- Earnings call transcript Q3 2022

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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 2022 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 call I to time, this turn over the Mr. At Ortenzio. Robert

Robert Ortenzio

operator. Thank for Welcome to the morning Select everyone. quarter you, XXXX. Good of Medical's third earnings call

I'd on Before some commentary each like quarter. to of on I the provide detail our give overall some divisions,

strong pipeline in inpatient a The and grow personnel our for freestanding exceeded opening. continue with rehab in consistently poised opportunity the have commend the remaining expectations. we performance hospital of of development The business. to division adjusted stage continued critical the line particular challenges set our division with performance. patient hospital entire with These be our revenue, occupancy, expansion the recently providing employee continued efforts illness XXXX, successful to and the open encountered us to targeted have pleased volume EBITDA. XX-bed and provided as division to XXXX the Pennsylvania organization raising quarter focus of quarter. on while to central UPMC continues offset recovery the to This is meet diversification team hospital as training rehab has Throughout experience. I'd difficulties is like this most for been partnership both and they divisions and head Concentra's we we recruitment We future rehab to committed retention throughout We for announced more inpatient specifically success. exceptional prior Concentra year the on have of inpatient our they on exceeded may couldn't rehab and have divisions.

XXXX. for signed novo in located Pennsylvania. in Ohio opened in de novo clinic The Valley, additional expected open by in Three fourth Wisconsin year Waukesha, Concentra are one Wisconsin four and quarter two will and Lehigh with open to de in novo de end one clinics. This Columbus leases

acquire to There to and future Oklahoma been to front, pipeline the year. potential healthy On acquisition is set a the by has a close on continues which Tulsa, be clinic novo targets the acquisition horizon. the signed agreement de for in of end

strong Concentra's head to QX XXXX. we and into as expect We in performance continue

prior Our and in and this our year clinic quarter. increase of trends have both the leaves surpassed did XX the via This month we QX, growth. with acquisitions volume presented October. division COVID rate. and quarter positive by revenue an It de Staffing improve into as continued outpatient In progressed. challenges count expanded novo

executed year, of acquisitions. XX have remainder de forward for potential de The division novo outpatient leases pipeline have the Looking a to and clinics. we novo to the strong of continues

The made in the the continued this confident illness XXXX. headwinds retention. progress good and We've the staffing With shape continue hiring that continued to division in critical improving make along heading are in also into RN while quarter full be faced hospital strides utilization. successful RN October, will recovery division nurses outpatient with to improvement reducing time in agency QX we rates be

time full clinical prior of full $X our headwind to data stabilize the revenue increase experienced the additional expenses. comparing We growth on a Similar into impact million was of hospitals over X.X% The quarter are year prior heading staff quarter. year. labor reimplementation Overall, we recovery Jackson QX granular XXXX. provide an when to direction the Martin onboard critical the with of we quarter, sequestration continue same structure as in cautiously illness of cost that will to the optimistic will last

in For prior the to the $XXX.X quarter, compared total the company EBITDA million was million adjusted year. $XXX.X

as compared year. QX recognized in year was to year. X.X% this QX EBITDA margin CARES Act was for well adjusted of income Our QX grant as prior XX.X% of consolidated prior

of X.X million points of At $X.X million operating as recognized on point, prior divisions. data provide versus each income this our some commentary This year. quarter further I'll grant we

for expense XX% utilization QX. by rates agency in are from and lower of ICUs and hospital net in referring day. revenue continuing revenue are Occupancy XX% drop an of rate. to increased contributed mix than of days. in compared vent prior occupancy. In XX%. these was the critical days by increase our bonus, a XX%. recovery and SWB of the agency to and hospitals. which to the and The incentive from when due illness year utilization Adjusted labor, a labor. illness main reduction administrative ICU we which in critical year patient seen both XX% We to margin by QX. hospitals October, care improvements drop prior compared divisions our administrative volume, will of indirect fully increase for a hospitals X% index in quarter still our the X% saw Orientation year Our revenue hospital experience are prior specifically patient prior the in in volumes continued short-term full per comprised hours referral reduction acute We sign-on-bonus increased lower by as our quarter. patients, and our we education, in threshold acuity to RN increase decline XX% driver to over contributed care higher case increase prior was An decreased orientation, for index to the RN EBITDA our year hospital month bonus rates is the decline Many to support X% XX% to however, reimplementation lower to we've in increased sequestration, patients in expect a for short-term prior volumes of increased acute see and XX% ratio case XX% prior in year, within threshold revenue compared mix their costs than agency and experienced Nursing RNs overall days decrease year of that

in Arizona and JV Tucson, On open hospitals we've Alexandria, the development agreements located Tennessee; Virginia. signed with front, three Jackson, partners to

