Encompass Health Corporation · NYSE:EHC
Encompass Health — Non-Deal Roadshow (June 2022)
40 slides from Encompass Health's roadshow presentation, Jun 13, 2022
Slide 1: Enhabit Home Health & Hospice June 2022
Enhabit Home Health & Hospice June 2022
Slide 2: Disclaimer
Enhabit Home Health & Hospice 2 Disclaimer This presentation and the accompanying oral presentation (this “Presentation”) has been prepared by Enhabit, Inc. (the “Company”) solely for information purposes. This Presentation and its contents are confidential and may contain material non-public inform
Slide 3: Table of Contents
Enhabit Home Health & Hospice 3 Table of Contents • Introduction • Industry Overview • Competitive Strengths & Investment Highlights • Company Overview • Financial Overview • Appendix 1 2 5 4 3
Slide 4: Introduction
Enhabit Home Health & Hospice 4 Introduction 1
Slide 5: Enhabit at a Glance
Enhabit Home Health & Hospice 5 Enhabit at a Glance 1. Pro forma adjusted EBITDA includes additional corporate overhead and standalone costs totaling ~$28mm; 2. Public peers include Amedysis, Inc. and LHC Group, Inc. We are a leading provider of home health and hospice services that strives to provi
Slide 6: Overview | Home Health
Enhabit Home Health & Hospice 6 Overview | Home Health Based on 2019 Medicare expenditures As of June 30, 2021 Excludes corporate employees not assigned to either home health or hospice Trailing 12 months through June 30, 2021 Leading Provider of Medicare-Certified Skilled Home Health Services(1) 25
Slide 7: Overview | Hospice
Enhabit Home Health & Hospice 7 Overview | Hospice 1. Based on 2020 Medicare expenditures; 2. As of March 31, 2022; 3. Excludes corporate employees not assigned to either home health or hospice; 4. For the twelve months ended December 31, 2021. Leading Provider of Medicare-Certified Hospice Services
Slide 8: Active History of Growth and Expansion Initiatives
Enhabit Home Health & Hospice 8 Active History of Growth and Expansion Initiatives… Home Health & Hospice Locations Over Time Note: Acquired locations include incremental acquisitions to the headline transaction. Note: As of year-end except Q1 2022. 1. The 2019–2020 decline is due to the merging of
Slide 9: …That Has Led to a Scaled Footprint
Enhabit Home Health & Hospice 9 …That Has Led to a Scaled Footprint 1. Based on 2020 Home Health Medicare revenues; 2. As of March 31, 2022. 11 states where we are #1 or #2 in Home Health(1) 85 Hospice locations co-located with Home Health locations(2) ~69% of total Medicare home health spend occurs
Slide 10: Industry Overview
Enhabit Home Health & Hospice 10 Industry Overview 2
Slide 11: Industry Opportunity
Enhabit Home Health & Hospice 11 Industry Opportunity • In 2020, ~$124 billion(1) was spent on broader home health expenditures. This is expected to grow at a 6.3% CAGR until at least 2028 • Medicare skilled home health and hospice expenditures in 2020 were ~$17 billion and ~$22 billion, respectivel
Slide 12: Growth in the Home Health & Hospice Space is Driven by Several Tailwinds
Enhabit Home Health & Hospice 12 Growth in the Home Health & Hospice Space is Driven by Several Tailwinds • As of 2020, there were over 11,300 home health agencies operating, near an all-time high. Similar to home health, the hospice space is highly fragmented with 1.7 million Medicare beneficiaries
Slide 13: Our Approach to Home Health & Hospice Services
Enhabit Home Health & Hospice 13 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 20 00 20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18 20 20 20 22 20 24 20 26 20 28 20 30 20 32 20 34 20 36 20 38 20 40 65 to 74 75 to 84 85 to 94 95 or Older Our Approach to Home Health & Hospice Services Prioritizi
Slide 14: Competitive Strengths & Investment Highlights
Enhabit Home Health & Hospice 14 Competitive Strengths & Investment Highlights 3
Slide 15: Scale and Density
