Encompass Health reports results for first quarter 2023
Increases full-year guidance
"We are very pleased with our first quarter performance," said President and Chief Executive Officer of Encompass Health
Summary results
Growth | |||||||
Q1 2023 | Q1 2022 | Dollars | Percent | ||||
(In Millions, Except Per Share Data) | |||||||
Net operating revenue | $ 1,160.4 | $ 1,059.3 | $ 101.1 | 9.5 % | |||
Income from continuing operations attributable to | 0.88 | 0.64 | 0.24 | 37.5 % | |||
Adjusted earnings per share | 0.88 | 0.67 | 0.21 | 31.3 % | |||
Cash flows provided by operating activities | 227.9 | 218.9 | 9.0 | 4.1 % | |||
Adjusted EBITDA | 229.0 | 194.9 | 34.1 | 17.5 % | |||
Adjusted free cash flow | 158.7 | 123.2 | 35.5 | 28.8 % | |||
(Actual Amounts) | |||||||
Discharges | 55,557 | 50,771 | 9.4 % | ||||
Same-store discharge growth | 5.9 % | ||||||
Net patient revenue per discharge | $ 20,415 | $ 20,409 | — % |
See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.
- Revenue growth of
9.5% resulted primarily from increased volumes. Total discharge growth for the first quarter of 2023 was9.4% including same-store growth of5.9% . Revenue reserves related to bad debt as a percent of revenue increased to2.4% . - Cash flows provided by operating activities increased
4.1% over the prior year to , due primarily to improved collections of accounts receivable.$227.9 million - The
17.5% increase in Adjusted EBITDA primarily resulted from increased revenue and a decrease in contract labor expense and sign-on and shift bonuses.
2023 Guidance
The Company increased its full-year guidance as follows:
Full-Year 2023 Guidance | |||
Previous Guidance | Updated Guidance | ||
(In Millions, Except Per Share Data) | |||
Net operating revenue | |||
Adjusted EBITDA | |||
Adjusted earnings per share from continuing operations attributable to |
For considerations regarding the Company's 2023 guidance, see the supplemental information posted on the Company's website at http://investor.encompasshealth.com. See also the "Other information" section below for an explanation of why the Company does not provide guidance for comparable GAAP measures for Adjusted EBITDA and adjusted earnings per share.
Earnings conference call and webcast
The Company will host an investor conference call at
The conference call may be accessed by dialing 800 225-9448 and giving the conference ID EHCQ123. International callers should dial 203 518-9708 and give the same conference ID. Please call approximately ten minutes before the start of the call to ensure you are connected. The conference call will also be webcast live and will be available for on-line replay at http://investor.encompasshealth.com by clicking on an available link.
About
Other information
The information in this press release is summarized and should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the quarter ended
The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company's adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are included below or in the Q1 Earnings Form 8-K. Readers are encouraged to review the "Note Regarding Presentation of Non-GAAP Financial Measures" included in the Q1 Earnings Form 8-K which provides further explanation and disclosure regarding the Company's use of these non-GAAP financial measures.
Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of items that are deemed to be outside the control of the Company or otherwise not indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional fees—accounting, tax, and legal; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be not indicative of its ongoing operations. These items cannot be reasonably predicted and will depend on several factors, including industry and market conditions, and could be material to the Company's results computed in accordance with GAAP.
However, the following reasonably estimable GAAP measures for 2023 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures could be reasonably predicted:
- Interest expense and amortization of debt discounts and fees - estimate of
to$145 million $155 million - Amortization of debt-related items - approximately
$10 million
The Q1 Earnings Form 8-K and, when filed, the
Condensed Consolidated Statements of Comprehensive Income (Unaudited) | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions, Except Per Share Data) | |||
Net operating revenues | $ 1,160.4 | $ 1,059.3 | |
Operating expenses: | |||
Salaries and benefits | 629.0 | 587.4 | |
Other operating expenses | 177.9 | 159.0 | |
