10-Q – 2026-07-27 – ensg-20260630.htm

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2026 .
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                      .

Commission file number: 001-33757
_____________________________

THE ENSIGN GROUP, INC .
(Exact Name of Registrant as Specified in Its Charter)

Delaware 33-0861263
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

29222 Rancho Viejo Road, Suite 127
San Juan Capistrano , CA 92675
(Address of Principal Executive Offices and Zip Code)

( 949 )  487-9500
(Registrant’s Telephone Number, Including Area Code)
_____________________________
Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share ENSG NASDAQ Global Select Market

Indicate by check mark:

whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ☐ No
whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ☐ No
whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer þ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Yes ☐ No

whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

As of July 23, 2026, 58,282,434 shares of the registrant’s common stock, $0.001 par value, were outstanding.

Table of Contents

THE ENSIGN GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026
TABLE OF CONTENTS

PART I. Financial Information
Pg.
Item 1. Financial Statements (unaudited):

Condensed Consolidated Balance Sheets as of June 3 0 , 2026 and December 31, 202 5
1

Condensed Consolidated Statements of Income for the three and six months ended June 3 0 , 2026 and 202 5
2

Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 3 0 , 2026 and 202 5
3

Condensed Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2026 and 202 5
5

Notes to the Condensed Consolidated Financial Statements
7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
30

Item 3. Quantitative and Qualitative Disclosures About Market Risk
73

Item 4. Controls and Procedures
74

P ART II. Other Information

Item 1. Legal Proceedings
74

Item 1A. Risk Factors
77

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
109

Item 5. Other Information
110

Item 6. Exhibits
111

Signatures

Table of Contents

PART I.

Item 1.     FINANCIAL STATEMENTS

THE ENSIGN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)

June 30, 2026 December 31, 2025

ASSETS    
Current assets:    
Cash and cash equivalents $ 262,300   $ 503,881  
Accounts receivable—less allowance for doubtful accounts of $ 7,895 and $ 7,805 at June 30, 2026 and December 31, 2025, respectively
668,902   636,985  

Investments—current 58,544   68,506  

Prepaid expenses and other current assets 81,742   62,932  

Total current assets $ 1,071,488   $ 1,272,304  
Property and equipment, net 2,096,977   1,696,863  
Right-of-use assets 2,143,787   2,097,862  
Insurance subsidiary deposits and investments 210,077   166,841  

Deferred tax assets 83,068   83,138  
Restricted and other assets 39,755   41,600  
Intangible assets, net 6,263   6,381  
Goodwill 97,981   97,981  

TOTAL ASSETS $ 5,749,396   $ 5,462,970  
LIABILITIES AND EQUITY    
Current liabilities:    
Accounts payable $ 119,675   $ 97,327  

Accrued wages and related liabilities 368,817   422,326  
Lease liabilities—current 121,117   114,816  
Accrued self-insurance liabilities—current 100,007   81,623  

Other accrued liabilities 171,001   174,027  
Current maturities of long-term debt 4,182   4,227  

Total current liabilities $ 884,799   $ 894,346  

Long-term lease liabilities—less current portion 1,989,485   1,949,213  
Accrued self-insurance liabilities—less current portion 195,813   164,792  
Other long-term liabilities 98,428   82,266  
Long-term debt—less current maturities 135,562   137,529  

TOTAL LIABILITIES $ 3,304,087   $ 3,228,146  

Commitments and contingencies (Notes 13 and 18)

EQUITY    
Ensign Group, Inc. stockholders' equity:
Common stock: $ 0.001 par value; 150,000 shares authorized; 62,102 and 58,272 shares issued and shares outstanding at June 30, 2026, respectively, and 61,652 and 58,085 shares issued and shares outstanding at December 31, 2025, respectively
62   62  
Additional paid-in capital 673,846   614,724  
Retained earnings 1,947,958   1,756,137  
Treasury stock, at cost, 3,830 and 3,567 shares at June 30, 2026 and December 31, 2025
( 180,178 ) ( 139,198 )
Total Ensign Group, Inc. stockholders' equity $ 2,441,688   $ 2,231,725  
Non-controlling interest 3,621   3,099  
Total equity $ 2,445,309   $ 2,234,824  
TOTAL LIABILITIES AND EQUITY $ 5,749,396   $ 5,462,970  

See accompanying notes to the 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,
  2026 2025 2026 2025

(In thousands, except per share data)
REVENUE
Service revenue $ 1,432,497   $ 1,221,414   $ 2,814,800   $ 2,388,454  
Rental revenue 7,984   6,355   14,877   12,356  
TOTAL REVENUE $ 1,440,481   $ 1,227,769   $ 2,829,677   $ 2,400,810  

Expense:
Cost of services 1,134,237   971,780   2,230,063   1,899,629  

Rent—cost of services 66,412   57,195   131,918   114,271  
General and administrative expense 85,922   69,107   160,132   131,662  
Depreciation and amortization 31,406   25,785   60,207   49,973  
TOTAL EXPENSES $ 1,317,977   $ 1,123,867   $ 2,582,320   $ 2,195,535  
Income from operations 122,504   103,902   247,357   205,275  
Other income (expense):
Interest expense ( 1,933 ) ( 2,025 ) ( 3,865 ) ( 4,062 )
Interest income 4,633   5,240   11,169   12,123  
Other income 8,470   5,241   7,585   5,602  
OTHER INCOME, NET
$ 11,170   $ 8,456   $ 14,889   $ 13,663  
Income before provision for income taxes 133,674   112,358   262,246   218,938  
Provision for income taxes 33,840   27,892   62,656   54,119  

NET INCOME $ 99,834   $ 84,466   $ 199,590   $ 164,819  
Less:

Net income attributable to noncontrolling interests 96   70   184   146  
NET INCOME ATTRIBUTABLE TO THE ENSIGN GROUP, INC.
$ 99,738   $ 84,396   $ 199,406   $ 164,673  

NET INCOME PER SHARE ATTRIBUTABLE TO THE ENSIGN GROUP INC.

Basic $ 1.72   $ 1.48   $ 3.45   $ 2.88  

Diluted $ 1.68   $ 1.44   $ 3.35   $ 2.81  
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 57,958   57,157   57,865   57,128  
Diluted 59,483   58,602   59,527   58,560  

See accompanying notes to the condensed consolidated financial statements.
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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, 2026 58,085   $ 62   $ 614,724   $ 1,756,137   3,567   $ ( 139,198 ) $ 3,099   $ 2,234,824  
Issuance of common stock to employees and directors resulting from the exercise of stock options 188   —  11,490   —  —  —  —  11,490  
Issuance of restricted stock, net of forfeitures 150   —  13,555   —  —  —  —  13,555  
Shares of common stock used to satisfy tax withholding obligations —  —  —  —  —  ( 23 ) —  ( 23 )
Dividends declared ($ 0.0650 per share)
—  —  —  ( 3,797 ) —  —  —  ( 3,797 )
Employee stock award compensation —  —  13,693   —  —  —  —  13,693  

Net income attributable to noncontrolling interest —  —  —  —  —  —  88   88  
Noncontrolling interests attributable to subsidiary equity plan —  —  ( 61 ) —  —  —  260   199  
Net income attributable to the Ensign Group, Inc. —  —  —  99,668   —  —  —  99,668  
BALANCE - MARCH 31, 2026 58,423   $ 62   $ 653,401   $ 1,852,008   3,567   $ ( 139,221 ) $ 3,447   $ 2,369,697  
Issuance of common stock to employees and directors resulting from the exercise of stock options 66   —  4,384   —  —  —  —  4,384  
Issuance of restricted stock, net of forfeitures 46   —  —  —  —  —  —  — 
Shares of common stock used to satisfy tax withholding obligations ( 6 ) —  —  —  6   ( 957 ) —  ( 957 )
Dividends declared ($ 0.0650 per share)
—  —  —  ( 3,788 ) —  —  —  ( 3,788 )
Employee stock award compensation —  —  15,962   —  —  —  —  15,962  
Repurchase of common stock (Note 19)
( 257 ) —  —  —  257   ( 40,000 ) —  ( 40,000 )

Net income attributable to noncontrolling interest —  —  —  —  —  —  96   96  
Noncontrolling interests attributable to subsidiary equity plan —  —  99   —  —  —  78   177  
Net income attributable to the Ensign Group, Inc. —  —  —  99,738   —  —  —  99,738  
BALANCE - JUNE 30, 2026 58,272   $ 62   $ 673,846   $ 1,947,958   3,830   $ ( 180,178 ) $ 3,621   $ 2,445,309  

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  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 19)
( 84 ) —  —  —  84   ( 10,775 ) —  ( 10,775 )

Net income attributable to noncontrolling interest —  —  —  —  —  —  76   76  
Noncontrolling interests attributable to subsidiary equity plan —  —  71   —  —  —  ( 53 ) 18  
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 19)
( 73 ) —  —  —  73   ( 9,225 ) —  ( 9,225 )

Net income attributable to noncontrolling interest —  —  —  —  —  —  70   70  
Noncontrolling interests attributable to subsidiary equity plan —  —  53   —  —  —  ( 86 ) ( 33 )
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  

See accompanying notes to the condensed consolidated financial statements.
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THE ENSIGN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,
(In thousands) 2026 2025
Cash flows from operating activities:    
Net income $ 199,590   $ 164,819  

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 60,207   49,973  

Amortization of deferred financing fees 527   530  

Stock-based compensation 30,061   22,386  

Insurance proceeds and loss on long-lived assets 2,455   402  

Other operating activities, net 1,744   1,279  
Change in operating assets and liabilities  
Accounts receivable ( 29,618 ) ( 9,025 )
Prepaid income taxes ( 17,943 ) ( 10,453 )
Prepaid expenses and other assets 614   ( 469 )

