ENSIGN GROUP, INC 10-Q

Item 1. FINANCIAL STATEMENTS THE ENSIGN GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par values) June 30, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 363,969 $ 464,598 Accounts receivable—less allowance for doubtful accounts of $ 8,320 and $ 8,435 at June 30, 2025 and December 31, 2024, respectively 578,050 569,897 Investments—current 54,473 62,255 Prepaid expenses and other current assets 70,703 60,882 Total current assets $ 1,067,195 $ 1,157,632 Property and equipment, net 1,535,185 1,291,354 Right-of-use assets 1,930,662 1,861,071 Insurance subsidiary deposits and investments 170,752 141,246 Deferred tax assets 66,278 66,281 Restricted and other assets 55,729 46,499 Intangible assets, net 6,509 7,292 Goodwill 97,981 97,981 TOTAL ASSETS $ 4,930,291 $ 4,669,356 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 102,799 $ 98,947 Accrued wages and related liabilities 334,404 347,532 Lease liabilities—current 103,825 93,475 Accrued self-insurance liabilities—current 75,542 67,331 Other accrued liabilities 134,820 132,057 Current maturities of long-term debt 4,155 4,086 Total current liabilities $ 755,545 $ 743,428 Long-term debt—less current maturities 139,576 141,585 Long-term lease liabilities—less current portion 1,792,218 1,735,325 Accrued self-insurance liabilities—less current portion 158,991 144,421 Other long-term liabilities 62,978 64,169 TOTAL LIABILITIES $ 2,909,308 $ 2,828,928 Commitments and contingencies (Notes 14 and 19) EQUITY Ensign Group, Inc. stockholders' equity: Common stock: $ 0.001 par value; 150,000 shares authorized; 61,240 and 57,676 shares issued and shares outstanding at June 30, 2025, respectively, and 60,838 and 57,438 shares issued and shares outstanding at December 31, 2024, respectively 61 61 Additional paid-in capital 572,200 528,052 Retained earnings 1,584,233 1,426,762 Common stock in treasury, at cost, 3,564 and 3,400 shares at June 30, 2025 and December 31, 2024, respectively ( 138,835 ) ( 117,764 ) Total Ensign Group, Inc. stockholders' equity $ 2,017,659 $ 1,837,111 Non-controlling interest 3,324 3,317 Total equity $ 2,020,983 $ 1,840,428 TOTAL LIABILITIES AND EQUITY $ 4,930,291 $ 4,669,356 See accompanying notes to condensed consolidated financial statements. 1 Table of Contents THE ENSIGN GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (In thousands, except per share data) REVENUE Service revenue $ 1,221,414 $ 1,030,574 $ 2,388,454 $ 2,035,059 Rental revenue 6,355 5,711 12,356 11,398 TOTAL REVENUE $ 1,227,769 $ 1,036,285 $ 2,400,810 $ 2,046,457 Expense: Cost of services 971,780 820,360 1,899,629 1,619,623 Rent—cost of services 57,195 53,272 114,271 105,148 General and administrative expense 69,107 56,194 131,662 113,352 Depreciation and amortization 25,785 20,488 49,973 40,145 TOTAL EXPENSES $ 1,123,867 $ 950,314 $ 2,195,535 $ 1,878,268 Income from operations 103,902 85,971 205,275 168,189 Other income (expense): Interest expense ( 2,025 ) ( 2,040 ) ( 4,062 ) ( 4,004 ) Interest income 5,240 7,084 12,123 13,544 Other income 5,241 1,049 5,602 3,933 OTHER INCOME, NET $ 8,456 $ 6,093 $ 13,663 $ 13,473 Income before provision for income taxes 112,358 92,064 218,938 181,662 Provision for income taxes 27,892 20,883 54,119 41,521 NET INCOME $ 84,466 $ 71,181 $ 164,819 $ 140,141 Less: Net income attributable to noncontrolling interests 70 174 146 299 NET INCOME ATTRIBUTABLE TO THE ENSIGN GROUP, INC. $ 84,396 $ 71,007 $ 164,673 $ 139,842 NET INCOME PER SHARE ATTRIBUTABLE TO THE ENSIGN GROUP INC. Basic $ 1.48 $ 1.26 $ 2.88 $ 2.48 Diluted $ 1.44 $ 1.22 $ 2.81 $ 2.41 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 57,157 56,544 57,128 56,441 Diluted 58,602 58,013 58,560 57,969 See accompanying notes to condensed consolidated financial statements. 2 Table of Contents THE ENSIGN GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Non-Controlling Interest (In thousands) Shares Amount Shares Amount Total BALANCE - JANUARY 1, 2025 57,438 $ 61 $ 528,052 $ 1,426,762 3,400 $ ( 117,764 ) $ 3,317 $ 1,840,428 Issuance of common stock to employees and directors resulting from the exercise of stock options 106 — 5,050 — — — — 5,050 Issuance of restricted stock, net of forfeitures 87 — 8,003 — — — — 8,003 Shares of common stock used to satisfy tax withholding obligations — — — — — ( 14 ) — ( 14 ) Dividends declared ($ 0.0625 per share) — — — ( 3,597 ) — — — ( 3,597 ) Employee stock award compensation — — 10,691 — — — — 10,691 Repurchase of common stock (Note 20) ( 84 ) — — — 84 ( 10,775 ) — ( 10,775 ) Acquisition of noncontrolling interest shares — — ( 11 ) — — — — ( 11 ) Net income attributable to noncontrolling interest — — — — — — 76 76 Noncontrolling interests attributable to subsidiary equity plan — — 82 — — — ( 53 ) 29 Net income attributable to the Ensign Group, Inc. — — — 80,277 — — — 80,277 BALANCE - MARCH 31, 2025 57,547 $ 61 $ 551,867 $ 1,503,442 3,484 $ ( 128,553 ) $ 3,340 $ 1,930,157 Issuance of common stock to employees and directors resulting from the exercise of stock options 168 — 8,652 — — — — 8,652 Issuance of restricted stock, net of forfeitures 41 — — — — — — — Shares of common stock used to satisfy tax withholding obligations ( 7 ) — — — 7 ( 1,057 ) — ( 1,057 ) Dividends declared ($ 0.0625 per share) — — — ( 3,605 ) — — — ( 3,605 ) Employee stock award compensation — — 11,628 — — — — 11,628 Repurchase of common stock (Note 20) ( 73 ) — — — 73 ( 9,225 ) — ( 9,225 ) Acquisition of noncontrolling interest shares — — ( 64 ) — — — — ( 64 ) Net income attributable to noncontrolling interest — — — — — — 70 70 Noncontrolling interests attributable to subsidiary equity plan — — 117 — — — ( 86 ) 31 Net income attributable to the Ensign Group, Inc. — — — 84,396 — — — 84,396 BALANCE - JUNE 30, 2025 57,676 $ 61 $ 572,200 $ 1,584,233 3,564 $ ( 138,835 ) $ 3,324 $ 2,020,983 3 Table of Contents Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Non-Controlling Interest (In thousands) Shares Amount Shares Amount Total BALANCE - JANUARY 1, 2024 56,597 $ 60 $ 465,707 $ 1,142,653 3,390 $ ( 116,555 ) $ 5,452 $ 1,497,317 Issuance of common stock to employees and directors resulting from the exercise of stock options 219 — 6,229 — — — — 6,229 Issuance of restricted stock, net of forfeitures 88 — 6,165 — — — — 6,165 Shares of common stock used to satisfy tax withholding obligations — — — — — ( 14 ) — ( 14 ) Dividends declared ($ 0.0600 per share) — — — ( 3,414 ) — — — ( 3,414 ) Employee stock award compensation — — 8,231 — — — — 8,231 Acquisition of noncontrolling interest shares — — ( 10 ) — — — — ( 10 ) Net income attributable to noncontrolling interest — — — — — — 125 125 Noncontrolling interests attributable to subsidiary equity plan — — 14 — — — ( 11 ) 3 Net income attributable to the Ensign Group, Inc. — — — 68,835 — — — 68,835 BALANCE - MARCH 31, 2024 56,904 $ 60 $ 486,336 $ 1,208,074 3,390 $ ( 116,569 ) $ 5,566 $ 1,583,467 Issuance of common stock to employees and directors resulting from the exercise of stock options 117 1 4,089 — — — — 4,090 Issuance of restricted stock, net of forfeitures 38 — — — — — — — Shares of common stock used to satisfy tax withholding obligations ( 10 ) — — — 10 ( 1,195 ) — ( 1,195 ) Dividends declared ($ 0.0600 per share) — — — ( 3,424 ) — — — ( 3,424 ) Employee stock award compensation — — 8,978 — — — — 8,978 Repurchase of common stock (Note 20) — — — — — — — — Acquisition of noncontrolling interest shares — — ( 29 ) — — — — ( 29 ) Net income attributable to noncontrolling interest — — — — — — 174 174 Noncontrolling interests attributable to subsidiary equity plan — — 37 — — — ( 34 ) 3 Net income attributable to the Ensign Group, Inc. — — — 71,007 — — — 71,007 BALANCE - JUNE 30, 2024 57,049 $ 61 $ 499,411 $ 1,275,657 3,400 $ ( 117,764 ) $ 5,706 $ 1,663,071 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents THE ENSIGN GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, (In thousands) 2025 2024 Cash flows from operating activities: Net income $ 164,819 $ 140,141 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49,973 40,145 Amortization of deferred financing fees 530 531 Non-cash leasing arrangement 407 385 Impairment of long-lived assets — 1,849 Deferred income taxes — 552 Provision for doubtful accounts 872 718 Stock-based compensation 22,386 17,222 Cash received from insurance proceeds 1,000 199 (Gain) loss on insurance claims and asset disposals ( 598 ) 254 Litigation — ( 3,734 ) Change in operating assets and liabilities Accounts receivable ( 9,025 ) ( 62,813 ) Prepaid income taxes ( 10,453 ) ( 14,968 ) Prepaid expenses and other assets ( 469 ) ( 15,538 ) Cash surrender value of life insurance policy premiums ( 12,295 ) ( 10,725 ) Deferred compensation liability 12,162 10,707 Operating lease obligations ( 3,169 ) 400 Accounts payable 4,952 ( 5,559 ) Accrued wages and related liabilities ( 17,523 ) ( 8,343 ) Other accrued liabilities 1,817 1,258 Accrued self-insurance liabilities 22,564 19,568 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 227,950 $ 112,249 Cash flows from investing activities: Purchase of property and equipment ( 92,521 ) ( 64,635 ) Cash payments for acquisitions ( 204,609 ) ( 65,390 ) Escrow deposits ( 9,002 ) ( 646 ) Cash from insurance proceeds and the sale of assets 2,990 2,949 Purchases of investments ( 62,678 ) ( 35,508 ) Maturities of investments 53,249 19,267 Other restricted assets 647 ( 601 ) NET CASH USED IN INVESTING ACTIVITIES $ ( 311,924 ) $ ( 144,564 ) Cash flows from financing activities: Payments on debt ( 2,025 ) ( 1,958 ) Issuance of common stock upon exercise of options 13,702 10,319 Repurchase of shares of common stock to satisfy tax withholding obligations ( 1,071 ) ( 1,209 ) Repurchase of shares of common stock (Note 20) ( 20,000 ) — Dividends paid ( 7,186 ) ( 6,810 ) Non-controlling interest distribution — ( 278 ) Purchase of non-controlling interest ( 75 ) ( 39 ) NET CASH (USED IN)/PROVIDED BY IN FINANCING ACTIVITIES $ ( 16,655 ) $ 25 Net decrease in cash and cash equivalents ( 100,629 ) ( 32,290 ) Cash and cash equivalents beginning of period 464,598 509,626 Cash and cash equivalents end of period $ 363,969 $ 477,336 5 Table of Contents Six Months Ended June 30, (In thousands) 2025 2024 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 3,567 $ 3,488 Income taxes 64,621 56,062 Lease liabilities 117,256 104,749 Non-cash financing and investing activity Accrued capital expenditures $ 6,800 $ 6,000 Accrued dividends declared 3,605 3,424 Right-of-use assets obtained in exchange for new and modified operating lease obligations 113,553 124,133 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars, shares and options in thousands, except per share data) 1. DESCRIPTION OF BUSINESS The Company — The Ensign Group, Inc. (collectively, Ensign or the Company), is a holding company with no direct operating assets, employees or revenue. The Company's independent subsidiaries provide health care services across the post-acute care continuum and engage in the ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare-related properties and ancillary businesses. As of June 30, 2025, the Company's independent subsidiaries operated 347 facilities and other ancillary operations located in 17 states. The Company's independent subsidiaries have a collective capacity of approximately 35,500 operational skilled nursing beds and 3,300 