Encompass Health Corp 8-K, filed Oct 28, 2026
Encompass Health Corp (EHC)
8-K
2026-10-28
For: 2026-10-28
View Original
Added on
October 28, 2026
About this 8-K
Encompass Health Corp filed this 8-K on October 28, 2026.
Encompass Health reported third-quarter revenue of $1,609.5 million, Adjusted EBITDA of $346.6 million and adjusted earnings per share of $1.52, and increased 2026 revenue guidance to $6,450 to $6,500 million. AI summary
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 28, 2026
(Exact name of Registrant as specified in its Charter)
(State or Other Jurisdiction of Incorporation)
| (Commission File Number) | (IRS Employer Identification No.) | ||||
Attention: Corporate Secretary
(Address of Principal Executive Offices, Including Zip Code)
(205 ) 967-7116
(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 | ||||||
The information contained herein is being furnished pursuant to Item 2.02 of Form 8‑K, “Results of Operations and Financial Condition,” and Item 7.01 of Form 8-K, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 2.02. Results of Operations and Financial Condition.
On October 28, 2026, Encompass Health Corporation (“Encompass Health” or the “Company”) issued a press release reporting the financial results of the Company for the three and nine months ended September 30, 2026. A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.
The Company uses “same-store” comparisons to explain the changes in certain performance metrics within its financial statements. Same-store comparisons are calculated based on hospitals open throughout both the full current and prior periods presented. These comparisons include the financial results of market consolidation transactions and capacity expansions (including the addition of satellite and remote hospitals) in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company's results of operations.
ITEM 7.01. Regulation FD Disclosure.
See Item 2.02, “Results of Operations and Financial Condition,” above.
In addition, a copy of the supplemental information which will be discussed during the Company’s earnings call at 10:00 a.m. Eastern Time on Thursday, October 29, 2026 is attached to this report as Exhibit 99.2 and incorporated herein by reference.
Note Regarding Presentation of Non-GAAP Financial Measures
The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow.
The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”). The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to prior periods given that it excludes the impact of government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging and equity instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments, settlements of income tax claims, windfall tax benefits, and executive compensation disallowance); items related to corporate and facility restructurings; and certain other items the Company believes to be non-indicative of its ongoing operating performance. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company’s ongoing operating performance. Accordingly, they can complicate comparisons of the Company’s results of operations across periods and comparisons of the Company’s results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States (“GAAP”) as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies. The Company reconciles adjusted earnings per share to earnings per share in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.
The leverage ratio referenced therein is defined as the ratio of consolidated total debt to Adjusted EBITDA for the trailing four quarters. The Company believes its leverage ratio and Adjusted EBITDA are measures of its ability to service its debt and its ability to make capital expenditures. Additionally, the leverage ratio is a standard measurement used by investors to gauge the creditworthiness of an institution. The Company’s credit agreement also includes a maximum leverage ratio financial covenant which allows the Company to deduct cash on hand from consolidated total debt. In calculating the leverage ratio under our credit agreement, we are permitted to use pro forma Adjusted EBITDA, the calculation of which includes historical income statement items and pro forma adjustments, subject to certain limitations, resulting from (1) dispositions and repayments or incurrence of debt and (2) investments, acquisitions, mergers, amalgamations, consolidations and other operational changes to the extent such items or effects are not yet reflected in our trailing four-quarter financial statements. The Company reconciles Adjusted EBITDA to net cash provided by operating activities and net income in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.
The Company uses Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants contained within the Company’s credit agreement, which is discussed in more detail in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” and Note 8, Long-term Debt, to the consolidated financial statements included in its Annual Report on Form 10‑K for the year ended December 31, 2025 (the “2025 Form 10‑K”). These covenants are material terms of the credit agreement. Noncompliance with these financial covenants under the credit agreement—its interest coverage ratio and its leverage ratio—could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might be on terms less favorable to those in the Company’s existing credit agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying common stock dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the Company’s assessment of its liquidity.
In general terms, the credit agreement definition of Adjusted EBITDA, therein referred to as “Adjusted Consolidated EBITDA,” allows the Company to add back to consolidated net income interest expense, income taxes, and depreciation and amortization and then add back to consolidated net income (1) all unusual or nonrecurring items reducing consolidated net income (of which only up to $10 million in a year may be cash expenditures), (2) any losses from discontinued operations, (3) non-ordinary course fees, costs and expenses incurred with respect to any litigation or settlement, (4) share-based compensation expense, (5) costs and expenses associated with changes in the fair value of marketable securities, (6) costs and expenses associated with the issuance or prepayment of debt and acquisitions, and (7) any restructuring charges and certain pro-forma cost savings and synergies related to transactions and initiatives, which in the aggregate are not in excess of 25% of Adjusted Consolidated EBITDA. The Company also subtracts from consolidated net income all unusual or nonrecurring items to the extent they increase consolidated net income.
The calculation of Adjusted EBITDA under the credit agreement does not require us to deduct net income attributable to noncontrolling interests or gains on fair value adjustments of hedging and equity instruments, disposal of assets, and development activities. It also does not allow us to add back losses on fair value adjustments of hedging instruments or unusual or nonrecurring cash expenditures in excess of $10 million. These items and amounts, in addition to the items falling within the credit agreement’s “unusual or nonrecurring” classification, may occur in future periods, but can vary significantly from period to period and may not directly relate to, or be indicative of, the Company's ongoing liquidity or operating performance. Accordingly, the Adjusted EBITDA calculation presented here includes adjustments for them.
Adjusted EBITDA is not a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financing activities. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2025 Form 10‑K.
The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Management believes the presentation of adjusted free cash flow provides investors an efficient means by which they can evaluate the Company’s capacity to reduce debt, pursue development activities, and return capital to its common stockholders. The calculation of adjusted free cash flow and a reconciliation of net cash provided by operating activities to adjusted free cash flow are included in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities. The Company's definition of adjusted free cash flow is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, distributions to noncontrolling interests, and certain items deemed to be non-indicative of ongoing operating performance. Common stock dividends are not included in the calculation of adjusted free cash flow. The Company’s definition of adjusted free cash flow is limited and does not represent residual cash flows available for discretionary spending. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. See the consolidated statements of cash flows included in the 2025 Form 10‑K, the condensed consolidated statements of cash flows included in the Company's quarterly report on Form 10-Q for the quarterly period ended September 30, 2026 (the “September 2026 Form 10-Q”), when filed, and in the press release attached as Exhibit 99.1 for the GAAP measures of cash flows from operating, investing, and financing activities.
Forward-Looking Statements
The information contained in the press release and supplemental information includes certain estimates, projections, and other forward-looking statements that involve known and unknown risks and relate to, among other things, future events, the business model, strategy, outlook and guidance, growth targets, labor cost trends, financial plans, dividend strategies or payments, effective income tax rates, plans to repurchase its debt or equity securities, future financial performance, projected business results, ability to return value to its shareholders, projected capital expenditures and development plans, leverage ratio, guidance considerations, and the impact of future legislation or regulation. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These estimates, projections, and other forward-looking statements are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.
There can be no assurance that any estimates, projections, or forward-looking statements will be realized.
All such estimates, projections, and forward-looking statements speak only as of the date hereof. The Company undertakes no duty to publicly update or revise that information.
You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking statements in this report, the press release, and supplemental information as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in the attached press release and in the 2025 Form 10‑K, the September 2026 Form 10-Q, when filed, and in other documents the Company previously filed with the SEC, many of which are beyond the Company’s control. These factors may cause actual results to differ materially from the views, beliefs, and estimates expressed herein.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | |||||||
| 104 | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document | |||||||
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.
| ENCOMPASS HEALTH CORPORATION | ||||||||
| By: | /S/ DOUGLAS E. COLTHARP | |||||||
| Name: | Douglas E. Coltharp | |||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||
Dated: October 28, 2026
Exhibit 99.1
| Media Contact | October 28, 2026 | ||||
| Polly Manuel, 205 969-4532 | |||||
| polly.manuel@encompasshealth.com | |||||
| Investor Relations Contact | |||||
| Mark Miller, 205 970-5860 | |||||
| mark.miller@encompasshealth.com | |||||
Encompass Health reports results for third quarter 2026
Increases full-year guidance
BIRMINGHAM, Ala. - Encompass Health Corporation (NYSE: EHC), the largest owner and operator of inpatient rehabilitation hospitals in the United States, today reported its results of operations for the third quarter ended September 30, 2026.
Summary results
| Growth | |||||||||||||||||||||||
| Q3 2026 | Q3 2025 | Dollars | Percent | ||||||||||||||||||||
| (In Millions, Except Per Share Data) | |||||||||||||||||||||||
| Net operating revenue | $ | 1,609.5 | $ | 1,477.5 | $ | 132.0 | 8.9 | % | |||||||||||||||
Income from continuing operations attributable to Encompass Health per diluted share | 1.51 | 1.24 | 0.27 | 21.8 | % | ||||||||||||||||||
| Adjusted earnings per share | 1.52 | 1.23 | 0.29 | 23.6 | % | ||||||||||||||||||
Cash flows provided by operating activities | 362.0 | 270.8 | 91.2 | 33.7 | % | ||||||||||||||||||
| Adjusted EBITDA | 346.6 | 300.1 | 46.5 | 15.5 | % | ||||||||||||||||||
| Adjusted free cash flow | 263.4 | 174.2 | 89.2 | 51.2 | % | ||||||||||||||||||
| (Actual Amounts) | |||||||||||||||||||||||
| Discharges | 69,605 | 65,839 | 5.7 | % | |||||||||||||||||||
| Same-store discharge growth | 3.0 | % | |||||||||||||||||||||
| Net patient revenue per discharge | $ | 22,543 | $ | 21,679 | 4.0 | % | |||||||||||||||||
See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.
“We are very pleased with our performance for the third quarter, with revenue increasing 8.9% and Adjusted EBITDA growing 15.5%,” said Mark Tarr, President and Chief Executive Officer. “During the first nine months of 2026, we opened four hospitals totaling 189 beds and added 85 beds to existing hospitals, reflecting our commitment to meeting the growing demand for high-quality inpatient rehabilitation services. Our value proposition and disciplined operating strategy continue to be validated, and we remain highly optimistic about the long-term prospects of our business.”
