The Ensign Group, Inc. (ENSG) Q2 2019 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the Ensign Group Inc. Second Quarter Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Also, as a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to your host to Mr. Chad Keetch. You may proceed sir.

Thank you, operator. Welcome everyone and thank you for joining us today. Here with me today I have Barry Port, our newly appointed CEO; Suzanne Snapper, our CFO; and Danny Walker CEO of The Pennant Group Inc. which we'll be discussing later in this call. As always, before we begin, I have just a few housekeeping matters. We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website at www.ensigngroup.net. A replay of this call will also be available on our website until 5:00 P.M. Pacific on Friday August 30th, 2019. We want to remind anyone that may be listening to a replay of this call that all the statements made are as of today, August 2nd, 2019 and these statements have not been nor will be updated subsequent to today's call. Also any forward-looking statements made today are based on management's current expectations assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason. In addition The Ensign Group Inc. is a holding company with no direct operating assets employees or revenues. Certain of our wholly-owned independent subsidiaries, collectively referred to as the Service Center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to the other operating subsidiaries through contractual relationships with such subsidiaries. In addition, our wholly-owned captive insurance company which we refer to as the captive, provides certain claims made coverage to our operating subsidiaries for general and professional liability as well as for workers' compensation and insurance liabilities. The words Ensign, company, we, our, and us refer to the Ensign Group Inc. and its consolidated subsidiaries. All of our operating subsidiaries the Service Center and the captive are operated by separate wholly-owned independent companies that have their own management employees and assets. References herein to the consolidated company and its assets and activities as well as the use of the terms we, us, our, and similar terms used today 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. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business but they should not be relied upon to the exclusion of the GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and in our 10-Q. And with that I'll turn the call over to Barry Port, our CEO. Barry?

