Encompass Health reports results for second quarter 2025

Growth

Q2 2025

Q2 2024

Dollars

Percent

(In Millions, Except Per Share Data)

Net operating revenue

$      1,457.7

$      1,301.2

$     156.5

12.0 %

Income from continuing operations attributable to
Encompass Health per diluted share

1.40

1.13

0.27

23.9 %

Adjusted earnings per share

1.40

1.11

0.29

26.1 %

Cash flows provided by operating activities

270.2

217.4

52.8

24.3 %

Adjusted EBITDA

318.6

271.8

46.8

17.2 %

Adjusted free cash flow

185.9

142.5

43.4

30.5 %

(Actual Amounts)

Discharges

65,237

60,833

7.2 %

   Same-store discharge growth

4.7 %

Net patient revenue per discharge

$       21,670

$       20,803

4.2 %

Full-Year 2025 Guidance

Previous Guidance

Updated Guidance

(In Millions, Except Per Share Data)

Net operating revenue

$5,850 to $5,925

$5,880 to $5,980

Adjusted EBITDA

$1,185 to $1,220

$1,220 to $1,250

Adjusted earnings per share from continuing operations
attributable to Encompass Health

$4.85 to $5.10

$5.12 to $5.34

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Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months
Ended June 30,

Six Months Ended
June 30,

2025

2024

2025

2024

(In Millions, Except Per Share Data)

Net operating revenues

$  1,457.7

$  1,301.2

$  2,913.1

$  2,617.2

Operating expenses:

Salaries and benefits

767.7

700.5

1,530.0

1,412.1

Other operating expenses

213.8

189.9

431.3

393.8

Occupancy costs

14.7

14.2

29.6

28.2

Supplies

63.1

57.6

125.3

116.1

General and administrative expenses

59.4

50.5

111.7

100.7

Depreciation and amortization

79.9

72.9

159.1

143.2

Total operating expenses

1,198.6

1,085.6

2,387.0

2,194.1

Interest expense and amortization of debt discounts and fees

30.4

34.3

62.2

69.5

Other income

(6.7)

(3.3)

(9.2)

(8.7)

Equity in net income of nonconsolidated affiliates

(1.4)

(1.4)

(2.3)

(2.1)

Income from continuing operations before income tax expense

236.8

186.0

475.4

364.4

Provision for income tax expense

51.0

38.3

92.6

76.6

Income from continuing operations

185.8

147.7

382.8

287.8

Loss from discontinued operations, net of tax

(0.9)

(1.2)

(1.4)

(2.5)

Net income

184.9

146.5

381.4

285.3

Less: Net income attributable to noncontrolling interests

(42.8)

(32.4)

(87.8)

(58.7)

Net income attributable to Encompass Health

$     142.1

$     114.1

$     293.6

$     226.6

Weighted average common shares outstanding:

Basic

100.6

99.9

100.6

99.9

Diluted

102.3

102.0

102.2

102.1

Earnings per common share:

Basic earnings per share attributable to Encompass Health common shareholders:

Continuing operations

$       1.42

$       1.14

$       2.92

$       2.28

Discontinued operations

(0.01)

(0.01)

(0.01)

(0.03)

Net income

$       1.41

$       1.13

$       2.91

$       2.25

Diluted earnings per share attributable to Encompass Health common shareholders:

Continuing operations

$       1.40

$       1.13

$       2.88

$       2.24

Discontinued operations

(0.01)

(0.01)

(0.01)

(0.02)

Net income

$       1.39

$       1.12

$       2.87

$       2.22

Amounts attributable to Encompass Health common shareholders:

Income from continuing operations

$     143.0

$     115.3

$     295.0

$     229.1

Loss from discontinued operations, net of tax

(0.9)

(1.2)

(1.4)

(2.5)

Net income attributable to Encompass Health

$     142.1

$     114.1

$     293.6

$     226.6

Encompass Health Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

June 30, 2025

December 31, 2024

(In Millions)

Assets

Current assets:

Cash and cash equivalents

$              99.1

$                85.4

Restricted cash

38.3

37.7

Accounts receivable

612.5

598.8

Other current assets

168.2

165.0

Total current assets

918.1

886.9

Property and equipment, net

3,820.3

3,643.1

Operating lease right-of-use assets

215.5

203.7

Goodwill

1,303.0

1,284.0

Intangible assets, net

295.9

297.8

Other long-term assets

232.9

219.2

Total assets

$          6,785.7

$           6,534.7

Liabilities and Shareholders' Equity

Current liabilities:

Current portion of long-term debt

$             139.2

$              138.6

Current operating lease liabilities

25.5

26.3

Accounts payable

174.5

171.0

Accrued expenses and other current liabilities

525.9

505.1

Total current liabilities

865.1

841.0

Long-term debt, net of current portion

2,320.3

2,359.2

Long-term operating lease liabilities

200.7

189.7

Deferred income tax liabilities

110.6

105.2

Other long-term liabilities

200.8

190.4

Total liabilities

3,697.5

3,685.5

Commitments and contingencies

Redeemable noncontrolling interests

55.1

56.5

Shareholders' equity:

Encompass Health shareholders' equity

2,280.1

2,067.0

Noncontrolling interests

753.0

725.7

Total shareholders' equity

3,033.1

2,792.7

Total liabilities and shareholders' equity

$          6,785.7

$           6,534.7

Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows 
(Unaudited)

Six Months Ended June 30,

2025

2024

(In Millions)

Cash flows from operating activities:

Net income

$              381.4

$              285.3

Loss from discontinued operations, net of tax

1.4

2.5

Adjustments to reconcile net income to net cash provided by operating activities—

Depreciation and amortization

159.1

143.2

Stock-based compensation

23.8

22.9

Deferred tax expense

5.3

4.2

Other, net

1.1

14.2

Change in assets and liabilities, net of acquisitions—

Accounts receivable

(15.7)

0.9

Other assets

(16.5)

(48.4)

Accounts payable

(2.5)

1.8

Other liabilities

23.3

32.3

Net cash used in operating activities of discontinued operations

(1.9)

(2.7)

Total adjustments

176.0

168.4

Net cash provided by operating activities

558.8

456.2

Cash flows from investing activities:

Purchases of property, equipment, and intangible assets

(320.0)

(296.3)

Proceeds from sale of restricted investments

132.0

17.0

Purchases of restricted investments

(127.8)

(8.2)

Other, net

(8.1)

(0.6)

Net cash used in investing activities

(323.9)

(288.1)

Cash flows from financing activities:

Principal payments on debt, including pre-payments

(10.7)

(2.4)

Borrowings on revolving credit facility

60.0

50.0

Payments on revolving credit facility

(80.0)

(50.0)

Principal payments under finance lease obligations

(11.6)

(10.7)

Repurchases of common stock, including fees and expenses

(56.8)

(16.8)

Dividends paid on common stock

(35.1)

(30.8)

Distributions paid to noncontrolling interests of consolidated affiliates

(73.3)

(52.5)

Taxes paid on behalf of employees for shares withheld

(19.9)

(12.1)

Contributions from noncontrolling interests of consolidated affiliates

—

33.3

Other, net

6.8

1.8

Net cash used in financing activities

(220.6)

(90.2)

Increase in cash, cash equivalents, and restricted cash

14.3

77.9

Cash, cash equivalents, and restricted cash at beginning of period

123.1

104.2

Cash, cash equivalents, and restricted cash at end of period

$              137.4

$              182.1

Encompass Health Corporation and Subsidiaries
Supplemental Information
Earnings Per Share

Three Months
Ended June 30,

Six Months
Ended June 30,

2025

2024

2025

2024

(In Millions, Except Per Share Data)

Adjusted EBITDA

$     318.6

$     271.8

$     632.2

$     544.8

Depreciation and amortization

(79.9)

(72.9)

(159.1)

(143.2)

Interest expense and amortization of debt discounts and fees

(30.4)

(34.3)

(62.2)

(69.5)

Stock-based compensation

(14.3)

(13.6)

(23.8)

(22.9)

(Loss) gain on disposal or impairment of assets

(0.3)

3.0

(0.5)

(10.7)

193.7

154.0

386.6

298.5

Items not indicative of ongoing operating performance:

Change in fair market value of equity securities

0.3

(0.4)

1.0

(0.1)

Asset impairment impact on noncontrolling interests

—

—

—

7.3

Pre-tax income

194.0

153.6

387.6

305.7

Income tax expense

(51.0)

(38.3)

