Summary of Enhabit (EHAB) FY Conference Call - June 10, 2025 Company Overview - **Company**: Enhabit (EHAB) - **Industry**: Home Health and Hospice Care Key Points Industry and Market Dynamics - The home health industry is experiencing mid-single-digit volume growth, with Medicare Advantage driving higher utilization compared to traditional Medicare, which is declining at approximately -4% [7][10] - The aging population is a significant factor fueling growth in home health services [7] - Enhabit has seen a decline in traditional Medicare volumes but is working to stabilize and improve this through strategic initiatives [10][35] Company Strategy and Performance - Enhabit has focused on payer innovation as a critical part of its strategy to be recognized as a full-service provider [3] - The company has made substantial investments in changing its case management clinical model for hospice, which has shown positive results in growth [4] - Enhabit aims to grow its payer innovation contracts, which have shown a year-over-year increase of approximately 15% [21] - The company has successfully renegotiated contracts with major national and regional payers, enhancing its full-service provider status [14] Financial Metrics and Projections - Enhabit reported a decline in fee-for-service volumes, improving from -13% to -7% year-over-year, with a target to further reduce this to -4% to -5% by the end of the year [35][38] - The company has a goal to maintain a Medicare revenue percentage in line with peers, currently at just under 57% [12] - The average daily census (ADC) for hospice is expected to continue growing due to improved case management and business development efforts [60] Cost Management and Efficiency - Home health cost per day increased by 1% in 2024, with a focus on managing costs through technology and optimizing visit utilization [68][70] - Hospice cost per day is projected to grow by 2% to 3%, reflecting market inflation and operational efficiencies [75] - General and administrative (G&A) costs have been effectively managed, running slightly below the target range of $27 million to $28 million per quarter [76] Regulatory and Reimbursement Environment - Enhabit is advocating for better reimbursement rates from CMS, emphasizing the need for all-payer margin analysis rather than just Medicare margins [49][50] - The company is preparing for potential clawbacks and is actively engaging with MedPAC to address reimbursement challenges [53][54] Future Outlook - Enhabit plans to continue expanding its hospice services, with a focus on early patient acceptance and education for referral sources [57][64] - The company is targeting approximately 10 new sites annually, with a focus on hospice, which is expected to contribute to overall revenue growth [61] - Enhabit aims to leverage best practices from successful markets to enhance performance across its portfolio [39] Additional Insights - The company is focused on maintaining high-quality care while managing costs effectively, ensuring a balanced approach to patient care and operational efficiency [73] - Enhabit is committed to strategic growth through organic means, de novo expansions, and potential M&A opportunities, particularly in the hospice sector [62] This summary encapsulates the key insights and strategic directions discussed during the Enhabit FY Conference Call, highlighting the company's performance, market dynamics, and future growth strategies.

Disclaimer Forward looking statements This presentation cortains historical information, as well as forward-tooking statements within the meaning of Section 27A of the Securities Ad of 1933, as amended, and Sea of the Securities Exchange Ad of 1934, as amended title "Exchange Act") that involve known and unknown risks and relate to, among other things, future events, projections, guidance, leqislative or requlatory developments, strategy or growth opportunities, our future financial performance, our project ...

