the bottom 20% receiving a one-star rating and the remaining 70% receiving a distribution of two-, three-, and four-star ratings.

State Legislation Concerning Nursing Home Supervision — California passed into law a bill which changes the limitations, or “caps,” on non-economic damages that can be awarded in medical negligence cases filed against healthcare providers (including skilled nursing and long-term care facilities).

Beginning on January 1, 2023, non-economic damages (i.e., pain and suffering) available to plaintiffs suing healthcare providers in medical malpractice and professional negligence cases increased from $0.25 million to $0.35 million, and will then increase over the following ten years up to a $0.75 million cap.

Once the limit reaches $0.75 million, a 2% annual inflationary adjustment will attach beginning on January 1, 2034.

In wrongful death cases that arise from claims of medical malpractice and professional negligence, the cap on non-economic damages increased from $0.25 million to $0.50 million on January 1, 2023, and increase every year thereafter for ten years until the cap on non-economic damages in such cases is $1.0 million;

thereafter, this cap will also be subject to an annual 2.0% increase.

The caps are separate as to each claim, meaning that there is one cap for negligence and one cap for wrongful death.

The new limits on non-economic damages apply prospectively to lawsuits filed on and after January 1, 2023.

In 2022, California’s Governor signed into law the Skilled Nursing Facility Ownership and Management Reform Act of 2022.

This law increases the oversight authority of the California Department of Public Health, and changes several provisions regarding SNF licensing in the State of California.

This includes eliminating previous regulatory provisions that permitted SNFs to operate in advance of receiving their formal license from the State.

(2) leases or subleases real property to the facility, or owns 5% or more of the real property’s total value;

and (3) provides any management or administrative services (or consults regarding the same), or provides accounting or financial services to SNFs.

As of November of 2024, all SNFs are required to comply with this rule’s requirements.

Certain states have adopted laws reflecting their concerns regarding ownership transparency.

For example, Iowa adopted laws requiring disclosure of ownership information not previously required for licensure to promote transparency in 2023.

State-level Legislation and Healthcare Reform

The states where we operate have varied legislative priorities and accordingly legislation.

These different legislative priorities vary for many reasons but ultimately result in the operations of our independent subsidiaries having different profiles for risk, regulatory burden, taxation and benefits based on the state in which the facility operates.

By way of example, in 2022, California’s Governor signed into law the Skilled Nursing Facility Ownership and Management Reform Act of 2022.

This law increased the authority of the California Department of Public Health and changed several provisions regarding SNF licensing in the State of California.

These changes include eliminating previous regulatory provisions that permitted SNFs to operate in advance of receiving their formal license from the State.

This law also requires SNF license applicants to disclose additional information in connection with a license application and evaluates more data regarding the applicant’s prior operations, including prior citations, CMS sanctions and legal proceedings against the applicant or other facilities owned or managed by the applicant before issuing a license.

United States Supreme Court Decisions – On June 28, 2024, the United States Supreme Court issued its opinion in Loper Bright Enterprises v.

In contrast, on June 20, 2025, Texas passed SB 457 which will allow a new operator to receive uninterrupted Medicaid payments during the change of ownership process beginning on September 1, 2025.

These examples, highlight the varied approaches that occur from state to state, with different approaches making it either easier or harder for our independent subsidiaries to operate.

We continue to monitor and advocate for positions that protect the interest of our employees, residents and those of our independent subsidiaries at all levels of government, particularly at the state and local levels.

The Impact of United States Supreme Court Decisions

On June 28, 2024, the United States Supreme Court issued its opinion in Loper Bright Enterprises v.

Raimondo, deciding to vacate and remand decisions by the United States Courts of Appeals that relied on the Supreme Court’s own 1984 precedent in Chevron U.S.A.

Natural Resources Defense Council, Inc.

, which sometimes required courts to defer to “permissible” agency interpretations of the statutes those agencies administered and enforced—a legal doctrine known as the “Chevron doctrine.” In Loper , the Supreme Court had to decide whether it should overrule or clarify the Chevron doctrine based on its application more than 40 years after its creation, and the Supreme Court chose to overrule it.

Natural Resources Defense Council, Inc., which sometimes required courts to defer to “permissible” agency interpretations of the statutes those agencies administered and enforced—a legal doctrine known as the “Chevron doctrine.” In Loper, the Supreme Court had to decide whether it should overrule or clarify the Chevron doctrine based on its application more than 40 years after its creation, and the Supreme Court chose to overrule it.

The Chevron doctrine required courts to use a two-step process to interpret statutes administered by federal agencies.

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Our independent subsidiaries are also subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.

On January 17, 2024, CMS published the CMS Interoperability and Prior Authorization Final Rule (Interoperability Final Rule), which affects the data standards and application programming interfaces (APIs) used by entities that are payors for our services, including but not limited to Medicare Advantage organizations, Medicaid fee-for-service providers, and managed care organizations.

This new rule requires these payor entities to adopt new patient access APIs beginning January 1, 2026, and to complete implementation of both patient and provider access APIs by January 1, 2027, to facilitate the sharing of payor information with payors and providers.

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States that administer Medicaid programs for services in senior living communities are responsible for monitoring the participating communities and, as a result of the growth of senior living in recent years, these states have adopted licensing standards applicable to senior living communities.

