On April 24, 2025, Encompass Health Corp (EHC, Financial) released its 8-K filing detailing its financial results for the first quarter of 2025. As the largest owner and operator of inpatient rehabilitation hospitals in the United States, Encompass Health provides specialized rehabilitative treatment through a network of hospitals primarily located in the eastern half of the United States and Texas.
Q1 2025 Financial Performance
Encompass Health Corp (EHC, Financial) reported net operating revenue of $1,455.4 million for Q1 2025, surpassing the analyst estimate of $1,431.09 million. This represents a 10.6% increase from the $1,316.0 million reported in Q1 2024. The company's income from continuing operations attributable to Encompass Health per diluted share was $1.48, exceeding the estimated earnings per share (EPS) of $1.16. Adjusted earnings per share also rose to $1.37, a 22.3% increase from the previous year.
Key Financial Achievements
Encompass Health's financial achievements in Q1 2025 are significant for the healthcare providers and services industry. The company reported a 14.9% increase in Adjusted EBITDA to $313.6 million, driven by increased revenue and expense leverage. Cash flows provided by operating activities rose by 20.9% to $288.6 million, primarily due to an increase in net income. Additionally, adjusted free cash flow increased by 32.7% to $222.4 million.
Operational Highlights and Challenges
The company's operational performance was bolstered by a 6.3% increase in total discharges, including a 4.4% growth in same-store discharges. Net patient revenue per discharge grew by 3.9%, contributing to the overall revenue growth. However, challenges such as staffing shortages and competitive compensation practices in the healthcare industry could pose potential risks to sustaining this growth.
Guidance and Future Outlook
Encompass Health has raised its full-year 2025 guidance, reflecting confidence in its operational strategy and market position. The updated guidance projects net operating revenue between $5,850 million and $5,925 million, and adjusted EBITDA between $1,185 million and $1,220 million. Adjusted earnings per share from continuing operations are expected to range from $4.85 to $5.10.
“We are very pleased with our first quarter performance, which drove a 10.6% increase in revenue and a 14.9% increase in Adjusted EBITDA,” said President and Chief Executive Officer of Encompass Health Mark Tarr. “During the quarter, we further increased our capacity, opening one new 40-bed hospital and adding 25 beds to existing hospitals. Our value proposition and operating strategy continue to be validated and we remain highly optimistic about the long-term prospects of our business.”
Financial Statements Overview
The condensed consolidated statements of comprehensive income, balance sheets, and cash flows provide further insights into Encompass Health's financial health. Key metrics such as adjusted EBITDA and free cash flow are crucial for assessing the company's ability to generate cash and sustain operations. The company's strategic investments in expanding hospital capacity and enhancing service offerings are expected to support continued growth.
Encompass Health's strong Q1 2025 performance and increased guidance underscore its robust market position and operational efficiency. As the company continues to navigate industry challenges, its focus on expanding capacity and optimizing operations will be critical to maintaining its growth trajectory.
Explore the complete 8-K earnings release (here) from Encompass Health Corp for further details.
