Encompass Health (NYSE: EHC) lifts 2026 guidance and expands $1B buyback
Rhea-AI Filing Summary
Encompass Health Corporation reported higher results for Q2 2026, with net operating revenues of $1,597.4 million, up 9.6% from Q2 2025. Diluted earnings per share from continuing operations were $1.55 compared with $1.40, and Adjusted EBITDA rose 9.2% to $348.0 million. Discharges increased 5.6% to 68,895, driven by 2.8% same‑store discharge growth and a 3.9% rise in net patient revenue per discharge to $22,521.
For the first six months of 2026, net operating revenues reached $3,184.0 million and net income attributable to Encompass Health was $348.4 million, with diluted EPS from continuing operations of $3.32. Management raised full‑year 2026 guidance, projecting net operating revenue of $6,410 to $6,490 million, Adjusted EBITDA of $1,365 to $1,395 million, and adjusted earnings per share of $6.02 to $6.25. Results and outlook are presented using several non‑GAAP measures such as Adjusted EBITDA, adjusted EPS, leverage ratio, and adjusted free cash flow, each reconciled to GAAP metrics.
Liquidity included net cash provided by operating activities of $282.6 million in Q2 and $595.7 million year‑to‑date, while adjusted free cash flow totaled $177.0 million for Q2. The board increased aggregate common stock repurchase authorization to $1 billion; the company had repurchased $145.8 million of common stock year to date and reported cash and cash equivalents of $107.7 million at June 30, 2026.
Positive
- Q2 2026 revenue and earnings growth: net operating revenues rose 9.6% year over year to $1,597.4 million, and diluted EPS from continuing operations increased to $1.55 from $1.40, supported by higher discharges and revenue per discharge.
- Full‑year 2026 guidance raised: net operating revenue is now guided to $6,410 to $6,490 million, Adjusted EBITDA to $1,365 to $1,395 million, and adjusted EPS to $6.02 to $6.25, all above prior ranges.
- Expanded share repurchase capacity: the board increased aggregate common stock repurchase authorization to $1 billion; the company has already repurchased $145.8 million year to date, enhancing flexibility for capital returns.
Negative
- None.
Filing Explained
The disclosure adds covenant and non-GAAP context; dividend, borrowing, and other restrictions are conditional on credit-agreement compliance.
Encompass Health furnished this Form 8-K to report second-quarter results and provide Regulation FD supplemental information; the added structural context is that certain financing and dividend restrictions depend on compliance with its credit agreement.
The filing says its adjusted EPS, Adjusted EBITDA, leverage ratio, and adjusted free cash flow are non-GAAP measures, so they supplement rather than replace GAAP results. It also states that adjusted free cash flow excludes common stock dividends and is not residual cash available for discretionary spending.
The filing says failure to satisfy the credit agreement's interest-coverage or leverage covenants could let lenders require immediate repayment and could restrict additional borrowing, common-stock dividends, certain payments, and acquisitions or dispositions; it does not report a current violation.
The filing directs readers to the June 2026 Form 10-Q, when filed, for the related GAAP cash-flow presentation and additional liquidity detail.
8-K Event Classification
3 items: 2.02, 7.01, 9.01
3 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 7.01
Regulation FD Disclosure
Disclosure
Material non-public information disclosed under Regulation Fair Disclosure, often investor presentations or guidance.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
Q2 2026 net operating revenues: $1,597.4 million
Q2 2026 diluted EPS from continuing operations: $1.55
Q2 2026 Adjusted EBITDA: $348.0 million
+5 more
8 metrics
Q2 2026 net operating revenues
$1,597.4 million
Compared with $1,457.7 million in Q2 2025, a 9.6% increase
Q2 2026 diluted EPS from continuing operations
$1.55
Up from $1.40 in Q2 2025
Q2 2026 Adjusted EBITDA
$348.0 million
Increased from $318.6 million in Q2 2025, a 9.2% rise
Q2 2026 adjusted free cash flow
$177.0 million
Compared with $185.9 million in Q2 2025
Full-year 2026 net operating revenue guidance
$6,410 to $6,490 million
Updated range above prior $6,375 to $6,470 million
Full-year 2026 adjusted EPS guidance
$6.02 to $6.25
Raised from prior range of $5.89 to $6.11
Common stock repurchase authorization
$1 billion
Aggregate authorization after board’s July 23, 2026 approval
Q2 2026 discharges
68,895
Increased 5.6% from 65,237 discharges in Q2 2025
Key Terms
Adjusted EBITDA, adjusted free cash flow, leverage ratio, loss on early extinguishment of debt, +1 more
5 terms
Adjusted EBITDA financial
"Adjusted EBITDA | 348.0 | 318.6 | 29.4 | 9.2 %"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
adjusted free cash flow financial
"The Company also uses adjusted free cash flow as an analytical indicator"
Adjusted free cash flow is the amount of money a company generates from its operations after accounting for essential expenses and investments, like maintaining or upgrading equipment. It shows how much cash is truly available to grow the business, pay debts, or return to shareholders, helping investors see the company's financial health more clearly.
leverage ratio financial
"The leverage ratio referenced therein is defined as the ratio of consolidated total debt"
Leverage ratio measures how much a company relies on borrowed money compared with its own funds or assets, typically expressed as debt relative to equity or total assets. Like a homeowner with a mortgage, higher leverage can amplify returns when business is strong but also raises the chance of big losses or default if revenue falls, so investors use it to judge financial risk and resilience.
loss on early extinguishment of debt financial
"Loss on early extinguishment of debt | 3.2 | — | 3.4 | —"
A loss on early extinguishment of debt is the one-time accounting charge a company records when it pays off a loan or bond before the agreed date and pays more (fees or penalties) than the remaining balance. Think of it like breaking a rental lease early and paying a penalty; it reduces reported profit and uses cash now. Investors watch it because it can lower short-term earnings, affect cash reserves, and signal refinancing or financial stress.
redeemable noncontrolling interests financial
"Redeemable noncontrolling interests | 57.9 | 58.3"
A redeemable noncontrolling interest is a minority ownership stake in a company that the holder can force the company to buy back at a set price or under certain conditions. For investors this matters because it creates a future cash obligation and can be treated more like a liability than permanent equity, affecting a company’s reported debt, net income and valuation — think of it as a part-owner who can cash out, forcing the business to pay them.
