Enhabit, Inc. · NYSE:EHAB
Enhabit — Q1 2023 Earnings Presentation
32 slides from Enhabit's earnings presentation, May 9, 2023
Slide 1: First Quarter Earnings Call Supplemental Information
First Quarter Earnings Call Supplemental Information May 10, 2023
Slide 2: Disclaimer
Enhabit Home Health & Hospice 2 Disclaimer 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 forw
Slide 3: Contents
Contents Overview of Quarterly Results and Strategic Commentary 4 Consolidated 5-7 De Novos and Acquisitions 8 Home Health 9-10 - Quality 11 Hospice 12-13 Consolidated Adjusted EBITDA 14 Debt, Liquidity and Adjusted Free Cash Flow 15-16 Guidance 17-20 Appendix, Including Company Overview & Reconcili
Slide 4: Home health continued strong growth in Medicare Advantage admissions; new agreements added
Enhabit Home Health & Hospice 4 Home health continued strong growth in Medicare Advantage admissions; new agreements added Non-episodic admissions grew 31.9%, driving total admissions growth of 1.2% year over year. Nine new Medicare Advantage agreements negotiated during Q1, including one national p
Slide 5: Consolidated Results
Enhabit Home Health & Hospice 5 Consolidated Results ($ in millions, except per share data) Q1 '23 vs. '222023 2022 Home health net service revenue $215.8 $224.9 (4.0) % Hospice net service revenue $49.3 $49.4 (0.2) % Total net service revenue $265.1 $274.3 (3.4) % % of Revenue % of Revenue Cost of
Slide 6: Consolidated Results (continued)
Enhabit Home Health & Hospice 6 Consolidated Results (continued) • The continued shift to more non-episodic admissions in home health and the resumption of sequestration impacted consolidated revenue. – Approximately 29% of total home health visits were non-episodic visits in Q1 2023, up from approx
Slide 7: Consolidated Results (continued)
Enhabit Home Health & Hospice 7 Consolidated Results (continued) Continued growth in Medicare Advantage Continued success in Recruitment and Retention • Continued increase in full-time nursing candidate pool drove 101 net new full-time nursing hires in Q1 2023 – Home health - 91 – Hospice - 10 • Imp
Slide 8: De Novos and Acquisitions
Enhabit Home Health & Hospice 8 De Novos and Acquisitions Strategically reinvesting for growth • Added three new locations in Q1 2023 – Completed the acquisition of Specialty Home Health Care, Inc. in Evansville, Indiana on March 1, 2023 – Opened two hospice de novo locations > Lubbock, Texas and Co
Slide 9: Home Health Segment
Enhabit Home Health & Hospice 9 Home Health Segment ($ in millions) Q1 '23 vs. '222023 2022 Net service revenue $215.8 $224.9 (4.0) % Cost of services $108.2 $108.0 0.2 % Gross margin 49.9 % 52.0 % General and administrative expenses $62.9 $58.7 7.2 % Noncontrolling interests $0.4 $0.5 Adjusted EBIT
Slide 10: Home Health Segment (continued)
Enhabit Home Health & Hospice 10 Home Health Segment (continued) • Revenue declined 4.0% primarily due to the continued payor mix shift to more non-episodic admissions and the resumption of sequestration. – The continued shift to more non-episodic admissions reduced revenue approximately $5 million.
Slide 11: Clinical Expertise and High-Quality Outcomes
Enhabit Home Health & Hospice 11 Clinical Expertise and High-Quality Outcomes National Average Enhabit % Above National Average QoPC Star Rating(1) 3.2 3.7 16% HHCAHPS Star Rating(2) 3.6 3.7 3% 30-Day Hospital Readmission Rate(3) 18.2 14.6 360 bps better Standardized Protocols Motivated Clinicians D
Slide 12: Hospice Segment
Enhabit Home Health & Hospice 12 Hospice Segment ($ in millions) Q1 '23 vs. '222023 2022 Net service revenue $49.3 $49.4 (0.2) % Cost of services $24.4 $21.7 12.4 % Gross margin 50.5 % 56.1 % General and administrative expenses $16.3 $14.9 9.4 % Noncontrolling interests $0.1 $0.1 — % Adjusted EBITDA
Slide 13: Hospice Segment (continued)
Enhabit Home Health & Hospice 13 Hospice Segment (continued) Hospice average daily census decreased 0.9% year over year • Net service revenue was relatively flat to the prior year as the decline in average daily census and resumption of sequestration was offset by increased Medicare reimbursement ra
Slide 14: Consolidated Adjusted EBITDA
Enhabit Home Health & Hospice 14 Consolidated Adjusted EBITDA ($ in millions) Q1 2023 % of Consolidated Revenue Q1 2022 % of Consolidated Revenue Home health segment Adjusted EBITDA $44.3 $57.7 Hospice segment Adjusted EBITDA $8.5 $12.7 Home office general & administrative expenses $(27.5) (10.4) %
Slide 15: Debt & Liquidity Metrics
Enhabit Home Health & Hospice 15 Debt & Liquidity Metrics ($ in millions) March 31, 2023 December 31, 2022 Advances under $350 million revolving credit facility, due 2027(1) $185.0 $190.0 $400 million term loan facility, due 2027(2) $383.1 $387.9 Finance lease obligations $4.3 $5.2 Total debt $572.4
Slide 16: Adjusted Free Cash Flow