Similarly, states that elect to provide Medicaid coverage for an expanded range of HCBS services for individuals who do not require institutional care may also offer lower rates of reimbursement for those HCBS services than services provided in SNFs.

This cost differential may make those HCBS services more attractive to Medicaid programs than SNF-based care.

CMS has continued to commence a series of actions to increase its oversight of state quality assurance programs for senior living communities and has provided guidance and technical assistance to states to improve their ability to monitor and improve the quality of services paid through Medicaid waiver programs.

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RESULTS OF OPERATIONS

Our total revenue for the three months ended March 31, 2025 increased $162.9 million, or 16.1%, compared to the three months ended March 31, 2024, while our diluted GAAP earnings per share grew by 15.1%, from $1.19 to $1.37, compared to the three months ended March 31, 2024.

Our Same Facilities occupancy of 82.6% during the three months ended March 31, 2025, an increase of 2.9% compared to the same period in 2024, demonstrates our ability to gain additional market share even at our more mature operations.

Our total revenue for the three months ended June 30, 2025 increased $191.5 million, or 18.5%, compared to the three months ended June 30, 2024, while our diluted GAAP earnings per share grew by 18.0%, from $1.22 to $1.44, compared to the three months ended June 30, 2024.

Our Same Facilities occupancy of 82.1% during the three months ended June 30, 2025, an increase of 2.0% compared to the same period in 2024, demonstrates our ability to gain additional market share even at our more mature operations.

Further, our Transitioning Facilities occupancy increased by 4.6% to 84.0% compared to the same period in 2024, highlighting our organic growth ability that results from transforming underperforming operations that we have acquired.

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As these operations become "operations of choice" in each of their respective healthcare markets, we typically see both occupancy and skilled mix increase.

Throughout the quarter, we continued to make progress on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities, attracting and developing our people and acquiring underperforming skilled nursing operations and integrating them with our proven cultural and operational principles.

During the three months ended March 31, 2025, we added 13 new operations.

We consistently experience healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations so that each can reach its full clinical and financial potential.

We have continued to make progress on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities, attracting and developing our people and acquiring underperforming skilled nursing operations and integrating them with our proven cultural and operational principles.

During the six months ended June 30, 2025, we added 20 new operations.

We consistently experience healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations so that each operation can reach its full clinical and financial potential.

Our strength remains in our operating model, which empowers each operator to form their own market-specific strategy and adjust to the needs of their local medical communities, including methods for attracting new healthcare professionals into our workforce and retaining and developing existing staff.

Despite continued labor pressures, there are positive trends on both turnover and agency usage across our operations.

As we continue to execute on core fundamentals, we continue to see positive trends on both turnover and agency usage across our operations.

The following table sets forth details of operating results for our revenue, expenses and earnings, and their respective components, as a percentage of total revenue for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Service revenue 99.5 % 99.4 % 99.5 % 99.4 %

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Interest income 0.4 0.7 0.5 0.7

0.5 0.1 0.3 0.2

OTHER INCOME, NET 0.7 % 0.6 % 0.6 % 0.7 %

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Net income attributable to The Ensign Group, Inc.

Three Months Ended March 31,

6.9 % 6.9 % 6.9 % 6.8 %

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

SEGMENT INCOME (1)

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Standard Bearer (2)

9,126 7,360 17,709 14,618

NON-GAAP FINANCIAL MEASURES:

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• litigation;

• impairment on long-lived assets;

• gain on business interruption recoveries and loss on long-lived assets;

• amortization of patient base intangible assets.

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The table below reconciles income before provision for income taxes to Adjusted EBT for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Consolidated statements of income data:

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Stock-based compensation expense

11,662 8,985 22,386 17,223

Litigation (1)

Impairment of long-lived assets

— (1,634) — (870)

(Gain)/loss on business interruption recoveries and long-lived assets

(1,000) — (1,000) 1,849

Acquisition related costs (2)

654 165 1,135 279

Costs incurred related to system implementations

437 2,357 771 2,433

Depreciation and amortization - patient base (3)

409 174 1,020 213

(1) Represents specific proceedings arising outside of the ordinary course of business.

$ 124,520 $ 102,111 $ 243,250 $ 202,789

(1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Represents costs incurred to acquire operations that are not capitalizable.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Consolidated statements of income data:

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Net income attributable to noncontrolling interests

70 174 146 299

Interest income

5,240 7,084 12,123 13,544

Provision for income taxes

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Litigation (1)

Impairment of long-lived assets

— (1,634) — (870)

(Gain)/loss on business interruption recoveries and long-lived assets

(1,000) — (1,000) 1,849

Acquisition related costs (2)

654 165 1,135 279

Costs incurred related to system implementations

437 2,357 771 2,433

ADJUSTED EBITDA

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ADJUSTED EBITDAR

(1) Litigation relates to specific proceedings arising outside of the ordinary course of business.

(2) Costs incurred to acquire operations that are not capitalizable.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

$ 203,806 $ 398,267

(1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Represents costs incurred to acquire operations that are not capitalizable.

Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024

The following tables set forth details of operating results for our revenue and earnings, and their respective components, by our reportable segment for the periods indicated.

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Skilled services Standard Bearer All Other Eliminations Consolidated

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Income before provision for income taxes $ 112,358

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Skilled services Standard Bearer All Other Eliminations Consolidated

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Segment income (loss) 122,185 7,360 (37,481) — 92,064

Impairment of long-lived assets

Income before provision for income taxes $ 92,064

Our total revenue increased by $162.9 million, or 16.1%, compared to the three months ended March 31, 2024.

