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]

Group 1 - Enhabit, Inc. is a leading national home health and hospice provider [1] - The company will participate in the Jefferies 2025 Healthcare Services Conference [1] - Enhabit's President and CEO Barb Jacobsmeyer and CFO Ryan Solomon will engage in a fireside chat on September 30 at 10:55 a.m. CT [1] Group 2 - The fireside chat will be webcast live and available for replay on Enhabit's investor website [1]

[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights that the report contains forward-looking statements subject to risks and uncertainties, where actual results may differ materially - The report contains forward-looking statements that are subject to known and unknown risks and uncertainties, and actual results may differ materially[9](index=9&type=chunk) - Factors that could cause actual results to differ include regulatory developments, changes in reimbursement rates, general economic conditions, ability to attract and retain personnel, and potential disruptions to information systems[9](index=9&type=chunk) [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents Enhabit, Inc.'s unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, equity, and cash flows [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section provides the unaudited condensed consolidated statements of income, detailing net service revenue, operating income, and net income Condensed Consolidated Statements of Income (in millions, except per share data) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net service revenue | $266.1 | $260.6 | $526.0 | $523.0 | | Operating income | $16.7 | $11.2 | $32.6 | $24.1 | | Net income | $5.7 | $0.4 | $24.1 | $1.3 | | Net income (loss) attributable to Enhabit, Inc. | $5.2 | $(0.2) | $23.0 | $— | | Basic earnings per share attributable to Enhabit, Inc. common stockholders | $0.10 | $— | $0.45 | $— | | Diluted earnings per share attributable to Enhabit, Inc. common stockholders | $0.10 | $— | $0.45 | $— | - Net income attributable to Enhabit, Inc. significantly increased to **$5.2 million** for the three months ended June 30, 2025, from a loss of **$(0.2) million** in the prior year, and to **$23.0 million** for the six months ended June 30, 2025, from **$0 million** in the prior year[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the unaudited condensed consolidated statements of comprehensive income, showing net income and other comprehensive income Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $5.7 | $0.4 | $24.1 | $1.3 | | Total other comprehensive income | $0.2 | $0.1 | $0.2 | $1.4 | | Comprehensive income (loss) attributable to Enhabit, Inc. | $5.4 | $(0.1) | $23.2 | $1.4 | - Comprehensive income attributable to Enhabit, Inc. improved from a loss of **$(0.1) million** to a gain of **$5.4 million** for the three months ended June 30, 2025, and from **$1.4 million** to **$23.2 million** for the six months ended June 30, 2025[15](index=15&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the unaudited condensed consolidated balance sheets, including assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in millions) | Metric | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | | Total assets | $1,225.4 | $1,226.0 | | Total liabilities | $642.5 | $672.1 | | Total stockholders' equity | $577.9 | $548.9 | | Cash and cash equivalents | $37.1 | $28.4 | | Long-term debt, net of current portion | $456.9 | $492.6 | - Cash and cash equivalents increased to **$37.1 million** at June 30, 2025, from **$28.4 million** at December 31, 2024[17](index=17&type=chunk) - Long-term debt, net of current portion, decreased to **$456.9 million** at June 30, 2025, from **$492.6 million** at December 31, 2024[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines the unaudited condensed consolidated statements of stockholders' equity, showing changes from net income and stock-based compensation Condensed Consolidated Statements of Stockholders' Equity (in millions) | Metric | Balance at Dec 31, 2024 | Net income (6 months) | Stock-based compensation expense (6 months) | Balance at Jun 30, 2025 | | :---------------------- | :---------------------- | :-------------------- | :------------------------------------------ | :---------------------- | | Total stockholders' equity | $548.9 | $24.1 | $7.0 | $577.9 | - Net income contributed **$24.1 million** to stockholders' equity for the six months ended June 30, 2025[20](index=20&type=chunk) - Stock-based compensation expense added **$7.0 million** to stockholders' equity for the six months ended June 30, 2025[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in millions) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $28.5 | $26.9 | | Net cash provided by (used in) investing activities | $19.0 | $(1.7) | | Net cash used in financing activities | $(38.9) | $(24.8) | | Increase in cash, cash equivalents, and restricted cash | $8.6 | $0.4 | | Cash, cash equivalents, and restricted cash at end of period | $38.9 | $30.3 | - Net cash