Prepared remarks
Ladies and gentlemen, thank you for joining us, and welcome to The Ensign Group Q3 Earnings Call. At this time, I would like to turn the call over to Mr. Keetch. Please go ahead.
Thank you, operator, and welcome, everyone. We filed our earnings press release yesterday, and it is available on the Investor Relations section of our website at ensigngroup.net. A replay of this call will also be available on our website until 5:00 p.m. Pacific on November 30, 2025. We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, November 4, 2025, and these statements have not been or will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.
Except as required by federal securities laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, The Ensign Group, Inc., is a holding company with no direct operating assets, employees or revenues. Certain of our independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to the other independent subsidiaries through contractual relationships. In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims made coverage to our operating companies for general and professional liability as well as for workers' compensation insurance liabilities.
Ensign also owns Standard Bearer Healthcare REIT, Inc., which is a captive real estate investment trust that invests in health care properties and enters into lease agreements with certain independent subsidiaries of Ensign as well as third-party tenants that are unaffiliated with the Ensign Group. The words Ensign, company, we, our and us refer to The Ensign Group, Inc., and its consolidated subsidiaries. All our independent subsidiaries, the Service Center, Standard Bearer and the insurance captive are operated by separate independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities as well as use of the words we, us, our and similar terms are not meant to imply nor should it be construed as meaning that the Ensign Group has direct operating assets, employees or revenue or that any of the subsidiaries are operated by The Ensign Group.
Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available on our Form 10-Q. And with that, I'll turn the call over to Barry Port, our CEO.
Thanks, Chad, and thank you all for joining us today. We're pleased to report another record quarter in several key areas. Before we jump into some of the financial highlights, I do want to provide some more detail about the primary driver of our success, which is the extraordinary outcomes achieved by the dedicated and talented clinical teams. While we are always trying to highlight our clinically driven culture, sometimes the financial outcomes take the forefront on calls like this. We do feel, however, it's important to point out again that our clinical performance continues to be the key differentiator for us. Simply put, our consistent financial results would not be possible without a relentless patient-focused culture that strives to deliver the highest quality clinical outcomes. According to the most recently published CMS data, same-store Ensign affiliated facilities outperformed their peers in their annual survey results by an impressive 24% at the state level and 33% at the county level.
This exceptional performance is not just a snapshot. It reflects the sustained clinical excellence of our local leadership teams and caregivers. In that same CMS data set, Ensign-affiliated operations also maintained a 10% advantage in overall 4- and 5-star rated buildings when compared to their peers. What makes this especially notable is that the majority of these communities were 1- and 2-star facilities at the time of acquisition. Together, these results demonstrate our consistent ability to elevate quality of care, strengthen operational execution and create long-term value across our portfolio. We can't emphasize enough how hard our teams are working every day to give our patients and their families the best service possible while developing and sharing best practices with their peers in their own clusters and markets and beyond. These efforts are bearing fruit and showing through in several ways.
On the census front, our same-store and transitioning occupancy increased to 83% and 84.4% during the quarter, which were both all-time highs. The primary reason for this growth in occupancy is due to the fact that our teams are capturing more market share by earning the trust of the communities they serve through the clinical outcomes described earlier. As each operation earns and solidifies the reputation as the facility of choice in their respective markets, they're not only seeing more patients, but they're also being entrusted to care for more and more medically complex patients, which includes a larger share of Medicare, managed care and other skilled patients. In addition, we believe we're just now starting to see the increased demand for our services related to the strong demographic trends. As we look ahead, these demographic trends are undeniable. The U.S. population aged 80 and older, our core population is projected to grow by more than 50% over the next decade from roughly 13 million today to over 20 million by 2035.
