Enhabit, Inc. · NYSE:EHAB
Enhabit — Q4 2023 Earnings Presentation
39 slides from Enhabit's earnings presentation, Mar 6, 2024
Slide 1: Fourth Quarter Earnings Call Supplemental Information
Fourth Quarter Earnings Call Supplemental Information March 7, 2024
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 2023 Year in Review 4 2024 Priorities 5 Quarterly Results at a Glance 6 Consolidated Results 7-8 Clinical Expertise and High-Quality Outcomes 9 Payor Innovation 10 De Novos and Acquisitions 11 Home Health Segment 12-13 Hospice Segment 14-15 Consolidated Adjusted EBITDA 16 Debt and Liquidity
Slide 4: 2023 Year in Review
Enhabit Home Health & Hospice 4 2023 Year in Review First full year as a standalone company Payor innovation Successful recruitment and retention efforts De novo strategy High-quality outcomes • 41 new agreements (59 since inception of team) – Two new national agreements • Success shifting non-episo
Slide 5: 2024 Priorities
Enhabit Home Health & Hospice 5 2024 Priorities Home Health Hospice De Novos People Strategy • Stabilize Medicare as a % of total home health revenue • Leverage payor innovation strategy – Improve Medicare Advantage rates – Shift away from lower rate contracts • Grow through increased clinical staff
Slide 6: Quarterly Results at a Glance
Enhabit Home Health & Hospice 6 Strong growth in Medicare Advantage admissions Non-episodic admissions grew 34.2%, driving total admissions growth of 3.9% year over year. Continued payor innovation progress resulted in 11 new Medicare Advantage agreements negotiated during Q4 2023. New national adva
Slide 7: Consolidated Results
Enhabit Home Health & Hospice 7 Consolidated Results ($ in millions, except per share data) Q4 '23 vs. '222023 2022 Home health net service revenue $209.5 $215.8 (2.9) % Hospice net service revenue $51.1 $47.4 7.8 % Total net service revenue $260.6 $263.2 (1.0) % % of Revenue % of Revenue Cost of se
Slide 8: Consolidated Results (continued)
Enhabit Home Health & Hospice 8 Consolidated Results (continued) • The continued shift to more non-episodic admissions in home health impacted consolidated revenue and Adjusted EBITDA by approximately $8 million, net of the impact from improved pricing of payor innovation contracts. Consolidated Adj
Slide 9: Clinical Expertise and High-Quality Outcomes
Enhabit Home Health & Hospice 9 Clinical Expertise and High-Quality Outcomes Enhabit National Average % Better Than Average QoPC Star Rating1 3.5 3.0 16.7% 89% of our home health agencies are 3 Stars or higher; 34% are 4 Stars or higher1 HHCAHPS Star Rating2 3.7 3.5 5.7% 99% of our home health agenc
Slide 10: Payor Innovation
Enhabit Home Health & Hospice 10 Payor Innovation Payor innovation strategy continues to foster Medicare Advantage growth. New national payor innovation contract effective January 1, 2024 25% of non-episodic visits are now in payor innovation contracts at improved rates. • 11 new agreements negotiat
Slide 11: De Novos and Acquisitions
Enhabit Home Health & Hospice 11 De Novos and Acquisitions Strategically reinvesting for growth • Opened one home health and one hospice de novo location in Q4 2023 – Cincinnati, Ohio home health location began accepting patients in October 2023. – Springfield, Illinois hospice location began accept
Slide 12: Home Health Segment
Enhabit Home Health & Hospice 12 Home Health Segment ($ in millions) Q4 '23 vs. '222023 2022 Net service revenue $209.5 $215.8 (2.9) % Cost of services 109.4 109.0 0.4 % Gross margin 47.8 % 49.5 % General and administrative expenses 59.3 60.0 (1.2) % Other income — (0.9) (100.0) % Equity earnings /
Slide 13: Home Health Segment (continued)
Enhabit Home Health & Hospice 13 Home Health Segment (continued) Revenue decreased $6.3 million, or 2.9%, year over year primarily due to the continued payor mix shift to more non- episodic admissions. • Total admissions growth was driven by 34.2% year-over-year growth in non-episodic admissions. •
