[CEO Commentary](index=1&type=section&id=CEO%20Commentary) Enhabit's CEO, Barb Jacobsmeyer, highlighted strong execution of strategic priorities in Q2 2025, leading to sequential and year-over-year growth in revenue and Adjusted EBITDA - Strong execution of strategic 2025 priorities resulted in sequential and year-over-year growth in revenue and Adjusted EBITDA[2](index=2&type=chunk) - Home health benefited from payer contract initiatives, with admissions growing **1.3% year over year** and Medicare Fee-for-Service census stabilizing[2](index=2&type=chunk) - Hospice achieved its sixth consecutive quarter of growth, with average daily census (ADC) rising **12.3% year over year**[2](index=2&type=chunk) - The company strengthened its balance sheet by reducing bank debt and increasing liquidity, positioning it for success in the second half of 2025[2](index=2&type=chunk) [Recent Company Highlights](index=1&type=section&id=RECENT%20COMPANY%20HIGHLIGHTS) Enhabit reported a net service revenue of $266.1 million and net income of $5.2 million for Q2 2025, with significant growth in hospice Adjusted EBITDA (53.8% YoY) and home health non-Medicare admissions (5.2% YoY), while also reducing bank debt by $10.0 million Consolidated Financial Highlights (Q2 2025) | Metric | Q2 2025 Value | | :------------------------------------- | :------------ | | Net service revenue | $266.1 million | | Net income attributable to Enhabit, Inc. | $5.2 million | | Adjusted EBITDA | $26.9 million | | Earnings per share | $0.10 | | Adjusted diluted earnings per share | $0.13 | - Home health non-Medicare admissions increased **5.2% year over year**, contributing to a total admissions growth of **1.3%** (2.0% normalized for closed branches)[5](index=5&type=chunk) - Hospice average daily census (ADC) increased **12.3% year over year**, marking sequential growth every quarter since Q1 2024[5](index=5&type=chunk) - Hospice Adjusted EBITDA increased **53.8% year over year**[5](index=5&type=chunk) [Financial Results - Consolidated](index=2&type=section&id=FINANCIAL%20RESULTS) Enhabit achieved significant financial improvements in Q2 2025, with increased total net service revenue and Adjusted EBITDA, alongside a substantial reduction in net loss and continued debt prepayment efforts [Quarterly Performance Overview](index=2&type=section&id=Quarterly%20Performance%20Overview) Enhabit reported a 2.1% increase in total net service revenue to $266.1 million in Q2 2025, driven by strong hospice revenue growth, with net income attributable to Enhabit, Inc. significantly improving to $5.2 million from a loss in the prior year, and Adjusted EBITDA growing 6.7% year over year Consolidated Financial Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | % Change | | :------------------------------------- | :------ | :------ | :------- | | Home health net service revenue | $205.9 | $210.2 | (2.0)% | | Hospice net service revenue | $60.2 | $50.4 | 19.4% | | Total net service revenue | $266.1 | $260.6 | 2.1% | | Cost of service | $135.5 | $131.8 | 2.8% | | Gross margin | $130.6 | $128.8 | 1.4% | | General and administrative expenses | $103.2 | $103.0 | 0.2% | | Total operating expenses | $238.7 | $234.8 | 1.7% | | Adjusted EBITDA | $26.9 | $25.2 | 6.7% | | Adjusted EBITDA margin | 10.1% | 9.7% | | | Net income (loss) attributable to Enhabit, Inc. | $5.2 | ($0.2) | 2,700.0% | | Reported diluted EPS | $0.10 | $— | N/A | | Adjusted diluted EPS | $0.13 | $0.07 | 85.7% | - Consolidated Adjusted EBITDA grew **6.7% year over year** and **1.2% sequentially**, reaching **$26.9 million**[8](index=8&type=chunk) [Balance Sheet and Debt Management](index=2&type=section&id=Balance%20Sheet%20and%20Debt%20Management) Enhabit continued its de-levering strategy, marking the fifth consecutive quarter of debt prepayment, reducing bank debt by $10.0 million in Q2 2025, contributing to a total of $45 million in prepayments since Q1 2024, which has lowered interest expense - Consistent de-levering of the balance sheet with the fifth straight quarter of debt prepayment[8](index=8&type=chunk) - Reduced bank debt by **$10.0 million** in Q2 2025[8](index=8&type=chunk) - Total prepayments of **$45 million** since Q1 2024, resulting