2026 Third Quarter Earnings Call
October 29, 2026 Supplemental information
Summary 4
Revenue 5
Adjusted EBITDA 6
Earnings per share 7-8
Adjusted free cash flow 9
2026 Guidance and guidance considerations 10-11
Adjusted free cash flow assumptions 12
Uses of free cash flow 13
Appendix
Map of locations 15
Growth targets, fundamentals and value drivers 16
Multiple modalities for capacity expansion 17
Development activity 18
RCD and TEAM 19
Debt maturity profile and schedule 20-21
New-store/same-store growth 22
Payment sources 23
Operational metrics 24
Share information 25
Reconciliations to GAAP 26-33
End notes 34-35
SummaryQ3 9 Months
($ in millions, except per share data) 2026 2025 % △ 2026 2025 % △
Encompass Health | |||||||
Net operating revenue | $ 1,609.5 | $ 1,477.5 | 8.9 | % | $ 4,793.5 | $ 4,390.6 | 9.2 % |
Adjusted EBITDA | $ 346.6 | $ 300.1 | 15.5 | % | $ 1,043.4 | $ 932.3 | 11.9 % |
Adjusted EPS | $ 1.52 | $ 1.23 | 23.6 | % | $ 4.67 | $ 3.99 | 17.0 % |
Adjusted free cash flow | $ 263.4 | $ 174.2 | 51.2 | % | $ 634.2 | $ 582.5 | 8.9 % |
u Capacity additions
Key takeaways
Ÿ Opened a 50-bed hospital in Norristown, PA; opened 4 hospitals totaling 189 beds YTD
Ÿ Net pre-opening and ramp-up costs of $4.9 million in Q3; $15.8 million YTD
Ÿ Added 31 beds to existing hospitals in Q3; added 85 beds to existing hospitals YTD
u Balance sheetŸ Issued an additional $100 million of 5.875% Senior Notes due 2034
Ÿ Net leverage of 1.8x
u Shareholder distributionsŸ Paid quarterly dividend of $0.19 per share in July
Ÿ Repurchased 494,657 shares of common stock for $57.9 million in Q3; repurchased 1,906,499 shares for $203.7 million YTD
Ÿ Declared $0.21 per share cash dividend in July (paid in October)
RevenueQ3 Q3 % Change*
($ in millions) 2026 2025
Net operating revenue: | |||
Inpatient | $ 1,569.1 | $ 1,427.3 | 9.9% |
Other(1) | 40.4 | 50.2 | (19.5%) |
Total revenue | $ 1,609.5 | $ 1,477.5 | 8.9% |
(Actual Amounts) | |||
Discharges | 69,605 | 65,839 | 5.7% |
New-store discharge growth | 2.7% | ||
Same-store discharge growth | 3.0% | ||
Net patient revenue per discharge | $ 22,543 | $ 21,679 | 4.0% |
Revenue reserves related to bad debt as a percent of revenue | 2.7 % | 1.9 % | 80 bps |
u Medicaid supplemental payments(2) decreased $10.0 million.**
u Increase in bad debt as a percent of revenue primarily attributable to a billing and collecting disruption issue following a system conversion in Q2 2026
Adjusted EBITDA(3)($ in millions) | 2026 | Revenue 2025 Revenue | ||||
Net operating revenue | $ 1,609.5 | $ 1,477.5 | ||||
Operating expenses: | ||||||
Salaries and benefits | (840.7) | 52.2 | % | (784.8) | 53.1 % | |
Other operating expenses(a) | (244.4) | 15.2 | % | (229.2) | 15.5 % | |
Supplies | (65.0) | 4.0 | % | (64.6) | 4.4 % | |
Occupancy costs | (15.0) | 0.9 | % | (14.9) | 1.0 % | |
Hospital operating expenses | (324.4) | 20.2 | % | (308.7) | 20.9 % | |
General and administrative expenses(b) | (45.6) | 2.8 | % | (39.6) | 2.7 % | |
Other income(c) | 2.9 | 2.6 | ||||
Equity in nonconsolidated affiliates | 0.1 | 1.2 | ||||
Noncontrolling interests in continuing operations(d) | (55.2) | (48.1) | ||||
Adjusted EBITDA | $ 346.6 | $ 300.1 | ||||
u Provider tax expenses(2) increased $1.5 million.* | ||||||
($ in millions) | Q3 2026 | Q3 2025 | ||||
In arriving at Adjusted EBITDA, the following were excluded: | ||||||
(a) Loss on disposal or impairment of assets | $ 0.8 | $ 1.9 | ||||
(b) Stock-based compensation and the change in fair market value of the non-qualified deferred comp plan | $ 14.3 | $ 16.5 | ||||
(c) Change in fair market value of marketable securities and the non-qualified | ||||||
deferred comp plan | $ 1.0 | $ (3.3) | ||||
(d) State regulatory change impact on noncontrolling interests(4) | $ (1.5) | $ - | ||||
Q3 % of
Q3 % of
Earnings per share - as reportedQ3 9 Months
($ in millions, except per share data) | 2026 | 2025 | 2026 | 2025 | |
Adjusted EBITDA | $ 346.6 | $ 300.1 | $ 1,043.4 | $ 932.3 | |
Depreciation and amortization(4) | (95.7) | (82.4) | (273.4) | (241.5) | |
Interest expense and amortization of debt discounts and fees | (32.2) | (30.8) | (96.8) | (93.0) | |
Stock-based compensation | (15.0) | (14.3) | (40.3) | (38.1) | |
Loss on disposal or impairment of assets | (0.8) | (1.9) | (3.2) | (2.4) | |
202.9 | 170.7 | 629.7 | 557.3 | ||
Items not indicative of ongoing operating performance: | |||||
Loss on early extinguishment of debt | - | - | (3.4) | - | |
State regulatory change impact on noncontrolling interests(4) | 1.5 | - | 1.5 | - | |
Change in fair market value of marketable securities | (0.3) | 1.1 | 1.9 | 2.1 | |
Gain on sale(5) | - | - | 17.5 | - | |
Pre-tax income | 204.1 | 171.8 | 647.2 | 559.4 | |
Income tax expense | (53.4) | (44.9) | (163.4) | (137.5) | |
Income from continuing operations* | $ 150.7 | $ 126.9 | $ 483.8 | $ 421.9 | |
Diluted shares (see page 25) | 99.7 | 102.3 | 100.2 | 102.3 | |
Diluted earnings per share* | $ 1.51 | $ 1.24 | $ 4.83 | $ 4.13 | |
Encompass Health
* Earnings per share are determined using income from continuing operations attributable to Encompass Health.