The increase in revenue was primarily driven by an increase in occupancy of 2.9% and 5.0% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates and the impact of acquisitions.

Additionally, our skilled services in Recently Acquired Facilities increased total revenue by $95.7 million, when compared to the same period in 2024.

Our total revenue increased by $191.5 million, or 18.5%, compared to the three months ended June 30, 2024.

The increase in revenue was primarily driven by increases in occupancy of 2.0% and 4.6% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates.

In addition, our Recently Acquired Facilities revenue increased by $110.9 million, when compared to the same period in 2024 as a result of acquisitions.

Skilled Services

The following tables present the skilled services revenue and key performance metrics by category during the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

The following tables present the skilled services revenue and key performance metrics by category during the three months ended June 30, 2025 and 2024:

Three Months Ended June 30,

2025 2024 Change % Change

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Skilled services revenue

$ 1,173,576 $ 991,285 $ 182,291 18.4 %

Number of facilities at period end 303 272 31 11.4 %

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Skilled mix by nursing revenue 49.2 % 48.2 % 1.0 % 2.1 %

Three Months Ended March 31,

Three Months Ended June 30,

2025 2024 Change % Change

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Skilled services revenue

$ 845,409 $ 793,594 $ 51,815 6.5 %

Number of facilities at period end 210 210 — — %

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Skilled mix by nursing revenue 51.2 % 48.8 % 2.4 % 4.9 %

Three Months Ended March 31,

Three Months Ended June 30,

2025 2024 Change % Change

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Skilled services revenue

$ 188,875 $ 169,268 $ 19,607 11.6 %

Number of facilities at period end 48 48 — — %

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Skilled mix by nursing revenue 50.4 % 47.8 % 2.6 % 5.4 %

Three Months Ended March 31,

Three Months Ended June 30,

2025 2024 Change % Change

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(Dollars in thousands)

Skilled services revenue $ 104,586 $ 8,902 $ 95,684 NM

Skilled services revenue

$ 139,292 $ 28,389 $ 110,903 NM

Number of facilities at period end 45 13 32 NM

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Skilled mix by nursing revenue 35.6 % 30.4 % NM NM

Three Months Ended March 31,

2025 2024 Change % Change

FACILITY CLOSED RESULTS:

(Dollars in thousands)

Skilled services revenue $ — $ 540 $ (540) NM

Actual patient days — 2,082 (2,082) NM

Occupancy percentage — Operational beds — % 65.4 % NM NM

(1) Campus represents a facility that offers both skilled nursing and senior living services.

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(4) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2024.

(5) Facility Closed results represent one closed operation during 2024 due to the transitioning of an intermediate care facility program to group home setting, which is included in All Other category.

The operation revenue was excluded from Same Facilities results for the three months ended March 31, 2024 for comparison purposes.

Skilled services revenue increased by $154.0 million, or 15.9%, compared to the three months ended March 31, 2024.

(5) Skilled services revenue and key performance metrics for a closed facility was not material and has been excluded from Same Facilities results during the three months ended June 30, 2024.

The facility was closed in 2024 as the program was transitioned from an intermediate care facility to a group home setting.

Skilled services revenue increased by $182.3 million, or 18.4%, compared to the three months ended June 30, 2024.

The increases in skilled services revenue were across all payer types, including increases in Medicaid revenue of $81.2 million, or 17.4%, Medicare revenue of $32.2 million, or 12.5%, managed care revenue of $38.5 million, or 20.1% and private revenue of $30.4 million, or 41.2%.

The increase in skilled services revenue was primarily driven by strong occupancy performance across our skilled services operations.

Our consolidated occupancy increased by 2.2% to 81.9%, during the three months ended March 31, 2025 compared to the same period in 2024, as a result of an increase in skilled days, driven by steady growth in our managed care, Medicare and long-term care Medicaid patients.

Our consolidated occupancy increased by 1.5% to 81.3%, during the three months ended June 30, 2025 compared to the same period in 2024, as a result of an increase in skilled days, driven by steady growth in our managed care, Medicare and long-term care Medicaid patients.

Revenue in our Same Facilities increased by $51.8 million, or 6.5%, compared to the same period in 2024, due to increased occupancy from strong skilled days and revenue per patient day.

Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 12.4%, mainly due to an increase in managed care days of 8.9% and revenue per patient day of 3.8%.

Our Medicare revenue increased by 2.4% mainly due to an increase in Medicare days of 3.0%.

In addition, Medicaid revenue increased by $8.3 million or 2.3%, mainly from the increase in revenue per patient day.

Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 10.5%, mainly due to an increase in managed care days and revenue per patient day.

Our Medicare revenue increased by 4.6% mainly due to an increase in Medicare days and an increase in revenue per patient day.

In addition, Medicaid revenue increased by $13.2 million or 3.5%, mainly from the increase in Medicaid days and an increase in revenue per patient day, driven by daily rates, supplemental and quality improvement programs.

Revenue generated by our Transitioning Facilities increased by $19.6 million, or 11.6%, primarily due to improved occupancy growth, increases in skilled mix days and revenue per patient day.

The increases in revenue were derived from increasing in Managed Care revenue of 21.1%, Medicaid revenue of 8.5% and private revenue of 19.8%.