At the same time, the ratio of seniors to middle-age family members is expected to decline by nearly 40%, creating sustained and growing demand for the kind of skilled nursing and rehabilitation services offered in our facilities every day. These powerful tailwinds will only bolster the census momentum we're seeing across our portfolio, giving us confidence in the long-term growth and opportunity ahead. On the skilled mix front, we saw skilled days increase for both our same-store transitioning operations by 5.1% and 10.9%, respectively, over the prior year quarter. We also saw Medicare revenue increase for both our same-store and transitioning operations by 10% and 8.8%, respectively, and an increase in our same-store Medicare days by 4.2% over the prior year quarter. In addition, we saw managed care revenue increased for both our same-store and transitioning operations by 7.1% and 24.3%, respectively.
These improvements in skilled mix in our same-store operations and the even larger improvements in our transitioning operations highlight our ability to capture a portion of the enormous upside inherent in our existing portfolio. The combination of strong demand for our services and our efforts to be best-in-class in our markets creates a pathway to continue to produce long-term sustainable growth. At the same time, we continue to acquire new operations with massive long-term upside. Since 2024, we have successfully sourced, underwritten, closed and transitioned 73 new operations across several markets, many of which were already performing at or above our expectations. Our opportunity to continue adding new operations to our portfolio remains solid. However, as Chad will discuss in a minute, the deal market does fluctuate. In our 26-year history, we've seen periods of time when capital seems to flood into the industry, which can temporarily raise prices to irrational levels.
A close look at our history will show in an environment like that, we have remained disciplined and taken a slower pace to growth, avoiding the addition of what we believe to be overpriced deals. Instead, our local leaders spend fewer hours on transitioning newly acquired assets and shift their focus towards enhancing our capabilities within our same-store and transitioning portfolio. Over time, we have experienced very consistent growth in revenue and earnings, even though the deal market has been and will continue to be choppy. While we're thrilled with our current record same-store occupancy, we're actually excited that it's as low as it is. At 83%, we have enough organic growth potential left in our organization to sustain our consistent earnings and revenue growth, even if we stopped acquiring during periods of irrational pricing. To illustrate this opportunity, reaching a minimum of 85% occupancy in same-store would be like adding 8 new 100-bed operations and at a minimum of 88%, it would be the equivalent of adding 17.
This kind of organic growth is even more powerful than acquisitions because it expands census without adding new fixed overhead, driving stronger and more efficient margin improvement. As we point out during each of our earnings calls each quarter with specific facility examples, it's not uncommon to see some of our most mature operations consistently achieve and maintain occupancies in mid- to high 90s. As we grow, our local leaders are always on a lookout to attract and develop new partners into post-acute care, including administrators and training, nursing and therapy leaders and other key contributors. We are encouraged by the deep bench of incredible talent that continues to flow into our organization, and we look forward to working with them to continue to achieve our mission to dignify post-acute care. On the labor front, we do continue to experience improvements in turnover, stable wage growth and lower staffing agency usage even in the face of increased occupancy.
As we've said before, our people are at the heart of our efforts and seeing these metrics consistently improve is critical to maintaining our path of success and to achieve industry-leading results. After another stronger-than-expected quarter, we are again raising our 2025 earnings guidance to between $6.48 to $6.54 per diluted share, up from our previously raised guidance of $6.34 to $6.46 per diluted share. The new midpoint of this increased 2025 earnings guidance represents an increase of 18.4% over our 2024 results and is 36.5% higher than our 2023 results. We are also increasing our annual revenue guidance to $5.05 billion to $5.07 billion, up from $4.99 billion to $5.02 billion to account for our current quarter performance and acquisitions we anticipate closing through the end of the year. We're excited about the trajectory we are on for the year and look forward to continuing our consistent march towards great clinical and financial results.
This increased guidance is due to the continued execution of our growth model with organic growth stemming from continued strength in occupancy and skilled mix as we head into the fourth quarter, which is typically one of our strongest quarters. In addition, many of our new acquisitions are performing well ahead of schedule, which highlights our continued commitment to our locally driven transition strategy and also points towards solid underwriting and investment decisions. We are excited about our performance so far this year and are confident that our partners will continue to execute and innovate while balancing the addition of newly acquired operations. We are eager to continue to drive organic improvements and take advantage of the acquisition opportunities we see on the horizon. The combination of improvements in occupancy and skilled mix in our more mature operations and the long-term upside in our newly acquired operations highlights the enormous organic potential we see in our existing portfolio. Next, I'll ask Chad to add some additional insights regarding our recent growth.