Cash surrender value of life insurance policy premiums ( 16,485 ) ( 12,295 )
Deferred compensation liability 16,124   12,162  
Operating lease obligations ( 200 ) ( 3,169 )
Accounts payable 20,578   4,952  
Accrued wages and related liabilities ( 39,407 ) ( 17,523 )

Other accrued liabilities ( 4,100 ) 1,817  
Accrued self-insurance liabilities 47,961   22,564  

NET CASH PROVIDED BY OPERATING ACTIVITIES
$ 272,108   $ 227,950  

Cash flows from investing activities:    
Purchase of property and equipment ( 88,301 ) ( 92,521 )
Cash payments for acquisitions ( 375,983 ) ( 213,611 )

Cash proceeds from insurance recoveries and sale of assets 1,692   2,990  

Purchases of investments ( 61,511 ) ( 62,678 )
Maturities of investments 44,722   53,249  

Other investing activities 488   647  
NET CASH USED IN INVESTING ACTIVITIES
$ ( 478,893 ) $ ( 311,924 )

Cash flows from financing activities:    

Payments on debt ( 2,094 ) ( 2,025 )

Issuance of common stock upon exercise of options 15,874   13,702  
Repurchase of shares of common stock to satisfy tax withholding obligations ( 980 ) ( 1,071 )

Repurchase of shares of common stock (Note 19)
( 40,000 ) ( 20,000 )
Dividends paid ( 7,572 ) ( 7,186 )

Other financing activities ( 24 ) ( 75 )

NET CASH USED IN FINANCING ACTIVITIES
$ ( 34,796 ) $ ( 16,655 )

Net decrease in cash and cash equivalents ( 241,581 ) ( 100,629 )
Cash and cash equivalents beginning of period 503,881   464,598  
Cash and cash equivalents end of period $ 262,300   $ 363,969  

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Six Months Ended June 30,
(In thousands) 2026 2025
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    

Cash paid during the period for:    
Interest $ 3,327   $ 3,567  
Income taxes 81,217   64,621  
Lease liabilities 133,064   117,256  
Non-cash financing and investing activity  
Accrued capital expenditures $ 10,870   $ 6,800  
Accrued dividends declared 3,788   3,605  

Right-of-use assets obtained in exchange for new and modified operating lease obligations 106,727   113,553  

See accompanying notes to the condensed consolidated financial statements.
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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, 2026, the Company's independent subsidiaries operated 396 facilities and other ancillary operations located in 17 states. The Company's independent subsidiaries have a collective capacity of approximately 40,700 operational skilled nursing beds and 3,400 senior living units.
As of June 30, 2026, the Company's independent subsidiaries operated 254 facilities under long-term lease arrangements and had options to purchase eight of those 254 facilities. The Company's real estate portfolio consists of 181 owned real estate properties, which includes 142 facilities operated and managed by the Company's independent subsidiaries, 39 operations leased to and operated by third-party operators and the Service Center (defined below) location. Of those 39 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.
During the six months ended June 30, 2026, the Company expanded its presence with the addition of 21 stand-alone skilled nursing operations and two campus operations in four states . These new operations added a total of 2,724 operational skilled nursing beds and 135 operational senior living units to be operated by the Company's independent subsidiaries.
Subsequent to June 30, 2026, the Company expanded its presence with the addition of two stand-alone skilled nursing operations in Texas, and these new operations will add 250 operational skilled nursing beds to be operated by the Company's independent subsidiaries.
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.
To support its growth efforts and operational needs, the Company maintains a centralized support structure through its Service Center and captive insurance subsidiary, which provide essential services and risk management to its wholly-owned independent subsidiaries. Certain of the Company’s wholly-owned independent subsidiaries, collectively referred to as the Service Center, provide specific accounting, payroll, human resources, compliance, 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.
Each of the Company's wholly-owned independent subsidiaries has its 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, 2026 and for the three and six months ended June 30, 2026 and 2025 (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, 2025, 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.

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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.
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. Certain amounts in the prior period statements of cash flows have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on previously reported net income.
Recent Accounting Pronouncements — Except for rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws and a limited number of grandfathered standards, the FASB ASC is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. For any new pronouncements announced, the Company considers whether the new pronouncement could alter previous generally accepted accounting principles and determines whether any new or modified principles will have a material impact on the Company's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company's financial management and certain standards are under consideration.
Recently Issued Accounting Pronouncements Not Yet Adopted — 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 annual 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.
In September 2025, the FASB issued ASU 2025-06 " Targeted Improvements to the Accounting for Internal-Use Software ," which amends the accounting for and disclosure of software costs under the existing standards. The amendments clarify the requirement for capitalizing software costs. ASU 2025-06 is effective beginning with the Company's fiscal year 2028 for both interim and annual periods, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its 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.

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 68.9 % and 69.0 % of the three and six months ended June 30, 2026, and 69.8 % and 69.6 % for the three and six months ended June 30, 2025, respectively. Settlements with Medicare, Medicaid and managed care 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, 2026 and 2025.

Service revenue for the three and six months ended June 30, 2026 and 2025 is summarized in the following tables:

  Three Months Ended June 30,
2026 2025
Revenue % of Revenue Revenue % of Revenue
Medicaid (1)
$ 566,819   39.6   % $ 485,848   39.8   %
Medicare 339,650   23.7   291,117   23.8  
Medicaid-skilled 80,664   5.6   75,207   6.2  
Total Medicaid and Medicare $ 987,133   68.9   % $ 852,172   69.8   %
Managed care 265,348   18.5   229,495   18.8  
Private and other (2)
180,016   12.6   139,747   11.4  
SERVICE REVENUE $ 1,432,497   100.0   % $ 1,221,414   100.0   %
(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.

  Six Months Ended June 30,
2026 2025
Revenue % of Revenue Revenue % of Revenue
Medicaid (1)
$ 1,110,269   39.4   % $ 939,688   39.3   %
Medicare 675,479   24.0   578,868   24.2  
Medicaid-skilled
155,902   5.6   144,758   6.1  
Total Medicaid and Medicare
$ 1,941,650   69.0   % $ 1,663,314   69.6   %
Managed care 526,199   18.7   456,712   19.1  
Private and other (2)
346,951   12.3   268,428   11.3  
SERVICE REVENUE $ 2,814,800   100.0   % $ 2,388,454   100.0   %
(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), 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 is $ 7,984 and $ 14,877 for the three and six months ended June 30, 2026, respectively, and $ 6,355 and $ 12,356 , for the three and six months ended June 30, 2025, respectively.

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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, 2026 and December 31, 2025, and no material contracts occurred during the three and six months ended June 30, 2026 and 2025.

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, 2026 and December 31, 2025, is summarized in the following table:

June 30, 2026 December 31, 2025

Medicaid $ 303,348   $ 296,649  
Managed care 176,273   163,463  
Medicare 109,306   102,693  
Private and other payors 87,870   81,985  
  $ 676,797   $ 644,790  
Less: allowance for doubtful accounts ( 7,895 ) ( 7,805 )
ACCOUNTS RECEIVABLE, NET $ 668,902   $ 636,985  

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,
  2026 2025 2026 2025
NUMERATOR:    
Net income $ 99,834   $ 84,466   $ 199,590   $ 164,819  
Less: net income attributable to noncontrolling interests 96   70   184   146  
Net income attributable to The Ensign Group, Inc. $ 99,738   $ 84,396   $ 199,406   $ 164,673  

DENOMINATOR:  
Weighted average shares outstanding
57,958   57,157   57,865   57,128  

Basic net income per common share: $ 1.72   $ 1.48   $ 3.45   $ 2.88  

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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,
  2026 2025 2026 2025
NUMERATOR:    
Net income $ 99,834   $ 84,466   $ 199,590   $ 164,819  
Less: net income attributable to noncontrolling interests 96   70   184   146  
Net income attributable to The Ensign Group, Inc. $ 99,738   $ 84,396   $ 199,406   $ 164,673  

DENOMINATOR:    
Weighted average common shares outstanding 57,958   57,157   57,865   57,128  
Plus: incremental shares from assumed conversion (1)
1,525   1,445   1,662   1,432  
Adjusted weighted average common shares outstanding 59,483   58,602   59,527   58,560  

Diluted net income per common share: $ 1.68   $ 1.44   $ 3.35   $ 2.81  

(1) Options and restricted stock awards outstanding that were anti-dilutive and therefore excluded from the calculation of weighted average common shares outstanding were 1,377 and 1,192 for the three and six months ended June 30, 2026, respectively, and 920 and 855 for the three and six months ended June 30, 2025, respectivel y.

5. FAIR VALUE MEASUREMENTS

The Company's financial assets include held-to-maturity investments carried at amortized cost basis of $ 165,982 and $ 150,119 , of which $ 103,900 and $ 81,816 are designated to support insurance subsidiary liabilities, as of June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026 and December 31, 2025, the amortized cost basis of these financial assets is considered to approximate fair value and is derived using Level 2 inputs. The Company believes its amortized cost basis investments that were in an unrealized loss position as of June 30, 2026 and December 31, 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.
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, 2026 and December 31, 2025, the fair value of the investment funds was $ 90,890 and $ 74,405 , respectively, which are derived using Level 2 inputs. Refer to Note 16, Defined Contribution Plans for more information.
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 175 of the Company's 181 owned real estate properties, of which 138 are operated and managed by the Company's independent subsidiaries and 38 are leased to and operated by third-party operators. Of those 38 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, 2026, Standard Bearer added $ 374,645 of real estate assets associated with 18 stand-alone skilled nursing operations, three stand-alone senior living operations and two campus operations. Of these additions, three stand-alone senior living operations are leased to a third-party operator and the remaining additions are operated by the Company's independent subsidiaries.
Subsequent to June 30, 2026, Standard Bearer added approximately $ 36,000 real estate assets associated with two stand-alone skilled nursing operations to be operated by the Company's independent subsidiaries.
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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 these additions were related to the exercise of 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.
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 7, 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 138 Standard Bearer independent real estate subsidiaries have entered into 10 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 $ 37,785 and $ 68,617 for the three and six months ended June 30, 2026, respectively and $ 26,756 and $ 50,660 for the three and six months ended June 30, 2025, respectively.
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, 2026 were $ 2,646 and $ 4,809 , respectively. Management fees generated between Standard Bearer and the Service Center for the three and six months ended June 30, 2025 were $ 1,883 and $ 3,575 , 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 13, 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, 2026 and 2025, the Company did not grant any stock options or restricted shares under the Standard Bearer Equity Plan. During the six months ended June 30, 2026 and 2025, no restricted stock awards vested during either period.
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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, 2026 and 2025, share-based compensation expense under the Standard Bearer Equity Plan was not material.

