Encompass Health (EHC) Q1 2026 earnings summary

Executive summary

• Net operating revenue for Q1 2026 rose 9.0% year-over-year to $1,586.6 million, with adjusted EBITDA up 11.2% to $348.8 million and adjusted EPS up 16.8% to $1.60.

• Net income attributable to shareholders increased 28.4% to $194.5 million, with diluted EPS from continuing operations up 19.6% to $1.77.

• Opened a new 49-bed hospital in South Carolina and added 44 beds to existing hospitals in Q1 2026.

• Paid a quarterly dividend of $0.19 per share and repurchased approximately 708,000 shares for $71.6 million.

• Patient outcomes and quality metrics improved, with discharge TME rates at 84.5% and RN turnover at its lowest since 2012.

Financial highlights

• Net patient revenue per discharge rose 3.7% year-over-year to $22,633, aided by patient mix and favorable Medicare SSI adjustment.

• Adjusted free cash flow for Q1 was $193.8 million, down from $222.4 million in Q1 2025.

• Salaries and benefits as a percentage of revenue decreased to 51.6% from 52.4% year-over-year.

• Bad debt expense rose 20 basis points to 2.2% due to legacy audit claim write-offs.

• Adjusted EBITDA margin improved to approximately 22%.

Outlook and guidance

• 2026 net operating revenue expected at $6,375–$6,470 million, adjusted EBITDA at $1,350–$1,380 million, and adjusted EPS at $5.89–$6.11.

• Plans to open 7–8 new hospitals and add 100–175 beds to existing facilities in 2026.

• Pipeline includes 11 hospitals with 520 beds scheduled to open beyond 2026.

• Medicare pricing expected to increase ~3.0% for Q1–Q3 and 2.4% for Q4 2026; managed care pricing up 2.0–3.0%.

• Adjusted free cash flow for 2026 expected between $760–$875 million.