The increases in revenue were derived from increasing in Managed Care revenue of 22.7%, Medicare revenue of 6.0%, Medicaid revenue of 8.9% and private revenue of 30.4%.

These increases demonstrate our ability to focus on increasing occupancy across payer types.

Skilled services revenue generated by Recently Acquired Facilities increased by approximately $95.7 million compared to the three months ended March 31, 2024 .

The increase was primarily due to 38 operational expansions between April 1, 2024 and March 31, 2025 across 13 states.

Skilled services revenue generated by Recently Acquired Facilities increased by approximately $110.9 million compared to the three months ended June 30, 2024 .

The increase was primarily due to 34 operational expansions between July 1, 2024 and June 30, 2025 across 14 states.

Historically, we have generally experienced lower occupancy rates and lower skilled mix at Recently Acquired Facilities and therefore, we anticipate lower overall occupancy during years of growth.

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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 March 31,

Three Months Ended June 30,

Same Facility Transitioning Acquisitions Total

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(1) The rates are based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606.

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.0% and 4.3%, respectively, compared to the three months ended March 31, 2024.

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.1% and 3.8%, respectively, compared to the three months ended June 30, 2024.

The increase is attributable to the 4.2% net market basket increase that became effective in October 2024, and a shift toward higher acuity patients.

Our average Medicaid rates increased 3.6% due to state reimbursement increases, our participation in supplemental Medicaid payment programs and quality improvement programs in various states and changes in Medicaid mix.

For example, we continue to have increases in Medicaid days in states with higher rates, such as California.

Our average Medicaid rates increased 4.4% due to state reimbursement increases, our participation in supplemental Medicaid payment programs and quality improvement programs in various states.

Payor Sources as a Percentage of Skilled Nursing Services.

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The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:

Three Months Ended March 31,

Three Months Ended June 30,

Same Facility Transitioning Acquisitions Total

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100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Three Months Ended March 31,

Three Months Ended June 30,

Same Facility Transitioning Acquisitions Total

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The following table sets forth total cost of services for our skilled services segment for the periods indicated (dollars in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2025 2024 $ %

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Cost of services related to our skilled services segment increased by $141.2 million, or 17.8% from the same period in 2024.

Cost of services as a percentage of revenue increased to 79.4% from 79.2% due to increased costs from our new acquisitions which are in the turnaround stage, increased insurance expenses, offset by decreased expense related to the deferred compensation investment program.

Our cost of services as a percentage of revenue varies depending on the volume of acquisitions during the period, which typically have higher costs during the transition period.

Cost of services as a percentage of revenue decreased to 79.5% from 79.9% during the same period as we continued to see a shift in revenue mix, stabilized labor markets and moderated insurance expenses, which were partially offset by increases in expense related to deferred compensation.

In addition, our cost of services as a percentage of revenue varies depending on the volume of acquisitions during the period, which typically have higher costs during the transition period.

Standard Bearer

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2025 2024 $ %

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$ 18,391 $ 14,526 $ 3,865 26.6 %

Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $6.2 million, or 27.9%, to $28.4 million, compared to the three months ended March 31, 2024.

The increase in revenue is primarily attributable to 27 real estate purchases, as well as annual rent increases since the three months ended March 31, 2024.

FFO — Our FFO increased by $3.0 million, or 21.1%, to $17.1 million, compared to the three months ended March 31, 2024.

Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $8.1 million, or 34.7%, to $31.5 million, compared to the three months ended June 30, 2024.

The increase in revenue is primarily attributable to 20 real estate purchases, as well as annual rent increases since the three months ended June 30, 2024.

FFO — Our FFO increased by $3.9 million, or 26.6%, to $18.4 million, compared to the three months ended June 30, 2024.

The increase in rental revenue of $8.1 million was partially offset by increases in interest expense of $4.0 million associated with the agreements between Standard Bearer and us as we continue to grow our real estate portfolio.

All Other Revenue

Our other revenue increased by $9.9 million, or 23.1%, to $52.4 million, compared to the three months ended March 31, 2024.

Other revenue includes senior living revenue of $24.0 million, revenue from other ancillary services of $25.4 million and rental income of $3.0 million.

Our other revenue increased by $10.0 million, or 21.1%, to $57.3 million, compared to the three months ended June 30, 2024.

Other revenue includes senior living revenue of $27.6 million, revenue from other ancillary services and rental income of $3.2 million.

The increase in other revenue is primarily attributable to the increase in occupancy in our senior living operations and growth in our other ancillary services.

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General and administrative expense — General and administrative expense increased $12.9 million or 23.0%, to $69.1 million.

This increase was primarily driven by additional headcount due to acquisition activities.

General and administrative expense as a percentage of revenue decreased by 0.4% to 5.3%.

This increase was primarily driven by additional headcount due to acquisition activities and increases in wages and benefits due to enhanced performance and growth.

General and administrative expense as a percentage of revenue increased by 0.2% to 5.6%.

Depreciation and amortization — Depreciation and amortization expense increased $5.3 million, or 25.9%, to $25.8 million.

This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations and capital expenditures.

Depreciation and amortization expense as a percentage of revenue increased 0.2%, to 2.1%.

Other income, net — Other income, net as a percentage of revenue decreased by 0.3%.

Depreciation and amortization expense as a percentage of revenue remained consistent at 2.0%.