senior living units. As of June 30, 2025, the Company's independent subsidiaries operated 238 facilities under long-term lease arrangements and had options to purchase eight of those 238 facilities. The Company's real estate portfolio consists of 144 owned real estate properties, which includes 109 facilities operated and managed by the Company's independent subsidiaries, 35 operations leased to and operated by third-party operators and the Service Center (defined below) location. Of those 35 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that an independent subsidiary operates. Certain of the Company’s wholly-owned independent subsidiaries, collectively referred to as the Service Center, provide specific accounting, payroll, human resources, information technology, legal, risk management and other centralized services to the other independent subsidiaries. The Company also has a wholly-owned captive insurance subsidiary that provides some claims-made coverage to the Company’s independent subsidiaries for general and professional liabilities, as well as coverage for certain workers’ compensation insurance liabilities. The Company's captive real estate investment trust (REIT), Standard Bearer Healthcare REIT, Inc. (Standard Bearer), owns and manages its real estate business. The REIT structure provides the Company with an efficient vehicle for future acquisitions of properties that could be operated by Ensign's independent subsidiaries or other third parties. Standard Bearer has elected to be taxed as a REIT for U.S. federal income tax purposes. Refer to Note 6, Standard Bearer for additional information on Standard Bearer. Each of the Company's independent subsidiaries are operated by wholly-owned subsidiaries that have their own management, employees and assets. References herein to the consolidated “Company” and “its” assets and activities in this Quarterly Report are not meant to imply, nor should it be construed as meaning that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the subsidiaries are operated by The Ensign Group, Inc. Other Information — The accompanying condensed consolidated financial statements as of June 30, 2025, and for the three and six months ended June 30, 2025 and 2024 (collectively, the Interim Financial Statements) are unaudited. Certain information and note disclosures normally included in the annual consolidated financial statements have been condensed or omitted, as permitted under applicable rules and regulations. Readers of the Interim Financial Statements should refer to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2024 which are included in the Company’s Annual Report on Form 10-K, File No. 001-33757 (the Annual Report) filed with the Securities and Exchange Commission (SEC). Management believes that the Interim Financial Statements reflect all adjustments which are of a normal and recurring nature necessary to present fairly the Company’s financial position and results of operations in all material respects. The results of operations presented in the Interim Financial Statements are not necessarily representative of operations for the entire year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation — The accompanying Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The Company is the sole member or stockholder of various consolidated limited liability companies and corporations established to operate various acquired skilled nursing operations, senior living operations and related ancillary services. All intercompany transactions and balances have been eliminated in consolidation. The Company presents noncontrolling interests within the equity section of its condensed consolidated balance sheets and the amount of consolidated net income that is attributable to The Ensign Group, Inc. and the noncontrolling interests in its condensed consolidated statements of income. The Interim Financial Statements include the accounts of all independent subsidiaries controlled by the Company through its ownership of a majority voting interest. 7 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The preparation of the Interim Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates in the Company’s Interim Financial Statements relate to revenue, acquired property and equipment, goodwill, right-of-use assets, impairment of long-lived assets, lease liabilities, general and professional liabilities, workers' compensation and healthcare claims included in accrued self-insurance liabilities and income taxes. Actual results could differ from those estimates. Recently Issued Accounting Pronouncements — In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09 " Income Taxes (Topic 740): Improvements to Income Tax Disclosures, " which requires the Company to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation, income taxes paid and other income tax related amounts. This guidance is effective for annual periods beginning after December 15, 2024, which will be the Company's fiscal year 2025, with early adoption permitted. The adoption is expected to enhance the Company's Notes to the Consolidated Financial Statements. The Company is currently evaluating the impact of the ASU on its Annual Report. In November 2024, the FASB issued ASU 2024-03 " Disaggregation of Income Statement Expenses, " which requires the Company to disaggregate key expense categories such as employee compensation, depreciation and intangible asset amortization within its financial statements. ASU 2024-03 is effective for annuals periods beginning with the Company's fiscal year 2027, and interim periods within the Company's fiscal year 2028, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its Notes to the Consolidated Financial Statements. 3. REVENUE AND ACCOUNTS RECEIVABLE The Company's service revenue is derived primarily from providing healthcare services to its patients. Revenue is recognized when services are provided to patients at the amount that reflects the consideration that the Company expects to be entitled from patients and third-party payors, including Medicaid, Medicare and insurers (private and Medicare replacement plans), in exchange for providing patient care. Disaggregation of Revenue The Company disaggregates revenue from contracts with its patients by payors. The Company has determined that disaggregating revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue by Payor The Company’s revenue is derived primarily from providing healthcare services to patients and is recognized on the date services are provided at amounts billable to individual patients, adjusted for estimates for variable consideration. For patients under reimbursement arrangements with third-party payors, including Medicaid, Medicare and private insurers, revenue is recorded based on contractually agreed-upon amounts or rates, adjusted for estimates for variable consideration, on a per patient, daily basis or as services are performed. Revenue from the Medicare and Medicaid programs accounted for 69.8 % and 69.6 % of all service revenue for the three and six months ended June 30, 2025, respectively, and 71.2 % and 71.4 % of all service revenue for the three and six months ended June 30, 2024, respectively. Settlements with Medicare and Medicaid payors for retroactive adjustments due to audits and reviews are considered variable consideration and are included in the determination of the estimated transaction price. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity. Consistent with healthcare industry practices, any changes to these revenue estimates are recorded in the period the change or adjustment becomes known based on the final settlement. The Company recorded adjustments to revenue which were not material to the Company's revenue for the three and six months ended June 30, 2025 and 2024. 8 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Service revenue for the three and six months ended June 30, 2025 and 2024 is summarized in the following tables: Three Months Ended June 30, 2025 2024 Revenue % of Revenue Revenue % of Revenue Medicaid (1) $ 485,848 39.8 % $ 411,760 40.0 % Medicare 291,117 23.8 258,869 25.1 Medicaid — skilled 75,207 6.2 62,969 6.1 Total Medicaid and Medicare $ 852,172 69.8 % $ 733,598 71.2 % Managed care 229,495 18.8 191,022 18.5 Private and other (2) 139,747 11.4 105,954 10.3 SERVICE REVENUE $ 1,221,414 100.0 % $ 1,030,574 100.0 % (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 the "all other" category includes revenue from senior living and ancillary operations. Six Months Ended June 30, 2025 2024 Revenue % of Revenue Revenue % of Revenue Medicaid (1) $ 939,688 39.3 % $ 801,923 39.4 % Medicare 578,868 24.2 524,452 25.8 Medicaid — skilled 144,758 6.1 126,278 6.2 Total Medicaid and Medicare $ 1,663,314 69.6 % $ 1,452,653 71.4 % Managed care 456,712 19.1 379,126 18.6 Private and other (2) 268,428 11.3 203,280 10.0 SERVICE REVENUE $ 2,388,454 100.0 % $ 2,035,059 100.0 % (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 the "all other" category includes revenue from senior living and ancillary operations. In addition to the service revenue above, the Company's rental revenue derived from triple-net lease arrangements with third parties was $ 6,355 and $ 12,356 , respectively, for the three and six months ended June 30, 2025 and $ 5,711 and $ 11,398 , respectively, for the three and six months ended June 30, 2024. Balance Sheet Impact Included in the Company’s condensed consolidated balance sheets are contract balances, comprised of billed accounts receivable and unbilled receivables, which are the result of the timing of revenue recognition, billings and cash collections, as well as contract liabilities, which primarily represent payments the Company receives in advance of services provided. The Company had no material contract liabilities or contract assets as of June 30, 2025 and December 31, 2024, or activity during the three and six months ended June 30, 2025 and 2024. Accounts receivable consist primarily of amounts due from Medicare and Medicaid programs, other government programs, managed care health plans and private payor sources, net of estimates for variable consideration and doubtful accounts. Accounts receivable as of June 30, 2025 and December 31, 2024, is summarized in the following table: June 30, 2025 December 31, 2024 Medicaid $ 237,393 $ 228,872 Managed care 159,415 139,711 Medicare 92,542 77,056 Private and other payors 97,020 132,693 $ 586,370 $ 578,332 Less: allowance for doubtful accounts ( 8,320 ) ( 8,435 ) ACCOUNTS RECEIVABLE, NET $ 578,050 $ 569,897 9 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4. COMPUTATION OF NET INCOME PER COMMON SHARE Basic net income per share is computed by dividing income from operations attributable to stockholders of The Ensign Group, Inc. by the weighted average number of outstanding common shares for the period. The computation of diluted net income per share is similar to the computation of basic net income per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. A reconciliation of the numerator and denominator used in the calculation of basic net income per common share follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 NUMERATOR: Net income $ 84,466 $ 71,181 $ 164,819 $ 140,141 Less: net income attributable to noncontrolling interests 70 174 146 299 Net income attributable