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2026 Guidance
The Company increased its full-year guidance as follows:
| Full-Year 2026 Guidance | |||||||||||
| Previous Guidance | Updated Guidance | ||||||||||
| (In Millions, Except Per Share Data) | |||||||||||
| Net operating revenue | $6,410 to $6,490 | $6,450 to $6,500 | |||||||||
| Adjusted EBITDA | $1,365 to $1,395 | $1,395 to $1,415 | |||||||||
| Adjusted earnings per share from continuing operations attributable to Encompass Health | $6.02 to $6.25 | $6.23 to $6.37 | |||||||||
For considerations regarding the Company’s 2026 guidance, see the supplemental information posted on the Company’s website at http://investor.encompasshealth.com. See also the “Other information” section below for an explanation of why the Company does not provide guidance for comparable GAAP measures for Adjusted EBITDA and adjusted earnings per share.
Earnings conference call and webcast
The Company will host an investor conference call at 10:00 a.m. Eastern Time on Thursday, October 29, 2026 to discuss its results for the third quarter of 2026. For reference during the call, the Company will post certain supplemental information at http://investor.encompasshealth.com.
The conference call may be accessed by dialing 833 354-6854 and giving the conference ID EHCQ326. International callers should dial 785 838-9343 and give the same conference ID. Please call approximately ten minutes before the start of the call to ensure you are connected. The conference call will also be webcast live and will be available for on-line replay at http://investor.encompasshealth.com by clicking on an available link.
About Encompass Health
Encompass Health (NYSE: EHC) is the largest owner and operator of inpatient rehabilitation hospitals in the United States. With a national footprint that includes 179 hospitals in 39 states and Puerto Rico, the Company provides high-quality, compassionate rehabilitative care for patients recovering from a major injury or illness, using advanced technology and innovative treatments to maximize recovery. Encompass Health is recognized by Newsweek as America’s Most Awarded Leader in Inpatient Rehabilitation and is ranked among Fortune's World’s Most Admired Companies™1 and Forbes’ America’s Best Companies. It is also recognized by Becker’s Healthcare and Modern Healthcare as a top healthcare employer. For more information, visit encompasshealth.com, or follow us on our newsroom, X, Instagram and Facebook.
1 From Fortune. © 2026 Fortune Media IP Limited. All rights reserved. Fortune® is a registered trademark and Fortune World’s Most Admired Companies™ is trademark of Fortune Media IP Limited and are used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Encompass Health.
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Other information
The information in this press release is summarized and should be read in conjunction with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 (the “September 2026 Form 10-Q”), when filed, as well as the Company’s Current Report on Form 8-K filed on October 28, 2026 (the “Q3 Earnings Form 8-K”), to which this press release is attached as Exhibit 99.1. In addition, the Company will post supplemental information today on its website at http://investor.encompasshealth.com for reference during its October 29, 2026 earnings call.
The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are included below or in the Q3 Earnings Form 8-K. Readers are encouraged to review the “Note Regarding Presentation of Non-GAAP Financial Measures” included in the Q3 Earnings Form 8-K which provides further explanation and disclosure regarding the Company’s use of these non-GAAP financial measures.
Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of items that are deemed to be outside the control of the Company or otherwise not indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be not indicative of its ongoing operations. These items cannot be reasonably predicted and will depend on several factors, including industry and market conditions, and could be material to the Company’s results computed in accordance with GAAP.
However, the following reasonably estimable GAAP measures for 2026 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures could be reasonably predicted:
•Interest expense and amortization of debt discounts and fees - approximately $130 million
•Amortization of debt-related items - approximately $10 million
The Q3 Earnings Form 8-K and, when filed, the September 2026 Form 10-Q can be found on the Company’s website at http://investor.encompasshealth.com and the SEC's website at www.sec.gov.
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Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions, Except Per Share Data) | |||||||||||||||||||||||
| Net operating revenues | $ | 1,609.5 | $ | 1,477.5 | $ | 4,793.5 | $ | 4,390.6 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Salaries and benefits | 840.7 | 784.8 | 2,479.1 | 2,314.8 | |||||||||||||||||||
| Other operating expenses | 245.2 | 231.1 | 742.0 | 662.4 | |||||||||||||||||||
| Occupancy costs | 15.0 | 14.9 | 44.9 | 44.5 | |||||||||||||||||||
| Supplies | 65.0 | 64.6 | 195.4 | 189.9 | |||||||||||||||||||
| General and administrative expenses | 59.9 | 56.1 | 180.7 | 167.8 | |||||||||||||||||||
| Depreciation and amortization | 95.7 | 82.4 | 273.4 | 241.5 | |||||||||||||||||||
| Total operating expenses | 1,321.5 | 1,233.9 | 3,915.5 | 3,620.9 | |||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 3.4 | — | |||||||||||||||||||
| Interest expense and amortization of debt discounts and fees | 32.2 | 30.8 | 96.8 | 93.0 | |||||||||||||||||||
| Other income | (1.9) | (5.9) | (29.7) | (15.1) | |||||||||||||||||||
| Equity in net income of nonconsolidated affiliates | (0.1) | (1.2) | (0.6) | (3.5) | |||||||||||||||||||
| Income from continuing operations before income tax expense | 257.8 | 219.9 | 808.1 | 695.3 | |||||||||||||||||||
| Provision for income tax expense | 53.4 | 44.9 | 163.4 | 137.5 | |||||||||||||||||||
| Income from continuing operations | 204.4 | 175.0 | 644.7 | 557.8 | |||||||||||||||||||
| (Loss) income from discontinued operations, net of tax | (0.8) | (0.4) | 14.5 | (1.8) | |||||||||||||||||||
| Net income | 203.6 | 174.6 | 659.2 | 556.0 | |||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | (53.7) | (48.1) | (160.9) | (135.9) | |||||||||||||||||||
| Net income attributable to Encompass Health | $ | 149.9 | $ | 126.5 | $ | 498.3 | $ | 420.1 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 98.3 | 100.5 | 98.8 | 100.5 | |||||||||||||||||||
| Diluted | 99.7 | 102.3 | 100.2 | 102.3 | |||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Basic earnings per share attributable to Encompass Health common shareholders: | |||||||||||||||||||||||
Continuing operations | $ | 1.53 | $ | 1.26 | $ | 4.88 | $ | 4.19 | |||||||||||||||
Discontinued operations | (0.01) | — | 0.15 | (0.02) | |||||||||||||||||||
Net income | $ | 1.52 | $ | 1.26 | $ | 5.03 | $ | 4.17 | |||||||||||||||
Diluted earnings per share attributable to Encompass Health common shareholders: | |||||||||||||||||||||||
Continuing operations | $ | 1.51 | $ | 1.24 | $ | 4.83 | $ | 4.13 | |||||||||||||||
Discontinued operations | (0.01) | — | 0.14 | (0.02) | |||||||||||||||||||
Net income | $ | 1.50 | $ | 1.24 | $ | 4.97 | $ | 4.11 | |||||||||||||||
| Amounts attributable to Encompass Health common shareholders: | |||||||||||||||||||||||
| Income from continuing operations | $ | 150.7 | $ | 126.9 | $ | 483.8 | $ | 421.9 | |||||||||||||||
| (Loss) income from discontinued operations, net of tax | (0.8) | (0.4) | 14.5 | (1.8) | |||||||||||||||||||
| Net income attributable to Encompass Health | $ | 149.9 | $ | 126.5 | $ | 498.3 | $ | 420.1 | |||||||||||||||
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Encompass Health Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| September 30, 2026 | December 31, 2025 | |||||||||||||
| (In Millions) | ||||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 76.2 | $ | 72.2 | ||||||||||
| Restricted cash | 24.0 | 30.7 | ||||||||||||
| Accounts receivable | 712.0 | 619.2 | ||||||||||||
| Other current assets | 200.8 | 183.8 | ||||||||||||
| Total current assets | 1,013.0 | 905.9 | ||||||||||||
| Property and equipment, net | 4,477.6 | 4,101.6 | ||||||||||||
| Operating lease right-of-use assets | 194.5 | 212.6 | ||||||||||||
| Goodwill | 1,323.5 | 1,317.6 | ||||||||||||
| Intangible assets, net | 301.5 | 308.3 | ||||||||||||
| Other long-term assets | 256.4 | 243.7 | ||||||||||||
| Total assets | $ | 7,566.5 | $ | 7,089.7 | ||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Current portion of long-term debt | $ | 47.8 | $ | 43.6 | ||||||||||
| Current operating lease liabilities | 28.0 | 26.5 | ||||||||||||
| Accounts payable | 231.4 | 178.2 | ||||||||||||
| Accrued expenses and other current liabilities | 620.2 | 588.1 | ||||||||||||
| Total current liabilities | 927.4 | 836.4 | ||||||||||||
| Long-term debt, net of current portion | 2,551.3 | 2,447.2 | ||||||||||||
| Long-term operating lease liabilities | 176.3 | 196.6 | ||||||||||||
| Deferred income tax liabilities | 127.5 | 126.8 | ||||||||||||
| Other long-term liabilities | 222.8 | 206.9 | ||||||||||||
| Total liabilities | 4,005.3 | 3,813.9 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Redeemable noncontrolling interests | 58.6 | 58.3 | ||||||||||||
| Shareholders’ equity: | ||||||||||||||
| Encompass Health shareholders’ equity | 2,681.2 | 2,438.2 | ||||||||||||
| Noncontrolling interests | 821.4 | 779.3 | ||||||||||||
| Total shareholders’ equity | 3,502.6 | 3,217.5 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 7,566.5 | $ | 7,089.7 | ||||||||||
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Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (In Millions) | ||||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | 659.2 | $ | 556.0 | ||||||||||
| (Income) loss from discontinued operations, net of tax | (14.5) | 1.8 | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities— | ||||||||||||||
| Depreciation and amortization | 273.4 | 241.5 | ||||||||||||
| Loss on early extinguishment of debt | 3.4 | — | ||||||||||||
| Stock-based compensation | 40.3 | 38.1 | ||||||||||||
| Deferred tax expense | 1.6 | 3.2 | ||||||||||||
| Gain on investments | (21.8) | (6.1) | ||||||||||||
| Other, net | 9.7 | 7.2 | ||||||||||||
| Change in assets and liabilities, net of acquisitions— | ||||||||||||||
| Accounts receivable | (89.5) | (18.8) | ||||||||||||
| Other assets | (20.8) | (19.5) | ||||||||||||
| Accounts payable | 43.5 | (32.7) | ||||||||||||
| Accrued payroll | 13.6 | 6.4 | ||||||||||||
| Accrued interest payable | (5.7) | (15.8) | ||||||||||||
| Other liabilities | 46.1 | 70.8 | ||||||||||||
| Net cash provided by (used in) operating activities of discontinued operations | 19.2 | (2.5) | ||||||||||||