Earnings Snapshot
Q2 2026 net operating revenues: $1,597.4 million · Guidance included
Three and six months ended June 30, 2026
Q2 2026 net operating revenues
$1,597.4 million
up 9.6% vs Q2 2025
Q2 2026 diluted EPS from continuing operations
$1.55
up from $1.40 in Q2 2025
Q2 2026 Adjusted EBITDA
$348.0 million
up 9.2% vs $318.6 million in Q2 2025
Q2 2026 discharges
68,895
up 5.6% vs 65,237 in Q2 2025
Guidance
Full-year 2026 guidance: net operating revenue $6,410 to $6,490 million; Adjusted EBITDA $1,365 to $1,395 million; adjusted earnings per share $6.02 to $6.25.
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Encompass Health (EHC) perform financially in Q2 2026?
Encompass Health reported Q2 2026 net operating revenues of $1,597.4 million, up 9.6% from Q2 2025, and diluted EPS from continuing operations of $1.55 versus $1.40 a year earlier. Adjusted EBITDA increased 9.2% to $348.0 million, reflecting higher volumes and revenue per discharge.
What full-year 2026 guidance did Encompass Health (EHC) provide?
The company raised 2026 guidance to net operating revenue of $6,410 to $6,490 million, Adjusted EBITDA of $1,365 to $1,395 million, and adjusted earnings per share of $6.02 to $6.25. These ranges are higher than its previous guidance for all three metrics.
How did Encompass Health’s (EHC) adjusted EBITDA change in Q2 2026?
Adjusted EBITDA for Q2 2026 was $348.0 million, a 9.2% increase from $318.6 million in Q2 2025. For the first six months of 2026, Adjusted EBITDA totaled $696.8 million compared with $632.2 million in the prior-year period, demonstrating higher earnings before interest, taxes, depreciation, and amortization.
What were Encompass Health’s (EHC) key cash flow trends in the first half of 2026?
Net cash provided by operating activities for the first six months of 2026 was $595.7 million, up from $558.8 million a year earlier. Adjusted free cash flow for the same period totaled $370.8 million, after maintenance capital expenditures and distributions to noncontrolling interests.
How are Encompass Health’s (EHC) discharges and revenue per discharge trending?
In Q2 2026, Encompass Health recorded 68,895 discharges, a 5.6% increase from 65,237 in Q2 2025. Same‑store discharge growth was 2.8%, and net patient revenue per discharge rose 3.9% to $22,521, supporting overall revenue growth.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 5, 2026
(Exact name of Registrant as specified in its Charter)
(State or Other Jurisdiction of Incorporation)
| (Commission File Number) | (IRS Employer Identification No.) | ||||
(Address of Principal Executive Offices, Including Zip Code)
(205 ) 967-7116
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
The information contained herein is being furnished pursuant to Item 2.02 of Form 8‑K, “Results of Operations and Financial Condition,” and Item 7.01 of Form 8-K, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 2.02. Results of Operations and Financial Condition.
On August 5, 2026, Encompass Health Corporation (“Encompass Health” or the “Company”) issued a press release reporting the financial results of the Company for the three and six months ended June 30, 2026. A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.
The Company uses “same-store” comparisons to explain the changes in certain performance metrics within its financial statements. Same-store comparisons are calculated based on hospitals open throughout both the full current 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, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company's results of operations.
ITEM 7.01. Regulation FD Disclosure.
See Item 2.02, “Results of Operations and Financial Condition,” above.
In addition, a copy of the supplemental information which will be discussed during the Company’s earnings call at 10:00 a.m. Eastern Time on Thursday, August 6, 2026 is attached to this report as Exhibit 99.2 and incorporated herein by reference.
Note Regarding Presentation of Non-GAAP Financial Measures
The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow.
The Company is providing adjusted earnings per share from continuing operations attributable to Encompass Health (“adjusted earnings per share”). 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 the Company believes to be non-indicative of its 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 (“GAAP”) 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. The Company reconciles adjusted earnings per share to earnings per share in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.
The leverage ratio referenced therein is defined as the ratio of consolidated total debt to Adjusted EBITDA for the trailing four quarters. The Company believes its leverage ratio and Adjusted EBITDA are measures of its ability to service its debt and its ability to make capital expenditures. Additionally, the leverage ratio is a standard measurement used by investors to gauge the creditworthiness of an institution. The Company’s credit agreement also includes a maximum leverage ratio financial covenant which allows the Company to deduct cash on hand from consolidated total debt. In calculating the leverage ratio under our credit agreement, we are permitted to use pro forma Adjusted EBITDA, the calculation of which includes historical income statement items and pro forma adjustments, subject to certain limitations, resulting from (1) dispositions and repayments or incurrence of debt and (2) investments, acquisitions, mergers, amalgamations, consolidations and other operational changes to the extent such items or effects are not yet reflected in our trailing four-quarter financial statements. The Company reconciles Adjusted EBITDA to net cash provided by operating activities and net income in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2.
The Company uses Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants contained within the Company’s credit agreement, which is discussed in more detail in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” and Note 8, Long-term Debt, to the consolidated financial statements included in its Annual Report on Form 10‑K for the year ended December 31, 2025 (the “2025 Form 10‑K”). These covenants are material terms of the credit agreement. Noncompliance with these financial covenants under the credit agreement—its interest coverage ratio and its leverage ratio—could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might be on terms less favorable to those in the Company’s existing credit agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying common stock dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the Company’s assessment of its liquidity.
