Enhabit, Inc. · NYSE:EHAB
Enhabit — Q4 2022 Earnings Presentation
38 slides from Enhabit's earnings presentation, Apr 14, 2023
Slide 1: Fourth Quarter Earnings Call Supplemental Information
Fourth Quarter Earnings Call Supplemental Information Initially published - February 14, 2023 / revised - April 14, 2023
Slide 2: Disclaimers
Enhabit Home Health & Hospice 2 Disclaimers Forward looking statements Statements contained in this presentation which are not historical facts, such as those relating to future events, projections, financial guidance, legislative or regulatory developments, strategy or growth opportunities, are for
Slide 3: Contents
Contents Overview of Quarterly Results 4-10 Detailed Financial and Operational Results 11-15 Debt, Liquidity and Cash Flow 16-17 Guidance 18-21 Appendix, Including Company Overview & Reconciliations to GAAP 22-38
Slide 4: 2022 in Review: Strategic Initiatives Driving Positive Change
Enhabit Home Health & Hospice 4 2022 in Review Strategic Initiatives Driving Positive Change
Slide 5: Quarterly Results at a Glance
Enhabit Home Health & Hospice 5 Home health continued strong growth in Medicare Advantage admissions; new contracts added Non-episodic admissions grew 19.9% year over year Nine new agreements negotiated during Q4 $263.2M Revenue $30.3M Adjusted EBITDA 50,048 Home Health Total Admissions 2,915 Hospic
Slide 6: Q4'22 Strategic Commentary
Enhabit Home Health & Hospice 6 Q4’22 Strategic Commentary • Total admissions decreased primarily due to a reduction in episodic admissions partially offset by continued growth in non-episodic admissions • Revenue per episode decreased 1.7% year over year – The resumption of sequestration, the timin
Slide 7: Q4'22 Strategic Commentary
Enhabit Home Health & Hospice 7 Q4’22 Strategic Commentary • Adjustments to accounts receivable reserves, the continued shift to more non-episodic patients in home health, and resumption of sequestration impacted consolidated revenue – The full resumption of sequestration decreased revenue approxima
Slide 8: Q4'22 Strategic Commentary: Medicare Advantage and Nursing Labor
Enhabit Home Health & Hospice 8 Q4’22 Strategic Commentary Continued Growth in Medicare Advantage Nursing labor showing signs of improvement • Full-time nursing applicant pool increased 19% year over year • Net new full-time nursing hires – Home health - 60 – Hospice - 41 • Hospice case management s
Slide 9: Q4'22 Strategic Commentary: Strategically Reinvesting for Growth
Enhabit Home Health & Hospice 9 Q4’22 Strategic Commentary Strategically reinvesting for growth • Completed three acquisitions in Q4 2022 – Acquired Caring Hearts Hospice in October (four Texas locations) and Unity Hospice in November (one Arizona location) – Acquired Southwest Florida Home Care's F
Slide 10: Home Health & Hospice Highlights
Enhabit Home Health & Hospice 10 Home Health & Hospice Highlights Home Health Q4 Overview 4th Largest Provider of Medicare-Certified Skilled Home Health Services 34Home Health Locations States Hospice Q4 Overview 12th Largest Provider of Medicare-Certified Hospice Services 22Hospice Locations States
Slide 11: Consolidated Results Q4 '22 vs. '21
Enhabit Home Health & Hospice 11 Consolidated Results Q4 '22 vs. '21($ in millions, except per share data) 2022 2021 Home health net service revenue $215.8 $224.0 (3.7) % Hospice net service revenue $47.4 $52.1 (9.0) % Total net service revenue $263.2 $276.1 (4.7) % % of Revenue % of Revenue Cost of
Slide 12: Home Health Segment Q4 '22 vs. '21
Enhabit Home Health & Hospice 12 Home Health Segment Q4 '22 vs. '21($ in millions) 2022 2021 Net service revenue $215.8 $224.0 (3.7) % Cost of services $109.0 $106.4 2.4 % Gross margin 49.5 % 52.5 % Adjusted EBITDA $47.2 $59.6 (20.8) % % Adj. EBITDA margin 21.9 % 26.6 % Operational metrics (Actual A
Slide 13: Hospice Segment Q4 '22 vs. '21
Enhabit Home Health & Hospice 13 Hospice Segment Q4 '22 vs. '21($ in millions) 2022 2021 Net service revenue $47.4 $52.1 (9.0) % Cost of services $24.3 $22.1 10.0 % Gross margin 48.7 % 57.6 % Adjusted EBITDA $5.6 $15.2 (63.2) % % Adj. EBITDA margin 11.8 % 29.2 % Operational metrics (Actual Amounts)
Slide 14: Consolidated Adjusted EBITDA