| Total adjustments | 313.0 | 271.8 | ||||||||||||
| Net cash provided by operating activities | 957.7 | 829.6 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchases of property, equipment, and intangible assets | (617.2) | (507.1) | ||||||||||||
| Proceeds from sale of restricted investments | 83.2 | 160.0 | ||||||||||||
| Purchases of restricted investments | (79.7) | (165.9) | ||||||||||||
| Other, net | (13.6) | (12.2) | ||||||||||||
| Net cash used in investing activities | (627.3) | (525.2) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from bond issuance | 598.8 | — | ||||||||||||
| Principal payments on debt, including pre-payments | (414.5) | (113.2) | ||||||||||||
| Borrowings on revolving credit facility | 745.0 | 140.0 | ||||||||||||
| Payments on revolving credit facility | (800.0) | (80.0) | ||||||||||||
| Principal payments under finance lease obligations | (19.7) | (17.7) | ||||||||||||
| Debt amendment and issuance costs | (13.9) | — | ||||||||||||
| Repurchases of common stock, including fees and expenses | (203.7) | (81.7) | ||||||||||||
| Dividends paid on common stock | (57.9) | (52.1) | ||||||||||||
| Distributions paid to noncontrolling interests of consolidated affiliates | (141.8) | (109.4) | ||||||||||||
| Taxes paid on behalf of employees for shares withheld | (30.9) | (19.9) | ||||||||||||
| Other, net | 5.5 | 0.2 | ||||||||||||
| Net cash used in financing activities | (333.1) | (333.8) | ||||||||||||
| Decrease in cash, cash equivalents, and restricted cash | (2.7) | (29.4) | ||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 102.9 | 123.1 | ||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 100.2 | $ | 93.7 | ||||||||||
6 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Earnings Per Share
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions, Except Per Share Data) | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 346.6 | $ | 300.1 | $ | 1,043.4 | $ | 932.3 | |||||||||||||||
Depreciation and amortization | (95.7) | (82.4) | (273.4) | (241.5) | |||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (32.2) | (30.8) | (96.8) | (93.0) | |||||||||||||||||||
| Stock-based compensation | (15.0) | (14.3) | (40.3) | (38.1) | |||||||||||||||||||
| Loss on disposal or impairment of assets | (0.8) | (1.9) | (3.2) | (2.4) | |||||||||||||||||||
| 202.9 | 170.7 | 629.7 | 557.3 | ||||||||||||||||||||
| Items not indicative of ongoing operating performance: | |||||||||||||||||||||||
| Loss on early extinguishment of debt | — | — | (3.4) | — | |||||||||||||||||||
| State regulatory change impact on noncontrolling interests | 1.5 | — | 1.5 | — | |||||||||||||||||||
| Change in fair market value of marketable securities | (0.3) | 1.1 | 1.9 | 2.1 | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | 17.5 | — | |||||||||||||||||||
| Pre-tax income | 204.1 | 171.8 | 647.2 | 559.4 | |||||||||||||||||||
Income tax expense | (53.4) | (44.9) | (163.4) | (137.5) | |||||||||||||||||||
Income from continuing operations (1) | $ | 150.7 | $ | 126.9 | $ | 483.8 | $ | 421.9 | |||||||||||||||
| Basic shares | 98.3 | 100.5 | 98.8 | 100.5 | |||||||||||||||||||
| Diluted shares | 99.7 | 102.3 | 100.2 | 102.3 | |||||||||||||||||||
Basic earnings per share (1) | $ | 1.53 | $ | 1.26 | $ | 4.88 | $ | 4.19 | |||||||||||||||
Diluted earnings per share (1) | $ | 1.51 | $ | 1.24 | $ | 4.83 | $ | 4.13 | |||||||||||||||
(1)Income from continuing operations attributable to Encompass Health
7 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Earnings per share, as reported | $ | 1.51 | $ | 1.24 | $ | 4.83 | $ | 4.13 | |||||||||||||||
| Adjustments, net of tax: | |||||||||||||||||||||||
| State regulatory change impact | 0.01 | — | 0.01 | — | |||||||||||||||||||
Income tax adjustments | — | — | (0.05) | (0.12) | |||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 0.02 | — | |||||||||||||||||||
| Change in fair market value of marketable securities | — | (0.01) | (0.01) | (0.01) | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | (0.13) | — | |||||||||||||||||||
Adjusted earnings per share* | $ | 1.52 | $ | 1.23 | $ | 4.67 | $ | 3.99 | |||||||||||||||
* Adjusted EPS may not sum due to rounding.
8 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
Net cash provided by operating activities | $ | 362.0 | $ | 270.8 | $ | 957.7 | $ | 829.6 | |||||||||||||||
Interest expense and amortization of debt discounts and fees | 32.2 | 30.8 | 96.8 | 93.0 | |||||||||||||||||||
| (Loss) gain on investments, excluding impairments | (0.8) | 3.0 | 21.8 | 6.2 | |||||||||||||||||||
Equity in net income of nonconsolidated affiliates | 0.1 | 1.2 | 0.6 | 3.5 | |||||||||||||||||||
Net income attributable to noncontrolling interests in continuing operations | (53.7) | (48.1) | (160.9) | (135.9) | |||||||||||||||||||
Amortization of debt-related items | (2.1) | (2.4) | (6.7) | (7.2) | |||||||||||||||||||
Distributions from nonconsolidated affiliates | (0.1) | — | (0.3) | (1.4) | |||||||||||||||||||
| Current portion of income tax expense | 57.2 | 47.0 | 161.8 | 134.3 | |||||||||||||||||||
| Change in assets and liabilities | (48.1) | (1.8) | 12.8 | 9.6 | |||||||||||||||||||
| Cash used in (provided by) operating activities of discontinued operations | 1.1 | 0.6 | (19.2) | 2.5 | |||||||||||||||||||
| State regulatory change impact on noncontrolling interests | (1.5) | — | (1.5) | — | |||||||||||||||||||
| Change in fair market value of marketable securities | 0.3 | (1.1) | (1.9) | (2.1) | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | (17.5) | — | |||||||||||||||||||
| Other | — | 0.1 | (0.1) | 0.2 | |||||||||||||||||||
| Adjusted EBITDA | $ | 346.6 | $ | 300.1 | $ | 1,043.4 | $ | 932.3 | |||||||||||||||
9 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share
| For the Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||||||||||||||
| As Reported | State Regulatory Change Impact | Change in Fair Market Value of Marketable Securities | As Adjusted | ||||||||||||||||||||||||||||||||||||||
| (In Millions, Except Per Share Amounts) | |||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 346.6 | $ | — | $ | — | $ | 346.6 | |||||||||||||||||||||||||||||||||
| Depreciation and amortization | (95.7) | 2.9 | — | (92.8) | |||||||||||||||||||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (32.2) | — | — | (32.2) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | (15.0) | — | — | (15.0) | |||||||||||||||||||||||||||||||||||||
| Loss on disposal or impairment of assets | (0.8) | — | — | (0.8) | |||||||||||||||||||||||||||||||||||||
| State regulatory change impact on noncontrolling interests | 1.5 | (1.5) | — | — | |||||||||||||||||||||||||||||||||||||
| Change in fair market value of marketable securities | (0.3) | — | 0.3 | — | |||||||||||||||||||||||||||||||||||||
Income from continuing operations before income tax expense | 204.1 | 1.4 | 0.3 | 205.8 | |||||||||||||||||||||||||||||||||||||
| Provision for income tax expense | (53.4) | (0.4) | (0.1) | (53.9) | |||||||||||||||||||||||||||||||||||||
Income from continuing operations attributable to Encompass Health | $ | 150.7 | $ | 1.0 | $ | 0.2 | $ | 151.9 | |||||||||||||||||||||||||||||||||
Diluted earnings per share from continuing operations** | $ | 1.51 | $ | 0.01 | $ | — | $ | 1.52 | |||||||||||||||||||||||||||||||||
Diluted shares used in calculation | 99.7 | ||||||||||||||||||||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
10 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share
| For the Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||||||||||||||
| As Reported | Income Tax Adjustments | Change in Fair Market Value of Marketable Securities | As Adjusted | ||||||||||||||||||||||||||||||||||||||
| (In Millions, Except Per Share Amounts) | |||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 300.1 | $ | — | $ | — | $ | 300.1 | |||||||||||||||||||||||||||||||||
| Depreciation and amortization | (82.4) | — | — | (82.4) | |||||||||||||||||||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (30.8) | — | — | (30.8) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | (14.3) | — | — | (14.3) | |||||||||||||||||||||||||||||||||||||
| Loss on disposal or impairment of assets | (1.9) | — | — | (1.9) | |||||||||||||||||||||||||||||||||||||
| Change in fair market value of marketable securities | 1.1 | — | (1.1) | — | |||||||||||||||||||||||||||||||||||||
Income from continuing operations before income tax expense | 171.8 | — | (1.1) | 170.7 | |||||||||||||||||||||||||||||||||||||
| Provision for income tax expense | (44.9) | (0.2) | 0.3 | (44.8) | |||||||||||||||||||||||||||||||||||||
Income from continuing operations attributable to Encompass Health | $ | 126.9 | $ | (0.2) | $ | (0.8) | $ | 125.9 | |||||||||||||||||||||||||||||||||
Diluted earnings per share from continuing operations** | $ | 1.24 | $ | — | $ | (0.01) | $ | 1.23 | |||||||||||||||||||||||||||||||||
Diluted shares used in calculation | 102.3 | ||||||||||||||||||||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
11 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share
| For the Nine Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||||||||||||||
| As Reported | State Regulatory Change Impact | Loss on Early Exting. of Debt | Income Tax Adjustments | Change in Fair Market Value of Marketable Securities | Gain on Sale of Gamma Knife | As Adjusted | |||||||||||||||||||||||||||||||||||
| (In Millions, Except Per Share Amounts) | |||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 1,043.4 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,043.4 | |||||||||||||||||||||||||||
| Depreciation and amortization | (273.4) | 2.9 | — | — | — | — | (270.5) | ||||||||||||||||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (96.8) | — | — | — | — | — | (96.8) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | (40.3) | — | — | — | — | — | (40.3) | ||||||||||||||||||||||||||||||||||
| Loss on disposal or impairment of assets | (3.2) | — | — | — | — | — | (3.2) | ||||||||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | (3.4) | — | 3.4 | — | — | — | — | ||||||||||||||||||||||||||||||||||
| State regulatory change impact on noncontrolling interests | 1.5 | (1.5) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Change in fair market value of marketable securities | 1.9 | — | — | — | (1.9) | — | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of Gamma Knife | 17.5 | — | — | — | — | (17.5) | — | ||||||||||||||||||||||||||||||||||
Income from continuing operations before income tax expense | 647.2 | 1.4 | 3.4 | — | (1.9) | (17.5) | 632.6 | ||||||||||||||||||||||||||||||||||
| Provision for income tax expense | (163.4) | (0.4) | (0.9) | (5.2) | 0.5 | 4.5 | (164.9) | ||||||||||||||||||||||||||||||||||
Income from continuing operations attributable to Encompass Health | $ | 483.8 | $ | 1.0 | $ | 2.5 | $ | (5.2) | $ | (1.4) | $ | (13.0) | $ | 467.7 | |||||||||||||||||||||||||||
