Amid a feud with one of its minority investors, Enhabit Inc. (NYSE: EHAB) has demonstrated steady hospice growth, according to preliminary Q2 financial results released on Monday.
The company will release its comprehensive earnings report next month. But this early report indicates that Enhabit has seen five straight months of sequential hospice average daily census growth, though the report did not quantify that increase. Meanwhile, its home health segment saw a 6.4% year-over-year rise in admissions during the second quarter.
“Overall, the second quarter of 2024 is on track to mark Enhabit’s third consecutive quarter of business stabilization and successfully positioning the company for profitable growth,” CEO Barb Jacobsmeyer said in a statement. “This momentum underscores the strength of our strategy, disciplined approach to debt reduction and commitment to stockholder value creation.”

Enhabit also reported adjusted EBITDA somewhere between $24.5 million to $25.0 million for Q2 and a $15 million reduction in bank debt. In its Q1 2024 results, the company reported adjusted EBITDA of $25.3 million.
These results come at a time when Enhabit is fielding calls for board member changes from shareholder AREX Capital Management in the wake of the home health and hospice provider’s decision to remain an independent company.
Enhabit recently completed a strategic review, which began last August, to consider alternatives such as a merger or sale. Progress on the company’s goals had not been fast enough, Jacobsmeyer said at the time. The review focused heavily on a potential sale, but, ultimately, Enhabit received no formal proposals for a transaction, the company reported.
During the review, AREX had been calling on the company to pursue a sale. Now, the investor is calling on Enhabit to replace some board members. AREX holds 4.9% of Enhabit’s shares.
“The last two years have not been easy for the home health and hospice industries, but Enhabit’s peers have demonstrated an ability to navigate these challenges without substantially reducing their profitability. While peers caught colds, Enhabit caught pneumonia,” AREX Capital wrote in a statement. “We believe Enhabit’s significant underperformance versus peers is a direct result of the Board lacking the necessary industry expertise to hold management accountable.”
Dallas-based Enhabit has 255 home health locations and 112 hospice locations across 34 states. The company spun off from Encompass Health Corp. (NYSE: EHC) in 2022.
The company earlier this year issued a response to AREX’s latest feedback on the strategic review, including a defense of its board.
“AREX continues to criticize past actions, including in many cases those that were made prior to Enhabit’s separation,” Enhabit wrote. “To be clear, seven of the proposed eight Enhabit independent directors were not even on the Board at that time, having joined the Company on the date of the spin-off or thereafter.”
Enhabit is holding a shareholder vote to determine the future of its board, with results expected later this summer.
Last week, an independent proxy advisory firm, Institutional Shareholder Services (ISS), called for a shareholder vote on three of AREX Capital’s nominees Anna-Gene O’Neal, former president Brookdale Senior Living’s (NYSE: BKD) health care services segment; Mark W. Ohlendorf, Brookdale’s former CFO; and Dr. Gregory S. Sheff, the former leader of home solutions at Humana Inc. (NYSE: HUM).
ISS contends that Enhabit’s current board needs more home health and hospice experience, as well as more experience in financial reporting for public companies.
The advisory firm’s position was somewhat nuanced, noting their agreement with the validity of AREX Capital’s complaints while also defending some of Enhabit’s actions.
“The board has been receptive to investor input, reaching a settlement with two shareholders and adding two directors in 2023 and running a public sales process as requested by the dissident,” ISS indicated in a statement. “The board has also demonstrated some openness to a settlement with the dissident. These factors, along with the dissident’s prior intense focus on a sale of the company, suggest that majority change at the board level may not be necessary at this point, even if the addition of industry-relevant expertise may be beneficial.”
Companies featured in this article:
AREX Capital Management, Enhabit Inc., Institutional Shareholder Services