8-K/A
Enhabit, Inc. (EHAB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 14, 2023
Enhabit, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 001-41406 | 47-2409192 |
|---|---|
| (Commission File Number) | (IRS Employer Identification No.) |
6688 N. Central Expressway, Suite 1300, Dallas, Texas 75206
(Address of Principal Executive Offices, Including Zip Code)
(214) 239-6500
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | EHAB | New York Stock Exchange |
EXPLANATORY NOTE
On February 14, 2023, Enhabit, Inc. (the “Company”) issued a press release reporting its financial results for the quarter and year ended December 31, 2022 (the “Original Press Release”). A copy of the Original Press Release was furnished with a Current Report on Form 8-K on February 14, 2023 (the “Original 8-K”). On April 4, 2023, the Company filed Amendment No. 1 to the Original 8-K to amend Items 2.02 and 7.01 for purposes of disclosing the filing of its Form 12b-25 and anticipated adjustments to previously disclosed financial results contained in the Original Press Release.
This Amendment No. 2 on Form 8-K/A is being furnished to further amend and supplement Items 2.01, 7.01 and 9.01 of the Original 8-K for the revision of the Company’s previously disclosed financial results for the quarter and year ended December 31, 2022, as described below.
Item 2.02. Results of Operations and Financial Condition.*
On April 14, 2023, the Company corrected the Original Press Release (the “Corrected Press Release”) to revise the previously disclosed financial results contained in the Original Press Release. A copy of the Corrected Press Release is furnished as Exhibit 99.1 to this Amendment No. 2 on Form 8-K/A and is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure and Item 7.01.*
On April 14, 2023, the Company issued corrected supplemental information on the Company’s financial results for the quarter and year ended December 31, 2022 (the “Corrected Supplemental Information”).
A copy of the Corrected Supplemental Information is furnished as Exhibit 99.2 to this Amendment No. 2 on Form 8-K/A and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description |
|---|---|
| 99.1 | Corrected Press Release of Enhabit, Inc., datedApril 14, 2023.* |
| 99.2 | Corrected Supplemental Information for the quarter and year ended December 31, 2022 of Enhabit, Inc., dated April 14, 2023.* |
| 104 | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document. |
* The information in Item 2.02 and Item 7.01, including Exhibit 99.1 and Exhibit 99.2, is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated into any filing under the Securities Act of 1933, as amended, or the Exchange Act, unless specifically identified as being incorporated therein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| ENHABIT, INC. | ||
|---|---|---|
| By: | /s/ Dylan Black | |
| Name: | Dylan Black | |
| Title: | General Counsel |
Dated: April 14, 2023
Document
Exhibit 99.1
CORRECTION—Enhabit, Inc.
DALLAS, Texas, April 14, 2023 —This press release corrects a prior version published on February 14, 2023 and is updated to revise the Company’s previously disclosed financial results for the period ended December 31, 2022. The corrected release reads:
Enhabit Reports Fourth Quarter Results and Issues Full-Year 2023 Guidance
Company to host a conference call tomorrow, Feb. 15, 2023 at 10 AM EST
DALLAS, TX – Feb. 14, 2022 – Enhabit, Inc. (NYSE: EHAB), a leading home health and hospice care provider, today reported its results of operations for the fourth quarter ended December 31, 2022.
“Significant changes were required in 2022 to lead important strategies for our future success,” said Enhabit’s President and Chief Executive Officer, Barb Jacobsmeyer. “The expansion of our human resource and talent acquisitions teams, the establishment of our payor innovation team, and strategic changes to management and our staffing model in hospice are all making notable progress. We have also taken steps to align our operational and sales teams into a regional structure to drive success clinically and operationally at a local level. While we face numerous headwinds in 2023, we remain confident in the long-term prospects for Enhabit.”
SUMMARY PERFORMANCE - CONSOLIDATED
•Net service revenue of $263.2 million, declined 4.7% from Q4’21
•Net loss of $(94.7) million, declined 417.8% from Q4’21
•Adjusted EBITDA of $30.3 million, down 38.2% from Q4’21
•Loss per diluted share of $(1.91)
•Adjusted earnings per diluted share of $0.17
RECENT COMPANY HIGHLIGHTS
•Home health continues to have strong growth in Medicare Advantage with nine new negotiated agreements added during the fourth quarter.
•Strategic changes in hospice continue to provide positive momentum with average daily census growing sequentially during the fourth quarter.
•Nursing labor showing signs of improvement with a 19% year-over-year increase in our full-time nursing applicant pool.
•Completed three acquisitions and opened one home health de novo location in the fourth quarter, adding five hospice locations and two home health locations to our portfolio.
FINANCIAL RESULTS
Consolidated
| Q4 | '22 vs. '21 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ in millions, except per share data) | 2022 | 2021 | |||||||
| Home health net service revenue | $ | 215.8 | $ | 224.0 | (3.7)% | ||||
| Hospice net service revenue | 47.4 | 52.1 | (9.0)% | ||||||
| Total net service revenue | $ | 263.2 | $ | 276.1 | (4.7)% | ||||
| % of Revenue | % of Revenue | ||||||||
| Cost of services | 50.6% | $ | (133.3) | 46.5% | $ | (128.5) | 3.7% | ||
| Gross margin | 49.4% | $ | 129.9 | 53.5% | $ | 147.6 | (12.0)% | ||
| Impairment of goodwill | (41.4)% | $ | (109.0) | —% | $ | — | —% | ||
| Administrative & general expenses | 38.0% | (100.0) | 35.6% | (98.2) | 1.8% | ||||
| Operating expenses | 130.1% | $ | (342.3) | 82.1% | $ | (226.7) | 51.0% | ||
| Equity earnings / noncontrolling interests | 0.5 | 0.4 | |||||||
| Adjusted EBITDA | $ | 30.3 | $ | 49.0 | (38.2)% | ||||
| Adjusted EBITDA margin | 11.5% | 17.7% | |||||||
| Adjusted EPS | $ | 0.17 | $ | 0.59 | (71.2)% |
Adjustments to accounts receivable reserves, the continued shift to more non-episodic patients in home health and the resumption of sequestration combined to decrease consolidated revenue. The impact of these items were offset by an approximate $5 million audit recovery related to a prior year home health medical claims review and an increase in hospice Medicare reimbursements rates effective October 1, 2022.
Adjusted EBITDA decreased primarily due to the revenue items discussed above, higher cost of services and incremental costs associated with being a stand-alone company. Cost of services were higher due to increased labor costs and costs associated with fleet and mileage reimbursement. Increased labor costs primarily resulted from a $4.3 million increase in employee group medical claims year over year.
SEGMENT RESULTS
Home health
| Q4 | '22 vs. '21 | ||||
|---|---|---|---|---|---|
| ($ in millions) | 2022 | 2021 | |||
| Net service revenue | $ | 215.8 | $ | 224.0 | (3.7)% |
| Cost of services | 109.0 | 106.4 | 2.4% | ||
| Gross margin | 49.5% | 52.5% | |||
| Adjusted EBITDA | $ | 47.2 | $ | 59.6 | (20.8)% |
| % Adj. EBITDA margin | 21.9% | 26.6% | |||
| Operational metrics (Actual Amounts) | |||||
| Starts of care | |||||
| Episodic admissions | 34,572 | 37,908 | (8.8)% | ||
| Non-episodic admissions | 15,476 | 12,909 | 19.9% | ||
| Total admissions | 50,048 | 50,817 | (1.5)% | ||
| Same-store total admissions growth | (3.1)% | ||||
| Episodic recertifications | 25,279 | 27,273 | (7.3)% | ||
| Non-episodic recertifications | 7,104 | 5,348 | 32.8% | ||
| Total recertifications | 32,383 | 32,621 | (0.7)% | ||
| Same-store total recertifications growth | (1.3)% | ||||
| Total starts of care | 82,431 | 83,438 | (1.2)% | ||
| Completed episodes | 60,250 | 64,242 | (6.2)% | ||
| Revenue per episode | $ | 2,958 | $ | 3,010 | (1.7)% |
| Visits per episode | 14.3 | 15.1 | (5.3)% | ||
| Total visits | 1,159,420 | 1,219,906 | (5.0)% | ||
| Non-episodic visits | 297,350 | 246,777 | 20.5% | ||
| Cost per visit | $ | 92 | $ | 86 | 7.0% |
Total admissions decreased primarily due to a reduction in episodic admissions partially offset by continued growth in non-episodic admissions. Revenue per episode decreased year over year primarily due to the resumption of sequestration, timing of completed episodes, and adjustments to accounts receivable reserves partially offset by an increase in Medicare reimbursement rates and an approximate $5 million audit recovery related to a prior year medical claims review.