Enhabit Home Health & Hospice 15 Scale and Density We are able to drive low cost of care, high-quality outcomes and high standard of care for our patients through economies of scale and density in key states #3 #1 #1 #1 #1 #1 #1 #2 #1 #3 #2 #4 #4 #3 #2 #1 #3 11 states where we hold the #1 or #2 posi
Slide 16: Consistent and Disciplined Operating Model | Low-Cost Provider
Enhabit Home Health & Hospice 16 Consistent and Disciplined Operating Model | Low-Cost Provider • In 2021, our cost per visit of $83 was 15.8% lower than the average of our publicly- traded peers • Our disciplined operating model positions us to: – Achieve a high level of clinical quality more effic
Slide 17: Clinical Expertise and High-Quality Outcomes
Enhabit Home Health & Hospice 17 Clinical Expertise and High-Quality Outcomes National Average Enhabit % Above Average QoPC Star Rating(1) 3.3 3.7 12% HHCAHPS Star Rating(2) 3.5 3.7 6% 30-Day Hospital Readmission Rate(3) 17.3% 15.3% 200 bps better Standardized Protocols Motivated Clinicians Discipli
Slide 18: Multi-faceted Growth Strategy with Clearly Defined Areas of Opportunity
Enhabit Home Health & Hospice 18 Multi-faceted Growth Strategy with Clearly Defined Areas of Opportunity We have a history of executing transactions in the fragmented Home Health & Hospice industry and are well positioned to continue robust top line growth Drive organic growth at existing operations
Slide 19: Company Overview
Enhabit Home Health & Hospice 19 Company Overview 4
Slide 20: Our Patients | Home Health
Enhabit Home Health & Hospice 20 Our Patients | Home Health 1. Avalere Health and Alliance for Home Health Quality and Innovation Home Health Chart Book 2021; 2. Represents data as of 2021A. • For Medicare, a patient must be confined to the home and need intermittent skilled services • The patient m
Slide 21: Specialty Programs | Home Health
Enhabit Home Health & Hospice 21 Specialty Programs | Home Health Cardiopulmonary Post-Operative Community Care Balance & Fall Prevention Coordinated Care Services Heart Failure COPD Hypertension Heart & Vascular Hip & Knee Shoulder Spine Foot & Ankle General Surgery Orthopedics Diabetes Memory Care
Slide 22: Our Patients | Hospice
Enhabit Home Health & Hospice 22 Our Patients | Hospice • To be eligible for hospice care, a patient must be diagnosed with a terminal illness with a prognosis of six months or less • Patients are able to stay on hospice services past six months if their physician and care team decide it is still th
Slide 23: Geographic Presence by State
Enhabit Home Health & Hospice 23 Geographic Presence by State Note: Represents data as of March 31, 2022. 1. Home health or hospice certificate of need state or U.S. territory. State Home Health Hospice Total Missouri 1 1 2 Montana 3 5 8 Nevada 3 1 4 New Mexico 5 3 8 North Carolina(1) 6 — 6 Ohio 1 —
Slide 24: Comprehensive Compliance Program
Enhabit Home Health & Hospice 24 Comprehensive Compliance Program Program Overview • Our comprehensive compliance program helps ensure we meet regulatory and legal requirements applicable to our business • Process is supported by technology systems and highly coordinated workflows between all involv
Slide 25: Experienced Management Team
Enhabit Home Health & Hospice 25 Experienced Management Team Barb Jacobsmeyer, Chief Executive Officer Crissy Carlisle, Chief Financial Officer • Named CEO in June 2021 • Previously served as the Encompass Health’s Executive Vice President of Operations since 2016 • Joined Encompass Health in 2007 a
Slide 26: Financial Overview
Enhabit Home Health & Hospice 26 Financial Overview 5
Slide 27: Enhabit's Financial Highlights At-a-Glance
Enhabit Home Health & Hospice 27 Enhabit’s Financial Highlights At-a-Glance Significant Free Cash Flow Generation(1) Proven De Novo and Acquisitions Strategy Strong Admissions Growth Scalable Business Model ~1.8% Hospice ’20–’21FY Admissions CAGR 31 De Novo Expansions Since 2015 ~75% Average Free Ca
Slide 28: Basis of Presentation | Historical Financials