7. 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, 2026, the skilled services segment includes 348 skilled nursing and 32 campus operations that provide both skilled nursing and rehabilitative care services and senior living services. The Company's Standard Bearer segment consists of 175 owned real estate properties.
The Company also reports an “All Other” category that includes results from its senior living operations, which includes 16 stand-alone senior living operations and the senior living operations at 32 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.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following tables set forth financial information for the segments:

  Three Months Ended June 30, 2026
  Skilled Services Standard Bearer Total
Service revenue (1)
$ 1,379,912   $ —   $ 1,379,912  
Rental revenue —   44,133   44,133  
Segment revenue $ 1,379,912   $ 44,133   $ 1,424,045  

Reconciliation of revenue:

All other revenue (2)
64,268  
Elimination of intercompany revenue (3)
( 47,832 )
TOTAL CONSOLIDATED REVENUE
$ 1,440,481  
Less:

Other segment items (4)
1,184,846   3,621  
Depreciation and amortization 15,445   12,676  
Interest expense (5)
—   15,766  
Segment income
$ 179,621   $ 12,070   $ 191,691  

Reconciliation of profit or loss:

All other not included in segment income
( 58,017 )

INCOME BEFORE PROVISION FOR INCOME TAXES $ 133,674  

(1) Skilled services service revenue does not include intercompany service revenue generated by ancillary operations provided to the Company's independent subsidiaries or management service revenue generated by the Service Center for services provided to Standard Bearer. Intercompany service revenue is eliminated in "Elimination of intercompany revenue".
(2) All other revenue includes $ 61,053 of service revenue and $ 3,215 of rental revenue for the three months ended June 30, 2026, 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 $ 39,364 and intercompany service revenue of $ 8,468 for the three months ended June 30, 2026.
(4) Other segment items include cost of services of $ 1,089,109 and rent expense of $ 95,737 for the skilled services segment and cost of services of $ 500 , rent expense of $ 346 and general and administrative expenses of $ 2,775 for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 47,832 during the three months ended June 30, 2026, 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 $ 14,149 during the three months ended June 30, 2026, which is eliminated in consolidation.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

  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 or management service revenue generated by the Service Center for services provided to 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 of $ 932,823 and rent expense of $ 76,999 for the skilled services segment and cost of services of $ 472 , rent expense of $ 270 and general and administrative expenses of $ 2,024 for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 34,607 during the three months ended June 30, 2025, 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 $ 9,023 during the three months ended June 30, 2025, which is eliminated in consolidation.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

  Six Months Ended June 30, 2026
  Skilled Services Standard Bearer Total

Service revenue (1)
$ 2,710,747   $ —   $ 2,710,747  
Rental revenue
—   80,235   80,235  
Segment revenue
$ 2,710,747   $ 80,235   $ 2,790,982  

Reconciliation of revenue:

All other revenue (2)
126,524  
Elimination of intercompany revenue (3)
( 87,829 )
TOTAL CONSOLIDATED REVENUE
$ 2,829,677  
Less:

Other segment items (4)
2,326,354   6,743  
Depreciation and amortization 30,755   23,459  
Interest expense (5)
—   27,154  
Segment income
$ 353,638   $ 22,879   $ 376,517  

Reconciliation of profit or loss:

All other not included in segment income
( 114,271 )

INCOME BEFORE PROVISION FOR INCOME TAXES
$ 262,246  

(1) Skilled services service revenue does not include intercompany service revenue generated by ancillary operations provided to the Company's independent subsidiaries or management service revenue generated by the Service Center for services provided to Standard Bearer. Intercompany service revenue is eliminated in "Elimination of intercompany revenue".
(2) All other revenue includes $ 120,114 of service revenue and $ 6,410 of rental revenue for the six months ended June 30, 2026, 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 $ 71,768 and intercompany service revenue of $ 16,061 for the six months ended June 30, 2026.
(4) Other segment items includes cost of services of $ 2,141,833 and rent expense of $ 184,521 for the skilled services segment and cost of services of $ 1,125 , rent expense of $ 611 and general and administrative expenses of $ 5,007 for the Standard Bearer segment. Additionally, there are intercompany expenses of $ 87,829 during the six months ended June 30, 2026, 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 $ 23,916 during the six months ended June 30, 2026, which is eliminated in consolidation.

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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 or management service revenue generated by the Service Center for services provided to 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 of $ 1,824,678 and rent expense of $ 151,554 for the skilled services segment and cost of services of $ 1,070 , rent expense of $ 527 and general and administrative expenses of $ 3,775 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.

Service revenue by major payor source were as follows:

  Three Months Ended June 30, 2026
  Skilled Services All Other (3)
Total Service Revenue Revenue %
Medicaid (1)
$ 552,588   $ 14,231   $ 566,819   39.6   %
Medicare 339,650   —   339,650   23.7  
Medicaid-skilled 80,664   —   80,664   5.6  
Subtotal $ 972,902   $ 14,231   $ 987,133   68.9   %
Managed care 265,348   —   265,348   18.5  
Private and other (2)
141,662   38,354   180,016   12.6  
TOTAL SERVICE REVENUE $ 1,379,912   $ 52,585   $ 1,432,497   100.0   %

(1) Medicaid payor includes revenue generated from senior living operations.
(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.
(3) All Other incorporates intercompany eliminations.

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

  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   %

(1) Medicaid payor includes revenue generated from senior living operations.
(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.
(3) All Other incorporates intercompany eliminations.

  Six Months Ended June 30, 2026
  Skilled Services All Other (3)
Total Service Revenue Revenue %
Medicaid (1)
$ 1,081,921   $ 28,348   $ 1,110,269   39.4   %
Medicare 675,479   —   675,479   24.0  
Medicaid-skilled
155,902   —   155,902   5.6  
Total Medicaid and Medicare
$ 1,913,302   $ 28,348   $ 1,941,650   69.0   %
Managed care 526,199   —   526,199   18.7  
Private and other (2)
271,246   75,705   346,951   12.3  
TOTAL SERVICE REVENUE $ 2,710,747   $ 104,053   $ 2,814,800   100.0   %
( 1) Medicaid payor includes revenue generated from senior living operations.
(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.
(3) All Other incorporates intercompany eliminations.

  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  
Total Medicaid and Medicare
$ 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   %

(1) Medicaid payor includes revenue generated from senior living operations.
(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.
(3) All Other incorporates intercompany eliminations.

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8.  PROPERTY AND EQUIPMENT - NET
Property and equipment, net consists of the following:
June 30, 2026 December 31, 2025

Land $ 257,995   $ 219,857  
Buildings and improvements 1,602,352   1,231,704  
Leasehold improvements 279,397   254,309  
Equipment 532,026   478,729  
Furniture and fixtures 5,161   4,588  
Construction in progress 30,491   58,615  

  $ 2,707,422   $ 2,247,802  
Less: accumulated depreciation ( 610,445 ) ( 550,939 )
PROPERTY AND EQUIPMENT, NET $ 2,096,977   $ 1,696,863  

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 aggregate purchase price for the real estate purchases during the six months ended June 30, 2026 was $ 375,263 , which primarily consists of building and improveme nts of $ 326,417 and land of $ 38,138 . The aggregate purchase price for the real estate purchases during the six months ended June 30, 2025 was $ 204,609 , which primarily consists of building and improvements of $ 162,806 and land of $ 37,493 .
Subsequent to June 30, 2026, the Company, through Standard Bearer, added approximately $ 36,000 real estate assets associated with two stand-alone skilled nursing operations to be operated by the Company's independent subsidiaries.

9.  INTANGIBLE ASSETS - NET

  June 30, 2026 December 31, 2025

Weighted Average Life (Years)
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Intangible Assets Net Net

Facility trade name 30.0 733   ( 499 ) 234   733   ( 486 ) 247  
Customer relationships 18.4 4,582   ( 3,219 ) 1,363   4,582   ( 3,114 ) 1,468  
TOTAL   $ 5,315   $ ( 3,718 ) $ 1,597   $ 5,315   $ ( 3,600 ) $ 1,715  

Estimated amortization expense for each of the years ending December 31 is as follows:
Year Amount
2026 (remainder) $ 120  
2027 238  
2028 238  
2029 238  
2030 238  
2031 238  
Thereafter 287  
  $ 1,597  

Other indefinite-lived intangible assets consist of the following:

June 30, 2026 December 31, 2025

Trade name $ 889   $ 889  
Medicare and Medicaid licenses 3,777   3,777  
TOTAL $ 4,666   $ 4,666  

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10. 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 six months ended June 30, 2026. The Company anticipates that the majority of goodwill recognized will be fully deductible for tax purposes as of June 30, 2026. There were no activities in goodwill during the six months ended June 30, 2026. The following table represents goodwill value by the skilled services segment and "all other" category for June 30, 2026 and December 31, 2025:

  Skilled Services All Other Total

Goodwill $ 88,626   $ 9,355   $ 97,981  

11.  OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:
June 30, 2026 December 31, 2025

Quality assurance fee $ 15,121   $ 17,398  
Refunds, deferred revenue and advances
100,006   105,642  

Cash held in trust for patients 8,592   8,653  

Dividends payable 3,788   3,775  
Property taxes 14,418   7,150  
Income tax payable
—   818  
Accrued litigation (Note 18)
12,000   12,000  

Other 17,076   18,591  
OTHER ACCRUED LIABILITIES $ 171,001   $ 174,027  

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 consist 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.

