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Enhabit, Inc. (EHAB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest top-line growth and margin expansion: revenue rose to $266.1M (+2.1% y/y; +2.4% q/q) and Adjusted EBITDA to $26.9M (+6.7% y/y; +0.7% q/q), with adjusted EPS at $0.13 . Against S&P consensus, Enhabit posted a revenue beat (+$2.7M) and an adjusted EPS beat (+$0.03)*.
  • Hospice remained the engine: ADC up 12.3% y/y, revenue up 19.4% y/y, and segment Adjusted EBITDA up 53.8% y/y to $14.0M, while Home Health stabilized with sequential ADC growth and slowing Medicare FFS declines .
  • FY25 guidance was raised: revenue to $1.060–$1.073B (from $1.050–$1.080B), Adjusted EBITDA to $104–$108M (from $101–$107M), and adjusted EPS to $0.47–$0.55 (from $0.41–$0.51), alongside updated operating assumptions and a lower tax rate (~24%) .
  • Key catalysts: guidance raise, payer renegotiation (low double-digit rate increase effective 8/15/25), continued deleveraging (net debt/Adj. EBITDA to 4.3x) and strong hospice momentum; offset by regulatory overhang from CMS’s proposed 2026 home health rate cuts and CEO transition planning .

What Went Well and What Went Wrong

  • What Went Well

    • Hospice momentum: ADC +12.3% y/y and Adjusted EBITDA +53.8% y/y to $14.0M, with broad-based regional strength and lower discharged LOS, reducing cap liability risk .
    • Home Health stabilization: second straight quarter of sequential revenue and Adjusted EBITDA growth; Medicare ADC decline moderated to -3.4% y/y vs -14.1% in 2024 comparison period .
    • Strategic payer progress and liquidity: renegotiated a national payer contract for a low double-digit rate increase effective 8/15/25; available liquidity rose to $113.5M and net leverage fell to 4.3x .
    • Management quote: “Our second quarter results reflect strong execution… Hospice delivered its sixth consecutive quarter of growth… We also strengthened our balance sheet” — CEO Barb Jacobsmeyer .

  • What Went Wrong

    • Mix and unit economics: Home Health gross margin declined on lower unit revenues; segment Adjusted EBITDA margin fell to 19.1% (vs 21.0% y/y) .
    • Payer disruption late in Q2: census from a renegotiated national payer dropped sharply before recovering post-agreement; management cited admissions/census disruption into mid-July .
    • Regulatory headwinds: CMS’s proposed 2026 home health rule (permanent and temporary adjustments exceeding 20% cumulative cuts since PDGM) presents clear industry pressure, potentially requiring operating changes (visits-per-episode, branch consolidations) .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Service Revenue ($USD Millions)$258.2 $259.9 $266.1
Gross Margin %48.5% 49.9% 49.1%
Adjusted EBITDA ($USD Millions)$25.1 $26.6 $26.9
Adjusted EBITDA Margin %9.7% 10.2% 10.1%
Diluted EPS (GAAP, $)$(0.92) $0.35 $0.10
Adjusted Diluted EPS ($)$0.04 $0.10 $0.13

Segment revenue and profitability

Segment MetricQ4 2024Q1 2025Q2 2025
Home Health Net Service Revenue ($USD Millions)$200.4 $200.6 $205.9
Hospice Net Service Revenue ($USD Millions)$57.8 $59.3 $60.2
Home Health Segment Adjusted EBITDA ($USD Millions)$35.5 $38.3 $39.3
Home Health Segment Adjusted EBITDA Margin %17.7% 19.1% 19.1%
Hospice Segment Adjusted EBITDA ($USD Millions)$13.3 $15.0 $14.0
Hospice Segment Adjusted EBITDA Margin %23.0% 25.3% 23.3%

KPIs

Home Health KPIQ4 2024Q1 2025Q2 2025
Total Admissions (units)52,931 57,222 54,912
Average Daily Census (ADC, units)39,786 41,236 42,122
Visits per Episode (units)13.9 13.9 13.7
Revenue per Patient Day ($)$54.7 $54.1 $53.7
Cost per Patient Day ($)$28.8 $27.9 $28.0
Hospice KPIQ4 2024Q1 2025Q2 2025
Total Admissions (units)3,059 3,274 3,140
Patient Days (units)343,063 342,784 359,486
Average Daily Census (ADC, units)3,729 3,809 3,950
Revenue per Patient Day ($)$168.6 $173.0 $167.5
Cost per Patient Day ($)$80.4 $78.2 $78.7
Discharged Average LOS (days)110 101 103

Consensus vs. actual

MetricQ4 2024Q1 2025Q2 2025
Revenue Consensus ($USD Millions)*$259.1*$266.1*$263.4*
Revenue Actual ($USD Millions)$258.2 $259.9 $266.1
Adjusted EPS Consensus ($)*$0.055*$0.062*$0.099*
Adjusted EPS Actual ($)$0.04 $0.10 $0.13