Reconciliations to GAAP provided on pages 26-33. Refer to pages 34-35 for end notes.
7
Adjusted earnings per share(6)Q3 9 Months
2026 | 2025 | 2026 | 2025 | |
Diluted earnings per share, as reported | $ 1.51 | $ 1.24 | $ 4.83 | $ 4.13 |
Adjustments, net of tax: | ||||
State regulatory change impact(4) | 0.01 | - | 0.01 | - |
Income tax adjustments(7) | - | - | (0.05) | (0.12) |
Loss on early extinguishment of debt(8) | - | - | 0.02 | - |
Change in fair market value of marketable securities | - | (0.01) | (0.01) | (0.01) |
Gain on sale(5) | - | - | (0.13) - | |
Adjusted earnings per share* $ 1.52 $ 1.23 $ 4.67 $ 3.99 | ||||
u Adjusted earnings per share removes from GAAP earnings per share the impact of items the Company believes are not indicative of its ongoing operating performance.
* Adjusted EPS may not sum due to rounding. See complete calculations of adjusted earnings per share on pages 29-33.
Encompass Health
Refer to pages 34-35 for end notes.
8
Adjusted free cash flow(9)($ in millions)
$57.8
$111.1
$(4.4)
$(87.3)
$(25.5)
$582.5
$634.2
Adjusted free cash flow 9 mos. 2025
Adjusted EBITDA
Working capital and other
Cash interest expense
Cash tax payments, net of refunds
Maintenance capital expenditures
Adjusted free cash flow 9 mos. 2026
2026 Guidance (as of October 28, 2026)
Net Operating Revenue
Adjusted EBITDA(3)
Adjusted earnings per share from continuing operations attributable to Encompass Health(6)
$6,410 to $6,490
Previous Guidance
$6.02 to $6.25
$1,365 to $1,395
$6,450 to $6,500
Updated Guidance
$6.23 to $6.37
$1,395 to $1,415
($ in millions, except per share data)
2026 Guidance considerations (as of October 28, 2026)
u Pricing
Ÿ Medicare pricing increase of approximately 2.3% for Q4
Ÿ Managed Care pricing increase of 3.5% to 4.0%
Ÿ Bad debt reserves of 2.0% to 2.5% of revenue for Q4
u Labor
Ÿ SWB per FTE increase of 3.5% to 4.0%
u Capacity additions
Ÿ 8 new hospitals with a total of 389 beds
Ÿ Net pre-opening and ramp-up costs of $20 million to $24 million (inclusive of costs associated with 2027 openings incurred in 2026)
Ÿ 145 to 190 beds to existing hospitals
u Corporate
Ÿ Tax rate of approximately 26%
Encompass Health 11
Ÿ Diluted share count of approximately 100 million shares
Encompass Health
11
Encompass Health 12
Increase in cash tax payments primarily due to higher income, additional bonus depreciation and taxes paid in 2026 related to an underpayment from 2025
Adjusted free cash flow(9) assumptions (as of October 28, 2026)
Certain cash flow items ($ in millions) | 9 Months 2026 Actuals | 2025 Actuals | 2026 Assumptions |
Cash interest payments (net of amortization of debt discounts and fees) | $90.2 | $113.6 | $115 to $125 |
Cash payments for income taxes, net of refunds(10) | $176.5 | $124.0 | $200 to $220 |
Working capital and other | $(23.5) | $2.9 | $10 to $40 |
Maintenance CAPEX | $166.0 | $209.5 | $225 to $240 |
Adjusted free cash flow | $634.2 | $817.9 | $770 to $865 |
Encompass Health
Reconciliations to GAAP provided on pages 26-33.
Refer to pages 34-35 for end notes.
