• Consolidated Net Revenue: $253.6 million for Q3, down $4.7 million or 1.8% year over year.
• Consolidated Adjusted EBITDA: $24.5 million, up $1.3 million or 5.6% year over year.
• Home Health Revenue: Decreased by $9.9 million or 4.7% year over year.
• Home Health Adjusted EBITDA: Decreased by $5.3 million or 12.7% year over year.
• Hospice Revenue: Increased by $5.2 million or 11% year over year.
• Hospice Adjusted EBITDA: Increased by $2.3 million or 29.9% year over year.
• Average Daily Census (Hospice): Increased by 6.9% year over year in Q3.
• Non-Medicare Admissions Growth: 20.1% year over year.
• Total Admissions Growth: 5.6% year over year with 5.5% growth on a same-store basis.
• Leverage Ratio: Decreased to 4.8 times at the end of Q3.
• Free Cash Flow: Approximately $59 million year-to-date through September, with a conversion rate of 79%.
• Guidance for Full Year 2024: Net service revenue of $1,031 million to $1,046 million; Adjusted EBITDA of $98 million to $102 million.

• Warning! GuruFocus has detected 2 Warning Sign with EHAB.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Enhabit Inc (NYSE:EHAB) demonstrated a fourth consecutive quarter of volume growth, particularly in the hospice segment, with a 6.9% year-over-year increase in average daily census.
• The company successfully transitioned all branches to centralized admission departments, improving referral conversion rates from 74.2% to 77.4%.
• Non-Medicare admissions grew by 20.1%, contributing to a total admissions growth of 5.6% year over year.
• Enhabit Inc (NYSE:EHAB) reported a 5.6% year-over-year increase in consolidated adjusted EBITDA, reaching $24.5 million.
• The company is actively managing its debt, with a leverage ratio decrease for the third consecutive quarter and a voluntary $5 million payment to reduce the revolving credit facility balance.

Negative Points

• Consolidated net revenue decreased by $4.7 million or 1.8% year over year, primarily due to a decline in home health recertifications.
• The home health segment experienced a $9.9 million or 4.7% decrease in revenue year over year, driven by declining recertifications.
• Enhabit Inc (NYSE:EHAB) is facing ongoing challenges with Medicare fee-for-service admissions, which declined 2.5% from quarter two to quarter three.
• The company plans to consolidate or close approximately 8 to 10 underperforming branches by early 2025 due to underperformance.
• Hurricanes Helene and Milton negatively impacted admissions, resulting in an estimated $2 million negative impact on fourth-quarter revenue and adjusted EBITDA.

Q & A Highlights

Q: Can you provide an update on the negotiations with UnitedHealthcare and the strategy for shifting capacity to payor innovation contracts? A: Barbara Jacobsmeyer, President and CEO, stated that while no agreement has been signed with UnitedHealthcare, they are close to aligning terms. The company is operating as if the agreement will not happen, focusing on shifting capacity to payor innovation contracts. Despite a decline in United's census, overall census has grown, indicating successful capacity shifts.

Q: With the mid-single-digit home health volume outlook and other factors, should we expect EBITDA growth in 2025? A: Barbara Jacobsmeyer confirmed that with positive pricing in hospice and home health, along with G&A savings and growth strategies, Enhabit is confident in achieving EBITDA growth in 2025. The main headwind remains competitive merit increases in labor markets.

Q: Can you provide details on the potential branch closures and their impact on revenue? A: Barbara Jacobsmeyer mentioned that they are evaluating the closure or consolidation of 8 to 10 branches. The specifics, including potential revenue impact and consolidation details, will be provided in the fourth-quarter call.

Q: What strategies are driving the positive momentum in the hospice segment? A: Barbara Jacobsmeyer highlighted the increase in business development team members, use of Trella data for strategic focus, and the implementation of centralized admission departments for quicker referral responses as key strategies driving hospice growth.

Q: If an agreement with UnitedHealthcare is reached, can Enhabit quickly regain lost volume? A: Barbara Jacobsmeyer indicated that regaining volume would be a slower process. If an agreement is reached, they would resume accepting referrals, which would benefit both UnitedHealthcare and Enhabit's referral sources.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.