in a **$3.2 million reduction in interest expense** over the same period[8](index=8&type=chunk) [Segment Results](index=3&type=section&id=SEGMENT%20RESULTS) The Home Health segment experienced a slight revenue decline but growth in non-Medicare admissions, while the Hospice segment demonstrated robust growth in revenue, average daily census, and Adjusted EBITDA [Home Health Segment](index=3&type=section&id=Home%20Health%20Segment) The Home Health segment reported a 2.0% decrease in net service revenue to $205.9 million in Q2 2025, primarily due to a decline in Medicare revenue, despite which non-Medicare admissions grew by 5.2% and total admissions increased by 1.3% year over year, while Segment Adjusted EBITDA decreased by 11.1% Home Health Segment Financials (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | % Change | | :-------------------------- | :------ | :------ | :------- | | Net service revenue | $205.9 | $210.2 | (2.0)% | | Medicare net service revenue | $116.0 | $121.7 | (4.7)% | | Non-Medicare net service revenue | $87.8 | $86.3 | 1.7% | | Cost of service | $107.2 | $106.9 | 0.3% | | Segment Adjusted EBITDA | $39.3 | $44.2 | (11.1)% | | Segment Adj. EBITDA margin | 19.1% | 21.0% | | Home Health Operational Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | | Medicare Admissions | 23,138 | 24,015 | (3.7)% | | Non-Medicare Admissions | 31,774 | 30,209 | 5.2% | | Total Admissions | 54,912 | 54,224 | 1.3% | | Total Average daily census | 42,122 | 41,911 | 0.5% | | Revenue per episode (Medicare) | $2,988 | $2,924 | 2.2% | | Cost per patient day | $28.0 | $28.0 | —% | [Hospice Segment](index=5&type=section&id=Hospice%20Segment) The Hospice segment demonstrated strong growth in Q2 2025, with net service revenue increasing by 19.4% to $60.2 million, supported by a 12.3% rise in average daily census and an 8.7% increase in total admissions, leading to a 53.8% surge in Segment Adjusted EBITDA year over year Hospice Segment Financials (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | % Change | | :-------------------------- | :------ | :------ | :------- | | Net service revenue | $60.2 | $50.4 | 19.4% | | Cost of service | $28.3 | $24.9 | 13.7% | | Gross margin | 53.0% | 50.6% | | | Segment Adjusted EBITDA | $14.0 | $9.1 | 53.8% | | Segment Adj. EBITDA margin | 23.3% | 18.1% | | Hospice Operational Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :-------------------------- | :------ | :------ | :------- | | Total admissions | 3,140 | 2,888 | 8.7% | | Patient days | 359,486 | 320,026 | 12.3% | | Average daily census | 3,950 | 3,517 | 12.3% | | Revenue per patient day | $167.5 | $157.5 | 6.3% | | Cost per patient day | $78.7 | $77.9 | 1.0% | [Guidance](index=5&type=section&id=GUIDANCE) Enhabit has increased its full-year 2025 guidance for net service revenue, Adjusted EBITDA, and Adjusted EPS, reflecting strong Q2 performance and positive momentum, with updated ranges indicating higher expectations across key financial metrics compared to previous guidance Full-Year 2025 Guidance Update | Metric | 2024 Actuals (millions) | 2025 Previous Guidance (millions) | 2025 Updated Guidance (millions) | | :---------------- | :----------- | :--------------------- | :-------------------- | | Net service revenue | $1,034.8 | $1,050 to $1,080 | $1,060 to $1,073 | | Adjusted EBITDA | $100.1 | $101 to $107 | $104 to $108 | | Adjusted EPS | $0.21 | $0.41 to $0.51 | $0.47 to $0.55 | [Conference Call Information](index=5&type=section&id=CONFERENCE%20CALL%20INFORMATION) Enhabit will host an investor conference call on August 7, 2025, at 10 a.m. EDT to discuss its Q2 2025 results, with details for accessing the live call via phone or webcast, as well as replay information, provided - An investor conference call will be held on **August 7, 2025, at 10 a.m. EDT** to discuss Q2 2025 results[13](index=13&type=chunk) - Access to the live call is available via toll-free phone (888) 660-6150 (Conference ID: 5248158) or a simultaneous webcast at https://events.q4inc.com/attendee/680483829[13](index=13&type=chunk) - A replay of the call will be available on the Company's website at http://investors.ehab.com[13](index=13&type=chunk) [About Enhabit Home Health & Hospice](index=5&type=section&id=ABOUT%20ENHABIT%20HOME%20HEALTH%20%26%20HOSPICE) Enhabit Home Health & Hospice is a leading national provider of home health and hospice care, operating 249 home health and 114 hospice locations across 34 states, focusing on expanding patient care in the home through advanced technology and compassionate teams - Enhabit is a leading national home health and hospice provider[14](index=14&type=chunk) - The company operates **249 home health locations** and **114 hospice locations** across **34 states**[14](index=14&type=chunk) - Enhabit leverages advanced technology and compassionate teams to deliver patient care in the home[14](index=14&type=chunk) [Other Information](index=7&type=section&id=OTHER%20INFORMATION) This section clarifies the company's use of non-GAAP financial measures and same-store comparisons, detailing their methodologies and limitations for financial reporting [Note regarding presentation and reconciliation of non-GAAP financial measures](index=7&type=section&id=Note%20regarding%20presentation%20and%20reconciliation%20of%20non-GAAP%20financial%20measures) Enhabit utilizes non-GAAP financial measures like Adjusted EBITDA and Adjusted EPS to provide investors with a clearer view of core business operating results, unaffected by unusual or nonrecurring items, with the methodology for Adjusted free cash flow modified in 2025 to align with management's internal performance evaluation, and prior periods recast for conformity, noting the difficulty in reconciling forward-looking non-GAAP guidance to GAAP measures - Non-GAAP financial measures (e.g., Adjusted EBITDA, Adjusted EPS) are used to facilitate evaluation of core business operating results over multiple periods, excluding unusual or nonrecurring items[16](index=16&type=chunk)[17](index=17&type=chunk) - The methodology for calculating Adjusted free cash flow was modified in 2025 to exclude the impact of unusual or nonrecurring items on cash income taxes and changes in working capital, with prior periods recast[16](index=16&type=chunk) - The company is unable to reconcile guidance for Adjusted EBITDA and Adjusted EPS to corresponding GAAP measures without unreasonable effort due to the unpredictability of certain items[18](index=18&type=chunk) [Note regarding presentation of same-store comparisons](index=7&type=section&id=Note%20regarding%20presentation%20of%20same-store%20comparisons) Enhabit uses 'same-store' comparisons to analyze changes in performance metrics, which include locations open throughout both the current and prior periods, also incorporating market consolidation transactions in existing markets, as isolating their precise incremental impact is challenging - Same-store comparisons are calculated based on home health and hospice locations open throughout both the full current and immediately prior periods[19](index=19&type=chunk) - These comparisons include financial results of market consolidation transactions in existing markets, as their incremental impact is difficult to determine precisely[19](index=19&type=chunk) [Condensed Consolidated Financial Statements](index=8&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents Enhabit's consolidated statements of income, balance sheets, and cash flows, detailing the company's financial performance, position, and liquidity for the reported periods [Condensed Consolidated Statements of Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q2 2025, Enhabit reported net service revenue of $266.1 million, an operating income of $16.7 million, and net income attributable to Enhabit, Inc. of $5.2 million, a significant improvement from a net loss in Q2 2024, with year-to-date figures also showing substantial growth in net income Condensed Consolidated Statements of Income (Q2 and YTD June 30) | (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 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 | $— | | Diluted earnings per share attributable to Enhabit, Inc. common stockholders | $0.10 | $— | $0.45 | $— | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Enhabit's total assets were $1,225.4 million, slightly down from December 31, 2024, with a decrease in total liabilities to $642.5 