Enhabit, Inc. · NYSE:EHAB
Enhabit — Q3 2023 Earnings Presentation
39 slides from Enhabit's earnings presentation, Nov 7, 2023
Slide 1: Third Quarter Earnings Call Supplemental Information
Third Quarter Earnings Call Supplemental Information November 7, 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 Results at a Glance 4 Consolidated Results 5-6 Payor Innovation 7 Clinical Expertise and High-Quality Outcomes 8 De Novos and Acquisitions 9 Home Health Segment 10-11 Hospice Segment 12-13 Consolidated Adjusted EBITDA 14 Debt and Liquidity 15 Credit Agreement Amendment 16 Adjusted Free Cash
Slide 4: Results at a Glance
Enhabit Home Health & Hospice 4 Strong growth in Medicare Advantage admissions Non-episodic admissions grew 33.5% in the quarter, driving total admissions growth of 1.6% year over year. Continued payor innovation progress resulted in 11 new Medicare Advantage agreements negotiated during Q3 2023. Co
Slide 5: Consolidated Results
Enhabit Home Health & Hospice 5 Consolidated Results ($ in millions, except per share data) Q3 '23 vs. '222023 2022 Home health net service revenue $210.9 $216.3 (2.5) % Hospice net service revenue 47.4 49.4 (4.0) % Total net service revenue 258.3 265.7 (2.8) % % of Revenue % of Revenue Cost of serv
Slide 6: Consolidated Results (continued)
Enhabit Home Health & Hospice 6 Consolidated Results (continued) • The continued shift to more non-episodic admissions in home health impacted consolidated revenue and Adjusted EBITDA by approximately $8 million, net of the impact from improved pricing of payor innovation contracts. Consolidated Adj
Slide 7: Payor Innovation
Enhabit Home Health & Hospice 7 Payor Innovation Payor Innovation strategy continues to foster Medicare Advantage growth. 11 new agreements negotiated in Q3 2023 • Ten negotiated at episodic rates and one at improved per visit rates 48 agreements negotiated since inception of payor innovation team •
Slide 8: Clinical Expertise and High-Quality Outcomes
Enhabit Home Health & Hospice 8 Clinical Expertise and High-Quality Outcomes Enhabit National Average % Better Than Average QoPC Star Rating1 3.6 3.0. 20.0% 93% of our home health agencies are 3 Stars or higher; 37% are 4 Stars or higher1 HHCAHPS Star Rating2 3.8 3.6 5.6% 99% of our home health agen
Slide 9: De Novos and Acquisitions
Enhabit Home Health & Hospice 9 De Novos and Acquisitions Strategically reinvesting for growth • Added one hospice de novo location in Q3 2023 • Colorado Springs, Colorado hospice location began accepting patients in July 2023 • As of Q3 2023, we have opened six de novo locations: four hospice locat
Slide 10: Home Health Segment
Enhabit Home Health & Hospice 10 Home Health Segment ($ in millions) Q3 '23 vs. '222023 2022 Net service revenue $210.9 $216.3 (2.5) % Cost of services 110.0 109.6 0.4 % Gross margin 47.8 % 49.3 % General & administrative expenses 59.0 61.9 (4.7) % Other income (0.1) — Equity earnings / noncontrolli
Slide 11: Home Health Segment (continued)
Enhabit Home Health & Hospice 11 Home Health Segment (continued) Revenue declined $5.4 million, or 2.5%, primarily due to the continued payor mix shift to more non-episodic admissions. • Total admissions growth was driven by 33.5% year-over-year growth in non-episodic admissions. – The continued shi
Slide 12: Hospice Segment
Enhabit Home Health & Hospice 12 Hospice Segment ($ in millions) Q3 '23 vs. '222023 2022 Net service revenue $47.4 $49.4 (4.0) % Cost of services 24.0 22.7 5.7 % Gross margin 49.4 % 54.0 % General & administrative expenses 15.7 17.3 (9.2) % Equity earnings / noncontrolling interest — 0.1 Adjusted EB
Slide 13: Hospice Segment (continued)
Enhabit Home Health & Hospice 13 Hospice Segment (continued) Hospice average daily census decreased 2.8% year over year Revenue decreased $2.0 million, or 4.0%, year over year primarily due to a decrease in patient days. • Admissions increased 1.6% sequentially; decreased 3.4% year over year. – Mont
Slide 14: Consolidated Adjusted EBITDA
Enhabit Home Health & Hospice 14 Consolidated Adjusted EBITDA ($ in millions) Q3 2023 % of Consolidated Revenue Q3 2022 % of Consolidated Revenue Home health segment Adjusted EBITDA $41.8 $44.6 Hospice segment Adjusted EBITDA 7.7 9.3 Home office general & administrative expenses (26.3) (10.2) % (22.