In general terms, the credit agreement definition of Adjusted EBITDA, therein referred to as “Adjusted Consolidated EBITDA,” allows the Company to add back to consolidated net income interest expense, income taxes, and depreciation and amortization and then add back to consolidated net income (1) all unusual or nonrecurring items reducing consolidated net income (of which only up to $10 million in a year may be cash expenditures), (2) any losses from discontinued operations, (3) non-ordinary course fees, costs and expenses incurred with respect to any litigation or settlement, (4) share-based compensation expense, (5) costs and expenses associated with changes in the fair value of marketable securities, (6) costs and expenses associated with the issuance or prepayment of debt and acquisitions, and (7) any restructuring charges and certain pro-forma cost savings and synergies related to transactions and initiatives, which in the aggregate are not in excess of 25% of Adjusted Consolidated EBITDA. The Company also subtracts from consolidated net income all unusual or nonrecurring items to the extent they increase consolidated net income.
The calculation of Adjusted EBITDA under the credit agreement does not require us to deduct net income attributable to noncontrolling interests or gains on fair value adjustments of hedging and equity instruments, disposal of assets, and development activities. It also does not allow us to add back losses on fair value adjustments of hedging instruments or unusual or nonrecurring cash expenditures in excess of $10 million. These items and amounts, in addition to the items falling within the credit agreement’s “unusual or nonrecurring” classification, may occur in future periods, but can vary significantly from period to period and may not directly relate to, or be indicative of, the Company's ongoing liquidity or operating performance. Accordingly, the Adjusted EBITDA calculation presented here includes adjustments for them.
Adjusted EBITDA is not a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financing activities. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2025 Form 10‑K.
The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Management believes the presentation of adjusted free cash flow provides investors an efficient means by which they can evaluate the Company’s capacity to reduce debt, pursue development activities, and return capital to its common stockholders. The calculation of adjusted free cash flow and a reconciliation of net cash provided by operating activities to adjusted free cash flow are included in the press release attached as Exhibit 99.1 and the supplemental information attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities. The Company's definition of adjusted free cash flow 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. The Company’s definition of adjusted free cash flow is limited and does not represent residual cash flows available for discretionary spending. 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. See the consolidated statements of cash flows included in the 2025 Form 10‑K, the condensed consolidated statements of cash flows included in the Company's quarterly report on Form 10-Q for the quarterly period ended June 30, 2026 (the "June 2026 Form 10-Q"), when filed, and in the press release attached as Exhibit 99.1 for the GAAP measures of cash flows from operating, investing, and financing activities.
Forward-Looking Statements
The information contained in the press release and supplemental information includes certain estimates, projections, and other forward-looking statements that involve known and unknown risks and relate to, among other things, future events, the business model, strategy, outlook and guidance, growth targets, labor cost trends, financial plans, dividend strategies or payments, effective income tax rates, plans to repurchase its debt or equity securities, future financial performance, projected business results, ability to return value to its shareholders, projected capital expenditures and development plans, leverage ratio, guidance considerations, and the impact of future legislation or regulation. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These estimates, projections, and other forward-looking statements are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.
There can be no assurance that any estimates, projections, or forward-looking statements will be realized.
All such estimates, projections, and forward-looking statements speak only as of the date hereof. The Company undertakes no duty to publicly update or revise that information.
You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking statements in this report, the press release, and supplemental information as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in the attached press release and in the 2025 Form 10‑K, the June 2026 Form 10-Q, when filed, and in other documents the Company previously filed with the SEC, many of which are beyond the Company’s control. These factors may cause actual results to differ materially from the views, beliefs, and estimates expressed herein.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | |||||||
99.1 | Press release of Encompass Health Corporation, dated August 5, 2026 | |||||||
99.2 | Supplemental information provided in connection with the second quarter 2026 earnings call of Encompass Health Corporation | |||||||
| 104 | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| ENCOMPASS HEALTH CORPORATION | ||||||||
| By: | /S/ DOUGLAS E. COLTHARP | |||||||
| Name: | Douglas E. Coltharp | |||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||
Dated: August 5, 2026
Exhibit 99.1
| Media Contact | August 5, 2026 | ||||
| Polly Manuel, 205 969-4532 | |||||
| polly.manuel@encompasshealth.com | |||||
| Investor Relations Contact | |||||
| Mark Miller, 205 970-5860 | |||||
| mark.miller@encompasshealth.com | |||||
Encompass Health reports results for second quarter 2026
Increases full-year guidance
Announces increase in common stock repurchase authorization
BIRMINGHAM, Ala. - Encompass Health Corporation (NYSE: EHC), the largest owner and operator of inpatient rehabilitation hospitals in the United States, today reported its results of operations for the second quarter ended June 30, 2026.
Summary results
| Growth | |||||||||||||||||||||||
| Q2 2026 | Q2 2025 | Dollars | Percent | ||||||||||||||||||||
| (In Millions, Except Per Share Data) | |||||||||||||||||||||||
| Net operating revenue | $ | 1,597.4 | $ | 1,457.7 | $ | 139.7 | 9.6 | % | |||||||||||||||
Income from continuing operations attributable to Encompass Health per diluted share | 1.55 | 1.40 | 0.15 | 10.7 | % | ||||||||||||||||||
| Adjusted earnings per share | 1.55 | 1.40 | 0.15 | 10.7 | % | ||||||||||||||||||
Cash flows provided by operating activities | 282.6 | 270.2 | 12.4 | 4.6 | % | ||||||||||||||||||
| Adjusted EBITDA | 348.0 | 318.6 | 29.4 | 9.2 | % | ||||||||||||||||||
| Adjusted free cash flow | 177.0 | 185.9 | (8.9) | (4.8) | % | ||||||||||||||||||
| (Actual Amounts) | |||||||||||||||||||||||
| Discharges | 68,895 | 65,237 | 5.6 | % | |||||||||||||||||||
| Same-store discharge growth | 2.8 | % | |||||||||||||||||||||
| Net patient revenue per discharge | $ | 22,521 | $ | 21,670 | 3.9 | % | |||||||||||||||||
See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.