Thank you, Barry. We accelerated our growth by adding 22 new operations, including 10 real estate assets during the quarter and since. These include 2 larger deals, an 11-building portfolio in California and a 7-building portfolio in Utah. It also includes some single facility opportunities with one in Alabama, one in Wisconsin, one in Iowa and one in Idaho. In total, we added 1,857 new skilled nursing beds and 109 senior living units across 6 states. This growth brings a number of operations acquired during 2025 and since to 45. We are thrilled to complete the 11-building portfolio in California during the quarter after many months of preparing to transition these operations. These new acquisitions allow us to serve areas of California that we've been looking to enter for years. Consistent with other similar regional portfolios we've acquired in the past, our local team is prepared to execute on their specialized building-by-building transition plans several months in advance.
So far, we've been very pleased with the progress in these transitions. As long-term operators, we've never sold a skilled nursing operation. When we agree to operate a new facility, we make a commitment to the staff, patients and the larger health care community that we are there for the long haul. Our company was founded in California, and these additions only serve to deepen our commitment to the growing populations of seniors in this great state that will benefit from our high-quality health care services over the coming decades. We were also thrilled to close on the Stonehenge portfolio in Utah. We have admired these operations for many years and are honored to continue their legacy as one of the most reputable providers in the state of Utah. This strategic acquisition adds high-quality, newer constructed properties to our existing footprint and a very important state for us. The locations are a perfect fit with our existing clusters and introduce us into a few new markets.
We are also thrilled to add these assets to Standard Bearer's growing real estate portfolio. This acquisition is a perfect example of how our locally driven acquisition strategy works best. This off-market transaction was a multiyear process that would not have happened with a traditional centralized deal team. This opportunity came to our organization because of a very long-standing relationship between the sellers and our local leaders, who then worked together with our team at the service center to structure a win-win deal for us and the sellers. We are excited to add our second facility in Alabama and look forward to watching that market grow as we add strength and experience to our local team there. Because our growth over the last several quarters spans across many states and markets, it leaves us with significant bandwidth to grow in almost all of our markets. We continue to prioritize markets that we know best, while simultaneously and meticulously expanding into new markets.
Overall, our growth this quarter continues to demonstrate our ability to take on multi-facility portfolios as well as our traditional singles and doubles, which when taken collectively, are equivalent to a large transformative acquisition. We've shown that our approach to transitioning each operation as a complex health care business works on single operations, small portfolios and on a larger scale, particularly when a larger deal spans several markets and geographies. While we certainly will continue to evaluate and consider any deal that's out there, we are also very comfortable growing the way we've grown this year with lots of transactions across many states, which are typically more reasonably priced and don't carry the complexities that sometimes accompany the acquisition of a large company. As we look at the current pipeline, we continue to see opportunities that include everything from small to midsized owner-operated portfolios, landlords looking to replace current tenants, nonprofits looking to divest of their post-acute assets and a steady flow of traditional onesie-twosies.
However, we've also seen some trends in the last few months that show that pricing in certain areas has become too rich to support the fundamentals of the operations. We must and will remain committed to staying disciplined and true to the principles that have contributed to our consistent success, including ensuring that we pay prices that will allow the operations to have enough of the necessary resources to invest in the building and the clinical systems in order to achieve the highest possible clinical outcomes. With that said, we have several deals lining up for the first quarter of 2026 and our local leadership and their deal partners at the service center work together to source and underwrite reasonably priced deals with sellers who are not just interested in receiving top dollar, but care deeply about the quality and reputation of the company they select to inherit their legacy.
