Encompass Health Corp (EHC): Results of Operations and Financial Condition
Encompass Health Corp (EHC) filed an SEC Form 8-K — Results of Operations and Financial Condition. 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 Announc
How this was made
The 30-second read
Why it matters
The key tradable items are the raised 2026 guidance ranges (net operating revenue, adjusted EBITDA, adjusted EPS) and the increased common stock repurchase authorization to $1 billion, both of which can move analyst models and near-term sentiment.
Market read
Guidance raise plus a larger buyback authorization are concrete estimate-setting catalysts, with an earnings call scheduled for Aug 6, 2026.
What to watch
The guidance is on non-GAAP metrics; investors may scrutinize GAAP-to-non-GAAP reconciliation items and the sustainability of discharge growth and net patient revenue per discharge.
Encompass Health reports results for second quarter 2026; increases full-year guidance and announces increase in common stock repurchase authorization.
Net operating revenues increased 9.6%, income from continuing operations attributable to Encompass Health per diluted share and adjusted earnings per share each increased 10.7%, Adjusted EBITDA increased 9.2%, and the Company increased its full-year 2026 guidance. Adjusted free cash flow declined 4.8%.
Actuals vs. the company’s prior outlook
from its previous release| Metric | Guided | Reported | Verdict |
|---|---|---|---|
| Net operating revenue | $6,375 to $6,470 million | No full-year 2026 actual reported | n/a |
| Adjusted EBITDA | $1,350 to $1,380 million | No full-year 2026 actual reported | n/a |
| Adjusted earnings per share from continuing operations attributable to Encompass Health | $5.89 to $6.11 | No full-year 2026 actual reported | n/a |
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net operating revenuesGAAP | $1,597.4 million | – | 9.6% |
| Salaries and benefitsGAAP | $820.3 million | – | – |
| Other operating expensesGAAP | $254.9 million | – | – |
| Occupancy costsGAAP | $14.7 million | – | – |
| SuppliesGAAP | $66.1 million | – | – |
| General and administrative expensesGAAP | $62.6 million | – | – |
| Depreciation and amortizationGAAP | $90.4 million | – | – |
| Total operating expensesGAAP | $1,309.0 million | – | – |
| Loss on early extinguishment of debtGAAP | $3.2 million | – | – |
| Interest expense and amortization of debt discounts and feesGAAP | $32.8 million | – | – |
| Other incomeGAAP | $(9.1) million | – | – |
| Equity in net income of nonconsolidated affiliatesGAAP | $(0.1) million | – | – |
| Income from continuing operations before income tax expenseGAAP | $261.6 million | – | – |
| Provision for income tax expenseGAAP | $53.6 million | – | – |
| Income from continuing operationsGAAP | $208.0 million | – | – |
| (Loss) income from discontinued operations, net of taxGAAP | $(0.6) million | – | – |
| Net incomeGAAP | $207.4 million | – | – |
| Net income attributable to Encompass HealthGAAP | $153.9 million | – | – |
| Weighted average common shares outstanding, basicGAAP | 98.8 million | – | – |
| Weighted average common shares outstanding, dilutedGAAP | 100.0 million | – | – |
| Basic earnings per share attributable to Encompass Health common shareholders, continuing operationsGAAP | $1.56 | – | – |
| Basic net income per share attributable to Encompass Health common shareholdersGAAP | $1.55 | – | – |
| Diluted earnings per share attributable to Encompass Health common shareholders, continuing operationsGAAP | $1.55 | – | 10.7% |
| Diluted net income per share attributable to Encompass Health common shareholdersGAAP | $1.54 | – | – |
| Adjusted earnings per sharenon-GAAP | $1.55 | – | 10.7% |
| Cash flows provided by operating activitiesGAAP | $282.6 million | – | 4.6% |
| Adjusted EBITDAnon-GAAP | $348.0 million | – | 9.2% |
| Adjusted free cash flownon-GAAP | $177.0 million | – | (4.8)% |
| Dischargesother | 68,895 | – | 5.6% |
| Same-store discharge growthother | 2.8% | – | – |
| Net patient revenue per dischargeother | $22,521 | – | 3.9% |
Full-Year 2026 outlook
- Revenue$6,410 to $6,490 million
- NoteAdjusted EBITDA: $1,365 to $1,395 million
- NoteAdjusted earnings per share from continuing operations attributable to Encompass Health: $6.02 to $6.25
Capital returns
- On July 23, 2026, the 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.
- The Company had approximately $188 million remaining under the prior authorization as of June 30, 2026.
What drove it
- Net operating revenue increased 9.6% to $1,597.4 million.
- Discharges increased 5.6% to 68,895, and same-store discharge growth was 2.8%.
- Net patient revenue per discharge increased 3.9% to $22,521.
- Through the first half of the year, the Company opened three hospitals totaling 139 beds and added 54 beds to existing hospitals.
- The Company expects to open five additional hospitals and add more than 100 beds to existing facilities before year end.
Concerns
- Adjusted free cash flow decreased 4.8% to $177.0 million.
- The Company recorded a $3.2 million loss on early extinguishment of debt.