“We are very pleased with our performance for the second quarter, as revenue increased 9.6% and Adjusted EBITDA grew 9.2%,” said Mark Tarr, President and Chief Executive Officer. “Through the first half of the year, we have opened three hospitals totaling 139 beds and added 54 beds to existing hospitals. We expect to open five additional hospitals and add more than 100 beds to existing facilities before year end, further increasing access to high-quality inpatient rehabilitation care. Our value proposition and disciplined operating strategy continue to be validated, and we remain highly optimistic about the long-term prospects of our business.”
1 | ||||||||
2026 Guidance
The Company increased its full-year guidance as follows:
| Full-Year 2026 Guidance | |||||||||||
| Previous Guidance | Updated Guidance | ||||||||||
| (In Millions, Except Per Share Data) | |||||||||||
| Net operating revenue | $6,375 to $6,470 | $6,410 to $6,490 | |||||||||
| Adjusted EBITDA | $1,350 to $1,380 | $1,365 to $1,395 | |||||||||
| Adjusted earnings per share from continuing operations attributable to Encompass Health | $5.89 to $6.11 | $6.02 to $6.25 | |||||||||
For considerations regarding the Company’s 2026 guidance, see the supplemental information posted on the Company’s website at http://investor.encompasshealth.com. See also the “Other information” section below for an explanation of why the Company does not provide guidance for comparable GAAP measures for Adjusted EBITDA and adjusted earnings per share.
Common stock repurchase authorization
On July 23, 2026, the Company’s board of directors approved an increase in the aggregate common stock repurchase authorization to $1 billion. The Company repurchased $145.8 million of its common stock year to date and had approximately $188 million remaining under the prior authorization as of June 30, 2026.
Earnings conference call and webcast
The Company will host an investor conference call at 10:00 a.m. Eastern Time on Thursday, August 6, 2026 to discuss its results for the second quarter of 2026. For reference during the call, the Company will post certain supplemental information at http://investor.encompasshealth.com.
The conference call may be accessed by dialing 833 354-6854 and giving the conference ID EHCQ226. International callers should dial 785 838-9343 and give the same conference ID. Please call approximately ten minutes before the start of the call to ensure you are connected. The conference call will also be webcast live and will be available for on-line replay at http://investor.encompasshealth.com by clicking on an available link.
About Encompass Health
Encompass Health (NYSE: EHC) is the largest owner and operator of inpatient rehabilitation hospitals in the United States. With a national footprint that includes 176 hospitals in 39 states and Puerto Rico, the Company provides high-quality, compassionate rehabilitative care for patients recovering from a major injury or illness, using advanced technology and innovative treatments to maximize recovery. Encompass Health is recognized by Newsweek as America’s Most Awarded Leader in Inpatient Rehabilitation and is ranked among Fortune's World’s Most Admired Companies™1 and Forbes’ America’s Best Companies. It is also recognized by Becker’s Healthcare and Modern Healthcare as a top healthcare employer. For more information, visit encompasshealth.com, or follow us on our newsroom, X, Instagram and Facebook.
1 From Fortune. © 2026 Fortune Media IP Limited. All rights reserved. Fortune® is a registered trademark and Fortune World’s Most Admired Companies™ is trademark of Fortune Media IP Limited and are used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Encompass Health.
2 | ||||||||
Other information
The information in this press release is summarized and should be read in conjunction with the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (the “June 2026 Form 10-Q”), when filed, as well as the Company’s Current Report on Form 8-K filed on August 5, 2026 (the “Q2 Earnings Form 8-K”), to which this press release is attached as Exhibit 99.1. In addition, the Company will post supplemental information today on its website at http://investor.encompasshealth.com for reference during its August 6, 2026 earnings call.
The financial data contained in the press release and supplemental information include non-GAAP financial measures, including the Company’s adjusted earnings per share, leverage ratio, Adjusted EBITDA, and adjusted free cash flow. Reconciliations to their most comparable GAAP measure, except with regard to non-GAAP guidance, are included below or in the Q2 Earnings Form 8-K. Readers are encouraged to review the “Note Regarding Presentation of Non-GAAP Financial Measures” included in the Q2 Earnings Form 8-K which provides further explanation and disclosure regarding the Company’s use of these non-GAAP financial measures.
Excluding net operating revenues, the Company does not provide guidance on a GAAP basis because it is unable to predict, with reasonable certainty, the future impact of items that are deemed to be outside the control of the Company or otherwise not indicative of its ongoing operating performance. Such items include 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 instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and certain other items the Company believes to be not indicative of its ongoing operations. These items cannot be reasonably predicted and will depend on several factors, including industry and market conditions, and could be material to the Company’s results computed in accordance with GAAP.
However, the following reasonably estimable GAAP measures for 2026 would be included in a reconciliation for Adjusted EBITDA if the other reconciling GAAP measures could be reasonably predicted:
•Interest expense and amortization of debt discounts and fees - approximately $130 million
•Amortization of debt-related items - approximately $10 million
The Q2 Earnings Form 8-K and, when filed, the June 2026 Form 10-Q can be found on the Company’s website at http://investor.encompasshealth.com and the SEC's website at www.sec.gov.
