Enhabit(EHAB) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, consolidated net revenue was $258.2 million, a sequential increase of$ 4.6 million or 1.8% quarter over quarter, but a decrease of $2.4 million or 0.9% year over year [27] - Consolidated adjusted EBITDA for Q4 was$ 25.1 million, reflecting a sequential increase of $0.6 million or 2.4%, while remaining relatively flat year over year [28] - Home Health revenue was$ 200.4 million, a decrease of $0.6 million or 0.3% sequentially, primarily due to hurricane-related impacts [31] - Hospice revenue increased to$ 57.8 million, a sequential increase of $5.2 million or 9.9% [36] Business Line Data and Key Metrics Changes - Home Health admissions grew by 1.8% year over year, with non-Medicare admissions up 10.7% [7] - Hospice average daily census (ADC) increased by 8.6% year over year, with total admissions growing by 6.5% [17] - The percentage of home health visits in payer innovation contracts rose from 22% in Q4 2023 to 48% in Q4 2024 [11] Market Data and Key Metrics Changes - The Medicare ADC improved sequentially to 20,818 in Q4, with current Medicare ADC above 20,000 in Q1 2025 [34] - Hospice ADC of 3,729 in Q4 was 3.9% higher than the previous post-spin segment peak in Q4 2022 [38] Company Strategy and Development Direction - The company is focused on executing growth strategies in both home health and hospice segments, with a strong emphasis on payer innovation and operational efficiency [6][19] - A de novo strategy was implemented, successfully opening six new locations in 2024, with plans for fourteen more projects in process [20] - The company aims to optimize its cost structure by closing or consolidating branches, expecting to improve adjusted EBITDA by approximately$ 1 million [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the hospice segment's growth momentum and the effectiveness of the case management model implemented in 2023 [56] - The company anticipates a foundational year in 2024 to set the stage for consistent census growth and improved payer mix in 2025 [46] - Guidance for 2025 includes net service revenue of $1.05 billion to$ 1.08 billion and adjusted EBITDA of $101 million to$ 107 million, reflecting approximately 7% growth at the upper end [43] Other Important Information - The company generated approximately $54 million of adjusted free cash flow in 2024, with a conversion rate of approximately 54% [42] - The company plans to reduce leverage through 2025, having already reduced outstanding debt by approximately$ 40 million in 2024 [41] Q&A Session Summary Question: How does the momentum in Q4 carry over into 2025, especially with the business development team built out? - Management is confident in the hospice segment's growth due to the fully implemented case management model and the establishment of admission departments to improve referral conversion [60] Question: What visibility exists regarding payer innovation contracts and the potential to convert non-payer innovation contracts into better-paying deals? - Management noted ongoing discussions with regional plans on episodic contracts, indicating a renewed interest in moving towards episodic arrangements [64] Question: How do the new opportunities and historical agreements relate to the 2025 guidance? - The guidance includes an expectation of $19 million to$ 21 million in overall revenue improvement based on pricing, without assuming material incremental unit revenues from payer innovation [70] Question: Can you break down the components of hospice revenue per day increase? - The hospice cap accrual benefit was about $1.4 million, and normalizing for that shows consistency with expected Medicare rate increases [72]