ENCOMPASS HEALTH CORPORATION 2024 First Quarter
Earnings Call
April 25, 2024 Supplemental information
Forward-looking statements
The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect Encompass Health's current outlook, views and plans with respect to future events, including the business outlook, guidance and growth targets, value drivers, labor availability and costs, legislative and regulatory developments, strategy, capital expenditures, acquisition and other development activities, such as the de novo pipeline, costs, growth and timelines, operational initiatives, dividend strategies, leverage, repurchases of securities, effective tax rates, financial performance, financial assumptions and considerations, balance sheet and cash flow plans, market share capture, and addressable market size. These estimates, projections and other forward-looking information are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual events or results, and those differences may be material.
There can be no assurance any estimates, projections or forward-looking information will be realized.
All such estimates, projections and forward-looking information 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 estimates, projections and other forward-looking information 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 April 24, 2024 (the "Q1 Earnings Release Form 8-K"), the Form 10-K for the year ended December 31, 2023, the Form 10-Q for the quarter ended March 31, 2024, when filed, 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 Q1 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.
Encompass Health | 2 |
Table of contents | |
Q1 2024 Financial summary | 4 |
Key takeaways | 5 |
Revenue | 6 |
Adjusted EBITDA | 7 |
Earnings per share | 8-9 |
Adjusted free cash flow | 10 |
2024 Guidance and guidance considerations | 11-12 |
Adjusted free cash flow assumptions | 13 |
Uses of free cash flow | 14 |
Appendix | |
Map of locations | 16 |
Growth targets, fundamentals and value drivers | 17 |
De novo activity | 18 |
Debt maturity profile and schedule | 19-20 |
New-store/same-storegrowth | 21 |
Payment sources | 22 |
Operational metrics | 23 |
Share information | 24 |
Reconciliations to GAAP | 25-30 |
End notes | 31-32 |
Encompass Health | 3 |
Q1 2024 Financial summary
Q1 | |||||
($ in millions, except per share data) | 2024 | 2023 | % △ | ||
Encompass Health | |||||
Net operating revenue | $ | 1,316.0 | $ | 1,160.4 | 13.4 % |
Adjusted EBITDA | $ | 273.0 | $ | 229.0 | 19.2 % |
Adjusted EPS | $ | 1.12 | $ | 0.88 | 27.3 % |
Adjusted free cash flow | $ | 167.6 | $ | 158.7 | 5.6 % |
Encompass Health | Reconciliations to GAAP provided on pages 25-30. | 4 |
Q1 2024 Key takeaways
- Revenue
-
Net operating revenue growth of 13.4%
ü Discharge growth of 10.0% (6.7% same store)
-
Net operating revenue growth of 13.4%
- Adjusted EBITDA
- Adjusted EBITDA growth of 19.2%
- Balance sheet
- Net leverage of 2.5x
- Capacity additions
- Added 51 beds to existing hospitals
- Shareholder distributions
- Paid a $0.15 per share quarterly cash dividend in January 2024
- Declared a $0.15 per share quarterly cash dividend in February 2024 (paid in April 2024)
Encompass Health | Reconciliations to GAAP provided on pages 25-30. | 5 |
Revenue
Q1 | Q1 | % Change* | ||||||
($ in millions) | 2024 | 2023 | ||||||
Net operating revenue: | ||||||||
Inpatient | $ | 1,282.7 | $ | 1,134.2 | 13.1% | |||
Outpatient and other | 33.3 | 26.2 | 27.1% | |||||
Total revenue | $ | 1,316.0 | $ | 1,160.4 | 13.4% | |||
(Actual Amounts) | ||||||||
Discharges | 61,111 | 55,557 | 10.0% | |||||
New-store discharge growth | 3.3% | |||||||
Same-store discharge growth | 6.7% | |||||||
Net patient revenue per discharge | $ | 20,990 | $ | 20,415 | 2.8% | |||
Revenue reserves related to bad debt as a percent | ||||||||
of revenue | 2.2 % | 2.4 % | (20) bps |
u
Outpatient and other revenue includes a $6.9 million increase in provider tax revenues (primarily based on payments related to prior periods).