Financial Performance - Net service revenue for Q1 2025 was $259.9 million, a slight decrease of 0.9% from $262.4 million in Q1 2024[13] - Operating income increased to $15.9 million in Q1 2025, up 23.3% from $12.9 million in Q1 2024[13] - Net income attributable to Enhabit, Inc. was $17.8 million in Q1 2025, compared to $0.2 million in Q1 2024, representing a significant increase[13] - Earnings per share (EPS) for Q1 2025 was $0.35, compared to $0.01 in Q1 2024, reflecting a substantial improvement[13] - For the three months ended March 31, 2025, total net service revenue was $259.9 million, a decrease of 0.9% compared to $262.4 million for the same period in 2024[34] - Medicare revenue for the three months ended March 31, 2025, was $171.4 million, down 3.1% from $176.8 million in 2024[34] - Home Health segment net service revenue was $200.6 million for Q1 2025, down from $213.2 million in Q1 2024, a decrease of 5.9%[68] - Hospice segment net service revenue increased to $59.3 million in Q1 2025, compared to $49.2 million in Q1 2024, reflecting a growth of 20.4%[68] - Total segment adjusted EBITDA for Q1 2025 was $53.3 million, slightly up from $52.3 million in Q1 2024, indicating a growth of 1.9%[68] - Adjusted EBITDA for the three months ended March 31, 2025, increased to $26.6 million from $25.3 million in the prior period[98] Assets and Liabilities - Total assets as of March 31, 2025, were $1,235.9 million, a slight increase from $1,226.0 million as of December 31, 2024[17] - Total liabilities decreased to $662.6 million as of March 31, 2025, down from $672.1 million as of December 31, 2024[17] - Long-term debt as of March 31, 2025, was $489.8 million, a decrease from $515.4 million as of December 31, 2024[44] - The carrying amount of long-term debt under the Term Loan A Facility was $343.1 million as of March 31, 2025[57] - The Company has a $400.0 million term loan A facility and a $350.0 million revolving credit facility, both maturing in June 2027[46] Cash Flow - Cash and cash equivalents increased to $39.5 million in Q1 2025 from $28.4 million in Q4 2024[17] - The company reported a net cash provided by operating activities of $17.9 million for Q1 2025, compared to $17.3 million in Q1 2024[23] - The company had $39.5 million in cash and cash equivalents as of March 31, 2025, up from $28.4 million as of December 31, 2024[116] - Net cash provided by operating activities increased to $17.9 million for the three months ended March 31, 2025, compared to $17.3 million for the same period in 2024[118] Debt and Credit Facilities - Enhabit amended its credit facilities on June 27, 2023, increasing the maximum permitted total net leverage ratio to 5.25 to 1.00 for certain quarters in 2023[49] - The Company amended the Credit Facilities on November 3, 2023, increasing the maximum permitted Total Net Leverage Ratio to 6.75 to 1.00 for the quarters ended December 31, 2023, and March 31, 2024[51] - Enhabit was in compliance with the financial covenants under the Credit Facilities as of March 31, 2025, and forecasted results indicate continued compliance for one year from that date[54] - The interest rate on amounts drawn under the Term Loan A Facility and the Revolving Credit Facility was 6.9% as of March 31, 2025[56] - Enhabit reduced its Total Net Leverage Ratio below the 4.50 times to 1.00 requirement, allowing for improved pricing under the Credit Agreement and operational flexibility[79] Operational Overview - Enhabit, Inc. operates in 34 states, focusing on Medicare-certified skilled home health and hospice services[26] - The company operates 251 home health agencies and 113 hospice provider locations as of March 31, 2025, with a concentration in the southern half of the United States[67] - Enhabit completed its separation from Encompass on July 1, 2022, becoming an independent public company listed under the symbol "EHAB" on the New York Stock Exchange[27] Tax and Legal Matters - The effective income tax rates for the three months ended March 31, 2025, and 2024, were 28.7% and 50.0%, respectively[58] - The effective income tax rate decreased to 28.7% in 2025 from 50.0% in 2024, primarily due to a lower unfavorable rate impact from stock-based compensation[93] - The company is involved in various legal actions and regulatory audits, but does not believe any pending legal proceedings are material to its business[133] - The company may be subject to undisclosed qui tam lawsuits under the False Claims Act, which could involve significant monetary damages[134] Future Outlook - Medicare reimbursement rates are expected to increase by 2.4% for fiscal year 2026, which may positively impact the company's revenue[82] - The company plans to close four additional Home Health and three Hospice branches by the end of Q2 2025, based on performance evaluations[80] Miscellaneous - The Company does not expect the adoption of new accounting standards to have a material impact on its consolidated financial statements[37] - There were no changes in internal control over financial reporting that materially affected the company's financial reporting during the quarter ended March 31, 2025[130] - The company has not disclosed any new products or technologies in this report[132] - There are no updates on market expansion or acquisition strategies mentioned in the report[132] - During the quarter ended March 31, 2025, the company repurchased a total of 167,705 shares of common stock at an average price of $8.10 per share[136]

