Encompass Health reports results for third quarter 2024
Increases full-year guidance
BIRMINGHAM, Ala., Oct. 28, 2024 /PRNewswire/ -- Encompass Health Corporation (NYSE: EHC), the largest owner and operator of inpatient rehabilitation hospitals in the United States, today reported its results of operations for the third quarter ended September 30, 2024.
Summary results
Growth
Q3 2024
Q3 2023
Dollars
Percent
(In Millions, Except Per Share Data)
Net operating revenue
$ 1,351.0
$ 1,206.9
$ 144.1
11.9 %
Income from continuing operations attributable to Encompass Health per diluted share
1.07
0.85
0.22
25.9 %
Adjusted earnings per share
1.03
0.86
0.17
19.8 %
Cash flows provided by operating activities
267.8
215.2
52.6
24.4 %
Adjusted EBITDA
269.3
237.5
31.8
13.4 %
Adjusted free cash flow
189.7
149.3
40.4
27.1 %
(Actual Amounts)
Discharges
62,715
57,665
8.8 %
Same-store discharge growth
6.8 %
Net patient revenue per discharge
$ 20,987
$ 20,472
2.5 %
See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.
Revenue growth of 11.9% resulted primarily from discharge growth of 8.8%, including same-store growth of 6.8%. Net revenue per discharge grew 2.5%.
Cash flows provided by operating activities increased 24.4% to $267.8 million, primarily due to an increase in net income partly offset by higher cash tax payments.
Adjusted EBITDA increased 13.4%, primarily from increased revenue.
"We are very pleased with our third quarter performance as strong discharge growth facilitated an increase of 11.9% in revenue and 13.4% in Adjusted EBITDA," said President and Chief Executive Officer of Encompass Health Mark Tarr.
"Our teams did an exemplary job managing through very challenging conditions posed by Hurricanes Helene and Milton, prioritizing patient safety and continuity of operations. We thank our employees for their resilience and dedication to providing the highest quality care for our patients."
2024 Guidance
The Company increased its full-year guidance as follows:
Full-Year 2024 Guidance
Previous Guidance
Updated Guidance
(In Millions, Except Per Share Data)
Net operating revenue
$5,275 to $5,350
$5,325 to $5,375
Adjusted EBITDA
$1,040 to $1,075
$1,070 to $1,090
Adjusted earnings per share from continuing operations attributable to Encompass Health
$3.97 to $4.22
$4.19 to $4.33
For considerations regarding the Company's 2024 guidance, see the supplemental information posted on the Company's website at http://investor.encompasshealth.com. See also the "Other information" section below for an explanation of why the Company does not provide guidance for comparable GAAP measures for Adjusted EBITDA and adjusted earnings per share.
Earnings conference call and webcast
The Company will host an investor conference call at 10:00 a.m. Eastern Time on Tuesday, October 29, 2024 to discuss its results for the third quarter of 2024. For reference during the call, the Company will post certain supplemental information at http://investor.encompasshealth.com.
The conference call may be accessed by dialing 800 343-4849 and giving the conference ID EHCQ324. International callers should dial 203 518-9848 and give the same conference ID. Please call approximately ten minutes before the start of the call to ensure you are connected. The conference call will also be webcast live and will be available for on-line replay at http://investor.encompasshealth.com by clicking on an available link.
About Encompass Health
Encompass Health (NYSE:EHC) is the largest owner and operator of inpatient rehabilitation hospitals in the United States. With a national footprint that includes 165 hospitals in 38 states and Puerto Rico, the Company provides high-quality, compassionate rehabilitative care for patients recovering from a major injury or illness, using advanced technology and innovative treatments to maximize recovery. Encompass Health is ranked as one of Fortune's World's Most Admired Companies and Becker's Hospital Review's 150 Top Places to Work in Healthcare. For more information, visit encompasshealth.com, or follow us on our newsroom, Twitter, Instagram and Facebook.
Other information
The information in this press release is summarized and should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the "September 2024 Form 10-Q"), when filed, as well as the Company's Current Report on Form 8-K filed on October 28, 2024 (the "Q3 Earnings Form 8-K"), to which this press release is attached as Exhibit 99.1. In addition, the Company will post supplemental information today on its website at http://investor.encompasshealth.com for reference during its October 29, 2024 earnings call.
The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company's adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are included below or in the Q3 Earnings Form 8-K. Readers are encouraged to review the "Note Regarding Presentation of Non-GAAP Financial Measures" included in the Q3 Earnings Form 8-K which provides further explanation and disclosure regarding the Company's use of these non-GAAP financial measures.
Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of items that are deemed to be outside the control of the Company or otherwise not indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be not indicative of its ongoing operations. These items cannot be reasonably predicted and will depend on several factors, including industry and market conditions, and could be material to the Company's results computed in accordance with GAAP.
However, the following reasonably estimable GAAP measures for 2024 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures could be reasonably predicted:
Interest expense and amortization of debt discounts and fees - approximately $140 million
Amortization of debt-related items - approximately $10 million
The Q3 Earnings Form 8-K and, when filed, the September 2024 Form 10-Q can be found on the Company's website at http://investor.encompasshealth.com and the SEC's website at www.sec.gov.
Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2024
2023
2024
2023
(In Millions, Except Per Share Data)
Net operating revenues
$ 1,351.0
$ 1,206.9
$ 3,968.2
$ 3,554.4
Operating expenses:
Salaries and benefits
732.1
658.6
2,144.2
1,923.8
Other operating expenses
202.4
183.7
596.2
534.3
Occupancy costs
14.4
14.2
42.6
42.3
Supplies
60.6
53.9
176.7
159.7
General and administrative expenses
54.0
49.8
154.7
148.6
Depreciation and amortization
78.4
67.3
221.6
203.8
Total operating expenses
1,141.9
1,027.5
3,336.0
3,012.5
Loss on early extinguishment of debt
0.4
—
0.4
—
Interest expense and amortization of debt discounts and fees
34.9
35.9
104.4
108.6
Other income
(9.3)
(0.5)
(18.0)
(6.8)
Equity in net income of nonconsolidated affiliates
(0.7)
(1.0)
(2.8)
(2.3)
Income from continuing operations before income tax expense
183.8
145.0
548.2
442.4
Provision for income tax expense
36.0
30.3
112.6
95.0
Income from continuing operations
147.8
114.7
435.6
347.4
Loss from discontinued operations, net of tax
(0.7)
(1.3)
(3.2)
(3.5)
Net and comprehensive income
147.1
113.4
432.4
343.9
Less: Net and comprehensive income attributable to noncontrolling interests
(38.9)
(28.1)
(97.6)
(79.5)
Net and comprehensive income attributable to Encompass Health
$ 108.2
$ 85.3
$ 334.8
$ 264.4
Weighted average common shares outstanding:
Basic
99.9
99.5
99.9
99.5
Diluted
102.1
101.4
102.2
101.1
Earnings per common share:
Basic earnings per share attributable to Encompass Health common shareholders:
Continuing operations
$ 1.09
$ 0.86
$ 3.36
$ 2.68
Discontinued operations
(0.01)
(0.01)
(0.03)
(0.04)
Net income
$ 1.08
$ 0.85
$ 3.33
$ 2.64
Diluted earnings per share attributable to Encompass Health common shareholders:
Continuing operations
$ 1.07
$ 0.85
$ 3.31
$ 2.65
Discontinued operations
(0.01)
(0.01)
(0.03)
(0.03)
Net income
$ 1.06
$ 0.84
$ 3.28
$ 2.62
Amounts attributable to Encompass Health common shareholders:
Income from continuing operations
$ 108.9
$ 86.6
$ 338.0
$ 267.9
Loss from discontinued operations, net of tax
(0.7)
(1.3)
(3.2)
(3.5)
Net income attributable to Encompass Health
$ 108.2
$ 85.3
$ 334.8
$ 264.4
Encompass Health Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,2024
December 31,2023
(In Millions)
Assets
Current assets:
Cash and cash equivalents
$ 147.8
$ 69.1
Restricted cash
51.1
35.1
Accounts receivable
576.4
611.6
Other current assets
158.6
126.0
Total current assets
933.9
841.8
Property and equipment, net
3,523.7
3,301.0
Operating lease right-of-use assets
209.7
208.5
Goodwill
1,284.0
1,281.3
Intangible assets, net
296.2
278.2
Other long-term assets
210.9
191.6
Total assets
$ 6,458.4
$ 6,102.4
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt
$ 233.0
$ 24.8
Current operating lease liabilities
26.5
24.1
Accounts payable
170.3
170.0
Accrued expenses and other current liabilities
467.6
437.5
Total current liabilities
897.4
656.4
Long-term debt, net of current portion
2,344.5
2,687.8
Long-term operating lease liabilities
195.5
196.1
Deferred income tax liabilities
97.1
87.0
Other long-term liabilities
198.3
177.9
Total liabilities
3,732.8
3,805.2
Commitments and contingencies
Redeemable noncontrolling interests
56.5
42.0
Shareholders' equity:
Encompass Health shareholders' equity
1,959.8
1,647.5
Noncontrolling interests
709.3
607.7
Total shareholders' equity
2,669.1
2,255.2
Total liabilities and shareholders' equity
$ 6,458.4