12
Encompass Health 13
Uses of free cash flow (as of October 28, 2026)
($ in millions) | 9 Months 2026 Actuals | 2025 Actuals | 2026 Assumptions | |
Capacity expansions | $441.0 | $526.4 | $675 to $725 | |
Growth | Replacement IRFs | 10.2 | 0.5 | 20 to 30 |
$451.2 | $526.9 | $695 to $755 | ||
Debt reduction | Reduction (increase) in total debt(11) | ($108.3) | $7.0 | TBD |
Shareholder | Dividends on common stock | $57.9 | $71.1 | ~ $79 |
distributions | Common stock repurchases | $203.7 | $158.0 | TBD |
Ÿ Common stock repurchase authorization increased to $1 billion(12)
Encompass Health
Refer to pages 34-35 for end notes.
13
Appendix Encompass HealthLargest owner and operator of rehabilitation hospitals
67 are joint ventures
177
Rehabilitation hospitals "IRFs"
Company profile
as of 09/30/26
~$6.3
Billion in revenue
~273,500
patient discharges
Inpatient Rehabilitation Hospitals
Future Inpatient Rehabilitation Hospitals
Future Small Format Inpatient Rehabilitation Hospitals
17
IRFs under development**
39
States and Puerto Rico
Key statistics - trailing four quarters
15
~44,000
employees
*De novos under development - previously announced de novo hospitals under development as of October 28, 2026.
**IRFs under development as of October 28, 2026, include de novo and remote and satellite locations.(13) Refer to pages 34-35 for end notes.
Encompass Health
Growth targets, fundamentals and value drivers u 2023 - 2027 Growth targetsŸ 6 to 10 de novos per year Ÿ 80 to 120 bed additions per year Ÿ 6% to 8% discharge CAGR
u Large, under penetrated, and growing inpatient rehabilitation marketŸ Large addressable market indicated by low conversion rate of presumptively eligible inpatient rehabilitation patients
Ÿ Favorable demographics driving increased demand for rehabilitation services
Ÿ Unparalleled clinical expertise for treating inpatient rehabilitation conditions with consistent delivery of high-quality, cost-effective care
Ÿ Capacity addition strategy delivers attractive financial returns
Ÿ Cash flow and capital availability to fund capacity additions
Ÿ Fragmented sector presents unit acquisition and joint venture opportunities
Ÿ Significant barriers to entry and economies of scale
Ÿ Resilient business model with focus on non-discretionary conditions occurring predominantly in an aging population
u Shareholder distributions
Ÿ Cash dividend (currently $0.21 per share per quarter)
Ÿ $1 billion common stock repurchase authorization(12)
Multiple modalities for capacity expansionDe novos
300-500 beds per year
Bed additions
150-200 beds per year
Small format hospitals
25-100 beds per year
Ÿ 6-10 hospitals per year
Ÿ Freestanding hospitals (inclusive of remote and satellite locations(13)) with greater than 30 beds
Ÿ 4-8 acres of real estate
Ÿ Two primary prototypes
- one and two story - to best fit available real estate
Ÿ Typically can accommodate future expansion
Ÿ Addresses high occupancy levels at existing hospitals
Ÿ Project size can vary depending on market demand, available land, CON requirements, etc.
Ÿ Leverages existing market demand, established referral sources and payor contracts, and elements of fixed infrastructure and management team
Ÿ 1-4 hospitals per year
Ÿ First opening to occur in 2027
Ÿ Freestanding hospital with 20-30 beds
Ÿ Facilitates a hub and spoke strategy in large and growing markets
Ÿ 2-3 acres of real estate within 35 miles of an existing hospital to operate as a remote location
Ÿ Leverages management of existing Encompass Health hospital
Ÿ Non-expandable
Inpatient Rehabilitation Hospitals opened or under development | ||||
Joint | Expected | Number of beds | ||
venture open date | 2026 | 2027 | ||
De novos | ||||
Irmo, SC | 49 | - | ||
Concordville, PA | 50 | - | ||
Loganville, GA | ü | 40 | - | |
Norristown, PA | 50 | - | ||
Bangor, ME | 50 | - | ||
San Antonio, TX | 50 | - | ||
Avondale, AZ | 4Q26 | 60 | - | |
Wesley Chapel, FL | - | 50 | ||
Apollo Beach, FL | - | 50 | ||
St. George, UT | - | 50 | ||
Fishers, IN | - | 50 | ||
Haslet, TX | - | 50 | ||
Flowood, MS | - | 50 | ||
Cookeville, TN | ü | - | 40 | |
Remote and satellite(13) | ||||
Cleveland, TN | 4Q26 | 40 | - | |
Conroe, TX (SFH) | - | 24 | ||
Other bed additions | 145 to 190 | 150 to 200 | ||
Total capacity expansion* | 534 to 579 | 514 to 564 | ||
17
IRF development projects announced and underway**3Q 2026 Development activity highlights | ||
De novos opened | # of beds | JV |
Ÿ Norristown, PA | 50 | |
Beds added to existing hospitals | ||
31 | ||
Remote and satellite announcement | ||
Ÿ Conroe, TX (SFH) | 24 | |
SFH = Small Format Hospital
*All dates are tentative and subject to change
Encompass Health
**IRFs under development as of October 28, 2026, include de novo and remote and satellite locations.(13)
Refer to pages 34-35 for end notes.