Financial Data and Key Metrics Changes - In Q1 2025, consolidated net revenue was $259.9 million, reflecting a sequential increase of $1.7 million or 0.7% quarter over quarter, but a decrease of $2.5 million or 1% year over year [16] - Consolidated adjusted EBITDA was $26.6 million, an increase of $1.5 million or 6% sequentially, and up $1.3 million or 5.1% year over year, with an overall EBITDA margin of 10.2%, an increase of 60 basis points from the prior year [17] - The leverage ratio improved to 4.4 times, below the covenant of 4.5 times, allowing for better pricing under existing agreements and additional flexibility for acquisitions [22][24] Business Line Data and Key Metrics Changes - Home Health segment revenue was $200.6 million, a slight increase of $200,000 or 0.1%, with a 3.7% increase in average daily census [18] - Hospice segment revenue reached $59.3 million, reflecting a sequential increase of $1.5 million or 2.6% and a year-over-year increase of $10.1 million or 20.5% [19] - Home Health adjusted EBITDA totaled $38.3 million, reflecting a sequential increase of $2.8 million or 7.9% [18] Market Data and Key Metrics Changes - Non-Medicare admissions in Home Health were up 7.4% year over year, driven by payer innovation contracts [8] - Hospice admissions grew 8% year over year, with same-store growth of 5.2% [10] - Average daily census in hospice reached 38.09 in Q1, an improvement of 2.1% sequentially and 12.3% year over year [20] Company Strategy and Development Direction - The company is focusing on payer contract initiatives to drive growth, with a significant increase in the percentage of home health visits under payer innovation contracts from 30.8% to 44% [9] - A de novo strategy is being implemented, with one new hospice location opened and 13 projects underway [11] - The company aims to continue leveraging technology to improve efficiency and reduce costs, including piloting two internally developed apps [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to build capacity in a normalizing labor market, with a 4% increase in capacity from December to March [29] - The company reaffirmed its 2025 guidance based on strong Q1 results and business momentum [24] - Management noted that the focus remains on balancing admissions to maintain a healthy payer mix, especially in light of negative growth in Medicare [26] Other Important Information - The company completed the transition to outsourced coding resources, expected to deliver $1.5 million in cost savings for the remainder of 2025 [12] - Free cash flow generated in Q1 was approximately $17 million, with a 63.5% conversion rate [21] Q&A Session Summary Question: Thoughts on volume growth within the non-Medicare book of business - Management noted that payer innovation contracts contributed significantly to positive growth, with a focus on hiring to improve average daily census and admissions [26][27] Question: Expectations for labor market inflation - Management indicated a return to normal salary inflation rates of 2% to 3%, with some markets experiencing tighter conditions [28] Question: Initiatives for gaining share in hospice - Management highlighted the combination of increased referrals and the establishment of regional admissions departments to improve conversion rates [31][32] Question: Dynamics behind business per episode in home health - The use of the Metalogics Pulse tool has been critical in optimizing visits per episode, focusing on higher acuity patients [33][34] Question: Capacity and productivity in hospice - Management confirmed that they are maintaining capacity at the branch level and do not anticipate changes in growth trajectory [42][43] Question: Rate increases and inflation protection in payer contracts - Most contracts are two to three years long, with some having escalators tied to quality metrics, and management is actively renegotiating contracts [48][49] Question: Declining research rates - Management acknowledged challenges in securing research for patients, particularly as Medicare Advantage grows, but emphasized a focus on overall census growth [50][52]

Financial Data and Key Metrics Changes - In Q1 2025, consolidated net revenue was $259.9 million, reflecting a sequential increase of $1.7 million or 0.7% quarter over quarter, but a decrease of $2.5 million or 1% year over year [15] - Consolidated adjusted EBITDA was $26.6 million, an increase of $1.5 million or 6% sequentially, and up $1.3 million or 5.1% year over year, with an overall EBITDA margin of 10.2%, an increase of 60 basis points from the prior year [16] - The leverage ratio improved to 4.4 times, below the covenant of 4.5 times, allowing for better pricing under existing agreements and additional flexibility for acquisitions [22][23] Business Line Data and Key Metrics Changes - Home Health revenue was $200.6 million, a slight increase of $200,000 or 0.1%, with a 3.7% increase in average daily census [16][18] - Hospice revenue reached $59.3 million, reflecting a sequential increase of $1.5 million or 2.6% and a year-over-year increase of $10.1 million or 20.5% [19] - Home Health adjusted EBITDA totaled $38.3 million, reflecting a sequential increase of $2.8 million or 7.9% [18] Market