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Enhabit, Inc. (EHAB)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered mixed but improving performance: adjusted EPS of $0.17, up sharply year over year; consolidated net service revenue grew 3.9% YoY to $263.6M; adjusted EBITDA rose 10.2% YoY to $27.0M . Hospice remained the growth engine with 20.0% YoY revenue and 72.0% YoY adjusted EBITDA growth .
  • Versus Wall Street: EPS beat consensus ($0.17 vs $0.12*), while revenue missed ($263.6M vs $267.1M*). The beat on EPS reflects stronger profitability than expected; the revenue miss tied to temporary disruption from a national payer contract renegotiation early in the quarter .
  • Guidance: FY25 adjusted EBITDA and adjusted EPS were raised (to $106–$109M and $0.50–$0.56, respectively), while revenue was narrowed/lowered to $1.058–$1.063B, signaling margin improvements offsetting modest top-line pressure .
  • Catalysts: continued hospice strength and margin execution, ongoing payer renegotiations with rate updates, and rollout of visits-per-episode optimization; risk factor is the pending CMS 2026 Home Health Final Rule .

What Went Well and What Went Wrong

  • What Went Well

    • Hospice outperformance: “continued strong momentum… ADC increasing 12.6%… revenue increased 20.0%… Adjusted EBITDA increased 72.0%” .
    • Leverage and liquidity improved: net debt/adjusted EBITDA fell to 3.9x; total debt reduced ~$100M since Q4 2023, annualized cash interest down ~$19M .
    • Management tone on payer strategy: CEO highlighted “low double-digit increase in our per visit rate effective August 15, 2025” and another national payer renegotiation effective November without census disruption .

  • What Went Wrong

    • Home health margin compression: unit revenue per patient day declined 2.0% sequentially and 3.7% YoY, lowering segment adjusted EBITDA margin to 16.9% (vs 18.2% LY) .
    • Temporary volume disruption: sequential ADC was lower by 1.6% early in Q3 due to renegotiations with a national payer, driving the revenue miss vs consensus .
    • Revenue mix and productivity: Medicare visits and completed episodes fell YoY; total visits per episode declined, reflecting ongoing mix shifts and operational optimization needs .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$253.6 $266.1 $263.6
Gross Margin (%)48.1% 49.1% 48.5%
Adjusted EBITDA ($USD Millions)$24.5 $26.9 $27.0
Adjusted EBITDA Margin (%)9.7% 10.1% 10.2%
Reported Diluted EPS ($)($2.20) $0.10 $0.22
Adjusted Diluted EPS ($)$0.03 $0.13 $0.17

Estimate comparison (S&P Global consensus):

MetricConsensusActualSurprise
Revenue ($USD Millions)$267.1*$263.6 -$3.5M (-1.3%)*
Primary EPS ($)$0.12*$0.17 +$0.05 (+40%)*
Values retrieved from S&P Global.*

Segment breakdown:

Segment MetricQ3 2024Q2 2025Q3 2025
Home Health Net Service Revenue ($M)$201.0 $205.9 $200.5
Home Health Segment Adjusted EBITDA ($M)$36.5 $39.3 $33.9
Home Health Seg. Adj. EBITDA Margin (%)18.2% 19.1% 16.9%
Hospice Net Service Revenue ($M)$52.6 $60.2 $63.1
Hospice Segment Adjusted EBITDA ($M)$10.0 $14.0 $17.2
Hospice Seg. Adj. EBITDA Margin (%)19.0% 23.3% 27.3%

Key KPIs:

KPI (Home Health)Q3 2024Q2 2025Q3 2025
Avg Daily Census39,987 42,122 41,451
Revenue per Patient Day ($)$54.6 $53.7 $52.6
Cost per Patient Day ($)$28.8 $28.0 $28.2
Visits per Episode14.1 13.7 13.4
KPI (Hospice)Q3 2024Q2 2025Q3 2025
Avg Daily Census3,622 3,950 4,077
Revenue per Patient Day ($)$157.7 $167.5 $168.2
Cost per Patient Day ($)$77.3 $78.7 $74.9
Discharged Avg Length of Stay (days)100 103 101

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Service RevenueFY 2025$1.060B–$1.073B $1.058B–$1.063B Lowered/Narrowed
Adjusted EBITDAFY 2025$104M–$108M $106M–$109M Raised
Adjusted EPSFY 2025$0.47–$0.55 $0.50–$0.56 Raised
Tax Rate (assumption)FY 2025~24% ~23% Lowered
Diluted Shares (assumption)FY 2025~51.2M ~51.3M Slightly Higher