18
RCD and TEAMReview Choice Demonstration ("RCD") |
RCD is a five-year demonstration project initiated by the Centers for Medicare & Medicaid Services ("CMS") providing either pre-claim or post-payment claim review to demonstrate compliance with Medicare IRF rules. This demonstration is only applicable to Medicare fee-for-service claims. |
Ÿ In September 2026, CMS announced the expansion of RCD to all IRFs billing under MAC Jurisdiction JJ, effective January 1, 2027. 75 EHC hospitals are subject to this expansion. Ÿ Beginning January 1, 2027, EHC will have 108 IRFs subject to RCD. Ÿ During the initial six-month review period (Cycle 1), providers are subject to either 100% pre-claim review or post-payment review. IRFs that achieve a Cycle 1 affirmation rate of 80% or greater may elect from three review options for Cycle 2: ü 100% pre-claim review ü Selective post-payment review ü Spot check pre-payment review of 5% of claims |
Transforming Episode Accountability Model ("TEAM") | |
A CMS 30-day bundled payment initiative for certain acute care hospitals ("ACHs") covering five surgical episode groups. | Potential impact factors: |
Ÿ Medicare FFS population only for 189 of 930 CBSAs (700+ ACHs) Ÿ 5-year period from Jan. 2026 to Dec. 2030 Ÿ Surgical episode groups included: Lower extremity joint replacement (LEJR); surgical hip and femur fracture treatment (SHFFT); coronary artery bypass graft (CABG); spinal fusion; major bowel procedure Ÿ ACHs may not restrict Medicare beneficiaries' choice of post-acute provider. Ÿ Medicare beneficiaries eligible for Medicare on the basis of having end stage renal disease are excluded from TEAM. | Ÿ 2% of EHC discharges were within TEAM geographic, episode and payor parameters in 2025. Ÿ 89 EHC hospitals are in TEAM markets; 41 are joint ventures Ÿ 98% of the TEAM episodes were within 51 EHC markets in 2025. Ÿ Quality of outcomes impacts ACHs' bonus amounts. |
As of September 30, 2026*
Callable
beginning June 2029
$800
Senior Notes 4.75%
$400
Senior Notes 4.625%
$600
Senior Notes 5.875%
Revolver capacity
$75 Drawn +
$54 reserved for LCs
$400
Senior Notes 4.5%
Callable at 102.313
Callable at par
Callable at 101.583
$871
Available
($ in millions)
2031 2031
2026 -
2027
2028 2029 2030
2031
2032 2033 2034
u Issued an additional $100 million of 5.875% Senior Notes due 2034 in August 2026
September 30, | December 31, | Change in Debt vs. | ||
($ in millions) | 2026 | 2025 | YE 2025 | |
Advances under $1 billion revolving credit facility | $ 75.0 | $ 130.0 | $ (55.0) | |
Bonds Payable: | ||||
4.50% Senior Notes due 2028 | 397.4 | 792.0 | (394.6) | |
4.75% Senior Notes due 2030 | 789.2 | 787.0 | 2.2 | |
4.625% Senior Notes due 2031 | 394.4 | 393.6 | 0.8 | |
5.875% Senior Notes due 2034 | 588.2 | - | 588.2 | |
Other notes payable | 80.0 | 93.6 | (13.6) | |
Finance lease obligations | 274.9 | 294.6 | (19.7) | |
Long-term debt | $ 2,599.1 | $ 2,490.8 | $ 108.3 | |
Debt to Adjusted EBITDA | 1.9x | 2.0x | ||
Leverage net of cash and cash equivalents | 1.8x | 1.9x |
The leverage ratio for 3Q26 stated in terms of the most comparable GAAP measurement would be Debt to Net cash provided by operating activities: 2.0x The leverage ratio for 2025 stated in terms of the most comparable GAAP measurement would be Debt to Net cash provided by operating activities: 2.1x
New-store/same-store growthProsper, TX (40 beds)
Fitchburg, WI (56 beds)
Houston, TX
(61 beds)
Johnston, RI (50 beds) Fort Mill, SC (39 beds)
10.0% Athens, GA
(40 beds) Daytona Beach, FL (50 beds)
Danbury, CT (40 beds)
Norristown, PA
(50 beds)
7.5%
Irmo, SC
(49 beds)
5.0%
2.5%
0.0%
Fort Myers, FL (60 beds)
Concordville, PA (50 beds) Loganville, GA (40 beds)
St. Petersburg, FL (50 beds) Amarillo, TX (50 beds)
Lake Worth, FL (50 beds)
Kissimmee, FL (50 beds) Atlanta, GA (40 beds) Louisville, KY (40 beds)
Discharges | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | Q1 2026 | Q2 2026 | Q3 2026 | |
New store | 3.0% | 3.3% | 1.9% | 2.0% | 2.0% | 1.9% | 2.5% | 2.1% | 2.1% | 2.7% | 2.8% | 2.7% | |
Same store(14) | 5.3% | 6.7% | 4.8% | 6.8% | 5.8% | 4.4% | 4.7% | 2.9% | 3.2% | 1.6% | 2.8% | 3.0% | |
