Encompass Health (EHC) Q2 2024 earnings summary

Executive summary

• Q2 2024 net operating revenue rose 9.6% year-over-year to $1,301.2 million, driven by 6.7% discharge growth and 2.0% higher net patient revenue per discharge.

• Adjusted EBITDA increased 8.9% to $271.8 million, and adjusted EPS grew 16.8% to $1.11.

• Net income attributable to Encompass Health increased 24.8% to $114.1 million for Q2 2024 compared to Q2 2023.

• Capacity expanded by 194 beds in Q2, including new and existing hospitals; further expansion planned for 2024.

• Share repurchase activity resumed, with 198,708 shares repurchased for $16.8 million and dividend increased to $0.17 per share.

Financial highlights

• Net operating revenue: $1,301.2M in Q2 2024 vs. $1,187.1M in Q2 2023 (up 9.6%).

• Adjusted EBITDA: $271.8M in Q2 2024 vs. $249.6M in Q2 2023 (up 8.9%).

• Adjusted free cash flow grew 14.7% to $142.5 million in Q2, totaling $310.1 million year-to-date.

• Net patient revenue per discharge increased 2.0% to $20,803.

• Unrestricted cash stood at $154.4 million, with no draws on the $1 billion credit facility.

Outlook and guidance

• 2024 net operating revenue guidance raised to $5,275–$5,350 million; Adjusted EBITDA to $1,040–$1,075 million; Adjusted EPS to $3.97–$4.22.

• Medicare pricing assumption for Q4 updated to a 3.3% increase following the IRF final rule.

• Full-year bad debt reserves expected at 2.4%–2.6% of revenue due to audit activity.

• De novo pre-opening and ramp-up costs projected at $15–$18 million for 2024.

• Capital expenditures for 2024 projected at $580–$610 million, with $185–$195 million for maintenance.