Encompass Health — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net operating revenue increased 8.9% year-over-year to $1,609.5 million for the third quarter of 2026, compared to $1,477.5 million in the prior year period.
• Income from continuing operations attributable to Encompass Health per diluted share was $1.51 for Q3 2026, up 21.8% from $1.24 in Q3 2025.
• Adjusted earnings per share (EPS) reached $1.52 for Q3 2026, an increase of 23.6% from $1.23 in the prior year quarter.
• Adjusted EBITDA grew 15.5% year-over-year to $346.6 million in Q3 2026, compared to $300.1 million in Q3 2025.
• Adjusted free cash flow increased 51.2% to $263.4 million in Q3 2026, up from $174.2 million in Q3 2025.
• Cash flows provided by operating activities rose 33.7% to $362.0 million in Q3 2026, compared to $270.8 million in Q3 2025.
• For the nine months ended September 30, 2026, net operating revenue was $4,793.5 million, up from $4,390.6 million in the prior year period.
• Income from continuing operations attributable to Encompass Health for the nine months of 2026 was $483.8 million, compared to $421.9 million in the prior year period.
• Adjusted EBITDA for the nine months of 2026 was $1,043.4 million, compared to $932.3 million in the prior year period.
• Adjusted free cash flow for the nine months of 2026 was $634.2 million, compared to $582.5 million in the prior year period.
• Total assets were $7,566.5 million as of September 30, 2026, compared to $7,089.7 million as of December 31, 2025.
• Long-term debt, net of current portion, was $2,551.3 million as of September 30, 2026, compared to $2,447.2 million as of December 31, 2025.

Guidance and Future Outlook:

• The Company increased its full-year 2026 net operating revenue guidance to a range of $6,450 million to $6,500 million, up from the previous range of $6,410 million to $6,490 million.
• Full-year 2026 Adjusted EBITDA guidance was raised to a range of $1,395 million to $1,415 million, compared to the previous range of $1,365 million to $1,395 million.
• Full-year 2026 Adjusted EPS guidance from continuing operations was increased to a range of $6.23 to $6.37, up from the previous range of $6.02 to $6.25.
• Management remains highly optimistic about the long-term prospects of the business, citing a validated value proposition and disciplined operating strategy.

Business Segments and Product Lines:

• During the first nine months of 2026, the Company opened four new hospitals totaling 189 beds.
• The Company added 85 beds to existing hospitals during the first nine months of 2026.
• Total discharges for Q3 2026 were 69,605, representing a 5.7% increase from 65,839 in Q3 2025.
• Same-store discharge growth was 3.0% in Q3 2026.
• Net patient revenue per discharge increased 4.0% to $22,543 in Q3 2026, compared to $21,679 in Q3 2025.
• The Company operates 179 hospitals across 39 states and Puerto Rico.

Market and Competitive Landscape:

• Encompass Health is the largest owner and operator of inpatient rehabilitation hospitals in the United States.
• The Company is recognized by Newsweek as America's Most Awarded Leader in Inpatient Rehabilitation.
• The Company is ranked among Fortune's World's Most Admired Companies and Forbes' America's Best Companies.
• The Company is recognized by Becker's Healthcare and Modern Healthcare as a top healthcare employer.

Risks and Challenges:

• The Company does not provide GAAP guidance for net operating revenues due to the inability to predict with reasonable certainty the future impact of items outside its control, including government, class action, and related settlements; professional fees; mark-to-market adjustments for stock appreciation rights; gains or losses related to hedging instruments; loss on early extinguishment of debt; and adjustments to the income tax provision.
• Forward-looking statements note risks including potential reductions in Medicaid reimbursement, infectious disease outbreaks, economic downturns affecting patient demand, adverse legal outcomes, cybersecurity incidents, and difficulties in attracting and retaining key management and clinical personnel.
• Risks also include increases in labor and employee benefit costs, Medicare audit activity, and changes in healthcare regulation or reimbursement rates.

Management Commentary and Tone:

• Mark Tarr, President and Chief Executive Officer, stated the Company was "very pleased with our performance for the third quarter."
• Management highlighted that the opening of new hospitals and addition of beds reflects a commitment to meeting growing demand for high-quality inpatient rehabilitation services.
• The tone of management commentary was optimistic, emphasizing the validation of the Company's value proposition and disciplined operating strategy.

Other Key Points:

• For the nine months ended September 30, 2026, the Company repurchased common stock for $203.7 million.
• Cash dividends paid on common stock totaled $57.9 million for the nine months ended September 30, 2026.
• Distributions paid to noncontrolling interests of consolidated affiliates were $141.8 million for the nine months ended September 30, 2026.
• The Company incurred a loss on early extinguishment of debt of $3.4 million for the nine months ended September 30, 2026.
• A gain on the sale of Gamma Knife was recorded at $17.5 million for the nine months ended September 30, 2026.
• The Company will host an investor conference call on October 29, 2026, at 10:00 a.m. Eastern Time to discuss results.
• Supplemental information regarding non-GAAP measures and reconciliations is available at the Company's investor website.