Total by quarter | 8.3% | 10.0% | 6.7% | 8.8% | 7.8% | 6.3% | 7.2% | 5.0% | 5.3% | 4.3% | 5.6% | 5.7% | |
Total by year | 8.7% | 8.3% | 6.0% | ||||||||||
Same store by year(14) | 4.8% | 5.6% | 3.4% |
Q3 9 Months Full Year 2026 2025 2026 2025 2025 | |||||
Medicare | 66.3 % | 64.1 % | 65.7 % | 65.2 % | 65.4 % |
Medicare Advantage | 15.7 | % | 16.6 % | 16.1 | % | 16.7 % | 16.4 % |
Managed care | 10.8 | % | 11.1 % | 10.7 | % | 10.8 % | 10.7 % |
Medicaid | 3.1 | % | 3.4 % | 3.0 | % | 3.1 % | 3.1 % |
Other third-party payors | 0.7 | % | 0.7 % | 0.7 | % | 0.6 % | 0.7 % |
Workers' compensation | 0.5 | % | 0.6 % | 0.5 | % | 0.5 % | 0.5 % |
Patients | 0.5 | % | 0.3 % | 0.5 | % | 0.3 % | 0.3 % |
Other income | 2.4 | % | 3.2 % | 2.8 | % | 2.8 % | 2.9 % |
Total | 100.0 % | 100.0 % | 100.0 % | 100.0 % | 100.0 % | ||
Q3 2026 | Q2 2026 | Q1 2026 | Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Full Year 2025 | ||
Net operating revenues: | (In Millions) | ||||||||
Inpatient | $ 1,569.1 | $ 1,551.6 | $ 1,533.7 | $ 1,497.6 $ 1,427.3 | $ 1,413.7 | $ 1,417.7 | $ 5,756.3 | ||
Other | 40.4 | 45.8 | 52.9 | 47.0 | 50.2 | 44.0 | 37.7 | 178.9 | |
Net operating revenues | $ 1,609.5 $ 1,597.4 $ 1,586.6 | $ 1,544.6 $ 1,477.5 $ 1,457.7 $ 1,455.4 | $ 5,935.2 | ||||||
(Actual Amounts) | |||||||||
Discharges(15) | 69,605 | 68,895 | 67,763 | 67,238 | 65,839 | 65,237 | 64,985 | 263,299 | |
Net patient revenue per discharge | $ 22,543 | $ 22,521 | $ 22,633 | $ 22,273 | $ 21,679 | $ 21,670 | $ 21,816 | $ 21,862 | |
Outpatient visits | 18,789 | 21,742 | 21,935 | 22,325 | 22,361 | 21,597 | 19,955 | 86,238 | |
Average length of stay | 11.9 | 11.9 | 12.1 | 12.0 | 12.1 | 12.0 | 12.2 | 12.1 | |
Occupancy % | 77.0 % | 77.4 % | 78.7 % | 76.3 % | 76.2 % | 76.6 % | 78.8 % | 75.9 % | |
# of licensed beds | 11,722 | 11,641 | 11,541 | 11,465 | 11,352 | 11,233 | 11,159 | 11,465 | |
Occupied beds | 9,026 | 9,010 | 9,083 | 8,748 | 8,650 | 8,604 | 8,793 | 8,702 | |
Full-time equivalents (FTEs) - internal | 30,226 | 29,800 | 29,599 | 29,236 | 29,198 | 28,784 | 28,572 | 28,948 | |
Contract labor FTEs | 272 | 333 | 345 | 313 | 354 | 379 | 375 | 355 | |
Total FTEs(16) | 30,498 | 30,133 | 29,944 | 29,549 | 29,552 | 29,163 | 28,947 | 29,303 | |
EPOB(17) | 3.38 | 3.34 | 3.30 | 3.38 | 3.42 | 3.39 | 3.29 | 3.37 | |
Weighted Average for the Period
Q3 9 Months Full Year
(in millions) | 2026 | 2025 | 2026 | 2025 | 2025 | 2024 | 2023 |
Basic shares outstanding | 98.3 | 100.5 | 98.8 | 100.5 | 100.5 | 99.9 | 99.5 |
Restricted stock awards, dilutive stock options, and restricted | |||||||
stock units | 1.4 | 1.8 | 1.4 | 1.8 | 1.7 | 2.3 | 1.8 |
Diluted shares outstanding | 99.7 | 102.3 | 100.2 | 102.3 | 102.2 | 102.2 | 101.3 |
End of Period
Q3 9 Months Full Year
(in millions) | 2026 | 2025 | 2026 | 2025 | 2025 | 2024 2023 |
Basic shares outstanding | 98.3 | 100.7 | 98.3 | 100.7 | 100.0 | 100.8 100.3 |
Q3 9 Months Full Year
($ in millions) 2026 2025 2026 2025 2025
Net cash provided by operating activities | $ 362.0 | $ 270.8 $ 957.7 $ 829.6 | $ 1,175.6 |
Interest expense and amortization of debt discounts and fees | 32.2 | 30.8 96.8 93.0 | 123.2 |
(Loss) gain on investments, excluding impairments | (0.8) | 3.0 21.8 6.2 | 5.9 |
Equity in net income of nonconsolidated affiliates | 0.1 | 1.2 0.6 3.5 | 4.3 |
Net income attributable to noncontrolling interests in continuing operations | (53.7) | (48.1) (160.9) (135.9) | (192.9) |
Amortization of debt-related items | (2.1) | (2.4) (6.7) (7.2) | (9.6) |
Distributions from nonconsolidated affiliates | (0.1) | - (0.3) (1.4) | (4.1) |
Current portion of income tax expense | 57.2 | 47.0 161.8 134.3 | 170.6 |
Change in assets and liabilities | (48.1) | (1.8) 12.8 9.6 | (4.3) |
Cash used in (provided by) operating activities of discontinued operations | 1.1 | 0.6 (19.2) 2.5 | 1.4 |
State regulatory change impact on noncontrolling interests(4) | (1.5) | - (1.5) - | - |
Change in fair market value of marketable securities | 0.3 | (1.1) (1.9) (2.1) | (2.5) |
Gain on sale(5) | - | - (17.5) - | - |
Other | - | 0.1 (0.1) 0.2 | 0.3 |
Adjusted EBITDA | $ 346.6 | $ 300.1 $ 1,043.4 $ 932.3 | $ 1,267.9 |
Q3 9 Months Full Year