Diluted earnings per share from continuing operations** | $ | 4.83 | $ | 0.01 | $ | 0.02 | $ | (0.05) | $ | (0.01) | $ | (0.13) | $ | 4.67 | |||||||||||||||||||||||||||
Diluted shares used in calculation | 100.2 | ||||||||||||||||||||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
12 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share
| For the Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||||||||||||||
| As Reported | Income Tax Adjustments | Change in Fair Market Value of Marketable Securities | As Adjusted | ||||||||||||||||||||||||||||||||||||||
| (In Millions, Except Per Share Amounts) | |||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 932.3 | $ | — | $ | — | $ | 932.3 | |||||||||||||||||||||||||||||||||
| Depreciation and amortization | (241.5) | — | — | (241.5) | |||||||||||||||||||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (93.0) | — | — | (93.0) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | (38.1) | — | — | (38.1) | |||||||||||||||||||||||||||||||||||||
| Loss on disposal or impairment of assets | (2.4) | — | — | (2.4) | |||||||||||||||||||||||||||||||||||||
| Change in fair market value of marketable securities | 2.1 | — | (2.1) | — | |||||||||||||||||||||||||||||||||||||
Income from continuing operations before income tax expense | 559.4 | — | (2.1) | 557.3 | |||||||||||||||||||||||||||||||||||||
| Provision for income tax expense | (137.5) | (11.8) | 0.6 | (148.7) | |||||||||||||||||||||||||||||||||||||
Income from continuing operations attributable to Encompass Health | $ | 421.9 | $ | (11.8) | $ | (1.5) | $ | 408.6 | |||||||||||||||||||||||||||||||||
Diluted earnings per share from continuing operations** | $ | 4.13 | $ | (0.12) | $ | (0.01) | $ | 3.99 | |||||||||||||||||||||||||||||||||
Diluted shares used in calculation | 102.3 | ||||||||||||||||||||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
13 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Income to Adjusted EBITDA
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
| Net income | $ | 203.6 | $ | 174.6 | $ | 659.2 | $ | 556.0 | |||||||||||||||
| Loss (income) from discontinued operations, net of tax, attributable to Encompass Health | 0.8 | 0.4 | (14.5) | 1.8 | |||||||||||||||||||
| Net income attributable to noncontrolling interests included in continuing operations | (53.7) | (48.1) | (160.9) | (135.9) | |||||||||||||||||||
| Provision for income tax expense | 53.4 | 44.9 | 163.4 | 137.5 | |||||||||||||||||||
Interest expense and amortization of debt discounts and fees | 32.2 | 30.8 | 96.8 | 93.0 | |||||||||||||||||||
| Depreciation and amortization | 95.7 | 82.4 | 273.4 | 241.5 | |||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 3.4 | — | |||||||||||||||||||
| Loss on disposal or impairment of assets | 0.8 | 1.9 | 3.2 | 2.4 | |||||||||||||||||||
| Stock-based compensation | 15.0 | 14.3 | 40.3 | 38.1 | |||||||||||||||||||
| State regulatory change impact on noncontrolling interests | (1.5) | — | (1.5) | — | |||||||||||||||||||
| Change in fair market value of marketable securities | 0.3 | (1.1) | (1.9) | (2.1) | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | (17.5) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 346.6 | $ | 300.1 | $ | 1,043.4 | $ | 932.3 | |||||||||||||||
14 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 362.0 | $ | 270.8 | $ | 957.7 | $ | 829.6 | |||||||||||||||
| Impact of discontinued operations | 1.1 | 0.6 | (19.2) | 2.5 | |||||||||||||||||||
| Net cash provided by operating activities of continuing operations | 363.1 | 271.4 | 938.5 | 832.1 | |||||||||||||||||||
| Capital expenditures for maintenance | (56.0) | (61.4) | (166.0) | (140.5) | |||||||||||||||||||
Distributions paid to noncontrolling interests of consolidated affiliates | (43.7) | (36.1) | (141.8) | (109.4) | |||||||||||||||||||
| Items not indicative of ongoing operating performance: | |||||||||||||||||||||||
| Transaction costs and related liabilities | — | 0.3 | 3.5 | 0.3 | |||||||||||||||||||
| Adjusted free cash flow | $ | 263.4 | $ | 174.2 | $ | 634.2 | $ | 582.5 | |||||||||||||||
For the three months ended September 30, 2026, net cash used in investing activities was $241.6 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended September 30, 2026 was $153.7 million and resulted primarily from repurchases of common stock, distributions paid to noncontrolling interests of consolidated affiliates, net debt payments, and cash dividends paid on common stock.
For the three months ended September 30, 2025, net cash used in investing activities was $201.3 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended September 30, 2025 was $113.2 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, net debt payments, repurchases of common stock, and cash dividends paid on common stock.
For the nine months ended September 30, 2026 net cash used in investing activities was $627.3 million and resulted primarily from capital expenditures. Net cash used in financing activities during the nine months ended September 30, 2026 was $333.1 million and resulted primarily from repurchases of common stock, distributions paid to noncontrolling interests of consolidated affiliates, cash dividends paid on common stock, and taxes paid on behalf of employees for shares withheld partially offset by net debt borrowings.
For the nine months ended September 30, 2025, net cash used in investing activities was $525.2 million and resulted primarily from capital expenditures. Net cash used in financing activities during the nine months ended September 30, 2025 was $333.8 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, repurchases of common stock, net debt payments, and cash dividends paid on common stock.
15 | ||||||||
Encompass Health Corporation and Subsidiaries
Forward-Looking Statements
Statements contained in this press release and the supplemental information which are not historical facts, such as those relating to the business, strategy, outlook, growth targets and guidance considerations, dividend strategies, effective income tax rates, cost trends, legislative and regulatory developments or their impacts, financial guidance, ability to return value to shareholders, projected capital expenditures, acquisition opportunities, development projects, addressable market size, other balance sheet and cash flow plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, Encompass Health, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date hereof, and Encompass Health 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 Encompass Health include, but are not limited to, possible reductions or other changes in Medicaid reimbursement, including Medicaid directed and supplemental payment programs and Medicaid waiver programs, which may decrease our revenues and increase our provider tax expenses; infectious disease outbreak, including the speed, depth, geographic reach and duration of its spread, which could decrease our patient volumes and revenues and lead to staffing and supply shortages and associated cost increases; Encompass Health's infectious disease prevention and control efforts; the demand for Encompass Health’s services, including based on any downturns in the economy and consumer confidence in patient care; the price of Encompass Health's common stock as it affects Encompass Health's willingness and ability to repurchase shares and the financial and accounting effects of any repurchases; any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings involving Encompass Health, including any matters related to yet undiscovered issues, if any, in acquired operations; Encompass Health's ability to attract and retain key management personnel; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of Encompass Health's or its vendors' or partners’ information systems, including unauthorized access to or theft of patient, business associate, or other sensitive information or inability to provide patient care because of system unavailability; Encompass Health's ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with its growth strategy; increases in Medicare audit activity, including increased use of sampling and extrapolation, resulting in additional unpaid reimbursement claims and an increase in the backlog of appealed claims denials; changes, delays in (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for Encompass Health's services by governmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels, including as part of national healthcare reform and deficit reduction and Encompass Health's ability to adapt operations to those changes, including in connection with the CMS inpatient rehabilitation review choice demonstration project; competitive pressures in the healthcare industry and Encompass Health's response thereto; Encompass Health's ability to obtain and retain favorable arrangements with third-party payors; Encompass Health's ability to control costs, particularly labor and employee benefit costs, including group medical expenses; adverse effects resulting from coverage determinations made by Medicare Administrative Contractors regarding its Medicare reimbursement claims and lengthening delays in Encompass Health's ability to recover improperly denied claims through the administrative appeals process on a timely basis, including as part of the review choice demonstration; Encompass Health's ability to adapt to changes in the healthcare delivery system, including value-based purchasing such as the transforming episode accountability model and involvement in coordinated care initiatives or programs that may arise with its referral sources; Encompass Health's ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages, which may be worsened by infectious disease outbreaks, and the impact on Encompass Health's labor expenses from potential union activity, staffing shortages, and competitive compensation practices; general conditions in the economy and capital markets, including any instability or uncertainty related to trade war, armed conflict or an act of terrorism, governmental impasse over approval of the United States federal budget, an increase in the debt ceiling, or an international sovereign debt crisis; the increase in
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Encompass Health Corporation and Subsidiaries
Forward-Looking Statements
the cost of, or the decrease in the availability of, construction materials and necessary supplies, including as a result of tariffs and import restrictions; the increase in the costs of defending and insuring against alleged professional liability claims, and Encompass Health's ability to predict the estimated costs related to such claims; and other factors which may be identified from time to time in Encompass Health's SEC filings and other public announcements, including Encompass Health's Form 10‑K for the year ended December 31, 2025 and Form 10-Q for the quarters ended March 31, 2026, June 30, 2026, and September 30, 2026, when filed.