million, while total stockholders' equity increased to $577.9 million, reflecting improved financial health Condensed Consolidated Balance Sheets (June 30, 2025 vs Dec 31, 2024) | (in millions) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $37.1 | $28.4 | | Total current assets | $205.5 | $192.7 | | Goodwill | $900.0 | $900.0 | | Total assets | $1,225.4 | $1,226.0 | | Total current liabilities | $130.9 | $126.2 | | Long-term debt, net of current portion | $456.9 | $492.6 | | Total liabilities | $642.5 | $672.1 | | Total stockholders' equity | $577.9 | $548.9 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, Enhabit generated $28.5 million in net cash from operating activities, an increase from the prior year, with investing activities providing $19.0 million, primarily due to proceeds from the sale of an investment, and financing activities resulting in a net cash outflow of $38.9 million, reflecting debt payments Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | (in millions) | 2025 | 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 | $30.2 | - Proceeds from the sale of investment contributed **$21.0 million** to investing activities in 2025[25](index=25&type=chunk) - Principal payments on debt and revolving credit facility payments were significant components of cash used in financing activities[25](index=25&type=chunk) [Supplemental Non-GAAP Information](index=11&type=section&id=Supplemental%20Non-GAAP%20Information) This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including Adjusted EPS, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Free Cash Flow, and Adjusted EBITDA Margin, offering a comprehensive view of operational performance [Reconciliation of Earnings Per Share to Adjusted Diluted Earnings Per Share](index=11&type=section&id=Reconciliation%20of%20Earnings%20Per%20Share%20to%20Adjusted%20Diluted%20Earnings%20Per%20Share) Enhabit's Adjusted diluted EPS for Q2 2025 was $0.13, an 85.7% increase from $0.07 in Q2 2024, with this adjustment primarily accounting for unusual or nonrecurring operational items and income tax adjustments, providing a clearer view of ongoing earnings Reconciliation of EPS to Adjusted Diluted EPS (Q2 and YTD June 30) | (actual amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted earnings per share attributable to Enhabit, Inc. common stockholders | $0.10 | $— | $0.45 | $— | | Gain on sale of investment and disposal of assets | — | — | (0.29) | — | | Unusual or nonrecurring items that are not typical of ongoing operations | 0.02 | 0.07 | 0.04 | 0.13 | | Income tax adjustments | 0.01 | — | 0.04 | 0.01 | | Adjusted diluted earnings per share | $0.13 | $0.07 | $0.23 | $0.14 | - Unusual or nonrecurring items in Q2 2025 included costs for restructuring, severance, nonroutine litigation, and third-party legal/advisory fees[27](index=27&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=12&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) Enhabit's Adjusted EBITDA for Q2 2025 was $26.9 million, up from $25.2 million in Q2 2024, with this reconciliation adjusting net income for interest, taxes, depreciation, amortization, stock-based compensation, noncontrolling interests, and unusual or nonrecurring items to reflect operational profitability Reconciliation of Net Income to Adjusted EBITDA (Q2 and YTD June 30) | ($ in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $5.7 | $0.4 | $24.1 | $1.3 | | Interest expense and amortization of debt discounts and fees | 8.7 | 10.9 | 18.1 | 22.0 | | Provision for (benefit from) income taxes | 2.3 | (0.1) | 9.7 | 0.8 | | Depreciation and amortization | 5.7 | 7.6 | 12.0 | 15.4 | | Gain on sale of investment and disposal of assets | — | — | (19.3) | (0.2) | | Stock-based compensation | 3.6 | 2.2 | 7.6 | 4.0 | | Net income attributable to noncontrolling interests | (0.5) | (0.6) | (1.1) | (1.3) | | Unusual or nonrecurring items that are not typical of ongoing operations | 1.4 | 4.8 | 2.4 | 8.5 | | Adjusted EBITDA | $26.9 | $25.2 | $53.5 | $50.5 | [Reconciliation of Income Before Income Taxes and Noncontrolling Interests to Segment Adjusted EBITDA](index=13&type=section&id=Reconciliation%20of%20Income%20Before%20Income%20Taxes%20and%20Noncontrolling%20Interests%20to%20Segment%20Adjusted%20EBITDA) Total