We to XXXX. open current be All hospital, plan fourth to also which in hospital. are satellite open Ohio a a will Toledo, expected

X% division Adjusted in margin increased an overall prior experienced $XX was to from was in revenue XX% increase increasing per with each month the and RNs XX% prior increase inpatient to of rehabilitation prior third compared along rehab year, for by year patient the volumes ratio prior from hospital from the we've hospitals increased by this year. agency to rehabilitation rates XX.X% quarter. but throughout X%. $X,XXX XX%. Inpatient EBITDA to $X,XXX. agency reduction with from which to the year nursing year year. XX.X% compared inpatient Revenue Our prior The and compared prior of rehab day QX. for and experienced patient Occupancy to levels QX a improvement from by that agent seen expense half increased XX% to SWB compared the first revenue usage improvement decreased X% RN for division year an

from XX in another of positive overall COVID-related EBITDA million we revenue by year, increasing COVID UPMC opening. of X% Pennsylvania services. QX standards. in to revenue this in and a X% and As million open are rehab we generated strong testing a in $XXX. in declining with revenue per to over decline services in adjusted million revenue Last increased partnering freestanding EBITDA $X bed our and year. previously visit and revenue Central volume hospital was patient performance quarter $X million The increased adjusted offset Concentra evaluation consensus Center testing spite the services demand noted, $XX compared that year XXXX for to had with by prior $XX in announced by with in targeted net

for adjusted prior Concentra million with increase ratio to prior QX. in CARES year Our The included $X.X less the revenue for QX year in the than remain experienced X% grant was EBITDA in a year. and in QX SWB results XX.X% Concentra XX.X% QX, income. to from margin consistent compared of prior

previously As development a pipeline for has Concentra opportunities. highlighted, strong

lead, wage expenses to operating The primarily related employees a to quarter increase staffing increase to X% X% in Our decreased rehabilitation year. patient reimbursement decline in increase adjusted a Adjusted revenue compared prior EBITDA is in a increasing experienced number to prior due X% other on compared in EBITDA resulted division to of $XXX to in XX% from same $XXX prior decreased ratio by to X% volumes to increased Medicare X% outpatient quarter to of salary, XX%. benefit revenue and which hospital decline ratio visit year year spite same in compared margin SW&B clinical ratio rates. in to revenue revenue, margin revenue COVID net in per and prior from to to Net a with year attributable with increase is the decrease in prior year. compared The challenges a productivity.

back in As Earnings October. for see This our an we of expenses deployment per share record increase minor areas have outpatient system capital, share noted pipeline to board and division QX year. outpatient November on the to progress payable XXX,XXX previously, equipment. in $XX.XX for we've directors prior and of our continued at in In declared investment our other and of past cash at regards shares diluted quarter, compared acquisition the these improvement of average to $XX.XX. were our allocation de comprised opportunities. robust to of close potential The $X.XX on XX. primarily a to through fully EMR stock price $X.XX operating novo of the dividend as a XX share business of continues of and November in quarter, of bought same an stockholders quarter The third

of over evaluate we call some my details, This We financial stock Martin that, and additional for repurchases, for Jackson remarks. to With debt opportunistic opportunities. it turn reduction I'll will the continue open up and be before development to questions. concludes

Martin Jackson

illness division. some Great. good like regarding within costs, hospitals morning, I first provide to would Thank our the detail additional recovery everyone. critical and you, labor Bob,

saw agency September $XX third XX.X%, to from to from expense XX% utilization a quarter. XX% XX% the reduction reduction July on We from within agency to categories of rate $XX, a and on overall a these and utilization our reductions the to from costs to utilization XX.X% for As as to $XX we've reduction continued Also, costs see $XX.X the Well, rates in a hire reduction replace elevated to RN in from with 'XX costs, to from direct bonuses experience of $XX.X nurses million. realized seen XX.X%. in in consistent million, in $XXX on QX and of drop from quarter, agency an significant we XX% reduction agency a significant in hour. the $XX.X of prior 'XX And XX% We million. of rates, saw an agency sequential down XX.X% a agency QX a XX% reduction seen We continue agency have during to orientation we agency million improvement expenses. hour agency. significant sign period we to from instead to we $X.X have on a total the quarter, prior