3 | ||||||||
Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions, Except Per Share Data) | |||||||||||||||||||||||
| Net operating revenues | $ | 1,597.4 | $ | 1,457.7 | $ | 3,184.0 | $ | 2,913.1 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Salaries and benefits | 820.3 | 767.7 | 1,638.4 | 1,530.0 | |||||||||||||||||||
| Other operating expenses | 254.9 | 213.8 | 496.8 | 431.3 | |||||||||||||||||||
| Occupancy costs | 14.7 | 14.7 | 29.9 | 29.6 | |||||||||||||||||||
| Supplies | 66.1 | 63.1 | 130.4 | 125.3 | |||||||||||||||||||
| General and administrative expenses | 62.6 | 59.4 | 120.8 | 111.7 | |||||||||||||||||||
| Depreciation and amortization | 90.4 | 79.9 | 177.7 | 159.1 | |||||||||||||||||||
| Total operating expenses | 1,309.0 | 1,198.6 | 2,594.0 | 2,387.0 | |||||||||||||||||||
| Loss on early extinguishment of debt | 3.2 | — | 3.4 | — | |||||||||||||||||||
| Interest expense and amortization of debt discounts and fees | 32.8 | 30.4 | 64.6 | 62.2 | |||||||||||||||||||
| Other income | (9.1) | (6.7) | (27.8) | (9.2) | |||||||||||||||||||
| Equity in net income of nonconsolidated affiliates | (0.1) | (1.4) | (0.5) | (2.3) | |||||||||||||||||||
| Income from continuing operations before income tax expense | 261.6 | 236.8 | 550.3 | 475.4 | |||||||||||||||||||
| Provision for income tax expense | 53.6 | 51.0 | 110.0 | 92.6 | |||||||||||||||||||
| Income from continuing operations | 208.0 | 185.8 | 440.3 | 382.8 | |||||||||||||||||||
| (Loss) income from discontinued operations, net of tax | (0.6) | (0.9) | 15.3 | (1.4) | |||||||||||||||||||
| Net income | 207.4 | 184.9 | 455.6 | 381.4 | |||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | (53.5) | (42.8) | (107.2) | (87.8) | |||||||||||||||||||
| Net income attributable to Encompass Health | $ | 153.9 | $ | 142.1 | $ | 348.4 | $ | 293.6 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 98.8 | 100.6 | 99.0 | 100.6 | |||||||||||||||||||
| Diluted | 100.0 | 102.3 | 100.3 | 102.2 | |||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Basic earnings per share attributable to Encompass Health common shareholders: | |||||||||||||||||||||||
Continuing operations | $ | 1.56 | $ | 1.42 | $ | 3.36 | $ | 2.92 | |||||||||||||||
Discontinued operations | (0.01) | (0.01) | 0.15 | (0.01) | |||||||||||||||||||
Net income | $ | 1.55 | $ | 1.41 | $ | 3.51 | $ | 2.91 | |||||||||||||||
Diluted earnings per share attributable to Encompass Health common shareholders: | |||||||||||||||||||||||
Continuing operations | $ | 1.55 | $ | 1.40 | $ | 3.32 | $ | 2.88 | |||||||||||||||
Discontinued operations | (0.01) | (0.01) | 0.15 | (0.01) | |||||||||||||||||||
Net income | $ | 1.54 | $ | 1.39 | $ | 3.47 | $ | 2.87 | |||||||||||||||
| Amounts attributable to Encompass Health common shareholders: | |||||||||||||||||||||||
| Income from continuing operations | $ | 154.5 | $ | 143.0 | $ | 333.1 | $ | 295.0 | |||||||||||||||
| (Loss) income from discontinued operations, net of tax | (0.6) | (0.9) | 15.3 | (1.4) | |||||||||||||||||||
| Net income attributable to Encompass Health | $ | 153.9 | $ | 142.1 | $ | 348.4 | $ | 293.6 | |||||||||||||||
4 | ||||||||
Encompass Health Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| June 30, 2026 | December 31, 2025 | ||||||||||
| (In Millions) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 107.7 | $ | 72.2 | |||||||
| Restricted cash | 25.8 | 30.7 | |||||||||
| Accounts receivable | 687.3 | 619.2 | |||||||||
| Other current assets | 220.2 | 183.8 | |||||||||
| Total current assets | 1,041.0 | 905.9 | |||||||||
| Property and equipment, net | 4,341.7 | 4,101.6 | |||||||||
| Operating lease right-of-use assets | 198.2 | 212.6 | |||||||||
| Goodwill | 1,323.5 | 1,317.6 | |||||||||
| Intangible assets, net | 306.8 | 308.3 | |||||||||
| Other long-term assets | 246.3 | 243.7 | |||||||||
| Total assets | $ | 7,457.5 | $ | 7,089.7 | |||||||
| Liabilities and Shareholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | 35.9 | $ | 43.6 | |||||||
| Current operating lease liabilities | 27.5 | 26.5 | |||||||||
| Accounts payable | 221.6 | 178.2 | |||||||||
| Accrued expenses and other current liabilities | 588.4 | 588.1 | |||||||||
| Total current liabilities | 873.4 | 836.4 | |||||||||
| Long-term debt, net of current portion | 2,598.1 | 2,447.2 | |||||||||
| Long-term operating lease liabilities | 180.8 | 196.6 | |||||||||
| Deferred income tax liabilities | 131.9 | 126.8 | |||||||||
| Other long-term liabilities | 212.2 | 206.9 | |||||||||
| Total liabilities | 3,996.4 | 3,813.9 | |||||||||
| Commitments and contingencies | |||||||||||
| Redeemable noncontrolling interests | 57.9 | 58.3 | |||||||||
| Shareholders’ equity: | |||||||||||
| Encompass Health shareholders’ equity | 2,597.7 | 2,438.2 | |||||||||
| Noncontrolling interests | 805.5 | 779.3 | |||||||||
| Total shareholders’ equity | 3,403.2 | 3,217.5 | |||||||||
| Total liabilities and shareholders’ equity | $ | 7,457.5 | $ | 7,089.7 | |||||||