Encompass Health | *Except for Revenue reserves related to bad debt as a percent of revenue, which is increase (decrease) | 6 |
Refer to pages 31-32 for end notes. | ||
Adjusted EBITDA(1)
Q1 | % of | Q1 | % of | |||||
2024 | 2023 | |||||||
($ in millions) | Revenue | Revenue | ||||||
Net operating revenue | $1,316.0 | $ | 1,160.4 | |||||
Operating expenses: | ||||||||
Salaries and benefits | (711.6) | 54.1 | % | (629.0) | 54.2 | % | ||
Other operating expenses(a) | (190.2) | 14.5 | % | (177.2) | 15.3 | % | ||
Supplies | (58.5) | 4.4 | % | (53.8) | 4.6 | % | ||
Occupancy costs | (14.0) | 1.1 | % | (13.8) | 1.2 | % | ||
Hospital operating expenses | (262.7) | 20.0 | % | (244.8) | 21.1 | % | ||
General and administrative expenses(b) | (38.9) | 3.0 | % | (34.2) | 2.9 | % | ||
Other income(c) | 3.1 | 1.8 | ||||||
Equity in nonconsolidated affiliates | 0.7 | 0.4 | ||||||
Noncontrolling interests in continuing operations(d) | (33.6) | (25.6) | ||||||
Adjusted EBITDA | $ 273.0 | $ | 229.0 | |||||
Percent change | 19.2 % |
u
Other operating expenses as a percent of revenue decreased 80 basis points primarily due to the favorable impact from the implementation of on-site dialysis and efficiencies in recruiting.
Q1 | Q1 | |
($ in millions) | 2024 | 2023 |
In arriving at Adjusted EBITDA, the following were excluded: | ||||
(a) Loss on disposal or impairment of assets(2) | $ | 13.7 | $ | 0.7 |
(b) Stock-based compensation and the change in fair market value of the non- | ||||
qualified deferred comp plan | $ | 11.3 | $ | 9.2 |
(c) Change in fair market value of equity securities and the non-qualified | ||||
deferred comp plan | $ | (2.3) | $ | (1.8) |
(d) Asset impairment impact on noncontrolling interests(2) | $ | (7.3) | $ | - |
Encompass Health | Reconciliations to GAAP provided on pages 25-30. | 7 |
Refer to pages 31-32 for end notes. | ||
Earnings per share - as reported
Q1 | ||||||
($ in millions, except per share data) | 2024 | 2023 | ||||
Adjusted EBITDA | $ | 273.0 | $ | 229.0 | ||
Depreciation and amortization | (70.3) | (63.9) | ||||
Interest expense and amortization of debt discounts and fees | (35.2) | (36.4) | ||||
Stock-based compensation | (9.3) | (7.9) | ||||
Loss on disposal or impairment of assets | (13.7) | (0.7) | ||||
144.5 | 120.1 | |||||
Items not indicative of ongoing operating performance: | ||||||
Change in fair market value of equity securities | 0.3 | 0.5 | ||||
Asset impairment impact on noncontrolling interests(2) | 7.3 | - | ||||
Pre-tax income | 152.1 | 120.6 | ||||
Income tax expense | (38.3) | (31.9) | ||||
Income from continuing operations* | $ | 113.8 | $ | 88.7 | ||
Diluted shares (see page 24) | 102.2 | 100.9 | ||||
Diluted earnings per share* | ||||||
$ | 1.11 | $ | 0.88 | |||
Encompass Health | * Earnings per share are determined using income from continuing operations attributable to Encompass Health. | 8 |
Reconciliations to GAAP provided on pages 25-30. Refer to pages 31-32 for end notes. | ||
Adjusted earnings per share(4)
Q1 | |||||
2024 | 2023 | ||||
Diluted earnings per share, as reported | $ | 1.11 | $ | 0.88 | |
Adjustments, net of tax: | |||||
Asset impairment impact(2) | 0.02 | - | |||
Income tax adjustments | (0.01) | - | |||
Adjusted earnings per share* | $ | 1.12 | $ | 0.88 | |
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.
u Asset impairment related to the closure of Rehabilitation Hospital of Western Wisconsin (Eau Claire).
* Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 28-30.
Encompass Health | Refer to pages 31-32 for end notes. | 9 |
Q1 2024 Adjusted free cash flow(5)
($ in millions) | ||
$44.0 | ||
$1.3 | ||
$(28.7) | $(6.8) | $(0.9) |
$158.7 | $167.6 |
Adjusted free cash | Adjusted | Working capital | Cash interest | Cash tax payments, | Maintenance capital | Adjusted free cash |
flow 3 mos. 2023 | EBITDA | and other | payments | net of refunds | expenditures | flow 3 mos. 2024 |
Encompass Health | Reconciliations to GAAP provided on pages 25-30. | 10 |
Refer to pages 31-32 for end notes. | ||
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Encompass Health Corporation published this content on 26 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 April 2024 15:41:51 UTC.