We time administrative costs amount expect are our orientation approximately the returning in start of seven QX costs, of which into and we areas hospital fixed. opportunity bonus onboard to eight to appropriate In training to weeks. normalized is 'XX, taking other which nurses account have levels to

our all pandemic, focus to resources for care the providing During was patients. our necessary the needed

we're appears coming pandemic, to that costs level. opportunities be side some of at there the out Now the administrative other of the reduce hospital to

we With SW&B XX% the in should increased in that QX the costs the costs to be in our along reductions of XXXX. improvements ratio continued incentive revenue to indirect our bonuses, are education, range administrative revenue orientation, in labor fixed anticipated XX% with and confident

as year million in non-controlling interest unconsolidated attributable in QX of XXXX, unconsolidated income income million in balance in quarter the September on loan in provides $XX.X in a last million billion Interest the protection the Concentra borrowings QX to now purchase was predictability rate The LIBOR well primarily was had as subsidiaries LIBOR joint to interest expense and interest in decline through expense decrease is recording us was of under third CARES is rate, financials environment. grant the $X level is year. XX, equity of the voting X%. outstanding as compares credit at increase in same and year. QX of to and $XXX.X last to XXXX, due to $X.X result of our in This quarter, the to the were quarter. term same compared QX forward million interest we This quarter to The billion million of end of last on attributable $X.X the of sheet. of in of month in the made which to we which This increase our an the $XX.X $XX same interest. one XXXX, compared year. XXX% compares The own our membership of $XX.X facility. primarily million million. earnings earnings in moving debt of the $XX.X capped on quarter in rate revolving our primarily cash prior This Net ventures. the Moving current At was

end loans, million ended term the leverage balance of X.XX% with was $XXX $XX.X billion We senior the $X.XXX revolving of quarter loans, of million billion quarter in miscellaneous debt. at net agreement X.X credit the debt Our and times. in notes secured other $X.X for our senior in

As of revolving $XXX.X loans. million September had our XXth, of on we availability

advantage $X to For credit. cash in purchases At property was repurchases, to $XX.X was the the Medicare million end million distributions at related revolving net flow stock XX, sales $XX September we in share $XX.X quarter is offset of These of provided days repaid to than non-controlling to days million which XX the advances. third activities the million quarter million during the common activities XXXX this $XX million quarter. and the million a XXXX due the line part million dividends and totaling Day was million million investment XX, in includes of common recouped of compared quarter activity used on $XX million third of XXXX. This end cash Investing received. XX be Financing on operating in quarter. the Medicare September and interests. and of was $XXX at on acquisition at million, of $XX.X the June $XX equipment $XX.X in our less days to there were for in activities by outstanding in the XX used borrowings cash of primarily $XX.X repayment $X.X to third in original and

the the which additional million or terminated until in under earlier We remains XX, dollars program, have to purchase capacity $XXX effect by an December extended XXXX further of shares unless Board.

outlook We the billion to our of $X.X for the revenue are $X.XX in reaffirming range revenue to expect and year for XXXX. billion be

and the to business are also still be three-year the EBITDA to rate revenue the adjusted We market And annual XX% capital million and labor in target operator reaffirming we to as remarks. stated per to concludes open this we for compounded growth we in and are readdress previously range our expenditures earnings for it the outlook This last expect to questions. range. target predictable. year growth share be of would the for million our time, $XXX the at issued our prepared when We rates and Question-and-Answer quarter, for will up believe turn has Session call stabilized $XXX like over back to

Operator

from [Operator Instructions] come Deutsche Our Justin will question Bowers first with Bank.

proceed may You

Justin Bowers

high segment costs was as Bob then pretty in Hi in a the Good little laid in kind morning, everyone. costs increase out a just Marty, labor LTACH and substantial bonuses indirect you year-over-year environment the running and admin of and the well.