Adjusted EBITDA decreased year over year primarily due to lower revenue and higher cost of services associated with labor and increased costs associated with fleet and mileage reimbursement. Increased labor costs primarily resulted from a $2.8 million increase in employee group medical claims.
Hospice
| Q4 | '22 vs. '21 | ||||
|---|---|---|---|---|---|
| ($ in millions) | 2022 | 2021 | |||
| Net service revenue | $ | 47.4 | $ | 52.1 | (9.0)% |
| Cost of services | 24.3 | 22.1 | 10.0% | ||
| Gross margin | 48.7% | 57.6% | |||
| Adjusted EBITDA | $ | 5.6 | $ | 15.2 | (63.2)% |
| % Adj. EBITDA margin | 11.8% | 29.2% | |||
| Operational metrics (Actual Amounts) | |||||
| Total admissions | 2,915 | 3,223 | (9.6)% | ||
| Same-store total admissions growth | (13.5)% | ||||
| Patient days | 330,102 | 334,011 | (1.2)% | ||
| Discharged average length of stay | 110 | 106 | 3.8% | ||
| Average daily census | 3,588 | 3,631 | (1.2)% | ||
| Revenue per day | $ | 144 | $ | 156 | (7.7)% |
| Cost per day | $ | 74 | $ | 66 | 12.1% |
Revenue per day decreased 7.7% year over year primarily due to adjustments to accounts receivable reserves and the resumption of sequestration partially offset by an increase in Medicare reimbursement rates. Average daily census increased sequentially from the third quarter of 2022 primarily due to improvements in staffing capacity.
Adjusted EBITDA decreased year over year primarily due to increased labor costs and costs associated with fleet and mileage reimbursement. Increased labor costs primarily resulted from lower clinical productivity associated with nurses in orientation, increased use of contract labor, and a $0.5 million increase in employee group medical claims.
GUIDANCE
The Company is providing full-year 2023 guidance as follows:
| Full-year 2023 | Guidance |
|---|---|
| Net Service Revenue | between $1,110 and $1,140 million |
| Adjusted EBITDA | between $125 and $140 million |
| Adjusted EPS | between $0.50 and $0.89 |
For additional considerations regarding the Company’s 2023 guidance ranges, see the supplemental information provided in the quarterly earnings slide deck 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 Feb. 15, 2023 to discuss its results for the fourth quarter of 2022. 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 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 252 home health locations and 105 hospice locations across 34 states. Enhabit leverages advanced technology and compassionate teams to deliver extraordinary patient care. For more information, visit ehab.com.
OTHER INFORMATION
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.
However, in reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, reconciliation of its 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.
Enhabit, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
| Three Months Ended December 31, | For the Year Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (In Millions, Except Per Share Data) | ||||||||
| Net service revenue | $ | 263.2 | $ | 276.1 | $ | 1,071.1 | $ | 1,106.6 |
| Cost of service (excluding depreciation and amortization) | 133.3 | 128.5 | 525.6 | 513.9 | ||||
| Gross margin | 129.9 | 147.6 | 545.5 | 592.7 | ||||
| General and administrative expenses | 104.6 | 103.1 | 414.9 | 412.9 | ||||
| Depreciation and amortization | 8.3 | 9.0 | 33.0 | 36.9 | ||||
| Impairment of goodwill | 109.0 | — | 109.0 | — | ||||
| Operating (loss) income | (92.0) | 35.5 | (11.4) | 142.9 | ||||
| Interest expense and amortization of debt discounts and fees | 8.7 | 0.1 | 15.0 | 0.3 | ||||
| Equity in net income of nonconsolidated affiliates | — | (0.1) | — | (0.6) | ||||
| Other income | (0.9) | (3.2) | (0.9) | (4.8) | ||||
| (Loss) income before income taxes and noncontrolling interests | (99.8) | 38.7 | (25.5) | 148.0 | ||||
| Income tax (benefit) expense | (5.1) | 8.9 | 12.8 | 35.1 | ||||
| Net (loss) income | (94.7) | 29.8 | (38.3) | 112.9 | ||||
| Less: Net income attributable to noncontrolling interests | 0.5 | 0.5 | 2.1 | 1.8 | ||||
| Net (loss) income attributable to Enhabit, Inc. | $ | (95.2) | $ | 29.3 | $ | (40.4) | $ | 111.1 |
| Weighted average common shares outstanding: | ||||||||
| Basic | 49.7 | 49.6 | 49.7 | 49.6 | ||||
| Diluted | 49.8 | 49.6 | 49.7 | 49.6 | ||||
| (Loss) earnings per common share: | ||||||||
| Basic (loss) earnings per share attributable to Enhabit, Inc. common stockholders | $ | (1.92) | $ | 0.59 | $ | (0.81) | $ | 2.24 |
| Diluted (loss) earnings per share attributable to Enhabit, Inc. common stockholders | $ | (1.91) | $ | 0.59 | $ | (0.81) | $ | 2.24 |
Enhabit, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| December 31,<br>2022 | December 31,<br>2021 | |||
|---|---|---|---|---|
| (In Millions) | ||||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 22.9 | $ | 5.4 |
| Restricted cash | 4.3 | 2.6 | ||
| Accounts receivable | 149.6 | 164.5 | ||
| Income tax receivable | 11.4 | — | ||
| Prepaid expenses and other current assets | 23.6 | 6.3 | ||
| Total current assets | 211.8 | 178.8 | ||
| Property and equipment, net | 20.4 | 20.4 | ||
| Operating lease right-of-use assets | 42.0 | 48.4 | ||
| Goodwill | 1,144.8 | 1,189.0 | ||
| Intangible assets, net | 102.6 | 259.1 | ||
| Other long-term assets | 5.2 | 24.3 | ||
| Total assets | $ | 1,526.8 | $ | 1,720.0 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Current portion of long-term debt | $ | 23.1 | $ | 5.0 |
| Current operating lease liabilities | 14.0 | 14.9 | ||
| Accounts payable | 3.8 | 3.5 | ||
| Accrued payroll | 35.5 | 66.4 | ||
| Refunds due patients and other third-party payors | 8.3 | 9.4 | ||
| Income tax payable | — | 4.2 | ||
| Accrued medical insurance | 7.5 | 8.3 | ||
| Other current liabilities | 40.7 | 24.8 | ||
| Total current liabilities | 132.9 | 136.5 | ||
| Long-term debt, net of current portion | 560.0 | 3.5 | ||
| Long-term operating lease liabilities | 28.1 | 33.5 | ||
| Deferred income tax liabilities | 28.6 | 63.2 | ||
| Other long-term liabilities | 1.9 | — | ||
| 751.5 | 236.7 | |||
| Commitments and contingencies | ||||
| Redeemable noncontrolling interests | 5.2 | 5.0 | ||
| Stockholders’ equity: | ||||
| Enhabit, Inc. stockholders’ equity: | 741.7 | 1,470.0 | ||
| Noncontrolling interests | 28.4 | 8.3 | ||
| Total stockholders’ equity | 770.1 | 1,478.3 | ||