5 | ||||||||
Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In Millions) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 455.6 | $ | 381.4 | |||||||
| (Income) loss from discontinued operations, net of tax | (15.3) | 1.4 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities— | |||||||||||
| Depreciation and amortization | 177.7 | 159.1 | |||||||||
| Loss on early extinguishment of debt | 3.4 | — | |||||||||
| Stock-based compensation | 25.3 | 23.8 | |||||||||
| Deferred tax expense | 5.4 | 5.3 | |||||||||
| Gain on investments | (22.6) | (3.2) | |||||||||
| Other, net | 6.8 | 4.3 | |||||||||
| Change in assets and liabilities, net of acquisitions— | |||||||||||
| Accounts receivable | (63.4) | (15.7) | |||||||||
| Other assets | (28.4) | (16.5) | |||||||||
| Accounts payable | 20.3 | (2.5) | |||||||||
| Other liabilities | 10.6 | 23.3 | |||||||||
| Net cash provided by (used in) operating activities of discontinued operations | 20.3 | (1.9) | |||||||||
| Total adjustments | 155.4 | 176.0 | |||||||||
| Net cash provided by operating activities | 595.7 | 558.8 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property, equipment, and intangible assets | (382.7) | (320.0) | |||||||||
| Proceeds from sale of restricted investments | 59.6 | 132.0 | |||||||||
| Purchases of restricted investments | (54.5) | (127.8) | |||||||||
| Other, net | (8.1) | (8.1) | |||||||||
| Net cash used in investing activities | (385.7) | (323.9) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from bond issuance | 500.0 | — | |||||||||
| Principal payments on debt, including pre-payments | (411.8) | (10.7) | |||||||||
| Borrowings on revolving credit facility | 670.0 | 60.0 | |||||||||
| Payments on revolving credit facility | (600.0) | (80.0) | |||||||||
| Principal payments under finance lease obligations | (12.9) | (11.6) | |||||||||
| Debt amendment and issuance costs | (11.8) | — | |||||||||
| Repurchases of common stock, including fees and expenses | (145.8) | (56.8) | |||||||||
| Dividends paid on common stock | (39.2) | (35.1) | |||||||||
| Distributions paid to noncontrolling interests of consolidated affiliates | (98.1) | (73.3) | |||||||||
| Taxes paid on behalf of employees for shares withheld | (30.9) | (19.9) | |||||||||
| Other, net | 1.1 | 6.8 | |||||||||
| Net cash used in financing activities | (179.4) | (220.6) | |||||||||
| Increase in cash, cash equivalents, and restricted cash | 30.6 | 14.3 | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 102.9 | 123.1 | |||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 133.5 | $ | 137.4 | |||||||
6 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Earnings Per Share
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions, Except Per Share Data) | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 348.0 | $ | 318.6 | $ | 696.8 | $ | 632.2 | |||||||||||||||
Depreciation and amortization | (90.4) | (79.9) | (177.7) | (159.1) | |||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (32.8) | (30.4) | (64.6) | (62.2) | |||||||||||||||||||
| Stock-based compensation | (13.8) | (14.3) | (25.3) | (23.8) | |||||||||||||||||||
| Loss on disposal or impairment of assets | (2.1) | (0.3) | (2.4) | (0.5) | |||||||||||||||||||
| 208.9 | 193.7 | 426.8 | 386.6 | ||||||||||||||||||||
| Items not indicative of ongoing operating performance: | |||||||||||||||||||||||
| Loss on early extinguishment of debt | (3.2) | — | (3.4) | — | |||||||||||||||||||
| Change in fair market value of marketable securities | 2.4 | 0.3 | 2.2 | 1.0 | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | 17.5 | — | |||||||||||||||||||
| Pre-tax income | 208.1 | 194.0 | 443.1 | 387.6 | |||||||||||||||||||
Income tax expense | (53.6) | (51.0) | (110.0) | (92.6) | |||||||||||||||||||
Income from continuing operations (1) | $ | 154.5 | $ | 143.0 | $ | 333.1 | $ | 295.0 | |||||||||||||||
| Basic shares | 98.8 | 100.6 | 99.0 | 100.6 | |||||||||||||||||||
| Diluted shares | 100.0 | 102.3 | 100.3 | 102.2 | |||||||||||||||||||
Basic earnings per share (1) | $ | 1.56 | $ | 1.42 | $ | 3.36 | $ | 2.92 | |||||||||||||||
Diluted earnings per share (1) | $ | 1.55 | $ | 1.40 | $ | 3.32 | $ | 2.88 | |||||||||||||||
(1)Income from continuing operations attributable to Encompass Health
7 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Earnings per share, as reported | $ | 1.55 | $ | 1.40 | $ | 3.32 | $ | 2.88 | |||||||||||||||
| Adjustments, net of tax: | |||||||||||||||||||||||
Income tax adjustments | (0.01) | — | (0.05) | (0.11) | |||||||||||||||||||
| Loss on early extinguishment of debt | 0.02 | — | 0.02 | — | |||||||||||||||||||
| Change in fair market value of marketable securities | (0.02) | — | (0.02) | (0.01) | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | (0.13) | — | |||||||||||||||||||
Adjusted earnings per share* | $ | 1.55 | $ | 1.40 | $ | 3.15 | $ | 2.77 | |||||||||||||||
* Adjusted EPS may not sum due to rounding.