Other income, net — Other income, net as a percentage of revenue increased by 0.1%.

Other income primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses.

Other income, net decreased by $2.2 million due to losses in our deferred compensation plan which incurs gains or losses depending on market performance.

During the three months ended March 31, 2025 and 2024, the deferred compensation plan had a loss of $0.3 million and a gain of $2.4 million, respectively.

We also recorded a reduction in expense and an offsetting expense allocated between cost of services and general and administrative expenses for the respective periods.

Provision for income taxes — Our effective tax rate was 24.6% for the three months ended March 31, 2025, compared to 23.0% for the same period in 2024.

Other income, net increased by $2.4 million due to gains in our deferred compensation plan which incurs gains or losses depending on market performance.

These gains were offset by a decline in interest income as we used cash on hand to fund more real estate purchases during the period.

During the three months ended June 30, 2025 and 2024, the deferred compensation plan had gains of $4.5 million and $0.5 million, respectively.

We also recorded an offsetting expense allocated between cost of services and general and administrative expenses for the respective periods.

Provision for income taxes — Our effective tax rate was 24.8% for the three months ended June 30, 2025, compared to 22.7% for the same period in 2024.

The effective tax rate for both periods was driven by the impact of excess tax benefits from stock-based compensation, partially offset by non-deductible expenses including non-deductible compensation.

See Note 13, Income Taxes , in the Notes to the Interim Financial Statements for further discussion.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024

The following tables set forth details of operating results for our revenue and earnings, and their respective components, by our reportable segment for the periods indicated.

Six Months Ended June 30, 2025

Skilled Services Standard Bearer All Other Eliminations Consolidated

Total revenue $ 2,297,130 $ 59,869 $ 109,758 $ (65,947) $ 2,400,810

Total expenses, including other income, net

2,003,195 42,160 202,464 (65,947) 2,181,872

Segment income (loss) 293,935 17,709 (92,706) — 218,938

Income before provision for income taxes $ 218,938

Six Months Ended June 30, 2024

Skilled Services Standard Bearer All Other Eliminations Consolidated

Total revenue $ 1,960,887 $ 45,555 $ 89,911 $ (49,896) $ 2,046,457

Total expenses, including other income, net

1,711,893 30,937 170,012 (49,896) 1,862,946

Segment income (loss) 248,994 14,618 (80,101) — 183,511

Impairment of long-lived assets

Income before provision for income taxes $ 181,662

Our total revenue increased by $354.4 million, or 17.3%, compared to the six months ended June 30, 2024.

The increase in revenue was primarily driven by an increase in occupancy of 2.5% and 4.9% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates.

In addition, our Recently Acquired Facilities revenue increased by $206.6 million, when compared to the same period in 2024 as a result of acquisitions.

Skilled Services Segment

The following tables present the skilled services revenue and key performance metrics by category during the six months ended June 30, 2025 and 2024:

Six Months Ended June 30,

2025 2024 Change % Change

TOTAL FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue $ 2,297,130 1,960,887 $ 336,243 17.1 %

Number of facilities at period end 303 272 31 11.4 %

Number of campuses at period end (1)

31 29 2 6.9 %

Actual patient days 5,153,626 4,554,599 599,027 13.2 %

Occupancy percentage — Operational beds 81.6 % 80.1 % 1.5 % 1.9 %

Skilled mix by nursing days 31.1 % 30.4 % 0.7 % 2.3 %

Skilled mix by nursing revenue 49.7 % 49.0 % 0.7 % 1.4 %

Six Months Ended June 30,

2025 2024 Change % Change

SAME FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue

$ 1,680,197 $ 1,584,400 $ 95,797 6.0 %

Number of facilities at period end 210 210 — — %

Number of campuses at period end (1)

Actual patient days 3,726,732 3,651,915 74,817 2.0 %

Occupancy percentage — Operational beds 82.4 % 80.4 % 2.0 % 2.5 %

Skilled mix by nursing days 32.8 % 31.3 % 1.5 % 4.8 %

Skilled mix by nursing revenue 51.6 % 49.5 % 2.1 % 4.2 %

Six Months Ended June 30,

2025 2024 Change % Change

TRANSITIONING FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue

$ 373,055 $ 338,622 $ 34,433 10.2 %

Number of facilities at period end 48 48 — — %

Number of campuses at period end (1)

Actual patient days 840,252 805,595 34,657 4.3 %

Occupancy percentage — Operational beds 83.8 % 79.9 % 3.9 % 4.9 %

Skilled mix by nursing days 29.8 % 28.0 % 1.8 % 6.4 %

Skilled mix by nursing revenue 50.9 % 48.8 % 2.1 % 4.3 %

Six Months Ended June 30,

2025 2024 Change % Change

RECENTLY ACQUIRED FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue

$ 243,878 $ 37,291 $ 206,587 NM

Number of facilities at period end 45 13 32 NM

Number of campuses at period end (1)

Actual patient days 586,642 95,007 491,635 NM

Occupancy percentage — Operational beds 74.4 % 72.4 % NM NM

Skilled mix by nursing days 22.0 % 17.8 % NM NM

Skilled mix by nursing revenue 34.3 % 29.9 % NM NM

(1) 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.

(2) Same Facility results represent all facilities purchased prior to January 1, 2022.

(3) Transitioning Facility results represent all facilities purchased from January 1, 2022 to December 31, 2023.