provided by investing activities significantly improved to **$19.0 million** in 2025 from a use of **$(1.7) million** in 2024, driven by proceeds from the sale of an investment[23](index=23&type=chunk)[130](index=130&type=chunk) [1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section details Enhabit's significant accounting policies, including its business segments and the impact of its separation from Encompass Health - Enhabit provides Medicare-certified skilled home health and hospice services in **34 states**, managed through two reportable segments: Home Health and Hospice[26](index=26&type=chunk) - The company became an independent public company on July 1, 2022, after separating from Encompass Health Corporation[27](index=27&type=chunk) Net Service Revenue by Payer Source and Segment (Three Months Ended June 30, in millions) | Payer Source | Home Health 2025 | Home Health 2024 | Hospice 2025 | Hospice 2024 | Consolidated 2025 | Consolidated 2024 | | :----------- | :--------------- | :--------------- | :----------- | :----------- | :---------------- | :---------------- | | Medicare | $116.0 | $121.7 | $59.7 | $49.5 | $175.7 | $171.2 | | Medicare Advantage | $63.7 | $61.3 | — | — | $63.7 | $61.3 | | Managed Care | $23.1 | $24.2 | $0.5 | $0.9 | $23.6 | $25.1 | | Medicaid | $1.9 | $2.4 | — | — | $1.9 | $2.4 | | Other | $1.2 | $0.6 | — | — | $1.2 | $0.6 | | Total | $205.9 | $210.2 | $60.2 | $50.4 | $266.1 | $260.6 | [2. Variable Interest Entities ("VIEs")](index=12&type=section&id=2.%20Variable%20Interest%20Entities%20(%22VIEs%22)) This section discusses Enhabit's consolidation of joint venture Variable Interest Entities (VIEs) and its role as primary beneficiary - Enhabit consolidates two joint venture VIEs, with ownership ranging from **60%** to **90%**, and acts as the primary beneficiary by managing operations and making key economic decisions[41](index=41&type=chunk) - The terms of the agreements governing the VIEs prohibit the Company from using the assets of the VIEs to satisfy the obligations of other entities[41](index=41&type=chunk) Consolidated VIEs' Assets and Liabilities (in millions) | Metric | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | | Total assets | $16.7 | $16.7 | | Total liabilities | $1.0 | $1.3 | [3. Long‑Term Debt](index=13&type=section&id=3.%20Long%E2%80%91Term%20Debt) This section details Enhabit's long-term debt, including term loan facilities, revolving credit, and compliance with financial covenants Long-Term Debt Outstanding (in millions) | Metric | Jun 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :----------- | :----------- | | Term loan A facility | $338.3 | $348.0 | | Advances under revolving credit facility | $135.0 | $160.0 | | Finance lease obligations | $6.0 | $7.4 | | Total debt | $479.3 | $515.4 | | Long-term debt, net of current portion | $456.9 | $492.6 | - The Covenant Adjustment Period ended on May 9, 2025, leading to a maximum permitted Total Net Leverage Ratio of **4.5 to 1.0** and a minimum Interest Coverage Ratio of **2.5 to 1.0**[53](index=53&type=chunk) - As of June 30, 2025, Enhabit was in compliance with all financial covenants under the Credit Facilities, with amounts drawn under the Term Loan A Facility and Revolving Credit Facility having an interest rate of **6.7%**[55](index=55&type=chunk)[56](index=56&type=chunk) [4. Income Taxes](index=16&type=section&id=4.%20Income%20Taxes) This section provides information on Enhabit's effective income tax rates and the anticipated impact of new tax legislation Effective Income Tax Rates | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | 28.8% | (33.3)% | | Six Months Ended June 30 | 28.7% | 38.1% | - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is expected to affect current and deferred tax balances, with the company currently evaluating its impact[60](index=60&type=chunk) [5. Derivative Instrument](index=16&type=section&id=5.%20Derivative%20Instrument) This section describes Enhabit's interest rate swap, used to hedge interest rate exposure on its Term Loan A Facility - An interest rate swap with a **$200.0 million** notional value and October 20, 2025, maturity is used to hedge interest rate exposure on the Term Loan A Facility, where the company receives one-month SOFR and pays a fixed rate of **4.3%**[56](index=56&type=chunk)[61](index=61&type=chunk) Cash Flow Hedge Activities (in millions) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $(0.2) | $0.8 | $(0.2) | $(0.5) | | Unrealized gain recognized in other comprehensive income, net of tax | $0.2 | $0.5 | $0.2 | $2.1 | | Reclassified to interest expense, net of tax | — | $(0.4) | — | $(0.7) | | Balance at end of period | $— | $0.9 | $— | $0.9 | [6. Contingencies and Other Commitments](index=17&type=section&id=6.