(92.6)

(76.6)

Income from continuing operations ⁽¹⁾

$     143.0

$     115.3

$     295.0

$     229.1

Basic shares

100.6

99.9

100.6

99.9

Diluted shares

102.3

102.0

102.2

102.1

Basic earnings per share ⁽¹⁾

$       1.42

$       1.14

$       2.92

$       2.28

Diluted earnings per share ⁽¹⁾

$       1.40

$       1.13

$       2.88

$       2.24

⁽¹⁾

Income from continuing operations attributable to Encompass Health

Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share

Q2

6 Months

2025

2024

2025

2024

Earnings per share, as reported

$      1.40

$    1.13

$      2.88

$      2.24

Adjustments, net of tax:

Asset impairment impact

—

—

—

0.02

Income tax adjustments

—

(0.02)

(0.11)

(0.03)

Change in fair market value of equity securities

—

—

(0.01)

—

Adjusted earnings per share*

$      1.40

$    1.11

$      2.77

$      2.23

*     Adjusted EPS may not sum due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

Three Months Ended
June 30,

Six Months Ended
June 30,

2025

2024

2025

2024

(In Millions)

Net cash provided by operating activities

$     270.2

$     217.4

$     558.8

$     456.2

Interest expense and amortization of debt discounts and fees

30.4

34.3

62.2

69.5

Gain (loss) on sale of investments, excluding impairments

3.3

(0.1)

3.2

1.2

Equity in net income of nonconsolidated affiliates

1.4

1.4

2.3

2.1

Net income attributable to noncontrolling interests in continuing operations

(42.8)

(32.4)

(87.8)

(58.7)

Amortization of debt-related items

(2.4)

(2.5)

(4.8)

(4.9)

Distributions from nonconsolidated affiliates

(0.9)

(1.2)

(1.4)

(2.0)

Current portion of income tax expense

54.5

40.6

87.3

72.4

Change in assets and liabilities

3.9

11.8

11.4

13.4

Cash used in operating activities of discontinued operations

1.2

2.0

1.9

2.7

Asset impairment impact on noncontrolling interests

—

—

—

(7.3)

Change in fair market value of equity securities

(0.3)

0.4

(1.0)

0.1

Other

0.1

0.1

0.1

0.1

Adjusted EBITDA

$     318.6

$     271.8

$     632.2

$     544.8

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share

For the Three Months Ended June 30, 2025

Adjustments

As
Reported

Income Tax
Adjustments

Change in Fair
Market Value
of Equity
Securities

As
Adjusted

(In Millions, Except Per Share Amounts)

Adjusted EBITDA*

$    318.6

$                —

$                   —

$     318.6

Depreciation and amortization

(79.9)

—

—

(79.9)

Interest expense and amortization of debt discounts and fees

(30.4)

—

—

(30.4)

Stock-based compensation

(14.3)

—

—

(14.3)

Loss on disposal or impairment of assets

(0.3)

—

—

(0.3)

Change in fair market value of equity securities

0.3

—

(0.3)

—

Income from continuing operations before income tax expense

194.0

—

(0.3)

193.7

Provision for income tax expense

(51.0)

0.4

0.1

(50.5)

Income from continuing operations attributable to Encompass Health

$    143.0

$             0.4

$               (0.2)

$     143.2

Diluted earnings per share from continuing operations**

$      1.40

$                —

$                   —

$       1.40

Diluted shares used in calculation

102.3

*     See reconciliation of net income to Adjusted EBITDA.

**    Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share

For the Three Months Ended June 30, 2024

Adjustments

As
Reported

Income Tax
Adjustments

Change in Fair
Market Value
of Equity
Securities

As
Adjusted

(In Millions, Except Per Share Amounts)

Adjusted EBITDA*

$    271.8

$                 —

$                   —

$     271.8

Depreciation and amortization

(72.9)

—

—

(72.9)

Interest expense and amortization of debt discounts and fees

(34.3)

—

—

(34.3)

Stock-based compensation

(13.6)

—

—

(13.6)

Gain on disposal or impairment of assets

3.0

—

—

3.0

Change in fair market value of equity securities

(0.4)

—

0.4

—

Income from continuing operations before income tax expense

153.6

—

0.4

154.0

Provision for income tax expense

(38.3)

(2.4)

(0.1)

(40.8)

Income from continuing operations attributable to Encompass Health

$    115.3

$             (2.4)

$                0.3

$     113.2

$      1.13

$           (0.02)

$                   —

$       1.11

102.0

*     See reconciliation of net income to Adjusted EBITDA.

