The Ensign Group, Inc. (NASDAQ:ENSG) Q4 2022 Earnings Call Transcript

Scott Fidel: Actually, just wanted to pick that right up on that last topic just around operating cash flow and maybe get a little more visibility into what you’re building into your outlook for next year. You’ve been running in that $275 million area for the last two years. And then you’ve talked about in the near term, having some of these — some of these dynamics just around the acquisitions. Is it reasonable to think about operating cash flow stepping up a bit in 2023, just given the larger revenue scale? Or are you assuming it remain relatively stable with where it’s been trending the last two years? And then also what you’re modeling for CapEx as well?

Suzanne Snapper: Yes, great question, Scott. I think the one thing, when you’re looking at cash flows and you kind of think through the number of acquisitions that we’ve done, our states can vary between four months and 18 months is the longest transition that we’ve ever had as they’ve got us on. And then so as you kind of think through where those cash flows go, we try to try to normalize it all and hope that they all come in kind of in the middle of that realm. And then after we get that licensing process done, then we have to go through the managed care process and get them re-credentialed through our new license under managed care. So that’s a secondary step. And again, that can take two to six months on top of that after you’ve already waited.

And so, it’s a little bit of a waiting game. And so that’s why we kind of — as you listen to chat of use of cash, one of the things that we’ll probably end up having to do is use some of that working capital to get us through those to processes. Now our hope and we have great systems and great processes that it goes very succinctly. And we’re on the early end of that. But unfortunately, we are at each individual state governments processing time line a little bit here with regards to how quickly it goes through. So I think it wouldn’t be unreasonable to say we would expect kind of that same flow net-net because AR will grow and…

Chad Keetch: Just a little bit there. California tends to be one of the slower states too. Texas is faster than California and that’s why it’ll probably be a little more pronounced with this particular set of deals as well.

Suzanne Snapper: Right. And definitely, different states have different things they turn off immediately. So Texas turns a lot more stuff off immediately. And so, we get not a dollar in the door. In California, there’s a little bit we get some cash in the door quick and then we have a turn off period and then goes back on. So every state again is — it’s — we’re talking super nuance here, so a little bit up and down there.

Barry Port: We haven’t talked a whole lot very recently about Standard Bearer, but I mean, we have been preparing for this and are still thinking a great deal about opportunities for Standard Bearer. So having cash availability for deals that, again, may not fit our operating footprint, but might be good real estate opportunities or something we always want to be ready for as well, not signaling that we have anything in the works necessarily, but we have great hopes for Standard Bearer to have some opportunities as well for growth.