| Total liabilities and stockholders’ equity | $ | 1,526.8 | $ | 1,720.0 |
Enhabit, Inc. and Subsidiaries
Condensed Consolidated Cash Flows
(Unaudited)
| For the Year Ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (In Millions) | ||||
| Cash flows from operating activities: | ||||
| Net (loss) income | $ | (38.3) | $ | 112.9 |
| Adjustments to reconcile net income to net cash provided by operating activities— | ||||
| Depreciation and amortization | 33.0 | 36.9 | ||
| Amortization of debt related costs | 0.6 | — | ||
| Impairment of goodwill | 109.0 | — | ||
| Equity in net income of nonconsolidated affiliates | — | (0.6) | ||
| Distributions from nonconsolidated affiliates | — | 0.3 | ||
| Stock-based compensation | 9.2 | 3.6 | ||
| Deferred tax expense | (4.3) | 8.6 | ||
| Other, net | 0.1 | (5.6) | ||
| Changes in assets and liabilities, net of acquisitions— | ||||
| Accounts receivable | 21.6 | (24.8) | ||
| Prepaid expenses and other assets | (27.5) | (0.1) | ||
| Accounts payable | 0.2 | (0.7) | ||
| Accrued payroll | (31.0) | (7.7) | ||
| Other liabilities | 7.5 | 0.5 | ||
| Net cash provided by operating activities | 80.1 | 123.3 | ||
| Cash flows from investing activities: | ||||
| Acquisition of businesses, net of cash acquired | (36.3) | (117.5) | ||
| Purchases of property and equipment | (7.1) | (4.3) | ||
| Other, net | 1.1 | 2.6 | ||
| Net cash used in investing activities | (42.3) | (119.2) | ||
| Cash flows from financing activities: | ||||
| Principal borrowings on term loan | 400.0 | — | ||
| Principal payments on debt | (10.0) | — | ||
| Borrowings on revolving credit facility | 190.0 | — | ||
| Principal payments under finance lease obligations | (5.0) | (7.2) | ||
| Debt issuance costs | (4.7) | — | ||
| Contributions from Encompass | 59.8 | 126.4 | ||
| Distributions to Encompass | (654.9) | (154.1) | ||
| Contributions from noncontrolling interests of consolidated affiliates | 7.4 | — | ||
| Other | (1.2) | (1.2) | ||
| Net cash used in financing activities | (18.6) | (36.1) | ||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 19.2 | (32.0) | ||
| Cash, cash equivalents, and restricted cash at beginning of year | 8.0 | 40.0 | ||
| Cash, cash equivalents, and restricted cash at end of year | $ | 27.2 | $ | 8.0 |
Enhabit, Inc. and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Q4 | Full Year | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Earnings per share, as reported | $ | (1.91) | $ | 0.59 | $ | (0.81) | $ | 2.24 |
| Adjustments, net of tax: | ||||||||
| Transaction costs and gain on consolidation | 0.05 | — | 0.14 | 0.13 | ||||
| Income tax adjustments | 0.12 | — | 0.12 | (0.01) | ||||
| Impairment of goodwill | 1.91 | — | 1.91 | — | ||||
| Adjusted earnings per share* | $ | 0.17 | $ | 0.59 | $ | 1.36 | $ | 2.36 |
* Adjusted EPS may not sum due to rounding.
Enhabit, Inc. and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Q4 QTD | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | ||||||||||
| Adjustments | ||||||||||
| As Reported | Impairment of Goodwill | Transaction Costs | Income Tax Adjustments | As Adjusted | ||||||
| (In Millions, Except Per Share Amounts) | ||||||||||
| Adjusted EBITDA* | $ | 30.3 | $ | — | $ | — | $ | — | $ | 30.3 |
| Depreciation and amortization | (8.3) | — | — | — | (8.3) | |||||
| Interest expense and amortization of debt discounts and fees | (8.7) | — | — | — | (8.7) | |||||
| Impairment of goodwill | (109.0) | 109.0 | — | — | — | |||||
| Stock-based compensation | (2.1) | — | — | — | (2.1) | |||||
| Transaction costs | (2.5) | — | 2.5 | — | — | |||||
| Income before income tax expense | (100.3) | 109.0 | 2.5 | — | 11.2 | |||||
| Provision for income tax expense | 5.1 | (0.6) | 6.2 | (3.0) | ||||||
| Net (loss) income attributable to Enhabit | $ | (95.2) | $ | 95.3 | $ | 1.9 | $ | 6.2 | $ | 8.2 |
| Diluted earnings per share** | $ | (1.91) | $ | 1.91 | $ | 0.05 | $ | 0.12 | $ | 0.17 |
| Diluted shares used in calculation | 49.8 |
* Reconciliation to GAAP provided on page 15
** Diluted EPS may not sum due to rounding
Enhabit, Inc. and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Q4 QTD | ||||||
|---|---|---|---|---|---|---|
| 2021 | ||||||
| Adjustments | ||||||
| As Reported | Transaction Costs and Gain on Consolidation | As Adjusted | ||||
| (In Millions, Except Per Share Amounts) | ||||||
| Adjusted EBITDA* | $ | 49.0 | $ | — | $ | 49.0 |
| Depreciation and amortization | (9.0) | — | (9.0) | |||
| Interest expense and amortization of debt discounts and fees | (0.1) | — | (0.1) | |||
| Gain on disposal of assets | 0.4 | — | 0.4 | |||
| Stock-based compensation | (1.5) | — | (1.5) | |||
| Stock-based compensation included in overhead allocation | (0.8) | — | (0.8) | |||
| Transaction costs | (3.0) | 3.0 | — | |||
| Gain on consolidation of joint venture formerly accounted for under<br> the equity method of accounting | 3.2 | (3.2) | — | |||
| Income before income tax expense | 38.2 | (0.2) | 38.0 | |||
| Provision for income tax expense | (8.9) | — | (8.9) | |||
| Net income attributable to Enhabit | $ | 29.3 | $ | (0.2) | $ | 29.1 |
| Diluted earnings per share** | $ | 0.59 | $ | — | $ | 0.59 |
| Diluted shares used in calculation | 49.6 |
* Reconciliation to GAAP provided on page 15
** Diluted EPS may not sum due to rounding
Enhabit, Inc. and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Q4 YTD | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | ||||||||||
| Adjustments | ||||||||||
| As Reported | Impairment of Goodwill | Transaction Costs | Income Tax Adjustments | As Adjusted | ||||||
| (In Millions, Except Per Share Amounts) | ||||||||||
| Adjusted EBITDA* | $ | 149.3 | $ | — | $ | — | $ | — | $ | 149.3 |
| Depreciation and amortization | (33.0) | — | — | — | (33.0) | |||||
| Interest expense and amortization of debt discounts and fees | (15.0) | — | — | — | (15.0) | |||||
| Impairment of goodwill | (109.0) | 109.0 | — | — | — | |||||
| loss on disposal of assets | (0.1) | — | — | — | (0.1) | |||||
| Stock-based compensation | (9.2) | — | — | — | (9.2) | |||||
| Stock-based compensation included in overhead allocation | (1.1) | — | — | — | (1.1) | |||||
| Transaction costs | (9.5) | — | 9.5 | — | — | |||||
| Income before income tax expense | (27.6) | 109.0 | 9.5 | — | 90.9 | |||||
| Provision for income tax expense | (12.8) | (13.7) | (2.4) | 6.2 | (22.7) | |||||