Segment Adjusted EBITDA for Q2 2025 remained flat year-over-year at $53.3 million, with the Home Health segment's Adjusted EBITDA at $39.3 million (19.1% margin) and the Hospice segment's Adjusted EBITDA significantly increasing to $14.0 million (23.3% margin), reflecting strong performance in hospice Reconciliation to Total Segment Adjusted EBITDA (Q2 and YTD June 30) | ($ in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income taxes and noncontrolling interests | $8.0 | $0.3 | $33.8 | $2.1 | | Non-segment general and administrative expenses | 27.8 | 32.9 | 55.5 | 63.4 | | Interest expense and amortization of debt discounts and fees | 8.7 | 10.9 | 18.1 | 22.0 | | Depreciation and amortization | 5.7 | 7.6 | 12.0 | 15.4 | | Gain on sale of investment | — | — | (19.3) | — | | Stock-based compensation expense | 3.6 | 2.2 | 7.6 | 4.0 | | Net income attributable to noncontrolling interests | (0.5) | (0.6) | (1.1) | (1.3) | | Total Segment Adjusted EBITDA | $53.3 | $53.3 | $106.6 | $105.6 | Segment Adjusted EBITDA Breakdown (Q2 and YTD June 30) | ($ in millions) | Home Health Q2 2025 | Home Health Q2 2024 | Hospice Q2 2025 | Hospice Q2 2024 | Home Health YTD 2025 | Home Health YTD 2024 | Hospice YTD 2025 | Hospice YTD 2024 | | :-------------------------- | :------------------ | :------------------ | :-------------- | :-------------- | :------------------- | :------------------- | :--------------- | :--------------- | | Net service revenue | $205.9 | $210.2 | $60.2 | $50.4 | $406.5 | $423.4 | $119.5 | $99.6 | | Segment Adjusted EBITDA | $39.3 | $44.2 | $14.0 | $9.1 | $77.6 | $87.4 | $29.0 | $18.2 | | Segment Adjusted EBITDA margin | 19.1% | 21.0% | 23.3% | 18.1% | 19.1% | 20.6% | 24.3% | 18.3% | [Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow](index=14&type=section&id=Reconciliation%20of%20Net%20Cash%20Provided%20by%20Operating%20Activities%20to%20Adjusted%20Free%20Cash%20Flow) Enhabit's Adjusted free cash flow for Q2 2025 was $10.9 million, an increase from $8.5 million in Q2 2024, with this metric adjusting net cash from operating activities for unusual items, capital expenditures for maintenance, other working capital adjustments, and distributions to noncontrolling interests Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (Q2 and YTD June 30) | ($ in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $10.6 | $9.6 | $28.5 | $26.9 | | Unusual or nonrecurring items that are not typical of ongoing operations | 3.4 | 4.8 | 4.4 | 8.5 | | Capital expenditures for maintenance | (1.9) | (0.7) | (2.2) | (2.5) | | Other working capital adjustments | (1.1) | (3.0) | (1.9) | (3.6) | | Distributions paid to noncontrolling interests of consolidated affiliates | (0.1) | (2.2) | (1.0) | (2.2) | | Adjusted free cash flow | $10.9 | $8.5 | $27.8 | $27.1 | - For 2025 and going forward, adjusted free cash flow excludes the cash impact of unusual and nonrecurring items from both cash income tax payments (refunds), net, and working capital and other[36](index=36&type=chunk) [Reconciliation of Gross Margin to Adjusted EBITDA Margin](index=14&type=section&id=Reconciliation%20of%20Gross%20Margin%20to%20Adjusted%20EBITDA%20Margin) Enhabit's Adjusted EBITDA margin improved to 10.1% in Q2 2025 from 9.7% in Q2 2024, with this reconciliation adjusting the gross margin percentage by accounting for general and administrative expenses, stock-based compensation, noncontrolling interests, and unusual or nonrecurring items Reconciliation of Gross Margin to Adjusted EBITDA Margin (Q2 and YTD June 30) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross margin as a percentage of revenue | 49.1% | 49.4% | 49.5% | 49.1% | | General and administrative expenses | (40.7)% | (42.2)% | (41.0)% | (41.6)% | | Stock-based compensation | 1.4% | 0.9% | 1.4% | 0.8% | | Noncontrolling interests | (0.2)% | (0.2)% | (0.2)% | (0.2)% | | Unusual or nonrecurring items that are not typical of ongoing operations | 0.5% | 1.8% | 0.5% | 1.6% | | Adjusted EBITDA margin | 10.1% | 9.7% | 10.2% | 9.7% | [Forward-Looking Statements](index=15&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section serves as a cautionary note regarding