12. INCOME TAXES
The Company recorded income tax expense of $ 62,656 and $ 54,119 during the six months ended June 30, 2026 and 2025, respectively, or 23.9 % of earnings before income taxes for the six months ended June 30, 2026, compared to 24.7 % for the six months ended June 30, 2025. 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 2026, the statutes of limitations will lapse on the Company's 2022 federal tax year and certain 2021 and 2022 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, 2026 and 2025.
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13. DEBT
Debt consists of the following:

June 30, 2026 December 31, 2025

Mortgage loans and promissory note $ 142,258   $ 144,352  

Less: current maturities ( 4,182 ) ( 4,227 )
Less: debt issuance costs, net ( 2,514 ) ( 2,596 )
LONG-TERM DEBT LESS CURRENT MATURITIES $ 135,562   $ 137,529  

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, 2026, there was no outstanding debt under the Credit Facility. The Company was in compliance with all loan covenants as of June 30, 2026.
Mortgage Loans and Promissory Note

As of June 30, 2026, the Company has 23 subsidiaries that have mortgage loans insured with HUD in the aggregate amount of $ 141,686 , 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 $ 572 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, 2026 and December 31, 2025, the Company had approximately $ 8,402 of borrowing capacity under the Credit Facility pledged as collateral to secure outstanding letters of credit. The Company believes that its outstanding letters of credit as of June 30, 2026 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.
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14. OPTIONS AND AWARDS

Stock-based compensation expense consists of stock-based payment awards made to employees and directors, including employee stock options, restricted stock awards and performance stock units (PSUs) 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, 2026 and 2025 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 grants equity awards under the Amended and Restated 2022 Omnibus Incentive Plan (the Amended and Restated Plan), the amendment and restatement of which was approved by the Company’s stockholders during the second quarter of 2025. There are 4,231 shares of common stock available for issuance under the Amended and Restated Plan, and the number of shares available for issuance is reduced by one share for each share subject to an option or stock appreciation right award and by two shares for each share subject to an award other than an option or stock appreciation right. At June 30, 2026, 2,425 shares remained available for future issuance under the Amended and Restated Plan.

Non-employee director stock options, to the extent granted, vest and become exercisable in three equal annual installments, or over the term of the award if less than three years , subject to continued service from the grant date through the date of vesting. All other stock options generally vest over five years at a rate of 20 % per year on each anniversary of the grant date. Stock options expire ten years from the grant date.
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.
Stock Options
The Company used the following assumptions for stock options granted during the three months ended June 30, 2026 and 2025:

Grant Year Options Granted Weighted Average Risk-Free Rate Expected Life Weighted Average Volatility Weighted Average Dividend Yield
2026 197 4.2 % 6.2 years 37.9 % 0.1 %
2025 175 4.2 % 6.2 years 39.1 % 0.2 %

The Company used the following assumptions for stock options granted during the six months ended June 30, 2026 and 2025:

Grant Year Options Granted Weighted Average Risk-Free Rate Expected Life Weighted Average Volatility Weighted Average Dividend Yield
2026 509 3.9 % 6.2 years 38.2 % 0.1 %
2025 327 4.2 % 6.2 years 39.4 % 0.2 %

For the six months ended June 30, 2026 and 2025, 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
2026 509 $ 199.28   $ 87.28  
2025 327 $ 137.42   $ 61.71  

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, 2026 and 2025 and therefore, the intrinsic value was $ 0 at the date of grant.

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THE ENSIGN GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table represents the employee stock option activity during the six months ended June 30, 2026:

Number of Options Outstanding Weighted Average
Exercise Price Number of
Options Vested Weighted Average Exercise Price of Options Vested

January 1, 2026 4,071   $ 96.87   1,991   $ 67.10  
Granted 509   199.28  
Forfeited ( 43 ) 127.12  
Exercised ( 254 ) 62.45  
June 30, 2026 4,283   $ 110.77   2,042   $ 73.22  

The aggregate intrinsic value of options outstanding, vested, expected to vest and exercised as of June 30, 2026 and December 31, 2025 is as follows:

Options June 30, 2026 December 31, 2025

Outstanding $ 239,432   $ 317,984  
Vested 177,815   213,189  
Expected to vest 58,481   98,487  

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, 2026 and 2025 was $ 17,267 and $ 22,121 , respectively. The total intrinsic value of options exercised during the six months ended June 30, 2026 and 2025 was $ 33,869 and $ 24,957 , respectively.
Restricted Stock Awards
The Company granted 50 and 205 restricted stock awards during the three and six months ended June 30, 2026, respectively. The Company granted 42 and 134 restricted stock awards during the three and six months ended June 30, 2025, 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, 2026 and 2025 ranged from $ 178.00 to $ 212.65 and $ 126.34 to $ 147.04 , respectively. The fair value per share includes quarterly stock awards to non-employee directors. Included in the restricted stock award grants are $ 13,555 and $ 8,003 of annual bonuses that were settled in vested restricted stock awards during the six months ended June 30, 2026 and 2025, respectively.
A summary of the status of the Company's non-vested restricted stock awards as of June 30, 2026 and changes during the six months ended June 30, 2026 is presented below:

Non-Vested Restricted Awards Weighted Average Grant Date Fair Value

Nonvested at January 1, 2026 436   $ 129.54  
Granted 205   203.09  
Vested ( 142 ) 156.12  
Forfeited ( 9 ) 123.94  
Nonvested at June 30, 2026
490   $ 152.85  

During the three and six months ended June 30, 2026, the Company granted four and seven automatic quarterly stock awards to non-employee directors for their service on the Company's board of directors. The fair value per share of these stock award s ranged from $ 183.54 to $ 197.92 based on the market price on the grant date.
Performance Stock Units
PSU awards are granted to certain employees and vest based on the achievement of specified Company performance objectives over a designated performance period. During the three months ended June 30, 2026, the Company granted 54 PSU awards with a grant date fair values ranging from $ 169.70 to $ 257.70 per share. PSU awards are subject to a three-year cliff vesting schedule and the ultimate number of shares granted may range from 0 to 2.5 times the target number of awards based on the Company's achievement of earnings and shareholder returns. Compensation expense is recognized over the requisite service period based on the estimated number of awards expected to vest.
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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, 2026 and 2025 was as follows:

Three Months Ended June 30, Six Months Ended June 30,
  2026 2025 2026 2025
Stock-based compensation expense related to stock options $ 9,456   $ 7,402   $ 18,108   $ 14,207  
Stock-based compensation expense related to restricted stock awards 4,727   3,761   9,107   7,163  
Stock-based compensation expense related to restricted stock awards to non-employee directors
713   465   1,374   949  
Stock-based compensation expense related to performance stock units 1,066   —   1,066   —  
TOTAL $ 15,962   $ 11,628   $ 29,655   $ 22,319  

In future periods, the Company expects to recognize approximately $ 126,656 , $ 65,928 and $ 10,450 in stock-based compensation expense for unvested options, restricted stock awards and performance stock units, respectively, that were outstanding as of June 30, 2026. Future stock-based compensation expense will be recognized over 3.8 , 3.9 and 2.1 weighted average years for unvested options, restricted stock awards and performance stock units, respectively. There were 2,241 unvested and outstanding options as of June 30, 2026, of which 2,068 options are expected to vest. The weighted average contractual life for options outstanding, vested and expected to vest as of June 30, 2026 was  6.7 years.

15. LEASES
The Company leases real property associated with 103 independent skilled nursing and senior living facilities under eight triple‑net master lease agreements with CareTrust REIT, Inc. (collectively, the Master Leases). The Master Leases have initial terms ranging from 13 to 20 years and include two or three five‑year renewal options at the Company’s election, subject to customary conditions. 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 such Master Lease.
The Master Leases are non‑cancelable prior to expiration without the consent of CareTrust. Rent consists of a fixed base amount subject to annual escalation equal to the lesser of 2.5 % or the percentage change in the Consumer Price Index (not less than zero ). As triple‑net leases, the Company is responsible for substantially all property‑level operating costs, including taxes, insurance, utilities, and maintenance. Total rent expense under the Master Leases was approximately $ 19,755 and $ 39,386 for the three and six months ended June 30, 2026, respectively, and $ 16,904 and $ 34,030 for the three and six months ended June 30, 2025, respectively.
The Master Leases require the Company to comply with certain financial covenants, including portfolio coverage and minimum rent coverage ratios, as well as customary reporting and other requirements. The Company was in compliance with all such requirements as of June 30, 2026.
The Company leases facilities where its independent subsidiaries operate under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years. Most of these leases contain renewal options, certain of which involve rent increases.
The Company's 104 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases with CareTrust, are operated under 19 separate master lease arrangements. 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 an event of 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.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The components of operating lease expense are as follows:

Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Rent - cost of services (1)
$ 66,412   $ 57,195   $ 131,918   $ 114,271  
Cost of services (2)
7,922   6,611   14,901   13,040  
General and administrative expense 275   214   495   413  

$ 74,609   $ 64,020   $ 147,314   $ 127,724  

(1) Rent - cost of services includes deferred rent expense adju stments of $ 255 and $ 576 for the three and six months ended June 30, 2026, respectively, and $ 199 and $ 407 for the three and six months ended June 30, 2025, respectively. Additionally, rent - cost of services includes other variable lease costs such as consumer price index increases and short-term leases of $ 5,127 and $ 10,258 for the three and six months ended June 30, 2026, respectively, and $ 4,634 and $ 8,638 for the three and six months ended June 30, 2025, respectively.
(2) Cost of services includes variable lease costs consisting of property taxes and insurance.