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2026 Third Quarter Earnings Call October 29, 2026 Supplemental information
Encompass Health 2 The information contained in this presentation includes certain assumptions, estimates, projections and other forward- looking statements that reflect Encompass Health’s current outlook, views and plans with respect to future events, including the business outlook, guidance and growth targets, future reimbursement rates, labor availability and costs, the effect of tariffs on costs, legislative and regulatory developments, such as the effects of Medicaid and Medicare payment system changes, including RCD, TEAM, and state supplemental payment programs, strategy, capital expenditures, acquisition and other development activities, such as the de novo pipeline and bed additions, operational and quality of care initiatives, dividend strategies, leverage, repurchases of securities, outstanding shares of common stock, effective tax rates, financial performance, financial assumptions and considerations, balance sheet and cash flow plans, market barriers to entry, and addressable market size. These assumptions, estimates, projections and other forward-looking statements are based on what the Company believes, as of the date hereof, to be reasonable. Inevitably, there will be differences between such forward- looking statements and actual events or results, and those differences may be material. There can be no assurance any estimates, projections or forward-looking statements will be realized. All such assumptions, estimates, projections and forward-looking statements speak only as of the date hereof. Encompass Health undertakes no duty to publicly update or revise the information contained herein. You are cautioned not to place undue reliance on the assumptions, estimates, projections and other forward-looking statements in this presentation as they are based on current expectations and general assumptions and are subject to various risks, uncertainties and other factors, including those set forth in the earnings release attached as Exhibit 99.1 to the Company’s Form 8-K dated October 28, 2026 (the “Q3 Earnings Release Form 8-K”), the Form 10-K for the year ended December 31, 2025, the Forms 10-Q for the quarters ended March 31, 2026, June 30, 2026 and when filed, September 30, 2026, and in other documents Encompass Health previously filed with the SEC, many of which are beyond Encompass Health’s control, that may cause actual events or results to differ materially from the views, beliefs and estimates expressed herein. Note regarding presentation of non-GAAP financial measures The following 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. Schedules are attached that reconcile the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. The Q3 Earnings Release Form 8-K provides further explanation and disclosure regarding Encompass Health’s use of non-GAAP financial measures and should be read in conjunction with this supplemental information. Forward-looking statements
Encompass Health 3 Summary ................................................................................................................................................................................ 4 Revenue ................................................................................................................................................................................. 5 Adjusted EBITDA .................................................................................................................................................................. 6 Earnings per share ............................................................................................................................................................... 7-8 Adjusted free cash flow ..................................................................................................................................................... 9 2026 Guidance and guidance considerations ............................................................................................................... 10-11 Adjusted free cash flow assumptions ............................................................................................................................. 12 Uses of free cash flow ........................................................................................................................................................ 13 Appendix Map of locations ................................................................................................................................................................... 15 Growth targets, fundamentals and value drivers ........................................................................................................ 16 Multiple modalities for capacity expansion .................................................................................................................. 17 Development activity ......................................................................................................................................................... 18 RCD and TEAM ...................................................................................................................................................................... 19 Debt maturity profile and schedule ................................................................................................................................ 20-21 New-store/same-store growth .......................................................................................................................................... 22 Payment sources .................................................................................................................................................................. 23 Operational metrics ............................................................................................................................................................ 24 Share information ................................................................................................................................................................ 25 Reconciliations to GAAP ..................................................................................................................................................... 26-33 End notes ............................................................................................................................................................................... 34-35 Table of contents
Encompass Health 4 Summary Q3 9 Months ($ in millions, except per share data) 2026 2025 % △ 2026 2025 % △ Encompass Health Net operating revenue $ 1,609.5 $ 1,477.5 8.9 % $ 4,793.5 $ 4,390.6 9.2 % Adjusted EBITDA $ 346.6 $ 300.1 15.5 % $ 1,043.4 $ 932.3 11.9 % Adjusted EPS $ 1.52 $ 1.23 23.6 % $ 4.67 $ 3.99 17.0 % Adjusted free cash flow $ 263.4 $ 174.2 51.2 % $ 634.2 $ 582.5 8.9 % Reconciliations to GAAP provided on pages 26-33. Key takeaways uCapacity additions Ÿ Opened a 50-bed hospital in Norristown, PA; opened 4 hospitals totaling 189 beds YTD Ÿ Net pre-opening and ramp-up costs of $4.9 million in Q3; $15.8 million YTD Ÿ Added 31 beds to existing hospitals in Q3; added 85 beds to existing hospitals YTD uBalance sheet Ÿ Issued an additional $100 million of 5.875% Senior Notes due 2034 Ÿ Net leverage of 1.8x uShareholder distributions Ÿ Paid quarterly dividend of $0.19 per share in July Ÿ Repurchased 494,657 shares of common stock for $57.9 million in Q3; repurchased 1,906,499 shares for $203.7 million YTD Ÿ Declared $0.21 per share cash dividend in July (paid in October)
Encompass Health 5 Revenue Q3 Q3 % Change* ($ in millions) 2026 2025 Net operating revenue: Inpatient $ 1,569.1 $ 1,427.3 9.9% Other(1) 40.4 50.2 (19.5%) Total revenue $ 1,609.5 $ 1,477.5 8.9% (Actual Amounts) Discharges 69,605 65,839 5.7% New-store discharge growth 2.7% Same-store discharge growth 3.0% Net patient revenue per discharge $ 22,543 $ 21,679 4.0% Revenue reserves related to bad debt as a percent of revenue 2.7 % 1.9 % 80 bps *Except for Revenue reserves related to bad debt as a percent of revenue, which is increase (decrease). **Medicaid supplemental payments are accounted for in Other revenue. Refer to pages 34-35 for end notes. u Medicaid supplemental payments(2) decreased $10.0 million.** u Increase in bad debt as a percent of revenue primarily attributable to a billing and collecting disruption issue following a system conversion in Q2 2026
Encompass Health 6 Adjusted EBITDA(3) Q3 % of Revenue Q3 % of Revenue($ in millions) 2026 2025 Net operating revenue $ 1,609.5 $ 1,477.5 Operating expenses: Salaries and benefits (840.7) 52.2 % (784.8) 53.1 % Other operating expenses(a) (244.4) 15.2 % (229.2) 15.5 % Supplies (65.0) 4.0 % (64.6) 4.4 % Occupancy costs (15.0) 0.9 % (14.9) 1.0 % Hospital operating expenses (324.4) 20.2 % (308.7) 20.9 % General and administrative expenses(b) (45.6) 2.8 % (39.6) 2.7 % Other income(c) 2.9 2.6 Equity in nonconsolidated affiliates 0.1 1.2 Noncontrolling interests in continuing operations(d) (55.2) (48.1) Adjusted EBITDA $ 346.6 $ 300.1 ($ in millions) Q3 2026 Q3 2025 In arriving at Adjusted EBITDA, the following were excluded: (a) Loss on disposal or impairment of assets $ 0.8 $ 1.9 (b) Stock-based compensation and the change in fair market value of the non- qualified deferred comp plan $ 14.3 $ 16.5 (c) Change in fair market value of marketable securities and the non-qualified deferred comp plan $ 1.0 $ (3.3) (d) State regulatory change impact on noncontrolling interests(4) $ (1.5) $ — *Provider tax expenses are accounted for in Other operating expenses. Reconciliations to GAAP provided on pages 26-33. Refer to pages 34-35 for end notes. u Provider tax expenses(2) increased $1.5 million.*
Encompass Health 7 Earnings per share - as reported Q3 9 Months ($ in millions, except per share data) 2026 2025 2026 2025 Adjusted EBITDA $ 346.6 $ 300.1 $ 1,043.4 $ 932.3 Depreciation and amortization(4) (95.7) (82.4) (273.4) (241.5) Interest expense and amortization of debt discounts and fees (32.2) (30.8) (96.8) (93.0) Stock-based compensation (15.0) (14.3) (40.3) (38.1) Loss on disposal or impairment of assets (0.8) (1.9) (3.2) (2.4) 202.9 170.7 629.7 557.3 Items not indicative of ongoing operating performance: Loss on early extinguishment of debt — — (3.4) — State regulatory change impact on noncontrolling interests(4) 1.5 — 1.5 — Change in fair market value of marketable securities (0.3) 1.1 1.9 2.1 Gain on sale(5) — — 17.5 — Pre-tax income 204.1 171.8 647.2 559.4 Income tax expense (53.4) (44.9) (163.4) (137.5) Income from continuing operations* $ 150.7 $ 126.9 $ 483.8 $ 421.9 Diluted shares (see page 25) 99.7 102.3 100.2 102.3 Diluted earnings per share* $ 1.51 $ 1.24 $ 4.83 $ 4.13 * Earnings per share are determined using income from continuing operations attributable to Encompass Health. Reconciliations to GAAP provided on pages 26-33. Refer to pages 34-35 for end notes.
Encompass Health 8 Adjusted earnings per share(6) Refer to pages 34-35 for end notes. Q3 9 Months 2026 2025 2026 2025 Diluted earnings per share, as reported $ 1.51 $ 1.24 $ 4.83 $ 4.13 Adjustments, net of tax: State regulatory change impact(4) 0.01 — 0.01 — Income tax adjustments(7) — — (0.05) (0.12) Loss on early extinguishment of debt(8) — — 0.02 — Change in fair market value of marketable securities — (0.01) (0.01) (0.01) Gain on sale(5) — — (0.13) — Adjusted earnings per share* $ 1.52 $ 1.23 $ 4.67 $ 3.99 u Adjusted earnings per share removes from GAAP earnings per share the impact of items the Company believes are not indicative of its ongoing operating performance. * Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 29-33.
Encompass Health 9 $582.5 $111.1 $57.8 $(4.4) $(87.3) $(25.5) $634.2 Adjusted free cash flow 9 mos. 2025 Adjusted EBITDA Working capital and other Cash interest expense Cash tax payments, net of refunds Maintenance capital expenditures Adjusted free cash flow 9 mos. 2026 Adjusted free cash flow(9) Reconciliations to GAAP provided on pages 26-33. Refer to pages 34-35 for end notes. ($ in millions)
Encompass Health 10 2026 Guidance (as of October 28, 2026) Previous Guidance Updated Guidance ($ in millions, except per share data) Net Operating Revenue $6,410 to $6,490 $6,450 to $6,500 Adjusted EBITDA(3) $1,365 to $1,395 $1,395 to $1,415 Adjusted earnings per share from continuing operations attributable to Encompass Health(6) $6.02 to $6.25 $6.23 to $6.37 Reconciliations to GAAP provided on pages 26-33. Refer to pages 34-35 for end notes.
