Encompass Health (EHC) Q4 2024 earnings summary

Executive summary

• Q4 2024 net operating revenue rose 12.7% year-over-year to $1,405.0 million, with Adjusted EBITDA up 13.6% to $289.6 million and Adjusted EPS up 23.2% to $1.17, driven by 7.8% discharge growth and strategic expansion.

• Full-year 2024 net operating revenue increased 11.9% to $5,373.2 million, Adjusted EBITDA rose 13.7% to $1,103.7 million, and Adjusted Free Cash Flow grew 31.3% to $690.3 million.

• Capacity expanded by 427 beds in 2024 through new hospitals and additions to existing facilities.

• The company continues to focus on the growing Medicare beneficiary population, with significant investments in capacity and clinical innovation.

• Opened 6 de novo hospitals and added 107 beds to existing hospitals in 2024.

Financial highlights

• Q4 2024 net revenue per discharge rose 4.2% to $21,399, aided by a 200 bps decrease in bad debt expense.

• Q4 discharges increased 7.8% year-over-year; same-store discharge growth was 5.8%.

• Medicare and Medicare Advantage accounted for 82.1% of Q4 revenue; Medicare Advantage discharges grew 14.7% in Q4.

• Net leverage at year-end 2024 was 2.2x, reduced from 2.7x in 2023; $250 million of 5.75% Senior Notes redeemed.

• Q4 2024 income from continuing operations per diluted share was $1.18, up 25.5% year-over-year.

Outlook and guidance

• 2025 guidance: net operating revenue of $5,800–$5,900 million, Adjusted EBITDA of $1,160–$1,200 million, and Adjusted EPS of $4.67–$4.96.

• CapEx expected to increase by about $100 million in 2025, mainly for growth-related projects; maintenance CapEx projected at $215–$225 million.

• Plans to open 7 de novo hospitals, one satellite, and ~100 bed additions in 2025.

• Group medical prescription drug cost growth expected to remain elevated through H1 2025, especially due to GLP-1 and cancer drugs.

• 2025 free cash flow expected to be $590–$690 million.