Future minimum lease payments for all third-party leases as of June 30, 2026 are as follows:

Year Amount
2026 (remainder) $ 122,703  
2027 245,198  
2028 244,213  
2029 239,030  
2030 233,671  
2031 223,098  
Thereafter 1,797,565  
TOTAL LEASE PAYMENTS $ 3,105,478  
Less: present value adjustment ( 994,876 )
PRESENT VALUE OF TOTAL LEASE LIABILITIES $ 2,110,602  
Less: current lease liabilities ( 121,117 )
LONG-TERM OPERATING LEASE LIABILITIES $ 1,989,485  

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, 2026, the weighted average remaining lease term is  13.7 years and the weighted average discount rate used to determine the operating lease liabilities is  6.1 %.
Lessor Activities

The Company leases 39 owned real estate properties to third‑party operators, including 35 senior living operations operated by The Pennant Group, Inc. (Pennant). All of the leases are triple‑net arrangements, under which the tenants are responsible for substantially all property‑level operating costs, including taxes, insurance, utilities, and maintenance. The initial terms range from 14 to 16 years.
During the three and six months ended June 30, 2026, the Company, through Standard Bearer, entered into three lease agreements with a third-party operator for three stand-alone senior living operations, each with initial lease terms of 15 years.
Total rental income from all third-party sources for the three and six months ended June 30, 2026 and 2025 is as follows:

Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Pennant (1)
$ 4,427   $ 4,082   $ 8,640   $ 8,204  
Other third-party (2)(3)
3,557   2,273   6,237   4,152  
TOTAL $ 7,984   $ 6,355   $ 14,877   $ 12,356  
(1) Pennant rental income includes variable rent such as property taxes of $ 321 and $ 633 during the three and six months ended June 30, 2026 and $ 270 and $ 580 for the three and six months ended June 30, 2025.
(2) Other third-party includes rental revenue associated with the Company's subleases to third parties of $ 1,144 and $ 2,279 for the three and six months ended June 30, 2026, and $ 1,116 and $ 2,223 for the three and six months ended June 30, 2025, respectively.
(3) For the three and six months ended June 30, 2026, other third-party revenue included $ 1,016 of rental income earned from acquired real estate properties during the period prior to their lease to the Company's independent operating subsidiaries.
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Future contractual minimum annual rental income for all third-party leases as of June 30, 2026 were as follows:

Year Amount

2026 (remainder) $ 14,647  
2027 28,719  
2028 28,269  
2029 28,148  
2030 27,072  
2031 27,052  
Thereafter 115,327  
TOTAL $ 269,234  

16. 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 highly compensated employees 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.

As of June 30, 2026 and December 31, 2025, the Company accrued $ 98,224 and $ 81,553 , 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, 2026, the Company recorded gains on its DCP of $ 7,640 and $ 5,946 , which is included in other income, net and recorded offsetting expense of $ 7,804 and $ 6,206 , respectively, which is allocated between cost of services and general and administrative expenses.

For the three and six months ended June 30, 2025, the Company recorded gains on its DCP of $ 4,482 and $ 4,200 , which is included in other income, net and recorded offsetting expenses of $ 4,578 and $ 4,344 , respectively, which is allocated between cost of services and general and administrative expenses.

17. 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 $ 3,950 . 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 $ 5,100 . 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.
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.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 2026.
The following table represents the Company's self-insurance liabilities, on an undiscounted basis, inclusive of anticipated insurance recoveries, as of June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

Accrued general liability and professional malpractice liabilities $ 222,192     $ 186,780  
Accrued workers’ compensation liabilities 47,605     42,121  
Accrued health benefits
26,023     17,514  

TOTAL SELF-INSURANCE LIABILITIES $ 295,820   $ 246,415  
Less: current self-insurance liabilities
100,007   81,623  
LONG-TERM SELF-INSURANCE LIABILITIES
$ 195,813   $ 164,792  

The anticipated insurance recoveries included in the self-insurance liabilities are presented gross rather than net with the corresponding asset of $ 18,587 and $ 17,143 , as of June 30, 2026 and December 31, 2025, 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.

18. COMMITMENTS AND CONTINGENCIES
Indemnities — From time to time, the independent subsidiaries of the Company enter into certain types of contracts that contingently require the affiliates 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.

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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" claims related to alleged violations of the False Claims Act (FCA) 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 and general business operations. These claims may come from a variety of governmental agencies, including but not limited to, the following federal agencies: U.S. Department of Health and Human Services (HHS), including the Centers for Disease Control and Prevention (CDC), Centers for Medicare and Medicaid Services (CMS), Office for Civil Rights (OCR) and Office of Inspector General (OIG); U.S. Department of Justice (DOJ); Occupational Safety and Health Administration (OSHA); U.S. Equal Employment Opportunity Commission (EEOC); National Labor Relations Board (NLRB); U.S. Department of Labor (DOL); U.S. Department of Housing and Urban Development (HUD); U.S. Department of Veterans Affairs (VA); and Environmental Protection Agency (EPA). In addition to these federal agencies, there are also a variety of state and local authorities with the ability to bring claims against our independent subsidiaries, such as the Office of Health Care Affordability (OHCA).
The Company and its independent subsidiaries are also subject to requests for information and investigations by other state and federal governmental entities. For example, representatives of the State Attorney General's Office or the State OIG Office may and do request medical records, operational information, and other such documents and materials from the Company's independent subsidiaries. The Company cannot predict or provide any assurance as to the possible outcome of any such request, inquiry, investigation or subsequent litigation. If any such request, inquiry, investigation or related litigation were to proceed, and the Company and/or its independent subsidiaries are subjected to, alleged to be liable for, or agree to a settlement of related claims or obligations under federal Medicare statutes, the FCA, or similar state and federal statutes and regulations, the Company's business, financial condition, results of operations and cash flows could be materially and adversely affected and its stock price could be adversely impacted. In addition, if the Company and/or its independent subsidiaries are alleged or found to be liable on theories of general or professional negligence or conduct alleged to be related to its employment practices (including 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 resolve 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.
From time to time, various state or Federal agencies may issue requests for information, including but not limited to a subpoena. As an example, California's Office of Health Care Affordability is currently conducting a Cost and Market Impact Review (CMIR) with respect to specific components of a proposed transaction involving three of the Company's independent subsidiaries in California. The Company provided OHCA with the requested information regarding specific components of the proposed transaction as part of the CMIR. The Company has been unable to effect resolution including attempts to narrow the scope of the inquiry to that contemplated by the applicable regulation, and limit the requests to its independent subsidiaries operating in California. The Company has filed a Petition in the Superior Court of the State of California, County of Orange, seeking a declaration that the CMIR regulations violate the United States Constitution and/or the California Constitution, and are void and unenforceable as applied to the Company. It also has requested that OHCA be ordered to withdraw the subpoena and close the inquiry, so the underlying transaction can be completed.
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. In 2025, the Company agreed to settle substantially all alleged wage, hour or labor code-related violations asserted on a class or representative basis against its independent subsidiaries in California for purported violations occurring during the six year period ending December 2025, pending court approval. Accordingly, the Company has recorded an accrual of $ 12,000 within Other accrued liabilities on the condensed consolidated balance sheet both as of June 30, 2026 and December 31, 2025. 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.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On July 16, 2026, a purported stockholder filed a derivative complaint in the Superior Court of the State of California, County of Orange, captioned Thompson v. Keetch, et. al., Case No. 2026-01584212-CU-NP-CXC (the “Derivative Action”) against certain current and former directors and officers of the Company and against the Company as a nominal defendant. The complaint asserts claims for, among other things, breach of fiduciary duty and unjust enrichment arising from allegations relating to the Company's healthcare regulatory compliance, staffing, executive compensation, stock sales by certain of the individual defendants, and related-party transactions. The complaint seeks, on behalf of the Company, unspecified damages, disgorgement, corporate governance reforms, attorneys' fees and costs, and other relief. No responsive pleading has been filed. As the Company is unable to determine at this time whether any loss ultimately will occur or to reasonably estimate the possible loss or range of loss, no amount has been accrued in the financial statements at this time.
From time to time, the Company has received Civil Investigative Demands (CID) from the U.S. Department of Justice (DOJ). Certain of these matters resulted in settlements that were material to the Company’s financial statements in prior periods. In 2024, the Company, on behalf of its independent subsidiaries, received a CID 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, following 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 appealed the result, and the Arizona Court of Appeals issued its decision in the Company's favor on July 6, 2026. The Company vigorously defends against these specific claims, and in general these types of claims and cases, however, there can be no assurance that the outcomes of these matters will not have a material adverse effect on operational results and financial condition.
Medicare Revenue Recoupments — The Company's independent subsidiaries are subject to regulatory reviews relating to the provision of Medicare and Medicaid services, to include reviews of billings and potential overpayments by Recovery Audit Contractors (RAC), and 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 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 other billings in the same time period. The Company anticipates that these Reviews could increase in frequency in the future. As of June 30, 2026, and through the filing date of this report, 18 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 61.0 % and 61.9 % of its total accounts receivable as of June 30, 2026 and December 31, 2025, respectively. Revenue from reimbursement under the Medicare and Medicaid programs accounted for 68.9 % and 69.0 % of the Company's revenue for the three and six months ended June 30, 2026, respectively, and 69.8 % and 69.6 % for the three and six months ended June 30, 2025, respectively.