Encompass Health 11 2026 Guidance considerations (as of October 28, 2026) u Pricing Ÿ Medicare pricing increase of approximately 2.3% for Q4 Ÿ Managed Care pricing increase of 3.5% to 4.0% Ÿ Bad debt reserves of 2.0% to 2.5% of revenue for Q4 u Labor Ÿ SWB per FTE increase of 3.5% to 4.0% u Capacity additions Ÿ 8 new hospitals with a total of 389 beds Ÿ Net pre-opening and ramp-up costs of $20 million to $24 million (inclusive of costs associated with 2027 openings incurred in 2026) Ÿ 145 to 190 beds to existing hospitals u Corporate Ÿ Tax rate of approximately 26% Ÿ Diluted share count of approximately 100 million shares
Encompass Health 12 Adjusted free cash flow(9) assumptions (as of October 28, 2026) Certain cash flow items ($ in millions) 9 Months 2026 Actuals 2025 Actuals 2026 Assumptions Cash interest payments (net of amortization of debt discounts and fees) $90.2 $113.6 $115 to $125 Cash payments for income taxes, net of refunds(10) $176.5 $124.0 $200 to $220 Working capital and other $(23.5) $2.9 $10 to $40 Maintenance CAPEX $166.0 $209.5 $225 to $240 Adjusted free cash flow $634.2 $817.9 $770 to $865 Reconciliations to GAAP provided on pages 26-33. Refer to pages 34-35 for end notes. Increase in cash tax payments primarily due to higher income, additional bonus depreciation and taxes paid in 2026 related to an underpayment from 2025
Encompass Health 13 Uses of free cash flow (as of October 28, 2026) ($ in millions) 9 Months 2026 Actuals 2025 Actuals 2026 Assumptions Growth Capacity expansions $441.0 $526.4 $675 to $725 Replacement IRFs 10.2 0.5 20 to 30 $451.2 $526.9 $695 to $755 Debt reduction Reduction (increase) in total debt(11) ($108.3) $7.0 TBD Shareholder distributions Dividends on common stock $57.9 $71.1 ~ $79 Common stock repurchases $203.7 $158.0 TBD Refer to pages 34-35 for end notes. Ÿ Common stock repurchase authorization increased to $1 billion(12)
Appendix
Encompass Health 15 *De novos under development - previously announced de novo hospitals under development as of October 28, 2026. **IRFs under development as of October 28, 2026, include de novo and remote and satellite locations.(13) Refer to pages 34-35 for end notes. Encompass Health Largest owner and operator of rehabilitation hospitals Company profile as of 09/30/26 177 Rehabilitation hospitals “IRFs” 67 are joint ventures 17 IRFs under development** 39 States and Puerto Rico Inpatient Rehabilitation Hospitals Future Inpatient Rehabilitation Hospitals Future Small Format Inpatient Rehabilitation Hospitals Key statistics - trailing four quarters ~273,500 patient discharges ~$6.3 Billion in revenue ~44,000 employees
Encompass Health 16 u 2023 - 2027 Growth targets Ÿ 6 to 10 de novos per year Ÿ 80 to 120 bed additions per year Ÿ 6% to 8% discharge CAGR u Large, under penetrated, and growing inpatient rehabilitation market Ÿ Large addressable market indicated by low conversion rate of presumptively eligible inpatient rehabilitation patients Ÿ Favorable demographics driving increased demand for rehabilitation services Ÿ Unparalleled clinical expertise for treating inpatient rehabilitation conditions with consistent delivery of high-quality, cost-effective care Ÿ Capacity addition strategy delivers attractive financial returns Ÿ Cash flow and capital availability to fund capacity additions Ÿ Fragmented sector presents unit acquisition and joint venture opportunities Ÿ Significant barriers to entry and economies of scale Ÿ Resilient business model with focus on non-discretionary conditions occurring predominantly in an aging population u Shareholder distributions Ÿ Cash dividend (currently $0.21 per share per quarter) Ÿ $1 billion common stock repurchase authorization(12) Refer to pages 34-35 for end notes. Growth targets, fundamentals and value drivers
Encompass Health 17 Multiple modalities for capacity expansion De novos • 300-500 beds per year Small format hospitals • 25-100 beds per year Ÿ 6-10 hospitals per year Ÿ Freestanding hospitals (inclusive of remote and satellite locations(13)) with greater than 30 beds Ÿ 4-8 acres of real estate Ÿ Two primary prototypes - one and two story - to best fit available real estate Ÿ Typically can accommodate future expansion Ÿ Addresses high occupancy levels at existing hospitals Ÿ Project size can vary depending on market demand, available land, CON requirements, etc. Ÿ Leverages existing market demand, established referral sources and payor contracts, and elements of fixed infrastructure and management team Ÿ 1-4 hospitals per year Ÿ First opening to occur in 2027 Ÿ Freestanding hospital with 20-30 beds Ÿ Facilitates a hub and spoke strategy in large and growing markets Ÿ 2-3 acres of real estate within 35 miles of an existing hospital to operate as a remote location Ÿ Leverages management of existing Encompass Health hospital Ÿ Non-expandable Refer to pages 34-35 for end notes. Bed additions • 150-200 beds per year
Encompass Health 18 Inpatient Rehabilitation Hospitals opened or under development Joint venture Expected open date Number of beds 2026 2027 De novos Irmo, SC 49 — Concordville, PA 50 — Loganville, GA ü 40 — Norristown, PA 50 — Bangor, ME 50 — San Antonio, TX 50 — Avondale, AZ 4Q26 60 — Wesley Chapel, FL — 50 Apollo Beach, FL — 50 St. George, UT — 50 Fishers, IN — 50 Haslet, TX — 50 Flowood, MS — 50 Cookeville, TN ü — 40 Remote and satellite(13) Cleveland, TN 4Q26 40 — Conroe, TX (SFH) — 24 Other bed additions 145 to 190 150 to 200 Total capacity expansion* 534 to 579 514 to 564 Development activity 3Q 2026 Development activity highlights uDe novos opened # of beds JV Ÿ Norristown, PA 50 Beds added to existing hospitals 31 Remote and satellite announcement Ÿ Conroe, TX (SFH) 24 IRF development projects announced and underway** 17 SFH = Small Format Hospital *All dates are tentative and subject to change **IRFs under development as of October 28, 2026, include de novo and remote and satellite locations.(13) Refer to pages 34-35 for end notes.
Encompass Health 19 RCD and TEAM Review Choice Demonstration (“RCD”) RCD is a five-year demonstration project initiated by the Centers for Medicare & Medicaid Services (“CMS”) providing either pre-claim or post-payment claim review to demonstrate compliance with Medicare IRF rules. This demonstration is only applicable to Medicare fee-for-service claims. Ÿ In September 2026, CMS announced the expansion of RCD to all IRFs billing under MAC Jurisdiction JJ, effective January 1, 2027. 75 EHC hospitals are subject to this expansion. Ÿ Beginning January 1, 2027, EHC will have 108 IRFs subject to RCD. Ÿ During the initial six-month review period (Cycle 1), providers are subject to either 100% pre-claim review or post-payment review. IRFs that achieve a Cycle 1 affirmation rate of 80% or greater may elect from three review options for Cycle 2: ü 100% pre-claim review ü Selective post-payment review ü Spot check pre-payment review of 5% of claims Transforming Episode Accountability Model (“TEAM”) A CMS 30-day bundled payment initiative for certain acute care hospitals (“ACHs”) covering five surgical episode groups. Potential impact factors: Ÿ Medicare FFS population only for 189 of 930 CBSAs (700+ ACHs) Ÿ 2% of EHC discharges were within TEAM geographic, episode and payor parameters in 2025. Ÿ 5-year period from Jan. 2026 to Dec. 2030 Ÿ Surgical episode groups included: Lower extremity joint replacement (LEJR); surgical hip and femur fracture treatment (SHFFT); coronary artery bypass graft (CABG); spinal fusion; major bowel procedure Ÿ 89 EHC hospitals are in TEAM markets; 41 are joint ventures Ÿ ACHs may not restrict Medicare beneficiaries’ choice of post- acute provider. Ÿ 98% of the TEAM episodes were within 51 EHC markets in 2025. Ÿ Medicare beneficiaries eligible for Medicare on the basis of having end stage renal disease are excluded from TEAM. Ÿ Quality of outcomes impacts ACHs’ bonus amounts.