to The Ensign Group, Inc. $ 84,396 $ 71,007 $ 164,673 $ 139,842 DENOMINATOR: Weighted average shares outstanding for basic net income per share 57,157 56,544 57,128 56,441 Basic net income per common share: $ 1.48 $ 1.26 $ 2.88 $ 2.48 A reconciliation of the numerator and denominator used in the calculation of diluted net income per common share follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 NUMERATOR: Net income $ 84,466 $ 71,181 $ 164,819 $ 140,141 Less: net income attributable to noncontrolling interests 70 174 146 299 Net income attributable to The Ensign Group, Inc. $ 84,396 $ 71,007 $ 164,673 $ 139,842 DENOMINATOR: Weighted average common shares outstanding 57,157 56,544 57,128 56,441 Plus: incremental shares from assumed conversion (1) 1,445 1,469 1,432 1,528 Adjusted weighted average common shares outstanding 58,602 58,013 58,560 57,969 Diluted net income per common share: $ 1.44 $ 1.22 $ 2.81 $ 2.41 (1) Options outstanding which are anti-dilutive and therefore not factored into the weighted average common shares amount above were 920 and 855 for the three and six months ended June 30, 2025, respectively, and 1,368 and 1,252 for the three and six months ended June 30, 2024, respectivel y. 5. FAIR VALUE MEASUREMENTS The Company's financial assets include held-to-maturity investments carried at amortized cost basis of $ 146,725 and $ 138,600 , of which $ 73,839 and $ 65,831 are designated to support long-term insurance subsidiary liabilities, as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025 and December 31, 2024, the amortized cost basis of these financial assets are considered to approximate fair value and are derived using Level 2 inputs. The Company believes its amortized cost basis investments that were in an unrealized loss position as of June 30, 2025 and December 31, 2024 do not require an allowance for expected credit losses, nor has any event occurred through the filing date of this report that would indicate differently. 10 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company's financial assets also include the contracts insuring the lives of certain employees who are eligible to participate in non-qualified deferred compensation plans that are held in a rabbi trust. The cash surrender value of these contracts is based on funds that shadow the investment allocations specified by participants in the deferred compensation plan and are held at fair value. As of June 30, 2025 and December 31, 2024, the fair value of the investment funds was $ 68,344 and $ 56,049 , respectively, which are derived using Level 2 inputs. Additionally, the Company has other investments held at historical cost basis, which are not material, for which the fair value is derived using Level 3 inputs. 6. STANDARD BEARER Standard Bearer's real estate portfolio consists of 138 of the Company's 144 owned real estate properties, of which 105 are operated and managed by the Company's independent subsidiaries and 34 are leased to and operated by third-party operators. Of those 34 operations, one senior living operation is located on the same real estate property as a skilled nursing operation that an independent subsidiary operates. During the six months ended June 30, 2025, Standard Bearer added $ 195,045 of real estate assets 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 under an existing lease arrangement from CareTrust REIT, Inc. (CareTrust). Of these additions, one stand-alone skilled nursing operation is leased to a third-party operator and the remaining additions are operated by the Company's independent subsidiaries. Refer to Note 7, Operation Expansions , for additional information. Subsequent to June 30, 2025, Standard Bearer added approximately $ 20,820 of real estate assets associated with two stand-alone skilled nursing operations, of which one was leased back to the Company's independent subsidiaries and one leased to a third-party operator. Refer to Note 7, Operation Expansions, for additional information. During the six months ended June 30, 2024, Standard Bearer added $ 63,412 of real estate assets associated with five stand-alone skilled nursing operations and two campus operations, all of which are operated by the Company's independent subsidiaries. Refer to Note 7, Operation Expansions , for additional information. As part of the formation of Standard Bearer, certain of the Company's independent subsidiaries , Standard Bearer and Standard Bearer's independent real estate subsidiaries entered into several agreements that include leasing, management services and debt arrangements between the operations . All intercompany transactions have been eliminated in consolidation. Refer to Note 8, Business Segments , for additional information related to these intercompany eliminations as well as Standard Bearer as a reportable segment. Intercompany master lease agreements Certain of the Company's independent subsidiaries and 105 Standard Bearer independent real estate subsidiaries have entered into seven triple-net master lease agreements (collectively, the Standard Bearer Master Leases). The lease periods range from 15 to 19 years with three five-year renewal options beyond the initial term, on the same terms and conditions. The rent structure under the Standard Bearer Master Leases includes a fixed component, subject to annual escalation equal to the lesser of (1) the percentage change in the Consumer Price Index (but not less than zero ) or (2) 2.5 %. In addition to rent, the independent subsidiaries are required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties; (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. Intercompany rental revenue generated from Ensign affiliated operations was $ 26,756 and $ 50,660 , respectively, for the three and six months ended June 30, 2025 and $ 19,156 and $ 37,162 , respectively, for the three and six months ended June 30, 2024. 11 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Intercompany management agreement Standard Bearer has no employees. The Service Center provides personnel and services to Standard Bearer pursuant to the management agreement between Standard Bearer and the Service Center. The management agreement provides for a base management fee that is equal to 5.0 % of total rental revenue and an incentive management fee that is equal to 5.0 % of funds from operations (FFO) and is capped at 1.0 % of total rental revenue, for a total of 6.0 %. Management fee generated between Standard Bearer and the Service Center for the three and six months ended June 30, 2025 was $ 1,883 and $ 3,575 , respectively. Management fees generated between Standard Bearer and the Service Center for the three and six months ended June 30, 2024 was $ 1,401 and $ 2,733 , respectively. Intercompany debt arrangements Standard Bearer obtains its funding through various sources including operating cash flows, access to debt arrangements and intercompany loans. The intercompany debt arrangements include mortgage loans and a credit facility to fund acquisitions and working capital needs. The interest rate under the credit facility is a base rate plus a margin ranging from 0.25 % to 1.25 % per annum or SOFR plus a margin ranging from 1.25 % to 2.25 % per annum. In addition, as the Department of Housing and Urban Development (HUD) mortgage loans and promissory note are entered into by real estate subsidiaries of Standard Bearer, the interest expense incurred from these debts are included in Standard Bearer's segment income. Refer to Note 14, Debt , for additional information related to these debts. Equity Instrument Denominated in the Shares of a Subsidiary As part of the formation of Standard Bearer in 2022, the Company established the Standard Bearer Healthcare REIT, Inc. 2022 Omnibus Incentive Plan (Standard Bearer Equity Plan). The Company may grant stock options and restricted stock awards under the Standard Bearer Equity Plan to employees and management of Ensign's independent subsidiaries. These awards generally vest over a period of five years or upon the occurrence of certain prescribed events. The value of the stock options and restricted stock awards is tied to the value of the common stock of Standard Bearer, which is determined based on an independent valuation of Standard Bearer. The Company can also call the awards, generally upon employee termination. During the six months ended June 30, 2025 and 2024, the Company did not grant any stock options or restricted shares under the Standard Bearer Equity Plan. During the six months ended June 30, 2025 and 2024, there were no restricted stock awards vested for the periods. The grant-date fair value of the awards is recognized as compensation expense over the relevant vesting periods, with a corresponding adjustment to noncontrolling interests. The grant value was determined based on an independent valuation of the subsidiary shares. For the three and six months ended June 30, 2025, the Standard Bearer Equity Plan's share-based compensation expense was not material. There was no expense during the three and six months ended June 30, 2024. 7. OPERATION EXPANSIONS The focus of the Company's independent subsidiaries is to expand its operations through leases or acquisitions of real estate that are complementary to the current operations, accretive to the business, or otherwise advance the Company's strategy. The results of all independent subsidiaries are included in the Interim Financial Statements subsequent to the date of acquisition. Acquisitions are accounted for using the acquisition method of accounting. In connection with the new operations obtained through long-term leases, the Company did not acquire any material assets or assume any liabilities other than the tenant's post-assumption rights and obligations under the long-term lease. The Company also entered into a separate operations transfer agreement with each prior operator as part of each transaction. The Company's independent subsidiaries also enter into long-term leases that may include options to purchase the facilities. As a result, from time to time, an independent real estate subsidiary may acquire the property of facilities that have previously been operated under third-party leases. 2025 Expansions During the six months ended June 30, 2025, the Company expanded its operations with the addition of 17 stand-alone skilled nursing operations, two stand-alone senior living operations and one campus operation. These new operations added a total of 1,955 operational skilled nursing beds and 204 operational senior living units be operated by the Company's independent subsidiaries. 12 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Subsequent to June 30, 2025, the Company expanded its operations with the addition of one stand-alone skilled nursing operation. This new operation added 120 operational skilled nursing beds to be operated by one of the Company's independent subsidiary. 2024 Expansions During the six months ended June 30, 2024, the Company expanded its operations with the addition of 13 stand-alone skilled nursing operations and two campus operations. One of the stand-alone skilled nursing operations includes a long-term acute care hospital. These new operations added a total of 1,369 operational skilled nursing beds and 202 operational senior living units operated by the Company's independent subsidiaries. Included within the operational skilled nursing bed are 43 long-term acute care beds. The Company also invested in new ancillary services that are complementary to its existing businesses. 