Encompass Health Corporation · NYSE:EHC
Encompass Health — Q4 2024 Earnings Presentation
32 slides from Encompass Health's earnings presentation, Feb 7, 2025
Slide 1: 2024 Fourth Quarter Earnings Call
2024 Fourth Quarter Earnings Call February 7, 2025 Supplemental information
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’s current outlook, views and plans with respect to future events, including the business outlook, guidance and growth
Slide 3: Table of contents
Table of contents Summary ................................................................................................................................................................................ 4 Revenue .......................................................................................
Slide 4: Summary
Summary Q4 Full Year ($ in millions, except per share data) 2024 2023 %△ 2024 2023 %△ Encompass Health Net operating revenue $ 1,405.0 $ 1,246.8 12.7 % $ 5,373.2 $ 4,801.2 11.9 % Adjusted EBITDA $ 289.6 $ 255.0 13.6 % $ 1,103.7 $ 971.1 13.7 % Adjusted EPS $ 1.17 $ 0.95 23.2 % $ 4.43 $ 3.64 21.7 % Ad
Slide 5: Revenue
Revenue Q4 Q4 % Change* ($ in millions) 2024 2023 Net operating revenue: Inpatient $ 1,366.1 $ 1,216.8 12.3% Outpatient and other 38.9 30.0 29.7% Total revenue $ 1,405.0 $ 1,246.8 12.7% (Actual Amounts) Discharges 63,839 59,247 7.8% New-store discharge growth 2.0% Same-store discharge growth 5.8% Ne
Slide 6: Adjusted EBITDA
Adjusted EBITDA(3) Q4 % of Q4 % of ($ in millions) 2024 Revenue 2023 Revenue Net operating revenue $ 1,405.0 $ 1,246.8 Operating expenses: Salaries and benefits (756.8) 53.9 % (676.3) 54.2 % Other operating expenses(a) (200.3) 14.3 % (178.7) 14.3 % Supplies (62.3) 4.4 % (58.6) 4.7 % Occupancy costs
Slide 7: Earnings per share - as reported
Earnings per share - as reported Q4 Year Ended ($ in millions, except per share data) 2024 2023 2024 2023 Adjusted EBITDA $ 289.6 $ 255.0 $ 1,103.7 $ 971.1 Depreciation and amortization(4) (78.0) (70.1) (299.6) (273.9) Interest expense and amortization of debt discounts and fees (33.0) (34.9) (137.4
Slide 8: Adjusted earnings per share
Adjusted earnings per share(8) Q4 Year Ended 2024 2023 2024 2023 Diluted earnings per share, as reported $ 1.18 $ 0.94 $ 4.49 $ 3.59 Adjustments, net of tax: Asset impairment impact(5) — — 0.02 — Income tax adjustments(9) (0.03) 0.03 (0.08) 0.03 State regulatory change impact(4) — — — 0.03 Change in
Slide 9: 2024 Adjusted free cash flow
2024 Adjusted free cash flow(10) ($ in millions) $50.6 $6.3 $32.3 $132.6 $(57.2) $690.3 $525.7 Adjusted free cash Adjusted Working capital Cash interest Cash tax payments, Maintenance capital Adjusted free cash flow FY 2023 EBITDA and other payments net of refunds expenditures flow FY 2024 u Decreas
Slide 10: 2025 Guidance
2025 Guidance 2024 Actuals 2025 Guidance ($ in millions, except per share data) Net Operating Revenue $5,373.2 $5,800 to $5,900 Adjusted EBITDA(3) $1,103.7 $1,160 to $1,200 Adjusted earnings per share from continuing operations attributable $4.43 $4.67 to $4.96 to Encompass Health(8) Reconciliations
Slide 11: 2025 Guidance considerations
2025 Guidance considerations u Pricing Medicare pricing increase of 3.3% for Q1 through Q3 and an estimated 2.5% to 3.0% for Q4 Managed Care pricing increase of 2.0% to 3.0% Bad debt reserves of 2.0% to 2.5% of revenue u Labor SWB per FTE* increase of 3.25% to 3.75% u Capacity additions (11)
Slide 12: Adjusted free cash flow assumptions
Adjusted free cash flow(10) assumptions Certain cash flow items 2024 2025 ($ in millions) Actuals Assumptions Cash interest payments Decreased cash interest payments due to (net of amortization of debt $127.7 $110 to $120 repayment of $250 million of Senior Notes discounts and fees) during 2024 Cash
Slide 13: Uses of free cash flow
Uses of free cash flow 2024 2025 ($ in millions) Actuals Assumptions IRF bed expansions $96.8 $145 to $155 New IRFs Growth in - De novos 358.1 380 to 390 core business - Replacement IRFs and other 3.0 TBD $457.9 $525 to $545 Debt Change in total debt(12) $214.8 TBD reduction Cash dividends on common
Slide 14: Appendix
Appendix
Slide 15: Encompass Health
Encompass Health Largest owner and operator of rehabilitation hospitals Company profile as of 12/31/24 166 Rehabilitation hospitals “IRFs” 65 are joint ventures 17 38 IRFs under States and development** Puerto Rico Key statistics trailing four quarters Rehabilitation hospitals “IRFs” ~248,500 patien
Slide 16: Growth targets, fundamentals and value drivers
Growth targets, fundamentals and value drivers u 2023 - 2027 Growth targets 6 to 10 de novos per year 80 to 120 bed additions per year 6% to 8% discharge CAGR u Large, under penetrated, and growing inpatient rehabilitation market Large addressable market indicated by low conversion rate of p
Slide 17: Development activity
Development activity Inpatient Rehabilitation Hospitals opened or under development Joint venture Expected open date 2024 # of new beds 2025 2026 2027 17 De novos* Kissimmee, FL 50 — — — IRF development projects Atlanta, GA ü 40 — — — announced and underway** Louisville, KY ü 40 — — — Johnston, RI 5