8 | ||||||||
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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
Net cash provided by operating activities | $ | 282.6 | $ | 270.2 | $ | 595.7 | $ | 558.8 | |||||||||||||||
Interest expense and amortization of debt discounts and fees | 32.8 | 30.4 | 64.6 | 62.2 | |||||||||||||||||||
| Gain on investments, excluding impairments | 6.4 | 3.3 | 22.6 | 3.2 | |||||||||||||||||||
Equity in net income of nonconsolidated affiliates | 0.1 | 1.4 | 0.5 | 2.3 | |||||||||||||||||||
Net income attributable to noncontrolling interests in continuing operations | (53.5) | (42.8) | (107.2) | (87.8) | |||||||||||||||||||
Amortization of debt-related items | (2.2) | (2.4) | (4.6) | (4.8) | |||||||||||||||||||
Distributions from nonconsolidated affiliates | (0.1) | (0.9) | (0.2) | (1.4) | |||||||||||||||||||
| Current portion of income tax expense | 56.7 | 54.5 | 104.6 | 87.3 | |||||||||||||||||||
| Change in assets and liabilities | 27.1 | 3.9 | 60.9 | 11.4 | |||||||||||||||||||
| Cash used in (provided by) operating activities of discontinued operations | 0.9 | 1.2 | (20.3) | 1.9 | |||||||||||||||||||
| Change in fair market value of marketable securities | (2.4) | (0.3) | (2.2) | (1.0) | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | (17.5) | — | |||||||||||||||||||
| Other | (0.4) | 0.1 | (0.1) | 0.1 | |||||||||||||||||||
| Adjusted EBITDA | $ | 348.0 | $ | 318.6 | $ | 696.8 | $ | 632.2 | |||||||||||||||
9 | ||||||||
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, 2026 | |||||||||||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||
| As Reported | Loss on Early Exting. of Debt | Income Tax Adjustments | Change in Fair Market Value of Marketable Securities | As Adjusted | |||||||||||||||||||||||||
| (In Millions, Except Per Share Amounts) | |||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 348.0 | $ | — | $ | — | $ | — | $ | 348.0 | |||||||||||||||||||
| Depreciation and amortization | (90.4) | — | — | — | (90.4) | ||||||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (32.8) | — | — | — | (32.8) | ||||||||||||||||||||||||
| Stock-based compensation | (13.8) | — | — | — | (13.8) | ||||||||||||||||||||||||
| Loss on disposal or impairment of assets | (2.1) | — | — | — | (2.1) | ||||||||||||||||||||||||
| Loss on early extinguishment of debt | (3.2) | 3.2 | — | — | — | ||||||||||||||||||||||||
| Change in fair market value of marketable securities | 2.4 | — | — | (2.4) | — | ||||||||||||||||||||||||
Income from continuing operations before income tax expense | 208.1 | 3.2 | — | (2.4) | 208.9 | ||||||||||||||||||||||||
| Provision for income tax expense | (53.6) | (0.8) | (0.5) | 0.6 | (54.3) | ||||||||||||||||||||||||
Income from continuing operations attributable to Encompass Health | $ | 154.5 | $ | 2.4 | $ | (0.5) | $ | (1.8) | $ | 154.6 | |||||||||||||||||||
Diluted earnings per share from continuing operations** | $ | 1.55 | $ | 0.02 | $ | (0.01) | $ | (0.02) | $ | 1.55 | |||||||||||||||||||
Diluted shares used in calculation | 100.0 | ||||||||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
10 | ||||||||
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 Marketable 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 marketable 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 | ||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
11 | ||||||||
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, 2026 | |||||||||||||||||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||||||||
| As Reported | Loss on Early Exting. of Debt | Income Tax Adjustments | Change in Fair Market Value of Marketable Securities | Gain on Sale of Gamma Knife | As Adjusted | ||||||||||||||||||||||||||||||
| (In Millions, Except Per Share Amounts) | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 696.8 | $ | — | $ | — | $ | — | $ | — | $ | 696.8 | |||||||||||||||||||||||
| Depreciation and amortization | (177.7) | — | — | — | — | (177.7) | |||||||||||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | (64.6) | — | — | — | — | (64.6) | |||||||||||||||||||||||||||||
| Stock-based compensation | (25.3) | — | — | — | — | (25.3) | |||||||||||||||||||||||||||||
| Loss on disposal or impairment of assets | (2.4) | — | — | — | — | (2.4) | |||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | (3.4) | 3.4 | — | — | — | — | |||||||||||||||||||||||||||||
| Change in fair market value of marketable securities | 2.2 | — | — | (2.2) | — | — | |||||||||||||||||||||||||||||
| Gain on sale of Gamma Knife | 17.5 | — | — | — | (17.5) | — | |||||||||||||||||||||||||||||
Income from continuing operations before income tax expense | 443.1 | 3.4 | — | (2.2) | (17.5) | 426.8 | |||||||||||||||||||||||||||||
| Provision for income tax expense | (110.0) | (0.9) | (5.2) | 0.6 | 4.5 | (111.0) | |||||||||||||||||||||||||||||
Income from continuing operations attributable to Encompass Health | $ | 333.1 | $ | 2.5 | $ | (5.2) | $ | (1.6) | $ | (13.0) | $ | 315.8 | |||||||||||||||||||||||
Diluted earnings per share from continuing operations** | $ | 3.32 | $ | 0.02 | $ | (0.05) | $ | (0.02) | $ | (0.13) | $ | 3.15 | |||||||||||||||||||||||
Diluted shares used in calculation | 100.3 | ||||||||||||||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
12 | ||||||||
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 Marketable 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 marketable 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 | ||||||||||||||||||||||