8. BUSINESS SEGMENTS The Company has two reportable segments: (1) skilled services, which includes the operation of skilled nursing facilities and rehabilitation therapy services and (2) Standard Bearer, which is comprised of selected real estate properties owned by Standard Bearer and leased to skilled nursing and senior living operators. As of June 30, 2025, the skilled services segment includes 303 skilled nursing and 31 campus operations that provide both skilled nursing and rehabilitative care services and senior living services. The Company's Standard Bearer segment consists of 138 owned real estate properties. The Company also reports an “All Other” category that includes results from its senior living operations, which includes 13 stand-alone senior living operations and the senior living operations at 31 campus operations that provide both skilled nursing and rehabilitative care services and senior living services. In addition, the "All Other" category includes mobile diagnostics, medical transportation, other real estate, other ancillary operations and the Service Center. Services included in the “All Other” category are insignificant individually, and therefore do not constitute a reportable segment. The Company’s reportable segments are significant operating segments that offer differentiated services. The segment structure reflects the Company's current operational and financial management and provides the best structure to maximize the quality of care and investment strategy provided, while maintaining financial discipline. Segment income is defined as income before provision for income taxes, excluding gain or loss from sale of real estate, real estate insurance recoveries and impairment of long-lived assets. The Company's chief operating decision maker or CODM, who is the Chief Executive Officer, reviews segment income for each operating segment to evaluate performance and allocate capital resources. The CODM uses segment income to analyze actual results as part of operational planning and to decide whether to reinvest profits into the segments or into other parts of the Company, such as through acquisitions, to pay dividends or to recommend a stock repurchase program. The Company's CODM does not review assets by segment in his resource allocation and therefore assets by segment are not disclosed below. Intercompany revenue is eliminated in consolidation, along with corresponding intercompany expenses. Included in segment income for Standard Bearer is expense for intercompany services provided by the Service Center as described in Note 6, Standard Bearer , as it is part of the CODM financial information. 13 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables set forth financial information for the segments: Three Months Ended June 30, 2025 Skilled Services Standard Bearer Total Service revenue (1) $ 1,173,576 $ — $ 1,173,576 Rental revenue — 31,468 31,468 Segment revenue $ 1,173,576 $ 31,468 $ 1,205,044 Reconciliation of revenue: All other revenue (2) 57,332 Elimination of intercompany revenue (3) ( 34,607 ) TOTAL CONSOLIDATED REVENUE $ 1,227,769 Less: Other segment items (4) 1,009,822 2,766 Depreciation and amortization 13,750 9,265 Interest expense (5) — 10,311 Segment income $ 150,004 $ 9,126 $ 159,130 Reconciliation of profit or loss: All other not included in segment income ( 46,772 ) INCOME BEFORE PROVISION FOR INCOME TAXES $ 112,358 (1) Skilled services service revenue does not include intercompany service revenue generated by ancillary operations provided to the Company's independent subsidiaries and management service revenue generated by the Service Center with Standard Bearer. Intercompany service revenue is eliminated in "Elimination of intercompany revenue". (2) All other revenue includes $ 54,174 of service revenue and $ 3,158 of rental revenue for the three months ended June 30, 2025, both of which include intercompany revenue that is eliminated in "Elimination of intercompany revenue". (3) Elimination of intercompany revenue includes the elimination of intercompany rental revenue of $ 28,271 and intercompany service revenue of $ 6,336 for the three months ended June 30, 2025. (4) Other segment items include cost of services and rent expense for the skilled services segment and cost of services, rent expense and general and administrative expenses for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 34,607 during the three months ended June 30, 2025, which are eliminated in consolidation. (5) Included in interest expense in Standard Bearer is interest from intercompany debt arrangements between Standard Bearer and The Ensign Group, Inc. of $ 9,023 during the three months ended June 30, 2025, which is eliminated in consolidation. 14 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Three Months Ended June 30, 2024 Skilled Services Standard Bearer Total Service revenue (1) $ 991,285 $ — $ 991,285 Rental revenue — 23,354 23,354 Segment revenue $ 991,285 $ 23,354 $ 1,014,639 Reconciliation of revenue: All other revenue (2) 47,339 Elimination of intercompany revenue (3) ( 25,693 ) TOTAL CONSOLIDATED REVENUE $ 1,036,285 Less: Other segment items (4) 858,189 2,129 Depreciation and amortization 10,911 7,166 Interest expense (5) — 6,699 Segment income $ 122,185 $ 7,360 $ 129,545 Reconciliation of profit or loss: All other not included in segment income ( 37,481 ) INCOME BEFORE PROVISION FOR INCOME TAXES $ 92,064 (1) Skilled services service revenue does not include intercompany service revenue generated by ancillary operations provided to the Company's independent subsidiaries and management service revenue generated by the Service Center with Standard Bearer. Intercompany service revenue is eliminated in "Elimination of intercompany revenue". (2) All Other revenue includes $ 44,340 of service revenue and $ 2,999 of rental revenue for the three months ended June 30, 2024, both of which include intercompany revenue that is eliminated in "Elimination of intercompany revenue". (3) Elimination of intercompany revenue includes the elimination intercompany rental revenue of $ 20,642 and intercompany service revenue of $ 5,051 for the three months ended June 30, 2024. (4) Other segment items include cost of services and rent expense for the skilled services segment and cost of services, rent expense and general and administrative expenses for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 25,693 during the three months ended June 30, 2024, which is eliminated in consolidation. (5) Included in interest expense in Standard Bearer is interest from intercompany debt arrangements between Standard Bearer and The Ensign Group, Inc. of $ 4,998 during the three months ended June 30, 2024, which is eliminated in consolidation. 15 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Six Months Ended June 30, 2025 Skilled Services Standard Bearer Total Service revenue (1) $ 2,297,130 $ — $ 2,297,130 Rental revenue — 59,869 59,869 Segment revenue $ 2,297,130 $ 59,869 $ 2,356,999 Reconciliation of revenue: All other revenue (2) 109,758 Elimination of intercompany revenue (3) ( 65,947 ) TOTAL CONSOLIDATED REVENUE $ 2,400,810 Less: Other segment items (4) 1,976,232 5,372 Depreciation and amortization 26,963 17,741 Interest expense (5) — 19,047 Segment income $ 293,935 $ 17,709 $ 311,644 Reconciliation of profit or loss: All other not included in segment income ( 92,706 ) INCOME BEFORE PROVISION FOR INCOME TAXES $ 218,938 (1) Skilled services service revenue does not include intercompany service revenue generated by ancillary operations provided to the Company's independent subsidiaries and management service revenue generated by the Service Center with Standard Bearer. Intercompany service revenue is eliminated in "Elimination of intercompany revenue". (2) All other revenue includes $ 103,601 of service revenue and $ 6,157 of rental revenue for the six months ended June 30, 2025, both of which include intercompany revenue that is eliminated in "Elimination of intercompany revenue". (3) Elimination of intercompany revenue includes the elimination of intercompany rental revenue of $ 53,670 and intercompany service revenue of $ 12,277 for the six months ended June 30, 2025. (4) Other segment items include cost of services and rent expense for the skilled services segment and cost of services, rent expense and general and administrative expenses for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 65,947 during the six months ended June 30, 2025, which are eliminated in consolidation. (5) Included in interest expense in Standard Bearer is interest from intercompany debt arrangements between Standard Bearer and The Ensign Group, Inc. of $ 16,063 during the six months ended June 30, 2025, which is eliminated in consolidation. 16 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Six Months Ended June 30, 2024 Skilled Services Standard Bearer Total Service revenue (1) $ 1,960,887 $ — $ 1,960,887 Rental revenue — 45,555 45,555 Segment revenue $ 1,960,887 $ 45,555 $ 2,006,442 Reconciliation of revenue: All other revenue (2) 89,911 Elimination of intercompany revenue (3) ( 49,896 ) TOTAL CONSOLIDATED REVENUE $ 2,046,457 Less: Other segment items (4) 1,690,446 4,266 Depreciation and amortization 21,447 13,995 Interest expense (5) — 12,676 Segment income $ 248,994 $ 14,618 $ 263,612 Reconciliation of profit or loss: All other not included in segment income ( 81,950 ) INCOME BEFORE PROVISION FOR INCOME TAXES $ 181,662 (1) Skilled services service revenue does not include intercompany service revenue generated by ancillary operations provided to the Company's independent subsidiaries and management service revenue generated by the Service Center with Standard Bearer. Intercompany service revenue is eliminated in "Elimination of intercompany revenue". (2) All Other revenue includes $ 83,966 of service revenue and $ 5,945 of rental revenue for the six months ended June 30, 2024, both of which include intercompany revenue that is eliminated in "Elimination of intercompany revenue". (3) Elimination of intercompany revenue includes the elimination intercompany rental revenue of $ 40,102 and intercompany service revenue of $ 9,794 for the six months ended June 30, 2024. (4) Other segment items include cost of services and rent expense for the skilled services segment and cost of services, rent expense and general and administrative expenses for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 49,896 during the six months ended June 30, 2024, which is eliminated in consolidation. (5) Included in interest expense in Standard Bearer is interest from intercompany debt arrangements between Standard Bearer and The Ensign Group, Inc. of $ 9,283 during the six months ended June 30, 2024, which is eliminated in consolidation. Service revenue by major payor source were as follows: Three Months Ended June 30, 2025 Skilled Services All Other (3) Total Service Revenue Revenue % Medicaid (1) $ 473,904 $ 11,944 $ 485,848 39.8 % Medicare 291,117 — 291,117 23.8 Medicaid-skilled 75,207 — 75,207 6.2 Subtotal $ 840,228 $ 11,944 $ 852,172 69.8 % Managed care 229,495 — 229,495 18.8 Private and other (2) 103,853 35,894 139,747 11.4 TOTAL SERVICE REVENUE $ 1,173,576 $ 47,838 $ 1,221,414 100.0 % 17 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Three Months Ended June 30, 2024 Skilled Services All Other (3) Total Service Revenue Revenue % Medicaid (1) $ 403,127 $ 8,633 $ 411,760 40.0 % Medicare 258,869 — 258,869 25.1 Medicaid-skilled 62,969 — 62,969 6.1 Subtotal $ 724,965 $ 8,633 $ 733,598 71.2 % Managed care 191,022 — 191,022 18.5 Private and other (2) 75,298 30,656 105,954 10.3 TOTAL SERVICE REVENUE $ 991,285 $ 39,289 $ 1,030,574 100.0 % Six Months Ended June 30, 2025 Skilled Services All Other (3) Total Service Revenue Revenue % Medicaid (1) $ 917,315 $ 22,373 $ 939,688 39.3 % Medicare 578,868 — 578,868 24.2 Medicaid-skilled 144,758 — 144,758 6.1 Subtotal $ 1,640,941 $ 22,373 $ 1,663,314 69.6 % Managed care 456,712 — 456,712 19.1 Private and other (2) 199,477 68,951 268,428 11.3 TOTAL SERVICE REVENUE $ 2,297,130 $ 91,324 $ 2,388,454 100.0 % Six Months Ended June 30, 2024 Skilled Services All Other (3) Total Service Revenue Revenue % Medicaid (1) $ 785,245 $ 16,678 $ 801,923 39.4 % Medicare 524,452 — 524,452 25.8 Medicaid-skilled 126,278 — 126,278 6.2 Subtotal $ 1,435,975 $ 16,678 $ 1,452,653 71.4 % Managed care 379,126 — 379,126 18.6 Private and other (2) 145,786 57,494 203,280 10.0 TOTAL SERVICE REVENUE $ 1,960,887 $ 74,172 $ 2,035,059 100.0 % (1) Medicaid payor includes revenue generated from senior living 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. 