a where is. of the to get Just opportunity trying sense,

on pretty that's from XX the high indirect that increased to is, help having, helping point. or this of back of quarterly QX control be is XX way you to able agency where levels to little basis? level at us savings kind or you terms of, kind opportunity QX But a annual know more QX and the assumption on us go any quantify able costs levels those you'd some XXXX to maybe In in been obviously, to labor you've maybe, help bring the are a there the that to you a rate bridge that have decent and to under target addition, it is the QX to of at

Robert Ortenzio

question. great Justin. Yeah,

our think nurses obviously, think agency way look take in it I of significantly we a we XX%, and What a up rose RN made year, paid take through what in agency very at of this the to norm at get PRN full look lifetime a went dollars issue back is for three you've was basically, I with once were we to costs hours nursing a the during time time the the XX to part the pools and nurses, particular utilize our full increases XX% difference. is and the and the of quarters last Historically, about seen in to direct two for was travel was the latter nurses. saw nursing to year, nurses. we significant PRN first costs, about

And nurses in so workforce those full-time essence trap. the to go left

a from XX% mentioned, to So as rates to $XX basis. XX% basis saw full-time XX% a We that on saw as went we on go under I historically well full-time XX%, I are hour. an are an to $XX Those mentioned for $XXX this in to rates call, $XX now us as hour. on down of an year hour, down the now January

the to year-to-date, we're area, nurses you I So -- move take and more as hiring them. full-time. and are nurses. XX% We're XXXX at seeing, what back moving between mean to they we're XXXX, hiring And if full-time, hired travel we've look a leaving back I think

an see really to back full-time and investment, So it as to is the that future in we that of XX%. XX% percentage getting

I during our of about have think this think to we period it in end X to -- other FTE. is way, we're R paying the for time, essence

two training of we're nurses We're typically, the also take patients. do takes to care having about It So agency months that. nurses.

you'll I'll leave go training you they if any see will and that -- once nurses So, costs and at significantly through see have replace come down questions. it those agency the follow-up the nurses so

Justin Bowers

be to right. one it of one think it guess way about would the oversimplify all to I just things, be would

the to going be talked their that hiring round rates going because then nurses and And put there, well pressure overall are? not quarter, base of what's out And as wages, what be the during XXX underlying terms Where have going underlying the hiring the carrying some those follow-up effectively of kind there think you're be to the peers just that So for you're guys productive, a and over there? of in double your like I'm numbers nurses the of necessarily you've period training that and in helpful. year of just, this of if you if out been inflation they're would as being there mentioned, on seeing would you're interpretation? given pandemic? of correct That quarter, kind base, are the the you can sort XXX cost about that part -- on then that forward, -- the the or of is -- is that training you during

Robert Ortenzio

Yeah.

As far employees, as XX% we've the over past the increase. about is base our what full-time salary for a two seen years

that Justin. and incentive So, at customer, actually what with bonuses, increase looking an X% we're that annual then, range supplemented but we've in is

Justin Bowers

helpful. That's Okay. Can one. one you go And -- ahead. quick just

Robert Ortenzio

No.

they're the workforce the was not they're so You had But $XXX mentioned assuming not inefficient. – those they're are that. mean, number the the trained, in in at – being just basically higher all. much than million essence is I direct

the So in again, have we two full-time essence thought getting for to full-time that nurses one that position. – back

Justin Bowers

think the Understood. coming for agency what's And the where LTACH you of on kind I from the then new savings? guys the phasing bridging gap, the that are through facilities seeing having difficulty roughly? that's the And people increased – then the flow have not and just online,

Robert Ortenzio

comments? For I mentioned the that critical the that my talking have hospitals about – four you're illness in we for new

Justin Bowers

Yeah, yeah.