Good morning everyone. We're happy to report that our local operators continue to drive impressive results. We are honored to be affiliated with so many outstanding caregivers and healthcare leaders and their collective efforts have led to another strong quarter with GAAP earnings per share for the quarter of $0.51, an increase of 24% over the prior year quarter and adjusted earnings per share of $0.54, up 23% over the prior year quarter. Our organic growth this quarter has again come from the steady improvement in the organization's most mature operations as well as an increasingly positive contribution from our transitioning and newly acquired operations. While we are pleased with our progress, we've only begun to approach or potential in about half the states in which we operate not to mention the tremendous opportunities from our disciplined acquisition strategy. Our local leaders in newer states are working diligently to implement proven practices that have consistently led to stronger clinical and financial results and we are confident that as they do so, these newer markets will soon become enormous positive contributors to our collective results. And what we've said many times before remains as true today as it did several years ago, we still see a very clear pathway to unlock the extraordinary potential that remains within our existing portfolio, including within our same-store and transitioning operations not to mention the vast opportunities for future disciplined acquisitions. These results are due to the collective impact of the improvements made by dozens of operations built on a foundation of high-quality health care outcomes strong regulatory results enhanced efforts in collections and strengthened relationships with managed care providers. Let me give you an example. In 2017, our Idaho group acquired Meadow View Nursing and Rehabilitation in Nampa, Idaho. As is often the case, the operation was losing money and had significant clinical challenges. Enter CEO, Chase Gunderson; and COO, Jeremy Withers. Chase and Jeremy immediately embraced the staff and engaged them on an impressive journey to reposition themselves in the market. They obtained state approval for a specialized behavioral program, while enhancing their ability to provide excellent rehabilitation and other skilled services to meet their community's needs. This year they have improved revenues by over 18% and earnings by over 75% over the prior year quarter on a higher occupancy and skilled mix all while maintaining a CMS four-star rating and employee turnover rate of 10%. Our unique entrepreneurial culture and history of incubating other post-acute and health care businesses continued during the quarter. By applying these same principles that have led to consistent results in our skilled nursing operations, Cornerstone Healthcare Inc. our home health and hospice venture grew its segment revenue and income by 22% and 17% respectively over the prior year quarter. One example of their growth was seen at Hospice of the Pines located in Prescott, Arizona, led by Executive Director, Brad Schaeffer; and Director of Clinical Services [indiscernible] this agency achieved outstanding results during the quarter with an increase in revenue of 28% and earnings growth of 74% each over the prior year quarter. Hospice of the Pines success is the result of the team full of talented clinicians, who have developed strong community relationships and their commitment to clinical excellence resulted in a deficiency-free survey. With some of the highest employee satisfaction ratings in the organization, these caregivers have engaged with local hospital systems and senior living communities in the Prescott and Sedona areas in a meaningful way. They love what they do, and it shows in their growth as a leading provider in that market. Let me highlight one last example of our local leaders driving impressive growth in our senior living operations. Desert View Senior Living is an assisted living and memory care community in Las Vegas, Nevada led by Executive Director, Paul Ortega; and Wellness Director, Joseph Rank. Following the example of these dedicated leaders, the Desert View team has become a force in their local community. They fund specific feedback from these community partners. They implemented a carefully tailed plan to expand their memory care service offering. This relentless focus on serving their community's needs led to a second quarter revenue increase of 26% and an EBIT increase of 158% in addition to improving their overall occupancy by 16 percentage points all over the prior year quarter. We are seeing dozens of examples of growth just like these in each of our business segments, as we acquire underperforming operations and drive organic growth. As we will discuss in more detail in a few minutes, we believe the proposed transaction we announced in May will both accelerate the growth of these businesses, while also allowing our shareholders direct access to the inherent value in these lines of business. Our second quarter results are on schedule with what we expected when we increased our 2019 annual earnings guidance last quarter. And therefore, we are reaffirming our annual earnings guidance of between $2.22 and $2.30 per diluted share and our annual revenue guidance of between $2.34 billion and $2.4 billion. Overall, the midpoint of this guidance represents a 20% or $0.38 per share increase over our 2018 annual earnings. We are very excited about our first and second quarter performance in the coming year. We remind you again that our guidance favors the second half of the year, but we are confident that each leader -- as each leader continues to adjust to local market conditions, we will carry this momentum forward. As we take a minute to look back on the last few quarters, the primary drivers of our strong results are high-quality health care outcomes, stronger occupancy, strong regulatory results and consistent collection efforts. In addition, the partnerships between our local clusters and managed care companies and their markets continues to be an advantage. Our focus isn't just on skilled occupancy, it's developing an appropriate mix across all peer types that fit the unique needs of the markets we serve. We hope that these results will continue to show that even in a period, where occupancies across the industry are down, we are able to consistently drive results across all peer types including Medicaid, Medicare, managed care and private pay. Thanks to our distinctive local leadership model and our disciplined real estate investments and acquisitions, we are confident that this performance is sustainable over the long-term. And with that, I'll ask Chad to give us an update on our recent investment activity. Chad?

Thank you, Barry. During the quarter, we paid a quarterly cash dividend of $0.0475 per share. We have been a dividend paying company since 2002 and have increased our dividend every year for 16 years. Also during the quarter and since, we announced the acquisition of four skilled nursing operations in California; two healthcare campuses both of which include skilled nursing and senior living operations; and one skilled nursing operation in Arizona; one skilled health care campus in Texas; one management arrangement for a hospital-based skilled nursing operation in California; and one skilled nursing operation in Utah. In our Home Health and Hospice segment, we acquired two home care agencies in Utah; two hospice agencies in Texas; one home health and hospice agency in Wisconsin; and one hospice agency in Arizona. In senior living we acquired two assisted living operations; one in North Texas and one in Southern California. We are very excited about these carefully selected acquisitions and are pleased with the progress our local operators have already made in many of them. Even though we've had a solid year on the acquisition front so far, the deals we have completed to date are not representative of the number of attractive opportunities that are available to us. Our pipeline is as full as ever, but we have intentionally kept plenty of dry powder on hand for what we believe will be an increasingly more attractive buyers market. We are very excited to grow within our existing geographical footprint and we'll continue to do so as we see significant advantages to adding strength in markets we know well. We are in the process of evaluating dozens of opportunities and expect to announce more deals in the third and fourth quarters. These additions bring our growing portfolio to 200 skilled nursing operations, 27 of which also include senior living operations, 57 standalone senior living operations, 28 hospice agencies, 26 home health agencies and nine home care businesses across 16 states. We continue to methodically add value to our real estate portfolio by improving the operating results in our owned operations and by acquiring additional real estate assets. Since we spun out 94 of our real estate assets to CareTrust REIT in 2014, we have added 194 operations and acquired 79 real estate assets. As we look to our past and what we have been able to accomplish with our real estate we are very excited about the opportunities we have to unlock the value in our owned real estate. We are constantly evaluating our options and looking forward to creating a structure that will ensure both cultural and operational alignment. With that I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance. Suzanne?