18 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 9. PROPERTY AND EQUIPMENT - NET Property and equipment, net consists of the following: June 30, 2025 December 31, 2024 Land $ 200,366 $ 162,873 Buildings and improvements 1,111,361 933,790 Leasehold improvements 232,052 212,603 Equipment 440,385 396,018 Furniture and fixtures 4,642 4,349 Construction in progress 54,054 41,209 $ 2,042,860 $ 1,750,842 Less: accumulated depreciation ( 507,675 ) ( 459,488 ) PROPERTY AND EQUIPMENT, NET $ 1,535,185 $ 1,291,354 Management evaluated its long-lived assets and determined there was no impairment during the six months ended June 30, 2025. During the six months ended June 30, 2024, the Company recorded an impairment charge of $ 1,849 within the Company's consolidated statement of income as cost of services . Real Estate Acquisitions A majority of the real estate properties were acquired by subsidiaries of Standard Bearer, as detailed in Note 6. Standard Bearer. The table below presents the allocation of the purchase price for real estate purchases during the six months ended June 30, 2025 and 2024: Six Months Ended June 30, 2025 2024 Land $ 37,493 $ 14,491 Building and improvements 162,806 48,535 Equipment, furniture, and fixtures 3,956 1,483 Assembled occupancy 354 377 Goodwill — 372 Other indefinite-lived intangible assets — 132 TOTAL ACQUISITIONS $ 204,609 $ 65,390 10. INTANGIBLE ASSETS - NET June 30, 2025 December 31, 2024 Weighted Average Life (Years) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Intangible Assets Net Net Assembled occupancy 0.4 $ 2,345 $ ( 2,336 ) $ 9 $ 1,991 $ ( 1,316 ) $ 675 Facility trade name 30.0 733 ( 474 ) 259 733 ( 462 ) 271 Customer relationships 18.4 4,582 ( 3,007 ) 1,575 4,582 ( 2,902 ) 1,680 TOTAL $ 7,660 $ ( 5,817 ) $ 1,843 $ 7,306 $ ( 4,680 ) $ 2,626 During the three and six months ended June 30, 2025, amortization expense was $ 740 and $ 1,551 , respectively, of which $ 272 and $ 414 was related to the amortization of right-of-use assets, respectively. Amortization expense was $ 536 and $ 937 , respectively, of which $ 303 and $ 606 was related to the amortization of right-of-use assets for the three and six months ended June 30, 2024, respectively. 19 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Estimated amortization expense for each of the years ending December 31 is as follows: Year Amount 2025 (remainder) $ 128 2026 234 2027 234 2028 234 2029 234 2030 234 Thereafter 545 $ 1,843 Other indefinite-lived intangible assets consist of the following: June 30, 2025 December 31, 2024 Trade name $ 889 $ 889 Medicare and Medicaid licenses 3,777 3,777 TOTAL $ 4,666 $ 4,666 11. GOODWILL Goodwill is subject to annual testing for impairment during the fourth quarter of each year. In addition, goodwill is tested for impairment if events occur or circumstances indicate that its carrying value may not be recoverable. There were no indicators of goodwill impairment noted during the three and six months ended June 30, 2025. The Company anticipates that the majority of goodwill recognized will be fully deductible for tax purposes as of June 30, 2025. Provided that goodwill corresponds to the acquisition of a business and not merely the acquisition of real estate property, the Company's Standard Bearer segment appropriately does not carry a goodwill balance. There were no activities in goodwill during the six months ended June 30, 2025. The following table represents goodwill value by the skilled services segment and "all other" category as of June 30, 2025 and December 31, 2024: Skilled Services All Other Total Goodwill $ 88,626 $ 9,355 $ 97,981 12. OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: June 30, 2025 December 31, 2024 Quality assurance fee $ 15,963 $ 12,667 Refunds, deferred revenue and advances 78,817 75,573 Cash held in trust for patients 7,557 6,370 Dividends payable 3,605 3,589 Property taxes 10,943 15,400 Other 17,935 18,458 OTHER ACCRUED LIABILITIES $ 134,820 $ 132,057 Quality assurance fee represents the aggregate of amounts payable to various states that have a mandated fee based on patient days or licensed beds. Refunds, deferred revenue and advances consists of liabilities related to duplicate payments and credit balances from various payor sources, as well as payments received from residents in advance of services provided. Cash held in trust for patients reflects monies received from or on behalf of patients. Maintaining a trust account for patients is a regulatory requirement and, while the trust assets offset the liabilities, the Company assumes a fiduciary responsibility for these funds. The cash balance related to this liability is included in other current assets in the condensed consolidated balance sheets. 20 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 13. INCOME TAXES The Company recorded income tax expense of $ 54,119 and $ 41,521 during the six months ended June 30, 2025 and 2024, respectively, or 24.7 % of earnings before income taxes for the six months ended June 30, 2025, compared to 22.9 % for the six months ended June 30, 2024. The effective tax rate for both periods is driven by the impact of excess tax benefits from stock-based compensation, offset by non-deductible expenses including non-deductible compensation. The Company is not currently under examination by any major income tax jurisdiction. During 2025, the statutes of limitations will lapse on the Company's 2021 federal tax year and certain 2020 and 2021 state tax years. The Company does not believe the federal or state statute lapses or any other event will significantly impact the balance of unrecognized tax benefits in the next twelve months. The net balance of unrecognized tax benefits was not material to the Interim Financial Statements for the six months ended June 30, 2025 and 2024. On July 4, 2025, the One Big Beautiful Bill (OBBB) was enacted in the U.S. The OBBB includes provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and changes to certain U.S. corporate tax provisions. These changes include 100% bonus depreciation for capital expenditures incurred after January 19, 2025, and full expensing of domestic research and experimental expenditures. FASB ASC Topic 740, Income Taxes , requires the effects of tax law changes to be recognized in the period of enactment. As the legislation was signed into law after the close of the Company's second quarter, the impacts are not included in the Company's operating results for the six months ended June 30, 2025. The Company is currently assessing the impact but does not expect that the provisions will have a material impact on its consolidated financial statements. 14. DEBT Debt consists of the following: June 30, 2025 December 31, 2024 Mortgage loans and promissory note $ 146,413 $ 148,438 Less: current maturities ( 4,155 ) ( 4,086 ) Less: debt issuance costs, net ( 2,682 ) ( 2,767 ) LONG-TERM DEBT LESS CURRENT MATURITIES $ 139,576 $ 141,585 Credit Facility with a Lending Consortium Arranged by Truist The Company maintains a revolving credit facility between the Company and its independent subsidiaries, including Standard Bearer as co-borrowers, and Truist Securities (Truist) (the Credit Facility) with a revolving line of credit of up to $ 600,000 in aggregate principal amount with a maturity date of April 8, 2027. Borrowings are supported by a lending consortium arranged by Truist. The interest rates applicable to loans under the Credit Facility are, at the Company's option, equal to either a base rate plus a margin ranging from 0.25 % to 1.25 % per annum or SOFR plus a margin ranging from 1.25 % to 2.25 % per annum, based on the Consolidated Total Net Debt to Consolidated EBITDA ratio (as defined in the Credit Facility). In addition, there is a commitment fee on the unused portion of the commitments that ranges from 0.20 % to 0.40 % per annum, depending on the Consolidated Total Net Debt to Consolidated EBITDA ratio. Borrowings made under the Credit Facility are guaranteed, jointly and severally, by certain of the Company’s wholly-owned subsidiaries, and are secured by a pledge of stock of the Company's material independent subsidiaries as well as a first lien on substantially all of such independent subsidiaries' personal property. The Credit Facility contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments. Under the terms of the Credit Facility, the Company must comply with financial maintenance covenants to be tested quarterly, consisting of (i) a maximum consolidated total net debt to consolidated EBITDA ratio (which shall not be greater than 3.75 :1.00; provided that if the aggregate consideration for approved acquisitions in a six month period is greater than $ 50,000 , then the ratio can be increased at the election of the Company with notice to the administrative agent to 4.25 :1.00 for the first fiscal quarter and the immediately following three fiscal quarters), and (ii) a minimum interest/rent coverage ratio (which cannot be less than 1.50 :1.00). As of June 30, 2025, there was no outstanding debt under the Credit Facility. The Company was in compliance with all loan covenants as of June 30, 2025. 21 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Mortgage Loans and Promissory Note As of June 30, 2025, the Company has 23 subsidiaries that have mortgage loans insured with HUD in the aggregate amount of $ 145,187 , which subjects these subsidiaries to HUD oversight and periodic inspections. The mortgage loans bear effective interest rates in a range of 3.1 % to 4.2 %, including fixed interest rates in a range of 2.4 % to 3.3 % per annum. In addition to the interest rate, the Company incurs other fees for HUD placement, including, but not limited to audit fees. Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees based on the principal balance on the date of prepayment. For the majority of the loans, during the first three years, the prepayment fee is 10.0 % and is reduced by 3.0 % in the fourth year of the loan and reduced by 1.0 % per year for years five through ten of the loan. There is no prepayment penalty after year ten. The terms for all the mortgage loans are 25 to 35 years. In addition to the HUD mortgage loans above, the Company has a promissory note of $ 1,226 that bears a fixed interest rate of 5.3 % per annum and has a term of 12 years. The note, which was assumed as part of an acquisition, is secured by the real property comprising the facility and the rent, issues and profits thereof, as well as all personal property used in the operation of the facility. Off-Balance Sheet Arrangements As of June 30, 2025, the Company had approximately $ 7,402 of borrowing capacity under the Credit Facility pledged as collateral to secure outstanding letters of credit, a decrease of $ 20,491 from December 31, 2024. The Company believes that its outstanding letters of credit as of June 30, 2025 do not require an allowance for expected credit losses, nor has any event occurred through the filing date of this report that would indicate differently. 15. OPTIONS AND AWARDS Stock-based compensation expense consists of stock-based payment awards made to employees and directors, including employee stock options and restricted stock awards, based on estimated fair values. As stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three and six months ended June 30, 2025 and 2024 was based on awards expected to vest, it has been reduced for estimated forfeitures. The Company estimates forfeitures at the time of grant and, if necessary, revises the estimate in subsequent periods if actual forfeitures differ. The Company has one stock incentive plan, the Amended and Restated 2022 Omnibus Incentive Plan (the Amended and Restated Plan), pursuant to which grants of the Company's securities may currently be made. During the second quarter of 2025, the Company’s stockholders approved the Amended and Restated Plan, which increased the total number of shares authorized for issuance under the 2022 Omnibus Incentive Plan (the Predecessor Plan). Including the shares rolled over from the Predecessor Plan, the Amended and Restated Plan provides for the issuance of 4,231 shares of common stock. The number of shares available to be issued under the Amended and Restated Plan will be reduced by (i) one share for each share that relates to an option or stock appreciation right award and (ii) two shares for each share which relates to an award other than a stock option or stock appreciation right award (a full-value award). Non-employee director options, to the extent granted, will vest and become exercisable in three equal annual installments, or the length of the term if less than three years , on the completion of each year of service measured from the grant date. All other options generally vest over five years at 20 % per year on the anniversary of the grant date. Options expire ten years from the date of grant. At June 30, 2025, the total number of shares available for issuance under the Amended and Restated Plan was 3,982 . The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for stock option awards. Determining the appropriate fair-value model and calculating the fair value of stock option awards at the grant date requires judgment, including estimating stock price volatility, expected option life, and forfeiture rates. The fair-value of the restricted stock awards at the grant date is based on the market price on the grant date, adjusted for forfeiture rates. The Company develops estimates based on historical data and market information, which can change significantly over time. 22 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Stock Options The Company used the following assumptions for stock options granted during the three months ended June 30, 2025 and 2024: Grant Year Options Granted Weighted Average Risk-Free Rate Expected Life Weighted Average Volatility Weighted Average Dividend Yield 2025 175 4.2 % 6.2 years 39.1 % 0.2 % 2024 173 4.4 % 6.1 years 40.6 % 0.2 % The Company used the following assumptions for stock options granted during the six months ended June 30, 2025 and 2024: Grant Year Options Granted Weighted Average Risk-Free Rate Expected Life Weighted Average Volatility Weighted Average Dividend Yield 2025 327 4.2 % 6.2 years 39.4 % 0.2 % 2024 354 4.4 % 6.1 years 40.8 % 0.2 % For the six months ended June 30, 2025 and 2024, the following represents the exercise price and fair value displayed at grant date for stock option grants: Grant Year Granted Weighted Average Exercise Price Weighted Average Fair Value of Options 2025 327 $ 137.42 $ 61.71 2024 354 $ 120.98 $ 55.39 The weighted average exercise price equaled the weighted average fair value of common stock on the grant date for all options granted during the six months ended June 30, 2025 and 2024 and therefore, the intrinsic value was $ 0 at the date of grant. The following table represents the employee stock option activity during the six months ended June 30, 2025: Number of Options Outstanding Weighted Average Exercise Price Number of Options Vested Weighted Average Exercise Price of Options Vested January 1, 2025 3,987 $ 78.84 1,895 $ 52.64 Granted 327 137.42 Forfeited ( 31 ) 104.56 Exercised ( 274 ) 49.89 June 30, 2025 4,009 $ 85.40 1,943 $ 58.64 The aggregate intrinsic value of options outstanding, vested, expected to vest and exercised as of June 30, 2025 and December 31, 2024 is as follows: Options June 30, 2025 December 31, 2024 Outstanding $ 276,046 $ 219,309 Vested 185,823 152,011 Expected to vest 84,487 63,243 The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the options . The aggregate intrinsic value of options that vested during the six months ended June 30, 2025 and 2024 was $ 22,121 and $ 18,073 , respectively. The total intrinsic value of options exercised during the six months ended June 30, 2025 and 2024 was $ 24,957 and $ 29,894 , respectively. 23 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Restricted Stock Awards The Company granted 42 and 134 restricted stock awards during the three and six months ended June 30, 2025, respectively. The Company granted 42 and 137 restricted stock awards during the three and six months ended June 30, 2024, respectively. All awards were granted at an issue price of $ 0 and generally vest over five years . The fair value per share of restricted awards granted during the six months ended June 30, 2025 and 2024 ranged from $ 126.34 to $ 147.04 and $ 116.65 to $ 122.69 , respectively. The fair value per share includes quarterly stock awards to non-employee directors. Included in the restricted stock award grants are $ 8,003 and $ 6,165 of annual bonuses that were settled in vested restricted stock awards in the first quarter of 2025 and 2024, respectively . A summary of the status of the Company's non-vested restricted stock awards as of June 30, 2025 and changes during the six months ended June 30, 2025 is presented below: Non-Vested Restricted Awards Weighted Average Grant Date Fair Value Nonvested at January 1, 2025 435 $ 102.71 Granted 134 134.11 Vested ( 152 ) 105.12 Forfeited ( 6 ) 109.88 Nonvested at June 30, 2025 411 $ 112.17 During the three and six months ended June 30, 2025, the Company granted 3 and 7 automatic quarterly stock awards, respectively, to non-employee directors for their service on the Company's board of directors. The fair value per share of these stock awards ranged from $ 129.09 to $ 134.58 based on the market price on the grant date. Stock-based compensation expense Stock-based compensation expense recognized for the Company's equity incentive plans and long-term incentive plan for the three and six months ended June 30, 2025 and 2024 was as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Stock-based compensation expense related to stock options $ 7,402 $ 5,518 $ 14,207 $ 10,506 Stock-based compensation expense related to restricted stock awards 3,761 2,936 7,163 5,663 Stock-based compensation expense related to restricted stock awards to non-employee directors 465 524 949 1,040 TOTAL $ 11,628 $ 8,978 $ 22,319 $ 17,209 In future periods, the Company expects to recognize approximately $ 89,480 and $ 39,906 in stock-based compensation expense for unvested options and unvested restricted stock awards, respectively, that were outstanding as of June 30, 2025. Future stock-based compensation expense will be recognized over 3.7 weighted average years for both unvested options and restricted stock awards. There were 2,066 unvested and outstanding options as of June 30, 2025, of which 1,900 options are expected to vest. The weighted average contractual life for options outstanding, vested and expected to vest as of June 30, 2025 was 6.7 years. 16. LEASES The Company leases from CareTrust real property associated with 96 independent skilled nursing and senior living facilities used in the Company’s operations under eight “triple-net” master lease agreements (collectively, the Master Leases), which range in terms from 13 to 20 years. At the Company’s option, the Master Leases may be extended for two or three five-year renewal terms beyond the initial term, on the same terms and conditions. The extension of the term of any of the Master Leases is subject to the following conditions: (1) no event of default under any of the Master Leases having occurred and continuing; and (2) the tenants providing timely notice of their intent to renew. The term of the Master Leases is subject to termination prior to the expiration of the current term upon default by the tenants in their obligations, if not cured within any applicable cure periods set forth in the Master Leases. If the Company elects to renew the term of a Master Lease, the renewal will be effective to all, but not less than all, of the leased property then subject to the Master Lease. 