Enhabit Home Health & Hospice 28 Basis of Presentation | Historical Financials Historical Financials • Financial information for historical periods through December 31, 2021 presented consistent with Home Health & Hospice’s audited carve out financial statements, adjusted to reflect the following: −
Slide 29: Financial Overview
Enhabit Home Health & Hospice 29 Financial Overview ($ in millions) Net Service Revenue Gross Margin Pro Forma Adjusted EBITDA Pro Forma Free Cash Flow(1) % Growth – (1.3)% 2.6% % Margin % Margin % Conversion(2) Note: Please reference appendix for non-GAAP reconciliation. 1. Pro Forma Free Cash Flow
Slide 30: Consolidated Financial Summary
Enhabit Home Health & Hospice 30 Consolidated Financial Summary Fiscal Year Ended December 31st ’19–’21 CAGR($ in Millions) 2019 2020 2021 Home Health $918 $878 $897 (1.1)% Hospice 174 201 209 9.7 % Net Service Revenue $1,092 $1,078 $1,107 0.7 % % Growth 17.3% (1.3)% 2.6 % Home Health $473 $434 $474
Slide 31: Home Health Historical Performance
Enhabit Home Health & Hospice 31 Home Health Historical Performance Fiscal year ending December 31st CAGR ’19A–’21($ in millions, except where otherwise noted) 2019 2020 2021 Net Revenue $918 $878 $897 (1.1)% (–) Cost of Services (446) (444) (424) (2.5)% Gross Margin $473 $434 $474 0.1 % (–) A&G (24
Slide 32: Hospice Historical Performance
Enhabit Home Health & Hospice 32 Hospice Historical Performance Fiscal year ending December 31st CAGR ’19A–’21($ in millions, except where otherwise noted) 2019 2020 2021 Net Revenue $174 $201 $209 9.7 % (–) Cost of Services1 (82) (94) (90) 5.1 % Gross Margin $92 $107 $119 13.6 % (–) A&G (43) (60) (
Slide 33: Capital Expenditures Overview
Enhabit Home Health & Hospice 33 Capital Expenditures Overview ($ in millions) Capital Expenditures % of Consolidated Revenue Pro Forma Adjusted Free Cash Flow1 % Conversion 76.8 % 83.8 % 64.1 %22.3% 0.4% 11.1% Note: Please reference appendix for non-GAAP reconciliation. 1. Pro Forma Free Cash Flow
Slide 34: Pro Forma Capitalization
Enhabit Home Health & Hospice 34 Pro Forma Capitalization ($ in millions) 1Does not net debt issuance costs of $3.5 million 22021 Pro Forma Adjusted EBITDA reflects 2021 Adjusted EBITDA of $197.2 million (including allocated corporate overhead costs of $14.3 million) and standalone costs of $13.2 mi
Slide 35: 2022 Enhabit Guidance
Enhabit Home Health & Hospice 35 2022 Enhabit Guidance ($ in millions, except per share data) Enhabit 2022 Guidance1 Net Service Revenue $1,080 to $1,120 Adjusted EBITDA $165 to $185 Adjusted EPS $1.64 to $2.01 Working Capital and Other $25 to $35 Maintenance Capex $5 to $10 Adjusted FCF $83 to $128
Slide 36: Appendix
Enhabit Home Health & Hospice 36 Appendix
Slide 37: Pro Forma Adjusted EBITDA Reconciliation
Enhabit Home Health & Hospice 37 Pro Forma Adjusted EBITDA Reconciliation ($ in millions) For the year ended December 31 2019A 2020A 2021A Net Income $ 25 $ 76 $ 113 Income Tax Expense 9 24 35 Interest Expense 28 5 0 Depreciation and Amortization 38 40 37 (Gain) Loss on Disposal or Impairment of Ass
Slide 38: Pro Forma Free Cash Flow Reconciliation
Enhabit Home Health & Hospice 38 Pro Forma Free Cash Flow Reconciliation ($ in millions) For the Year ended December 31 2019A 2020A 2021A Pro Forma Adjusted EBITDA $ 177 $ 136 $ 184 Maintenance capex (12) (4) (5) Cash taxes (22) - (28) Working Capital (7) (18) (33) Pro Forma Free Cash Flow $ 136 $ 1
Slide 39: GAAP Measure Reconciling Items for 2022 Adjusted EBITDA
Enhabit Home Health & Hospice 39 GAAP Measure Reconciling Items for 2022 Adjusted EBITDA Estimable 2022 GAAP Measures Interest expense and amortization of debt discounts and fees $7 million to $12 million Amortization of debt-related items ~$0.3 million Excluding net service revenues, Enhabit does n
Slide 40: Risk Factors
Enhabit Home Health & Hospice 40 Risk Factors Investing in our common stock involves a high degree of risk, including risks related to government reimbursement of healthcare costs, other governmental regulation, operational and financial aspects of our business, the effects of the COVID-19 pandemic,