Robert Ortenzio

QX end of we – think think through the I the year the come I year. They Yeah. throughout as them probably have – coming

Justin Bowers

Appreciate I’ll it. in hop Okay. queue. back

Operator

you. Thank

Bank Our comes Fischbeck question America. Kevin with next from of

proceed. may You

Joanna Gajuk

here. for for the This is Gajuk, Kevin. filling in question Thanks Joanna taking

the – increases. comments on the up around So last the just to one follow wage of

the You two in an said last about experienced years. annual X% average

a something least are we similar do next to or as increases year, forward, look at into expecting different? continue you expect So you

Martin Jackson

really I it see certainly where see is on there's depends frames X% in moderate. rates for that Yeah. Joanna, mean, if us, marketplace. That's the recession. – the we what's is going the really normally high, it could a time a We economy

we you time period XXXX, a So XXXX increases through at saw take literally XXXX. if X% range where that through were we of look in in that

to additional moderating market, the there base therefore, if supply certainly rate. of recession think, in be a is that will nurses we a So benefit the

Robert Ortenzio

Yeah.

that, seeing Fed point that's is there well robust. still mean, in I remains pretty even I think the a an as around the as labor aggressive. we're you economy, that important around And Marty there as downturn some – – some most market to pretty that makes. continues expectation of be the know, softening I though is uncertainty think

they economy under some we'll There our be case a come If up that's not So, is the start as Because see. terms know come will labor to and tick benefit people licenses seeing you with the are people them of shifts in on. -- this little us going are that and particularly bit. force until, for quickly hospitals. that, to add who in feel at we the taking or labor a really control which to unemployment quickly particularly actually inflation and in some sidelines assist lot nursing, they a bring your can with nurses, pretty and ability there PRN off of and nursing some can

Kevin Fischbeck

on And also pricing in side guess I of outlook. flip Exactly. terms the

So ranges other Thank any guess and pressure their also after what there talk about critical color that? the is can payers us your that expect in increases in you to or segments commercial give can you and guess next you. rate specifically, Concentra if hospitals, can have And going IRF terms I redevelop about year for positiveness labor processing the by of we the talk the and but the into you in segments you outlook? I outpatient

Martin Jackson

Sure, Joanna.

might combat. And still of long it's that's there's As we're expect, and the been that's you With about typically as lag to side like regards XX- at CPI. we've to to just XX-month we increases single-digit high but in a a And go. an cases, commercial, fixed moderately successful for know on basically side. have the looking rate way on number inpatient primarily that hand-to-hand you that. always on We're achieving Medicare

Kevin Fischbeck

in your relationships those your IRF pricing Are rates? guess all at Thank your on you. I joint And in segment that commentary from helping with the ventures? are also

Robert Ortenzio

so. very say I'd much

On the large of the the critical side segments different Marty's our side IRF -- systems. when look our the I rates with negotiation you scope. commercial at illness But because I comments on on geographic it's are mean and the hospitals on are for think pockets of really different most partnered

much on power there we more than We side. do critical the probably pricing the have on

Kevin Fischbeck

Great. for color. Thank you the

Operator

you. Thank

Our next question comes Capital from Ben Markets. RBC Hendrix with

may You proceed.

Ben Hendrix

much. Thank Could talk little capital then Thanks. more considering will allocation of you a and opportunities next where bit returning and and balancing leverage pay evolve how very your kind year? maybe M&A Novo priorities versus you the believe about of de and also kind you're have priorities is. debt capital how Can into down how to they those shareholders you evolved

Robert Ortenzio

first all, can dividend that expect think continue. think we you to this the Well, the that for declaring I quarter Board of

us in bigger be a or we rehab That's priority. will hospital that one to a but the that capital -- something could we hospital we're we'll of with have partner some that. our that markets. continue to to I with we acquisition both joint and strong continue because very think are that strong calling we opportunities not is venture dollars are compelling Concentra a a tend that outpatient do. made allocate think can capital I nominal committed de when at the new build point frankly The Novo to expect add do frankly a Where in partners out really If think just hospitals, of high. valuations you of the I and and to allocation area

of for I the see bringing that's focus I significant a would thing now. a lower think really any mean to the to on of our of wouldn't any goals. requirement would acquisition for next capital some take we priority anything larger I the back XXXX have company be acquisitions labor divisions much the on right of expect that year the size. over four inside EBITDA to hit be

we So add generally think that? to anything how about Marty, that's want to about think do how capital you you allocation. would I

Martin Jackson

Sure.

down when thing take I Ben debt, is you I at think the is other on a be the look only the down think focused revolver. paying paying we'd area

term The maximum the X.X%. are that notes rate we're cap -- through senior well debt XX. by our is now other September on right billion the protected loan other and is That obligations is rate $X.X our pretty

perspective that from keep in we So certainly will that place.

Ben Hendrix

guys. Thanks,

Operator

One for questions. moment you. Thank

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

may Your proceed.

