Enhabit (EHAB) Q2 2024 earnings summary

Executive summary

• Net service revenue for Q2 2024 was $260.6 million, down 0.6% year-over-year, with adjusted EBITDA up 5.4% to $25.2 million and net income improving to $0.4 million from a $74.1 million loss last year.

• Total home health admissions grew 6.4% year-over-year, driven by a 25.2% increase in non-Medicare admissions; cost per visit decreased 2.2%.

• Hospice segment saw average daily census increase 2.7% year-over-year, with admissions up 1.8% and adjusted EBITDA up 9.6%.

• Announced CFO transition and concluded a strategic review, incurring nonrecurring legal and advisory costs.

• Notice given to terminate UnitedHealth Group contract, effective January 31, 2025, with plans to shift revenue to other payors.

Financial highlights

• Q2 2024 consolidated net service revenue was $260.6 million, down 0.6% year-over-year; adjusted EBITDA was $25.2 million (9.7% margin), up 5.4%.

• Adjusted EPS was $0.07, up from $0.04 in Q2 2023; reported EPS was $0.00 due to nonrecurring items.

• Home health net service revenue declined 1.7% year-over-year to $210.2 million; hospice net service revenue increased 3.9% to $50.4 million.

• Gross margin improved to 49.4% of revenue; adjusted EBITDA margin rose to 9.7%.

• Bank debt reduced by $15 million in the quarter; net debt at $525.2 million as of June 30, 2024.

Outlook and guidance

• 2024 net service revenue guidance narrowed to $1,050–$1,063 million; adjusted EBITDA guidance narrowed to $100–$106 million.

• Adjusted EPS guidance updated to $0.12–$0.43 for 2024.

• Free cash flow expected between $39–$58 million in 2024, with Medicare fee-for-service volume as the key variable.

• Medicare pricing expected to increase 1.2% for home health and 2.9–3% for hospice; CMS proposed a 1.7% net decrease for home health in 2025.

• Home health and hospice admissions expected to grow at mid- to high-single digits over the next three years.