($ in millions) | 2026 | 2025 | 2026 | 2025 | 2025 |
Net income | $ 203.6 | $ 174.6 | $ 659.2 | $ 556.0 | $ 759.1 |
Loss (income) from discontinued operations, net of tax, attributable to Encompass Health | 0.8 | 0.4 (14.5) 1.8 1.0 | |||
Net income attributable to noncontrolling interests included in continuing operations | (53.7) | (48.1) (160.9) (135.9) (192.9) | |||
Provision for income tax expense | 53.4 | 44.9 163.4 137.5 192.9 | |||
Interest expense and amortization of debt discounts and fees | 32.2 | 30.8 96.8 93.0 123.2 | |||
Depreciation and amortization | 95.7 | 82.4 273.4 241.5 327.9 | |||
Loss on early extinguishment of debt | - | - 3.4 - - | |||
Loss on disposal or impairment of assets | 0.8 | 1.9 3.2 2.4 2.7 | |||
Stock-based compensation | 15.0 | 14.3 40.3 38.1 56.5 | |||
State regulatory change impact on noncontrolling interests(4) | (1.5) | - (1.5) - - | |||
Change in fair market value of marketable securities | 0.3 | (1.1) (1.9) (2.1) (2.5) | |||
Gain on sale(5) | - | - (17.5) - - | |||
Adjusted EBITDA | $ 346.6 | $ 300.1 $ 1,043.4 $ 932.3 $ 1,267.9 | |||
($ in millions) | 2026 | 2025 | 2026 | 2025 | 2025 |
Net cash provided by operating activities | $ 362.0 | $ 270.8 | $ 957.7 | $ 829.6 | $ 1,175.6 |
Impact of discontinued operations | 1.1 | 0.6 | (19.2) | 2.5 | 1.4 |
Net cash provided by operating activities of continuing operations | 363.1 | 271.4 | 938.5 | 832.1 | 1,177.0 |
Capital expenditures for maintenance | (56.0) | (61.4) | (166.0) | (140.5) | (209.5) |
Distributions paid to noncontrolling interests of consolidated affiliates | (43.7) | (36.1) | (141.8) | (109.4) | (152.1) |
Items not indicative of ongoing operating | |||||
Transaction costs and related liabilities | - | 0.3 | 3.5 | 0.3 | 2.5 |
Adjusted free cash flow | $ 263.4 | $ 174.2 | $ 634.2 | $ 582.5 | $ 817.9 |
Q3 9 Months Full Year
performance:
Cash dividends on common stock $ 18.7 $ 17.0 $ 57.9 $ 52.1 $ 71.1
For the Three Months Ended September 30, 2026 Adjustments
As Reported
State Regulatory Change Impact
Change in Fair Market Value of Marketable Securities
As Adjusted
($ in millions, except per share amounts)
Adjusted EBITDA | $ 346.6 | $ - | $ - | $ 346.6 | ||
Depreciation and amortization(4) | (95.7) | 2.9 | - | (92.8) | ||
Interest expense and amortization of debt discounts and fees | (32.2) | - | - | (32.2) | ||
Stock-based compensation | (15.0) | - | - | (15.0) | ||
Loss on disposal or impairment of assets | (0.8) | - | - | (0.8) | ||
State regulatory change impact on noncontrolling interests(4) | 1.5 | (1.5) | - | - | ||
Change in fair market value of marketable securities | (0.3) | - | 0.3 | - | ||
Income from continuing operations before income tax expense | 204.1 | 1.4 | 0.3 | 205.8 | ||
Provision for income tax expense | (53.4) | (0.4) | (0.1) | (53.9) | ||
Income from continuing operations attributable to Encompass Health | $ 150.7 | $ | 1.0 | $ | 0.2 | $ 151.9 |
Diluted earnings per share from continuing operations* Diluted shares used in calculation | $ 1.51 $ 0.01 $ - $ 1.52 |
99.7 |
For the Three Months Ended September 30, 2025 Adjustments
Change in Fair Market Value of
As Reported
Income Tax Adjustments
Marketable Securities
As Adjusted
($ in millions, except per share amounts)
Adjusted EBITDA | $ 300.1 | $ - | $ - | $ 300.1 |
Depreciation and amortization | (82.4) | - | - | (82.4) |
Interest expense and amortization of debt discounts and fees | (30.8) | - | - | (30.8) |
Stock-based compensation | (14.3) | - | - | (14.3) |
Loss on disposal or impairment of assets | (1.9) | - | - | (1.9) |
Change in fair market value of marketable securities | 1.1 | - | (1.1) | - |
Income from continuing operations before income tax expense | 171.8 | - | (1.1) | 170.7 |
Provision for income tax expense | (44.9) | (0.2) | 0.3 | (44.8) |
Income from continuing operations attributable to Encompass Health | $ 126.9 $ | (0.2) $ | (0.8) $ 125.9 | |
Diluted earnings per share from continuing operations* | $ 1.24 $ | - $ | (0.01) $ | 1.23 |
Diluted shares used in calculation | 102.3 | |||
For the Nine Months Ended September 30, 2026 Adjustments
As Reported
State Regulatory Change Impact
Loss on Early Exting. of Debt