Our local leaders continue to recruit future CEOs for Ensign affiliated operations, and we have a deep bench of CEOs in training that are eagerly preparing for an opportunity to lead. During the quarter, we reached an all-time high for AITs in our pipeline. This high-quality influx of local talent, combined with our decentralized transition model allows us to grow without being limited by typical corporate bottlenecks. Therefore, our unique acquisition and transition strategy puts us in an excellent position to continue growing in a healthy and sustainable way. Lastly, we are pleased with the continued growth of Standard Bearer, which added 11 new assets during the quarter and since, including 1 skilled nursing asset that we acquired in Texas that will be operated by a high-quality third-party tenant pursuant to a triple net lease. Standard Bearer is now comprised of 149 owned properties, 115 are leased to an Ensign affiliated operator and 35 are leased to third-party operators.
We were excited to add our growing list of relationships with unaffiliated operators, which further diversifies our tenant base and helps our organization as a whole continue to advance our mission by working closely with like-minded operators that want to make a difference in this industry. Going forward, Standard Bearer will continue to work together with our existing operating partners and new relationships we are developing in order to acquire portfolios comprised of operations that Ensign would operate and facilities at third parties that are interested in operating under a lease. Collectively, Standard Bearer generated rental revenue of $32.6 million for the quarter, of which $27.6 million was derived from Ensign affiliated operations. For the quarter, Standard Bearer reported $19.3 million in FFO and as of the end of the quarter, had an EBITDAR to rent coverage ratio of 2.5x. And with that, I'll turn the call over to Spencer, our COO, to add more color around operations.
Thanks, Chad, and hello, everyone. As always, we'd like to share a few examples of how operations in various stages of their maturity are contributing to our outstanding results. It's the aggregation of achievements like these that comprise the Ensign story. And we believe these examples are the best way to explain how we produce consistent results over time. As Barry and Chad both mentioned, one of the biggest drivers of Ensign's consistent growth that our same-store operations are continually pushing for quality and improvement year after year. A great example of that diligence is Beacon Harbor Healthcare & Rehabilitation located in Rockwall, Texas. Beacon is led by Executive Director, Cory Blomquist, and his clinical partner, COO, Don Thompson, who has guided a remarkably stable leadership team since the facility joined Ensign back in 2019. Beacon has long been a strong clinical and financial performer, and the team has been executing a thoughtful multiyear strategy to make the facility the clear provider of choice in their community.
First and foremost, they've focused on taking care of their caregivers. Despite operating in a tough labor market, Beacon enjoys turnover well below state averages, runs low overtime and hasn't used a single nursing agency shift all year. Because their staff feel valued and supported, that care naturally extends to their patients. Second, the team has maintained their 5-star CMS quality rating, while growing their reputation for clinical excellence. They've also expanded their medical partnerships, adding cardiology, pulmonology and nephrology specialists and strengthened relationships with local hospitals, which enabled them to participate successfully in multiple ACOs and expanded managed care partnerships. The results speak for themselves. Occupancy has increased from 69.4% in Q3 of 2024 to 77.7% in Q3 of 2025, with Medicare days up 11% and managed care days up 21%. As the team has methodically executed their plan, earnings have followed.
Q3 EBIT is up nearly 45% from the prior year quarter. Even more exciting is the fact that the operation still is less than 80% occupied and is primed to experience even more growth in coming years. With a stable leadership team, strong labor practices and a culture that puts people first, Beacon Harbor stands as a powerful example of how sustained organic growth continues to drive Ensign forward. The second example highlights the kind of transformational growth we often see in our newly acquired operations when they're led by strong local leaders with clear shared vision. River Park Post Acute in Chandler, Arizona, was acquired in May of 2024. Prior to transition, the facility primarily served long-term care residents and had limited visibility in the local health care community. It operated at 3 stars and struggled with census and referrals. That changed quickly under Executive Director, Arjun Purvis and Director of Nursing, Rhonda Gilbert.
