Core Insights - The company has seen success in its strategies implemented over the past few years, particularly in hospice care, which continues to outperform expectations [1] - The payer strategy in home health is beginning to yield positive results, especially in negotiations with various payers [1] - The company has focused on reducing leverage, which has contributed to improved free cash flow [1] - Overall performance for 2025 is viewed positively, with a strong start to the fourth quarter [1]

Enhabit (NYSE: EHAB) 2025 Conference Summary Company Overview - Enhabit operates in the home health and hospice industry, focusing on providing care services to patients in their homes. Key Points Industry Performance - The hospice segment has continued to outperform expectations, reinforcing the effectiveness of strategies implemented over the past few years [2][4] - Home health payer strategies are beginning to yield positive results, particularly in negotiations with various payers [2][4] Financial Performance - The company reported strong performance in 2025, with a focus on reducing leverage and improving free cash flow [2][5] - Hospice revenues increased by 20% in the quarter, driven by admissions and revenue per patient day [29] - The company anticipates low to mid-single-digit growth for home health and mid to high single-digit growth for hospice in the coming years [4] Proposed Rule Impact - The final rule from CMS is expected to be released by the end of November or early December, with expectations that it will be better than the proposed rule [6][8] - The proposed rule includes a potential 6.4% rate cut, which could create a headwind of $35 million to $40 million for the company [9][14] - Clarity on the final rule is critical for the company to strategize effectively and mitigate potential impacts [10][12] Margin and Cost Management - Hospice margins have benefited from increased volume on fixed costs, indicating durable margin profiles [5] - The company is implementing a pilot program to reduce visits per episode from 15 to 13, which could result in significant cost savings without compromising quality [11][39] Payer Relationships - The company has successfully renegotiated contracts with national payers, resulting in low double-digit increases in rates [17] - Most payer agreements are three-year contracts, with a preference for episodic arrangements to manage patient visits effectively [18] Labor Market and Workforce - The clinical workforce situation has improved compared to the pandemic years, with turnover rates returning to pre-pandemic levels [21][55] - Wage trends are stabilizing at a normal increase of 2.5% to 3% [52] Growth Strategy - Enhabit aims to open 10 new locations each year, with a focus on hospice services [37] - The company is prioritizing de novo strategies and expanding its footprint in markets where it already has home health services [34][36] Market Dynamics - The company has not observed significant changes in market dynamics despite the presence of larger competitors like Humana and UnitedHealth [22] - There is ongoing interest in the Medicare Advantage market, with potential stabilization in the transition back to fee-for-service models [23] M&A Opportunities - The company is exploring strategic M&A opportunities, particularly in smaller and medium-sized assets that do not command high multiples [60][61] - Clarity from the final rule is expected to facilitate better alignment between buyer and seller expectations in the market [62][63] Summary Outlook - Enhabit is positioned well for the end of 2025 and the start of 2026, with strong execution in hospice and improving metrics in home health [78][80] - The company is confident in its ability to navigate the proposed rule changes and maintain operational effectiveness [80]

Core Viewpoint - Enhabit (EHAB) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is influenced by changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in buying or selling actions that affect stock prices [4]. Company Performance and Outlook - The upgrade for Enhabit reflects an improvement in the company's underlying business, suggesting that investors may push the stock price higher due to this positive trend [5]. - For the fiscal year ending December 2025, Enhabit is expected to earn $0.50 per share, with a 9.3% increase in the Zacks Consensus Estimate over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong track record of performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [7]. - Enhabit’s upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Financial Data and Key Metrics Changes - Consolidated net revenue totaled $263.6 million, an increase of $10 million or 3.9% year over year [17] - Consolidated adjusted EBITDA was $27 million, reflecting a sequential increase of $0.1 million or 0.4% and a year-over-year increase