19. COMMON STOCK REPURCHASE PROGRAM
On May 13, 2026, the Board of Directors approved a stock repurchase program pursuant to which the Company is authorized to repurchase up to $ 40,000 of its common stock under the program for a period of approximately 12 months from June 12, 2026. On June 12, 2026, the Board of Directors approved an amendment to the stock repurchase program pursuant to which the Company is authorized to repurchase an additional $ 60,000 of its common stock under the program. During the three months ended June 30, 2026, the Company repurchased 257 shares of its common stock for $ 40,000 . As of June 30, 2026, $ 60,000 authorized for repurchase remained available under the stock repurchase program.
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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. The stock repurchase program expired on June 16, 2026 and is no longer in effect. 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 first quarter of 2025, the Company repurchased 84 shares of its common stock for $ 10,775 . During the second quarter of 2025, the Company repurchased an additional 73 shares of its common stock for $ 9,225 . This repurchase program expired upon the repurchase of the maximum authorized amount.
Under each of the repurchase programs, 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.

Item 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2025 (Annual Report), which discusses our business and related risks in greater detail, as well as subsequent reports we may file from time to time on Form 10-Q and Form 8-K, for additional information. The section entitled “Risk Factors” contained in Part II, Item 1A of this Quarterly Report on Form 10-Q, and similar discussions in our other SEC filings, also describe some of the important risk factors that may affect our business, financial condition, results of operations and/or liquidity. You should carefully consider those risks, in addition to the other information in this Quarterly Report on Form 10-Q and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.
This Quarterly Report on Form 10-Q contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, which include, but are not limited to our expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, and plans and objectives of management. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those expressed in any forward-looking statements as a result of various factors, some of which are listed under the section “Risk Factors” contained in Part II, Item 1A of this Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and are based on our current expectations, estimates and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
Overview
We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare-related properties and ancillary businesses located in 17 states. Our independent subsidiaries, each of which strive to be the operation of choice in the communities they serve, provide a broad spectrum of services. As of June 30, 2026, we offered skilled nursing, long-term acute care, senior living and rehabilitative care services through 396 skilled nursing and senior living facilities. Our real estate portfolio includes 181 owned real estate properties, which includes 142 facilities operated and managed by us, 39 operations leased to and operated by third-party operators and the Service Center location. Of the 39 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.

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The following table summarizes our independent subsidiaries and operational skilled nursing beds and senior living units by ownership status as of June 30, 2026:

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

Number of facilities 142  8  246  396 
Percentage of total 35.9  % 2.0  % 62.1  % 100.0  %
Operational skilled nursing beds 14,079  687  25,945  40,711 
Percentage of total 34.6  % 1.7  % 63.7  % 100.0  %
Senior living units 2,076  142  1,221  3,439 
Percentage of total 60.4  % 4.1  % 35.5  % 100.0  %

The Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Our subsidiaries are operated by separate, independent entities, each of which has its own management, employees and assets. In addition, certain of our wholly-owned subsidiaries including Ensign Services, Inc. and Cornet Limited, Inc., referred to collectively as the Service Center, provide centralized accounting, payroll, human resources, information technology, legal, risk management and other centralized services to the other independent subsidiaries. We also have a wholly-owned captive insurance subsidiary that provides some claims-made coverage to our independent subsidiaries for general and professional liability, as well as coverage for certain workers’ compensation insurance liabilities. Our captive real estate investment trust, Standard Bearer, owns and manages our real estate business. 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 in this Quarterly Report, are not meant to imply, nor should they 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.
Our acquisition strategy has been focused on identifying both opportunistic and strategic acquisitions within our target markets that offer strong opportunities for return. The operations added by us are frequently underperforming financially and can have regulatory and clinical challenges to overcome. Financial information, especially with underperforming operations, is often inadequate, inaccurate or unavailable. Consequently, we believe that prior operating results are not a meaningful representation of our current operating results or indicative of the integration potential of our newly acquired independent subsidiaries.
Recent Activities
We believe we exist to dignify and transform post-acute care. We set out a strategy to achieve our goal of ensuring our patients are receiving the best possible care through our ability to acquire, integrate and improve our operations. Our results serve as a strong indicator that our strategy is working and our transformation is underway. Our dedication to our cultural and operational fundamentals continues to deliver strong results. Refer to Results of Operations for further discussion.
Operational Expansions — During the six months ended June 30, 2026, we expanded our operations with the addition of 21 stand-alone skilled nursing operations and two campus operations in four states. These new operations added a total of 2,724 operational skilled nursing beds operated by our independent subsidiaries. Twenty of our expansions were in Texas, establishing it as our largest market with 105 skilled nursing and senior living operations and reinforcing our continued growth in the state where we began in 1999.
Subsequent to June 30, 2026, we expanded our presence with the addition of two stand-alone skilled nursing operations in Texas, and these new operations will add 250 operational skilled nursing beds to be operated by our independent subsidiaries.
Standard Bearer Acquisitions — Standard Bearer Healthcare REIT, Inc. (Standard Bearer), our captive REIT, is a holding company with subsidiaries that own a majority of our real estate portfolio. Management believes that the REIT structure enhances transparency into the value of the Company’s owned real estate and provides an efficient platform to support future property acquisitions, which may be operated by our independent subsidiaries or leased to third‑party operators.
During the six months ended June 30, 2026, Standard Bearer added $374.6 million of real estate assets associated with 18 stand-alone skilled nursing operations, three stand-alone senior living operations and two campus operations. Of these additions, three stand-alone senior living operations are leased to a third-party operator and the remaining additions are operated by our independent subsidiaries.
Subsequent to June 30, 2026, Standard Bearer added approximately $36.0 million real estate assets associated with two stand-alone skilled nursing operations operated by our independent subsidiaries.
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Common Stock Repurchase Program — On May 13, 2026, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $40.0 million of our common stock under the program for a period of approximately 12 months from June 12, 2026. On June 12, 2026, the Board of Directors approved an amendment to the stock repurchase program pursuant to which we are authorized to repurchase an additional $60.0 million of our common stock under the program. During the three months ended June 30, 2026, we repurchased 257 shares of our common stock for $40.0 million. As of June 30, 2026, $60.0 million remained authorized and available for repurchase under the stock repurchase program.

Facility Information
The following table sets forth the location of our facilities and the number of operational beds and units located at our skilled nursing, senior living and campus facilities as of June 30, 2026:

Facility Counts Bed / Unit Counts
Skilled Operations Senior Living Communities Campus Operations (1)
Total Skilled Operational Beds Senior Living Units Total Beds / Units
Texas 97 1 7 105 12,591 742 13,333
California 78 4 3 85 8,253 378 8,631
Arizona 36 1 5 42 5,396 791 6,187
Colorado 33 5 1 39 3,571 633 4,204
Utah
26 2 1 29 2,412 163 2,575
Washington 17 1 — 18 1,608 98 1,706
Idaho 14 — 1 15 1,331 21 1,352
Kansas 4 — 8 12 883 251 1,134
Tennessee 11 — — 11 1,122 — 1,122
Iowa 8 — 2 10 664 31 695
South Carolina 9 — — 9 1,126 — 1,126
Nebraska 4 1 3 8 496 199 695
Wisconsin 5 — — 5 350 — 350
Nevada 3 — — 3 483 — 483
Alaska 1 1 — 2 146 82 228
Alabama 2 — — 2 181 — 181
Oregon — — 1 1 98 50 148
348 16 32 396 40,711 3,439 44,150
(1) Campuses represent facilities that offer both skilled nursing and senior living services.

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The following table provides summary information regarding the location of our owned and operated real estate properties as of June 30, 2026:

Facility Counts Bed / Unit Counts
Skilled Operations Senior Living Communities Campus Operations (1)
Total Skilled Operational Beds Senior Living Units Total Beds / Units
Texas 40 1 6 47 5,426 712 6,138
Arizona 12 — 5 17 2,052 494 2,546
Utah 15 — — 15 1,102 — 1,102
California 11 — 1 12 1,291 42 1,333
Colorado 6 3 — 9 597 369 966
Kansas 2 — 5 7 495 167 662
Washington 6 — — 6 621 — 621
Idaho 6 — — 6 590 — 590
South Carolina 5 — — 5 544 — 544
Wisconsin 5 — — 5 350 — 350
Iowa 4 — — 4 296 — 296
Nebraska 1 1 1 3 171 160 331
Tennessee 3 — — 3 300 — 300
Alaska 1 1 — 2 146 82 228
Oregon — — 1 1 98 50 148

117 6 19 142 14,079 2,076 16,155
(1) Campuses represent facilities that offer both skilled nursing and senior living services.