%20Contingencies%20and%20Other%20Commitments) This section addresses Enhabit's exposure to litigation, claims, regulatory proceedings, and outlines minimum amounts due under service contracts - The company is routinely subject to litigation, claims, and regulatory proceedings in the highly regulated healthcare industry, which could materially and adversely affect its financial position[64](index=64&type=chunk) - No claims were deemed probable of loss and reasonably estimable as liabilities as of June 30, 2025, or December 31, 2024[65](index=65&type=chunk) - Minimum amounts due under service and other contracts are **$16.3 million** in 2025, **$8.0 million** in 2026, and **$3.7 million** thereafter[66](index=66&type=chunk) [7. Segment Reporting](index=17&type=section&id=7.%20Segment%20Reporting) This section details Enhabit's two reportable segments, Home Health and Hospice, and the primary measure used to evaluate their performance - Enhabit operates two reportable segments: Home Health (**249 agencies** in **33 states**) and Hospice (**114 locations** in **24 states**), both concentrated in the southern U.S[67](index=67&type=chunk) - Segment Adjusted EBITDA is the primary measure used by the Chief Operating Decision Maker to evaluate performance and allocate resources[67](index=67&type=chunk) Segment Adjusted EBITDA (in millions) | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Home Health | $39.3 | $44.2 | $77.6 | $87.4 | | Hospice | $14.0 | $9.1 | $29.0 | $18.2 | | Total Segment Adjusted EBITDA | $53.3 | $53.3 | $106.6 | $105.6 | [8. Related Party Transactions](index=19&type=section&id=8.%20Related%20Party%20Transactions) This section covers Enhabit's related party transactions, including the expiration of the Transition Services Agreement and a recent investment sale - The Transition Services Agreement (TSA) with Encompass Health, which provided certain services, expired on March 31, 2024[73](index=73&type=chunk) - On March 19, 2025, Enhabit sold its investment interest in TVG Holdings, LLC, for approximately **$21 million**, resulting in a **$19.3 million** gain on sale of investment[76](index=76&type=chunk) - **$20.0 million** of the proceeds from the investment sale were used to reduce debt under the Credit Agreement[76](index=76&type=chunk) [9. Supplemental Cash Flow Information](index=21&type=section&id=9.%20Supplemental%20Cash%20Flow%20Information) This section provides supplemental cash flow disclosures, including cash paid for income taxes and interest, and non-cash investing and financing activities Supplemental Cash Flow Disclosures (in millions) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Cash paid for income taxes, net | $0.6 | $(0.3) | | Cash paid for interest | $17.4 | $22.4 | Non-Cash Investing and Financing Activities (in millions) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Property and equipment additions through finance leases | $0.1 | $4.5 | | Operating lease additions | $6.6 | $5.3 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Enhabit's financial condition, operational results, liquidity, capital resources, and critical accounting estimates [Overview](index=22&type=section&id=Overview) This section provides an overview of Enhabit's business as a leading provider of home health and hospice services across the U.S - Enhabit is a leading provider of home health and hospice services in the U.S., operating **249 home health** and **114 hospice locations** across **34 states** as of June 30, 2025[80](index=80&type=chunk) - The company's operations are principally managed through two operating segments: Home Health and Hospice[81](index=81&type=chunk) [Recent Developments](index=22&type=section&id=Recent%20Developments) This section highlights recent developments, including the end of the Covenant Adjustment Period and branch closures or consolidations - The Covenant Adjustment Period for the Credit Agreement ended on May 9, 2025, providing improved pricing and operational flexibility, including for acquisitions[82](index=82&type=chunk) - Seven Home Health and four Hospice branches were closed or consolidated in the first half of 2025 due to performance[83](index=83&type=chunk) [Factors Affecting Our Performance](index=22&type=section&id=Factors%20Affecting%20Our%20Performance) This section discusses key factors influencing Enhabit's performance, primarily focusing on Medicare reimbursement rates and regulatory changes - Medicare reimbursement rates significantly impact net service revenue and are subject to annual changes[84](index=84&type=chunk) - CMS proposed a **6.4%** estimated decrease in home health payments for fiscal year 2026, which Enhabit is actively advocating against[86](index=86&type=chunk)[88](index=88&type=chunk) - CMS finalized a **2.6%** net increase to hospice payments for fiscal year 2026, effective October 1, 2025[85](index=85&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of Enhabit's consolidated results of operations, including net service revenue, operating income, and net income Consolidated Results of Operations (in millions, except percentages) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | % Change | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | % Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Net service revenue | $266.1 | $260.6 | 