SEM - Earnings call transcript Q3 2020 | Select Medical Holdings Corporation

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Operator

Good morning and thank you for joining us today for Select Medical Holdings Corporation's Earnings Conference Call to discuss the Third Quarter 2020 Results and the Company's Business Outlook.

Speaking today are the Company's Executive Chairman and Co-Founder, Robert Ortenzio; and the Company's Executive Vice President and Chief Financial Officer, Martin Jackson. Management will give you an overview of the quarter and then open the call for questions.

Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company including without limitation, statements regarding operating results, growth opportunities and other statements that refer to Select Medical's plans, expectations, strategies, intentions and beliefs. These forward-looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change. will conference I Mr. over time, this turn call the to At Ortenzio. Robert

Robert Ortenzio

for morning, Thank third Select call for you, quarter everyone conference thanks Operator. Good and for joining us earnings XXXX. Medical's

times. I our during of operational I reiterating of and the is quarter's operational things the how some these last excellence Before said our call metrics, leadership one on outline have I earnings me organization start let proud unusual seen by throughout of which I clinical am

to group the staff of care a continue focusing our and providing quality support We clinicians and patients have of highest safe. our organization priority while staffs on keeping the

We in more and operational performance with and quarter evolve our clear both in pleased changing financial I not also the third income. our businesses it continue results in environment. any make learn, did needs be wanted include the today's adapt, grant that couldn't to innovate our to to quarter. unique address additional I

and we earnings recorded Similar to In quarter. $X.X third included quarter we've statistics and grant second quarter in the a our in of of operational occupancy of fact illustrates revenue pandemic. in the business volume a release very each income we our from nice operating in segments net improvement as the rebound reduction COVID the monthly which our divisions lows XX-Q early our saw million

in from rates basis growth our management past recovery segment. expense illness in this improvement coupled the growing occupancy critical hospitals of third Our in XX% to the XXX strong year-over-year XXXX increase realized contributed with significant volume quarter margins XX% in our this QX a This quarter. for point to in

rate a in occupancy from also growing this frequent levels. have some quarter the fact occupancy pre-COVID we have the occupancy to have experienced fully markets QX rate hospitals XX% in that not an quarter growth XX% that rebounded XXXX rehabilitation despite Our meaningful third of from

been we've quarter XXX point patients higher to basis the experience costs to able continue margin to improvement treat yet We third XX.X%. in manage to

our segments, improvement biggest segments. our quarter While volumes Concentra in in to saw be meaningful challenge rehabilitation outpatient and continue in the both third we

Our significant XX.X% over from in negative By improvement compared business September of X.X% their when to a with year. and X.X% down lockdown we terrific height for was all experiencing of XX% period variance September a the similar our April variance has seeing to negative prior outpatient September XXXX this the Concentra our volume May down from volume XXXX. our outpatient accounts, rehab from were In same was for April. also business this volume past variance seen of the a was volume and variance a high-volume improvement company. quarter September

$XXX business per patient the in segment $XXX last from year, Net million X% both for the patient days. were in quarter $XXX the index same quarter. X.X% year X.XX outpatient revenue to to same third last to up million Our days year. to million increased compared mix patient per year. revenue Net same billion quarter $XXX quarter $X,XXX quarter. inpatient third $X.XX X% business to third the XX% Net last in the quarter with third $XXX was our a quarter segment days the with XX.X% the to quarter. segments increased up year days compared quarter. were the year the day X.XX revenue quarter X.X% in revenue regaining revenue $X,XXX last patient compared in same day in to third double-digit in same quarter Case X.X% year. declined in their the illness third of down to XXX,XXX most up $XXX segments were last combined in norms. growth hospital increased visits critical in third last was million to to volume compared quarter our Patient over per day rehabilitation revenue was to quarter in compared in recent in quarter. made per in Overall our great previously the Patient X.X% quarter strides the day the increased our X.XX million and X.X% rehab from the and saw recovery Patient in to in segment our quarter hospital million Net net net revenue up compared the same outpatient last third