**    Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share

For the Six Months Ended June 30, 2025

Adjustments

As
Reported

Income Tax
Adjustments

Change in Fair
Market Value
of Equity
Securities

As
Adjusted

(In Millions, Except Per Share Amounts)

Adjusted EBITDA*

$    632.2

$                —

$                   —

$     632.2

Depreciation and amortization

(159.1)

—

—

(159.1)

Interest expense and amortization of debt discounts and fees

(62.2)

—

—

(62.2)

Stock-based compensation

(23.8)

—

—

(23.8)

Loss on disposal or impairment of assets

(0.5)

—

—

(0.5)

Change in fair market value of equity securities

1.0

—

(1.0)

—

Income from continuing operations before income tax expense

387.6

—

(1.0)

386.6

Provision for income tax expense

(92.6)

(11.6)

0.3

(103.9)

Income from continuing operations attributable to Encompass Health

$    295.0

$         (11.6)

$               (0.7)

$     282.7

Diluted earnings per share from continuing operations**

$      2.88

$         (0.11)

$             (0.01)

$       2.77

Diluted shares used in calculation

102.2

*     See reconciliation of net income to Adjusted EBITDA.

**    Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations Attributable to Encompass Health per Diluted Share to Adjusted Earnings Per Share

For the Six Months Ended June 30, 2024

Adjustments

As
Reported

Asset
Impairment
Impact

Income Tax
Adjustments

Change in Fair
Market Value
of Equity
Securities

As
Adjusted

(In Millions, Except Per Share Amounts)

Adjusted EBITDA*

$    544.8

$              —

$                 —

$                   —

$     544.8

Depreciation and amortization

(143.2)

—

—

—

(143.2)

Interest expense and amortization of debt discounts and fees

(69.5)

—

—

—

(69.5)

Stock-based compensation

(22.9)

—

—

—

(22.9)

Loss on disposal or impairment of assets

(10.7)

10.4

—

—

(0.3)

Change in fair market value of equity securities

(0.1)

—

—

0.1

—

Asset impairment impact on noncontrolling interests

7.3

(7.3)

—

—

—

Income from continuing operations before income tax expense

305.7

3.1

—

0.1

308.9

Provision for income tax expense

(76.6)

(1.3)

(3.0)

—

(80.9)

Income from continuing operations attributable to Encompass Health

$    229.1

$           1.8

$             (3.0)

$                0.1

$     228.0

$      2.24

$         0.02

$           (0.03)

$                   —

$       2.23

102.1

*     See reconciliation of net income to Adjusted EBITDA.

**    Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Income to Adjusted EBITDA

Three Months Ended
June 30,

Six Months Ended
June 30,

2025

2024

2025

2024

(In Millions)

Net income

$     184.9

$    146.5

$    381.4

$     285.3

Loss from discontinued operations, net of tax, attributable to Encompass Health

0.9

1.2

1.4

2.5

Net income attributable to noncontrolling interests included in continuing operations

(42.8)

(32.4)

(87.8)

(58.7)

Provision for income tax expense

51.0

38.3

92.6

76.6

Interest expense and amortization of debt discounts and fees

30.4

34.3

62.2

69.5

Depreciation and amortization

79.9

72.9

159.1

143.2

Loss (gain) on disposal or impairment of assets

0.3

(3.0)

0.5

10.7

Stock-based compensation

14.3

13.6

23.8

22.9

Change in fair market value of equity securities

(0.3)

0.4

(1.0)

0.1

Asset impairment impact on noncontrolling interests

—

—

—

(7.3)

Adjusted EBITDA

$     318.6

$    271.8

$    632.2

$     544.8

Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow

Three Months Ended
June 30,

Six Months Ended
June 30,

2025

2024

2025

2024

(In Millions)

Net cash provided by operating activities

$     270.2

$     217.4

$     558.8

$     456.2

Impact of discontinued operations

1.2

2.0

1.9

2.7

Net cash provided by operating activities of continuing operations

271.4

219.4

560.7

458.9

Capital expenditures for maintenance

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