DALLAS--(BUSINESS WIRE)--Enhabit, Inc. (NYSE: EHAB), a leading home health and hospice care provider, today reported its results of operations for the first quarter ended March 31, 2023. “The first quarter was underscored by progress in two of our critical success factors for 2023. Our sequential admissions growth for home health and hospice was possible due to our continued efforts in recruitment and retention of clinical staff and our payor innovation team negotiating a new national payor agreement and two convener agreements with national reach,” said Enhabit’s President and Chief Executive Officer, Barb Jacobsmeyer. “With our expansion of Medicare Advantage contracts and improved rates combined with reduced staffing capacity constraints, we expect to see improvements in our bottom line throughout 2023.” QUARTERLY PERFORMANCE - CONSOLIDATED
Net service revenue of $265.1 million
Net income of $3.2 million
Adjusted EBITDA of $25.3 million
Earnings per diluted share of $0.05
Adjusted earnings per diluted share of $0.09
RECENT COMPANY HIGHLIGHTS
Executed new national agreement with Medicare Advantage payor plus two new agreements with conveners with national reach
Continued strong growth in home health Medicare Advantage admissions with non-episodic admissions up 31.9% driving total admissions growth of 1.2% year over year
Continued recruiting success adding 101 net new full-time nursing hires in the first quarter
Further reduced staffing constrained hospice locations with continued implementation of case management model for nurses; hospice staffing constraints lowest in four quarters
Acquired one home health location in Indiana and opened two de novo hospice locations in Texas in March
($ in millions, except per share data)
Home health net service revenue
Hospice net service revenue
Total net service revenue
General and administrative expenses
Equity earnings / noncontrolling interests
The continued shift to more non-episodic admissions in home health and the resumption of sequestration reduced consolidated net service revenue and adjusted EBITDA approximately $10 million year over year.
Adjusted EBITDA decreased year over year primarily due to the continued shift to more non-episodic admissions in home health, the resumption of sequestration, and increased general and administrative expenses. General and administrative expenses were higher year over year primarily due to an increase in employee group medical claims, approximately $2 million of incremental costs associated with being a stand-alone company, vendor rebates received in the first quarter of 2022, and improved back office staffing in the field.
General and administrative expenses
Operational metrics (Actual Amounts)
Same-store total admissions growth
Episodic recertifications
Non-episodic recertifications
Same-store total recertifications growth
The year-over-year decrease in revenue was due primarily to the continued payor mix shift to more non-episodic admissions and the resumption of sequestration. Revenue per episode decreased year over year primarily due to the resumption of sequestration and the timing of completed episodes partially offset by a 0.7% increase in Medicare reimbursement rates.
Adjusted EBITDA decreased year over year primarily due to lower revenue and increased general and administrative expenses. General and administrative expenses increased primarily due to an increase in employee group medical claims, vendor rebates received in the first quarter of 2022, and improved back office staffing in the field. Cost per visit increased year over year primarily due to merit and market rate increases for clinical staff, increased contract labor, and increased costs associated with employee group medical claims partially offset by improved clinical productivity.
General and administrative expenses
Operational metrics (Actual Amounts)
Same-store total admissions growth
Discharged average length of stay
Net service revenue was relatively flat to the prior year as the decline in average daily census and resumption of sequestration was offset by increased Medicare reimbursement rates. Admissions decreased 3.8% year over year but increased 7.1% sequentially. Revenue per day increased year over year primarily due to increased Medicare reimbursement rates partially offset by the resumption of sequestration and patient mix.
Adjusted EBITDA decreased year over year primarily due to higher cost of services resulting from increased labor costs. Cost per day increased year over year primarily due to increased labor costs related to the implementation of the new case management model, including costs associated with dedicated on-call and triage nurses, increased contract labor, and an increase in employee group medical claims.
The Company reaffirmed its full-year 2023 guidance as follows:
between $1,110 and $1,140 million
between $125 and $140 million
For additional considerations regarding the Company’s 2023 guidance ranges, see the supplemental information posted on the Company’s website at http://investors.ehab.com. See also “Other Information” below for an explanation of why the Company does not provide guidance for comparable GAAP measures for adjusted EBITDA and adjusted EPS.
CONFERENCE CALL INFORMATION
The Company will host an investor conference call at 10 AM Eastern Time on May 10, 2023 to discuss its results for the first quarter of 2023. To access the live call by phone, dial toll-free (888) 660-6150 or international (929) 203-0843; the conference ID is 5248158. A simultaneous webcast of the call, along with supplemental information, may be accessed by visiting http://investors.ehab.com. Following the call, a replay will be available at the same location.
ABOUT ENHABIT HOME HEALTH & HOSPICE
Enhabit Home Health & Hospice (Enhabit, Inc.) is a leading national home health and hospice provider working to expand what's possible for patient care in the home. Enhabit’s team of clinicians supports patients and their families where they are most comfortable, with a nationwide footprint spanning 253 home health locations and 107 hospice locations across 34 states. Enhabit leverages advanced technology and compassionate teams to deliver extraordinary patient care. For more information, visit ehab.com. Note regarding presentation of non-GAAP financial measures
The financial data contained in the press release and supplemental information includes non-GAAP financial measures as defined in Regulation G under the Securities Exchange Act of 1934, including adjusted EBITDA, adjusted EBITDA margin, leverage ratios, adjusted EPS, and adjusted free cash flow. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP are presented on the attached schedules. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, reconciliation of our guidance of adjusted EBITDA and adjusted EPS to their corresponding GAAP measures is not provided because the Company is unable to provide such reconciliation, without unreasonable effort, due to the inherent difficulty in predicting, with reasonable certainty, the future impact of items that are outside the control of the Company or otherwise non-indicative of its ongoing operating performance. Such items include, but are not limited to, 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); and items related to corporate and facility restructurings. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
Note regarding presentation of same-store comparisons
The Company uses “same-store” comparisons to explain the changes in certain performance metrics and line items within its financial statements. Same-store comparisons are calculated based on home health and hospice locations open throughout both the full current period and the immediately prior period presented. These comparisons include the financial results of market consolidation transactions in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company’s results of operations.
Condensed Consolidated Statements of Income
Cost of service, excluding depreciation and amortization
General and administrative expenses
Depreciation and amortization
Interest expense and amortization of debt discounts and fees
Income before income taxes and noncontrolling interests
Less: Net income attributable to noncontrolling interests
Weighted average common shares outstanding:
Earnings per common share:
Basic earnings per share attributable to Enhabit, Inc. common stockholders Diluted earnings per share attributable to Enhabit, Inc. common stockholders Condensed Consolidated Balance Sheets
Cash and cash equivalents
Prepaid expenses and other current assets
Property and equipment, net
Operating lease right-of-use assets
Liabilities and Stockholders’ Equity
Current portion of long-term debt
Current operating lease liabilities
Refunds due patients and other third-party payors
Accrued medical insurance
Other current liabilities
Total current liabilities
Long-term debt, net of current portion
Long-term operating lease liabilities
Deferred income tax liabilities
Other long-term liabilities
Commitments and contingencies
Redeemable noncontrolling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
Condensed Consolidated Cash Flows
Three Months Ended March 31,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization
Amortization of debt related costs
Deferred tax expense (benefit)
Changes in assets and liabilities, net of acquisitions—
Prepaid expenses and other assets
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Principal payments on term loan
Payments on revolving credit facility
Distributions paid to noncontrolling interests of consolidated affiliates
Principal payments under finance lease obligations
Contributions from Encompass
Distributions to Encompass
Contributions from noncontrolling interests of consolidated affiliates
Net cash used in financing activities
Increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
Adjusted Earnings Per Share
Earnings per share, as reported
Unusual or nonrecurring items that are not typical of ongoing operations(1)
Adjusted earnings per share(2)
Unusual or nonrecurring items include costs associated with the strategic alternatives review, shareholder activism defense, and non-routine litigation.