of $2.5 million or 10.2% [18] - Net debt to adjusted EBITDA leverage ratio improved to 3.9 times, down from 5.4 times in Q4 2023 [15][26] Business Line Data and Key Metrics Changes - Home Health total admissions increased by 3.6% year over year, with a census increase of 3.7% [7] - Hospice segment revenue reached $63.1 million, reflecting a year-over-year growth of 20% [22] - Home health adjusted EBITDA totaled $33.9 million, a decrease of 7.1% year over year [20] Market Data and Key Metrics Changes - Fee-for-Service Medicare census stabilized with a decline of only 1.4% year over year, compared to a 14.1% decline in Q3 2024 [8] - Non-Medicare admissions increased by 10.4%, contributing to a 2.8% increase in non-Medicare revenue per visit year over year [8] Company Strategy and Development Direction - The company is focused on mitigating pricing headwinds from the CMS 2026 Home Health Final Rule through various strategies [29] - The de novo strategy is positively impacting total growth, with plans to open a total of 10 de novos in 2025 [11] - The company aims to improve operational efficiency and reduce costs to strategically invest in people and technology [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning within the industry, citing experienced leaders and innovative technology [13] - The company anticipates continued growth momentum into Q4 and has updated full-year guidance for revenue and adjusted EBITDA [27][28] - Management highlighted the importance of maintaining staffing productivity to offset wage inflation [44] Other Important Information - The company has successfully reduced overall bank debt by $15.5 million during the quarter, with a total reduction of $100 million since Q4 2023 [26] - Home office expenses improved to 9.1% of revenues, down from 9.9% in the prior quarter, reflecting effective cost management initiatives [25] Q&A Session Summary Question: Can you provide some color on the rate increase from the new payer innovation contract in November? - Management indicated that they cannot disclose specific updates but mentioned that more regional agreements will be coming up for renewal in the next year [33] Question: Can you provide details on the G&A expense reduction? - Management noted that the reduction came from headcount adjustments and efficiencies gained by insourcing capabilities, estimating that $1 million-$1.5 million of the improvement is durable [34] Question: What seasonal factors drive hospice performance at the end of the year? - Management acknowledged that holiday times can be unpredictable, with patients often delaying decisions until after the holidays [38] Question: How long is the typical recontracting cycle for payer innovation contracts? - Management stated that most contracts are typically three years, with some being two years [40] Question: How is the company managing labor costs and wage inflation? - Management reported an uptick in the applicant pool for nursing and therapy, with wage inflation expected to normalize around 3% [44]

Q3 2025 Performance Highlights - Consolidated net service revenue increased by 3.9% year-over-year to $263.6 million[19, 20] - Adjusted EBITDA grew by 10.2% year-over-year to $27.0 million, with an Adjusted EBITDA margin of 10.2%[19, 20] - Net income attributable to Enhabit, Inc was $11.1 million, a 110.1% increase compared to the previous year[19, 20] - Adjusted diluted EPS was $0.17, a 466.7% increase compared to the previous year[19, 20] Home Health Segment - Home health net service revenue was $200.5 million, a decrease of 0.2% year-over-year[19, 20] - Total admissions increased 3.6% year-over-year[18, 68] - Medicare admissions decreased by 5.1% year-over-year, while non-Medicare admissions increased by 10.4%[19, 68] - Cost per patient day improved by 2.1% year-over-year[19, 68] Hospice Segment - Hospice net service revenue increased by 20.0% year-over-year to $63.1 million[19, 20] - Adjusted EBITDA increased 72.0% year-over-year[19] - Average daily census grew by 12.6% year-over-year[18, 38] - Cost per patient day improved by 3.1% year-over-year[19, 44] Balance Sheet and Guidance - Reduced bank debt by $15.0 million in Q3, exiting with a 3.9x leverage ratio[19] - Total debt reduced by $100 million since Q4 2023[51] - Updated 2025 net service revenue guidance to $1.058 billion to $1.063 billion[56]