Income Tax Adjustments(7)
Change in Fair Market Value of Marketable Securities
Gain on Sale(5)
As Adjusted
($ in millions, except per share amounts)
Adjusted EBITDA $1,043.4 $ - $ - $ - $ - $ - $1,043.4
Depreciation and amortization(4) (273.4) 2.9 - - - - (270.5)
Interest expense and amortization of
debt discounts and fees (96.8) - - - - - (96.8)
Stock-based compensation (40.3) - - - - - (40.3) Loss on disposal or impairment of assets (3.2) - - - - - (3.2) Loss on early extinguishment of debt(8) (3.4) - 3.4 - - - -
State regulatory change impact on
noncontrolling interests(4) 1.5 (1.5) - - - - -
Change in fair market value of
marketable securities 1.9 - - - (1.9) - -
Gain on sale(5) 17.5 - - - - (17.5) -
Income from continuing operations
Provision for income tax expense
(163.4)
(0.4)
(0.9)
(5.2)
0.5
4.5
(164.9)
before income tax expense 647.2 1.4 3.4 - (1.9) (17.5) 632.6
Income from continuing operations
attributable to Encompass Health $ 483.8 $ 1.0 $ 2.5 $ (5.2) $ (1.4) $ (13.0) $ 467.7
Diluted earnings per share from continuing operations*
$ 4.83 $ 0.01 $ 0.02 $
(0.05) $
(0.01) $ (0.13) $ 4.67
Diluted shares used in calculation
100.2
Adjusted EPS(6) - YTD Q3 2025For the Nine Months Ended September 30, 2025 Adjustments
Change in Fair Market Value of
As Reported
Income Tax Adjustments(7)
Marketable Securities
As Adjusted
($ in millions, except per share amounts)
Adjusted EBITDA | $ 932.3 | $ - | $ - | $ 932.3 |
Depreciation and amortization | (241.5) | - | - | (241.5) |
Interest expense and amortization of debt discounts and fees | (93.0) | - | - | (93.0) |
Stock-based compensation | (38.1) | - | - | (38.1) |
Loss on disposal or impairment of assets | (2.4) | - | - | (2.4) |
Change in fair market value of marketable securities | 2.1 | - | (2.1) | - |
Income from continuing operations before income tax expense | 559.4 | - | (2.1) | 557.3 |
Provision for income tax expense | (137.5) | (11.8) | 0.6 | (148.7) |
Income from continuing operations attributable to Encompass Health | $ 421.9 $ | (11.8) $ | (1.5) $ 408.6 | |
Diluted earnings per share from continuing operations* | $ 4.13 $ | (0.12) $ | (0.01) $ | 3.99 |
Diluted shares used in calculation | 102.3 | |||
For the Year Ended December 31, 2025 Adjustments
Change in Fair Market Value of
As Reported
Income Tax Adjustments(7)
Marketable Securities
As Adjusted
($ in millions, except per share amounts)
Adjusted EBITDA | $1,267.9 | $ - | $ - | $1,267.9 |
Depreciation and amortization | (327.9) | - | - | (327.9) |
Interest expense and amortization of debt discounts and fees | (123.2) | - | - | (123.2) |
Stock-based compensation | (56.5) | - | - | (56.5) |
Loss on disposal or impairment of assets | (2.7) | - | - | (2.7) |
Change in fair market value of marketable securities | 2.5 | - | (2.5) | - |
Income from continuing operations before income tax expense | 760.1 | - | (2.5) | 757.6 |
Provision for income tax expense | (192.9) | (7.9) | 0.6 | (200.2) |
Income from continuing operations attributable to Encompass Health | $ 567.2 $ | (7.9) $ | (1.9) $ 557.4 | |
Diluted earnings per share from continuing operations* | $ 5.55 $ | (0.08) $ | (0.02) $ | 5.45 |
Diluted shares used in calculation | 102.2 | |||
Historically, we used the term "Outpatient and other" revenue to report revenue related to our outpatient business and other revenue sources. As we have decreased our outpatient business, the associated revenues do not represent the primary source of "Outpatient and other" revenue. As of December 31, 2025, this category of revenue is referred to as "Other" revenue.
Historically, we have used the term "provider tax revenues" to refer to "Medicaid supplemental payments," both of which represent amounts received in connection with state Medicaid programs that are not included in the specific Medicaid claim reimbursements we receive. These amounts include state directed and supplemental payment programs associated with Medicaid. Provider taxes are amounts paid by us to fund, in part, state Medicaid programs. We have used the term "net provider tax revenues" to represent the difference between provider taxes paid and the Medicaid supplemental payments received.