The following table provides summary information regarding the location of our owned real estate properties as of June 30, 2026:

Owned and Operated by Ensign (1)
Owned and Leased to Third-Party Operators (1)
Service Center Total Properties (1)

Texas (1)
47 7 — 53
Wisconsin 5 24 — 29
Arizona 17 1 — 18
Utah 15 — — 15
California
12 3 1 16
Colorado 9 — — 9
Washington 6 3 — 9
Kansas 7 — — 7
Idaho 6 — — 6
South Carolina 5 — — 5
Iowa 4 — — 4
Nebraska 3 — — 3
Tennessee 3 — — 3
Alaska 2 — — 2
Oregon 1 — — 1
Nevada — 1 — 1

142 39 1 181

(1) One senior living operation in Texas, which is owned by an independent subsidiary of Ensign and leased to a third-party operator, is located on the same real estate property as a skilled nursing facility that we own and operate. In this situation, the senior living operation is included in the total under "Owned and Leased to Third Party Operators" and the skilled nursing operation is included in the total under "Owned and Operated by Ensign", however, the amount reflected under "Total Properties" only recognizes the operation as a single property.
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Key Performance Indicators
We manage the fiscal aspects of our business by monitoring key performance indicators that affect our financial performance. Revenue associated with these metrics is generated based on contractually agreed-upon amounts or rate, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606. These indicators and their definitions include the following:
Skilled Services
• Routine revenue — Routine revenue is generated by the contracted daily rate charged for all contractually inclusive skilled nursing services. The inclusion of therapy and other ancillary treatments varies by payor source and by contract. Services provided outside of the routine contractual agreement are recorded separately as ancillary revenue, including Medicare Part B therapy services, and are not included in the routine revenue definition.
• Skilled revenue — The amount of routine revenue generated from patients in the skilled nursing facilities who are receiving higher levels of care under Medicare, managed care, Medicaid, or other skilled reimbursement programs. The other skilled patients who are included in this population represent very high acuity patients who are receiving high levels of nursing and ancillary services which are reimbursed by payors other than Medicare or managed care. Skilled revenue excludes any revenue generated from our senior living services.
• Skilled mix — The amount of our skilled revenue as a percentage of our total skilled nursing routine revenue. Skilled mix (in days) represents the number of days our Medicare, managed care, or other skilled patients are receiving skilled nursing services at the skilled nursing facilities divided by the total number of days patients from all payor sources are receiving skilled nursing services at the skilled nursing facilities for any given period.
• Average daily rates — The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period.
• Occupancy percentage (operational beds) — The total number of patients occupying a bed in a skilled nursing facility as a percentage of the beds in a facility which are available for occupancy during the measurement period.
• Number of facilities and operational beds — The total number of skilled nursing facilities that we own or operate, and the total number of operational beds associated with these facilities.
Skilled Mix — Like most skilled nursing providers, we measure both patient days and revenue by payor. Medicare, managed care and other skilled patients, whom we refer to as high acuity patients, typically require a higher level of skilled nursing and rehabilitative care. Accordingly, Medicare and managed care reimbursement rates are typically higher than from other payors. In most states, Medicaid reimbursement rates are generally the lowest of all payor types. Changes in the payor mix can significantly affect our revenue and profitability.

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

Three Months Ended June 30, Six Months Ended June 30,
Skilled Mix: 2026 2025 2026 2025
Days 31.0  % 30.8  % 31.5  % 31.1  %
Revenue 50.0  % 49.2  % 50.3  % 49.7  %

Occupancy — We define occupancy derived from our skilled services as the ratio of actual patient days (one patient day equals one patient occupying one bed for one day) during any measurement period to the number of beds in facilities which are available for occupancy during the measurement period. The number of beds in a skilled nursing facility that are actually operational and available for occupancy may be less than the total official licensed bed capacity. This sometimes occurs due to the permanent dedication of bed space to alternative purposes, such as enhanced therapy treatment space or other desirable uses calculated to improve service offerings and/or operational efficiencies in a facility. In some cases, three- and four-bed wards have been reduced to two-bed rooms for resident comfort, and larger wards have been reduced to conform to changes in Medicare requirements. These beds are seldom expected to be placed back into service. We believe that reporting occupancy based on operational beds is consistent with industry practices and provides a more useful measure of actual occupancy performance from period to period.

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

Three Months Ended June 30, Six Months Ended June 30,
Occupancy for skilled services: 2026 2025 2026 2025
Operational beds at end of period 40,711  35,545  40,711  35,545 
Available patient days 3,638,219  3,216,445  7,087,378  6,316,122 
Actual patient days 3,017,641  2,615,490  5,913,675  5,153,626 
Occupancy percentage (based on operational beds) 82.9  % 81.3  % 83.4  % 81.6  %

Segments
We have 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 select properties owned by us through our captive REIT and leased to skilled nursing and senior living operations, including our own independent subsidiaries and third-party operators.
We also reported an “all other” category that includes operating results from our senior living operations, mobile diagnostics, transportation, other real estate and other ancillary operations. These businesses are neither significant individually, nor in aggregate and therefore do not constitute a reportable segment. Our Chief Executive Officer, who is our chief operating decision maker, or CODM, reviews financial information at the operating segment level.

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

  Three Months Ended June 30,
Skilled Services All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid (1)
$ 552,588  $ 473,904  $ 14,231  $ 11,944  $ 566,819  $ 485,848 
Medicare 339,650  291,117  —  —  339,650  291,117 
Medicaid-skilled 80,664  75,207  —  —  80,664  75,207 
Subtotal $ 972,902   $ 840,228   $ 14,231   $ 11,944   $ 987,133   $ 852,172  
Managed care 265,348  229,495  —  —  265,348  229,495 
Private and other (2)
141,662  103,853  38,354  35,894  180,016  139,747 
TOTAL SERVICE REVENUE $ 1,379,912   $ 1,173,576   $ 52,585   $ 47,838   $ 1,432,497   $ 1,221,414  

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  Three Months Ended June 30,
Skilled Services All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid (1)
40.0  % 40.4  % 27.1  % 25.0  % 39.6  % 39.8  %
Medicare 24.6  24.8  —  —  23.7  23.8 
Medicaid-skilled 5.9  6.4  —  —  5.6  6.2 
Subtotal 70.5   % 71.6   % 27.1   % 25.0   % 68.9   % 69.8   %
Managed care 19.2  19.6  —  —  18.5  18.8 
Private and other (2)
10.3  8.8  72.9  75.0  12.6  11.4 
TOTAL SERVICE REVENUE 100.0   % 100.0   % 100.0   % 100.0   % 100.0   % 100.0   %
(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.

(3) All Other incorporates intercompany eliminations.

  Six Months Ended June 30,
Skilled Services All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid (1)
$ 1,081,921  $ 917,315  $ 28,348  $ 22,373  $ 1,110,269  $ 939,688 
Medicare 675,479  578,868  —  —  675,479  578,868 
Medicaid-skilled 155,902  144,758  —  —  155,902  144,758 
Subtotal $ 1,913,302   $ 1,640,941   $ 28,348   $ 22,373   $ 1,941,650   $ 1,663,314  
Managed care 526,199  456,712  —  —  526,199  456,712 
Private and other (2)
271,246  199,477  75,705  68,951  346,951  268,428 
TOTAL SERVICE REVENUE $ 2,710,747   $ 2,297,130   $ 104,053   $ 91,324   $ 2,814,800   $ 2,388,454  
(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other in our "all other" category includes revenue from senior living operations and all revenue generated in our other ancillary operations.
(3) All Other incorporates intercompany eliminations.

  Six Months Ended June 30,
Skilled Services All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid (1)
39.9  % 39.9  % 27.2  % 24.5  % 39.4  % 39.3  %
Medicare 24.9  25.2  —  —  24.0  24.2 
Medicaid-skilled 5.8  6.3  —  —  5.6  6.1 
Subtotal 70.6   % 71.4   % 27.2   % 24.5   % 69.0   % 69.6   %
Managed care 19.4  19.9  —  —  18.7  19.1 
Private and other (2)
10.0  8.7  72.8  75.5  12.3  11.3 
TOTAL SERVICE REVENUE 100.0   % 100.0   % 100.0   % 100.0   % 100.0   % 100.0   %
(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other in skilled services includes private, Veteran Affairs and hospice payors. In addition, private and other in our "all other" category includes revenue from senior living and ancillary operations.

(3) All Other incorporates intercompany eliminations.

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GOVERNMENT REGULATION
General
Healthcare is an area of extensive and frequent regulatory change. Changes in the law or new interpretations of existing laws may have a significant impact on our revenue, costs and business operations. Our independent subsidiaries that provide healthcare services are subject to federal, state and local laws relating to, among other things, licensure, quality and adequacy of care, physical plant requirements, life safety, personnel and operating policies. In addition, these same subsidiaries are subject to federal and state laws that govern billing and reimbursement, relationships with vendors, business relationships with physicians and workplace protection for healthcare staff. Such laws include (but are not limited to) the Anti-Kickback Statute (AKS), the federal False Claims Act (FCA), the federal prohibition on physician self-referral known as the Stark Law, state law, and state corporate practice of medicine statutes.
Governmental and other authorities periodically inspect our independent subsidiaries to verify continued compliance with applicable regulations and standards. The operations must pass these inspections to remain licensed under state laws and to comply with Medicare and Medicaid provider agreements and applicable Conditions of Participation. The operations can only participate in these third-party payment programs if unannounced inspections by regulatory authorities reveal that the operations are in substantial compliance with applicable state and federal requirements. In the ordinary course of business, federal or state regulatory authorities may issue notices to the operations alleging deficiencies in certain regulatory practices, which may require corrective action to regain and maintain compliance. In some cases, federal or state regulators may impose other remedies including imposition of directed in-service training, state monitoring, civil monetary penalties, temporary admission and/or payment bans, loss of certification as a provider in the Medicare or Medicaid programs, or revocation of a state operating license.
We believe that the regulatory environment surrounding the healthcare industry subjects providers to intense scrutiny. In the ordinary course of business, providers are subject to inquiries, investigations and audits by federal and state agencies related to compliance with participation and payment rules under government payment programs. These inquiries may originate from the Department of Health and Human Services (HHS), Office of the Inspector General (OIG), state Medicaid agencies, state Attorneys General, local and state ombudsman offices and the Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractors, among other agencies. In response to the inquiries, investigations and audits, federal and state agencies may impose citations for regulatory deficiencies and other regulatory penalties, including demands for refund of overpayments, expanded civil monetary penalties that extend over long periods of time and date back to incidents prior to surveyor visits, Medicare and Medicaid payment bans and terminations from those programs, which may be temporary or permanent in nature. We vigorously contest each such regulatory outcome when appropriate; however, there are significant legal and other expenses involved that consume our financial and personnel resources. Expansion of enforcement activity could adversely affect our business, financial condition or the results of operations.
Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions
The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have recently released the following proposed or final rulemaking, or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or senior living facilities:
CMS Risk-Based Surveys — In July 2026, CMS announced the nationwide implementation of a Risk-Based Survey (RBS) process for qualifying skilled nursing facilities, effective September 8, 2026. Under the program, qualifying facilities may undergo a streamlined survey process, while state survey resources are redirected toward complaint investigations and facilities with greater risk indicators. CMS will also identify qualifying facilities with a high-performing designation on Nursing Home Care Compare. While the Company continues to evaluate the operational implications of the program, changes in survey and regulatory oversight practices could affect compliance requirements, public quality reporting, and other aspects of facility operations.