Segment considerations (from updated guidance):

  • Home Health: ADC +2.0% to +2.5%; unit revenue per patient day -3.5% to -3.0%; cost per day -1.5% to -2.0% .
  • Hospice: ADC +11.5% to +12.0%; unit revenue per patient day +5.5% to +6.0%; cost per patient day -1.0% to -1.5% .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Payer renegotiations & pricingQ2: low double-digit rate increase on national payer; continuing stabilizing Medicare ADC August 15 rate increase (low double-digit); volumes recovered by late Sept; additional national payer contract updated in November without census disruption Improving rates; operational recovery
Visits-per-episode optimizationEarly initiatives; lower visits per episode sequentially Pilot in 11 branches mid-Aug; visits per episode declined from ~15 to ~13; rollout to 83 branches in Oct, remaining by Nov Scaling optimization
Hospice growth6th straight quarter of sequential ADC growth; strong revenue per patient day 7th straight quarter of sequential ADC growth; record revenue/EBITDA; margin expansion to 27.3% Strong, sustained
G&A cost managementHome office G&A down YoY in Q1; sequential improvement targeted Home office G&A improved $2.3M sequentially; 9.1% of revenue (vs 9.9% prior quarter) Improving
Labor and wage inflationStable merit ~3%; localized pressure, therapy hot spots Continued applicant pool uptick for nursing/therapy; merit ~3% Stable with pockets
CMS 2026 Home Health RuleMonitoring proposed cuts; mitigation strategies Reinforced mitigation strategies; urged CMS to reverse adjustments; guidance update expected Q1 next year Policy risk persists

Management Commentary

  • CEO: “Our third quarter results reflect strong execution on our core strategic priorities, with year-over-year growth in revenue, census and Adjusted EBITDA” .
  • CEO on payer strategy: “low double-digit increase in our per visit rate effective August 15, 2025… census recovered by late September… recent admissions now at 120% of our weekly average” .
  • CFO: “Hospice segment momentum continues to be very strong, delivering record revenues and profitability… adjusted EBITDA margin… totaling 27.3%” .
  • CFO on balance sheet: “net leverage… 3.9x… lowers our Q3 2025 annualized cash interest expense by approximately $19 million compared to Q4 2023” .
  • CEO on CMS: “We urge CMS to reverse the temporary and permanent adjustments contained in the proposed rule…” .

Q&A Highlights

  • Payer renegotiation: Management declined specific rate disclosure on the November update but confirmed favorable outcome and a typical ~3-year contract cycle .
  • G&A reduction: ~$1–$1.5M of sequential improvement viewed as durable, with insourcing and headcount optimization as drivers .
  • Hospice seasonality: Holiday periods can be “bumpy” with some patients delaying election; comps are elevated into Q4 .
  • Labor/wage: Applicant pool improving; wage inflation around ~3% merit, with localized therapy market pressure .

Estimates Context

  • Q3 2025 vs S&P Global consensus: EPS beat (+$0.05), revenue miss (-$3.5M), indicating stronger profitability amid temporary top-line disruption . Values retrieved from S&P Global.*
  • Next quarter (Q4 2025) consensus implies EPS $0.16* and revenue ~$270.8M*, setting expectations for continued margin resilience and hospice momentum. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Hospice strength is the core driver: sustained sequential ADC growth and margin expansion to 27.3% support durable profitability into Q4 .
  • EPS beat and EBITDA guidance raise offset a modest revenue guide-down; margin execution and cost control are working despite payer mix and unit revenue pressure in home health .
  • Temporary payer renegotiation headwinds abated by late Q3; additional national contract update in November suggests continued pricing improvements without volume disruption .
  • Operational lever: visits-per-episode optimization is scaling (pilot results ~15 to ~13 visits), offering a tangible tool to mitigate rate pressure in 2026 .
  • Balance sheet optionality improving: leverage at 3.9x and ~$143M available liquidity enhance flexibility for de novos and selective M&A .
  • Watch risks: CMS 2026 Home Health Final Rule; Medicare unit revenue trends; therapy labor hotspots; holiday seasonality in hospice .
  • Near-term trading lens: positive bias on profitability and hospice trajectory; monitor Q4 volumes, consensus revisions, and further payer contract updates for continued margin support .
Note: All company-reported figures and management commentary are sourced from Enhabit’s Q3 2025 8-K press release and supplemental slides, and the Q3 2025 earnings call transcript. Consensus figures marked with * are S&P Global (Capital IQ) estimates.

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