Enhabit(US:EHAB)2025-05-08 15:02Financial 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]