forward-looking statements within the press release, emphasizing that they are estimates based on current information and subject to various known and unknown risks and uncertainties, with the company disclaiming any duty to publicly update or revise such information - The press release contains forward-looking statements that are estimates based on current information and involve known and unknown risks and uncertainties[39](index=39&type=chunk) - Factors that could cause actual results to differ materially include regulatory developments, changes in reimbursement rates, economic conditions, ability to attract and retain personnel, and potential disruptions to information systems[39](index=39&type=chunk) - The company undertakes no duty to publicly update or revise forward-looking information[39](index=39&type=chunk) [Contacts](index=15&type=section&id=Contacts) Contact information for Enhabit's investor relations and media inquiries is provided - Investor relations contact: Bob Okunski, investorrelations@ehab.com, 469-860-6061[40](index=40&type=chunk) - Media contact: Erin Volbeda, media@ehab.com, 972-338-5141[40](index=40&type=chunk)

Core Viewpoint - Enhabit (EHAB) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Institutional investors often rely on earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [4]. Company Performance and Outlook - The upgrade for Enhabit suggests an improvement in its underlying business, which could lead to increased stock prices as investors respond positively [5][10]. - For the fiscal year ending December 2025, Enhabit is expected to earn $0.44 per share, with the Zacks Consensus Estimate having increased by 18% 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 historical 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 [9][10].

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.

Q1 2025 Highlights - Home health census showed sequential growth, exiting Q1 above the prior year quarter[12] - Hospice maintained monthly sequential Average Daily Census (ADC) growth for 14 consecutive months[12] - The company reduced its leverage ratio by 0.9x since Q1 2024, falling below 4.5x, ahead of the credit agreement requirement[12] Volume Trends - Home health total admissions decreased by 0.8% from Q1 2024 to Q1 2025[17] - Hospice ADC increased by 8.1% from Q1 2024 to Q1 2025[17] - Home health ADC increased by 2.1% from Q1 2024 to Q1 2025[17] Financial Performance - Home Health Adjusted EBITDA Margin was 17.7% in Q1 2025[19] - The company's net debt to adjusted EBITDA leverage ratio decreased by 0.9 from FY 2023 to Q1 2025[19] - Home Health Medicare revenue as a percentage of segment revenue is declining, with a Q1 2025 value of 55.7%[19] Industry Outlook - The aging population is expected to grow, with a 5% expected annual growth in the target population over the next three years[22] - Home health care is presented as a cost-efficient alternative, with an average Medicare cost per day of $63, compared to $556 for skilled nursing facilities[22]

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]

Financial Performance - Total net service revenue decreased by 10% year-over-year, from $2624 million in Q1 2024 to $2599 million in Q1 2025[20] - Hospice net service revenue increased by 205% year-over-year, reaching $593 million in Q1 2025 compared to $492 million in Q1 2024[20] - Adjusted EBITDA increased by 51% year-over-year, from $253 million in Q1 2024 to $266 million in Q1 2025[20] - Net income attributable to Enhabit, Inc increased significantly by 8,8000%, reaching $178 million in Q1 2025, compared to $02 million in Q1 2024[20] - Adjusted diluted EPS increased by 429%, from $007 in Q1 2024 to $010 in Q1 2025[20] Home Health Segment - Home health net service revenue decreased by 59% year-over-year, from $2132 million to $2006 million[20] - Non-Medicare admissions increased by 74% year-over-year[18] - Cost per patient day decreased by 24% year-over-year[19] Hospice Segment - Hospice average daily census increased by 123% year-over-year[18] - Hospice revenue increased $101 million or 205% year over year[37] - Adjusted EBITDA increased 648% year over year[19]

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]