Consensus estimates marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Service Revenue ($USD Billions)FY 2025$1.050–$1.080 $1.060–$1.073 Narrowed/raised mid-point
Adjusted EBITDA ($USD Millions)FY 2025$101–$107 $104–$108 Raised
Adjusted EPS ($)FY 2025$0.41–$0.51 $0.47–$0.55 Raised
Tax Rate (%)FY 2025~25% ~24% Lowered
Diluted Share Count (Millions)FY 2025~51.6 ~51.2 Lowered
Home Health ADC (%)FY 2025+4% to +5% +2.0% to +3.0% Lowered
Home Health Unit Revenue (per patient day, %)FY 2025(0.5)% to flat (2.7)% to (2.3)% Lowered
Home Health Cost per Day (%)FY 2025+2% to +3% (1.0)% to (1.5)% Improved
Hospice ADC (%)FY 2025+7% to +8.5% +10.9% to +11.6% Raised
Hospice Unit Revenue (per patient day, %)FY 2025+4% to +5% +4.9% to +5.3% Slightly raised
Hospice Cost per Day (%)FY 2025+2% to +3% +1.0% to +0.6% Lowered

Earnings Call Themes & Trends

TopicQ4 2024 (prior two quarters)Q1 2025 (prior quarter)Q2 2025 (current)Trend
Regulatory/legal (CMS rate cuts)Not a focal point in Q4 release; focus on stabilization and payer innovation Limited direct detail in release; framework around covenant exit and ops Strong emphasis: CMS proposed 2026 cuts; exploring levers (visits-per-episode, branch consolidation) Intensifying headwind
Payer strategy/contracting48% of non-Medicare visits in payer innovation; signed national contract Dec-2024 Leveraging “full-service” capability, sequential growth, ops improvements Renegotiated national payer; low double-digit rate increase (effective 8/15/25); temporary census disruption Positive rates; short-term volume volatility
Technology/clinical optimizationCase management model maturing in hospice Investments in technology supporting ops Medalogix-driven “advanced PPE” oversight to reduce visits-per-episode; pilot in 11 branches Scaling optimization
Deleveraging/capitalReduced debt $40M in 2024 Reduced bank debt $25M; leverage <4.5x; covenant relief exit Fifth straight quarter of prepayments; net leverage 4.3x; liquidity $113.5M Improving
Hospice growthADC +8.6% y/y; revenue +13.1% ADC +12.3% y/y; revenue +20.5% y/y ADC +12.3% y/y; Adj. EBITDA +53.8% y/y Sustained strength

Management Commentary

  • “Fee for service Medicare census is stabilizing… our census has grown 2.1% sequentially and now up 0.5% year over year.” — Barb Jacobsmeyer .
  • “The CMS proposed 2026 Medicare home health rule… presents a clear and intensifying headwind… we are uniquely positioned to outperform many of our subscale competitors.” — Ryan Solomon .
  • “Consolidated net service revenue… the first quarter of year-over-year consolidated revenue growth post spin… adjusted EBITDA… expanded to 10.1%.” — Ryan Solomon .
  • CEO transition: “I intend to step down… in July 2026 or upon the appointment of a successor… the timing is optimal for a new CEO.” — Barb Jacobsmeyer (prepared remarks and press release) .

Q&A Highlights

  • Mitigating CMS cuts: Management will pilot “advanced PPE” oversight; per CFO, a 0.5 BPE reduction could be worth ~$5–8M, contingent on reallocation of freed capacity and mix of incremental patient load .
  • Payer disruption and rate increase: National payer renegotiation caused sharp census drop; agreement reached mid-July; rate up low double digits per visit from 8/15/25; census recovery underway .
  • Proposed rule mechanics: CFO views the temporary adjustment as a clearing event with a framework over ~7 years; focus remains on mitigating near-term impact .
  • FFS Medicare volumes: Mix dynamics and market MA penetration drive addressable FFS; Enhabit executing strategy ahead of schedule in slowing decline; not prioritizing MA over FFS .
  • Deleveraging before M&A: No specific leverage target disclosed; deleveraging remains priority over near-term acquisitions .

Estimates Context

  • Q2 beat: revenue $266.1M vs consensus $263.4M; adjusted EPS $0.13 vs consensus ~$0.099* .
  • Q1 miss on revenue but EPS beat: revenue $259.9M vs consensus $266.1M; adjusted EPS $0.10 vs consensus ~$0.062* .
  • Q4 slight miss on revenue and EPS: revenue $258.2M vs consensus $259.1M; adjusted EPS $0.04 vs consensus ~$0.055* .
  • FY25 consensus: revenue ~$1.060B; EPS ~$0.561*, now positioned versus raised company guidance .
    Consensus estimates marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Q2 delivered a clean revenue and EPS beat versus consensus with margin stability; hospice strength and sequential Home Health improvement are durable pillars .
  • Guidance raised across revenue, Adjusted EBITDA, and adjusted EPS; hospice ADC outlook increased and Home Health cost/day outlook improved — constructive for back-half trajectory and sentiment .
  • Near-term operational catalysts: payer rate increases effective mid-August, visits-per-episode optimization pilot, continued branch rationalization, and deleveraging support free cash flow and interest savings .
  • Watch regulatory risk: CMS’s proposed 2026 rule is the principal overhang; management’s optimization and payer strategy are designed to offset but execution milestones (pilot results, payer ramp) matter for estimate revisions and multiple support .
  • Balance sheet resilience: liquidity improved to $113.5M; net debt/Adj. EBITDA at 4.3x; CFO cited ~$10M annual cash interest reduction as covenants lifted and prepayments accrue .
  • Leadership transition: announced CEO succession plan through July 2026; expect continuity with experienced board and team — should have limited operational disruption but can be a headline risk near announcements .
  • Trading implications: guidance raise and hospice momentum are near-term positive catalysts; any updates on the PPE pilot and payer rate realization could further support the equity, while CMS rule developments are the swing factor for sentiment and valuation .