$XXX year. Net a compared each was to Volumes last X.X% prior the revenue same was visit shortfalls year's to compared $XXX quarter per lines quarter as month in to revenue the the net only during month revenue year. same in the the the September in third compared periods along same last the month ended down the when Our to consensus down for quarter with when to same our quarter million only X.X% million the same revenue and year. the last to segment to same year. September quarter last month compared same monthly Net compared last declined X.X% in for $XXX third year visits improvement $XXX

to same was Total third up quarter the occupational in same visits million centers to company the million last last third to the $XXX.X centers EBITDA compared patient was million health quarter the compared in were adjusted the $XXX.X quarter. Net year. per year. in down X.X revenue for a For visit quarter $XXX with $XXX XX.X% the visits in XX.X% quarter in the

for the Adjusted included Provider a with income Funds. Relief of EBITDA last adjusted from recognized for EBITDA XX.X% of XX% grant third to Our results consolidated same quarter was reduction $X.X margin million quarter net a the third compared quarter margin up the the year. for

segment increased were the adjusted for expenses $XX.X XX.X% driven Adjusted and $XX.X EBITDA a EBITDA quarter to as by margin same Our primarily net last partially quarter which COVID. third of the compared recovery was growth the for illness result compared hospital in revenue XX.X% in million year. margin critical increased the segment to offset third to Adjusted in million XX.X% quarter same growth last quarter the our operating by EBITDA was year.

XX.X% EBITDA compared as same New of quarter operating offset in for $XX.X third the XX.X% net the million year. shortfalls growth as to the adjusted quarter segment increased were driven expenses and quarter in partially, growth continued was our to rehabilitation to as South hospital last rehab last in same for revenue Adjusted the a partially third compared margin EBITDA in XX.X% up quarter year-over-year hospital COVID. segment higher primarily EBITDA million in was Our margin Adjusted which hospitals year. by Florida $XX.X result the well Jersey by

rehab compared by quarter year. $XX.X to same declines be last was to Adjusted related quarter compared for XX.X% adversely $XX the same third in volume to EBITDA COVID. EBITDA was continue margin million in Our the margin million the segment year. the Adjusted in quarter to EBITDA adjusted XX.X% impacted decline third outpatient quarter last and

third in Our to year. the to the margin quarter quarter EBITDA for $XX.X same X.X% was XX.X% adjusted last Adjusted Concentra XX.X% quarter last to EBITDA in $XX.X same the the increased million year. million quarter compared third in compared

quarter share last related both the a diluted in Adjusted excludes the year. for compared financial to same same $X.XX. significant Jackson fully volume was and details period loss shortfalls, drove to the prior diluted on improvement quarter of earnings our the point, Adjusted earnings this the adjusted growing diluted and the per in continue in third XXX% share of gains EBITDA the quarter which expenses were compared Earnings possible fully the year reductions over some additional share in per retirement year. tax and $X.XX quarter quarter margin costs this third made quarter third and then experience to up diluted the year. to the we of call debt year operating questions. during we'll fully an last related in the At $X.XX we share $X.XX earnings turn in in for per were the quarter non-operating I'll same almost and per for third quarter effects over Marty open last While

Martin Jackson

good and Bob you, morning everyone. Thank

include cost which services third XX.X% For operating was operating and in revenue. of billion the general our $X.X of net administrative and our quarter expense expenses

the quarter third was $XX.X year X.X% same year. in quarter compared year both of to last cost revenue G&A last of quarter of million compares quarter same year. of operating year for last the quarter net quarter quarter this last operating were XX.X% net year. revenue expenses to quarter of billion Cost same expense third XX.X% XX.X% net the same and year a was of services the same both this the G&A billion last percent million and in in for of the and $X.XX revenue. services percent quarter. $XX.X For third was This as and were in $X.X the a as third

