Before we begin, if you do not already have a copy, the third quarter earnings release, supplemental information, and related Form 8-K filed with the SEC are available on our website at encompasshealth.com. On page two of the supplemental information, you will find the Safe Harbor statements, which are also set forth in greater detail on the last page of the earnings release. During the call, we will make forward-looking statements such as guidance and growth projections, which are subject to risks and uncertainties, many of which are beyond our control. You are cautioned not to place undue reliance on the estimates, projections, guidance, and other forward-looking information presented, which are based on current estimates of future events and speak only as of today.

Revenue in Q3 increased 9.4% and adjusted EBITDA grew 11.4%, contributing to year to date revenue growth of 10.6% and adjusted EBITDA growth of 14.5%. Going largely to our Q3 results, we have again increased our 2025 guidance. Doug will cover the details of the quarter and guidance in his comments. We continue to invest in our clinical staff by providing professional growth and development opportunities such as our career ladder programs.

The demand for inpatient rehabilitation services remains considerably underserved and continues to grow as the U.S. The Medicare beneficiary population is the fastest growing segment of the U.S. As a result, the demand for treatment of the complex medical conditions such as stroke necessitating IRF care intensity remain significantly underserved. Our pipeline of announced new hospitals with opening dates beyond 2025 currently consists of 14 hospitals with 690 beds with an active pipeline, more than 40 projects.

What went well
  • Revenue rose 9.4% and adjusted EBITDA grew 11.4% to $300.1 million year-over-year, prompting another increase to full-year 2025 guidance.
  • Volume and pricing both contributed: total discharges up 5% and net revenue per discharge up 3.3%.
  • Quality metrics stayed above industry average (84.6% community discharge, 8.6% discharge-to-acute, 6.0% discharge-to-SNF).
  • Premium labor cost fell $5.6 million year-over-year to $27 million; RN turnover of 20.2% and therapist turnover of 7.8% remained favorable.
  • Opened three new hospitals (Danbury CT, Daytona Beach FL, and Wildwood/The Villages FL) plus 39 beds, and completed the 18-month Oracle Fusion ERP conversion on October 3 without significant disruption.
  • Retired the remaining $100 million of 2025 5.75% senior notes, ended the quarter at 2.0x net leverage, and repurchased about $25 million of stock ($82 million year-to-date).
What went wrong
  • Adjusted free cash flow declined 8.2% to $174.2 million, driven by a $55.8 million working-capital increase from accelerated accounts-payable payments ahead of the ERP conversion.
  • Consolidation of two satellite locations (72 beds in Cincinnati, OH and Sewickley, PA) cut roughly 35 basis points from total and same-store discharge growth.
  • EBITDA absorbed about $3 million of accelerated supplies purchases ahead of the Fusion conversion and a $1.3 million retroactive California property-tax assessment.
  • The ERP go-live left bugs and refinements still to be resolved.

More on Encompass Health Corp

Reported 2025-10-30 · figures from the Encompass Health Corp Q3 2025 earnings call.

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