24 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company does not have the ability to terminate the obligations under a Master Lease prior to its expiration without CareTrust’s consent. If a Master Lease is terminated prior to its expiration other than with CareTrust’s consent, the Company may be liable for damages and incur charges such as continued payment of rent through the end of the lease term as well as maintenance and repair costs for the leased property. The rent structure under the Master Leases includes a fixed component, subject to annual escalation equal to the lesser of (1) the percentage change in the Consumer Price Index (but not less than zero ) or (2) 2.5 %. In addition to rent, the Company is required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. Total rent expense under the Master Leases was approximately $ 16,904 and $ 34,030 for the three and six months ended June 30, 2025, respectively, and $ 17,272 and $ 34,072 for the three and six months ended June 30, 2024, respectively. Among other things, under the Master Leases, the Company must maintain compliance with specified financial covenants measured on a quarterly basis, including a portfolio coverage ratio and a minimum rent coverage ratio. The Master Leases also include certain reporting, legal and authorization requirements. The Company is in compliance with requirements of the Master Leases as of June 30, 2025. The Company leases facilities where its independent subsidiaries operate and certain administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years. In addition, the Company leases certain of its equipment under non-cancelable operating leases with initial terms ranging from three to five years . Most of these leases contain renewal options, certain of which involve rent increases. The Company's 100 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases with CareTrust, are operated under 17 separate master lease arrangements. In the first quarter of 2025, the Company entered into one new master lease arrangement to add six stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 15 years. The new master lease arrangement increased the lease liabilities and right-of-use assets by $ 57,961 to reflect the new lease obligations. In the second quarter of 2025, the Company entered into two new master lease arrangements to add four stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 15 years. The new master lease arrangements increased the lease liabilities and right-of-use assets by $ 52,753 to reflect the new lease obligations. Under the master leases, a default at a single facility could subject one or more of the other facilities covered by the same master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is a default under several of the Company’s leases, master lease agreements and debt financing instruments. In addition, other potential defaults related to an individual facility may cause a default of an entire master lease portfolio and could trigger cross-default provisions in the Company’s outstanding debt arrangements and other leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord. The components of operating lease expense are as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Rent - cost of services (1) $ 57,195 $ 53,272 $ 114,271 $ 105,148 Cost of services (2) 6,611 5,649 13,040 11,419 General and administrative expense 214 181 413 334 Depreciation and amortization (3) 272 303 414 606 $ 64,292 $ 59,405 $ 128,138 $ 117,507 (1) Rent - cost of services includes deferred rent expense adju stments of $ 199 and $ 407 for the three and six months ended June 30, 2025, respectively, and $ 190 and $ 385 for the three and six months ended June 30, 2024, respectively. Additionally, rent - cost of services includes other variable lease costs such as CPI increases and short-term leases of $ 4,634 and $ 8,638 for the three and six months ended June 30, 2025, respectively, and $ 3,300 and $ 6,357 for the three and six months ended June 30, 2024, respectively. (2) Cost of services includes variable lease costs consisting of property taxes and insurance. (3) Depreciation and amortization is related to the amortization of favorable and direct lease costs. 25 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Future minimum lease payments for all third-party leases as of June 30, 2025 are as follows: Year Amount 2025 (remainder) $ 108,371 2026 216,519 2027 215,728 2028 214,656 2029 210,795 2030 206,617 Thereafter 1,686,729 TOTAL LEASE PAYMENTS $ 2,859,415 Less: present value adjustment ( 963,372 ) PRESENT VALUE OF TOTAL LEASE LIABILITIES $ 1,896,043 Less: current lease liabilities ( 103,825 ) LONG-TERM OPERATING LEASE LIABILITIES $ 1,792,218 Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of June 30, 2025, the weighted average remaining lease term is 14.2 years and the weighted average discount rate used to determine the operating lease liabilities is 6.3 %. Lessor Activities The Company leases its owned real estate properties to third-party operators, of which 32 senior living operations are operated by The Pennant Group, Inc. (Pennant). All of these properties are triple-net leases, whereby the respective tenants are responsible for all costs at the properties including: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. The initial terms range from 14 to 16 years. During the three and six months ended June 30, 2025, the Company entered into two lease agreements with a third-party operator for one skilled nursing and one senior living operation, both with initial lease terms of 15 years. Total rental income from all third-party sources for the three and six months ended June 30, 2025 and 2024 is as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Pennant (1) $ 4,082 $ 3,824 $ 8,204 $ 7,644 Other third-party (2) 2,273 1,887 4,152 3,754 TOTAL $ 6,355 $ 5,711 $ 12,356 $ 11,398 (1) Pennant rental income includes variable rent such as property taxes of $ 270 and $ 580 during the three and six months ended June 30, 2025 and $ 314 and $ 632 for the three and six months ended June 30, 2024. (2) Other third-party includes rental revenue associated with the Company's subleases to third parties of $ 1,116 and $ 2,223 for the three and six months ended June 30, 2025, respectively, and $ 1,089 and $ 2,169 for the three and six months ended June 30, 2024, respectively. 26 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Future annual rental income for all third-party leases as of June 30, 2025 were as follows: Year Amount (1) 2025 (remainder) $ 13,218 2026 25,822 2027 25,278 2028 24,933 2029 24,821 2030 23,829 Thereafter 112,200 TOTAL $ 250,101 (1) Annual rental income includes base rents and variable rental income pursuant to existing leases as of June 30, 2025. Subsequent to June 30, 2025, the Company entered into one lease agreement with a third-party operator for one stand-alone skilled nursing operation . 17. DEFINED CONTRIBUTION PLANS The Company has a 401(k) defined contribution plan (the 401(k) Plan), whereby eligible employees may contribute up to 90 % of their annual basic earnings, subject to applicable annual Internal Revenue Code limits. Additionally, the 401(k) Plan provides for discretionary matching contributions (as defined in the 401(k) Plan) by the Company. The Company has a non-qualified deferred compensation plan (DCP), whereby certain highly compensated employees who are otherwise ineligible to participate in the Company's 401(k) plan, may defer the receipt of a portion of their base compensation and, for certain employees, up to 100 % of their eligible bonuses. Additionally, the DCP allows for the employee deferrals to be deposited into a rabbi trust and the funds are generally invested in individual variable life insurance contracts owned by the Company that are specifically designed to fund savings plans of this nature. The Company paid for related administrative costs, which were not significant during the three and six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024, the Company accrued $ 62,816 and $ 63,051 , respectively, as long term deferred compensation in other long term liabilities on the condensed consolidated balance sheets. Cash surrender value of the contracts is based on investment funds that shadow the investment allocations specified by participants in the deferred compensation plan. Refer to Note 5, Fair Value Measurements for more information on the funds. For the three and six months ended June 30, 2025, the Company recorded gains related to its DCP of $ 4,482 and $ 4,200 , respectively, which is included in other income (expense), and recorded offsetting expenses of $ 4,578 and $ 4,344 , respectively, which is allocated between cost of services and general and administrative expenses. For the three and six months ended June 30, 2024, the Company recorded gains related to its DCP of $ 527 and $ 2,921 , respectively, which is included in other income (expense), and recorded offsetting expenses of $ 628 and $ 3,116 , respectively, which is allocated between cost of services and general and administrative expenses. 18. SELF INSURANCE LIABILITIES The Company is partially self-insured for general and professional liability claims up to a base amount per claim (the self-insured retention) with an aggregate, one-time deductible above this limit. Losses beyond these amounts are insured through third-party policies with coverage limits per claim, per location and on an aggregate basis for the Company. The combined self-insured retention for the Company's independent subsidiaries in California is $ 1,000 per claim ($ 750 if an enforceable arbitration agreement applies), subject to an additional one-time deductible of $ 2,950 . For the independent subsidiaries not in California, the self-insured claim is $ 750 per claim ($ 650 if an enforceable arbitration agreement applies), subject to an additional one-time, deductible of $ 4,500 . For all independent subsidiaries, except those located in Colorado, the third-party coverage above these limits is $ 1,000 per claim, $ 3,000 per operation, with a $ 10,000 blanket aggregate limit and an additional state-specific aggregate where required by state law. In Colorado, the third-party coverage above these limits is $ 1,000 per claim and $ 3,000 per operation, which is independent of the aforementioned blanket aggregate limits that apply outside of Colorado. 27 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The majority of the self-insured retention and deductible limits for general and professional liabilities and workers' compensation liabilities are self-insured through the captive insurance subsidiary, the related assets and liabilities of which are included in the accompanying condensed consolidated balance sheets. The captive insurance subsidiary is subject to certain statutory requirements as an insurance provider. The Company’s policy is to accrue amounts equal to the actuarial estimated costs to settle open claims of insureds, as well as an estimate of the cost of insured claims that have been incurred but not reported. The Company develops information about the size of the ultimate claims based on historical experience, current industry information and actuarial analysis, and evaluates the estimates for claim loss exposure on a quarterly basis. The Company uses actuarial valuations to estimate the liability based on historical experience and industry information. The Company’s independent subsidiaries are self-insured for workers’ compensation liabilities in California. To protect itself against loss exposure in California with this policy, the Company has purchased individual specific excess insurance coverage that insures individual claims that exceed $ 625 per occurrence. In Texas, the independent subsidiaries have elected non-subscriber status for workers’ compensation claims and the Company has purchased individual stop-loss coverage that insures individual claims that exceed $ 750 per occurrence. The Company’s independent subsidiaries in all other states, with the exception of Washington, are under a loss sensitive plan that insures individual claims that exceed $ 350 per occurrence. In the state of Washington, the Company is self-insured and has purchased individual specific excess insurance coverage that insures individual claims that exceed $ 500 per occurrence. For all of the self-insured plans and retention, the Company accrues amounts equal to the estimated costs to settle open claims, as well as an estimate of the cost of claims that have been incurred but not reported. The Company uses actuarial valuations to estimate the liability based on historical experience and industry information. The Company self-funds medical (including prescription drugs) and dental healthcare