| Net (loss) income attributable to Enhabit | $ | (40.4) | $ | 95.3 | $ | 7.1 | $ | 6.2 | $ | 68.2 |
| Diluted earnings per share** | $ | (0.81) | $ | 1.91 | $ | 0.14 | $ | 0.12 | $ | 1.36 |
| Diluted shares used in calculation | 49.7 |
* Reconciliation to GAAP provided on page 15
** Diluted EPS may not sum due to rounding
Enhabit, Inc. and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Q4 YTD | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | ||||||||
| Adjustments | ||||||||
| As Reported | Transaction Costs and Gain on Consolidation | Income Tax Adjustments | As Adjusted | |||||
| (In Millions, Except Per Share Amounts) | ||||||||
| Adjusted EBITDA* | $ | 197.2 | $ | — | $ | — | $ | 197.2 |
| Depreciation and amortization | (36.9) | — | — | (36.9) | ||||
| Interest expense and amortization of debt discounts and fees | (0.3) | — | — | (0.3) | ||||
| Gain on disposal of assets | 0.8 | — | — | 0.8 | ||||
| Stock-based compensation | (3.6) | — | — | (3.6) | ||||
| Stock-based compensation included in overhead allocation | (2.3) | — | — | (2.3) | ||||
| Transaction costs | (11.9) | 11.9 | — | — | ||||
| Gain on consolidation of joint venture formerly accounted for under<br> the equity method of accounting | 3.2 | (3.2) | — | — | ||||
| Income before income tax expense | 146.2 | 8.7 | — | 154.9 | ||||
| Provision for income tax expense | (35.1) | (2.2) | (0.3) | (37.6) | ||||
| Net income attributable to Enhabit | $ | 111.1 | $ | 6.5 | $ | (0.3) | $ | 117.3 |
| Diluted earnings per share** | $ | 2.24 | $ | 0.13 | $ | (0.01) | $ | 2.36 |
| Diluted shares used in calculation | 49.6 |
* Reconciliation to GAAP provided on page 15
** Diluted EPS may not sum due to rounding
Enhabit, Inc. and Subsidiaries
Supplemental Information
Reconciliation of Net Income to Adjusted EBITDA
| Three Months Ended<br>December 31, | For the Year Ended<br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (In Millions) | ||||||||
| Net (Loss) Income | $ | (94.7) | $ | 29.8 | $ | (38.3) | $ | 112.9 |
| Income tax expense | (5.1) | 8.9 | 12.8 | 35.1 | ||||
| Interest expense and amortization of debt discounts and fees | 8.7 | 0.1 | 15.0 | 0.3 | ||||
| Depreciation and amortization | 8.3 | 9.0 | 33.0 | 36.9 | ||||
| Impairment of goodwill | 109.0 | — | 109.0 | — | ||||
| (Gain) loss on disposal of assets | — | (0.4) | 0.1 | (0.8) | ||||
| Stock-based compensation | 2.1 | 1.5 | 9.2 | 3.6 | ||||
| Stock-based compensation included in overhead allocation | — | 0.8 | 1.1 | 2.3 | ||||
| Net income attributable to noncontrolling interests | (0.5) | (0.5) | (2.1) | (1.8) | ||||
| Transaction costs | 2.5 | 3.0 | 9.5 | 11.9 | ||||
| Gain on consolidation of joint venture formerly accounted for under the equity method of accounting | — | (3.2) | — | (3.2) | ||||
| Adjusted EBITDA | $ | 30.3 | $ | 49.0 | $ | 149.3 | $ | 197.2 |
Enhabit, Inc. and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
| Three Months Ended<br>December 31, | For the Year Ended<br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (In Millions) | ||||||||
| Net cash provided by operating activities | $ | 4.1 | $ | 23.1 | $ | 80.1 | $ | 123.3 |
| Interest expense and amortization of debt discounts and fees | 8.7 | 0.1 | 15.0 | 0.3 | ||||
| Equity in net income of nonconsolidated affiliates | — | 0.1 | — | 0.6 | ||||
| Net income attributable to noncontrolling interests in continuing operations | (0.5) | (0.5) | (2.1) | (1.8) | ||||
| Distributions from nonconsolidated affiliates | — | (0.1) | — | (0.3) | ||||
| Current portion of income tax expense | (3.3) | 1.1 | 17.1 | 26.5 | ||||
| Change in assets and liabilities | 19.2 | 21.7 | 29.2 | 32.8 | ||||
| Transaction costs | 2.5 | 3.0 | 9.5 | 11.9 | ||||
| Stock-based compensation included in overhead allocation | — | 0.8 | 1.1 | 2.3 | ||||
| Other | (0.4) | (0.3) | (0.6) | 1.6 | ||||
| Adjusted EBITDA | $ | 30.3 | $ | 49.0 | $ | 149.3 | $ | 197.2 |
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
| Q4 | Full Year | |||||||
|---|---|---|---|---|---|---|---|---|
| ($ in millions) | 2022 | 2021 | 2022 | 2021 | ||||
| Net cash provided by operating activities | $ | 4.1 | $ | 23.1 | $ | 80.1 | $ | 123.3 |
| Capital expenditures for maintenance | (1.4) | (0.5) | (4.5) | (5.4) | ||||
| Distributions paid to noncontrolling interests of consolidated affiliates | (0.3) | (0.2) | (1.2) | (1.8) | ||||
| Items non-indicative of ongoing operating performance: | ||||||||
| Stock-based compensation included in overhead allocation | — | 0.8 | 1.1 | 2.3 | ||||
| Transaction costs and related assumed liabilities | 1.8 | 6.4 | 8.8 | 11.9 | ||||
| Adjusted free cash flow | $ | 4.2 | $ | 29.6 | $ | 84.3 | $ | 130.3 |
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 annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, each of which will be available 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.
Investor Relations Contact
Mark Brewer
Mark.Brewer@ehab.com
469-860-6061
Media Contact
Erin Volbeda
media@ehab.com
972-338-5141
17
correctedenhabit_earning
Fourth Quarter Earnings Call Supplemental Information Initially published - February 14, 2023 / revised - April 14, 2023
Enhabit Home Health & Hospice 2 Disclaimers Forward looking statements Statements contained in this presentation 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 annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, which will be filed with the SEC, 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 presentation. 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 presentation. Note regarding presentation of non-GAAP financial measures This presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including adjusted EBITDA, leverage ratios, adjusted earnings per share, 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 at the end of this presentation. Our Form 8-K, furnished as of the date of this presentation with the SEC, provides further explanation and disclosure regarding Enhabit’s use of non- GAAP financial measures and should be read in conjunction with this supplemental 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. Correction This presentation corrects a prior version published on February 14, 2023 and is updated to revise the Company’s previously disclosed financial results for the period ended December 31, 2022. The corrected presentation follows.