2.1% | $526.0 | $523.0 | 0.6% | | Operating income | $16.7 | $11.2 | 49.1% | $32.6 | $24.1 | 35.3% | | Net income | $5.7 | $0.4 | 1,325.0% | $24.1 | $1.3 | 1,753.8% | | Net income (loss) attributable to Enhabit, Inc. | $5.2 | $(0.2) | 2,700.0% | $23.0 | $— | N/A | - Net service revenue growth was driven by a **19.4%** increase in the Hospice segment for the three months, partially offset by a **2.0%** decrease in Home Health[94](index=94&type=chunk) - Adjusted EBITDA increased to **$26.9 million** (YoY **6.7%**) for the three months and **$53.5 million** (YoY **5.9%**) for the six months ended June 30, 2025[105](index=105&type=chunk) [Segment Results of Operations](index=26&type=section&id=Segment%20Results%20of%20Operations) This section analyzes the financial performance of Enhabit's Home Health and Hospice segments, detailing revenue changes and contributing factors Segment Net Service Revenue (in millions) | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------- | :--------------- | :--------------- | :--------------- | :--------------- | | Home Health | $205.9 | $210.2 | $406.5 | $423.4 | | Hospice | $60.2 | $50.4 | $119.5 | $99.6 | - Home Health net service revenue decreased by **2.0%** (3 months) and **4.0%** (6 months) due to a decrease in unit revenue per patient day, primarily from growth in non-Medicare patients[114](index=114&type=chunk)[115](index=115&type=chunk) - Hospice net service revenue increased by **19.4%** (3 months) and **20.0%** (6 months), driven by a **12.3%** increase in average daily census and improved unit revenue per patient day[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Enhabit's liquidity position, including cash, credit facility availability, and cash flows from operating and investing activities - As of June 30, 2025, Enhabit had **$37.1 million** in cash and cash equivalents and **$76.4 million** available under its Revolving Credit Facility[126](index=126&type=chunk) - Net cash provided by operating activities was **$28.5 million** for the six months ended June 30, 2025, an increase from the prior year[128](index=128&type=chunk)[129](index=129&type=chunk) - Net cash provided by investing activities was **$19.0 million**, primarily from the **$21 million** sale of an investment[128](index=128&type=chunk)[130](index=130&type=chunk) [Contractual Obligations](index=32&type=section&id=Contractual%20Obligations) This section details Enhabit's consolidated contractual obligations, including long-term debt, interest, lease obligations, and purchase commitments Consolidated Contractual Obligations as of June 30, 2025 (in millions) | Obligation Type | Total | Current (Jul 1 - Dec 31, 2025) | Long-Term (2026 and thereafter) | | :---------------------------------------------------------------- | :---- | :----------------------------- | :------------------------------ | | Long-term debt, excluding revolving credit facility, finance lease obligations and unamortized debt issuance costs | $339.9 | $11.2 | $328.7 | | Revolving credit facility | $135.0 | $— | $135.0 | | Interest on long-term debt | $91.2 | $30.4 | $60.8 | | Finance lease obligations | $6.4 | $2.7 | $3.7 | | Operating lease obligations | $64.8 | $16.0 | $48.8 | | Purchase obligations | $28.0 | $22.3 | $5.7 | | **Total** | **$665.3** | **$91.4** | **$573.9** | - Expected capital expenditures for maintenance in 2025 are between **$4 million** and **$5 million**[135](index=135&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there have been no material changes to Enhabit's critical accounting estimates since the last annual report - There have been no material changes to critical accounting estimates from those disclosed in the Annual Report on Form 10-K for the period ended December 31, 2024[136](index=136&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=33&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Enhabit's primary market risk is interest rate exposure on variable rate debt, partially mitigated by an interest rate swap, with a 1% rate change impacting cash flow by $2.8 million - Primary market risk is exposure to interest rate changes on variable rate debt (**$135.0 million** Revolving Credit Facility, **$340.0 million** Term Loan A Facility)[138](index=138&type=chunk) - An interest rate swap with a **$200.0 million** notional value helps manage interest rate exposure[139](index=139&type=chunk) - A **1%** increase in interest rates would result in an incremental negative cash flow of **$2.8 million** over the next 12 months, while a **1%** decrease would result in an incremental positive cash flow of **$2.8 million**[140](index=140&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=33&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Enhabit's management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2025[143](index=143&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[144](index=144&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, other information, and a list of exhibits [ITEM 1. LEGAL