Encompass Health (US:EHC)2025-10-31 16:14Financial Performance - Net operating revenues for Q3 2025 reached $1,477.5 million, a 9.3% increase from $1,351.0 million in Q3 2024[16] - Total operating expenses for Q3 2025 were $1,233.9 million, up from $1,141.9 million in Q3 2024, reflecting an increase of 8.0%[16] - Net income attributable to Encompass Health for Q3 2025 was $126.5 million, compared to $108.2 million in Q3 2024, representing a 16.0% increase[16] - Earnings per share (EPS) for Q3 2025 was $1.26, up from $1.09 in Q3 2024, indicating a 15.6% growth[16] - Comprehensive income attributable to Encompass Health for Q3 2025 was $126.7 million, up from $108.2 million in Q3 2024[18] - For the three months ended September 30, 2025, net income was $172.7 million, compared to $145.9 million for the same period in 2024, representing an increase of 18.5%[23] - Net income for the nine months ended September 30, 2025, was $556.0 million, an increase from $432.4 million in 2024, representing a growth of 28.5%[28] - Adjusted EBITDA for Q3 2025 was $300.1 million, up from $269.3 million in Q3 2024, reflecting a 11.5% growth[81] - Adjusted EBITDA for the nine months ended September 30, 2025, was $932.3 million, an increase of 14.5% from $814.1 million in the same period of 2024[150] Assets and Liabilities - Total assets as of September 30, 2025, were $6,865.7 million, an increase from $6,534.7 million as of December 31, 2024[20] - Current liabilities decreased to $762.0 million as of September 30, 2025, down from $841.0 million at the end of 2024[20] - Encompass Health's shareholders' equity increased to $2,373.8 million as of September 30, 2025, compared to $2,067.0 million at the end of 2024[20] - The total shareholders' equity at the end of September 2025 was $3,131.9 million, up from $2,669.1 million at the end of September 2024, reflecting a growth of 17.3%[25] - Long-term debt, net of current portion, stood at $2,393.9 million as of September 30, 2025, compared to $2,359.2 million at the end of 2024[60] - Total current liabilities as of September 30, 2025, were $577.3 million, down from $677.3 million as of December 31, 2024[144] - Long-term debt, net of current portion, was $2,328.8 million as of September 30, 2025, compared to $2,273.3 million as of December 31, 2024[144] Cash Flow and Capital Expenditures - Net cash provided by operating activities increased to $829.6 million in 2025 from $724.0 million in 2024, reflecting a rise of 14.6%[28] - The company made capital expenditures of approximately $507 million during the nine months ended September 30, 2025, and expects to spend between $785 million and $820 million for capital expenditures in 2025[137] - The company expects to fund capital expenditures using cash on hand and borrowings under its revolving credit facility[137] Shareholder Returns - Dividends declared for the nine months ended September 30, 2025, were $54.0 million, with a per-share dividend of $0.53, compared to $47.8 million for the same period in 2024[25] - The company repurchased $81.7 million worth of common stock in the open market during the nine months ended September 30, 2025[25] - The company repurchased a total of 221,894 shares of its common stock during the three months ended September 30, 2025, at an average price of $112.69 per share[161] - The maximum number of shares that may yet be purchased under the repurchase plans is approximately $408.5 million[161] Operational Highlights - The company operated 170 inpatient rehabilitation hospitals as of September 30, 2025, with a significant concentration in Florida and Texas[33] - The company expanded its capacity by adding 140 new beds across existing hospitals and new facilities in 2025[89] - The company plans to open new hospitals in St. Petersburg, Amarillo, and Lake Worth by Q4 2025, each with 50 new beds[90] - Discharges increased by 5.0% to 65,839 in Q3 2025, with same-store discharges growing by 2.9%[110] - Net patient revenue per discharge grew by 3.3% to $21,679 in Q3 2025, primarily due to increased reimbursement rates[110] Regulatory and Market Environment - The healthcare industry faces ongoing regulatory challenges, with the One Big Beautiful Bill Act expected to impact Medicaid programs starting in 2027[96] - The company is facing challenges in maintaining hospital volumes due to competition and regulatory burdens, which may impact future growth[101] - The company has engaged with the Medicare Administrative Contractor and CMS to address inconsistencies in the review process affecting claim validation rates[99] - The company expects a net increase of approximately 2.9% in Medicare payment rates effective October 1, 2025, due to the 2026 Final IRF Rule[97] - Medicare accounted for 64.1% of total net operating revenues for the three months ended September 30, 2025, down from 65.4% in the same period of 2024[102] Miscellaneous - The company reported a loss from discontinued operations of $0.4 million in Q3 2025, compared to a loss of $0.7 million in Q3 2024[16] - The company did not record any impairment charges related to its available-for-sale debt securities during the three and nine months ended September 30, 2025[57] - There were no changes in internal control over financial reporting that had a material effect during the quarter ended September 30, 2025[155] - The company continues to face regulatory and legal challenges in the healthcare industry, which may impact its financial position and operations[157]