Slide 15: Debt & Liquidity Metrics
Enhabit Home Health & Hospice 15 Debt & Liquidity Metrics ($ in millions) September 30, 2023 December 31, 2022 Advances under revolving credit facility, due 2027(1) $180.0 $190.0 $400 million term loan facility, due 2027(1)(2) 373.1 387.9 Finance lease obligations 5.3 5.2 Total debt $558.4 $583.1 Le
Slide 16: Credit Agreement Amendment
Enhabit Home Health & Hospice 16 Credit Agreement Amendment Amendment Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Amended Net Leverage Covenant 6.75 6.75 6.50 6.50 6.50 5.75 Fixed Charge Coverage Covenant1 1.15 1.15 1.15 1.15 1.15 1.15 1 Ratio defined as Adjusted EBITDA minus taxes and capex ove
Slide 17: Adjusted Free Cash Flow
Enhabit Home Health & Hospice 17 Adjusted Free Cash Flow • Adjusted free cash flow decreased year over year primarily due to the reduction in Adjusted EBITDA and increase in cash interest payments. – Credit agreement entered into on June 30, 2022 in connection with separation from Encompass Health;
Slide 18: 2023 Guidance
Enhabit Home Health & Hospice 18 2023 Guidance Revised as of November 7, 2023 ($ in millions, except per share data) 2022 Actuals 2023 Previous Guidance 2023 Revised Guidance Net service revenue $1,071.1 $1,057 to $1,065 $1,044 to $1,048 Adjusted EBITDA $149.3 $100 to $107 $93 to $98 Adjusted EPS $1
Slide 19: Guidance Considerations
Enhabit Home Health & Hospice 19 Guidance Considerations • An increase of 0.7% in Medicare pricing prior to the resumption of sequestration in Q1 and Q2 • Continued shift to more non-episodic admissions • Cost per visit increase of 1% to 3% Home Health • An increase of 3.8% in Medicare pricing prior
Slide 20: Adjusted Free Cash Flow Assumptions
Enhabit Home Health & Hospice 20 Adjusted Free Cash Flow Assumptions ($ in millions) Certain cash flow items 2022 Full Year 2023 YTD 2023 Assumptions Adjusted EBITDA $149.3 $72.5 $93 to $98 Cash interest expense 12.9 27.9 $39 to $41 Cash income tax payments (refunds), net 11.9 (5.4) $(5) to $(8) Wor
Slide 21: Uses of Adjusted Free Cash Flow
Enhabit Home Health & Hospice 21 Uses of Adjusted Free Cash Flow ($ in millions) Growth in Core Business 2022 Full Year YTD 2023 2023 Assumptions De novos $1.2 $1.8 $2 to $3 Acquisitions(1)(2) $36.3 $2.8 $2.8 Debt repayments (borrowings), net(3) $(10.0) $25.0 TBD (1) On January 1, 2022, Enhabit acqu
Slide 22: Appendix
Enhabit Home Health & Hospice 22 Appendix
Slide 23: Overview
Enhabit Home Health & Hospice 23 Overview 104 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 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 Evaluate strategic acquisitions Leverage care transitions expertise Expand Medicare Advantage focus Explore
Slide 25: Home Health Operational Metrics
Enhabit Home Health & Hospice 25 Home Health Operational Metrics (net service revenue $ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Q3 2023 Home health net service revenue $224.9 $220.2 $216.3 $215.8 $877.1 $215.8 $213.8 $210.9 (Actual Amounts) Total admissions 53,309 49,399
Slide 26: Hospice Operational Metrics
Enhabit Home Health & Hospice 26 Hospice Operational Metrics (net service revenue $ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 Q1 2023 Q2 2023 Q3 2023 Hospice net service revenue $49.4 $47.8 $49.4 $47.4 $194.0 $49.3 $48.5 $47.4 (Actual Amounts) Total admissions 3,246 2,835 2,982 2,915 11,9
Slide 27: Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit
Enhabit Home Health & Hospice 27 Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit Adjusted EBITDA PLACE HOLDER – WILL NEED: • EBITDA to Net income • Adjusted EPS to reported EPS and Net income ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 FY
Slide 28: Consolidated Results – YTD 2023
Enhabit Home Health & Hospice 28 Consolidated Results – YTD 2023 ($ in millions, except per share data) Year-To-Date '23 vs. '222023 2022 Home health net service revenue $640.5 $661.4 (3.2) % Hospice net service revenue 145.2 146.6 (1.0) % Total net service revenue $785.7 $808.0 (2.8) % % of Revenue