Together they united the team around a bold vision to become a beacon of quality in Chandler by caring for more complex skilled patients. They went to work strengthening hospital partnerships, enhancing the facility's appearance and raising clinical standards. Rhonda and her team focused on the fundamentals, training frontline caregivers, setting high expectations and establishing 7-day a week on-site physician group coverage. Confidence grew, and with it, the facility's reputation. In just 15 months, River Park has achieved 2 successful CMS surveys, including one deficiency free, a rare feat even among established operations. They've also advanced from 3 stars to 5 stars overall and in quality measures. Operationally, the turnaround has been just as impressive. Occupancy rose from 76.3% in Q3 of 2024 to 97.1% in Q3 of 2025. Skilled mix days increased from 40.7% to 67.5%, with Medicare days up 18.9% and managed care up 176%, adding more than 20 managed care patients per day compared to the prior year.
Both clinical and operational gains have translated into extraordinary financial results. Revenues are up 54% and EBIT is up 376% year-over-year. River Park story is a vivid reminder that when clinical excellence comes first, results follow quickly. It also shows the potential that exists in so many of our new acquisitions when talented local leaders are empowered, supported by our resource teams and backed by a culture that believes in doing the right thing for every patient every time. With that, I will turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance, and then we'll open it up for questions.
Thank you, Spencer, and good morning, everyone. Detailed financials for the quarter are contained in our 10-Q and press release filed yesterday. Some additional highlights for the quarter include the following: GAAP diluted earnings per share was $1.42, an increase of 6%. Adjusted diluted earnings per share was $1.64, an increase of 18%. Consolidated GAAP revenue and adjusted revenues were both $1.3 billion, an increase of 19.8%. GAAP net income was $83.8 million, an increase of 6.9%. And adjusted net income was $96.5 million, an increase of 18.9%. Other key metrics as of September 30, 2025, include cash and cash equivalents of $443.7 million and cash flows from operations of $381 million. During the 9 months ended September 30, 2025, we spent more than $240 million to execute on our strategic growth plan, most of which have been in the works for months. We made these investments from a position of strength as shown by the lease adjusted net debt-to-EBITDA ratio of 1.86x after taking these investments into consideration.
Our continued ability to maintain low leverage even during periods of significant growth is particularly noteworthy and demonstrates our commitment to disciplined growth as well as our belief that we can continue to achieve growth in the long run. In addition, we currently have approximately $593 million of available capacity under our line of credit, which, when combined with the cash on our balance sheet, gives us over $1 billion in dry powder for future investments. We also own 155 assets, of which 149 are held by Standard Bearer and 131 of which are owned completely debt-free and gaining significant value over time, adding even more liquidity to help with future growth. The company paid a quarterly cash dividend of $0.0625 per share for common stock. We have a long history of paying dividends and have increased the annual dividend for 22 consecutive years. In addition, we currently have a stock repurchase plan in place.
Also on October 1, 2025, the annual Medicare market basket net rate increased by 3.2%. We continue to work with both state and federal levels to ensure that our seniors and the workforce that supports their daily needs have a voice in the ever-evolving health care landscape. We are pleased with the outcomes of the 2025 rate year and feel optimistic that state and federal governments will continue to recognize the importance of properly funding the health care needs of the ever-growing senior population. As Barry mentioned, we are increasing our annual 2025 earnings guidance to between $6.48 to $6.54 per diluted share, and our annual revenue guidance between $5.05 billion and $5.07 billion. We have evaluated multiple scenarios and based on the strength of our performance and the positive momentum we have seen in occupancy and skilled mix as well as continued progress on labor, agency management and other operational initiatives, we have confidence that we can achieve these results.
Our 2025 guidance is based on diluted weighted average common shares outstanding of approximately 59 million, a tax rate of 25%, the inclusion of acquisitions closed and expected to be closed through the end of the year, the inclusion of management's expectations for reimbursement rates and with the primary exclusion coming from stock-based compensation. Additionally, other factors that could impact quarterly performance include variations in reimbursements, delays and changes in state budgets, seasonality in occupancy and skilled mix, the influence on the general economy, census and staffing, the short-term impact of our acquisition activities, variation in insurance accruals and other factors. And with that, I'll turn it back over to Barry.