benefits for the majority of its employees. The Company is fully liable for all financial and legal aspects of these benefit plans. To protect itself against loss exposure with this policy, the Company has purchased individual stop-loss insurance coverage that insures individual claims that exceed $ 525 for each covered person for fiscal year 2025. The following table represents the Company's self-insurance insurance liabilities, on an undiscounted basis, inclusive of anticipated insurance recoveries, as of June 30, 2025 and December 31, 2024: June 30, 2025 December 31, 2024 Accrued general liability and professional malpractice liabilities $ 179,515 $ 160,149 Accrued workers’ compensation liabilities 39,018 37,291 Accrued health benefits 16,000 14,312 TOTAL SELF-INSURANCE LIABILITIES $ 234,533 $ 211,752 Less: current self-insurance liabilities 75,542 67,331 LONG-TERM SELF-INSURANCE LIABILITIES $ 158,991 $ 144,421 The anticipated insurance recoveries included in the self-insurance liabilities are presented gross rather than net with the corresponding asset of $ 17,958 and $ 17,741 , as of June 30, 2025 and December 31, 2024, respectively, included in Restricted and other assets on the consolidated balance sheets. The Company believes that adequate provision has been made in the Interim Financial Statements for liabilities that may arise out of patient care, workers’ compensation, healthcare benefits and related services provided to date. 19. COMMITMENTS AND CONTINGENCIES Indemnities — From time to time, the Company enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. The terms of such obligations vary by contract and, in most instances, do not expressly state or include a specific or maximum dollar amount. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted. Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on the Company’s condensed consolidated balance sheets for any of the periods presented. 28 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Litigation and Regulatory Matters — The Company and its independent subsidiaries are party to various legal actions and administrative proceedings and are subject to various claims arising in the ordinary course of business. Such claims may be related to, but are not limited to, the Health Insurance Portability and Accountability Act of 1996, alleged Medicare or Medicaid false claims, qui tam or "whistleblower" provisions of the False Claims Act and/or the Anti-Kickback Statute, alleged violations of state and federal wage and hour laws, environmental matters, investigations, examinations, audits and surveys or other claims in connection with the delivery of healthcare and non-healthcare services. The Company and its independent subsidiaries are also subject to requests for information and investigations by other state and federal governmental entities (e.g., Offices of the Attorney General and Offices of the Inspector General). The Company cannot predict or provide any assurance as to the possible outcome of any inquiry, investigation or related litigation. If any such inquiry, investigation or related litigation were to proceed, and the Company and its independent subsidiaries are subjected to, alleged to be liable for, or agree to a settlement of, claims or obligations under federal Medicare statutes, the FCA, or similar state and federal statutes and related regulations, or if the Company or its independent subsidiaries are alleged or found to be liable on theories of general or professional negligence or wage and hour violations, the Company's business, financial condition and results of operations and cash flows could be materially and adversely affected and its stock price could be adversely impacted. Among other things, any settlement or litigation could involve the payment of substantial sums to settle any alleged violations and may also include the assumption of specific procedural and financial obligations by the Company or its independent subsidiaries under a Corporate Integrity Agreement and/or other such arrangement. Other claims and suits, including class actions, continue to be filed against the Company and other companies in its industry. The Company and its independent subsidiaries have been subjected to, and are currently involved in, class action litigation alleging violations (alone or in combination) of state and federal wage and hour laws as related to the alleged failure to pay wages, to timely provide and compensate for meal and rest breaks, and related causes of action. The Company does not believe that the ultimate resolution of these actions will have an ongoing material adverse effect on the Company’s business, cash flows, financial condition or results of operations. In 2024, the Company, on behalf of its independent subsidiaries, received a Civil Investigative Demand (CID) from the U.S. Department of Justice (DOJ) indicating that the DOJ is investigating the Company to determine whether claims have been submitted to Medicare and Texas Medicaid for services which were unnecessary or otherwise not consistent with existing reimbursement requirements. The CID covers the period from January 1, 2016, to the present. As a general matter, the Company's independent subsidiaries maintain policies and procedures to promote compliance with all applicable Medicare and Medicaid requirements, including but not limited to those relating to the presentation of claims for reimbursement for services provided . The Company is fully cooperating with the DOJ in response to the CID. However, the Company cannot predict the outcome of the investigation or its potential impact on the consolidated financial statements. In 2023, in a four-week medical negligence trial in the State of Arizona, the jury returned a verdict against one of the Company’s independent subsidiaries. The Company is in the process of appealing the jury verdict. The Company has in the past appealed similar decisions and has, in some circumstances, received decisions in its favor. Although the Company intends to vigorously defend against these specific claims and in general these types of claims and cases, there can be no assurance that the outcomes of these matters will not have a material adverse effect on operational results and financial condition. In 2018, the Company, on behalf of its independent subsidiaries, received a CID from the DOJ stating that it was investigating to determine whether there had been a violation of the False Claims Act (FCA) and/or the Anti-Kickback Statute (AKS) with respect to the relationships between certain of the Company’s independent subsidiaries and persons who serve or have served as medical directors. In 2020, the Company was advised that the DOJ declined to intervene in any subsequent action filed in connection with the subject matter of this investigation. Despite the decision of the DOJ to decline to participate in litigation based on the subject matter of its previously issued CID, the involved qui tam relator moved forward with the complaint in 2020. In 2024, the Company mediated with the involved parties and agreed to settle the civil case for $ 48,000 and recorded the accrual as of December 31, 2023. Following the finalization of the settlement documents and payment of the settlement funds during the fourth quarter of 2024, the qui tam complaint was dismissed and the matter was resolved. 29 Table of Contents THE ENSIGN GROUP, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Medicare Revenue Recoupments — The Company's independent subsidiaries are subject to regulatory reviews relating to the provision of Medicare and Medicaid services, billings and potential overpayments as a result of Recovery Audit Contractors (RAC), various Program Safeguard Contractors and Medicaid Integrity Contractors (collectively referred to as Reviews). Reviews vary in claim selection size and processes, ranging from a single episode/claim month to larger, multi-claim batches; and from single rounds of review to reviews of multiple rounds with pass/fail criteria. If an operation has a significant error rate or fails a Review and/or subsequent Reviews, the operation could then be subject to extended review or an extrapolation of the identified error rate to billings in the same time period. The Company anticipates that these Reviews could increase in frequency in the future. As of June 30, 2025 and through the filing date of this report, 10 of the Company's independent subsidiaries had multi-claim Reviews scheduled or in process. Concentrations Credit Risk — The Company has significant accounts receivable balances, the collectability of which is dependent on the availability of funds from certain governmental programs, primarily Medicare and Medicaid. These receivables represent the only significant concentration of credit risk for the Company. The Company does not believe there are significant credit risks associated with these governmental programs. The Company believes that an appropriate allowance has been recorded for the possibility of these receivables proving uncollectible and continually monitors and adjusts these allowances as necessary. The Company’s receivables from Medicare and Medicaid payor programs accounted for 56.3 % and 52.9 % of its total accounts receivable as of June 30, 2025 and December 31, 2024, respectively. Revenue from reimbursement under the Medicare and Medicaid programs accounted for 69.8 % and 69.6 % of the Company's service revenue for the three and six months ended June 30, 2025, respectively, and 71.2 % and 71.4 % for the three and six months ended June 30, 2024, respectively. 20. COMMON STOCK REPURCHASE PROGRAM On May 15, 2025, the Board of Directors approved a stock repurchase program pursuant to which the Company is authorized to repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from June 16, 2025. During the three months ended June 30, 2025, the Company 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 the Company was authorized to repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from March 26, 2025. During the three and six months ended June 30, 2025, the Company purchased 73 and 157 , respectively, of its common stock for $ 9,225 and $ 20,000 , respectively. This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect. On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which the Company was authorized to repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from September 1, 2024. The Company did not purchase any shares pursuant to this stock repurchase program before the repurchase program was cancelled on February 21, 2025. On August 29, 2023, the Board of Directors approved a stock repurchase program pursuant to which the Company was authorized to repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from September 1, 2023, which terminated by its terms on August 31, 2024. The Company did not purchase any shares pursuant to this stock repurchase program. Under the repurchase program, the Company is authorized to repurchase its 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 share repurchase program does not obligate the Company to acquire any specific number of shares. Any such repurchases will depend on the Company's business strategy, prevailing market conditions, the Company's liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material. 30 Table of Contents