Ensign Group Reports Second Quarter 2026 Financial Results and Details Non-GAAP Metrics

Ensign Group's Use of Adjusted EBT and Adjusted Net Income Metrics

The Ensign Group disclosed that Adjusted EBT represents net income before multiple categories of expenses and adjustments. According to the filing, Adjusted EBT excludes provision for income taxes, stock-based compensation expense, acquisition-related costs, costs incurred related to system implementations, loss or gain on long-lived assets and business interruption recoveries, and amortization of patient base intangible assets. This metric is designed to provide investors and management with a clearer view of operating performance by removing expenses that the company characterizes as infrequent or non-recurring in nature.

Similarly, Adjusted net income follows a comparable framework but is calculated differently in its final form. The company noted that Adjusted net income excludes stock-based compensation expense, acquisition-related costs, costs related to system implementations, loss or gain on long-lived assets and business interruption recoveries, amortization of patient base intangible assets, and the income tax effect of these adjustments. The filing indicates that the company believes these adjusted metrics provide important supplemental information to evaluate operating performance, as the excluded items are characterized as infrequent or variable in nature rather than representing current revenues or cash expenditures.

Adjusted Earnings Per Share and Per-Share Valuation

The Ensign Group defined Adjusted earnings per share as Adjusted net income divided by the weighted-average diluted shares outstanding for the applicable reporting period. By presenting this metric alongside standard diluted earnings per share, the company allows investors to assess per-share profitability on an adjusted basis that removes the impact of stock compensation, acquisition integration costs, and other non-recurring items. This metric is particularly relevant for investors who seek to compare operating leverage and shareholder value creation across reporting periods.

The company acknowledged in the filing that a material limitation of using Adjusted earnings per share, as compared to the GAAP measure of diluted earnings per share, is that the calculation may not be directly comparable with similar metrics calculated by other companies in the healthcare services and senior living industry. The disclosure emphasized that these non-GAAP measures should not be relied upon to the exclusion of GAAP financial measures and that investors should consider both sets of metrics when evaluating the company's financial condition and operating results.

EBITDA and Adjusted EBITDA Calculations and Relevance

The Ensign Group's disclosure defined EBITDA as net income before interest income, provision for income taxes, depreciation and amortization, and interest expense. This traditional measure of operating profitability is commonly used across capital-intensive industries to compare operational performance independent of financing and accounting policy choices. By starting with net income and adding back these items, EBITDA provides a view of cash generation from core operations before the impact of capital structure and non-cash charges.

Adjusted EBITDA extends this framework further by excluding additional items beyond the standard EBITDA calculation. According to the filing, Adjusted EBITDA also removes stock-based compensation expense, acquisition-related costs, costs incurred related to system implementations, and loss or gain on long-lived assets and business interruption recoveries. The company indicated that it believes the presentation of Adjusted EBITDA provides important supplemental information to management and investors because the excluded revenues and expenses are infrequent or variable in nature, allowing for better comparison of underlying operational trends across reporting periods.

Adjusted EBITDAR as a Real Estate and Valuation Metric

The filing specified that Adjusted EBITDAR represents net income before interest income, provision for income taxes, depreciation and amortization, interest expense, rent-cost of services, stock-based compensation expense, acquisition-related costs, costs related to system implementations, and loss or gain on long-lived assets and business interruption recoveries. The company explicitly noted that Adjusted EBITDAR is a financial valuation measure not specified under GAAP and is not displayed as a performance measure in the traditional sense because it excludes rent expense, which is a normal and recurring operating expense for the company's real estate operations.

The inclusion of Adjusted EBITDAR in the disclosure is particularly relevant to investors analyzing the company's real estate segment, as it allows for comparison of property-level profitability on a cash basis before occupancy costs. By removing rent expense, the metric permits evaluation of the underlying real estate asset quality and the operational earnings they generate independent of the company's leasing structure. This measure is commonly used in real estate analysis to assess property valuations and compare similar assets across different ownership structures.