Occupancy costs | 13.8 | 15.4 | |
Supplies | 53.8 | 49.8 | |
General and administrative expenses | 43.4 | 37.4 | |
Depreciation and amortization | 63.9 | 57.7 | |
Total operating expenses | 981.8 | 906.7 | |
Loss on early extinguishment of debt | — | 0.3 | |
Interest expense and amortization of debt discounts and fees | 36.4 | 39.6 | |
Other (income) expense | (3.6) | 3.6 | |
Equity in net income of nonconsolidated affiliates | (0.4) | (0.9) | |
Income from continuing operations before income tax expense | 146.2 | 110.0 | |
Provision for income tax expense | 31.9 | 23.6 | |
Income from continuing operations | 114.3 | 86.4 | |
(Loss) income from discontinued operations, net of tax | (1.0) | 23.7 | |
Net and comprehensive income | 113.3 | 110.1 | |
Less: Net income attributable to noncontrolling interests included in continuing operations | (25.6) | (22.0) | |
Less: Net income attributable to noncontrolling interests included in discontinued operations | — | (0.6) | |
Less: Net and comprehensive income attributable to noncontrolling interests | (25.6) | (22.6) | |
Net and comprehensive income attributable to | $ 87.7 | $ 87.5 | |
Weighted average common shares outstanding: | |||
Basic | 99.4 | 99.2 | |
Diluted | 100.9 | 100.2 | |
Earnings per common share: | |||
Basic earnings per share attributable to | |||
Continuing operations | $ 0.89 | $ 0.65 | |
Discontinued operations | (0.01) | 0.23 | |
Net income | $ 0.88 | $ 0.88 | |
Diluted earnings per share attributable to | |||
Continuing operations | $ 0.88 | $ 0.64 | |
Discontinued operations | (0.01) | 0.23 | |
Net income | $ 0.87 | $ 0.87 | |
Amounts attributable to | |||
Income from continuing operations | $ 88.7 | $ 64.4 | |
(Loss) income from discontinued operations, net of tax | (1.0) | 23.1 | |
Net income attributable to | $ 87.7 | $ 87.5 |
Condensed Consolidated Balance Sheets (Unaudited) | |||
|
| ||
(In Millions) | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 85.0 | $ 21.8 | |
Restricted cash | 34.3 | 31.6 | |
Accounts receivable | 514.5 | 536.8 | |
Other current assets | 127.9 | 127.0 | |
Total current assets | 761.7 | 717.2 | |
Property and equipment, net | 2,988.3 | 2,939.2 | |
Operating lease right-of-use assets | 212.7 | 212.5 | |
1,270.7 | 1,263.2 | ||
Intangible assets, net | 287.2 | 282.3 | |
Other long-term assets | 226.7 | 222.1 | |
Total assets | $ 5,747.3 | $ 5,636.5 | |
Liabilities and Shareholders' Equity | |||
Current liabilities: | |||
Current portion of long-term debt | $ 26.0 | $ 25.2 | |
Current operating lease liabilities | 26.3 | 25.6 | |
Accounts payable | 141.1 | 132.9 | |
Accrued medical insurance | 31.8 | 25.0 | |
Accrued expenses and other current liabilities | 366.9 | 367.2 | |
Total current liabilities | 592.1 | 575.9 | |
Long-term debt, net of current portion | 2,722.5 | 2,741.8 | |
Long-term operating lease liabilities | 199.2 | 199.7 | |
Deferred income tax liabilities | 87.0 | 83.0 | |
Other long-term liabilities | 183.3 | 174.2 | |
3,784.1 | 3,774.6 | ||
Commitments and contingencies | |||
Redeemable noncontrolling interests | 37.5 | 35.6 | |
Shareholders' equity: | |||
1,383.5 | 1,310.3 | ||
Noncontrolling interests | 542.2 | 516.0 | |
Total shareholders' equity | 1,925.7 | 1,826.3 | |
Total liabilities and shareholders' equity | $ 5,747.3 | $ 5,636.5 |
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions) | |||
Cash flows from operating activities: | |||
Net income | $ 113.3 | $ 110.1 | |
Loss (income) from discontinued operations, net of tax | 1.0 | (23.7) | |
Adjustments to reconcile net income to net cash provided by operating activities— | |||
Depreciation and amortization | 63.9 | 57.7 | |
Stock-based compensation | 7.9 | 6.1 | |
Deferred tax expense | 4.0 | 2.3 | |
Other, net | 1.2 | 8.0 | |
Change in assets and liabilities, net of acquisitions— | |||
Accounts receivable | 23.7 | 7.5 | |
Other assets | (3.7) | 13.6 | |
Accounts payable | 1.2 | 9.4 | |
Other liabilities | 16.7 | (8.5) | |
Net cash (used in) provided by operating activities of discontinued operations | (1.3) | 36.4 | |
Total adjustments | 113.6 | 132.5 | |
Net cash provided by operating activities | 227.9 | 218.9 | |
Cash flows from investing activities: | |||
Purchases of property and equipment | (96.6) | (112.9) | |
Other, net | (7.4) | (8.8) | |
Net cash used in investing activities of discontinued operations | — | (1.4) | |
Net cash used in investing activities | (104.0) | (123.1) | |
Cash flows from financing activities: | |||
