Encompass Health Corp Q1 FY2025 earnings call

• Revenue and adjusted EBITDA growth: First quarter revenues increased 10.6% and adjusted EBITDA increased 14.9%. - Discharge growth: Total discharge growth was 6.3%, with same-store discharges growing 4.4%. - Quality metrics: Performance on quality metrics compares favorably to the industry average. - Clinical team investment: Continues to invest in clinical team with professional growth and development programs. - Hospital openings: Opened a new 40-bed joint venture hospital in Athens, Georgia, and added beds to existing hospitals. - Leadership change: Pat Tuer promoted to Chief Operating Officer.

First quarter revenues increased 10.6% to $1.46 billion, and adjusted EBITDA increased 14.9% to $313.6 million. Total discharge growth was 6.3%, with same-store discharges growing 4.4%. The discharge to community rate was 84%, discharge to acute rate was 8.9%, and discharge to SNF rate was 6.4%. Revenue contribution from different segments is not explicitly broken down beyond the overall revenue figures.

Based primarily on Q1 results, Encompass Health is raising 2025 guidance. Net operating revenue is expected to be $5.85 billion to $5.925 billion, adjusted EBITDA is expected to be $1.185 billion to $1.220 billion, and adjusted earnings per share is expected to be $4.85 to $5.10.

• Regulatory developments: Risks related to regulatory changes. - Volume, bad debt, and cost trends: Could cause actual results to differ materially from projections. - Palmetto programs: Concerns regarding inconsistent treatment of claims under Palmetto's RCD and TPE programs.

Q: Pito Chickering with Deutsche Bank asked about payer mix and employees per occupied bed.

A: Douglas Coltharp and Mark Tarr responded that payer mix is not a new trend and EPOB is affected by seasonality and new hospital openings.

Q: Whit Mayo with Leerink Partners asked about tariffs and bed growth start-up costs.

A: Douglas Coltharp responded there is no near-term tariff risk and Medicaid impact is minor.

Q: Matthew Gillmor with KeyBanc asked about labor efficiency and flu impact.

A: Douglas Coltharp and Mark Tarr responded on labor efficiency metrics and minor flu impact.

Q: Ann Hynes with Mizuho Securities asked about capacity expansion and guidance.

A: Douglas Coltharp responded on accelerating growth and guidance based on Q1.

Q: Joanna Gajuk with Bank of America asked about demand and competitive environment.

A: Mark Tarr and Douglas Coltharp responded on demand across geographies and barriers to entry.

Q: Brian Tanquilut with Jefferies asked about economic slowdown and exchange exposure.

A: Mark Tarr and Douglas Coltharp responded on durable demand and de minimis exchange exposure.

Q: A.J. Rice with UBS asked about benefit expense and TPE program.

A: Douglas Coltharp responded on benefit expense and TPE program risks.

Q: Jared Haase with William Blair asked about OpEx leverage and quality sustainability.

A: Douglas Coltharp and Mark Tarr responded on OpEx leverage and quality sustainability.

Q: Andrew Mok with Barclays asked about revenue per discharge and share repurchase.

A: Douglas Coltharp responded on revenue per discharge drivers and continued share repurchases.

Q: John Ransom with Raymond James asked about Managed Care negotiations.

A: Douglas Coltharp and Mark Tarr responded on Managed Care contracting and pre-authorization challenges