Adjusted EPS may not sum due to rounding.
Adjusted Earnings Per Share
(In Millions, Except Per Share Amounts)
Depreciation and amortization
Interest expense and amortization of debt discounts and fees
Gain on disposal of assets
Unusual or nonrecurring items that are not typical of ongoing operations(2)
Income before income tax expense
Provision for income tax expense
Net income attributable to Enhabit
Diluted earnings per share(3)
Diluted shares used in calculation
See reconciliation of net income to adjusted EBITDA.
Unusual or nonrecurring items include costs associated with the strategic alternatives review, shareholder activism defense, and non-routine litigation.
Adjusted EPS may not sum due to rounding.
Adjusted Earnings Per Share
(In Millions, Except Per Share Amounts)
Depreciation and amortization
Interest expense and amortization of debt discounts and fees
Gain on disposal of assets
Stock-based compensation included in overhead allocation
Unusual or nonrecurring items that are not typical of ongoing operations(2)
Income before income tax expense
Provision for income tax expense
Net income attributable to Enhabit
Diluted earnings per share(3)
Diluted shares used in calculation
See reconciliation of net income to adjusted EBITDA.
Unusual or nonrecurring items include costs associated with the strategic alternatives review, shareholder activism defense, and non-routine litigation.
Adjusted EPS may not sum due to rounding.
Reconciliation of Net Income to Adjusted EBITDA
Interest expense and amortization of debt discounts and fees
Depreciation and amortization
(Gain) loss on disposal or impairment of assets
Stock-based compensation included in overhead allocation
Net income attributable to noncontrolling interests
Unusual or nonrecurring items that are not typical of ongoing operations(1)
Unusual or nonrecurring items include costs associated with the strategic alternatives review, shareholder activism defense, and non-routine litigation.
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
Net cash provided by operating activities
Interest expense and amortization of debt discounts and fees
Equity in net income of nonconsolidated affiliates
Net income attributable to noncontrolling interests in continuing operations
Distributions from nonconsolidated affiliates
Current portion of income tax expense
Change in assets and liabilities
Unusual or nonrecurring items that are not typical of ongoing operations(1)
Stock-based compensation included in overhead allocation
Unusual or nonrecurring items include costs associated with the strategic alternatives review, shareholder activism defense, and non-routine litigation.
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
Net cash provided by operating activities
Capital expenditures for maintenance
Distributions paid to noncontrolling interests of consolidated affiliates
Other working capital adjustments
Items non-indicative of ongoing operating performance:
Stock-based compensation included in overhead allocation
Unusual or nonrecurring items that are not typical of ongoing operations(1)
Unusual or nonrecurring items include costs associated with the strategic alternatives review, shareholder activism defense, and non-routine litigation.
FORWARD-LOOKING STATEMENTS
Statements contained in this press release which are not historical facts, such as those relating to future events, projections, financial guidance, legislative or regulatory developments, strategy or growth opportunities, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such estimates, projections, and forward-looking information speak only as of the date hereof, and Enhabit undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by Enhabit include, but are not limited to, our ability to execute on our strategic plans, regulatory and other developments impacting the markets for our services, changes in reimbursement rates, general economic conditions, our ability to attract and retain key management personnel and healthcare professionals, potential disruptions or breaches of our or our vendors’ information systems, the outcome of litigation, our ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures, and our ability to control costs, particularly labor and employee benefit costs. Our Form 10K and subsequent quarterly reports on Form 10-Q, each of which can be found on the Company’s website at http://investors.ehab.com and the SEC’s website at www.sec.gov, discuss other risks and factors that could cause actual results to differ materially from those expressed or implied by any forward-looking statement in this press release. We urge you to consider all of the risks, uncertainties and factors identified above or discussed in such reports carefully in evaluating the forward-looking statements in this press release.