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 full-year revenue up 11.9% to $5,373.2 million and Adjusted EBITDA up 13.6% in Q4 and 13.7% for the year, reaching $289.6 million and $1,103.7 million, respectively.

• Adjusted EPS was $1.17 for Q4 (up 23.2%) and $4.43 for the year (up 21.7%).

• Total discharge growth was 7.8% for Q4, with same-store discharge growth at 5.8% and net patient revenue per discharge up 4.2%.

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

• Investments in clinical innovation and operational scale improved patient outcomes and cost efficiency.

Financial highlights

• Q4 revenue reached $1.4 billion, Adjusted EBITDA was $289.6 million, and Adjusted free cash flow for Q4 was $190.5 million, more than double the prior year.

• Full-year 2024 adjusted free cash flow totaled $690.3 million, up 31.3% year-over-year.

• Net leverage reduced to 2.2x at year-end 2024, with $250 million of 5.75% Senior Notes redeemed.

• Medicare Advantage discharges grew 14.7% in Q4 and 12% for the year; same-store MA growth was 9.9%.

• Salaries and wages per FTE (excluding bonuses/contract labor) increased 4.8% in Q4.

Outlook and guidance

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

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

• Seven new de novo hospitals and one satellite hospital planned for 2025, with 340 and 50 beds respectively, plus 100 beds added to existing hospitals.

• SWB inflation expected at 3.25%–3.75% for 2025, with premium labor costs stable.

• 2025 free cash flow expected to be $590–$690 million, with increased investment in bed expansions and new hospitals.