the was payments change and in to $XXX.X $X.X in to income the compared million EBITDA grant provider XX% released recall view income relief compared previously EBITDA of $XX.X Bob last adjusted a as post guidance adjusted viewed notice the million related $XXX.X last you As same notice net recognition million associated income a in Depreciation of the our quarter these income quarter million million these caused quarters. last be same EBITDA and adjusted on generated On results million grant related and in year. adjusted in equity we million margin third reduction during the recognition which quarter to to compared amortization quarter mentioned unconsolidated the XX.X% was in in year. was total income of The included payment payments. total these $X EBITDA HHS adjusted third in margin the changed of EBITDA payments quarter $XX.X the $X.X may in operating reflected quarter funds in October change HHS issued these again reporting same second to us payment on million operating other quarter which a under subsidiaries will the earnings with coming another of released the year. grant requirements XXnd our XXth On to related as September which grants. in other the to we and quarter third recognized $XX to post third recorded and We

the million to had share year. last improved this same non-controlling and effective year. we the interest balance compared was non-operating on September income XX.X% $XX.X in quarter third tax gains Net to were the debt had tax in half the tax $X.XX. of same on Xst million expense of The XX.X% reported and part million due we compared expense of in $XX.X third of the excluding decline was reduction result well the as $X.XX, $X.X adjusted on quarter to consensus activity $XX.X refinancing million quarter. per income third the billion as quarter we the as the outstanding in rehab million this increase quarter. the cash million during $X.X last $XX.X Medical The in This third to tax same also attributable a expense The quarter the million for rates We $XXX the interest in ventures our sold of did gains in compares earnings was sheet. the of performance joint We've diluted affects the the well $XX.X third of was year. business $XX.X an in second to Select as year. of quarter end rate non-operating million sale quarter attributable to several related seed of quarter in per third million fully earnings of year represents share and rate our the in which of inpatient Net gain the was quarter which of the variable last the box last Interest was income an $XX effective year. tax in

from included senior agreement to third $X.X the activities provided activities Our million on in proceeds investment We plus in debt of X.XX. This LIBOR and the million investing the will debt. quarter secured quarter net $XXX.X net Operating million debt loans, of acquisition provision billion result the use other our our spread facility was for our property reduction XX million in balance X.XX%. leverage million $XX.X by and $XX.X quarter. and credit the credit at cash of the quarter, result of third offset end million term flow third third by borrowing of activities the provided of basis businesses, the in million $XX.X in sale cash leverage in of reduction senior with X.XX cash was the during $XX quarter quarter. in $XX.X cash of notes $XX.X in of $X.X the purchase and miscellaneous billion equipment Financing ended and point activities and driven

select to total Concentra million billion cash was close quarter end of under the credit $XXX Our available liquidity revolver at of $XXX availability million and in the $X.X the third including agreements. over in

release Additionally, in for the press our earnings year outlook include our updated calendar business we XXXX.

be We to expect range net $X.X revenue billion. of in billion to $X.XX the

We the in adjusted expected million. of be range $XXX the $XXX EBITDA to to million

for deluded which per effects. fully related open to adjusted And in excludes sale the at on share the the range of expect operator earnings gains we'd and our it like up to businesses tax $X.XX, $X.XX concludes $X.XX to questions. per to back prepared remarks. of the of to earnings and this $X.XX We turn the be This call share non-operating time, to over

Operator

comes question Morgan first Your Instructions] [Operator Frank Markets. Capital RBC from with

Frank Morgan

just and monthly guidance do fourth on maybe my are But first far But the your That's question. quarter. - the have how business? color year. you for October looking across initial any trends Obviously, the the just I'm curious this we and about details so trends appreciate

Robert Ortenzio

do. Frank, we Yes,

nicely the LTAX see north nice an know October little inpatient the X% continue on URS. both side. of side. we and seeing for You outpatient And trends is year-over-year trending on basis the a the on We're to a bit growth

Frank Morgan

what in say of not seeing, yet, to you're the the is when it of when year we I you fair about, half we know guidance a be next think second would guess that for think trends point sort light are is, understanding the you're but I starting XXXX year And to, of volume about giving net Thanks. attributing non-COVID my mostly XXXX, COVID just you've you business, that really is numbers? what's when then around just the recovery that our seen, last build business any or strong color this And I question growth? driving

Robert Ortenzio

to Well, let last part of the your respond us question.

