Enhabit (EHAB) Q4 2023 earnings summary

Executive summary

• Q4 net service revenue was $260.6M, down 1.0% YoY; Adjusted EBITDA fell 16.8% to $25.2M, with a $6.4M attributable net loss and adjusted EPS of $0.06.

• FY 2023 revenue was $1,046.3M, Adjusted EBITDA was $97.6M, and attributable net loss was $80.5M, including an $85.8M goodwill impairment.

• Home Health payer-mix transition pressured results while Hospice revenue and EBITDA grew; the non-episodic shift reduced Q4 revenue and Adjusted EBITDA by ~$8M.

• Operating priorities included payor innovation, clinical recruitment and retention, quality outcomes, and sequential growth in Hospice average daily census.

Financial highlights

• Q4 net service revenue was $260.6M versus $263.2M in Q4 2022; gross margin was $127.1M, or 48.8%, versus $129.9M, or 49.4%.

• Q4 Adjusted EBITDA was $25.2M, down $5.1M or 16.8% YoY; margin was 9.7% versus 11.5%.

• Q4 reported diluted loss per share was $(0.13) versus $(1.91); adjusted EPS was $0.06 versus $0.17.

• FY 2023 net service revenue declined 2.3% to $1,046.3M; Adjusted EBITDA declined 34.6% to $97.6M and adjusted EPS was $0.22 versus $1.36.

Outlook and guidance

• 2024 guidance: net service revenue $1,076M–$1,102M, Adjusted EBITDA $98M–$110M, and adjusted EPS $0.12–$0.43.

• 2024 adjusted free cash flow assumptions are $36M–$62M, based on Adjusted EBITDA of $98M–$110M, cash interest of $40M–$45M, and maintenance capex of $5M–$10M.

• Home Health assumptions include Medicare pricing up 1.2%, continued non-episodic mix shift, and cost per visit up 2.0%–3.0%; Hospice Medicare pricing rises 2.9% in Q1–Q3 and cost per patient day rises 2.0%–4.0%.

• Guidance assumes a 26% tax rate and 50.1M diluted shares; Adjusted EBITDA and adjusted EPS guidance could not be reconciled to GAAP without unreasonable effort.

• Priorities include opening 10 de novo locations, expanding clinical staffing, improving Medicare Advantage rates, and growing Hospice census through the case-management model.