(4) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2024.

(5) Skilled services revenue and key performance metrics for a closed facility was not material and has been excluded from Same Facilities results during the six months ended June 30, 2024.

The facility was closed in 2024 as the program was transitioned from an intermediate care facility to a group home setting.

Skilled services revenue increased $336.2 million, or 17.1%, compared to the six months ended June 30, 2024.

The increases in skilled services revenue were across all payer types, including increases in Medicaid revenue of of $148.7 million, or 16.3%, Medicare revenue of $54.4 million, or 10.4%, managed care revenue of $77.6 million, or 20.5% and private and other revenue of $55.5 million, or 38.5%.

The increase in skilled services revenue was primarily driven by strong occupancy performance across our skilled services operations.

Our consolidated occupancy increased by 1.9% to 81.6% during the six months ended June 30, 2025 compared to the same period in 2024, as a result of an increase in long-term care patients and an increase in Medicare and managed care skilled days.

Revenue in our Same Facilities increased $95.8 million, or 6.0%, compared to the same period in 2024, due to increased occupancy from long-term care patients, strong skilled days and revenue per patient day.

Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 11.5%, mainly due to increases in managed care days and revenue per patient day.

We continued to grow our Medicare patient population in addition to capturing market share in the increases in Medicare Advantage enrollments of the overall Medicare eligible population.

Medicare revenue increased by 3.5% due to the increase in patient days and revenue per day.

In addition, Medicaid revenue increased by $21.5 million or 2.9%, mainly from the increases in Medicaid days and revenue per patient day, driven by daily rates, supplemental and quality improvement programs.

Revenue generated by our Transitioning Facilities increased $34.4 million, or 10.2%, primarily due to improved occupancy growth, increases in skilled mix days and revenue per patient day.

The increases in revenue were derived from managed care revenue of 21.9%, Medicare revenue of 3.6%, Medicaid revenue of 8.7% and private revenue of 25.1%.

These increases demonstrate our ability to focus on increasing occupancy across payer types.

Included in the six months ended June 30, 2024 is the revenue related to a facility that was not operating at full capacity starting in the first quarter of 2024 due to flooding.

Skilled services revenue generated by Recently Acquired Facilities increased by approximately $206.6 million compared to the six months ended June 30, 2024.

The increases were primarily due to 34 operational expansions between July 1, 2024 and June 30, 2025 across 14 states.

Historically, we have generally experienced lower occupancy rates and lower skilled mix at Recently Acquired Facilities and therefore, we anticipate lower overall occupancy during years of growth.

In the future, if we acquire additional turnaround or start-up operations, we expect to see lower occupancy rates and skilled mix and these metrics are expected to vary from period to period based upon the type of the facilities and operations that we acquire.

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) :

Six Months Ended June 30,

Same Facility Transitioning Acquisitions Total

2025 2024 2025 2024 2025 2024 2025 2024

SKILLED NURSING AVERAGE DAILY REVENUE RATES

Medicare $ 784.11 $ 746.15 $ 849.04 $ 815.79 $ 666.07 $ 619.78 $ 786.58 $ 759.21

Managed care 574.18 548.90 596.80 557.48 511.07 463.40 572.51 549.10

Other skilled 652.85 617.98 600.99 520.13 710.78 745.59 650.67 606.98

Total skilled revenue 663.01 632.59 717.31 683.06 608.42 571.86 667.17 640.09

Medicaid 304.23 296.51 291.39 276.65 325.52 294.93 304.65 292.81

Private and other payors 293.09 280.57 313.09 289.32 340.25 265.45 303.52 281.69

Total skilled nursing revenue

$ 420.77 $ 400.08 $ 420.48 $ 391.91 $ 389.83 $ 339.62 $ 417.23 $ 397.34

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.1% and 4.1%, respectively, compared to the six months ended June 30, 2024.

The increases are attributable to the 4.2% net market basket increase that became effective in October 2024 and a shift toward higher acuity patients.

Our average Medicaid rates increased 4.0% due to state reimbursement increases, our participation in supplemental Medicaid payment programs and quality improvement programs in various states.

Payor Sources as a Percentage of Skilled Nursing Services — We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.

The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:

Six Months Ended June 30,

Same Facility Transitioning Acquisitions Total

2025 2024 2025 2024 2025 2024 2025 2024

PERCENTAGE OF SKILLED NURSING REVENUE

Medicare 21.7 % 21.1 % 28.6 % 29.5 % 15.6 % 14.8 % 22.2 % 22.5 %

Managed care 20.7 19.8 16.3 14.6 12.1 10.0 19.1 18.7

Other skilled 9.2 8.6 6.0 4.7 6.6 5.1 8.4 7.8

Skilled mix 51.6 % 49.5 % 50.9 % 48.8 % 34.3 % 29.9 % 49.7 % 49.0 %

Private and other payors 6.8 7.2 6.8 7.9 12.5 12.1 7.4 7.4

Medicaid 41.6 43.3 42.3 43.3 53.2 58.0 42.9 43.6

TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Six Months Ended June 30,

Same Facility Transitioning Acquisitions Total

2025 2024 2025 2024 2025 2024 2025 2024

PERCENTAGE OF SKILLED NURSING DAYS

Medicare 11.6 % 11.3 % 14.2 % 14.2 % 9.1 % 8.1 % 11.8 % 11.8 %

Managed care 15.2 14.4 11.5 10.2 9.2 7.3 13.9 13.5

Other skilled 6.0 5.6 4.1 3.6 3.7 2.4 5.4 5.1

Skilled mix 32.8 % 31.3 % 29.8 % 28.0 % 22.0 % 17.8 % 31.1 % 30.4 %

Private and other payors 9.7 10.3 9.2 10.7 14.3 15.5 10.1 10.5

Medicaid 57.5 58.4 61.0 61.3 63.7 66.7 58.8 59.1

TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of Services

The following table sets forth total cost of services for our skilled services segment for the periods indicated (dollars in thousands):