Slide 18: Debt maturity profile - face value
Debt maturity profile - face value As of December 31, 2024* ($ in millions) Callable Callable beginning at 101.125 February 2025 $944 Available Callable beginning April 2026 Revolver $800 $800 $20 Drawn + Senior capacity Senior Callable $36 reserved Notes Notes at par for LCs 4.75% 4.5% $100 $400 Se
Slide 19: Debt schedule
Debt schedule Change in December 31, December 31, Debt vs. ($ in millions) 2024 2023 YE 2023 Advances under $1 billion revolving credit facility $ 20.0 $ — $ 20.0 Bonds Payable: 5.75% Senior Notes due 2025 99.8 348.5 (248.7) 4.50% Senior Notes due 2028 788.4 785.0 3.4 4.75% Senior Notes due 2030 784
Slide 20: New-store/same-store growth
New-store/same-store growth Shiloh, IL (40 beds) St. Augustine, FL (40 beds) Libertyville, IL (60 beds) Clermont, FL (50 beds) Bowie, MD (60 beds) 20.0% Moline, IL (40 beds) Johnston, RI (50 beds) Naples, FL (50 beds) Fort Mill, SC (39 beds) Grand Forks, ND (40 beds) Prosper, TX (40 beds) Fitchburg,
Slide 21: Payment sources (percent of revenues)
Payment sources (percent of revenues) Q4 Full Year 2024 2023 2024 2023 Medicare 65.6 % 65.7 % 65.1 % 65.0 % Medicare Advantage 16.5 % 16.0 % 16.8 % 16.2 % Managed care 10.5 % 10.8 % 10.8 % 11.1 % Medicaid 3.2 % 3.6 % 3.3 % 4.0 % Other third-party payors 0.8 % 0.8 % 0.8 % 0.9 % Workers’ compensation
Slide 22: Operational metrics
Operational metrics Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2024 2024 2024 2024 2023 2023 2023 2023 2024 2023 (In Millions) Net patient revenue- inpatient $ 1,366.1 $ 1,316.2 $ 1,265.5 $ 1,282.7 $ 1,216.8 $ 1,180.5 $ 1,162.3 $ 1,134.2 $ 5,230.5 $ 4,693.8 Net patient revenue- outpatient and other revenues
Slide 23: Share information
Share information Weighted Average for the Period Q4 Full Year (in millions) 2024 2023 2024 2023 2022 Basic shares outstanding 100.0 99.5 99.9 99.5 99.2 Restricted stock awards, dilutive stock options, and restricted stock units 2.3 2.0 2.3 1.8 1.2 Diluted shares outstanding 102.3 101.5 102.2 101.3
Slide 24: Net cash provided by operating activities reconciled to Adjusted EBITDA
Net cash provided by operating activities reconciled to Adjusted EBITDA(3) Q4 Full Year ($ in millions) 2024 2023 2024 2023 Net cash provided by operating activities $ 278.8 $ 201.0 $ 1,002.8 $ 850.8 Interest expense and amortization of debt discounts and fees 33.0 34.9 137.4 143.5 (Loss) gain on sa
Slide 25: Reconciliation of net income to Adjusted EBITDA
Reconciliation of net income to Adjusted EBITDA(3) Q4 Full Year ($ in millions) 2024 2023 2024 2023 Net income $ 164.2 $ 119.1 $ 596.6 $ 463.0 (Income) loss from discontinued operations, net of tax, attributable to Encompass Health (0.4) 8.5 2.8 12.0 Net income attributable to noncontrolling interes
Slide 26: Reconciliation of net cash provided by operating activities to adjusted free cash flow
Reconciliation of net cash provided by operating activities to adjusted free cash flow(10) Q4 Full Year ($ in millions) 2024 2023 2024 2023 Net cash provided by operating activities $ 278.8 $ 201.0 $1,002.8 $ 850.8 Impact of discontinued operations (0.6) 11.4 3.1 16.0 Net cash provided by operating
Slide 27: Adjusted EPS - Q4 2024
Adjusted EPS(8) - Q4 2024 For the Three Months Ended December 31, 2024 Adjustments Loss on Early Change in Fair As Exting. Income Tax Market Value of As Reported of Debt Adjustments Equity Securities Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 289.6 $ — $ — $ — $ 289.6 Depre
Slide 28: Adjusted EPS - Q4 2023
Adjusted EPS(8) - Q4 2023 For the Three Months Ended December 31, 2023 Adjustments Change in Fair As Income Tax Market Value of As Reported Adjustments Equity Securities Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 255.0 $ — $ — $ 255.0 Depreciation and amortization (70.1) —
Slide 29: Adjusted EPS - 2024
Adjusted EPS(8) - 2024 For the Year Ended December 31, 2024 Adjustments Change in Fair Loss on Market Asset Early Value of As Impairment Exting. Income Tax Equity As Reported Impact of Debt Adjustments Securities Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $1,103.7 $ — $ — $ —
Slide 30: Adjusted EPS - 2023
Adjusted EPS(8) - 2023 For the Year Ended December 31, 2023 Adjustments Change in Fair State Market Regulatory Value of As Change Income Tax Equity As Reported Impact Adjustments Securities Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 971.1 $ — $ — $ — $ 971.1 Depreciation an
Slide 31: End notes
End notes (1) Provider taxes are amounts paid by us to fund, in part, state Medicaid programs. We have historically used the term “provider tax revenues” to represent all amounts received in connection with state Medicaid programs that are not included in the specific Medicaid claim reimbursements w
Slide 32: End notes (continued)
End notes (continued) (8) The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”), which is a non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional inf