Core Insights - Enhabit reported quarterly earnings of $0.17 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, and showing significant growth from $0.03 per share a year ago, resulting in an earnings surprise of +41.67% [1] - The company generated revenues of $263.6 million for the quarter ended September 2025, slightly missing the Zacks Consensus Estimate by 0.74%, but up from $253.6 million year-over-year [2] - Enhabit has surpassed consensus EPS estimates three times over the last four quarters, but has only topped revenue estimates once in the same period [2] Financial Performance - The earnings surprise of +41.67% indicates strong performance relative to expectations, while the revenue miss suggests challenges in meeting market forecasts [1][2] - The current consensus EPS estimate for the upcoming quarter is $0.13, with projected revenues of $271.08 million, and for the current fiscal year, the EPS estimate is $0.49 on revenues of $1.06 billion [7] Market Position - Enhabit shares have increased by approximately 4.4% since the beginning of the year, underperforming compared to the S&P 500's gain of 15.1% [3] - The Zacks Rank for Enhabit is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Outlook - The Medical Services industry, to which Enhabit belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, suggesting potential headwinds for stock performance [8] - The performance of Enhabit may be influenced by the overall outlook for the industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Financial Performance - Net service revenue for Q3 2025 was $263.6 million, a 3.9% increase from $253.6 million in Q3 2024[13] - Operating income for Q3 2025 was $16.8 million, compared to an operating loss of $98.0 million in Q3 2024[13] - Net income attributable to Enhabit, Inc. for Q3 2025 was $11.1 million, a significant recovery from a net loss of $110.2 million in Q3 2024[13] - The company reported a comprehensive income of $11.1 million for Q3 2025, compared to a comprehensive loss of $112.0 million in Q3 2024[15] - Earnings per share for Q3 2025 were $0.22, a recovery from a loss per share of $2.20 in Q3 2024[13] - Enhabit, Inc. reported a net income of $35.7 million for the nine months ended September 30, 2025, compared to a net loss of $108.2 million for the same period in 2024[24] - Total net service revenue for the nine months ended September 30, 2025, was $789.6 million, a decrease of 4.5% from $776.6 million in 2024[36] Assets and Liabilities - Total current assets increased to $213.7 million as of September 30, 2025, up from $192.7 million at the end of 2024[17] - Total liabilities decreased to $631.0 million as of September 30, 2025, down from $672.1 million at the end of 2024[17] - Cash and cash equivalents rose to $56.9 million as of September 30, 2025, compared to $28.4 million at the end of 2024[17] - Enhabit’s total liabilities decreased to $592.3 million as of September 30, 2025, from $592.9 million at the same time in 2024[21] - The company’s accounts receivable, net of allowances, showed a decrease of $13.3 million in the nine months ended September 30, 2025, compared to the previous year[24] - Total assets as of September 30, 2025, were $16.3 million, slightly down from $16.7 million as of December 31, 2024, showing a 2.4% decline[46] Cash Flow and Operating Activities - The company generated $66.3 million in net cash provided by operating activities for the nine months ended September 30, 2025, compared to $55.3 million in 2024, reflecting a 19.1% increase[24] - Cash and cash equivalents as of September 30, 2025, were $56.9 million, an increase from $28.4 million as of December 31, 2024[80] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $66.3 million, an increase from $55.3 million in 2024[128] Debt and Financing - As of September 30, 2025, total long-term debt outstanding was $463.8 million, down from $515.4 million as of December 31, 2024, reflecting a 10% decrease[47] - The company has scheduled principal payments due on long-term debt totaling $465.3 million over the next five years, with $5.6 million due in Q4 2025[48] - The company’s long-term debt, net of current portion, was $441.5 million as of September 30, 2025, down from $492.6 million as of December 31, 2024, a decrease of 10.4%[47] - Total long-term debt obligations as of September 30, 2025, amounted to $660.4 million, including $335.0 million in long-term debt and $125.0 million under the revolving credit facility[136] Revenue Segments - The company reported a total of $200.5 million in net service revenue for Home Health for the three months ended September 30, 2025, compared to $201.0 million in 2024[35] - Home Health segment net service revenue for the three months ended September 30, 2025, was $200.5 million, a slight decrease of 0.2% compared to $201.0 million in 2024[110] - Hospice segment net service revenue increased to $63.1 million for the three months ended September 30, 2025, up 19.9% from $52.6 million in 2024[107] - For the nine months ended September 30, 2025, Home Health segment net service revenue totaled $607.0 million, down from $624.4 million in 2024, while Hospice revenue increased to $182.6 million from $152.2 million[71] Expenses - General and administrative expenses for Q3 2025 were $105.5 million, slightly up from $103.8 million in Q3 2024[13] - Total general and administrative