Thank you Chad and good morning everyone. Detailed financials for the quarter are contained in our 10-Q and press release filed yesterday. Some additional highlights for the quarter include, consolidated GAAP net income was $29 million, an increase of 30% over the prior year quarter; and adjusted net income was $30 million, an increase of 28% over the prior year quarter. We also want to point out that we have made very few adjustments between our GAAP and non-GAAP numbers and that 90% of those adjustments relate to the renewal of costs associated with the potential spin-off transaction and share-based compensation. Other key metrics as of and for the period ended June 30 include cash and cash equivalents of $39 million, cash generated from operations of $72 million, $235 million of availability on our revolving line of credit. As we anticipated our lease-adjusted net debt-to-EBITDA ratio increased very slightly in the quarter to 3.77 times. And cash outlay from heavier acquisitions typically precedes the growth in EBITDAR from newly acquired operations that we expect to increase over time. As a reminder this is after we have invested $628 million in 194 acquisitions since we spun off the REIT. We continued our preparation to implement CMS's payment reforms for skilled nursing and home health, called Patient-Driven Payment Model or PDPM and Patient-Driven Groupings Model or PDGM. We believe that our interdisciplinary teams which have always been relentlessly focused on quality and efficient outcomes will serve us well under both programs which are slated to go into effect on October 1, 2019 and January 1, 2020 respectively. As Barry mentioned we are reaffirming our annual guidance for 2019 which we increased last quarter. We are projecting earnings between $2.22 and $2.30 per diluted share and annual revenues between $2.34 billion and $2.4 billion. The 2019 guidance is based on diluted weighted average common shares outstanding of approximately 56.7 million, a tax rate of approximately 25% with the primary exclusions coming from proposed spin-off transaction and stock-based compensation and the inclusion of acquisitions closed to date. Additionally other factors contributing to our asymmetrical quarters include; variations in reimbursement systems, delays in changes in state budget, seasonality in occupancy and skilled mix, the influence of the general economy on our census and staffing, the short-term impact of our acquisition activities, variations in insurance accruals and other factors. Accordingly, we expect the results to be more heavily weighted towards the second half of the year. And with that I'll turn the call back over to Chad to provide more details about the proposed spinoff. Chad?

Thank you, Suzanne. On May 6, 2019 we announced plans to separate our home health and hospice agencies and substantially all of our senior living businesses into a separate publicly traded company. Upon the consummation of the spinoff, the two companies will include; The Ensign Group Inc. which will include transitional and skilled services, rehabilitative care services, health care campuses, mobile diagnostic and clinical laboratory operations, other post-acute related new business ventures, and real estate investments. And the Pennant Group Inc. which will include Ensign's home health and hospice operations and substantially all of its senior living operations. Our Ensign leadership team will remain in place. Danny Walker, President of Ensign's Home Health and Hospice Holding Company Cornerstone Healthcare Inc. will become the Chairman, Chief Executive Officer and President of Pennant. Our current Executive Chairman, Christopher Christensen will also serve as Director for both companies for the foreseeable future. Although Pennant will have a new ownership structure, Ensign and Pennant are continuing to develop a preferred provider network which we call the Ensign Pennant Care Continuum. This will memorialize the operational partnership we have always enjoyed under one umbrella. As preferred providers within the care continuum, each Ensign and Pennant operation that elects to hop into the network will work together to appropriately share data and create care pathways designed by our clinicians to achieve the highest possible outcomes and transitions between care settings. We are excited to further enhance our service offerings to our acute care partners, payers and other channel partners and look forward to continuing earn the trust of patients, residents and their families. The spinoff is subject to customary conditions including receipt of a tax opinion from counsel, effectiveness of the registration statement filed with the SEC, certain lease amendments, execution of intercompany agreements and final approval by our Board of Directors. We are pleased with the progress we have made and are confident that we are on schedule to complete the spinoff on October 1, 2019, but there can be no assurances regarding the final terms and structure of the spinoff or that it will be completed at all. And with that, I'll hand the call back over to Barry.