Encompass Health 20 2026 - 2027 2028 2029 2030 2031 2031 2032 2033 2034 * This chart does not include ~$275 of finance lease obligations or ~$80 of other notes payable. See the debt schedule on page 21. Debt maturity profile - face value ($ in millions) Revolver capacity $800 Senior Notes 4.75% $400 Senior Notes 4.5% As of September 30, 2026* $871 Available $75 Drawn + $54 reserved for LCs Callable at par $400 Senior Notes 4.625% Callable at 101.583 2031 Callable at 102.313 Callable beginning June 2029 $600 Senior Notes 5.875% u Issued an additional $100 million of 5.875% Senior Notes due 2034 in August 2026
Encompass Health 21 Debt schedule Change in September 30, December 31, Debt vs. ($ in millions) 2026 2025 YE 2025 Advances under $1 billion revolving credit facility $ 75.0 $ 130.0 $ (55.0) Bonds Payable: 4.50% Senior Notes due 2028 397.4 792.0 (394.6) 4.75% Senior Notes due 2030 789.2 787.0 2.2 4.625% Senior Notes due 2031 394.4 393.6 0.8 5.875% Senior Notes due 2034 588.2 — 588.2 Other notes payable 80.0 93.6 (13.6) Finance lease obligations 274.9 294.6 (19.7) Long-term debt $ 2,599.1 $ 2,490.8 $ 108.3 Debt to Adjusted EBITDA 1.9x 2.0x Leverage net of cash and cash equivalents 1.8x 1.9x Reconciliations to GAAP provided on pages 26-33. The leverage ratio for 3Q26 stated in terms of the most comparable GAAP measurement would be Debt to Net cash provided by operating activities: 2.0x The leverage ratio for 2025 stated in terms of the most comparable GAAP measurement would be Debt to Net cash provided by operating activities: 2.1x
Encompass Health 22 0.0% 2.5% 5.0% 7.5% 10.0% New-store/same-store growth Discharges Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Q4 2025 Q1 2026 Q2 2026 Q3 2026 New store 3.0% 3.3% 1.9% 2.0% 2.0% 1.9% 2.5% 2.1% 2.1% 2.7% 2.8% 2.7% Same store(14) 5.3% 6.7% 4.8% 6.8% 5.8% 4.4% 4.7% 2.9% 3.2% 1.6% 2.8% 3.0% Total by quarter 8.3% 10.0% 6.7% 8.8% 7.8% 6.3% 7.2% 5.0% 5.3% 4.3% 5.6% 5.7% Total by year 8.7% 8.3% 6.0% Same store by year(14) 4.8% 5.6% 3.4% Johnston, RI (50 beds) Fort Mill, SC (39 beds) Athens, GA (40 beds) Irmo, SC (49 beds) Prosper, TX (40 beds) Fitchburg, WI (56 beds) Kissimmee, FL (50 beds) Atlanta, GA (40 beds) Louisville, KY (40 beds) Refer to pages 34-35 for end notes. Houston, TX (61 beds) Fort Myers, FL (60 beds) Daytona Beach, FL (50 beds) Danbury, CT (40 beds) St. Petersburg, FL (50 beds) Amarillo, TX (50 beds) Lake Worth, FL (50 beds) Concordville, PA (50 beds) Loganville, GA (40 beds) Norristown, PA (50 beds)
Encompass Health 23 Payment sources (percent of revenues) Q3 9 Months Full Year 2026 2025 2026 2025 2025 Medicare 66.3 % 64.1 % 65.7 % 65.2 % 65.4 % Medicare Advantage 15.7 % 16.6 % 16.1 % 16.7 % 16.4 % Managed care 10.8 % 11.1 % 10.7 % 10.8 % 10.7 % Medicaid 3.1 % 3.4 % 3.0 % 3.1 % 3.1 % Other third-party payors 0.7 % 0.7 % 0.7 % 0.6 % 0.7 % Workers’ compensation 0.5 % 0.6 % 0.5 % 0.5 % 0.5 % Patients 0.5 % 0.3 % 0.5 % 0.3 % 0.3 % Other income 2.4 % 3.2 % 2.8 % 2.8 % 2.9 % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Encompass Health 24 Operational metrics Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2026 2026 2026 2025 2025 2025 2025 2025 Net operating revenues: (In Millions) Inpatient $ 1,569.1 $ 1,551.6 $ 1,533.7 $ 1,497.6 $ 1,427.3 $ 1,413.7 $ 1,417.7 $ 5,756.3 Other 40.4 45.8 52.9 47.0 50.2 44.0 37.7 178.9 Net operating revenues $ 1,609.5 $ 1,597.4 $ 1,586.6 $ 1,544.6 $ 1,477.5 $ 1,457.7 $ 1,455.4 $ 5,935.2 (Actual Amounts) Discharges(15) 69,605 68,895 67,763 67,238 65,839 65,237 64,985 263,299 Net patient revenue per discharge $ 22,543 $ 22,521 $ 22,633 $ 22,273 $ 21,679 $ 21,670 $ 21,816 $ 21,862 Outpatient visits 18,789 21,742 21,935 22,325 22,361 21,597 19,955 86,238 Average length of stay 11.9 11.9 12.1 12.0 12.1 12.0 12.2 12.1 Occupancy % 77.0 % 77.4 % 78.7 % 76.3 % 76.2 % 76.6 % 78.8 % 75.9 % # of licensed beds 11,722 11,641 11,541 11,465 11,352 11,233 11,159 11,465 Occupied beds 9,026 9,010 9,083 8,748 8,650 8,604 8,793 8,702 Full-time equivalents (FTEs) - internal 30,226 29,800 29,599 29,236 29,198 28,784 28,572 28,948 Contract labor FTEs 272 333 345 313 354 379 375 355 Total FTEs(16) 30,498 30,133 29,944 29,549 29,552 29,163 28,947 29,303 EPOB(17) 3.38 3.34 3.30 3.38 3.42 3.39 3.29 3.37 Refer to pages 34-35 for end notes.
Encompass Health 25 Share information Weighted Average for the Period Q3 9 Months Full Year (in millions) 2026 2025 2026 2025 2025 2024 2023 Basic shares outstanding 98.3 100.5 98.8 100.5 100.5 99.9 99.5 Restricted stock awards, dilutive stock options, and restricted stock units 1.4 1.8 1.4 1.8 1.7 2.3 1.8 Diluted shares outstanding 99.7 102.3 100.2 102.3 102.2 102.2 101.3 End of Period Q3 9 Months Full Year (in millions) 2026 2025 2026 2025 2025 2024 2023 Basic shares outstanding 98.3 100.7 98.3 100.7 100.0 100.8 100.3
Encompass Health 26 Net cash provided by operating activities reconciled to Adjusted EBITDA(3) Q3 9 Months Full Year ($ in millions) 2026 2025 2026 2025 2025 Net cash provided by operating activities $ 362.0 $ 270.8 $ 957.7 $ 829.6 $ 1,175.6 Interest expense and amortization of debt discounts and fees 32.2 30.8 96.8 93.0 123.2 (Loss) gain on investments, excluding impairments (0.8) 3.0 21.8 6.2 5.9 Equity in net income of nonconsolidated affiliates 0.1 1.2 0.6 3.5 4.3 Net income attributable to noncontrolling interests in continuing operations (53.7) (48.1) (160.9) (135.9) (192.9) Amortization of debt-related items (2.1) (2.4) (6.7) (7.2) (9.6) Distributions from nonconsolidated affiliates (0.1) — (0.3) (1.4) (4.1) Current portion of income tax expense 57.2 47.0 161.8 134.3 170.6 Change in assets and liabilities (48.1) (1.8) 12.8 9.6 (4.3) Cash used in (provided by) operating activities of discontinued operations 1.1 0.6 (19.2) 2.5 1.4 State regulatory change impact on noncontrolling interests(4) (1.5) — (1.5) — — Change in fair market value of marketable securities 0.3 (1.1) (1.9) (2.1) (2.5) Gain on sale(5) — — (17.5) — — Other — 0.1 (0.1) 0.2 0.3 Adjusted EBITDA $ 346.6 $ 300.1 $ 1,043.4 $ 932.3 $ 1,267.9 Refer to pages 34-35 for end notes.
Encompass Health 27 Reconciliation of net income to Adjusted EBITDA(3) Q3 9 Months Full Year ($ in millions) 2026 2025 2026 2025 2025 Net income $ 203.6 $ 174.6 $ 659.2 $ 556.0 $ 759.1 Loss (income) from discontinued operations, net of tax, attributable to Encompass Health 0.8 0.4 (14.5) 1.8 1.0 Net income attributable to noncontrolling interests included in continuing operations (53.7) (48.1) (160.9) (135.9) (192.9) Provision for income tax expense 53.4 44.9 163.4 137.5 192.9 Interest expense and amortization of debt discounts and fees 32.2 30.8 96.8 93.0 123.2 Depreciation and amortization 95.7 82.4 273.4 241.5 327.9 Loss on early extinguishment of debt — — 3.4 — — Loss on disposal or impairment of assets 0.8 1.9 3.2 2.4 2.7 Stock-based compensation 15.0 14.3 40.3 38.1 56.5 State regulatory change impact on noncontrolling interests(4) (1.5) — (1.5) — — Change in fair market value of marketable securities 0.3 (1.1) (1.9) (2.1) (2.5) Gain on sale(5) — — (17.5) — — Adjusted EBITDA $ 346.6 $ 300.1 $ 1,043.4 $ 932.3 $ 1,267.9 Refer to pages 34-35 for end notes.
Encompass Health 28 Reconciliation of net cash provided by operating activities to adjusted free cash flow(9) Q3 9 Months Full Year ($ in millions) 2026 2025 2026 2025 2025 Net cash provided by operating activities $ 362.0 $ 270.8 $ 957.7 $ 829.6 $ 1,175.6 Impact of discontinued operations 1.1 0.6 (19.2) 2.5 1.4 Net cash provided by operating activities of continuing operations 363.1 271.4 938.5 832.1 1,177.0 Capital expenditures for maintenance (56.0) (61.4) (166.0) (140.5) (209.5) Distributions paid to noncontrolling interests of consolidated affiliates (43.7) (36.1) (141.8) (109.4) (152.1) Items not indicative of ongoing operating performance: Transaction costs and related liabilities — 0.3 3.5 0.3 2.5 Adjusted free cash flow $ 263.4 $ 174.2 $ 634.2 $ 582.5 $ 817.9 Cash dividends on common stock $ 18.7 $ 17.0 $ 57.9 $ 52.1 $ 71.1 Refer to pages 34-35 for end notes.
Encompass Health 29 For the Three Months Ended September 30, 2026 Adjustments As Reported State Regulatory Change Impact Change in Fair Market Value of Marketable Securities As Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 346.6 $ — $ — $ 346.6 Depreciation and amortization(4) (95.7) 2.9 — (92.8) Interest expense and amortization of debt discounts and fees (32.2) — — (32.2) Stock-based compensation (15.0) — — (15.0) Loss on disposal or impairment of assets (0.8) — — (0.8) State regulatory change impact on noncontrolling interests(4) 1.5 (1.5) — — Change in fair market value of marketable securities (0.3) — 0.3 — Income from continuing operations before income tax expense 204.1 1.4 0.3 205.8 Provision for income tax expense (53.4) (0.4) (0.1) (53.9) Income from continuing operations attributable to Encompass Health $ 150.7 $ 1.0 $ 0.2 $ 151.9 Diluted earnings per share from continuing operations* $ 1.51 $ 0.01 $ — $ 1.52 Diluted shares used in calculation 99.7 * Adjusted EPS may not sum across due to rounding. Refer to pages 34-35 for end notes. Adjusted EPS(6) - Q3 2026
Encompass Health 30 For the Three Months Ended September 30, 2025 Adjustments As Reported Income Tax Adjustments Change in Fair Market Value of Marketable Securities As Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 300.1 $ — $ — $ 300.1 Depreciation and amortization (82.4) — — (82.4) Interest expense and amortization of debt discounts and fees (30.8) — — (30.8) Stock-based compensation (14.3) — — (14.3) Loss on disposal or impairment of assets (1.9) — — (1.9) Change in fair market value of marketable securities 1.1 — (1.1) — Income from continuing operations before income tax expense 171.8 — (1.1) 170.7 Provision for income tax expense (44.9) (0.2) 0.3 (44.8) Income from continuing operations attributable to Encompass Health $ 126.9 $ (0.2) $ (0.8) $ 125.9 Diluted earnings per share from continuing operations* $ 1.24 $ — $ (0.01) $ 1.23 Diluted shares used in calculation 102.3 Adjusted EPS(6) - Q3 2025 * Adjusted EPS may not sum across due to rounding. Refer to pages 34-35 for end notes.