Six Months Ended June 30, Change

2025 2024 $ %

Cost of service $ 1,824,678 $ 1,559,590 $ 265,088 17.0 %

Revenue percentage 79.4 % 79.5 % (0.1) %

Cost of services related to our skilled services segment increased by $265.1 million, or 17.0%, from the same period in 2024.

Cost of services as a percentage of revenue decreased to 79.4% from 79.5% as we continue to see a shift in revenue mix, stabilized labor markets and moderated insurance expenses.

In addition, our cost of services as a percentage of revenue varies depending on the volume of acquisitions during the period, which typically have higher costs during the transition period.

Standard Bearer

Six Months Ended June 30, Change

2025 2024 $ %

(Dollars in thousands)

Rental revenue generated from third-party tenants $ 9,209 $ 8,393 $ 816 9.7 %

Rental revenue generated from Ensign's independent subsidiaries

50,660 37,162 13,498 36.3

TOTAL RENTAL REVENUE $ 59,869 $ 45,555 $ 14,314 31.4 %

Segment income 17,709 14,618 3,091 21.1

Depreciation and amortization 17,741 13,995 3,746 26.8

FFO $ 35,450 $ 28,613 $ 6,837 23.9 %

Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $14.3 million, or 31.4%, to $59.9 million, compared to the six months ended June 30, 2024.

The increase in revenue is primarily attributable to 20 real estate purchases as well as annual rent increases since the six months ended June 30, 2024.

FFO — Our FFO increased by $6.8 million, or 23.9%, to $35.5 million, compared to the six months ended June 30, 2024.

The increase in rental revenue of $14.3 million is offset by increases in interest expense of $6.8 million associated with the debt arrangements between Standard Bearer and us as Standard Bearer continues to grow its real estate portfolio.

All Other Revenue

Our other revenue increased by $19.8 million, or 22.1%, to $109.8 million, compared to the six months ended June 30, 2024.

Other revenue for the six months ended June 30, 2025 includes senior living revenue of $51.7 million, revenue from other ancillary services of $51.9 million and rental income of $6.2 million.

The increase in other revenue is primarily attributable to our senior living and other ancillary services.

Consolidated Financial Expenses

Rent-cost of services — Our rent-cost of services as a percentage of revenue decreased by 0.3% to 4.8%, as our operational expansions included a higher mix of real estate purchases.

General and administrative expense — General and administrative expense increased by $18.3 million or 16.2%, to $131.7 million.

This increase was primarily driven by additional headcount due to acquisition activities and increases in wages and benefits due to enhanced performance and growth.

General and administrative expense as a percentage of revenue decreased by 0.1% to 5.5%.

Depreciation and amortization — Depreciation and amortization expense increased by $9.8 million, or 24.5%, to $50.0 million.

This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations and capital expenditures.

Depreciation and amortization remained consistent at 2.0%, as a percentage of revenue.

Other income, net — Other income, net as a percentage of revenue decreased by 0.1%.

Other income, net primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses.

Other income, net increased by $0.2 million due to gains in our deferred compensation plan which incurs gains or losses depending on market performance offset by less interest income as we funded more real estate purchases.

During the six months ended June 30, 2025 and 2024, the deferred compensation plan had gains of $4.2 million and $2.9 million, respectively.

We also recorded an offsetting expense allocated between cost of services and general and administrative expenses.

Provision for income taxes — Our effective tax rate was 24.7% for the six months ended June 30, 2025, compared to 22.9% for the same period in 2024.

The effective tax rate for both periods was driven by the impact of excess tax benefits from stock-based compensation, partially offset by non-deductible expenses, including non-deductible compensation.

See Note 13, Income Taxes , in the Interim Financial Statements for further discussion.

Liquidity and Capital Resources

Our principal sources of liquidity have historically been derived from our cash flows from operations and long-term debt issuance secured by our real property and borrowings under our revolving Credit Facility (defined below).

Our liquidity as of March 31, 2025 is impacted by cash generated from strong operational performance offset by investments made for our operational expansions and ancillary businesses as well as capital expenditures to improve the quality of care at our existing operations.

Our liquidity as of June 30, 2025 is impacted by cash generated from strong operational performance offset by investments made for our operational expansions and ancillary businesses as well as capital expenditures to improve the quality of care at our existing operations.

Historically, we have primarily financed the majority of our acquisitions through mortgages on our properties, our Credit Facility and cash generated from operations.

Cash paid to fund acquisitions was $194.2 million for the three months ended March 31, 2025 compared to cash paid of $2.9 million for the three months ended March 31, 2024.

Total capital expenditures for property and equipment were $42.9 million and $29.4 million for the three months ended March 31, 2025 and 2024, respectively.