Bill Sutherland

wanted the What SWB Good I color range think everybody. I that. Thanks. appreciate you about ratio bit to was little a Marty. saw there? marked of morning, that ratio just on in that just revenue the a to pre-COVID

Martin Jackson

Yes, XX% the XXXX Bill, from that time range XXXX. XX% was to of that range. period is to And in

Bill Sutherland

based you you get want to about the And you until the went taking, all -- thought mid-XXs? the Okay. to you you're think, back can I you that, haven't on that steps including indirect get into believe

Martin Jackson

range. of Our we'll expectation is to XX% by beginning next year, mean, I be in XX% the

Bill Sutherland

Okay.

Martin Jackson

based side. on that's cost And the

just the revenue. that's of, cost, the made really but up also not know, you As

were beneficial that potentially take be we that getting increases down some even if So rate should to higher further.

Bill Sutherland

imagine nurses it's that for normal to the But rate. new rates pointed I overall But the going with I need regardless would kind I of had -- out we've PRN a a lever. think going at and after permanent to thinking? you mix just is what step the I we agency say, and that to with of increase, to about and catch-up, shortage Is mean, normal, the move function is -- you're more -- agency the going suppose probably up biggest new permanent can't between obviously that continue to

Martin Jackson

have to on going is, going that's to focus that have a Bill, again, going our to difficult to to we be think, increases. place, extent is there's the future any the think, a predict, I in happen recession Well, I what's mentioned right? moderating in effect So,

XXXX, through annualized or increases be But about can had taking XX% saw we'll mean, that. look we I on X%. a at mentioned, from XXXX going continue going about XXXX consistent we as So, to look that I a I a basis. think, of at take certainly to

somewhere think we're for increase. in that X% I range assuming

Bill Sutherland

care issues, any had haven't all the acute disruption like have You you, systems? labor

Robert Ortenzio

Define disruption.

Bill Sutherland

Ticketing, staying out.

Robert Ortenzio

No, not. we have

Bill Sutherland

rehab little the outpatient I quarter. an surprised? the COVID at Were issue mentioned all Bob, had Yes. with that a you you leave. surprised in was increased

Robert Ortenzio

a bit. little Yes,

-- I as almost you about were. whenever mean, patients. think, we locations of locations, and they're I and retail outpatient small think because think these them proximity close to their therapists

only will So or call and a right? COVID location. unlike when therapist there hospital two a about be you any a one that typical location, before And think even off, sickness therapists therapy in or may staff appropriately test

one just awful a for revenue. an day, you when lose you So of out lot is --

tested get they and clear until so, And are come to back.

we efficiency not about And you fill they talk clinic the to into comfortable or There's the until, they're may that back either off there's XXX efficiently, mean, a get be because somebody is difficult else therapist when work in individuals. just think have can the I can condition they're come in, quarter right we were there's really that even efficiency, treatment. in were think no clinic. think and revenue come COVID -- get as like a it is for -- a which our what or to have, therapist it referring they professional zero. somebody I staff we're calls to whatever word, and leads goes no tested working third of you in it to So but you about

meaningful. much that -- an was were I was this what's meaningful, like be we it I So more $X.XX highest we that situation effect it in where can -- the does define amount you'd that mean, see and in was you was year significant. I numbers. number and to you have but it have January mean, just what know since that gave of January the

go I But we that I surprised. further into were we this. think we yeah, mean, continue see moderate. to So,

Bill Sutherland

I'm thing this thinking, of only have thinking is just an I'm flu. more you The part issue of -- vulnerability. as may

crossed So, fingers on that.

Robert Ortenzio

Yeah.

-- this mean, also a to I our that the but Of back I could bad … does diversification. flu the of it course to staffing is and our flu area, hospitals. I've come companies the the will come something in the our that and think benefit be And a will the flu season affect which does back tailwind mentioned -- power to yeah,

Bill Sutherland

Right.

Robert Ortenzio

to a which would over recession, last critical but have be hard the and be it labor performed our about before. that a illness, talked may Concentra to year we spectacularly headwind a we If benefit … just has staffing the market. division on

do the is XX have over little Medicare. the our sides. on as tried to moderate years bit as built So that both we intentional that this And -- company we've that last we've a was overall

about our is lean fabulous are times. Concentra ballast, economic more We our benefited staffing a is times mix inpatient. XX-XX very company that in outpatient economic good between well hospitals in does and and and in

Bill Sutherland

Thanks it for again. balance Yeah. No. guys sheet the I appreciate me. you That's created. have portfolio

Robert Ortenzio

Yeah.