Encompass Health 31 For the Nine Months Ended September 30, 2026 Adjustments As Reported State Regulatory Change Impact Loss on Early Exting. of Debt Income Tax Adjustments(7) Change in Fair Market Value of Marketable Securities Gain on Sale(5) As Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 1,043.4 $ — $ — $ — $ — $ — $ 1,043.4 Depreciation and amortization(4) (273.4) 2.9 — — — — (270.5) Interest expense and amortization of debt discounts and fees (96.8) — — — — — (96.8) Stock-based compensation (40.3) — — — — — (40.3) Loss on disposal or impairment of assets (3.2) — — — — — (3.2) Loss on early extinguishment of debt(8) (3.4) — 3.4 — — — — State regulatory change impact on noncontrolling interests(4) 1.5 (1.5) — — — — — Change in fair market value of marketable securities 1.9 — — — (1.9) — — Gain on sale(5) 17.5 — — — — (17.5) — Income from continuing operations before income tax expense 647.2 1.4 3.4 — (1.9) (17.5) 632.6 Provision for income tax expense (163.4) (0.4) (0.9) (5.2) 0.5 4.5 (164.9) Income from continuing operations attributable to Encompass Health $ 483.8 $ 1.0 $ 2.5 $ (5.2) $ (1.4) $ (13.0) $ 467.7 Diluted earnings per share from continuing operations* $ 4.83 $ 0.01 $ 0.02 $ (0.05) $ (0.01) $ (0.13) $ 4.67 Diluted shares used in calculation 100.2 * Adjusted EPS may not sum across due to rounding. Refer to pages 34-35 for end notes. Adjusted EPS(6) - YTD Q3 2026
Encompass Health 32 For the Nine Months Ended September 30, 2025 Adjustments As Reported Income Tax Adjustments(7) Change in Fair Market Value of Marketable Securities As Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 932.3 $ — $ — $ 932.3 Depreciation and amortization (241.5) — — (241.5) Interest expense and amortization of debt discounts and fees (93.0) — — (93.0) Stock-based compensation (38.1) — — (38.1) Loss on disposal or impairment of assets (2.4) — — (2.4) Change in fair market value of marketable securities 2.1 — (2.1) — Income from continuing operations before income tax expense 559.4 — (2.1) 557.3 Provision for income tax expense (137.5) (11.8) 0.6 (148.7) Income from continuing operations attributable to Encompass Health $ 421.9 $ (11.8) $ (1.5) $ 408.6 Diluted earnings per share from continuing operations* $ 4.13 $ (0.12) $ (0.01) $ 3.99 Diluted shares used in calculation 102.3 Adjusted EPS(6) - YTD Q3 2025 * Adjusted EPS may not sum across due to rounding. Refer to pages 34-35 for end notes.
Encompass Health 33 For the Year Ended December 31, 2025 Adjustments As Reported Income Tax Adjustments(7) Change in Fair Market Value of Marketable Securities As Adjusted ($ in millions, except per share amounts) Adjusted EBITDA $ 1,267.9 $ — $ — $ 1,267.9 Depreciation and amortization (327.9) — — (327.9) Interest expense and amortization of debt discounts and fees (123.2) — — (123.2) Stock-based compensation (56.5) — — (56.5) Loss on disposal or impairment of assets (2.7) — — (2.7) Change in fair market value of marketable securities 2.5 — (2.5) — Income from continuing operations before income tax expense 760.1 — (2.5) 757.6 Provision for income tax expense (192.9) (7.9) 0.6 (200.2) Income from continuing operations attributable to Encompass Health $ 567.2 $ (7.9) $ (1.9) $ 557.4 Diluted earnings per share from continuing operations* $ 5.55 $ (0.08) $ (0.02) $ 5.45 Diluted shares used in calculation 102.2 Adjusted EPS(6) - 2025 * Adjusted EPS may not sum across due to rounding. Refer to pages 34-35 for end notes.
Encompass Health 34 End notes Reconciliations to GAAP provided on pages 26-33. (1) Historically, we used the term “Outpatient and other” revenue to report revenue related to our outpatient business and other revenue sources. As we have decreased our outpatient business, the associated revenues do not represent the primary source of “Outpatient and other” revenue. As of December 31, 2025, this category of revenue is referred to as “Other” revenue. (2) Historically, we have used the term “provider tax revenues” to refer to “Medicaid supplemental payments,” both of which represent amounts received in connection with state Medicaid programs that are not included in the specific Medicaid claim reimbursements we receive. These amounts include state directed and supplemental payment programs associated with Medicaid. Provider taxes are amounts paid by us to fund, in part, state Medicaid programs. We have used the term “net provider tax revenues” to represent the difference between provider taxes paid and the Medicaid supplemental payments received. (3) Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a non-GAAP measure. Management and some members of the investment community utilize Adjusted EBITDA as a financial measure and the leverage ratio as a liquidity measure on an ongoing basis. These measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should be aware that in the future the Company may incur expenses similar to the adjustments set forth. (4) In July of 2026, the governor of North Carolina signed into law S.257, 2026 Appropriations Act, which repealed the requirement of certain healthcare providers to obtain and/or maintain a certificate of need (“CON”). As a result of this repeal, in Q3 2026 we accelerated amortization of our CON asset in North Carolina, increasing depreciation and amortization expense by approximately $2.9 million and reducing noncontrolling interest in continuing operations by approximately $1.5 million (related to our joint venture partner’s share of income at one impacted location). The impact of these adjustments have been excluded from the calculation of Adjusted EBITDA and adjusted earnings per share in the third quarter of 2026 given the non-recurring natures of the CON repeal is not indicative of ongoing operating performance. (5) On December 31, 2025, we entered into an agreement to sell our 50% membership interest in Gamma Knife Center at Barnes-Jewish Hospital, LLC (“Gamma Knife”) to our existing joint venture partner, Barnes-Jewish Hospital, LLC, for $17.9 million effective January 1, 2026. We accounted for Gamma Knife as an equity method investment. As a result of this transaction, we recorded a $17.5 million pre-tax gain during the nine months ended September 30, 2026. (6) The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”), which is a non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to prior periods given that it excludes the impact of government, class action, and related settlements, professional fees - accounting, tax, and legal, mark-to-market adjustments for stock appreciation rights, gains or losses related to hedging and equity instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments, settlements of income tax claims, windfall tax benefits and executive compensation disallowance), items related to corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operating performance. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company's ongoing operating performance. Accordingly, they can complicate comparisons of the Company's results of operations across periods and comparisons of the Company's results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies. (7) Income tax adjustments primarily relate to windfall tax benefits and executive compensation disallowance.
Encompass Health 35 End notes (continued) (8) In the second quarter of 2026, the Company redeemed $400 million of its 4.50% Senior Notes due 2028. The redemption was completed at 100% of par using cash on hand. As a result of the redemption, the Company recorded a $3.2 million loss on early extinguishment of debt in the second quarter of 2026. (9) The definition of adjusted free cash flow, which is a non-GAAP measure, is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, distributions to noncontrolling interests, and certain items deemed to be non-indicative of ongoing operating performance. Common stock dividends are not included in the calculation of adjusted free cash flow. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. (10) The increase in our assumption for cash taxes compared to our prior assumption (provided February 5, 2026) is primarily driven by (i) gains recognized on the sale of our 50% membership interest in the Gamma Knife Center at Barnes-Jewish Hospital, LLC to our existing joint venture partner for $17.9 million, and (ii) the recovery of approximately $22 million of attorneys’ fees and other expenses in Enhabit, Inc. et al. v. Nautic Partners IX, L.P., et al., C.A. No. 2022-0837-LWW (Del. Ch.). The cash associated with these gains is not included in free cash flow. (11) Cash provided by net debt borrowings were $95.7 million during the nine months ended September 30, 2026. Cash used for net debt redemptions were $29.0 million during the twelve months ended December 31, 2025. (12) On October 28, 2013, the Company announced its board of directors authorized the repurchase of up to $200 million of its common stock, which has been amended from time to time. On July 24, 2024, the Company’s board increased the aggregate common stock repurchase authorization to $500 million. On July 23, 2026, the Company’s board approved an increase in the aggregate common stock repurchase authorization to $1.0 billion. As of September 30, 2026, approximately $955 million remained under this authorization. (13) Our inpatient rehabilitation hospitals (“IRFs”) may operate one or more satellite and/or remote locations. Satellite and remote locations are located within 35 miles to one of our existing IRFs but do not have a separate Medicare provider number. As such, they are considered a bed addition, are included in same store results from the day of opening, and are not included in our count of total open hospitals. As of September 30, 2026, we operated 9 remote locations. (14) Same-store comparisons are calculated based on hospitals open throughout both the full current periods and prior periods presented. These comparisons include the financial results of market consolidation transactions and capacity expansions (including the addition of satellite and remote hospitals) in existing markets. (15) Represents discharges from 177 consolidated hospitals in Q3 2026; 176 consolidated hospitals in Q2 2026; 174 consolidated hospitals in Q1 2026; 173 consolidated hospitals in Q4 2025; 170 consolidated hospitals in Q3 2025; 168 consolidated hospitals in Q2 2025 and 167 consolidated hospitals in Q1 2025. (16) Total full-time equivalents included in the table represent Encompass Health employees who participate in or support the operations of our hospitals and include full-time equivalents related to contract labor. (17) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of total full-time equivalents, including full-time equivalents from the utilization of contract labor, by the number of occupied beds during each period. Reconciliations to GAAP provided on pages 26-33.