Enhabit Home Health & Hospice 14 Consolidated Adjusted EBITDA (1) Home office administrative and general expenses in the above table exclude stock compensation of $2.1 million and $1.5 million for Q4 2022 and 2021, $2.5 million and $3.0 million in costs associated with the strategic alternatives rev
Slide 15: Clinical Expertise and High-Quality Outcomes
Enhabit Home Health & Hospice 15 Clinical Expertise and High-Quality Outcomes National Average Enhabit % Above National Average QoPC Star Rating(1) 3.2 3.7 16% HHCAHPS Star Rating(2) 3.5 3.7 6% 30-Day Hospital Readmission Rate(3) 18.2 14.2 400 bps better Standardized Protocols Motivated Clinicians D
Slide 16: Debt & Liquidity Metrics
Enhabit Home Health & Hospice 16 Debt & Liquidity Metrics ($ in millions) December 31, 2022 Advances under $350 million revolving credit facility, due 2027 $190.0 $400 million term loan facility, due 2027 $387.9 Finance lease obligations $5.2 Total debt $583.1 Less: Cash and cash equivalents $22.9 N
Slide 17: Adjusted Free Cash Flow
Enhabit Home Health & Hospice 17 Adjusted Free Cash Flow The year-over-year decrease in adjusted free cash flow primarily resulted from lower Adjusted EBITDA and cash interest payments associated with the credit agreement we entered into as part of the separation from Encompass Health. ($ in million
Slide 18: 2023 Guidance
Enhabit Home Health & Hospice 18 2023 Guidance reaffirmed as of April 4, 2023 ($ in millions, except per share data) 2022 Actuals 2023 Guidance Net service revenue $1,071.1 $1,110 to $1,140 Adjusted EBITDA $149.3 $125 to $140 Adjusted EPS $1.36 $0.50 to $0.89 Reconciliations to GAAP provided on page
Slide 19: Guidance Considerations
Enhabit Home Health & Hospice 19 Guidance Considerations • An increase of 0.7% in Medicare pricing prior to the resumption of sequestration in Q1 and Q2 • Continued shift to more non-episodic patients • Cost per visit increase of 4% to 5% Home Health • An increase of 3.8% in Medicare pricing prior t
Slide 20: Adjusted Free Cash Flow Assumptions
Enhabit Home Health & Hospice 20 Adjusted Free Cash Flow Assumptions Certain cash flow items (in millions) 2022 Full Year 2023 Assumptions Cash interest payments $12.9 $39 to $45 Cash income tax payments, net of refunds 11.9 $3 to $6 Working capital 35.7 $5 to $15 Maintenance capital expenditures 4.
Slide 21: Uses of Free Cash Flow
Enhabit Home Health & Hospice 21 Uses of Free Cash Flow (in millions) 2022 Full Year 2023 Assumptions Growth in Core Business De novos $1.2 $2 to $4 Acquisitions(1) $36.3 TBD Debt redemptions (borrowings), net(2) $(10.0) TBD (1) On January 1, 2022, we acquired a 50% equity interest from Frontier Hom
Slide 22: Appendix
Enhabit Home Health & Hospice 22 Appendix
Slide 23: Overview
Enhabit Home Health & Hospice 23 Overview 95 hospice locations co-located with home health locations(1) 11 states where we are #1 or #2 in home health(2) ~69% of total Medicare home health spend occurs in states in which we operate(2) Home Health Locations Hospice Locations Home Health & Hospice Sta
Slide 24: Growth Strategy
Enhabit Home Health & Hospice 24 Growth Strategy Multi-faceted growth avenues with clearly defined areas of opportunity Drive organic growth at existing operations Execute on de novo strategy Pursue strategic acquisitions Leverage care transitions expertise Expand Medicare Advantage focus Explore ad
Slide 25: Home Health Operational Metrics
Enhabit Home Health & Hospice 25 Home Health Operational Metrics (In Millions) Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 FY 2022 FY 2021 Home health net service revenue $215.8 $216.3 $220.2 $224.9 $224.0 $221.1 $232.3 $219.9 $877.1 $897.3 (Actual Amounts) Total admissions 50,04
Slide 26: Hospice Operational Metrics
Enhabit Home Health & Hospice 26 Hospice Operational Metrics (In Millions) Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 FY 2022 FY 2021 Hospice net service revenue $47.4 $49.4 $47.8 $49.4 $52.1 $52.8 $53.8 $50.6 $194.0 $209.3 (Actual Amounts) Total admissions 2,915 2,982 2,835 3,2
Slide 27: Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit
Enhabit Home Health & Hospice 27 Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit Adjusted EBITDA ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 YTD 2022 Encompass Health Segment Adjusted EBITDA $50.8 $61.7 $46.4 $52.6 $211.5 $50.1 $43.8 $93.