Funds from Operations for the Real Estate Segment

The company disclosed that Funds from Operations (FFO) for its Standard Bearer real estate segment consists of segment income, excluding depreciation and amortization related to real estate, gains or losses from the sale of real estate, insurance recoveries related to real estate, and impairment of long-lived assets. FFO is a standard metric used in real estate investment analysis to measure the cash-generating capability of real estate holdings. By removing the non-cash impact of depreciation and the volatility of gains and losses on asset sales, FFO provides a measure of recurring cash flow available to the business from its real estate operations.

The disclosure of FFO separately for the Standard Bearer segment reflects the company's operational structure, which includes both operating healthcare services entities and a real estate holding segment. Investors in companies with substantial real estate holdings often focus on FFO as a key performance metric because it more closely aligns with the economics of property ownership and provides a basis for comparing real estate asset productivity. The filing indicates that the company tracks this metric specifically for investor reference and transparent reporting of segment-level performance.

Limitations and Comparability Considerations for Non-GAAP Measures

The Ensign Group explicitly acknowledged material limitations associated with the use of its non-GAAP financial measures. The company stated that these measures may not be comparable with the calculation of net income and diluted earnings per share for other companies in the healthcare services and senior living industry. This limitation arises because different companies may apply different adjustments, definitions, and estimation methodologies when calculating adjusted metrics, making industry-wide comparisons challenging even when using the same measure name.

The filing emphasized that non-GAAP measures should not be relied upon to the exclusion of GAAP financial measures. Investors are advised to consider both GAAP and adjusted metrics when evaluating the company's financial condition and results of operations. The company directed investors to its periodic filings, including the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, for further explanation of why management believes these non-GAAP measures provide useful information, how management specifically uses these measures, and additional detail regarding their limitations.

Rationale for Excluding Specific Items from Adjusted Metrics

The Ensign Group provided justification for excluding certain categories of expenses and items from its adjusted financial measures. Stock-based compensation expense is excluded because it represents non-cash charges that fluctuate based on equity market conditions and vesting schedules rather than reflecting operational performance. Acquisition-related costs and system implementation expenses are excluded because the company characterizes them as infrequent and variable expenses associated with discrete corporate activities rather than ongoing operations.

Similarly, gains and losses on long-lived assets and business interruption recoveries are excluded because these items are described as infrequent and not representative of current operational performance. The amortization of patient base intangible assets is excluded because it represents a non-cash accounting charge that does not reflect current cash expenditures. By removing these items, the company argues that adjusted metrics more accurately reflect the underlying recurring profitability of the healthcare services and senior living operations, allowing investors and management to better assess operational trends and compare performance across periods.

Access to Complete Financial Disclosures and Supporting Documents

The Ensign Group directed investors to its investor relations website and the Securities and Exchange Commission's website for access to complete financial information and supporting documentation. The company's periodic filings, including the full press release dated July 27, 2026, are available through these sources. The SEC's EDGAR database provides access to all official filings, while the company's investor relations section offers supplementary information and tools for investors seeking to analyze the company's financial performance and operations.

The filing included the complete press release as Exhibit 99.1 and indicated that the cover page includes interactive XBRL data tags embedded within an Inline XBRL document. These resources allow investors to access both the narrative press release describing the financial results and the underlying structured data that supports analysis and comparison across reporting periods. Investors seeking comprehensive information about the company's second quarter 2026 results and financial condition should review both the narrative disclosures and the underlying financial statements and schedules.

Structure of Ensign Group's Business Segments and Reporting

The filing references the company's Standard Bearer segment, which operates the company's real estate holdings, and distinguishes this segment from the operating healthcare services entities. This segmented reporting structure reflects the company's business model, which combines skilled nursing facilities, assisted living communities, and other senior care operations with a real estate investment component. The separate disclosure of FFO for the Standard Bearer segment and the use of Adjusted EBITDAR metrics indicate that the company's management tracks these segments distinctly for performance evaluation and investor communication purposes.

The company's approach to non-GAAP reporting reflects the capital-intensive nature of healthcare real estate operations and the value investors place on understanding real estate asset quality independent of operating dynamics. By providing detailed breakdowns of adjusted metrics and segment-specific measures, the Ensign Group enables investors to understand both the operating performance of its healthcare services businesses and the quality of cash generation from its real estate holdings. This comprehensive disclosure supports investment analysis by allowing stakeholders to evaluate the company's business from multiple analytical perspectives.