Thanks, Suzanne. As we wrap up, we just want to reemphasize how grateful we are for our operational leaders, our clinicians, our field resources, our service center partners and most importantly, our frontline staff. So much is being done every day to improve the lives of those we care for, and those stories inspire all of us. Their level of dedication in creating an amazing experience for our residents and one another is truly remarkable. They are on a mission to dignify post-acute care in the eyes of the world and they show it through their collective ownership, which has led to these results. Looking ahead, we couldn't be more optimistic about our ability to continue our steady path forward as we build up the momentum from this quarter. And with that, we'll now turn it over to the Q&A portion of our call. Operator, would you please provide the instructions for Q&A.
Questions and answers
Your first question comes from Ben Hendrix with RBC Capital Markets.
I appreciate the commentary about the managed care growth. How should we think about the room to run on the skilled mix side, specifically in the same-store portfolio? And what have you guys seen as a sustainable like fully ramped skill mix in some of your higher-performing facilities? Maybe a Beacon would be a good example of that?
Yes, that's a great question. I would refer you to the steady and consistent growth we've experienced over the past several years, which we expect to continue. Looking at it on a same-store basis, a 5.1% growth is a significant increase over time. However, when you examine previous quarters, it's not entirely unusual. We are pleased with this growth, which is occurring not just in managed care but also in Medicare and other areas. Fundamentally, that's the core of our business. As we navigate transitions and continuously evolve our same-store approach, we remain focused on adding services that cater to the needs of our acute providers and managed care partners. The results you see reflect our collective efforts. Our operators are engaged in thoughtful discussions with partners to identify necessary services and to introduce new skill sets, programs, and capabilities that enable them not only to care for patients but also to achieve the desired outcomes. Spencer or Suzanne, would you like to add anything?
I would just add, you referenced Beacon, the example that I shared earlier. I would say in a lot of these facilities, you don't see necessarily a cap happen even after 5 years. There is potential, for example, in Beacon for that skilled mix to continue to ramp up. There's still over occupancy potential as well. But I would say we have so many of our facilities that are more mature, but still have substantial upside on overall census, but especially on skilled. That really is, like Barry mentioned, when you increase your clinical capacities and you climb the acuity chain, you're going to see that skilled growth even faster than your overall growth. And that's what I hope and I expect we'll continue to see in coming years.
If you look at it from a days basis, that same store and the current quarter is saying that only 31.7% of our same-store days are from skilled. And so the opportunity that we have to grow skilled across the same-store portfolio is very large, and that's why we get super excited about the organic growth not just from the skilled mix, but also from the occupancy mix, as we said in our prepared remarks, sitting at only 83% and that opportunity to have basically tons of buildings actually added if we sold it up to the markets that Barry mentioned.
I appreciate that. I have a quick follow-up regarding some of your newer markets, particularly about Alabama as you expand into that area. Can you discuss the managed care contracting environment you observe in those new markets? Also, how significant is the effort to align that contracting backdrop with what you have in your more established markets?
I'll start and others can add in. It's a process, right? I mean I think, we have relationships with a lot of the contractors because in some of these states like Tennessee, there is overlap with other states that we're already in, but it still takes time to get those contracts in place, and it takes time to make sure that we're ready for the patients, right? As we talked about in the prepared remarks, we're in a clinical business and growing our clinical care sets takes time. And then those partnerships to bond take up the time. And so again, you see acquisitions coming in at that lower skilled mix, you see them at lower rates. And then over time, we're able to grow it.
Your next question comes from the line of A.J. Rice with UBS.
I have a question regarding the deal activity you’ve experienced this year. It seems that the deals in California and Utah have been pursuits of yours for quite some time. Is there something in the current environment that is facilitating this deal activity, which appears to be at an accelerated pace? Are the expectations between buyers and sellers regarding pricing more aligned now? You mentioned a couple of markets where you’re noticing elevated expectations. Are there other buyers entering the scene, or are these deals just not being completed at this moment?