expenses for the nine months ended September 30, 2025, were $176.0 million, consistent with $176.3 million in the same period of 2024[72] - Interest expense for the nine months ended September 30, 2025, was $25.3 million, a decrease from $33.1 million in the same period of 2024[80] - Stock-based compensation expense increased to $10.6 million for the nine months ended September 30, 2025, from $7.8 million in the same period of 2024[24] Operational Changes and Strategies - The company is implementing a visit per episode (VPE) management pilot program to enhance operational efficiencies, with plans to expand it to all Home Health branches in Q4 2025[90] - The company closed or consolidated 13 branches in 2025, including eight Home Health and five Hospice branches, with no additional closures anticipated for the remainder of the year[84] - Inflation has primarily impacted labor costs, necessitating ongoing cost control measures to manage expenses effectively[92] Regulatory and Market Conditions - The Centers for Medicare and Medicaid Services (CMS) will implement a net increase of 2.6% to hospice payments effective October 1, 2025, which is expected to positively impact the company's revenue[86] - The proposed 2026 Home Health Rule suggests a 6.4% decrease in payments compared to 2025, with a 2.4% increase in the market basket offset by various adjustments[87] - The company anticipates that the proposed 2026 Home Health Rule, if finalized, could lead to significant reductions in reimbursement rates for the industry[89] Shareholder Activities - During the three months ended September 30, 2025, the company repurchased a total of 33,930 shares of common stock at an average price of $7.88 per share[148] Taxation - The effective income tax rates for the three and nine months ended September 30, 2025, were (38.1)% and 15.4%, respectively, primarily due to a reduction in the valuation allowance of $4.4 million[60] - The effective income tax rate for the three months ended September 30, 2025, was (38.1)%, compared to (0.6)% for the same period in 2024, primarily due to unfavorable permanent differences[101]

Financial Performance - Net service revenue for Q3 2025 was $263.6 million, representing a 3.9% increase from $253.6 million in Q3 2024[4] - Adjusted EBITDA for Q3 2025 was $27.0 million, up 10.2% from $24.5 million in Q3 2024[4] - Net income attributable to Enhabit, Inc. was $11.1 million, a significant recovery from a net loss of $110.2 million in Q3 2024, marking a 110.1% improvement[5] - Operating income for Q3 2025 was $16.8 million, compared to an operating loss of $98.0 million in Q3 2024[20] - Net income attributable to Enhabit, Inc. for the nine months ended September 30, 2025, was $34.1 million, a significant recovery from a net loss of $110.2 million in the same period of 2024[20] - Adjusted EBITDA for the nine months ended September 30, 2025, was $80.5 million, up from $75.0 million in the same period of 2024[27] - Basic earnings per share for Q3 2025 was $0.22, recovering from a loss of $2.20 per share in Q3 2024[25] Revenue Growth - Hospice net service revenue reached $63.1 million, a 20.0% increase from $52.6 million in Q3 2024, with Adjusted EBITDA for hospice rising 72.0% year-over-year[10] - Home health average daily census (ADC) grew by 3.7% year-over-year, while hospice ADC increased by 12.6%[4] - Home health admissions grew by 3.6% year-over-year, with non-Medicare admissions increasing by 10.4%[4] - The updated guidance for 2025 projects net service revenue between $1,058 million and $1,063 million, with Adjusted EBITDA expected to be between $106 million and $109 million[11] Cash Flow and Debt Management - The company reported a net cash provided by operating activities of $66.3 million for the nine months ended September 30, 2025, compared to $55.3 million in 2024[24] - Cash and cash equivalents increased to $56.9 million as of September 30, 2025, compared to $28.4 million at the end of 2024[22] - The company reduced total bank debt by $100.0 million since Q4 2023, resulting in annualized cash interest savings of $19.2 million[7] - The net cash provided by operating activities for the nine months ended September 30, 2025, was $66.3 million, an increase from $55.3 million in 2024[33] Expenses and Margins - General and administrative expenses as a percentage of revenue remained stable at 38.1% for both Q3 2025 and Q3 2024[5] - General and administrative expenses as a percentage of revenue decreased to 40.0% in Q3 2025 from 40.9% in Q3 2024[35] - The gross margin as a percentage of revenue for the three months ended September 30, 2025, was 48.5%, compared to 48.1% in 2024[35] Strategic Developments - The company opened two new hospice de novo locations during the quarter[4] - The company anticipates continued growth opportunities despite potential risks related to regulatory