- Long-term debt, net of current portion, was $2,598.1 million as of June 30, 2026, compared with $2,447.2 million as of December 31, 2025.
What to watch
- Execution of plans to open five additional hospitals and add more than 100 beds to existing facilities before year end.
- Same-store discharge growth and net patient revenue per discharge.
- Progress against updated full-year net operating revenue guidance of $6,410 to $6,490 million.
- Progress against updated full-year Adjusted EBITDA guidance of $1,365 to $1,395 million.
- Adjusted free cash flow following its 4.8% year-over-year decline.
Balance sheet and cash flow
- Cash and cash equivalents were $107.7 million as of June 30, 2026, compared with $72.2 million as of December 31, 2025.
- Restricted cash was $25.8 million as of June 30, 2026, compared with $30.7 million as of December 31, 2025.
- Current portion of long-term debt was $35.9 million as of June 30, 2026, compared with $43.6 million as of December 31, 2025.
- Long-term debt, net of current portion, was $2,598.1 million as of June 30, 2026, compared with $2,447.2 million as of December 31, 2025.
- Total assets were $7,457.5 million as of June 30, 2026, compared with $7,089.7 million as of December 31, 2025.
- Total liabilities were $3,996.4 million as of June 30, 2026, compared with $3,813.9 million as of December 31, 2025.
- Cash flows provided by operating activities were $282.6 million in the second quarter of 2026, compared with $270.2 million in the second quarter of 2025.
- Adjusted free cash flow was $177.0 million in the second quarter of 2026, compared with $185.9 million in the second quarter of 2025.
Analysis
Encompass Health reported a strong second quarter, led by net operating revenues of $1,597.4 million, up 9.6% from $1,457.7 million. Discharges increased 5.6% to 68,895, same-store discharge growth was 2.8%, and net patient revenue per discharge increased 3.9% to $22,521. These reported volume and revenue-per-discharge measures were the stated operating backdrop for revenue growth.
Profit measures also increased. Income from continuing operations attributable to Encompass Health per diluted share was $1.55, compared with $1.40, while adjusted earnings per share was also $1.55, compared with $1.40. Adjusted EBITDA increased 9.2% to $348.0 million. Total operating expenses were $1,309.0 million, compared with $1,198.6 million, including salaries and benefits of $820.3 million and other operating expenses of $254.9 million.
Cash generation was positive but adjusted free cash flow moved lower. Cash flows provided by operating activities increased 4.6% to $282.6 million, while adjusted free cash flow decreased 4.8% to $177.0 million. Cash and cash equivalents were $107.7 million at June 30, 2026, and long-term debt, net of current portion, was $2,598.1 million. The Company also recorded a $3.2 million loss on early extinguishment of debt.
Capital allocation included $145.8 million of year-to-date common-stock repurchases, and the board increased the aggregate repurchase authorization to $1 billion on July 23, 2026. The Company raised all three disclosed full-year guidance measures: net operating revenue to $6,410 to $6,490 million, Adjusted EBITDA to $1,365 to $1,395 million, and adjusted earnings per share from continuing operations attributable to Encompass Health to $6.02 to $6.25. Management also reported three hospital openings totaling 139 beds and 54 added beds during the first half, with five additional hospitals and more than 100 additional beds expected before year end.
Management, verbatim
We are very pleased with our performance for the second quarter, as revenue increased 9.6% and Adjusted EBITDA grew 9.2%.
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.
Mark Tarr, President and Chief Executive Officer
Not in the filing
stated, not guessed- GAAP operating income was not printed as a labeled line item.
- Gross margin was not reported.
- Segment revenue and segment profitability were not reported.
- Prior-quarter comparisons were not reported for the disclosed second-quarter metrics.
- A GAAP tax rate was not reported.
- Dividend declarations or payments were not reported.
- Full-year 2026 actual results are not reported, so prior full-year guidance cannot be assessed against actual results.
- The provided filing text truncates the detailed six-month condensed consolidated statement of cash flows.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
This SEC 8-K (Item 2.02) attaches the company’s Q2 2026 results release and outlines updated full-year 2026 guidance and capital return actions.
Ticker impact
Encompass Health reported Q2 results and raised full-year 2026 guidance, plus increased its $1B share repurchase authorization.
Near-term upside bias as guidance raise and buyback authorization can support sentiment and estimates.
The filing includes explicit updated 2026 guidance ranges and a board-approved increase to repurchase authorization, both direct drivers for earnings expectations and capital return.
Market effects
Rehab hospital operators may see read-across from improved guidance and discharge metrics, but impact is company-specific.
Limited, as the update is tied to Encompass Health’s national footprint and facility openings.
Low, primarily a US healthcare provider earnings and capital return update.
Counterpoint
Adjusted free cash flow declined year over year despite higher revenue and EBITDA, which could temper enthusiasm for the quality of earnings.
Key entities
- companyEncompass Health Corporation
Largest owner and operator of inpatient rehabilitation hospitals in the US, reporting Q2 2026 results and raising full-year guidance.
- governanceBoard of Directors
Approved an increase in aggregate common stock repurchase authorization to $1 billion on July 23, 2026.