Principal payments on debt, including pre-payments | (0.6) | (103.9) | |
Borrowings on revolving credit facility | 30.0 | 130.0 | |
Payments on revolving credit facility | (45.0) | (25.0) | |
Debt amendment costs | — | (20.0) | |
Taxes paid on behalf of employees for shares withheld | (7.7) | (7.2) | |
Contributions from noncontrolling interests of consolidated affiliates | 17.0 | 14.0 | |
Dividends paid on common stock | (15.6) | (28.5) | |
Distributions paid to noncontrolling interests of consolidated affiliates | (31.8) | (20.8) | |
Other, net | (4.3) | (4.6) | |
Net cash provided by financing activities of discontinued operations | — | 5.1 | |
Net cash used in financing activities | (58.0) | (60.9) | |
Increase in cash, cash equivalents, and restricted cash | 65.9 | 34.9 | |
Cash, cash equivalents, and restricted cash at beginning of period | 53.4 | 120.3 | |
Cash, cash equivalents, and restricted cash at end of period | $ 119.3 | $ 155.2 |
Condensed Consolidated Statements of Cash Flows (Continued) (Unaudited) | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions) | |||
Reconciliation of Cash, Cash Equivalents, and Restricted Cash | |||
Cash and cash equivalents at beginning of period | $ 21.8 | $ 49.4 | |
Restricted cash at beginning of period | 31.6 | 62.5 | |
Restricted cash included in other long-term assets at beginning of period | — | 0.4 | |
Cash, cash equivalents, and restricted cash in discontinued operations at beginning of period | — | 8.0 | |
Cash, cash equivalents, and restricted cash at beginning of period | $ 53.4 | $ 120.3 | |
Cash and cash equivalents at end of period | $ 85.0 | $ 76.6 | |
Restricted cash at end of period | 34.3 | 57.3 | |
Restricted cash included in other long-term assets at end of period | — | — | |
Cash, cash equivalents, and restricted cash in discontinued operations at end of period | — | 21.3 | |
Cash, cash equivalents, and restricted cash at end of period | $ 119.3 | $ 155.2 |
Supplemental Information Earnings Per Share | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions, Except Per Share Data) | |||
Adjusted EBITDA | $ 229.0 | $ 194.9 | |
Depreciation and amortization | (63.9) | (57.7) | |
Interest expense and amortization of debt discounts and fees | (36.4) | (39.6) | |
Stock-based compensation | (7.9) | (6.1) | |
Loss on disposal or impairment of assets | (0.7) | (0.7) | |
120.1 | 90.8 | ||
Items not indicative of ongoing operating performance: | |||
Loss on early extinguishment of debt | — | (0.3) | |
Change in fair market value of equity securities | 0.5 | (2.5) | |
Pre-tax income | 120.6 | 88.0 | |
Income tax expense | (31.9) | (23.6) | |
Income from continuing operations (1) | $ 88.7 | $ 64.4 | |
Basic shares | 99.4 | 99.2 | |
Diluted shares | 100.9 | 100.2 | |
Basic earnings per share (1) | $ 0.89 | $ 0.65 | |
Diluted earnings per share (1) | $ 0.88 | $ 0.64 |
(1) | Income from continuing operations attributable to |
Supplemental Information Adjusted Earnings Per Share | |||
Q1 | |||
2023 | 2022 | ||
Earnings per share, as reported | $ 0.88 | $ 0.64 | |
Adjustments, net of tax: | |||
Change in fair market value of equity securities | — | 0.02 | |
Adjusted earnings per share* | $ 0.88 | $ 0.67 |
* | Adjusted EPS may not sum due to rounding. |
Supplemental Information Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions) | |||
Net cash provided by operating activities | $ 227.9 | $ 218.9 | |
Interest expense and amortization of debt discounts and fees | 36.4 | 39.6 | |
Gain (loss) on sale of investments, excluding impairments | 1.7 | (4.6) | |
Equity in net income of nonconsolidated affiliates | 0.4 | 0.9 | |
Net income attributable to noncontrolling interests in continuing operations | (25.6) | (22.0) | |
Amortization of debt-related items | (2.3) | (2.3) | |
Distributions from nonconsolidated affiliates | (0.1) | (1.0) | |
Current portion of income tax expense | 27.9 | 21.3 | |
Change in assets and liabilities | (37.9) | (22.0) | |
Cash used in (provided by) operating activities of discontinued operations | 1.3 | (36.4) | |
Change in fair market value of equity securities | (0.5) | 2.5 | |
Other | (0.2) | — | |
Adjusted EBITDA | $ 229.0 | $ 194.9 |
Supplemental Information Reconciliation of Income from Continuing Operations Attributable to | |||||||
For the Three Months Ended | |||||||
Adjustments | |||||||
As | Income Tax | Change in Fair | As | ||||
(In Millions, Except Per Share Amounts) | |||||||
Adjusted EBITDA* | $ 229.0 | $ — | $ — | $ 229.0 | |||
Depreciation and amortization | (63.9) | — | — | (63.9) | |||