Thanks, Chad. As we've emphasized repeatedly over the last several quarters, our home health hospice and senior living leaders have created significant value as they've embraced and applied Ensign's innovative leadership and operating model. We believe that separating these two businesses will accelerate the ability of both organizations as two distinct, but very healthy enterprises to quickly adapt to the ever-changing needs of our patients, payers and other providers within the continuum of care. We also believe that this spinoff will shine light on value that has yet to be fully realized as a single entity and will present two very attractive investments that provide our partners and shareholders the opportunity to share and add value now and over time. As Chad mentioned earlier in the call, our real estate portfolio continues to grow and mature. We will always be an operationally-driven organization first, but we are continuously improving the underlying value in our owned real estate. We are also incubating several other new business ventures and look forward to our leaders finding other ways to create value and opportunity for their partners and ultimately our shareholders as those businesses continue to develop. We've always aspired to be a leadership company above all else. Developing outstanding entrepreneurial leaders is our most important priority. As we do so creating a pathway for each of these leaders, so that they can experience what so many at Ensign have already experienced is a key strategy to help us attract and retain the best and the brightest. Our organization has created multiple pathways to achieve the success that so many outstanding leaders deserve including the amazing opportunity that exists within our core business and the new business venture program. We are encouraged that so many are starting to truly understand what Ensign really is and our story is continuously gaining traction. It's opportunities like this spinoff as well as the incredible shared upside with our local leaders that have and will continue to allow us to attract such amazing talent from all walks of life to post-acute care. As we move towards a planned spin date of October 1, we are confident that our operational focus is stronger than ever. And as our collective results for the quarter indicate the spinoff has not been a distraction to our local leaders and operators. We want to again thank you for joining us today and express our appreciation to our shareholders for their confidence and support. We're also appreciative to our colleagues in the field and at the Service Center for making us better every day. In particular we are very excited about the extraordinary results in our skilled nursing operations and the impressive improvement in our occupancy by almost every measure. These gains are the ultimate demonstration that our local leaders are gaining the trust of our health care partners across dozens of diverse markets and an even more diverse patient population. As we look at occupancy levels across our portfolio, the momentum that we have seen over the last few quarters gives us even more confidence about the near and long-term future. We are hopeful that this will help you gain a glimpse into the enormous upside that we see in our portfolio. We'll now turn the time over to the Q&A portion of our call. And as Chad mentioned earlier, we're also here with Danny Walker, CEO of Pennant Group to help address questions about the spinoff and Pennant operations.

Hello everyone.

Dylan, can you please instruct the audience on the Q&A procedure?

Sure sir. Thank you. [Operator Instructions] Our first question comes from Chad Vanacore from Stifel. Please go ahead.

Hey good morning. This is Seth Canetto on for Chad.

Hi, Seth.

Hey, Seth.

Suzanne in your opening remarks you mentioned about the stronger EPS numbers in the back half of the year and you listed off a number of variables from changes in reimbursement and state budget delays to just the seasonality in occupancy. What's going to be the biggest driver of that upside in the back half of the year?

Yeah. I mean, Seth I think if you look over the years and you look at our quarters and see where things are at seasonality is probably the biggest driver of everything and that's been very, very consistent. In that fourth quarter, basically we have complete seasonality as well. That's when all of our reimbursement both on a state and federal level have kicked in at that point, across the skilled nursing industry. And so definitely the fourth quarter always being significantly stronger for us, but I would point first and foremost the seasonality and then followed by the reimbursement changes that happened mostly kind of end of Q3 beginning of Q4.

All right. Great. And then Chad you had mentioned that it's a really strong buyers market and you guys have a very robust pipeline for acquisition growth. Can you just give a little more color on what's driving that opportunity in the marketplace? And you seemed to have alluded to pretty strong 3Q and 4Q relative to the first half there?