Contents Overview of Quarterly Results 4-10 Detailed Financial and Operational Results 11-15 Debt, Liquidity and Cash Flow 16-17 Guidance 18-21 Appendix, Including Company Overview & Reconciliations to GAAP 22-38
Enhabit Home Health & Hospice 4 2022 in Review Strategic Initiatives Driving Positive Change
Enhabit Home Health & Hospice 5 Home health continued strong growth in Medicare Advantage admissions; new contracts added Non-episodic admissions grew 19.9% year over year Nine new agreements negotiated during Q4 $263.2M Revenue $30.3M Adjusted EBITDA 50,048 Home Health Total Admissions 2,915 Hospice Admissions 60,250 Home Health Completed Episodes 3,588 Hospice Average Daily Census Continued growth in average daily census; staffing improving 2.9% sequential increase in average daily census Shift to case management model is benefiting staff recruitment $2,958 Home Health Revenue per Completed Episode $144 Hospice Revenue per Day $92 Home Health Cost per Visit $74 Hospice Cost per Day Reconciliations to GAAP provided on pages 32 to 38 Quarterly Results at a Glance The resumption of sequestration, continued home health payor mix shift, and inflation all impacted the quarter. Adjustments to accounts receivable reserves, home health payor mix shift and the resumption of sequestration reduced consolidated net service revenue and Adjusted EBITDA Cost of services increased primarily due to higher costs of labor, increased employee group medical claims, and costs associated with fleet and mileage reimbursement
Enhabit Home Health & Hospice 6 Q4’22 Strategic Commentary • Total admissions decreased primarily due to a reduction in episodic admissions partially offset by continued growth in non-episodic admissions • Revenue per episode decreased 1.7% year over year – The resumption of sequestration, the timing of completed episodes, and adjustments to accounts receivable reserves negatively impacted revenue per episode – These decreases were offset by the year-over-year increase in Medicare reimbursement rates and an approximate $5 million audit recovery related to a prior year medical claims review • Cost per visit increased 7.0% year over year primarily due to increased labor costs and costs associated with fleet and mileage reimbursement – Increased labor cost primarily resulted from a $2.8 million increase in employee group medical claims Home health total admissions decreased 1.5% year over year Hospice average daily census decreased 1.2% year over year; grew 2.9% sequentially from Q3 • Admissions decreased 9.6% year over year • Revenue per day decreased 7.7% year over year primarily due adjustments to accounts receivable reserves and the resumption of sequestration partially offset by an increase in Medicare reimbursement rates • Cost per day increased 12.1% year over year primarily due to increased labor costs and costs associated with fleet and mileage reimbursement – Increased labor cost primarily resulted from; * Lower clinical productivity associated with nurses in orientation * Increased use of contract labor * A $0.5 million increase in employee group medical claims
Enhabit Home Health & Hospice 7 Q4’22 Strategic Commentary • Adjustments to accounts receivable reserves, the continued shift to more non-episodic patients in home health, and resumption of sequestration impacted consolidated revenue – The full resumption of sequestration decreased revenue approximately $5 million in Q4 2022 ($4 million home health and $1 million hospice) – Approximately 26% of total home health visits were non-episodic visits in Q4 2022, up from approximately 20% in Q4 2021, impacting revenue by approximately $6 million – These items were offset by an approximate $5 million audit recovery related to a prior year home health medical claims review and an increase in hospice Medicare reimbursement rates effective October 1, 2022 • Adjusted EBITDA decreased primarily due to adjustments to accounts receivable reserves, the continued shift to more non-episodic patients in home health, the resumption of sequestration, higher costs of services, and incremental costs associated with being a stand-alone company • Costs of services were higher due to increased labor costs and costs associated with fleet and mileage reimbursement – Increased labor cost primarily resulted from a $4.3 million increase in employee group medical claims • Incremental stand-alone company costs impacted Adjusted EBITDA approximately $1 million year over year Consolidated Adjusted EBITDA decreased $18.7 million, or 38.2%, year over year Consolidated revenue decreased $12.9 million, or 4.7%, year over year Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 8 Q4’22 Strategic Commentary Continued Growth in Medicare Advantage Nursing labor showing signs of improvement • Full-time nursing applicant pool increased 19% year over year • Net new full-time nursing hires – Home health - 60 – Hospice - 41 • Hospice case management staffing model benefiting staff recruitment • Deploying a disciplined approach to manage growth in Medicare Advantage and close the rate differential – Payor innovation team actively engaged in discussions with payors around our value proposition • Focused on a regional contracting strategy • Experiencing success negotiating episodic rate agreements with local and regional payors – Nine new agreements negotiated in Q4 – 18 new agreements in total during second half of 2022 * 9 of 18 are fully executed * 7 of the 9 executed are at episodic rates
Enhabit Home Health & Hospice 9 Q4’22 Strategic Commentary Strategically reinvesting for growth • Completed three acquisitions in Q4 2022 – Acquired Caring Hearts Hospice in October (four Texas locations) and Unity Hospice in November (one Arizona location) – Acquired Southwest Florida Home Care's Fort Myers home health location in December providing a strategic entry point in key market • Continued progress in our de novo strategy with additional locations awaiting regulatory approval – Opened one de novo home health location in Daytona, Florida during Q4 2022 Home Health Hospice Total December 31, 2020 241 82 323 De Novo Locations Opened 0 3 3 Acquired Locations 11 11 22 Merged/Closed Locations (1) 0 (1) December 31, 2021 251 96 347 De Novo Locations Opened 1 3 4 Acquired Locations 2 6 8 Merged/Closed Locations (2) 0 (2) December 31, 2022 252 105 357
Enhabit Home Health & Hospice 10 Home Health & Hospice Highlights Home Health Q4 Overview 4th Largest Provider of Medicare-Certified Skilled Home Health Services 34Home Health Locations States Hospice Q4 Overview 12th Largest Provider of Medicare-Certified Hospice Services 22Hospice Locations States 82,431 Total Starts of Care 50,048 Total Admissions $2,958 Revenue per Episode $92 Total Cost per Visit 1,159,420 Total Visits 2,915 Total Admissions 3,588 Average Daily Census $144 Revenue per Day $74 Cost per Day 110 Average Length of Stay Note: Market share is based on 2020 Medicare expenditures. Location count is as of December 31, 2022. 252 105
Enhabit Home Health & Hospice 11 Consolidated Results Q4 '22 vs. '21($ in millions, except per share data) 2022 2021 Home health net service revenue $215.8 $224.0 (3.7) % Hospice net service revenue $47.4 $52.1 (9.0) % Total net service revenue $263.2 $276.1 (4.7) % % of Revenue % of Revenue Cost of services 50.6 % $(133.3) 46.5 % $(128.5) 3.7 % Gross margin 49.4 % $129.9 53.5 % $147.6 (12.0) % Impairment of goodwill (41.4) % $(109.0) — % $0.0 — Administrative & general expenses 38.0 % $(100.0) 35.6 % $(98.2) 1.8 % Operating expenses 130.1 % $(342.3) 82.1 % $(226.7) 51.0 % Other income $(0.9) $0.0 Equity in net income of nonconsolidated affiliates — $(0.1) Noncontrolling interests $0.5 $0.5 Adjusted EBITDA $30.3 $49.0 (38.2) % Adjusted EBITDA margin 11.5 % 17.7 % Adjusted EPS (see calculations on slides 32 and 33) $0.17 $0.59 (71.2) % In arriving at Adjusted EBITDA, the following were excluded: Impairment of goodwill $109.0 $— Loss (gain) on disposal of assets $— $(0.4) Gain on consolidation of joint venture $— $(3.2) Stock compensation expense $2.1 $1.5 Transaction costs and stock compensation expense allocation $2.5 $3.8 Revenue • Adjustments to accounts receivable reserves, the continued shift to non-episodic patients in home health and resumption of sequestration reduced revenue • Approximate $5 million audit recovery and an increase in hospice Medicare reimbursement rates offset the declines Adjusted EBITDA • Adjustments to accounts receivable reserves, continued shift to more non-episodic patients in home health, resumption of sequestration, higher labor costs and costs associated with fleet and mileage reimbursement • Labor costs increased primarily