Slide 28: Consolidated Results – YTD 2022
Enhabit Home Health & Hospice 28 Consolidated Results – YTD 2022 Year-To-Date '22 vs. '21($ in millions, except per share data) 2022 2021 Home health net service revenue $877.1 $897.3 (2.3) % Hospice net service revenue $194.0 $209.3 (7.3) % Total net service revenue $1,071.1 $1,106.6 (3.2) % % of R
Slide 29: Home Health Segment Results – YTD 2022
Enhabit Home Health & Hospice 29 Home Health Segment Results – YTD 2022 Year-To-Date '22 vs. '21($ in millions) 2022 2021 Net service revenue $877.1 $897.3 (2.3) % Cost of services 435.5 $423.5 2.8 % Gross margin 50.3 % 52.8 % Adjusted EBITDA $202.2 $230.1 (12.1) % % Adj. EBITDA margin 23.1 % 25.6 %
Slide 30: Hospice Segment Results – YTD 2022
Enhabit Home Health & Hospice 30 Hospice Segment Results – YTD 2022 Year-To-Date '22 vs. '21($ in millions) 2022 2021 Net service revenue $194.0 $209.3 (7.3) % Cost of services $90.1 $90.4 (0.3) % Gross margin 53.6 % 56.8 % Adjusted EBITDA $38.4 $56.2 (31.7) % % Adj. EBITDA margin 19.8 % 26.9 % Oper
Slide 31: Payor Sources
Enhabit Home Health & Hospice 31 Payor Sources As a % of Revenue Q4 2022 Q4 2021 FY 2022 FY 2021 Consolidated Medicare 78.1 % 81.0 % 78.4 % 81.9 % Medicare Advantage 15.5 % 11.2 % 14.2 % 10.6 % Managed Care 5.0 % 6.3 % 6.1 % 5.9 % Medicaid 1.3 % 1.4 % 1.2 % 1.4 % Other 0.1 % 0.1 % 0.1 % 0.2 % Total
Slide 32: EPS Calculation: Q4 2022
Enhabit Home Health & Hospice 32 EPS Calculation: Q4 2022 Adjusted EPS – Q4 2022 ($ in millions, except per share amounts) As Reported Impairment of Goodwill Transaction Costs Income Tax Adjustments As Adjusted Adjusted EBITDA $30.3 $— $— $— $30.3 Depreciation and amortization (8.3) — — — (8.3) Inte
Slide 33: EPS Calculation: Q4 2021
Enhabit Home Health & Hospice 33 EPS Calculation: Q4 2021 Adjusted EPS – Q4 2021 ($ in millions, except per share amounts) As Reported Transaction Costs and Gain on Consolidation As Adjusted Adjusted EBITDA $49.0 $— $49.0 Depreciation and amortization (9.0) — (9.0) Interest exp. and amortization of
Slide 34: EPS Calculation: YTD 2022
Enhabit Home Health & Hospice 34 EPS Calculation: YTD 2022 Adjusted EPS – YTD 2022 ($ in millions, except per share amounts) As Reported Impairment of Goodwill Transaction Costs Income Tax Adjustments As Adjusted Adjusted EBITDA $149.3 $— $— $— $149.3 Depreciation and amortization (33.0) — — — (33.0
Slide 35: EPS Calculation: YTD 2021
Enhabit Home Health & Hospice 35 EPS Calculation: YTD 2021 Adjusted EPS – YTD 2021 ($ in millions, except per share amounts) As Reported Transaction Costs and Gain on Consolidation Income Tax Adjustments As Adjusted Adjusted EBITDA $197.2 $— $— $197.2 Depreciation and amortization (36.9) — — (36.9)
Slide 36: Reconciliation of Net (Loss) Income to Adjusted EBITDA
Enhabit Home Health & Hospice 36 Reconciliation of Net (Loss) Income to Adjusted EBITDA – Consolidated Fourth Quarter YTD ($ in millions) 2022 2021 2022 2021 Net (loss) income $(94.7) $29.8 $(38.3) $112.9 Income tax (benefit) expense (5.1) 8.9 12.8 35.1 Interest expense and amortization of debt disc
Slide 37: Reconciliation of Cash Provided by Operations to Adjusted EBITDA
Enhabit Home Health & Hospice 37 Reconciliation of Cash Provided by Operations to Adjusted EBITDA Fourth Quarter YTD ($ in millions) 2022 2021 2022 2021 Net cash provided by operating activities $4.1 $23.1 $80.1 $123.3 Interest expense and amortization of debt discounts and fees 8.7 0.1 15.0 0.3 Equ
Slide 38: Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
Enhabit Home Health & Hospice 38 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow PLACE HOLDER – WILL NEED: • EBITDA to Net income • Adjusted EPS to reported EPS and Net income Fourth Quarter YTD ($ in millions) 2022 2021 2022 2021 Net cash provided by operating