that seeing improve is referral we COVID relationships to the of this While the and that are continue we've really patients, with part pandemic experienced COVID the of sources. increase we whole our majority

sources ill. will I that think you are tell talk very referral patients patients now our are we if you can that that to operators, that our handle complex they critically very, understand

really we've during seen so quarter. expand And that this third

Martin Jackson

way you And mean, projections forecast and that about next internally the doing. know budgeting Frank we're as think process I our we our year,

the if a I people are acceleration now in over and, the real tough it year. have and little to lot out year uncertainty we're If could a the around, are will going because into live is we've the thinking while have businesses. strength - pandemic seen But inpatient bigger you are some what if outpatient. a on use in the I as can markets still we're the that we of you're side learning I mean pandemic if for a first year, quarter, is of about a as to we of on business. it year what Next know we - outpatient might the seen is I on carry some give that the there's of lockdowns guess our to businesses between a to look we've of ideas next could there. probably is do with you end term as then I different the think like. the calling people mean continue the virus in have as the first number see I it scenario, going the a obviously alternate half see absolute virus, to bit reduction of of recovering

be to the get saw a in next is be envision as March my hand it's pandemic lockdowns first So April. guess vaccine. part is the through to - year back we still it's my strict But somewhere best closer other hard and absolute going the the will that to judgment in that around we on the between of

it's not - next a that about we're for answer question direct we're your projections that's but and that's forecasts just how to a So year. thinking our at looking

Operator

Your Bowers next Bank. Justin question with from comes Deutsche

Justin Bowers

we kind that go know year? of the you I'll know ask like the differently. business of to just in if transpired a given you a about Altech But kind you know pandemic of relationships result we in back from in point business and base and the little Frank's the as we on question the hand this you environment" continue store it have think bit guys "normalized established is year. OpEx. a next point about it that a occupancy all increasing growing Is or of kind to the fair starting And about think XXXX starting that's think if

Robert Ortenzio

differently. I on the encourage believe higher point, I mean, you I or without as would that hospitals that continuum of on down markets. COVID. markets XXXX probably this I'd No. our starting I of said a on has the recovery will little either I and about think call to our care of our think illness hospital recovery of of up just the it enhanced our critical the is position And in reflection flat visibility illness in go local could you that be do of and that. think enhanced you or know or type in last most is critical role been and with played our I and a think the

We will we And in change. referral have think that and we confidence in that have us deeper more relationships I greater than do sources we XXXX. than not had have, by

of continuum markets a recognition recovery in result important development I greater in thinking of role the - I'm as some don't to think there a patients plays ill may that that fewer those illness not not patients. less in saying with we hospitals, ICU but are request Now some think I critically it of that fact, the possible, And the are getting to of if a return a efforts we see that's in mean our about hospitals accelerate volume. we're I XXXX. our critical

Justin Bowers

that answered just well as follow-up on just, you question you response. Well, my

And the on about of months capital mean you almost of I'm net I use of over just, months? in. of growth XX capital guys months, sheet, I'm, and XX looking the the the the mean generation sub XX EBITDA, say on cash next and, know leverage just like I'm kind about kind we're kind guys I of and move I'll out for kind then I Is thinking the balance going are you XXXX. So, sustainably that in of level in trajectory you how to thinking at

Martin Jackson

Yes.

for would the as the that We'll X.XX of times. down. Justin, range And of indicated in year we right to probably anticipate this next next is I X.X at we're times all Marty. Certainly, third year, quarter, times go now. year. we the under end leverage X be by will then

how of as changed probably next we that's that $XXX know that by some payment be the it's Now, year probably estimate you going in for have paying is feds our advance back to payments occur, $XXX million the the will outstanding. million, of money

during times We period still below X will that time. of be

Robert Ortenzio

we'll In I clinics acquisitions continue next look any terms capital some we'll XXXX. of year invest either plan of continue use clinics. wellness where major think not and to in for critical add But area. in development of at M&A continue in amounts I our think grow in of the do significant outpatient to to small more wouldn't or is Denovo we CapEx. capital mean to I add will our Concentra use

adjustments that business I and need the watching we'll driving on to any continue and and make to four focus to we margins think pandemic the volumes our platforms to.

in minority plan our then wouldn't is make to the Concentra the the obviously mechanism. call bring look put anything in to in through major and for XXXX final interest I payment So

balance to in of XXXX. early is in plan the our the bring minority Concentra So interest

Martin Jackson

and of of $XXX the if balance be all on most JV ownership, along be range balance cash with - in that not the such And would anticipate Justin as of we would million that of the that probably the the that acquisition sheet.