due to a $4.3 million increase in employee group medical claims • $1 million in incremental stand- alone company costs Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 12 Home Health Segment Q4 '22 vs. '21($ in millions) 2022 2021 Net service revenue $215.8 $224.0 (3.7) % Cost of services $109.0 $106.4 2.4 % Gross margin 49.5 % 52.5 % Adjusted EBITDA $47.2 $59.6 (20.8) % % Adj. EBITDA margin 21.9 % 26.6 % Operational metrics (Actual Amounts) Starts of care Episodic admissions 34,572 37,908 (8.8) % Non-episodic admissions 15,476 12,909 19.9 % Total admissions 50,048 50,817 (1.5) % Same-store total admissions growth (3.1) % Episodic recertifications 25,279 27,273 (7.3) % Non-episodic recertifications 7,104 5,348 32.8 % Total recertifications 32,383 32,621 (0.7) % Same-store total recertifications growth (1.3) % Total starts of care 82,431 83,438 (1.2) % Completed episodes 60,250 64,242 (6.2) % Revenue per episode $2,958 $3,010 (1.7) % Visits per episode 14.3 15.1 (5.3) % Total visits 1,159,420 1,219,906 (5.0) % Non-episodic visits 297,350 246,777 20.5 % Cost per visit $92 $86 7.0 % Revenue • Strong growth in non-episodic admissions • Shift to more non-episodic patients in home health reduced revenue approximately $6 million • Resumption of sequestration reduced revenue approximately $4 million • Impact from adjustments to accounts receivable reserves • Medical claims audit recovery of approximately $5 million in Q4 2022 Adjusted EBITDA • Lower revenue • Higher cost of services related to labor, fleet and mileage reimbursement • Labor costs increased primarily due to a $2.8 million increase in employee group medical claims
Enhabit Home Health & Hospice 13 Hospice Segment Q4 '22 vs. '21($ in millions) 2022 2021 Net service revenue $47.4 $52.1 (9.0) % Cost of services $24.3 $22.1 10.0 % Gross margin 48.7 % 57.6 % Adjusted EBITDA $5.6 $15.2 (63.2) % % Adj. EBITDA margin 11.8 % 29.2 % Operational metrics (Actual Amounts) Total admissions 2,915 3,223 (9.6) % Same-store total admissions growth (13.5) % Patient days 330,102 334,011 (1.2) % Discharged average length of stay 110 106 3.8 % Average daily census (ADC) 3,588 3,631 (1.2) % Revenue per day $144 $156 (7.7) % Cost per day $74 $66 12.1 % Revenue • Sequential ADC increase of 2.9% from Q3 2022 • Revenue per day decreased primarily due to adjustments to accounts receivable reserves and the resumption of sequestration partially offset by an increase in Medicare reimbursement rates Adjusted EBITDA • Increased cost of services primarily due to increased labor costs (including lower clinical productivity, use of contract labor, and increased employee group medical claims) and increased costs associated with fleet and mileage reimbursement
Enhabit Home Health & Hospice 14 Consolidated Adjusted EBITDA (1) Home office administrative and general expenses in the above table exclude stock compensation of $2.1 million and $1.5 million for Q4 2022 and 2021, $2.5 million and $3.0 million in costs associated with the strategic alternatives review for Q4 2022 and 2021, $0.0 million and $0.8 million of stock compensation included in overhead for Q4 2022 and 2021, as well as a $0.0 million and a $3.6 million gain on other items for Q4 2022 and 2021, respectively. ($ in millions) Q4 2022 % of Consolidated Revenue Q4 2021 % of Consolidated Revenue Home health segment Adjusted EBITDA $47.2 $59.6 Hospice segment Adjusted EBITDA $5.6 $15.2 Home office administrative and general expenses(1) $(22.5) 8.5 % $(25.8) 9.3 % Consolidated Adjusted EBITDA $30.3 $49.0 • Home office administrative and general expenses decreased as a percentage of revenue primarily due to a year-over-year decrease in cash incentive compensation • Q4 2022 stand-alone costs were approximately $5 million, or an approximate $1 million increase compared to the overhead allocation from Encompass Health in Q4 2021 Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 15 Clinical Expertise and High-Quality Outcomes National Average Enhabit % Above National Average QoPC Star Rating(1) 3.2 3.7 16% HHCAHPS Star Rating(2) 3.5 3.7 6% 30-Day Hospital Readmission Rate(3) 18.2 14.2 400 bps better Standardized Protocols Motivated Clinicians Disciplined Use of Technology Superior Performance 98% of our home health agencies are 3 Stars or higher; 47% are 4 Stars or higher(1) 96% of our home health agencies are 3 Stars or higher; 63% are 4 Stars or higher(2) Percent of patients readmitted to an acute care hospital (1) Quality of Patient Care (QoPC) Star Ratings as of January 2023 for dates of service (July 01, 2020-June 30, 2021; April 01, 2021-March 31, 2022) (2) Home Health Care Consumer Assessment of Healthcare Providers (HHCAHPS) Patient Survey Star Ratings as of January 2023 for dates of service (July 1, 2021 - June 30, 2022) (3) Research Institute for Home Care 2022 Chartbook (data from Medicare Standard Analytics Files for CY 2021) EHAB Data is CY 2022 (All payors)
Enhabit Home Health & Hospice 16 Debt & Liquidity Metrics ($ in millions) December 31, 2022 Advances under $350 million revolving credit facility, due 2027 $190.0 $400 million term loan facility, due 2027 $387.9 Finance lease obligations $5.2 Total debt $583.1 Less: Cash and cash equivalents $22.9 Net debt $560.2 Net debt to Adjusted EBITDA 3.8 x Trailing twelve-month EBITDA $149.3 Available liquidity $179.5 Notes: • In mid-October 2022, we entered into a $200 million notional value interest rate swap to hedge the variable portion of the rate on our term loan. The swap fixes the SOFR component of our interest rate at 4.3%. • The Q4 2022 weighted average interest rate for our debt outstanding was 5.75% (SOFR + credit spread adjustment + 175 bps) Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 17 Adjusted Free Cash Flow The year-over-year decrease in adjusted free cash flow primarily resulted from lower Adjusted EBITDA and cash interest payments associated with the credit agreement we entered into as part of the separation from Encompass Health. ($ in millions) $118.0 $(35.0) $16.1$(12.9) $(2.4) $0.5 $84.3 Pro Forma Adj. Free Cash Flow 2021 Adjusted EBITDA Cash Interest Cash Taxes (net of refunds) Change in Working Capital Maintenance Capital Expenditures Adj. Free Cash Flow 2022 $0 $25 $50 $75 $100 Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 18 2023 Guidance reaffirmed as of April 4, 2023 ($ in millions, except per share data) 2022 Actuals 2023 Guidance Net service revenue $1,071.1 $1,110 to $1,140 Adjusted EBITDA $149.3 $125 to $140 Adjusted EPS $1.36 $0.50 to $0.89 Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 19 Guidance Considerations • An increase of 0.7% in Medicare pricing prior to the resumption of sequestration in Q1 and Q2 • Continued shift to more non-episodic patients • Cost per visit increase of 4% to 5% Home Health • An increase of 3.8% in Medicare pricing prior to the resumption of sequestration in Q1 and Q2 • Cost per patient day increase of 4% to 5% Hospice • Year-over-year increase in costs associated with being a stand-alone company = $9 to $10 million • Incremental expense of approximately $1 to $3 million for de novo locations • Incremental interest expense of $24 million to $31 million • Tax rate of approximately 26% • Diluted share count of approximately 50.1 million shares Consolidated
Enhabit Home Health & Hospice 20 Adjusted Free Cash Flow Assumptions Certain cash flow items (in millions) 2022 Full Year 2023 Assumptions Cash interest payments $12.9 $39 to $45 Cash income tax payments, net of refunds 11.9 $3 to $6 Working capital 35.7 $5 to $15 Maintenance capital expenditures 4.5 $5 to $10 Adjusted free cash flow $84.3 $49 to $88 Reconciliations to GAAP provided on pages 32 to 38 • Cash interest payments in 2022 include two quarters of impact from debt incurred as part of the separation from Encompass Health. Cash interest payments in 2023 reflect 12 months, increased interest rates, and larger SOFR spread due to increased leverage. • Cash tax payments in 2022 resulted in a prepayment of approximately $9 million as of December 31, 2022.
Enhabit Home Health & Hospice 21 Uses of Free Cash Flow (in millions) 2022 Full Year 2023 Assumptions Growth in Core Business De novos $1.2 $2 to $4 Acquisitions(1) $36.3 TBD Debt redemptions (borrowings), net(2) $(10.0) TBD (1) On January 1, 2022, we acquired a 50% equity interest from Frontier Home Health and Hospice, LLC in a joint venture with Saint Alphonsus system which operates home health and hospice locations in Boise, Idaho. The total purchase price was $15.9 million and was funded on December 31, 2021. (2) Amounts in this row do not include debt incurred as part of the separation transaction from Encompass Health.