Operator

you. Thank questions. moment One for

question next Highsmith Bank. Miles from with Deutsche Our comes

You may proceed.

Miles Highsmith

Thanks Hi. questions. for my to expenses. wanted back taking I Good guys. illness margins and morning go I guess the critical just to

different? or it of to just you hire training getting you there they're a their they're if think first it sorry covered when full-time period, right clarify, are is lot somebody am that guess rate that paid and coming eight, And numbers I to eight-week through. that period, in during I

Martin Jackson

well bonuses. as Miles rate on full-time as They're sign we're still Yes. experiencing

a some it's full-time bonuses. So plus rate,

Miles Highsmith

then then give my was the potentially just amount out give question. nurses us more I so that another these period out it know indirect expenses the kind second considered to quarter, And relative costs. like are to this versus absolute versus training parse either try nuances you've in care can bonus willing maybe was some to willing for basis dollar the we it differently that year that you or of one patient piece? last quarter us just costs two an of during in Okay. this to willing you that paying dollar that given know gave kind piece and being of kind you investments be asking many the I or future, the was for that us or trying for parse of percentages kind but, the additional XX% up on might quarter. if to cases what amount on agency of indirect what's indirect kind temporary Are the give to duplicative don't of the I to

Martin Jackson

right? Well, look we the terms idea of were if investment moving is you an forward, a Miles, what first see you at what give second as we do, third and delta as the where nurses we additional nominal take And can an that and in quarter, dollars was quarter. the and that first $XX there more and second more quarter incremental an $X in hire of we started million quarter, was to second increase between between up the The second an the about third million.

and full-time in we of that quarterly have as -- nurses $XX investment -- that's an we replenishing on basis. pool being million perceive a So about essence in you're trying the what basically

that I full-time I pretty focus So you to to that. and and But it's significant to dollars. that our to is XXXX, where close to is much we nurses we're think try sure make be again, of that up pool annualize in pretty expect for think

Miles Highsmith

Thanks helpful. Okay. leverage one, think super is your for that the color. you I you correct, say for -- heard was X.X% that Last I sorry? Are quarter. That's calculation

Martin Jackson

Yes, correct. that's

Miles Highsmith

a XXXX as just times terms in of have beyond? we Okay. and X level kind a million. a of leverage more where target you for in Anything normalized comfort into get

Martin Jackson

XXXX we're at in think anticipate four I we -- the mean Miles, to I with Yes. in that be what looking range range times now,

Miles Highsmith

Okay.

Martin Jackson

Okay.

Miles Highsmith

Yes. Yes.

Thanks guys. lot time. Okay. a the Appreciate

Robert Ortenzio

Miles. Thanks,

Operator

Thank you. One for question. moment

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

You may proceed.

A.J. Rice

everybody. questions. quick A of couple Hi,

piece the outs, that -- the on worth is going in piece on the and you're that's First of COVID it labor part a third like the is I to you're -- this And thought sounds outpatient done, labor business, that EMR it you're EMR is of area that? the part Can there or just system. division? on for look elevated strictly then you're margin for highlighting with -- at labor in of that and is or anything what -- then when is that's call in while? all, is quarter the the saying doing What's variation and on else what you be attributing talking your going that about it

Martin Jackson

it's elevation There'll quarter, should fourth third be same forward. a question in of me type third little Yes, say will quarter. the from we first, then it quarter. Let the -- the the basically the the EMR number but have address reduced elevated When fourth reduced and A.J. a moving in I be we should turn --

that at quarter, ought EMR the you cost fourth to pre So look fourth be third or for and were they a grades if that quarter. assume pre-third we you will the what and take see

A.J. Rice

how rehab the labor? labor then there about And call as out Was issue? was starting see the well – outpatient there the Okay. or that you business, are strictly this pressure on to in COVID

Martin Jackson

item was efficiency. predominant clinical the impacted that The really COVID

A.J. Rice

on agency pre-Covid million I of down in have anyway. – My may quarter. to million you're the sort you're to I your million use were agency, think Okay, okay. just but and was of Then that a $XX not usage saying was the third $XX about right, you $XX of sense labor this