Data and Key Metrics Changes - Non-Medicare admissions increased by 7.4% year over year, driven by payer innovation contracts, with 44% of non-Medicare visits in payer innovation contracts in Q1 2025 [8][9] - Hospice segment admissions grew 8% year over year, with same-store growth of 5.2% [10] - Average daily census in hospice reached 38.09, an improvement of 2.1% sequentially and 12.3% year over year [20] Company Strategy and Development Direction - The company is focusing on payer contract initiatives to drive growth, with a goal to balance admissions and maintain a healthy payer mix [6][26] - A de novo strategy is being implemented, with one new hospice location opened and 13 projects underway [11] - The company is piloting two internally developed apps aimed at improving efficiency and communication [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to build capacity and improve average daily census, with expectations of continued growth through the year [29][42] - The company is monitoring labor market conditions and anticipates a return to normal salary inflation rates of 2% to 3% [28] - Management reaffirmed 2025 guidance based on strong Q1 results and business momentum [23] Other Important Information - The company completed the transition to outsourced coding resources, expected to deliver $1.5 million in cost savings for the remainder of 2025 [12] - Free cash flow generated in Q1 was approximately $17 million, with a 63.5% conversion rate [21] Q&A Session Summary Question: Thoughts on volume growth within the non-Medicare book of business - Management noted that payer innovation contracts contributed significantly to positive growth, with a focus on hiring to improve average daily census and admissions [26] Question: Labor market inflation expectations - Management indicated a return to normal inflation rates of 2% to 3%, with some markets experiencing tighter conditions [28] Question: Hospice ADC growth initiatives - Management highlighted the combination of increased referrals and the establishment of regional admissions departments as key drivers of growth [31] Question: Dynamics behind business per episode trends - The use of the Metalogics Pulse tool has been critical in optimizing visits per episode, focusing on higher acuity patients [33] Question: Capacity and productivity in hospice - Management confirmed that they are monitoring capacity at the branch level and do not anticipate changes in growth trajectory [42] Question: Rate increases and inflation protection in payer contracts - Most contracts are 2-3 years in length, with some having escalators tied to quality metrics, and management is actively renegotiating contracts [46] Question: Research recertification rates - Management acknowledged challenges in research due to the growth of Medicare Advantage and emphasized the focus on growing census as a primary driver [49]

First Quarter Earnings Call Supplemental Information May 8, 2025 Disclaimer Forward looking statements This presentation contains historical information, as well as forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that involve known and unknown risks and relate to, among other things, future events, projections, financial guidance, legislative or regulatory develop ...

Core Viewpoint - Enhabit (EHAB) reported quarterly earnings of $0.10 per share, exceeding the Zacks Consensus Estimate of $0.07 per share, marking a 42.86% earnings surprise compared to the previous year's earnings of $0.07 per share [1] Financial Performance - Enhabit posted revenues of $259.9 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 2.56% and down from $262.4 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times [2] Stock Performance - Enhabit shares have increased by approximately 2.9% since the beginning of the year, contrasting with the S&P 500's decline of -4.7% [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.09 on revenues of $267.14 million, and for the current fiscal year, it is $0.37 on revenues of $1.07 billion [7] - The estimate revisions trend for Enhabit is currently favorable, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Medical Services industry, to which Enhabit belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Financial Performance - Net service revenue for Q1 2025 was $259.9 million, a decrease of 1.0% compared to Q1 2024's $262.4 million[6] - Net income attributable to Enhabit, Inc. was $17.8 million, significantly up from $0.2 million in Q1 2024, representing an increase of 8,800.0%[6] - Adjusted EBITDA for Q1 2025 was $26.6 million, reflecting a year-over-year growth of 5.1%[7] - Hospice net service revenue rose to $59.3 million, a 20.5% increase from $49.2 million in Q1 2024[10] - Net income for Q1 2025 was $18.4 million, a significant increase from $0.9 million in Q1 2024, representing a growth of over 1,955%[23] - Adjusted EBITDA for Q1 2025 was $26.6 million, compared to $25.3 million in Q1 2024, reflecting a year-over-year increase of 5.1%[33] - The company reported a diluted earnings per share of $0.35 for Q1 2025, a substantial increase from $0.01 in Q1 2024[25] Admissions and Growth - Home health non-Medicare admissions increased by 7.4% year over year, while total admissions grew by 0.7%[5] - Hospice Adjusted EBITDA surged by 64.8% year over year, reaching $15.0 million[10] Debt and