Cash paid to fund acquisitions was $213.6 million for the six months ended June 30, 2025 compared to cash paid of $66.0 million for the six months ended June 30, 2024.

Total capital expenditures for property and equipment were $92.5 million and $64.6 million for the six months ended June 30, 2025 and 2024, respectively.

We currently have approximately $180.0 million budgeted for renovation projects in 2025.

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We may, in the future, seek to raise additional capital to fund growth, capital renovations, operations and other business activities, but such additional capital may not be available on acceptable terms, on a timely basis, or at all.

Our cash and cash equivalents of approximately $282.7 million as of March 31, 2025 consisted of bank deposits and money market funds.

In addition, as of March 31, 2025, we held investments of approximately $219.1 million.

We believe our investments that were in an unrealized loss position as of March 31, 2025 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so.

As mentioned above, our primary source of cash is from our ongoing operations.

Our cash and cash equivalents of approximately $364.0 million as of June 30, 2025 consisted of bank deposits and money market funds.

In addition, as of June 30, 2025, we held investments of approximately $225.2 million.

We believe our investments that were in an unrealized loss position as of June 30, 2025 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so.

Our primary source of cash is from our ongoing operations.

Our positive cash flows have supported our business and have allowed us to pay regular dividends to our stockholders.

We currently anticipate that existing cash and total investments as of March 31, 2025, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.

We currently anticipate that existing cash and total investments as of June 30, 2025, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.

Share Repurchases

On May 15, 2025, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from June 16, 2025.

During the second quarter of 2025, we did not repurchase any shares pursuant to this stock repurchase program.

On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from March 26, 2025.

During the three months ended March 31, 2025, we repurchased 84 shares of our common stock for $10.8 million.

Subsequent to March 31, 2025, we repurchased 73 shares of our common stock for $9.2 million.

On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we could repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024.

We did not purchase any shares pursuant to the stock repurchase program before the repurchase program was cancelled on February 21, 2025.

Under these repurchase programs, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws.

During the first quarter of 2025, we repurchased 84 shares of our common stock for $10.8 million.

During the second quarter of 2025, we repurchased 73 shares of our common stock for $9.2 million.

This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

Under our repurchase program, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws.

The stock repurchase programs do not obligate us to acquire any specific number of shares.

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

Three Months Ended March 31,

Six Months Ended June 30,

NET CASH PROVIDED BY/(USED IN):

3 unchanged sentences

Financing activities (16,655) 25

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

$ (100,629) $ (32,290)

3 unchanged sentences

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.

The $36.9 million increase in cash provided by operating activities for the three months ended March 31, 2025 compared to the same period in 2024 w as due to an increase in operational performance and timing of payments and accounts receivable collections.

The $115.7 million increase in cash provided by operating activities for the six months ended June 30, 2025 compared to the same period in 2024 w as due to an increase in operational performance and timing of payments and accounts receivable collections.

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.

The $209.1 million increase in cash used in investing activities for the three months ended March 31, 2025 compared to the same period in 2024 was primarily used for acquisitions and capital expenditures as well as increased investment activity as part of our capital strategy.

The $167.4 million increase in cash used in investing activities for the six months ended June 30, 2025 compared to the same period in 2024 was primarily used for acquisitions and capital expenditures as well as increased investment activity as part of our capital strategy.

Financing Activities

Financing cash flows consist primarily of cash provided by the issuance of common stock upon exercise of stock options, payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, payment for share repurchases and the noncontrolling interest activity.

The $11.9 million increase in cash used by financing activities for the three months ended March 31, 2025 compared to the same period in 2024, was primarily due to $10.8 million of share repurchases as part of our stock repurchase program in 2025.

The $16.7 million increase in cash used by financing activities for the six months ended June 30, 2025 compared to the same period in 2024, was primarily due to $20.0 million of share repurchases in 2025 as part of our stock repurchase program.

Credit Facility with a Lending Consortium Arranged by Truist

5 unchanged sentences

Mortgage Loans and Promissory Note

As of March 31, 2025, 23 of our subsidiaries had mortgage loans insured with HUD for an aggregate amount of $146.0 million, which subjects these subsidiaries to HUD oversight and periodic inspections.

As of June 30, 2025, 23 of our subsidiaries had mortgage loans insured with HUD for an aggregate amount of $145.2 million, which subjects these subsidiaries to HUD oversight and periodic inspections.

The mortgage loans bear effective interest rates at a range of 3.1% to 4.2%, including fixed interest rates at a range of 2.4% to 3.3% per annum.

7 unchanged sentences

Operating Leases

As of March 31, 2025, 233 of our facilities have long-term lease arrangements, of which 96 of the operations are under eight triple-net Master Leases with CareTrust.

As of June 30, 2025, 238 of our facilities have long-term lease arrangements, of which 96 of the operations are under eight triple-net Master Leases with CareTrust.

The Master Leases consist of multiple leases, each with its own pool of properties, that have varying maturities and diversity in property geography.

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If we elect to renew the term of a Master Lease, the renewal will be effective as to all, but not less than all, of the leased property then subject to the Master Lease.

During the three months ended March 31, 2025, we, through Standard Bearer, exercised the option to purchase the real estate of the four facilities from CareTrust for $44.6 million.

During the six months ended June 30, 2025, we, through Standard Bearer, exercised the option to purchase the real estate of four facilities from CareTrust for $44.6 million.

We also lease certain facilities and our administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis