Enhabit, Inc. Q1 FY2025 earnings call

• Home Health: Admissions from Q4 to Q1 increased 8.1%, fee-for-service grew 4% sequentially; year-over-year admission growth 0.7% (normalized 2.5%). Non-Medicare admissions up 7.4% Y/Y, non-Medicare visits in payer innovation contracts increased from 38% in Q1 2024 to 44% in Q1 2025, non-Medicare revenue per visit improved 7.6% Y/Y. Visits per episode declined 6.7% from Q1 2024 to Q1 2025.
• Hospice: Sequential monthly census growth continued, total admissions grew 8% Y/Y with same-store up 5.2%, census grew 12.3% with 10.6% same-store growth. Referral to admission conversion improved 310 basis points Y/Y. Opened one hospice location in Q1 and have 13 projects underway.
• Cost Structure: Completed transition of all branches to outsourced coding resource in Q1, estimated to deliver $1.5 million in cost savings for remainder of 2025. Seven branches closed or consolidated in Q1, four to be closed by end of Q2 2025. Piloting two internally developed apps.
• Human Capital: Completed annual employee engagement survey with results above health care benchmark, driven by employees finding work meaningful and collaborating to deliver quality outcomes.

Home Health Segment

• Revenue: $200.6 million in Q1 2025, up $0.2 million or 0.1% sequentially. Volumes up sequentially with a 3.7% increase in average daily census, patient day volume growth 1.4%. Adjusted EBITDA totaled $38.3 million in Q1, a sequential increase of $2.8 million or 7.9%. Gross margin as a percentage of revenue was 48.5%, an improvement of 110 basis points sequentially.
• Admissions from quarter four to quarter one increased by 8.1%, fee-for-service grew 4% sequentially. Year-over-year admission growth was up 0.7%, normalized for Leap Year and closed branches, growth is 2.5%. Non-Medicare admissions up 7.4% year-over-year, non-Medicare visits in payer innovation contracts increased from 38% in Q1 2024 to 44% in Q1 2025, non-Medicare revenue per visit improved 7.6% year-over-year. Visits per episode declined 6.7% from Q1 2024 to Q1 2025.

Hospice Segment

• Revenue: $59.3 million in Q1 2025, up $1.5 million or 2.6% sequentially, up $10.1 million or 20.5% year-over-year. Volume growth strong with average daily census totaling 38.09 in Q1, an improvement of 2.1% sequentially and 12.3% year-over-year. Adjusted EBITDA totaled $15.0 million in Q1, a sequential increase of $1.7 million or 12.8%.
• Total admissions grew 8% year-over-year with same-store up 5.2%, census grew 12.3% with 10.6% same-store growth. Referral to admission conversion improved 310 basis points year-over-year. Cost per day decreased 0.8% year-over-year and 2.7% sequentially. Opened one hospice location in Q1 and have 13 projects underway.

• Reaffirm 2025 guidance based on consolidated first quarter results and business momentum. - Generated approximately $17 million of free cash flow in Q1, a 63.5% free cash flow conversion rate. - Reduced overall bank debt by $25 million in Q1 through free cash flow generation and proceeds from sale of investment interest in Medalogix. - Leverage ratio now 4.4x, below covenant of 4.5x, effectively ending covenant relief period a quarter earlier than required.

• Certain risks and uncertainties that could cause actual results to differ materially from projections, estimates and expectations are discussed in SEC filings, including Annual Report on Form 10-K. - Risks beyond control that could impact actual results, such as those related to payer contract renegotiations and inflationary impacts on pricing.

Q: Brian Tanquilut from Jefferies asked about non-Medicare book of business volume growth and labor market inflation expectation.

A: Barb Jacobsmeyer said focus on hiring to improve average daily census and admissions; Ryan Solomon mentioned market normalizing and ability to build capacity, with end capacity growing ~4% from December to March.

Q: AJ Rice from UBS asked about hospice ADC growth drivers and home health visits per episode dynamics.

A: Barb Jacobsmeyer said hospice ADC growth is a combination of referrals up 3% Y/Y and timely response from regional admissions departments; home health visits per episode improvement is due to continued use of Medalogix Pulse tool.

Q: Ryan Langston from TD Cowen asked about hospice operations leverage and capacity/productivity.

A: Ryan Solomon said there will be minor incremental investments as they monitor margin profile; Barb Jacobsmeyer said capacity at branch level is monitored and growth trajectory not anticipated to change.

Q: Whit Mayo from Leerink Partners asked about payer innovation contract rate increases and research rates.

A: Barb Jacobsmeyer said most contracts are 2-3 years, some have escalators tied to quality metrics; focus on using Medalogix Pulse and growing census as driver for research rates.