Enhabit (EHAB) Q3 2024 earnings summary

Executive summary

• Achieved fourth consecutive quarter of sequential volume growth, with Adjusted EBITDA up 5.6% year-over-year to $24.5M, driven by cost controls and hospice revenue growth.

• Net service revenue declined 1.8% year-over-year to $253.6M, with a net loss of $110.2M due to a $107.9M goodwill impairment.

• Hospice segment showed strong performance: revenue up 11%, average daily census up 6.9%, and Adjusted EBITDA up 29.9%.

• Home Health admissions grew 5.6% year-over-year, with non-Medicare admissions up 20.1% through Payor Innovation contracts.

• Terminated UnitedHealth contract effective January 31, 2025, with ongoing efforts to shift volumes to higher-paying payors.

Financial highlights

• Q3 2024 net service revenue: $253.6M (down 1.8% year-over-year); Adjusted EBITDA: $24.5M (up 5.6%); net loss: $110.2M due to $107.9M goodwill impairment.

• Home Health revenue declined 4.7% to $201.0M, primarily from lower Medicare recertifications; Hospice revenue increased 11% to $52.6M.

• Adjusted free cash flow year-to-date was $59M, with a 79% conversion rate; Q3 free cash flow was $30.3M.

• Adjusted EBITDA margin improved to 9.7% from 9.0% year-over-year.

• Home office G&A expenses decreased to 8.7% of consolidated revenue.

Outlook and guidance

• 2024 net service revenue guidance revised to $1,031–$1,046M; Adjusted EBITDA to $98–$102M; Adjusted EPS to $0.19–$0.29.

• 2024 free cash flow expected at $47–$55M.

• Hospice volumes and revenues expected to grow at mid to high single digits in 2025; Home Health revenue targeted to grow low to mid single digits.

• Anticipated annual savings of $3M from restructuring and $2M from coding outsourcing, with most benefits realized in 2025.

• Guidance lowered due to lower recertifications and hurricane impacts.