Operator

from comes Kevin of Fischbeck, question next America. Bank Your

Kevin Fischbeck

obviously make I money CARES mean, potentially lot up mentioned could grow of the guess or commentary, sequestration you just takes as more hard and in a then being you actually ramping next do But the wanted I is these to on this year. it as puts year follow next you can year? bit the levels businesses determination of you you up and if see to too know XXXX know little this that nicely. as far know I year into to outpatient think here, still that off EBITDA from I headwinds is a

Robert Ortenzio

Yes.

think we is - I it get the that could given And set possible. I circumstances. right of think that's

Kevin Fischbeck

a in outlook a normalized Okay. we growth growth development COVID on to I of And on recovery business. the lot that credit I get think outlook? you given mentioned Could of once the illness hospital. pipeline kind you about guess business how critical haven't you long-term about talk a that kind of historically to the

Robert Ortenzio

last of years partnerships. we offerings. Kevin, they rehab know, country, more in goal our of done around systems a XX partnerships have were those we've led most of the to in might lot become as over embedded with largest partnerships that venture you to and tend those inpatient As and But is we've the some joint And that systems be country. expand the the

recovery we that care markets. markets additional add long-term in think illness we a critical hospitals - joint to we're we're to presence advantage rehab we have so take or we where those looking hospitals where have those of some in already And markets our have acute opportunities adding on perhaps ventures, And service. in

think that's So an opportunity we for us.

Kevin Fischbeck

And I can guess…

Martin Jackson

also think we is LTACs there have. with to existing beds I opportunities that Kevin, expand

you it's So Bob new capacity. expansion had also mentioned, bank but hospitals, not know the it's existing just of

Kevin Fischbeck

start show RF might you a what the to and I nice clip. mean, JV that Alex think And you in pretty it of took up see going little when the, we do the be to guys kind did guess to that kind at numbers? capacity start able while of a get to, I going

Robert Ortenzio

for numbers you Well the know themselves. Yes. speak

Kevin Fischbeck

Okay.

coming hospitals no online? when do there's as like might far as climbing So you like be

Robert Ortenzio

actually don't We, mean. we've I announce we signed, until them

includes very and new going very have partnership significant taken You illness both rehab that hospital that Rush to recently think announced that's and be may a Chicago. outpatient. University we and We recovery big critical notice deal, with a in

have announced announces. we we I we, those know continue and think expectations our will you So

Kevin Fischbeck

maybe And then just question. last

be I side. outpatient guess long-term You visibility you I growth rehab rate know guess those How guess long-term to I is strong, Concentra trying on to understand long-term should good we growth for post again think anything likely growth about growth But businesses that. is think RF side COVID, quite Thanks. and normalized about opportunity? to the how the the

Martin Jackson

Yes.

I to think able on the we in had on back before, X% to know we outpatient to I expect a were you X.X%. anticipate bring continue mean September top-line side, see the post-COVID. We on mean we negative you I outpatient that X% the growth them. be of to that saw in all variance we'll at of

the a that terrific job back. volume done getting So operators have

Robert Ortenzio

pandemic think a us on for we in markets a side on in some side the presence and perhaps new both both to opportunities there'll and and enter we where side add post the And that Concentra Concentra outpatient. have world currently be outpatient markets

of bright the very think businesses. those is both in we So future

Operator

with comes Company. question Sutherland The from Bill Benchmark next Your

Bill Sutherland

hospitals Wanted start, mentioned rehab notes I might this couple that in have my opening that to a Bob be quarter. on you you

Robert Ortenzio

opened that up - Bill are. Yes We've one they patients. a where got taking banner we we opened started up

it open week. hospital another up month think then this we'll last I and was actually

better two yes, hospital… So,

Bill Sutherland

Okay. startup think Marty? Will there should expenses - be we about

Martin Jackson

It's non-consolidating bill.