Financial Position - The company reduced bank debt by $25.0 million in the quarter, totaling a $60.0 million reduction year over year[7] - The leverage ratio improved to below 4.5 times, allowing the company to exit the covenant relief period restrictions[2] - Principal payments on debt totaled $25.0 million in Q1 2025, compared to $5.0 million in Q1 2024, indicating a significant increase in debt repayment[23] Guidance and Projections - Full-year 2025 guidance for net service revenue is projected between $1,050 million and $1,080 million, compared to $1,034.8 million in 2024[11] - Adjusted diluted earnings per share for 2025 is guided to be between $0.41 and $0.51, up from $0.21 in 2024[11] Assets and Equity - Total assets as of March 31, 2025, were $1,235.9 million, up from $1,226.0 million as of December 31, 2024, indicating a growth of 0.2%[21] - Cash and cash equivalents increased to $39.5 million in Q1 2025 from $28.4 million in Q4 2024, marking a rise of 39.2%[21] - Total stockholders' equity rose to $568.3 million as of March 31, 2025, compared to $548.9 million at the end of 2024, an increase of 3.1%[21] Cash Flow and Expenses - Cash flows from operating activities provided $17.9 million in Q1 2025, slightly higher than $17.3 million in Q1 2024[23] - Net cash provided by operating activities increased to $17.9 million in Q1 2025 from $17.3 million in Q1 2024, representing a growth of 3.5%[34] - Adjusted free cash flow decreased to $16.9 million in Q1 2025 from $18.6 million in Q1 2024, a decline of 9.1%[35] - General and administrative expenses as a percentage of revenue were 41.4% in Q1 2025, slightly up from 41.0% in Q1 2024[37] Margins and Unusual Items - Gross margin as a percentage of revenue improved to 49.9% in Q1 2025 compared to 48.9% in Q1 2024, indicating a 1.0 percentage point increase[37] - Adjusted EBITDA margin increased to 10.2% in Q1 2025 from 9.6% in Q1 2024, showing a growth of 0.6 percentage points[37] - Unusual or nonrecurring items in Q1 2025 amounted to $1.0 million, down from $3.7 million in Q1 2024, a reduction of 73.0%[35] Strategic Focus - The company plans to continue focusing on restructuring activities and addressing nonrecurring litigation costs as part of its ongoing strategy[33] - The company is focused on integrating technology into operations and successfully completing acquisitions and joint ventures as part of its growth strategy[38] - The company anticipates future financial performance to be influenced by strategic plans, regulatory developments, and economic conditions, with no specific guidance provided[38]

Group 1 - Enhabit (EHAB) is a notable stock in the Medical sector, currently ranked 4 in the Zacks Sector Rank, which evaluates 1003 companies across 16 sector groups [2] - The Zacks Rank system focuses on earnings estimates and revisions, with Enhabit holding a Zacks Rank of 2 (Buy), indicating a positive earnings outlook as the consensus estimate for its full-year earnings has increased by 32.1% over the past three months [3] - Year-to-date, Enhabit has returned approximately 2.8%, outperforming the Medical sector average return of -4.9% [4] Group 2 - Enhabit is part of the Medical Services industry, which includes 58 stocks and currently ranks 84 in the Zacks Industry Rank, with an average return of 0.2% this year, indicating that EHAB is performing better than its peers [5] - Another stock in the Medical sector, Doximity (DOCS), has also shown strong performance with a year-to-date return of 4.1% and a Zacks Rank of 2 (Buy) [4][5] - Investors in the Medical sector should monitor both Enhabit and Doximity for their continued solid performance [6]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher," contrasting with traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Strategy - Momentum investing can be risky as stocks may lose momentum if future growth does not justify high valuations [1] - Identifying the right entry point for fast-moving stocks is challenging, and traditional momentum parameters may not always be reliable [1] Group 2: Bargain Stocks and Screening - Investing in bargain stocks with recent price momentum may be safer, and the Zacks Momentum Style Score is useful for identifying such stocks [2] - The 'Fast-Paced Momentum at a Bargain' screen helps in spotting fast-moving stocks that are still attractively priced [2] Group 3: Enhabit (EHAB) Stock Analysis - Enhabit (EHAB) has shown a price increase of 7% over the past four weeks, indicating growing investor interest [3] - EHAB gained 13.2% over the past 12 weeks, demonstrating its ability to deliver positive returns over a longer timeframe [4] - The stock has a beta of 1.8, indicating it moves 80% higher than the market in either direction [4] Group 4: Valuation and Earnings Estimates - EHAB has a Momentum Score of A, suggesting it is an opportune time to invest [5] - The stock has a Zacks Rank 2 (Buy) due to upward trends in earnings estimate revisions, which attract more investors [6] - EHAB is trading at a Price-to-Sales ratio of 0.43, indicating it is relatively cheap at 43 cents for each dollar of sales [6] Group 5: Additional Investment Opportunities - Besides EHAB, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen [7] - Zacks offers over 45 Premium Screens tailored to different investing styles to help identify winning stock picks [8]