Enhabit Home Health & Hospice 22 Appendix
Enhabit Home Health & Hospice 23 Overview 95 hospice locations co-located with home health locations(1) 11 states where we are #1 or #2 in home health(2) ~69% of total Medicare home health spend occurs in states in which we operate(2) Home Health Locations Hospice Locations Home Health & Hospice State Home Health Only State (1) As of December 31, 2022 - due to scale, not all locations can be represented by locational markers (2) Based on 2020 Home Health Medicare revenues 105 Hospice Locations(1) 252 Home Health Locations(1) We are a leading provider of home health and hospice services that strives to provide superior, cost-effective care where patients prefer it: in their homes For over 20 years, we've provided care with high-quality outcomes becoming a trusted partner of health systems, payors and other risk-bearing entities We operate nationally across 34 states with 10,000+ employees We foster an award-winning culture that is a strategic advantage in attracting and retaining talent and a main contributor to our continued success
Enhabit Home Health & Hospice 24 Growth Strategy Multi-faceted growth avenues with clearly defined areas of opportunity Drive organic growth at existing operations Execute on de novo strategy Pursue strategic acquisitions Leverage care transitions expertise Expand Medicare Advantage focus Explore adjacent service offerings Currently located in states that represent ~69% of 2020 total Medicare home health spend Open 10 de novo locations per year Identify and evaluate opportunities Attractive partner due to quality of outcomes, data management capabilities, scale and market density Total Medicare beneficiaries choosing Medicare Advantage expected to continue to grow Explore adjacent verticals to further bolster our footprint in home health services
Enhabit Home Health & Hospice 25 Home Health Operational Metrics (In Millions) Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 FY 2022 FY 2021 Home health net service revenue $215.8 $216.3 $220.2 $224.9 $224.0 $221.1 $232.3 $219.9 $877.1 $897.3 (Actual Amounts) Total admissions 50,048 49,739 49,399 53,309 50,817 48,412 50,598 50,799 202,495 200,626 Episodic admissions 34,572 35,487 36,106 38,971 37,908 37,577 39,657 40,215 145,136 155,357 Non-episodic admissions 15,476 14,252 13,293 14,338 12,909 10,835 10,941 10,584 57,359 45,269 Total recertifications 32,383 32,362 32,440 31,787 32,621 32,942 33,794 31,902 128,972 131,259 Episodic recertifications 25,279 25,821 25,993 25,808 27,273 27,742 28,296 28,083 102,901 111,394 Non-episodic recertifications 7,104 6,541 6,447 5,979 5,348 5,200 5,498 3,819 26,071 19,865 Total starts of care 82,431 82,101 81,839 85,096 83,438 81,354 84,392 82,701 331,467 331,885 Completed episodes 60,250 60,396 62,691 63,111 64,242 66,065 67,839 66,435 246,448 264,581 Avg. revenue per episode $2,958 $3,009 $2,972 $3,038 $3,010 $2,916 $2,967 $2,923 $2,995 $2,954 Visits per episode 14.3 14.9 15.0 15.2 15.1 15.0 15.6 15.8 14.9 15.4 Total visits 1,159,420 1,175,002 1,217,447 1,228,084 1,219,906 1,213,370 1,297,350 1,239,073 4,779,953 4,969,699 Non-episodic visits 297,350 272,282 275,679 270,253 246,777 220,260 240,006 191,056 1,115,564 898,099 Cost per visit $92 $92 $88 $86 $86 $87 $80 $81 $89 $83
Enhabit Home Health & Hospice 26 Hospice Operational Metrics (In Millions) Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 FY 2022 FY 2021 Hospice net service revenue $47.4 $49.4 $47.8 $49.4 $52.1 $52.8 $53.8 $50.6 $194.0 $209.3 (Actual Amounts) Total admissions 2,915 2,982 2,835 3,246 3,223 3,262 3,298 3,330 11,978 13,113 Patient days 330,102 320,732 313,718 319,834 334,011 352,691 351,878 334,400 1,284,386 1,372,980 Discharged average length of stay 110 103 109 108 106 106 115 100 108 107 Average daily census 3,588 3,486 3,447 3,554 3,631 3,834 3,867 3,716 3,519 3,762 Revenue per day $144 $154 $152 $154 $156 $150 $153 $151 $151 $152 Cost per day $74 $71 $69 $68 $66 $67 $65 $65 $70 $66
Enhabit Home Health & Hospice 27 Reconciliation of Historic Segment Adjusted EBITDA of Encompass Health to Enhabit Adjusted EBITDA ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Q1 2022 Q2 2022 YTD 2022 Encompass Health Segment Adjusted EBITDA $50.8 $61.7 $46.4 $52.6 $211.5 $50.1 $43.8 $93.9 Less: Overhead allocation from Encompass Health (3.8) (4.6) (3.9) (4.4) (16.7) (3.6) (4.1) (7.7) Add: stock compensation included in overhead allocation 0.2 0.9 0.5 0.8 2.4 0.5 0.6 1.1 Enhabit Adjusted EBITDA $47.2 $58.0 $43.0 $49.0 $197.2 $47.0 $40.3 $87.3 Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 28 Consolidated Results – YTD 2022 Year-To-Date '22 vs. '21($ in millions, except per share data) 2022 2021 Home health net service revenue $877.1 $897.3 (2.3) % Hospice net service revenue $194.0 $209.3 (7.3) % Total net service revenue $1,071.1 $1,106.6 (3.2) % % of Revenue % of Revenue Cost of services 49.1 % $(525.6) 46.4 % $(513.9) 2.3 % Gross margin 50.9 % $545.5 53.6 % $592.7 (8.0) % Impairment of goodwill (10.2) % $(109.0) — % $— — Administrative & general expenses 36.9 % $(395.1) 35.8 % $(395.9) (0.2) % Operating expenses 96.1 % $(1,029.6) 82.2 % $(909.8) 13.2 % Other income $(0.9) $(1.6) Equity in net income of nonconsolidated affiliates $— $(0.6) Noncontrolling interests $2.1 $1.8 Adjusted EBITDA $149.3 $197.2 (24.3) % Adjusted EBITDA margin 13.9 % 17.8 % Adjusted EPS (see calculations on slides 34 and 35) $1.36 $2.36 (42.4) % In arriving at Adjusted EBITDA, the following were excluded: Impairment of goodwill $109.0 $— Loss (gain) on disposal of assets $0.1 $(0.8) Gain on consolidation of joint venture $— $(3.2) Stock compensation expense $9.2 $3.6 Transaction costs and stock compensation expense allocation $10.6 $14.2 Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 29 Home Health Segment Results – YTD 2022 Year-To-Date '22 vs. '21($ in millions) 2022 2021 Net service revenue $877.1 $897.3 (2.3) % Cost of services 435.5 $423.5 2.8 % Gross margin 50.3 % 52.8 % Adjusted EBITDA $202.2 $230.1 (12.1) % % Adj. EBITDA margin 23.1 % 25.6 % Operational metrics (Actual Amounts) Starts of care Episodic admissions 145,136 155,357 (6.6) % Non-episodic admissions 57,359 45,269 26.7 % Total admissions 202,495 200,626 0.9 % Same-store total admissions growth (1.5) % Episodic recertifications 102,901 111,394 (7.6) % Non-episodic recertifications 26,071 19,865 31.2 % Total recertifications 128,972 131,259 (1.7) % Same-store total recertifications growth (2.9) % Total starts of care 331,467 331,885 (0.1) % Completed episodes 246,448 264,581 (6.9) % Revenue per episode $2,995 $2,954 1.4 % Visits per episode 14.9 15.4 (3.2) % Total visits 4,779,953 4,969,699 (3.8) % Non-episodic visits 1,115,564 898,099 24.2 % Cost per visit $89 $83 7.2 % Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 30 Hospice Segment Results – YTD 2022 Year-To-Date '22 vs. '21($ in millions) 2022 2021 Net service revenue $194.0 $209.3 (7.3) % Cost of services $90.1 $90.4 (0.3) % Gross margin 53.6 % 56.8 % Adjusted EBITDA $38.4 $56.2 (31.7) % % Adj. EBITDA margin 19.8 % 26.9 % Operational metrics (Actual Amounts) Total admissions 11,978 13,113 (8.7) % Same-store total admissions growth (15.9) % Patient days 1,284,386 1,372,980 (6.5) % Discharged average length of stay 108 107 0.9 % Average daily census 3,519 3,762 (6.5) % Revenue per day $151 $152 (0.7) % Cost per day $70 $66 6.1 % Reconciliations to GAAP provided on pages 32 to 38
Enhabit Home Health & Hospice 31 Payor Sources As a % of Revenue Q4 2022 Q4 2021 FY 2022 FY 2021 Consolidated Medicare 78.1 % 81.0 % 78.4 % 81.9 % Medicare Advantage 15.5 % 11.2 % 14.2 % 10.6 % Managed Care 5.0 % 6.3 % 6.1 % 5.9 % Medicaid 1.3 % 1.4 % 1.2 % 1.4 % Other 0.1 % 0.1 % 0.1 % 0.2 % Total 100.0 % 100.0 % 100.0 % 100.0 % Home Health Medicare 72.0 % 77.1 % 73.8 % 78.2 % Medicare Advantage 18.9 % 13.8 % 17.3 % 13.1 % Managed Care 7.6 % 7.4 % 7.3 % 6.9 % Medicaid 1.4 % 1.6 % 1.4 % 1.6 % Other 0.1 % 0.1 % 0.2 % 0.2 % Total 100.0 % 100.0 % 100.0 % 100.0 % Hospice Medicare 99.2 % 97.5 % 98.8 % 97.9 % Managed Care — % 1.9 % 0.7 % 1.5 % Medicaid 0.8 % 0.6 % 0.5 % 0.6 % Total 100.0 % 100.0 % 100.0 % 100.0 % Note: For hospice payor source data, Medicare and Managed Care do not reflect the impact of adjustments to revenue reserves in Q4 2022. The impact of adjustments to revenue reserves in Q4 2022 cause Medicare to increase to 106.4% and Managed Care to decrease to (7.2%).