Slide 14: Hospice Segment
Enhabit Home Health & Hospice 14 Hospice Segment ($ in millions) Q4 '23 vs. '222023 2022 Net service revenue $51.1 $47.4 7.8 % Cost of services 24.0 24.3 (1.2) % Gross margin 53.0 % 48.7 % General and administrative expenses 15.4 17.5 (12.0) % Equity earnings / noncontrolling interest — — — % Adjust
Slide 15: Hospice Segment (continued)
Enhabit Home Health & Hospice 15 Hospice Segment (continued) Hospice average daily census decreased 4.3% year over year. Revenue increased $3.7 million, or 7.8%, year over year primarily due to an increase in revenue per day. • Admissions decreased 1.5% year over year. • Revenue per day increased 12
Slide 16: Consolidated Adjusted EBITDA
Enhabit Home Health & Hospice 16 Consolidated Adjusted EBITDA ($ in millions) Q4 2023 % of Consolidated Revenue Q4 2022 % of Consolidated Revenue Home health segment Adjusted EBITDA $40.3 $47.2 Hospice segment Adjusted EBITDA $11.7 $5.6 Home office general and administrative expenses $(26.8) 10.3 %
Slide 17: Debt & Liquidity Metrics
Enhabit Home Health & Hospice 17 Debt & Liquidity Metrics ($ in millions) December 31, 2023 December 31, 2022 Advances under revolving credit facility, due 2027(1)(3) $180.0 $190.0 $400 million term loan facility, due 2027 (1)(2) $367.1 $387.9 Finance lease obligations $5.5 $5.2 Total debt $552.6 $5
Slide 18: Adjusted Free Cash Flow
Enhabit Home Health & Hospice 18 Adjusted Free Cash Flow 2022 YTD 2021 YTD Adjusted EBITDA ($ in thousands) $87,317 $105,012 Change in net working capital (6,561) (8,297) Cash interest payments (123) (145) Cash tax payments - - Maintenance capital expenditures 2616 3,129 Adjusted free cash flow $78,
Slide 19: 2024 Guidance
Enhabit Home Health & Hospice 19 2024 Guidance ($ in millions, except per share data) 2023 Actuals 2024 Guidance Net service revenue $1,046.3 $1,076 to $1,102 Adjusted EBITDA $97.6 $98 to $110 Adjusted EPS $0.22 $0.12 to $0.43 Reconciliations to GAAP provided in Appendix
Slide 20: Guidance Considerations
Enhabit Home Health & Hospice 20 Guidance Considerations • An increase of 1.2% in Medicare pricing • Continued shift to more non-episodic admissions • Cost per visit increase of 2.0% to 3.0% Home Health • An increase of 2.9% in Medicare pricing for Q1 through Q3 • Cost per patient day increase of 2.
Slide 21: Adjusted Free Cash Flow Assumptions
Enhabit Home Health & Hospice 21 Adjusted Free Cash Flow Assumptions ($ in millions) Certain cash flow items 2022 Full Year 2023 Full Year 2024 Assumptions Adjusted EBITDA $149.3 $97.6 $98 to $110 Cash interest expense 12.9 40.6 $40 to $45 Cash income tax payments (refunds), net 11.9 (8.2) $4 to $6
Slide 22: Uses of Adjusted Free Cash Flow
Enhabit Home Health & Hospice 22 Uses of Adjusted Free Cash Flow ($ in millions) Growth in Core Business 2022 Full Year 2023 Full Year 2024 Assumptions De novos $1.2 $2.2 $2.5 to $3.5 Acquisitions(1)(2) $36.3 $2.8 TBD Debt repayments (borrowings), net(3) $(10.0) $30.0 TBD (1) On January 1, 2022, Enh
Slide 23: Enhabit Home Health & Hospice 23 Appendix
Enhabit Home Health & Hospice 23 Appendix
Slide 24: Overview
Enhabit Home Health & Hospice 24 Overview 105 hospice locations co-located with home health locations(1) 10 states where we are #1 or #2 in home health(2) ~66% of total Medicare home health spend occurs in states in which we operate(2) Home Health Locations Hospice Locations Home Health & Hospice St
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 Q4 2023 2023 FY Home health net service revenue $224.9 $220.2 $216.3 $215.8 $877.1 $215.8 $213.8 $210.9 $209.5 $850.1 (Actual Amounts)
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 Q4 2023 FY 2023 Hospice net service revenue $49.4 $47.8 $49.4 $47.4 $194.0 $49.3 $48.5 $47.4 $51.1 $196.2 (Actual Amounts) Total admissions
Slide 27: Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit
Enhabit Home Health & Hospice 27 Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit Adjusted EBITDA PLACE HOLDER – WILL NEED: • EBITDA to Net income • Adjusted EPS to reported EPS and Net income ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 Q2
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 $850.1 $877.1 (3.1) % Hospice net service revenue 196.2 194.0 1.1 % Total net service revenue $1,046.3 $1,071.1 (2.3) % % of Reven
Slide 29: Home Health Segment Results – YTD 2023
Enhabit Home Health & Hospice 29 Home Health Segment Results – YTD 2023 ($ in millions) Year-To-Date '23 vs. '222023 2022 Net service revenue $850.1 $877.1 (3.1) % Cost of services 439.0 435.5 0.8 % Gross margin 48.4 % 50.3 % General and administrative expenses 240.6 238.5 0.9 % Other income (0.2) (
Slide 30: Hospice Segment Results – YTD 2023
Enhabit Home Health & Hospice 30 Hospice Segment Results – YTD 2023 ($ in millions) Year-To-Date '23 vs. '222023 2022 Net service revenue $196.2 $194.0 1.1 % Cost of services 96.6 90.1 7.2 % Gross margin 50.8 % 53.6 % General and administrative expenses 63.4 65.2 (2.8) % Equity earnings / noncontrol
Slide 31: Payor Sources
Enhabit Home Health & Hospice 31 Payor Sources As a % of Revenue Fourth Quarter Fiscal Year Consolidated 2023 2022 2023 2022 Medicare 68.5% 78.1% 71.5% 78.4% Medicare Advantage 19.5% 15.5% 19.0% 14.2% Managed Care 10.6% 5.0% 8.2% 6.1% Medicaid 1.3% 1.3% 1.2% 1.2% Other 0.1% 0.1% 0.1% 0.1% Total 100.
Slide 32: EPS Calculation: Q4 2023
Enhabit Home Health & Hospice 32 EPS Calculation: Q4 2023 ($ in millions, except per share amounts) Adjusted EPS – Q4 2023 As Reported Unusual or nonrecurring items that are not typical of ongoing operations Income Tax Adjustments(3) As Adjusted Adjusted EBITDA(1) $25.2 $— $— $25.2 Interest expense
Slide 33: EPS Calculation: Q4 2022
Enhabit Home Health & Hospice 33 EPS Calculation: Q4 2022 ($ in millions, except per share amounts) Adjusted EPS – Q4 2022 As Reported Impairment of Goodwill Unusual or nonrecurring items that are not typical of ongoing operations Income Tax Adjustments(3) As Adjusted Adjusted EBITDA(1) $30.3 $— $—
Slide 34: EPS Calculation: YTD 2023
Enhabit Home Health & Hospice 34 EPS Calculation: YTD 2023 ($ 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(3) As Adjusted Adjusted EBITDA(1) $97.6 $— $
Slide 35: EPS Calculation: YTD 2022
Enhabit Home Health & Hospice 35 EPS Calculation: YTD 2022 ($ in millions, except per share amounts) Adjusted EPS – YTD 2022 As Reported Impairment of Goodwill Unusual or nonrecurring items that are not typical of ongoing operations Income Tax Adjustments(3) As Adjusted Adjusted EBITDA(1) $149.3 $—
Slide 36: Reconciliation of Net Loss to Adjusted EBITDA – Consolidated
Enhabit Home Health & Hospice 36 Reconciliation of Net Loss to Adjusted EBITDA – Consolidated ($ in millions) Fourth Quarter YTD 2023 2022 2023 2022 Net loss $(5.9) $(94.7) $(79.0) $(38.3) Interest expense 12.3 8.7 43.0 15.0 Unusual or nonrecurring items that are not typical of ongoing operations(1)
Slide 37: Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
Enhabit Home Health & Hospice 37 Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA (1) Unusual or nonrecurring items in Q4 2023 include costs associated with nonroutine litigation, the strategic review process and restructuring activities; FY 2023 include costs associate
Slide 38: Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
Enhabit Home Health & Hospice 38 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow PLACE HOLDER – WILL NEED: • EBITDA to Net income • Adjusted EPS to reported EPS and Net income ($ in millions) Fourth Quarter YTD 2023 2022 2023 2022 Net cash provided by operating
Slide 39: Reconciliation of Gross Margin to Adjusted EBITDA Margin
Enhabit Home Health & Hospice 39 Reconciliation of Gross Margin to Adjusted EBITDA Margin Fourth Quarter YTD 2023 2022 2023 2022 Gross margin as a percentage of revenue 48.8 % 49.4 % 48.8 % 50.9 % General and administrative expenses (43.9) % (39.7) % (42.2) % (38.7) % Unusual or nonrecurring items t