Yes. That's a great question. Regarding the deals we closed, there weren't any unusual market conditions that influenced their timing. For instance, in the Utah deal, the sellers made emotional choices after years of building their businesses. It was a lengthy process for them to decide to sell and transition to something new. In many cases, their decisions were influenced by who they want to carry on their legacy. The California deal was unique, as it involved a portfolio of about 30 buildings, and we acquired a portion with 11 buildings. This added complexity due to the number of operators involved and their licensing processes. In other states, we have noticed instances of pricing that don't align with the underlying fundamentals. Texas has seen financial buyers attempting to assemble portfolios at seemingly unsustainable prices. Our focus is on maintaining discipline. As Barry mentioned, we may encounter a challenging deal environment, but we have various strategies to rely on, so we are not solely dependent on securing deals to sustain our progress.
We are pleased with the deals we've finalized this year and have more scheduled for closure this year and in the first quarter of next year. Predicting the pipeline for 2026 is challenging, but we plan to maintain our current approach. We remain opportunistic, with pricing as an important consideration, and will stay committed to our principles.
Okay. Maybe one other area. We talked before, and it seemed like it's more in the early stages, demo stages. But with this tightness in capacity and behavioral health, it sounded like you had some managed care companies asking you whether you could potentially take some of those residents, they're having trouble finding places on an inpatient psych unit or a facility to place them. I wondered if there was any update in those discussions? And are you seeing any traction with that?
Yes, lots of traction, A.J. We continue to add behavior units in several of our facilities in states like Arizona and California. We've got long-standing relationships with county programs with managed care partners and we continue to build on those and add more capacity as they have demand for it. It is certainly an area that we've got a lot of experience and success with and one we hope to continue to look at growing.
Your next question comes from the line of Raj Kumar with Stephens.
Yes, I appreciate all the commentary on the clinical and quality performance differentiation for Ensign. Maybe just kind of wanted to focus on the higher acuity and the skill mix uptrend over the past few years. And overall, when you kind of look at your local markets, do you get a sense that your facilities are taking market share from other care settings, kind of thinking about inpatient rehab facilities that serve more higher acuity members. Do you get a sense that there's some market share gain from that? Or is it just predominantly being driven by just the demographic demand trends?
Yes, I wouldn't say there's a significant shift between care settings. Remember, we operate as an acute LTAC, and while we can accept some patients in a skilled nursing setting, I wouldn't describe it as a drastic change in settings. It seems more related to the growing demand for higher acuity patients. We're observing an increase in our target demographic, along with a rise in chronic illnesses and comorbidities among our patients. This has prompted us to ensure we adapt accordingly, providing the right training, personnel, and capabilities to care for these patients while continuing to expand our complex services.
Got it. And then maybe just one more on kind of the organic growth potential ahead that you framed in your prepared remarks. Just maybe wondering if you could frame it from a market share perspective in terms of what the market share is in your mature markets? How much more room there is on that front? And then kind of maybe thinking about those transitioning and newly acquired facilities and the market share gain potential there?
Certainly, the organic opportunity is significant, and for good reason. There is considerable potential for growth in all of our key markets as we continue to develop. Suzanne mentioned that establishing managed care partnerships takes time. Building those relationships and navigating the necessary steps results in gains that occur over many years, not just within one or two. When we introduce new services, it's crucial to ensure that the results align with these additions and that our managed care partners are satisfied with the outcomes. This evolution takes time, but there's a lot of potential for growth. We highlight examples of even the most established buildings that continue to achieve success. For instance, buildings like Beacon, which have been around for nearly a decade, show progress not only in overall occupancy but also in ongoing growth in skilled mix as they enhance and diversify their services. Spencer, do you have anything you'd like to add?