Slide 29: Home Health Segment Results – YTD 2023
Enhabit Home Health & Hospice 29 Home Health Segment Results – YTD 2023 ($ in millions) Year-To-Date '23 vs. '222023 2022 Net service revenue $640.5 $661.4 (3.2) % Cost of services 329.5 326.4 0.9 % Gross margin 48.6 % 50.7 % General & administrative expenses 181.3 178.4 1.6 % Other income (0.2) — E
Slide 30: Hospice Segment Results – YTD 2023
Enhabit Home Health & Hospice 30 Hospice Segment Results – YTD 2023 ($ in millions) Year-To-Date '23 vs. '222023 2022 Net service revenue $145.2 $146.6 (1.0) % Cost of services 72.6 65.8 10.3 % Gross margin 50.0 % 55.1 % General & administrative expenses 48.0 47.7 0.6 % Equity earnings / noncontroll
Slide 31: Payor Sources
Enhabit Home Health & Hospice 31 Payor Sources As a % of Revenue Third Quarter Year To Date Fiscal Year Consolidated 2023 2022 2023 2022 2022 Medicare 72.7% 77.6% 72.2% 78.4% 78.4% Medicare Advantage 17.7% 14.5% 18.9% 13.7% 14.2% Managed Care 8.2% 6.4% 7.7% 6.6% 6.1% Medicaid 1.4% 1.4% 1.2% 1.2% 1.2
Slide 32: EPS Calculation: Q3 2023
Enhabit Home Health & Hospice 32 EPS Calculation: Q3 2023 ($ in millions, except per share amounts) Adjusted EPS – Q3 2023 As Reported Unusual or nonrecurring items that are not typical of ongoing operations Income Tax Adjustments As Adjusted Adjusted EBITDA $23.2 $— $— $23.2 Interest expense and am
Slide 33: EPS Calculation: Q3 2022
Enhabit Home Health & Hospice 33 EPS Calculation: Q3 2022 ($ in millions, except per share amounts) Adjusted EPS – Q3 2022 As Reported Unusual or nonrecurring items that are not typical of ongoing operations As Adjusted Adjusted EBITDA $31.7 $— $31.7 Depreciation and amortization (8.0) — (8.0) Inter
Slide 34: EPS Calculation: YTD 2023
Enhabit Home Health & Hospice 34 EPS Calculation: YTD 2023 ($ in millions, except per share amounts) Adjusted EPS – YTD 2023 As Reported Impairment of Goodwill Unusual or nonrecurring items that are not typical of ongoing operations Income Tax Adjustments As Adjusted Adjusted EBITDA $72.5 $— $— $— $
Slide 35: EPS Calculation: YTD 2022
Enhabit Home Health & Hospice 35 EPS Calculation: YTD 2022 ($ in millions, except per share amounts) Adjusted EPS – FY 2022 As Reported Unusual or nonrecurring items that are not typical of ongoing operations As Adjusted Adjusted EBITDA $119.0 $— $119.0 Depreciation and amortization (24.7) — (24.7)
Slide 36: Reconciliation of Net (Loss) Income to Adjusted EBITDA – Consolidated
Enhabit Home Health & Hospice 36 Reconciliation of Net (Loss) Income to Adjusted EBITDA – Consolidated ($ in millions) Third Quarter YTD 2023 2022 2023 2022 Net (loss) income $(2.2) $8.9 $(73.1) $56.4 Interest expense and amortization of debt discounts and fees 10.9 6.2 30.7 6.3 Depreciation and amo
Slide 37: Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
Enhabit Home Health & Hospice 37 Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA ($ in millions) Third Quarter YTD 2023 2022 2023 2022 Net cash provided by operating activities $6.3 $1.0 $45.5 $76.0 Interest expense, excluding amortization of debt discounts and fees 10
Slide 38: Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
Enhabit Home Health & Hospice 38 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow ($ in millions) Third Quarter YTD 2023 2022 2023 2022 Net cash provided by operating activities $6.3 $1.0 $45.5 $76.0 Unusual or nonrecurring items that are not typical of ongoing
Slide 39: Reconciliation of Gross Margin to Adjusted EBITDA Margin
Enhabit Home Health & Hospice 39 Reconciliation of Gross Margin to Adjusted EBITDA Margin Third Quarter YTD 2023 2022 2023 2022 Gross margin as a percentage of revenue 48.1 % 50.2 % 48.8 % 51.4 % General and administrative expenses (42.1) % (40.5) % (41.6) % (38.4) % Unusual or nonrecurring items th