Interest expense and amortization of debt discounts and fees | (36.4) | — | — | (36.4) | |||
Stock-based compensation | (7.9) | — | — | (7.9) | |||
Loss on disposal or impairment of assets | (0.7) | — | — | (0.7) | |||
Change in fair market value of equity securities | 0.5 | — | (0.5) | — | |||
Income from continuing operations before income tax expense | 120.6 | — | (0.5) | 120.1 | |||
Provision for income tax expense | (31.9) | 0.3 | 0.1 | (31.5) | |||
Income from continuing operations attributable to | $ 88.7 | $ 0.3 | $ (0.4) | $ 88.6 | |||
Diluted earnings per share from continuing operations** | $ 0.88 | $ — | $ — | $ 0.88 | |||
Diluted shares used in calculation | 100.9 |
* | See reconciliation of net income to Adjusted EBITDA. |
** | Adjusted EPS may not sum across due to rounding. |
Supplemental Information Reconciliation of Income from Continuing Operations Attributable to | |||||||||
For the Three Months Ended | |||||||||
Adjustments | |||||||||
As | Loss on | Income Tax | Change in Fair | As | |||||
(In Millions, Except Per Share Amounts) | |||||||||
Adjusted EBITDA* | $ 194.9 | $ — | $ — | $ — | $ 194.9 | ||||
Depreciation and amortization | (57.7) | — | — | — | (57.7) | ||||
Interest expense and amortization of debt discounts and fees | (39.6) | — | — | — | (39.6) | ||||
Stock-based compensation | (6.1) | — | — | — | (6.1) | ||||
Loss on disposal or impairment of assets | (0.7) | — | — | — | (0.7) | ||||
Loss on early extinguishment of debt | (0.3) | 0.3 | — | — | — | ||||
Change in fair market value of equity securities | (2.5) | — | — | 2.5 | — | ||||
Income from continuing operations before income tax expense | 88.0 | 0.3 | — | 2.5 | 90.8 | ||||
Provision for income tax expense | (23.6) | (0.1) | 0.2 | (0.6) | (24.1) | ||||
Income from continuing operations attributable to | $ 64.4 | $ 0.2 | $ 0.2 | $ 1.9 | $ 66.7 | ||||
Diluted earnings per share from continuing operations** | $ 0.64 | $ — | $ — | $ 0.02 | $ 0.67 | ||||
Diluted shares used in calculation | 100.2 |
* | See reconciliation of net income to Adjusted EBITDA. |
** | Adjusted EPS may not sum across due to rounding. |
Supplemental Information Reconciliation of Net Income to Adjusted EBITDA | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions) | |||
Net income | $ 113.3 | $ 110.1 | |
Loss (income) from discontinued operations, net of tax, attributable to | 1.0 | (23.7) | |
Net income attributable to noncontrolling interests included in continuing operations | (25.6) | (22.0) | |
Provision for income tax expense | 31.9 | 23.6 | |
Interest expense and amortization of debt discounts and fees | 36.4 | 39.6 | |
Depreciation and amortization | 63.9 | 57.7 | |
Loss on early extinguishment of debt | — | 0.3 | |
Loss on disposal or impairment of assets | 0.7 | 0.7 | |
Stock-based compensation | 7.9 | 6.1 | |
Change in fair market value of equity securities | (0.5) | 2.5 | |
Adjusted EBITDA | $ 229.0 | $ 194.9 |
Supplemental Information Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow | |||
Three Months Ended | |||
2023 | 2022 | ||
(In Millions) | |||
Net cash provided by operating activities | $ 227.9 | $ 218.9 | |
Impact of discontinued operations | 1.3 | (36.4) | |
Net cash provided by operating activities of continuing operations | 229.2 | 182.5 | |
Capital expenditures for maintenance | (37.8) | (32.2) | |
Distributions paid to noncontrolling interests of consolidated affiliates | (31.8) | (20.8) | |
Items not indicative of ongoing operating performance: | |||
Transaction costs and related liabilities | (0.9) | (6.3) | |
Adjusted free cash flow | $ 158.7 | $ 123.2 |
For the three months ended
For the three months ended
Forward-Looking Statements
Statements contained in this press release and the supplemental information which are not historical facts, such as those relating to the business model, strategy, outlook and guidance, dividend strategies, effective income tax rates, labor cost trends, legislative and regulatory developments or their impacts, financial guidance, ability to return value to shareholders, projected capital expenditures, acquisition opportunities, development projects, other balance sheet and cash flow plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition,
Media Contact
casey.winger@encompasshealth.com
Investor Relations Contact
mark.miller@encompasshealth.com
View original content to download multimedia:https://www.prnewswire.com/news-releases/encompass-health-reports-results-for-first-quarter-2023-301810152.html
SOURCE