Encompass Health Corporation · NYSE:EHC
Encompass Health — FY2022 Earnings Presentation
22 slides from Encompass Health's earnings presentation, Jun 7, 2022
Slide 1: Encompass Health - 2022 Guidance for Encompass Health and Enhabit
Encompass Health - 2022 Guidance for Encompass Health and Enhabit June 7, 2022
Slide 2: Forward-looking statements
Forward-looking statements The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect Encompass Health and Enhabit’s current outlooks, views and plans with respect to future events, including the timing and effects, such
Slide 3: Spin off of Enhabit
Spin off of Enhabit u Spin off of Enhabit Home Health and Hospice (“Enhabit”) expected on July 1, 2022 The spin off is expected to be tax free to EHC shareholders. (A Private Letter Ruling request has been filed with the IRS.) Form 10 filed May 25, 2022 u Encompass Health Corporation (“Encompass
Slide 4: 2022 Encompass Health consolidated guidance
2022 Encompass Health consolidated guidance* 2022 Prior 2022 Updated Guidance Guidance ($ in millions, except per share data) Net Operating Revenue $5,380 to $5,500 $5,330 to $5,420 Adjusted EBITDA(1) $1,015 to $1,065 $1,005 to $1,045 Adjusted earnings per share from continuing operations attributab
Slide 5: 2022 Guidance for Encompass Health (Inpatient Rehabilitation)
2022 Guidance for Encompass Health (Inpatient Rehabilitation) 2021 Adjusted* 2022 Guidance** ($ in millions, except per share data) Net Operating Revenue $4,015 $4,250 to $4,300 Adjusted EBITDA(1) $817 $820 to $840 Adjusted earnings per share from continuing operations attributable to $2.93 $2.77 to
Slide 6: 2022 Guidance considerations for Encompass Health
2022 Guidance considerations for Encompass Health u Encompass Health will operate a single reportable segment: inpatient rehabilitation. An increase of 1.9% in Medicare pricing, prior to the resumption of sequestration Revenue reserves related to bad debt of approximately 2.0% of net operating r
Slide 7: Adjusted free cash flow assumptions for Encompass Health
Adjusted free cash flow(3) assumptions for Encompass Health Certain cash flow items 2021 2022 ($ in millions) Adjusted* Assumptions Cash interest payments expected Cash interest payments (net of to decrease due to debt amortization of debt discounts $156.6 $140 to $150 repayment with distribution pr
Slide 8: Uses of free cash flow for Encompass Health
Uses of free cash flow for Encompass Health 2021 2022 ($ in millions) Adjusted* Assumptions IRF bed expansions $48.6 $40 to $50 New IRFs Growth in - De novos 314.9 320 to 340 core business - Acquisitions 1.1 opportunistic - Replacement IRFs and other 48.9 10 to 20 $413.5 $370 to $410 Debt Debt redem
Slide 9: 2022-2026 Growth targets
2022-2026 Growth targets for Encompass Health 6 to 10 100 to 150 6% to 8% De novos bed additions Discharge per year per year CAGR Strong and sustainable business fundamentals Strong demographic tailwinds Multi-faceted growth strategy Highly fragmented sector presents acquisition and joint vent
Slide 10: 2022 Guidance for Enhabit
2022 Guidance for Enhabit 2021 2022 Adjusted* Guidance* ($ in millions, except per share data) Net Service Revenue $1,107 $1,080 to $1,120 Adjusted EBITDA(1) $197 $165 to $185 Adjusted earnings per share attributable to $2.35 $1.64 to $2.01 Enhabit(2) * Reflects Enhabit on a carve-out basis, net of
Slide 11: 2022 Guidance considerations for Enhabit
2022 Guidance considerations for Enhabit Enhabit will operate two reportable segments: home health and hospice. Home Health An increase of 3.4% in Medicare pricing prior to resumption of sequestration Cost per visit increase of 4% to 5% Hospice Capacity constraints related to staffing early in
Slide 12: Adjusted free cash flow assumptions for Enhabit
Adjusted free cash flow(3) assumptions for Enhabit Certain cash flow items 2021 2022 ($ in millions) Adjusted* Assumptions Increase associated with Cash interest payments (net of borrowings under new revolver amortization of debt discounts $0.3 $7 to $12 and term loan and fees)** Cash payments for i
Slide 13: Uses of free cash flow for Enhabit
Uses of free cash flow for Enhabit 2021 2022 ($ in millions) Adjusted* Assumptions Growth in Home health and hospice core $117.5 $50 to $100 acquisitions** business Debt Debt redemptions (borrowings), net*** $1.2 TBD reduction * Reflects Enhabit on a carve-out basis. ** Includes approximately $16 mi
Slide 14: 2022-2026 Growth targets for Enhabit
2022-2026 Growth targets for Enhabit ~10% 10% to 15% $50 million Home Health Hospice to $100 million admissions admissions Acquisitions CAGR CAGR per year Strong and sustainable business fundamentals Strong demographic tailwinds Multi-faceted growth strategies with clearly defined areas of oppor
Slide 15: Appendix
Appendix Encompass Health 15
Slide 16: Net cash provided by operating activities reconciled to Adjusted EBITDA
Encompass Health Net cash provided by operating activities reconciled to Adjusted EBITDA(1) For the Year Ended December 31, 2021 ($ in millions) Net cash provided by operating activities $ 715.8 Interest expense and amortization of debt discounts and fees 164.6 Equity in net income of nonconsolidate
Slide 17: Reconciliation of net cash provided by operating activities to adjusted free cash flow
Encompass Health Reconciliation of net cash provided by operating activities to adjusted free cash flow(3) For the Year Ended December 31, 2021 ($ in millions) Net cash provided by operating activities $ 715.8 Impact of discontinued operations 0.5 Net cash provided by operating activities of continu
Slide 18: Adjusted EPS
Encompass Health Adjusted EPS(2) For the Year Ended December 31, 2021 Adjustments Remove Costs Change in Gain on Home Associated Costs Fair Consolidation Health Loss on Income with the Associated Market of Former and Early Tax Strategic with the Value of Equity Hospice Encompass As Exting. Adjustme
Slide 19: Enhabit Reconciliation of net income to Adjusted EBITDA
Enhabit Reconciliation of net income to Adjusted EBITDA(1) For the Year Ended December 31, 2021 ($ in millions) Net Income $ 112.9 Income tax expense 35.1 Interest expense 0.3 Depreciation and amortization 36.9 Loss on disposal or impairment of assets (0.8) Stock-based compensation 3.6 Stock-based c
Slide 20: Enhabit Reconciliation to adjusted free cash flow
Enhabit Reconciliation of net cash provided by operating activities to adjusted free cash flow(3) For the Year Ended December 31, 2021 ($ in millions) Net cash provided by operating activities $ 123.3 Capital expenditures for maintenance (5.4) Distributions paid to noncontrolling interests of consol
Slide 21: Enhabit Adjusted EPS
Enhabit Adjusted EPS(2) For the Year Ended December 31, 2021 Adjustments Gain on Consolidation of Former Equity As Income Tax Transaction Method Joint Additional Shares Enhabit Reported Adjustments Costs Venture(6) Outstanding As Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 1
Slide 22: End notes
End notes (1) Adjusted EBITDA is a non-GAAP financial measure. Management and some members of the investment community utilize Adjusted EBITDA as a financial measure. This measure is not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. In