I think that's great. There is also a long-standing tailwind that we're working hard to leverage. This is driven by payers' desire to find the lowest-cost environments where high acuity services can be provided. Whether it's through the latest ACO models from CMS or managed care initiatives, this trend positions us well as we continue to develop what Beacon is already beginning to achieve. They are involved in several ACOs, for example. As we establish ourselves as a high-quality, low-cost alternative to other settings, it truly makes a difference and gives us significant optimism for the future.
Your final question will come from the line of Clarke Murphy with Truist Securities.
So just wanted to come back to you guys continue to deliver really solid results and your newer facilities have been a particular area of strength. Can you just kind of give us a sense for if there are any common themes behind how quickly your new facilities are contributing to your overall results? And then I kind of wanted to just touch on your expansion a little bit in the Southeast. Anything you guys have noticed in that region that's meaningfully different than you thought or expected in terms of demand trends, labor availability, ability to attract clinical talent or just kind of anything else in the Southeast?
Maybe I can start a little bit and then Barry and Spencer can add in. I think when you look at the recently acquired locations, after the acquisitions we announced this week, we will have 68 in that category. The revenue contribution from these locations is quite significant compared to previous years, currently accounting for about 15.5% of our revenue this quarter, and it is expected to be even higher in Q4. A large portion of our acquisitions has been contributing to this. We have always noted that when new facilities join us, it takes some time for them to start performing well. The managed care comments and the processes and clinical systems we've discussed all play a role in this. Initially, the contribution to our bottom line is relatively small, but it grows over time.
I mean I think if you zoom out and look at our margins, in spite of the fact that these new acquisitions, and there have been a lot of them aren't really contributing nearly what they should be or what they will, our margins have stayed steady, which speaks to how well they were transitioned because usually, we see somewhat of a drag when we acquired the pace that we have been over the last many months. So they're certainly ahead of schedule from that perspective, but I would tell you that they're nowhere near what their potential will be, obviously. But contributing in a way that is pretty exciting for us as they come in ahead of their pro forma expectations. But as you look at the Southeast and our growing portfolio in that market, we're pretty excited about it. All of those transitions in Alabama and Tennessee have been really, really good transitions. They're not all contributing yet, but we see the potential. We have some amazing leaders out there, a couple of great market leaders and also some really great facility leaders who are really kind of moving the dial and showing some pretty significant signs of what we could be out there, which gives us a lot more confidence to keep growing out there. We continue to look for opportunities to strengthen that Southeast portfolio and add some more buildings.
Yes, I'd like to add to your first question about process changes. When we look at how we acquire, the process is driven by operations. In any given market, there are many operators and clinicians involved in the acquisition, underwriting, and transitioning process. Over the past four or five years, as we've taken on deals, we've learned a great deal, and that knowledge is shared. Our responsibility is to ensure there is a forum for sharing best practices. What you see in some of these cases is that lessons learned are being applied. While we can't guarantee that all acquisitions will proceed more smoothly, overall, we are observing effective practices from operators being widely shared and implemented, which has led to significant improvements.
Great. I have another quick question. I appreciate the higher-level comments about labor that you provided. However, can you share more specific metrics regarding wage inflation and turnover? Are you still not utilizing contract labor to maintain solid results? Additionally, what initiatives are you implementing on the labor front to drive improvement?
Go ahead, Spencer. You can start, and I'll follow up.
Yes. I'll start maybe really granularly and then we can go up from there. We are using some contract labor. It's very, very minimal. It's less than 1/5 of what we used just a couple of years ago kind of in the staffing crisis. What we tend to see is our new acquisitions of the 3 buckets tend to use the most. It's still relatively less than it used to be. But our same-store is very, very, very minimal. I mean it's the small minority of our same store that has any contract labor right now.
Yes. And just to add, certainly, it's close to pre-COVID level. But I would add that wage inflation is back to normal levels, low to mid-single digits. And as we saw before, turnover is probably, I think, on its fourth year of decline for us and just really solid overall labor trends.
There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.