Adjusted EBITDA is a non-GAAP financial measure. The Company's leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a non-GAAP measure. Management and some members of the investment community utilize Adjusted EBITDA as a financial measure and the leverage ratio as a liquidity measure on an ongoing basis. These measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should be aware that in the future the Company may incur expenses similar to the adjustments set forth.
In July of 2026, the governor of North Carolina signed into law S.257, 2026 Appropriations Act, which repealed the requirement of certain healthcare providers to obtain and/or maintain a certificate of need ("CON"). As a result of this repeal, in Q3 2026 we accelerated amortization of our CON asset in North Carolina, increasing depreciation and amortization expense by approximately $2.9 million and reducing noncontrolling interest in continuing operations by approximately $1.5 million (related to our joint venture partner's share of income at one impacted location). The impact of these adjustments have been excluded from the calculation of Adjusted EBITDA and adjusted earnings per share in the third quarter of 2026 given the non-recurring natures of the CON repeal is not indicative of ongoing operating performance.
On December 31, 2025, we entered into an agreement to sell our 50% membership interest in Gamma Knife Center at Barnes-Jewish Hospital, LLC ("Gamma Knife") to our existing joint venture partner, Barnes-Jewish Hospital, LLC, for $17.9 million effective January 1, 2026. We accounted for Gamma Knife as an equity method investment. As a result of this transaction, we recorded a $17.5 million pre-tax gain during the nine months ended September 30, 2026.
The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health ("adjusted earnings per share"), which is a non-GAAP measure. The Company believes the presentation of adjusted earnings per share provides useful additional information to investors because it provides better comparability of ongoing operating performance to prior periods given that it excludes the impact of 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 and equity instruments, loss on early extinguishment of debt, adjustments to its income tax provision (such as valuation allowance adjustments, settlements of income tax claims, windfall tax benefits and executive compensation disallowance), items related to corporate and facility restructurings, and certain other items deemed to be non-indicative of ongoing operating performance. It is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the Company's ongoing operating performance. Accordingly, they can complicate comparisons of the Company's results of operations across periods and comparisons of the Company's results to those of other healthcare companies. Adjusted earnings per share should not be considered as a measure of financial performance under generally accepted accounting principles in the United States as the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted earnings per share is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.
Income tax adjustments primarily relate to windfall tax benefits and executive compensation disallowance.
End notes (continued)In the second quarter of 2026, the Company redeemed $400 million of its 4.50% Senior Notes due 2028. The redemption was completed at 100% of par using cash on hand. As a result of the redemption, the Company recorded a $3.2 million loss on early extinguishment of debt in the second quarter of 2026.
The definition of adjusted free cash flow, which is a non-GAAP measure, is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, distributions to noncontrolling interests, and certain items deemed to be non-indicative of ongoing operating performance. Common stock dividends are not included in the calculation of adjusted free cash flow. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies.
The increase in our assumption for cash taxes compared to our prior assumption (provided February 5, 2026) is primarily driven by (i) gains recognized on the sale of our 50% membership interest in the Gamma Knife Center at Barnes-Jewish Hospital, LLC to our existing joint venture partner for $17.9 million, and (ii) the recovery of approximately $22 million of attorneys' fees and other expenses in Enhabit, Inc. et al. v. Nautic Partners IX, L.P., et al., C.A. No. 2022-0837-LWW (Del. Ch.). The cash associated with these gains is not included in free cash flow.
Cash provided by net debt borrowings were $95.7 million during the nine months ended September 30, 2026. Cash used for net debt redemptions were $29.0 million during the twelve months ended December 31, 2025.
On October 28, 2013, the Company announced its board of directors authorized the repurchase of up to $200 million of its common stock, which has been amended from time to time. On July 24, 2024, the Company's board increased the aggregate common stock repurchase authorization to $500 million. On July 23, 2026, the Company's board approved an increase in the aggregate common stock repurchase authorization to $1.0 billion. As of September 30, 2026, approximately $955 million remained under this authorization.
Our inpatient rehabilitation hospitals ("IRFs") may operate one or more satellite and/or remote locations. Satellite and remote locations are located within 35 miles to one of our existing IRFs but do not have a separate Medicare provider number. As such, they are considered a bed addition, are included in same store results from the day of opening, and are not included in our count of total open hospitals. As of September 30, 2026, we operated 9 remote locations.
Same-store comparisons are calculated based on hospitals open throughout both the full current periods and prior periods presented. These comparisons include the financial results of market consolidation transactions and capacity expansions (including the addition of satellite and remote hospitals) in existing markets.
Represents discharges from 177 consolidated hospitals in Q3 2026; 176 consolidated hospitals in Q2 2026; 174 consolidated hospitals in Q1 2026;
173 consolidated hospitals in Q4 2025; 170 consolidated hospitals in Q3 2025; 168 consolidated hospitals in Q2 2025 and 167 consolidated hospitals in Q1 2025.
Total full-time equivalents included in the table represent Encompass Health employees who participate in or support the operations of our hospitals and include full-time equivalents related to contract labor.
Employees per occupied bed, or "EPOB," is calculated by dividing the number of total full-time equivalents, including full-time equivalents from the utilization of contract labor, by the number of occupied beds during each period.
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