Enhabit Home Health & Hospice 32 EPS Calculation: Q4 2022 Adjusted EPS – Q4 2022 ($ in millions, except per share amounts) As Reported Impairment of Goodwill Transaction Costs Income Tax Adjustments As Adjusted Adjusted EBITDA $30.3 $— $— $— $30.3 Depreciation and amortization (8.3) — — — (8.3) Interest exp. and amortization of debt discounts & fees (8.7) — — — (8.7) Impairment of goodwill (109.0) 109.0 — — — Stock compensation expense (2.1) — — — (2.1) Transaction costs (2.5) — 2.5 — — Net (loss) income before income taxes (100.3) 109.0 2.5 — 11.2 Income tax benefit (expense) 5.1 (13.7) (0.6) 6.2 (3.0) Net (loss) income attributable to Enhabit $(95.2) $95.3 $1.9 $6.2 $8.2 Diluted earnings per share $(1.91) $1.91 $0.05 $0.12 $0.17 Diluted shares 49.8 49.8
Enhabit Home Health & Hospice 33 EPS Calculation: Q4 2021 Adjusted EPS – Q4 2021 ($ in millions, except per share amounts) As Reported Transaction Costs and Gain on Consolidation As Adjusted Adjusted EBITDA $49.0 $— $49.0 Depreciation and amortization (9.0) — (9.0) Interest exp. and amortization of debt discounts & fees (0.1) — (0.1) Gain on disposal of assets 0.4 — 0.4 Stock compensation expense (1.5) — (1.5) Stock compensation included in overhead allocation (0.8) — (0.8) Transaction costs (3.0) 3.0 — Gain on consolidation of joint venture formerly accounted for under the equity method of accounting 3.2 (3.2) — Net income before income taxes 38.2 (0.2) 38.0 Income tax expense (8.9) — (8.9) Net income attributable to Enhabit $29.3 $(0.2) $29.1 Diluted earnings per share $0.59 $— $0.59 Diluted shares 49.6 49.6
Enhabit Home Health & Hospice 34 EPS Calculation: YTD 2022 Adjusted EPS – YTD 2022 ($ in millions, except per share amounts) As Reported Impairment of Goodwill Transaction Costs Income Tax Adjustments As Adjusted Adjusted EBITDA $149.3 $— $— $— $149.3 Depreciation and amortization (33.0) — — — (33.0) Interest exp. and amortization of debt discounts & fees (15.0) — — — (15.0) Impairment of goodwill (109.0) 109.0 — — — Loss on disposal of assets (0.1) — — — (0.1) Stock compensation expense (9.2) — — — (9.2) Stock compensation included in overhead allocation (1.1) — — — (1.1) Transaction costs (9.5) — 9.5 — — Net (loss) income before income taxes (27.6) 109.0 9.5 — 90.9 Income tax expense (12.8) (13.7) (2.4) 6.2 (22.7) Net (loss) income attributable to Enhabit $ (40.4) $95.3 $7.1 $6.2 $68.2 Diluted earnings per share $(0.81) $1.91 $0.14 $0.12 $1.36 Diluted shares 49.7 49.7
Enhabit Home Health & Hospice 35 EPS Calculation: YTD 2021 Adjusted EPS – YTD 2021 ($ in millions, except per share amounts) As Reported Transaction Costs and Gain on Consolidation Income Tax Adjustments As Adjusted Adjusted EBITDA $197.2 $— $— $197.2 Depreciation and amortization (36.9) — — (36.9) Interest exp. and amortization of debt discounts & fees (0.3) — — (0.3) Gain on disposal of assets 0.8 — — 0.8 Stock compensation expense (3.6) — — (3.6) Stock compensation included in overhead allocation (2.3) — — (2.3) Transaction costs (11.9) 11.9 — — Gain on consolidation of joint venture formerly accounted for under the equity method of accounting 3.2 (3.2) — — Net income before income taxes 146.2 8.7 — 154.9 Income tax expense (35.1) (2.2) (0.3) (37.6) Net income attributable to Enhabit $111.1 $6.5 $(0.3) $117.3 Diluted earnings per share $2.24 $0.13 $(0.01) $2.36 Diluted shares 49.6 49.6
Enhabit Home Health & Hospice 36 Reconciliation of Net (Loss) Income to Adjusted EBITDA – Consolidated Fourth Quarter YTD ($ in millions) 2022 2021 2022 2021 Net (loss) income $(94.7) $29.8 $(38.3) $112.9 Income tax (benefit) expense (5.1) 8.9 12.8 35.1 Interest expense and amortization of debt discounts and fees 8.7 0.1 15.0 0.3 Depreciation and amortization 8.3 9.0 33.0 36.9 Impairment of goodwill 109.0 — 109.0 — (Gain) loss on disposal of assets — (0.4) 0.1 (0.8) Stock-based compensation 2.1 1.5 9.2 3.6 Stock-based compensation including overhead allocation — 0.8 1.1 2.3 Net income attributable to noncontrolling interests (0.5) (0.5) (2.1) (1.8) Transaction costs 2.5 3.0 9.5 11.9 Gain on consolidation of joint venture formerly accounted for under the equity method of accounting — (3.2) — (3.2) Adjusted EBITDA $30.3 $49.0 $149.3 $197.2
Enhabit Home Health & Hospice 37 Reconciliation of Cash Provided by Operations to Adjusted EBITDA Fourth Quarter YTD ($ in millions) 2022 2021 2022 2021 Net cash provided by operating activities $4.1 $23.1 $80.1 $123.3 Interest expense and amortization of debt discounts and fees 8.7 0.1 15.0 0.3 Equity in net income of nonconsolidated affiliates — 0.1 — 0.6 Net income attributable to noncontrolling interests in continuing operations (0.5) (0.5) (2.1) (1.8) Distributions from nonconsolidated affiliates — (0.1) — (0.3) Current portion of income tax expense (3.3) 1.1 17.1 26.5 Change in assets and liabilities 19.2 21.7 29.2 32.8 Transaction costs 2.5 3.0 9.5 11.9 Stock-based compensation included in overhead allocation — 0.8 1.1 2.3 Other (0.4) (0.3) (0.6) 1.6 Adjusted EBITDA $30.3 $49.0 $149.3 $197.2
Enhabit Home Health & Hospice 38 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow PLACE HOLDER – WILL NEED: • EBITDA to Net income • Adjusted EPS to reported EPS and Net income Fourth Quarter YTD ($ in millions) 2022 2021 2022 2021 Net cash provided by operating activities $4.1 $23.1 $80.1 $123.3 Cash expenditures for maintenance (1.4) (0.5) (4.5) (5.4) Distributions paid to non controlling interests of consolidated affiliates (0.3) (0.2) (1.2) (1.8) Items non-indicative of ongoing operations performance: Stock-based compensation including overhead allocation — 0.8 1.1 2.3 Transaction costs and related assumed liabilities 1.8 6.4 8.8 11.9 Adjusted free cash flow $4.2 $29.6 $84.3 $130.3