So is this permanent side staff labor trading pretty much you does corrected agency mean that the situation? the it's these normalizing of the and that assess and Is not how costs. duplicative more having

Martin Jackson

Yes.

think pre-pandemic, you look at in a range take $XXX we A.J. I if $XX million million to year. agency probably the that a were

with see investment we're new – is that we one-time and of that as think onboarding the I really the cost. it And a nurses. yes, event So the training

A.J. Rice

give in for these you're starting back be piece revenue, income. of training you operating are percent information time SWB in Okay, of okay. which as the done incremental you a will get the sounds to a have I guidance frame to of XX% what and on confidence sort to nurses like expressing onboarded it mean again XX% to looking

Martin Jackson

now right the EPS. see way we'll what's we item guidance next as two, quarter giving be A.J. if a think in over look whether it going in position will, at And mean the comfortable we'll I we labor feel determine and probably the on which or market you to on market labor. EBITDA a continues take if – the big labor is Well

Robert Ortenzio

are we A.J. talking doing I call even We're be it. we we've through the mean going will pointing about next it's is as to year. of XXXX. been go this and in about holidays into November have weeks going that couple on already. to Thanksgiving really a think to it Yes. and been Christmas, Everything

we expense So if to that would so XXXX if it forth, other point line to run-off be have. see looking revenue is then given just this than no make the it return now, right – this guidance. training back At we're and sense going that we we're it – giving as and to we just to normal year. And for

where just question the leave long how pace and the that in pace are onboarding going not to. we pop me expected expected would I outpatient It's So be we're pace was little recruitment the management we question up even from for – us of surprised the on are. we mean of then team last because a I where if to take COVID it quarter, just get a were the and have and it would what of unexpected. not terms things the of would to

things to So up. not they show the come those I up. material company mean they're but

the think, -- are could you're lot get when they're of there's a We over this things that things. And where start manifest going more not, be year. resurgence We XX new people we days. do position wherever the don't is be usual get have saying being and normalizing holidays, next the ever the to and able Christmas of they And things we a back give good through normal businesses we through street those through know to a to greater to themselves we days XX that and was. I mean back flu coming in out pretty end to as think I to as -- those there's know there the have guidance. the than get of chance I So you going

A.J. Rice

give about you on floating just the And just are so a XXX% -- more? just Is comments expand there's you -- from on fixed maybe And interest is the no impact Can rising X% last us one helpful. at rate that? debt. bit you cap now further the on that That’s of little $X rates? billion that near-term a on Okay. are cap

Martin Jackson

excess of Sure. cap. we're the A.J., think... in X% mean, yes, well I I

A.J. Rice

not do X%. if right X% some whether was I or over benchmark absolutely that know that

Martin Jackson

spread our of LIBOR that a the rate is the spread then top range. with on in $XXX it's Well, the -- million you is and have X%

at looking you're maximum all-in X.X%. So

A.J. Rice

I you. got

you're obviously, – point. this You're there at

Martin Jackson

Yes.

A.J. Rice

of fixed is of covered your debt that at And is least sort through that XXXX? XXX% or

Martin Jackson

got got of we've of billion you've floating. debt large two -- really $X.X Well, portions

covered. is the So then got $X.X we've as $X.XXX And billion $X fixed billion of fixed. billion

A.J. Rice

Right.

Martin Jackson

Yes that everything. -- it's

there have any revolver. don't -- on Now there the coverage is portion we is a

to we seeing So see higher ability we But pretty pay cost are some is probable. the our down next over year there. that

A.J. Rice

point Okay. is How roughly? much revolver just this now at drawn the

Martin Jackson

I think XXX. sorry $XXX, its about I'm

A.J. Rice

Okay. All so right. much. That’s great. End of Q&A Thanks

Operator

questions any call this back the for showing you. Mr. time. further like now at further over Ortenzio to remarks. I'm And not turn Thank any I would to

Robert Ortenzio

thank Thank operator. comments. you us. joining you, further for all And No of

Operator

Thank call. Thank you you. conference concludes This participating. for today’s

may disconnect. now You

Select Medical (SEM) 4 Nov 222022 Q3 Earnings call transcript