Yes. Great question, Seth. There's obviously multiple factors that are impacting that. Clearly, I think as we had pointed to in the past transactions that were done several years ago that, we think were too aggressive and have turned out to be too aggressive have led to a lot of distressed operators that they're having troubles covering rent increases and escalators. And so that's led to several pretty notable bankruptcies that are out there amongst some larger regional operators. So that's one factor probably the biggest factor. And we think there's a lot more of that coming as well. And then the other thing, I think as is always the case is the regulatory environment continues to become more and more complex. You have things like PDPM and reform and reimbursement systems that just make it very difficult for smaller operators that don't have the resources to throw at those sorts of changes that continue to provide opportunities for us to continue to grow. So those are probably the two main factors.

All right. Great. And then do you guys think you'll grow in any particular geographies that are right for expansion? I mean, you mentioned earlier the deals you've done in California, Arizona, Texas and Utah. Are you just focused on growing and expanding in your existing footprint? Or how should we think about where those deals will be?

Yes. Definitely. Our focus right now is growing in the markets, we are already in. As we've talked about before and as Barry mentioned in his remarks we have some states that are newer to us. We're very focused on improving the operations there and gaining strength before we continue to grow there. So we're very careful about expanding into new states and we've got plenty of newer markets right now to keep our hands full so to speak. But definitely, we see a lot of opportunity just within the 16 states we're in and that's where our focus will be. In the future of course, as we've done in the past, we will look to new markets but I don't see that happening any time in the near future.

Okay. Thanks. And then last question just on the reimbursement change the PDPM expected to go into effect October 1. Can you just tell us like how far into the training and preparation you guys are? What's been the most challenging aspect? And then from a financial standpoint should we expect this to be neutral to your revenues with maybe slightly lower expenses from this change? Or how should we think about that?

Yeah. Seth, I mean the training is pretty vast. I think as you noted it encompasses not only, our reimbursement teams, our AR teams, our clinical teams, the leadership at the facilities. So we are deeply into it. We've done both live trainings, hands-on trainings workshop trainings, you name it have happened and will continue to happen and probably go live We also have just resource coverage that we're continuing to make sure that as questions come up, and we change some of the underlying systems, and some of the screens that they'll go through every day, and fill out we'll have the right coverage there to capture everything that we're delivering up in the care point to ensure that we get all the additional coding that needs to happen under the new system. So we're in the middle of it. We've done a lot, but still a lot to still do.

I'll just jump in here Seth. On the PDGM front for home health providers, it's very, very similar. We've mirrored the preparation that our SNF partners have been engaged in on the PDPM side. Lots of modeling a lot of work on the electronic medical record front so that you're starting to see the patient base and the care delivery model through a new lens. And we feel good about our preparation. It's still heavy and there's a lot of work going into it right now, as we make our kind of final preparations. In addition to the care delivery model, on the PDPM side we're obviously making great strides in preparation to shift from – away from RAPs to 30-day episode sequences. So -- but we feel good about it though.

And then one more thing probably just to finish out the question on that PDPM side. One of the things that we have continued to remind people is that our therapists are in-house. I mean they're part of the team. And I think that's really why we feel really confident about this because you're looking at the whole of the patient and they're part of the team making that clinical decision. And then with regards to the financial front, I think originally we had projected it was going to be a headwind to revenue. There's still some headwind that's out there. We think it will be slight. Obviously with the market basket increase, we think that that offsets most of that headwind we were previously predicting I mean and the potential cost savings coming in probably after we get phase through the implementation of it.

All right, great. Thanks a lot for taking my questions.

Thanks, Seth.

Thanks, Seth.

Thank you. Our next question comes from Frank Morgan from RBC Capital Markets. Please go ahead.

Hello. I guess, I'll stay on the point, Suzanne you were just making. So it sounds like if it's less of a revenue impact and the costs will be kicking in it seems like -- is it net-net better than -- I'm just trying to get a sense you're saying you think it's going to be net-net better than what your initial thoughts were or not?

We’re cautious Frank on how to answer that question. Obviously I mean I think the costs will probably not necessarily be as aggressively lower as maybe we thought initially or even others have indicated. For us it will be more of a shift. We've had a scarcity of therapy talent in the past that has not really allowed us to do as many of the programming things on the long-term care side of the house that we wanted to. And so for us we're going to shift a lot of our therapy talent to be able to redeploy them to provide more services on that side of the house on the part B front and provide long-term care programming to a lot of our existing patient base that we haven't necessarily been able to because of the constraint in talent. And we see there being some pretty big opportunities on that front. So net-net we'd probably be comfortable telling you it's going to be neutral right now. But the long-term answer is we take a very complex patient mix. And as you dive into PDPM there are opportunities for providers that provide services for that complex patient mix that we think we'll be able to capitalize just because of our inherent focus on that complex patient. So in the long-term we see it being in net benefit for sure.

