Encompass Health (EHC) Q3 2024 earnings summary

Executive summary

• Net operating revenue for Q3 2024 rose 11.9% year-over-year to $1.35 billion, driven by 8.8% discharge growth, new hospital openings, and strong demand for inpatient rehabilitation services.

• Adjusted EBITDA increased 13.4% to $269.3 million, and adjusted EPS grew 19.8% to $1.03; diluted EPS from continuing operations was $1.07, up 25.9%.

• Net income attributable to Encompass Health increased 26.8% to $108.2 million for Q3 2024.

• Five new hospitals opened and 125 new beds added in 2024, with further expansion projects underway.

• Quarterly dividend increased to $0.17 per share, and 0.3 million shares repurchased for $23.6 million in the first nine months.

Financial highlights

• Q3 2024 net operating revenue: $1.35 billion (up 11.9% year-over-year); nine months: $3.97 billion (up 11.6%).

• Adjusted EBITDA: $269.3 million (+13.4% YoY); nine months: $814.1 million (+13.7%).

• Net income attributable to Encompass Health: $108.2 million for Q3 2024, up from $85.3 million in Q3 2023.

• Adjusted free cash flow for Q3 2024 was $189.7 million, a 27.1% increase from the prior year; year-to-date total at $500 million.

• Net patient revenue per discharge increased 2.5% year-over-year; discharges grew 8.8% in Q3 2024.

Outlook and guidance

• 2024 guidance raised: net operating revenue of $5,325–$5,375 million, Adjusted EBITDA of $1,070–$1,090 million, and adjusted EPS of $4.19–$4.33.

• Full-year adjusted free cash flow expected at $560–$620 million.

• CMS 2025 Final Rule expected to increase Medicare payment rates by 3.3% effective October 1, 2024.

• Q4 guidance incorporates hurricane-related impacts, facility repairs, and ramp-up costs.

• 2025 headwinds include SWB per FTE inflation of 3–3.5% and less visibility on provider tax benefits.