Enhabit (EHAB) Q2 EPS Jumps 86%

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]