PROCEEDINGS](index=34&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Enhabit is routinely involved in legal actions and regulatory proceedings, though no pending cases are currently deemed material, with potential for undisclosed "qui tam" lawsuits - Enhabit is routinely subject to legal actions, claims, and regulatory proceedings in the highly regulated healthcare industry[146](index=146&type=chunk) - The company does not believe any pending legal proceedings are currently material, but this assessment could change[146](index=146&type=chunk) - The company may be party to undisclosed "qui tam" lawsuits under the False Claims Act[147](index=147&type=chunk) [ITEM 1A. RISK FACTORS](index=34&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section confirms that there have been no material changes to the risk factors previously disclosed in Enhabit's Annual Report on Form 10-K - No material changes to risk factors were reported since the December 31, 2024 Form 10-K[148](index=148&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=34&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds occurred[149](index=149&type=chunk) [ITEM 5. OTHER INFORMATION](index=34&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter[150](index=150&type=chunk) [ITEM 6. EXHIBITS](index=35&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Form 10-Q, including various agreements, corporate documents, and certifications - The exhibit index includes the Separation and Distribution Agreement, Amended and Restated Certificate of Incorporation and Bylaws, the 2025 Equity and Incentive Plan, and various certifications[154](index=154&type=chunk) [SIGNATURE](index=36&type=section&id=SIGNATURE) This section confirms the official signing of the report on behalf of Enhabit, Inc. by its Chief Financial Officer - The report was signed on behalf of Enhabit, Inc. by Ryan Solomon, Chief Financial Officer, on August 7, 2025[157](index=157&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net service revenue for Q2 2025 was $266.1 million, reflecting a sequential increase of $6.2 million or 2.4% and a year-over-year growth of $5.5 million or 2.1% [21] - Consolidated adjusted EBITDA was $26.9 million, an increase of $300,000 or 0.7% sequentially and $1.7 million or 6.7% year-over-year, with an adjusted EBITDA margin of 10.1%, up 40 basis points from the prior year [21][20] - Adjusted free cash flow year-to-date totaled $27.8 million, representing a 51.9% free cash flow conversion rate [26] Business Line Data and Key Metrics Changes - Home Health revenue was $205.9 million, showing sequential growth of $5.3 million or 2.6%, but down $4.3 million or 2% year-over-year [21] - Home Health adjusted EBITDA totaled $39.3 million, reflecting a sequential increase of $1 million or 2.6% [22] - Hospice revenue reached $60.2 million, with sequential growth of $900,000 or 1.5% and a year-over-year increase of $9.8 million or 19.4% [24] Market Data and Key Metrics Changes - Home Health admissions were up 1.3% year-over-year, with a normalized growth of 2% when accounting for closed branches [10] - Non-Medicare admissions increased by 5.2% year-over-year, primarily within payer innovation contracts [11] - Hospice segment experienced total admissions growth of 8.7% year-over-year, with same-store growth of 5.7% [12] Company Strategy and Development Direction - The company is focused on mitigating the impact of proposed cuts from CMS by evaluating operational levers, including advanced visit per episode management [7][10] - A de novo strategy is being implemented, with plans to open 10 new locations in areas with strong growth potential [13] - The company aims to maintain competitive wage rates to recruit and retain skilled workforce amid a highly competitive labor market [9] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns over CMS's proposed cuts, which could compromise access to home health care services and pressure provider sustainability [16][17] - The company believes it is well-positioned to outperform smaller competitors due to its scalable operating model and investments in technology [18] - Management remains confident in the full-year outlook, updating revenue guidance to a range of $1.06 billion to $1.073 billion [27] Other Important Information - The CEO announced plans to step down in July 2026, emphasizing the need for new leadership to elevate the company [29][30] - The company has successfully reduced overall bank debt by $10.5 million during the quarter [26] Q&A Session Summary Question: How is the company thinking about mitigating the negative impact of the proposed home nursing rule? - Management indicated that various operational levers are being considered, including the advanced PPE initiative, which will be piloted in the coming weeks [34] Question: Can you provide details on the recent payer disruption and its impact? - The company successfully renegotiated a national payer contract, achieving a low double-digit increase in per visit rates, and has since regained a significant portion of the lost census [36][37] Question: What are the longer-term leverage targets before pivoting to M&A or heavier investments? - Management stated that while specific leverage targets have not been provided, the focus remains on deleveraging the balance sheet before considering M&A activities [52] Question: Can you elaborate on the pilot programs and what success will look like? - The pilot programs will focus on operationalizing advanced visit per episode management, with success gauged by the ability to free up capacity and direct it to additional patient loads [62][64]

