Enhabit, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Home Health: Focused on stabilizing Medicare fee-for-service admissions (44% in Q4), growing non-Medicare admissions (up 10.7% YOY), and increasing visits in payer innovation contracts (from 22% to 48% in Q4). Entering 2025 with new contracts, census grew 7.2% sequentially from January to February.
• Hospice: Executed strategies to grow census, gain operating leverage. Opened 6 de novo locations in 2024 (5 hospice, 1 home health), with 14 de novo projects in process. Sequential census growth continued in January and February 2025.
• Cost Structure: Closing/consolidating 5 home health and 2 hospice branches, outsourcing coding functions. Expected to improve 2025 adjusted EBITDA by ~$1 million and save $1.5 million in 2025.

Segment Performance

• Home Health: Fourth quarter revenue was $200.4 million, a 0.3% sequential decrease due to volume decline (0.5% in average daily census) from hurricane impacts. Medicare ADC improved sequentially to 20,818. Non-Medicare visits in payer innovation contracts grew from 22% in Q4 2023 to 48% in Q4 2024, with non-Medicare revenue per visit up 5.7% year over year. Adjusted EBITDA was $35.5 million, down $1.0 million sequentially.
• Hospice: Fourth quarter revenue was $57.8 million, a 9.9% sequential increase due to volume increase (3% in average daily census) and unit revenue improvement (6.9%). Adjusted EBITDA was $13.3 million, up $3.3 million sequentially. Exited 2024 with highest census since spin, with sequential growth in January and February 2025.

Guidance

• 2025 net service revenue: $1.05B - $1.08B; adjusted EBITDA: $101M - $107M.
• Home Health: Assumes 4%-5% ADC growth, slows Medicare volume decline, revenue per patient day flat with 1% CMS Medicare pricing improvement offset by unfavorable mix.
• Hospice: Assumes 7%-8.5% ADC growth, unit revenue per patient day up 4%-5% due to hospice final rule and favorable cap liability development.
• Expected adjusted free cash flow: $47M - $58M in 2025, impacted by return to cash income tax payments.

Risks

• Impact of CMS payment adjustments on revenues.
• Wage inflation affecting cost structure.
• Uncertainty in payer mix optimization affecting revenue guidance.

Question and Answer

• Q: Thoughts on momentum carrying over into 2025 and fee-for-service share gain?

A: Barb mentioned hospice has case management model in place, admission departments built, and home health can now focus on full-service growth with census growth in Jan-Feb.

• Q: Visibility on payer innovation contracts and leverage to convert non-payer innovation?

A: Barbara noted ongoing discussions with regional plans on episodic contracts, payer innovation team continues to work on new opportunities.

• Q: Relation of payer innovation negotiations to 2025 guidance?

A: Ryan said guidance includes ~$19M - $21M revenue improvement from CMS rate rule and national agreement, no material incremental unit revenues from payer innovation in guide.

• Q: Breakdown of hospice revenue components (rate vs accruals)?

A: Ryan said hospice cap accrual benefit was ~$1.4M, normalizing shows consistent with Medicare rate increase.