Ensign : Third Quarter 2023 GAAP to Non-GAAP Net Income Reconciliation

THE ENSIGN GROUP, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(In thousands, except per share data)

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

The following table reconciles net income to Non-GAAP net income for the periods presented:

		Three Months Ended		Nine Months Ended
		September 30,		September 30,
		2023		2022		2023		2022
Net income attributable to The Ensign Group, Inc.	$	63,863	$	56,179	$	187,708	$	164,210
Non-GAAP adjustments
Stock-based compensation expense(a)		7,237		5,898		22,691		16,681
Cost of services - gain on business interruption recoveries and		(259)		(900)		(1,009)		(3,467)
sale of assets
Cost of services - legal adjustments(b)		-		859		(818)		4,212
Cost of services - acquisition related costs(c)		150		245		722		416
Interest expense - write-off of deferred financing fees(d)		-		-		-		566
Depreciation and amortization - patient base(e)		135		86		182		213
General and administrative - legal costs (f)		2,783		-		2,783		-
General and administrative - costs incurred related to new		-		321		875		390
systems implementation
Provision for income taxes on Non-GAAP adjustments(g)		(4,946)		(3,528)		(13,274)		(10,225)
Non-GAAP Income	$	68,963	$	59,160	$	199,860	$	172,996
Average number of diluted shares outstanding		57,337		56,761		57,245		56,829
Diluted Earnings Per Share
Net Income	$	1.11	$	0.99	$	3.28	$	2.89
Adjusted Diluted Earnings Per Share
Net Income	$	1.20	$	1.04	$	3.49	$	3.04
Footnotes:
(a) Represents stock-based compensation expense incurred.
	Three Months Ended September 30,	Nine Months Ended September 30,
		2023		2022		2023		2022
Cost of services	$	5,053	$	3,893	$	15,271	$	10,938
General and administrative		2,184		2,005		7,420		5,743
Total Non-GAAP adjustment	$	7,237	$	5,898	$	22,691	$	16,681

1. Legal adjustments relate to findings attributable to our ancillary services subsidiary, which includes the portion attributable to non-controlling interest.
2. Represents costs incurred to acquire operations that are not capitalizable.
3. Represents the write-off of deferred financing fees associated with the amendment of the credit facility.
4. Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.
5. Legal costs incurred in connection with the medical directors related matter.
6. Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0%.