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Fiscal Year 2027 Skilled Nursing Facility Prospective Payment System Proposed Rule (FY 2027 PPS PR) — In April 2026, CMS released the FY 2027 PPS PR, which outlines proposed changes to SNF payment rates and program requirements beginning October 1, 2026. CMS is proposing a 2.4% net increase in SNF payment rates, reflecting a 3.2% market basket update offset by a 0.8% productivity adjustment, excluding any adjustments under the SNF Value-Based Purchasing (VBP) Program. The proposed rule also includes several changes to the SNF Quality Reporting Program (QRP), such as removing COVID-19 vaccination measures beginning in fiscal year 2028, shortening the data submission deadline from 4.5 months to 45 days after each quarter beginning in fiscal year 2029 and requiring SNFs to submit Minimum Data Set (MDS) data for all residents, regardless of payer source beginning in fiscal year 2031. Additionally, CMS proposes estimated performance standards for the fiscal year 2029 and fiscal year 2030 VBP Program years and updates to certain MDS-based VBP measure snapshot dates to align with the proposed QRP reporting deadlines. As this is a proposed rule, these provisions remain subject to change pending publication of the final rule later this year.
Final Rule Updating Health-Care Related Tax Policies — In February 2026, CMS published a final rule, effective April 3, 2026, related to the statistical test used to evaluate state Medicaid health care-related tax waiver requests, implementing requirements codified in the One Big Beautiful Bill (OBBB). In relevant part, this rule limits the circumstances under which states may obtain waivers from CMS to impose taxes that fund state Medicaid programs by assessing taxes that impose a greater burden on Medicaid-participating organizations (whether based on volume or percentage of Medicaid taxable units) than the burden imposed on organizations that do not participate in Medicaid, or have relatively less Medicaid participation. While the rule primarily targets managed care organization taxes, it applies to all permissible provider tax classes, including nursing facilities, for which CMS has identified at least two existing taxes that appear to exploit the loophole. Non-MCO provider taxes, including nursing facility taxes, have a compliance deadline of the end of the applicable state fiscal year ending in calendar year 2028 (no later than September 30, 2028).
Federal Nurse Staffing Legislation — Following the repeal of the federal minimum staffing requirements in December 2025, there has been legislation introduced in Congress, that if enacted, would impose mandatory minimum staffing requirements for skilled nursing facilities participating in the Medicare and Medicaid Programs including the Nurses Belong in Nursing Homes Act and the Safe Staffing Saves Lives Act.
Controlled Substances Act Telemedicine Flexibilities — On December 31, 2025, the Drug Enforcement Administration (DEA), working with HHS, extended certain telemedicine flexibilities through December 31, 2026. Under the Ryan Haight Online Pharmacy Consumer Protection Act of 2008, practitioners must conduct at least one in-person medical evaluation before prescribing controlled substances to a patient via telemedicine. During the COVID-19 Public Health Emergency (PHE), the DEA temporarily waived this requirement, permitting practitioners to prescribe Schedules II through V controlled substances through audio-only or audio-visual telemedicine encounters, subject to specific conditions. These exceptions also include FDA-approved narcotic medications classified under Schedules III through V of the Controlled Substances Act when used for maintenance or withdrawal management treatment of opioid use disorder. The DEA has extended these telemedicine flexibilities several times rather than allowing them to expire, and they may continue beyond 2026 depending on future regulatory decisions.
Consolidated Appropriations Act of 2026 (CAA 2026) — On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA 2026) was passed, which further extended government funding through September 30, 2026. Of specific importance to our businesses are:
• Telehealth Waivers: Since the COVID-19 Pandemic, Congress has temporarily waived restrictions so Medicare beneficiaries can access telehealth services at home and outside of rural areas. Medicare recipients can now continue using telehealth under these relaxed rules, regardless of location. The waivers expired on September 30th but were reinstated effective October 1, 2025 and extended through December 31, 2027. Specifically, key waivers that were restored temporarily include:
• Lifting geographic limitations for medical telehealth services, allowing them to be provided nationwide, including in a person's home such as an assisted living residence.
• Allowing physical therapists, occupational therapists and speech-language pathologists to deliver telehealth services.
• Delay the Medicare requirement for in-person visits for mental health services provided through telehealth or audio-only telecommunications technology.
• Permits telehealth to be used for face-to-face encounters required for Hospice recertification purposes.
• Work Geographic Index Floor: Temporarily and retroactively restores nationwide payment floor multiplier for the work component of Medicare Part B services paid under the physician fee schedule. This is effective October 1, 2025 through at least September 30, 2026.
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• Extension of Funding for Quality Measure Endorsement, Input, and Selection: This extends such funding through September 30, 2026.
• Sequestration : This legislation prevents the triggering of statutory 4.0% Statutory Pay-As-You-Go Act of 2010 (PAYGO) sequestration cuts to Medicare ( See Sequestration of Medicare Rates below).
CMS has issued guidance instructing Medicare Administrative Contractors (MACs) to perform mass adjustments to any paid claims that are inconsistent with the above and instructing Practitioners to resubmit to CMS any returned claims that were previously determined not payable during the shutdown.
One Big Beautiful Bill (OBBB) — The OBBB was signed into law on July 4, 2025, implementing a range of federal reforms targeting Medicaid financing, eligibility, and payment structures. The following provisions of the OBBB are expected to impact Medicaid reimbursement mechanisms and enrollment dynamics relevant to our business.
Moratorium on New or Increased Provider Taxes — Provider taxes, which are state taxes assessed on healthcare providers or facilities, are commonly used by states to generate non-federal share of Medicaid payments, including payments to SNFs. Under the ACA, provider taxes were capped at 6% of a provider's net patient revenue. Existing federal law prohibits states Medicaid programs from guaranteeing providers that they will receive their provider taxes paid back - this is known as the hold harmless provision. The OBBB prohibits states from imposing new provider taxes or increasing existing provider tax rates or tax bases, with specific carve outs for nursing facilities and intermediate care facilities to remain at status quo. The OBBB reduces the hold harmless threshold in expansion states beginning in fiscal year 2028. This threshold will decrease by 0.5% per year in ACA expansion states until the safe harbor limit is 3.5% in fiscal year 2032. While SNFs are exempt from the moratorium, broader limitations on provider taxes could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates. In February 2026, CMS issued a final rule implementing these requirements as they pertain to granting state-requested waivers for imposing Medicaid provider taxes to fund those states' Medicaid programs. See Item 2., Government Regulation, Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions - Final Rule Updating Health-care Related Tax Policies.
Medicaid Recertification Changes and Retroactive Eligibility Cut — Beginning in the first quarter of 2027, states must conduct Medicaid eligibility redeterminations every six months, rather than annually, for individuals enrolled under Medicaid. Additionally, the OBBB includes a provision to reduce Medicaid retroactive eligibility from 90 days to 30 days for most enrollees but is 60 days for long-term care residents and traditional Medicaid enrollees. We believe that these provisions could create the conditions for coverage interruptions, potential delays or denied payments.
Revisions to State-Directed Payments (SDPs) — Prior to the OBBB’s passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods. These state-mandated payments by MCOs were known as SDPs, the upper limits for which generally were higher than the highest Medicare payment rate for those services, which is used in calculating Medicaid fee-for-service supplemental payments. The OBBB limits total payments under existing CMS-approved SDPs to current levels and caps future SDPs based on whether the state has expanded its Medicaid program under the ACA. SDPs approved prior to the OBBB’s implementation are grandfathered by the OBBB, although those grandfathered payments are reduced by 10% per year starting on January 1, 2028, until those SDPs reach the allowable Medicare-related payment limit. For Medicaid expansion states, new SDPs may not exceed 100% of the Medicare equivalent payment rate; for non-expansion states, the cap is 110%. In the absence of published Medicare payment rates, the OBBB limits SDPs to the Medicaid fee-for-service payment rate. This provision could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates. CMS issued implementing guidance on February 2, 2026, clarifying that SDPs covering rating periods for CY 2024 to CY 2026 may be grandfathered and qualify for protection from the OBBB's reductions in payment, provided that a state seeking this protection provided CMS with completed forms seeking approval for such directed payments before May 1, 2025; however, grandfathered dollar amounts are frozen at current approved levels and cannot be increased through any preprint version, amendment, or renewal. SDPs in rating periods beginning on or after March 30, 2026, will not qualify for grandfathering and must immediately comply with the new payment caps based on Medicare payment rates. On May 22, 2026, CMS published a proposed rule to implement the SDP provisions (the SDP Proposed Rule) included in the OBBB. Under the proposal, payment limits based on Medicare rates would be expanded to apply to all services covered by SDPs beginning with rating periods on or after January 1, 2029. The SDP Proposed Rule also applies similar Medicare-based payment caps to certain targeted Medicaid fee-for-service payments.
Cap on Home Equity Excluded for Long-Term Care Eligibility Determination — The OBBB establishes a limit of $1.0 million for home equity that can be exempted from calculating an individual’s eligibility for Medicaid in seeking long-term care beginning January 1, 2028. This threshold is not indexed to inflation. States may, however, apply different home equity limits for primary residences that are located on farms.
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