Financial Performance - Total net service revenue increased by 2.1% year-over-year to $266.1 million in Q2 2025[20] - Hospice net service revenue increased significantly by 19.4% year-over-year to $60.2 million[20] - Net income attributable to Enhabit, Inc was $5.2 million, a substantial increase compared to a loss of $0.2 million in Q2 2024[19, 20] - Adjusted EBITDA increased by 6.7% year-over-year to $26.9 million, with an Adjusted EBITDA margin of 10.1%[19, 20] - Home health net service revenue decreased by 2.0% year-over-year to $205.9 million[19, 20] Operational Metrics - Home Health non-Medicare admissions increased by 5.2% year-over-year[18, 63] - Hospice average daily census (ADC) grew by 12.3% year-over-year[18, 40] - Home Health Medicare ADC decreased by 3.4% compared to a 14.1% decline in the corresponding 2024 period[28] Debt and Liquidity - Bank debt was reduced by $10.0 million in Q2 2025, and is $70.0 million lower than Q1 2024[19] - Total debt decreased from $515.4 million at the end of 2024 to $479.3 million as of June 30, 2025[53] - Available liquidity was $113.5 million as of June 30, 2025[53, 55] Guidance - Updated 2025 net service revenue guidance to $1.06 billion to $1.073 billion[56]

Core Insights - Enhabit reported a modest revenue increase and stronger-than-expected profitability in Q2 2025, with GAAP revenue of $266.1 million, exceeding analyst expectations of $263.4 million, and up from $260.6 million in the prior year [1][2] - Non-GAAP EPS was $0.13, beating the consensus estimate of $0.10 and up from $0.07 a year earlier, prompting management to raise full-year guidance for revenue, adjusted EBITDA, and adjusted EPS [1][2][12] Financial Performance - GAAP revenue increased by 2.1% year-over-year, while non-GAAP EPS rose by 85.7% [2] - Adjusted EBITDA was $26.9 million, up 6.7% from $25.2 million in Q2 2024, with an adjusted EBITDA margin of 10.1%, an increase of 0.4 percentage points [2] - Free cash flow (non-GAAP) increased by 28.2% to $10.9 million compared to $8.5 million in the prior year [2] Business Overview - Enhabit operates in 34 states, providing skilled home health and hospice care, with 249 home health and 114 hospice locations, making it one of the largest standalone operators in the sector [3] - The business model combines Medicare and non-Medicare payers, focusing on optimizing payer contracts and expanding value-based payment arrangements [4] Segment Performance - Home health segment revenue declined by 2.0% to $205.9 million, primarily due to a 4.7% drop in Medicare revenue, while non-Medicare home health revenue rose by 1.7% [5] - The hospice segment saw significant growth, with net service revenue increasing by 19.4% to $60.2 million, and adjusted EBITDA reaching $14.0 million, up 53.8% from the prior year [7] Strategic Initiatives - Enhabit opened three new locations and paid down $10.0 million in debt as part of a deleveraging plan [8] - The company is investing in predictive analytics and technology to enhance operational efficiency and patient outcomes [4][11] Outlook - Management raised FY2025 guidance for net service revenue to between $1.060 and $1.073 billion, adjusted EBITDA to $104 to $108 million, and adjusted EPS to a range of $0.47 to $0.55 [12] - Key factors to monitor include trends in home health Medicare volumes, payer contract negotiations, and the impact of technology on productivity and quality [13]

分组1 - Enhabit reported quarterly earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.10 per share, and showing an increase from $0.07 per share a year ago, resulting in an earnings surprise of +30.00% [1] - The company posted revenues of $266.1 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.14%, and showing an increase from $260.6 million year-over-year [2] - Enhabit shares have underperformed the market, losing about 14.3% since the beginning of the year compared to the S&P 500's gain of 7.1% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $0.11 on revenues of $266.82 million, and for the current fiscal year, it is $0.44 on revenues of $1.06 billion [7] - The Medical Services industry, to which Enhabit belongs, is currently in the top 30% of over 250 Zacks industries, indicating a favorable outlook for the sector [8] - Auna S.A., another company in the same industry, is expected to report quarterly earnings of $0.16 per share, reflecting a year-over-year change of +433.3%, with revenues expected to be $314.67 million, up 7.8% from the previous year [9]