So through you'll equity see that earnings. in only

Bill Sutherland

your just or of provide - other and Bob hospital sort you to there South got related any New is to sense you that called give it's or in Florida sense Jersey of that's I'm do pressure rehab sure want out The be you their recovery? and color Okay. COVID

Robert Ortenzio

Florida the say has to being the we would levels Yes, recovered called that one the was fully, historically, factor has recovering, And - market but it the was Jersey, end but of direction. passed is and been on out one that's was back that that on I strongest. the back then operation that is a our quarter toward fully New we of mitigated trending I the to South the would other not right in other called say quarter

better ways go, characterize as to recovered Jersey but would little but I and material. a fully not Florida So

Bill Sutherland

the the many on that anchor backdrop. given extrapolate but But here about quarter - know - of from? or can't there's good know, takes just there's thinking and I margins out how of then which unusual in of I'm is but specific the the length And I that adjusted anything so to EBITDA spectacular hospitals? figure Is is nothing is the know up trying XXXX Marty, don't it stay a the that's you for if circumstances to kind we puts there's

Martin Jackson

that they Concentra. able we quarter. were Bill, I'll third to in before EBITDA are We to they margin that XX% one The number of the about we the most really XX% Yes. that's know, you margins business what tell some talked would think you of is I north some norm. on during XX% do Concentra for pick out is is fine. high And is pretty focus margins have that - up anticipate that we've range good think a

Bill Sutherland

in you've here to you given a the your finally that's does Bob sectors outpatient permanently to I such all And for not the many sure many shift then is all the model Concentra. care. - improve had more in think curious virtual types know I'm about that that Do of I'm that and rehab, the stay - - structure? cost use

Robert Ortenzio

- have of we months. has Bill That side You telehealth see substantially telerehab past couple Concentra did the in increases side. on the outpatient April on over May diminished and for both the significant and and

the to and we XXX day in range that's think a were I or I we down XXX - XX, visits XXX now. visits XX, at were think

I - of particular physical want a physical they therapies in, manipulation. to you would in - to you think So lot you that a are want see come it's would really the know - as therapist people we expect see to lot and of

So…

Bill Sutherland

It's a right. not you're Right. natural,

Robert Ortenzio

Yes.

Operator

with Your Suisse. next comes Credit from A.J. question Rice

Rob Moonen

you few I the able ask from QX and your that that margin. that in A.J. the implement a in quickly, and going costs of of a takes really This have maybe a sustainable quarter. EBITDA a for the it the Could I the wanted seasonality been to of seems Concentra forward? are coming hold also some Moonen step just you total you've kind a down Is how is you front to down and in discuss Rob of in bit see puts company. like cost Great most initiatives just step of and Rice. as line QX on then guide little or and those

Robert Ortenzio

look step marvelous one of things lot answer issue. a you expenses. operators is always the Concentra, a fourth to seasonal your question, in down lot going of particular And have those the volume to increased up, see - the - fixed occupancy In a of With done do covered. quarter, you it's has a with that the because first of the are yes, quarter just drop are regards dollars the with fourth side, Sure. just the a associated costs see incremental you'll our costs, margins when on the to in-patient in take when job rates managing really

at we And percentage do to seeing in and we increased you Salaries benefits benefits of the wages look take of just very, is, some wages lot when seems You're very a Number and a revenue. nice as salaries it on of think significantly. expansion has that were again down with margins a volume. two that. know because based

Rob Moonen

in then from the cash just I $XX from business had saw a as follow you up And quarter sales. million asset

also sale, there? assets community-based of this outpatient helping the Department to at that relates think of is some clinics margins of Veterans Concentra divesting I these Affair all

Robert Ortenzio

expanding. wasn't. are business, just No. in that were fine were It it - we mean a business, focused it that was margins really something on small was that a it's we - really not the I

Operator

to I over There you. are questions call time. this turn the further back no at will

Robert Ortenzio

concluding Thanks next to comments. and for quarter. updating joining No look you. forward we'll Thank us you

Operator

this concludes and for conference participating. call. you Thank gentlemen, today's Ladies

You may now disconnect.

Select Medical (SEM) 30 Oct 202020 Q3 Earnings call transcript