Enhabit Home Health & Hospice 16 Adjusted Free Cash Flow Adjusted free cash flow decreased year over year primarily due to the reduction in adjusted EBITDA and increase in cash interest payments offset by changes in working capital. • Credit agreement entered into on June 30, 2022 in connection with
Slide 17: 2023 Guidance Reaffirmed as of May 9, 2023
Enhabit Home Health & Hospice 17 2023 Guidance Reaffirmed as of May 9, 2023 Reconciliations to GAAP provided on pages 28 to 32 $ 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
Slide 18: Guidance Considerations
Enhabit Home Health & Hospice 18 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 admissions • Cost per visit increase of 4% to 5% Home Health • An increase of 3.8% in Medicare pricing prior
Slide 19: Adjusted Free Cash Flow Assumptions
Enhabit Home Health & Hospice 19 Adjusted Free Cash Flow Assumptions Certain cash flow items (in millions) 2022 Full Year Q1 2023 2023 Assumptions Cash interest payments $12.9 $10.2 $39 to $45 Cash income tax payments, net of refunds 11.9 (5.9) $3 to $6 Working capital 35.7 (7.9) $5 to $15 Maintenan
Slide 20: Uses of Adjusted Free Cash Flow
Enhabit Home Health & Hospice 20 Uses of Adjusted Free Cash Flow Growth in Core Business (in millions) 2022 Full Year Q1 2023 2023 Assumptions De novos $1.2 $0.5 $2 to $4 Acquisitions(1)(2) $36.3 $2.8 TBD Debt redemptions (borrowings), net(3) $(10.0) $10.0 TBD (1) On January 1, 2022, Enhabit acquire
Slide 21: Appendix
Enhabit Home Health & Hospice 21 Appendix
Slide 22: Overview
Enhabit Home Health & Hospice 22 Overview 100 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 St
Slide 23: Growth Strategy
Enhabit Home Health & Hospice 23 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 24: Home Health Operational Metrics
Enhabit Home Health & Hospice 24 Home Health Operational Metrics (In Millions) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 FY 2022 FY 2021 Home health net service revenue $215.8 $215.8 $216.3 $220.2 $224.9 $877.1 $897.3 (Actual Amounts) Total admissions 53,943 50,048 49,739 49,399 53,309 202,495 200,626
Slide 25: Hospice Operational Metrics
Enhabit Home Health & Hospice 25 Hospice Operational Metrics (In Millions) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 FY 2022 FY 2021 Hospice net service revenue $49.3 $47.4 $49.4 $47.8 $49.4 $194.0 $209.3 (Actual Amounts) Total admissions 3,122 2,915 2,982 2,835 3,246 11,978 13,113 Patient days 317,02
Slide 26: Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit Adjusted EBITDA
Enhabit Home Health & Hospice 26 Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit Adjusted EBITDA PLACE HOLDER – WILL NEED: • EBITDA to Net income • Adjusted EPS to reported EPS and Net income Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 FY 2022 Encompass
Slide 27: Payor Sources
Enhabit Home Health & Hospice 27 Payor Sources As a % of Revenue Q1 2023 Q1 2022 FY 2022 Consolidated Medicare 73.0 % 79.2 % 78.4 % Medicare Advantage 18.6 % 12.6 % 14.2 % Managed Care 7.1 % 6.9 % 6.1 % Medicaid 1.1 % 1.3 % 1.2 % Other 0.2 % — % 0.1 % Total 100.0 % 100.0 % 100.0 % Home Health Medica
Slide 28: EPS Calculation: Q1 2023
Enhabit Home Health & Hospice 28 EPS Calculation: Q1 2023 Adjusted EPS – Q1 2023 ($ in millions, except per share amounts) As Reported Income Tax Adjustments Unusual or nonrecurring items that are not typical of ongoing operations As Adjusted Adjusted EBITDA $25.3 $— $— $25.3 Depreciation and amorti
Slide 29: EPS Calculation: Q1 2022
Enhabit Home Health & Hospice 29 EPS Calculation: Q1 2022 Adjusted EPS – Q1 2022 ($ in millions, except per share amounts) As Reported Unusual or nonrecurring items that are not typical of ongoing operations As Adjusted Adjusted EBITDA $47.0 $— $47.0 Depreciation and amortization (8.5) — (8.5) Inter
Slide 30: Reconciliation of Net Income to Adjusted EBITDA – Consolidated
Enhabit Home Health & Hospice 30 Reconciliation of Net Income to Adjusted EBITDA – Consolidated First Quarter ($ in millions) 2023 2022 Net income $3.2 $26.7 Income tax expense 1.5 8.7 Interest expense and amortization of debt discounts and fees 9.5 — Depreciation and amortization 7.8 8.5 Gain on di
Slide 31: Reconciliation of Cash Provided by Operations to Adjusted EBITDA
Enhabit Home Health & Hospice 31 Reconciliation of Cash Provided by Operations to Adjusted EBITDA First Quarter ($ in millions) 2023 2022 Net cash provided by operating activities $29.6 $41.4 Interest expense and amortization of debt discounts and fees 9.5 — Equity in net income of nonconsolidated a
Slide 32: Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
Enhabit Home Health & Hospice 32 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow First Quarter ($ in millions) 2023 2022 Net cash provided by operating activities $29.6 $41.4 Cash expenditures for maintenance (0.6) (2.3) Distributions paid to non controlling in