Got you. I guess now one just more of a clerical question. I want to clarify or reiterate the guidance that you reiterated today still has Cornerstone/Pennant in it through the full year. Is that right?

Correct. We will be revisiting our guidance, obviously, in Q3 with the planned spinoff date of October 1st. We might end up just going to 2020 guidance. We're just still thinking about whether it was helpful for you guys. So we're still going through that but it does definitely have it in all the way through the end of the year.

Okay. And it sounds like this healthy pipeline of acquisitions is -- that is not in the numbers correct? Or in the guidance?

Correct. It's only acquisitions closed through today. So it's not in the numbers definitely. But we feel really good and strong about what the guidance we've put on there.

Got you. Okay. No, I was just clarifying. And then I guess going back to PDGM, there's been a lot of commentary through the earnings cycle from the pure-play home health care company. Just curious when the rule came out, it looks like the behavioral adjustments looks like there was a larger. I was just curious as you look at your -- or you thinking about your ability to offset this behavioral adjustment just what are your strategies either from a revenue side as it relates to the coding and then just on the cost side as well? Because presumably this is going to be a pretty big hurdle that most providers have to make up?

Yes. We've gone back through Frank and looked at what our expected impact would be and it's still in that range for us. We've -- a lot of that is a product of how we've operated the business from the get-go. We've never been highly focused on chipping into the next rug category, and just haven't been built that way. And so, for us, we feel good about continuing to make the adjustments. We don't see it as being as severe as what I've observed in the other pure-play settings. That said, making sure that we have each licensed professional operating at the highest level of their particular scope of practice is a big focus making sure that we're really disciplined about those questionable encounters and tightening up the coding and making certain that we're capturing everything that's going on with that particular patient. There's enormous training going on there as well. And really the biggest answer for us is we have such a unique ability to control what happens in each market because of our operating model. In a lot of ways, we are built exactly for this kind of circumstance where behavioral changes need to happen. And instead of having an executive team and an office somewhere trying to rollout something across many, many, many operations, we have local operators who have full transparency into their P&L and have already begun making some of the changes that -- some of the behavioral changes that make sense to make under the existing PPS structure. They're already well underway of making those changes. So, we're built for this exact type of structure, because we're -- we have that decentralized model. And so, overall we feel good about it. Our projections are still holding even after the final rule at that 1.5% to 2.5% headwind, and that's just in the home health side. We think that it's easily offset with the changes that have been announced on the hospice rule. And then, of course, our acquisition strategy is going to add fuel to the fire. So...

Got you. And I guess another point that some of the pure-plays have talked about is just the impact of the change in the rule around the RAP program, the pressure of that will put on smaller operators. Do you see that or you foresee that coming as you look at your M&A opportunities?

We do. Yeah, I mean first how it will affect us. We do expect to see several days increase in our DSO. That's what we're predicting, and we're preparing for that. We're making sure that the local operators really have a grasp for that. They're very, very interested in cash collections based on our model. And so, one, we're just going to plan thoughtfully for how to navigate those waters ourselves. But we do fully expect the smaller operators that are having difficulty not just adjusting to that, but also the cash flow side of things will drive more opportunities our way. And we're focused making specific investments in our leadership pipeline and developing more leaders that are going to be prepared to be deployed in different markets to take advantage of those opportunities.

Okay. That’s great. Thank you very much.

Thanks, Frank.

Thanks, Frank.

Thanks, Frank.

Thank you. I show no further questions in the queue. At this time, I'd like to turn the call over to Mr. Barry Port, CEO for closing remarks.

Thanks, Dylan. And thanks everyone for joining us today. We appreciate all of your support and all the good questions, and look forward to talking to you next quarter.

Thank you, ladies and gentlemen for attending today's conference. This concludes the program. You may all disconnect. Good day.