* Reconciliation to GAAP provided on page 9
** Adjusted EPS may not sum across due to rounding.
13 | ||||||||
Encompass Health Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Income to Adjusted EBITDA
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
| Net income | $ | 207.4 | $ | 184.9 | $ | 455.6 | $ | 381.4 | |||||||||||||||
| Loss (income) from discontinued operations, net of tax, attributable to Encompass Health | 0.6 | 0.9 | (15.3) | 1.4 | |||||||||||||||||||
| Net income attributable to noncontrolling interests included in continuing operations | (53.5) | (42.8) | (107.2) | (87.8) | |||||||||||||||||||
| Provision for income tax expense | 53.6 | 51.0 | 110.0 | 92.6 | |||||||||||||||||||
Interest expense and amortization of debt discounts and fees | 32.8 | 30.4 | 64.6 | 62.2 | |||||||||||||||||||
| Depreciation and amortization | 90.4 | 79.9 | 177.7 | 159.1 | |||||||||||||||||||
| Loss on early extinguishment of debt | 3.2 | — | 3.4 | — | |||||||||||||||||||
| Loss on disposal or impairment of assets | 2.1 | 0.3 | 2.4 | 0.5 | |||||||||||||||||||
| Stock-based compensation | 13.8 | 14.3 | 25.3 | 23.8 | |||||||||||||||||||
| Change in fair market value of marketable securities | (2.4) | (0.3) | (2.2) | (1.0) | |||||||||||||||||||
| Gain on sale of Gamma Knife | — | — | (17.5) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 348.0 | $ | 318.6 | $ | 696.8 | $ | 632.2 | |||||||||||||||
14 | ||||||||
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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 282.6 | $ | 270.2 | $ | 595.7 | $ | 558.8 | |||||||||||||||
| Impact of discontinued operations | 0.9 | 1.2 | (20.3) | 1.9 | |||||||||||||||||||
| Net cash provided by operating activities of continuing operations | 283.5 | 271.4 | 575.4 | 560.7 | |||||||||||||||||||
| Capital expenditures for maintenance | (66.2) | (45.1) | (110.0) | (79.1) | |||||||||||||||||||
Distributions paid to noncontrolling interests of consolidated affiliates | (40.3) | (40.4) | (98.1) | (73.3) | |||||||||||||||||||
| Items not indicative of ongoing operating performance: | |||||||||||||||||||||||
| Transaction costs and related liabilities | — | — | 3.5 | — | |||||||||||||||||||
| Adjusted free cash flow | $ | 177.0 | $ | 185.9 | $ | 370.8 | $ | 408.3 | |||||||||||||||
For the three months ended June 30, 2026, net cash used in investing activities was $235.6 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended June 30, 2026 was $76.9 million and resulted primarily from repurchases of common stock, distributions paid to noncontrolling interests of consolidated affiliates, and cash dividends paid on common stock partially offset by net debt borrowings.
For the three months ended June 30, 2025, net cash used in investing activities was $165.4 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended June 30, 2025 was $90.2 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, repurchases of common stock, cash dividends paid on common stock, and net debt payments.
For the six months ended June 30, 2026 net cash used in investing activities was $385.7 million and resulted primarily from capital expenditures. Net cash used in financing activities during the six months ended June 30, 2026 was $179.4 million and resulted primarily from repurchases of common stock, distributions paid to noncontrolling interests of consolidated affiliates, cash dividends paid on common stock, and taxes paid on behalf of employees for shares withheld partially offset by net debt borrowings.
For the six months ended June 30, 2025, net cash used in investing activities was $323.9 million and resulted primarily from capital expenditures. Net cash used in financing activities during the six months ended June 30, 2025 was $220.6 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, repurchases of common stock, net debt payments, and cash dividends paid on common stock.
15 | ||||||||
Encompass Health Corporation and Subsidiaries
Forward-Looking Statements
Statements contained in this press release and the supplemental information which are not historical facts, such as those relating to the business, strategy, outlook, growth targets and guidance considerations, dividend strategies, effective income tax rates, cost trends, legislative and regulatory developments or their impacts, financial guidance, ability to return value to shareholders, projected capital expenditures, acquisition opportunities, development projects, addressable market size, other balance sheet and cash flow plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, Encompass Health, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date hereof, and Encompass Health undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by Encompass Health include, but are not limited to, possible reductions or other changes in Medicaid, including Medicaid directed and supplemental payment programs and Medicaid waiver programs, which may decrease our revenues and increase our provider tax expenses; infectious disease outbreak, including the speed, depth, geographic reach and duration of its spread, which could decrease our patient volumes and revenues and lead to staffing and supply shortages and associated cost increases; Encompass Health's infectious disease prevention and control efforts; the demand for Encompass Health’s services, including based on any downturns in the economy and consumer confidence in patient care; the price of Encompass Health's common stock as it affects Encompass Health's willingness and ability to repurchase shares and the financial and accounting effects of any repurchases; any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings involving Encompass Health, including any matters related to yet undiscovered issues, if any, in acquired operations; Encompass Health's ability to attract and retain key management personnel; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of Encompass Health's or its vendors' or partners’ information systems, including unauthorized access to or theft of patient, business associate, or other sensitive information or inability to provide patient care because of system unavailability; Encompass Health's ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with its growth strategy; increases in Medicare audit activity, including increased use of sampling and extrapolation, resulting in additional unpaid reimbursement claims and an increase in the backlog of appealed claims denials; changes, delays in (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for Encompass Health's services by governmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels, including as part of national healthcare reform and deficit reduction and Encompass Health's ability to adapt operations to those changes, including in connection with the CMS inpatient rehabilitation review choice demonstration project; competitive pressures in the healthcare industry and Encompass Health's response thereto; Encompass Health's ability to obtain and retain favorable arrangements with third-party payors; Encompass Health's ability to control costs, particularly labor and employee benefit costs, including group medical expenses; adverse effects resulting from coverage determinations made by Medicare Administrative Contractors regarding its Medicare reimbursement claims and lengthening delays in Encompass Health's ability to recover improperly denied claims through the administrative appeals process on a timely basis, including as part of the review choice demonstration; Encompass Health's ability to adapt to changes in the healthcare delivery system, including value-based purchasing such as the transforming episode accountability model and involvement in coordinated care initiatives or programs that may arise with its referral sources; Encompass Health's ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages, which may be worsened by infectious disease outbreaks, and the impact on Encompass Health's labor expenses from potential union activity, staffing shortages, and competitive compensation practices; general conditions in the economy and capital markets, including any instability or uncertainty related to trade war, armed conflict or an act of terrorism, governmental impasse over approval of the United States federal budget, an increase in the debt ceiling, or an international sovereign debt crisis; the increase in
16 | ||||||||
Encompass Health Corporation and Subsidiaries
Forward-Looking Statements
the cost of, or the decrease in the availability of, construction materials and necessary supplies, including as a result of tariffs and import restrictions; the increase in the costs of defending and insuring against alleged professional liability claims, and Encompass Health's ability to predict the estimated costs related to such claims; and other factors which may be identified from time to time in Encompass Health's SEC filings and other public announcements, including Encompass Health's Form 10‑K for the year ended December 31, 2025 and Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026, when filed.
17 | ||||||||