changes and market conditions[36] - The company incurred $19.3 million in gains from the sale of investments during the nine months ended September 30, 2025[24] - The company plans to exclude the cash impact of unusual and nonrecurring items from future adjusted free cash flow calculations[33] Segment Performance - Total Segment Adjusted EBITDA for the nine months ended September 30, 2025, was $157.7 million, compared to $152.1 million in 2024[30] - Segment Adjusted EBITDA for the three months ended September 30, 2025, was $33.9 million, compared to $36.5 million in 2024, reflecting a margin of 16.9% versus 18.2%[30] - For the three months ended September 30, 2025, the company reported a net service revenue of $200.5 million, a slight decrease from $201.0 million in the same period of 2024[30] Unusual Items - The company incurred $2.0 million in unusual or nonrecurring items for the three months ended September 30, 2025, related to restructuring and legal fees[33]

Summary of Enhabit Conference Call Company Overview - Enhabit is a significant operator of home nursing services in the United States, having spun out from Encompass on July 1, 2022, with 249 home health locations and 114 hospice locations across 34 states [4][5] Core Industry Insights - The company is focusing on recruitment and retention post-pandemic, with a shift towards implementing a payer strategy, particularly in Medicare Advantage (MA) [4][6] - Enhabit has been negotiating contracts with Medicare Advantage plans to ensure fair compensation for services, which has been a two-and-a-half-year effort [6][7] Financial Performance and Projections - The company anticipates a potential $35 to $40 million headwind due to proposed cuts from the Centers for Medicare & Medicaid Services (CMS), which includes a significant 9% cut offset by market basket adjustments [7][10] - Enhabit is piloting a strategy to increase visits per episode (VPE), which could yield an annual benefit of $5 million to $8 million for each half visit reduced [13][14] Legislative and Regulatory Environment - There is a proposed legislative bill for a two-year pause on cuts to home health services, citing flawed methodologies and fraudulent data in CMS's proposals [8][9] - The company is preparing for potential disruptions in the industry due to these proposed cuts, focusing on optimizing costs and enhancing growth opportunities in hospice services [11][20] Operational Strategies - Enhabit is enhancing its operational efficiency by focusing on general and administrative (G&A) cost reductions without compromising capability [18][19] - The company is also exploring technology investments to improve clinician efficiency and documentation processes [47][48] Market Position and Competitive Landscape - Enhabit has successfully negotiated contracts with major payers, positioning itself as a full-service provider, which is crucial for maintaining market share [25][27] - The company is experiencing improved cash flows and is considering strategic M&A opportunities in light of potential industry disruptions [21][23] Growth in Hospice Services - Enhabit has seen substantial growth in its hospice platform due to improved care management and business development strategies [48][49] - The company has focused on diversifying referral sources and enhancing response times for patient admissions [49] Future Outlook - The next leadership will have opportunities to leverage technology and innovation to differentiate Enhabit in the market, particularly in attracting more clinicians and increasing market share [53][54] - The company is optimistic about its positioning and growth potential, despite the challenges posed by regulatory changes [54][55]

Company Overview - Enhabit operates nationally across 34 states with approximately 10,600 employees[5] - As of June 30, 2025, Enhabit has 249 Home Health locations and 114 Hospice locations[6] - As of June 30, 2025, 108 Hospice locations are co-located with Home Health locations[7] Industry Trends and Advocacy - The 2028 Medicare skilled home health expenditures are projected to be approximately $41 billion[9] - The 2028 Medicare Hospice expenditures are projected to be approximately $32 billion[9] - Without home health access, mortality rate increases by 41%[19] - Without home health access, episodes with readmissions increase by 34%[19] - Without home health access, episodes with emergency room visits increase 16%[19] - Without home health access, total cost of care increases by approximately $2,500[19] Financial Performance and Debt Management - Home health non-Medicare admissions increased 5.2%[38] - Hospice average daily census grew 12.3% year over year[38] - Since Q1 2024, bank debt has been reduced by $70 million[39] - Leverage ratio decreased from Q4 2023, largely due to $75 million in bank debt reduction during this period[28]