SEM - Earnings call 3 2023 | 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 2023 results in the company's business outlook.

Speaking today are the company's Executive Chairman and Co-Founder, Robert Ortenzio; and the company's Senior Executive Vice President of Strategic Finance and Operations, 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. circumstances based today, information no and update statements are of to obligation statements these Medical Select the as forward-looking on available the management to These change. company assumes

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

Robert Ortenzio

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

have lot to was quarter. strong a be QX We another positive about as

that within to the agency to continue sustain quarter have We prepandemic sixth Critical was which division. QX usage percentage levels. in reduction costs our a our XX%, Illness the labor RN sequential lower in our we seen expenses. than is of improvement agency target dropped

in continued announced management grew of $X.X was our executive We X promotions CARES comparing EBITDA prior believe Act our team operating prior year also QX divisions will revenue into and prior adjusted QX. current within income prior revenue compared success. to when organization Overall, to by year long-term million and of EBITDA. exceeded grew headwind heading the All performance. received I year, XX% grant We for year X% a that position the which

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

XX.X% adjusted EBITDA X.X% consolidated prior QX the year. in Our margin for was to compared

with in new regarding losses labor million detail hospitals provide illness of adjusted to ratio. quarter progress $XXX,XXX XXX% start-up in prior benefit to compared prior the critical and a illness increase quarters, Our within continued in recovery along compared this incurred X% revenue, with hospital Marty their Critical prior most XX% quarter year. significant year, Consistent reduction will division's with $X to additional a wages same Jackson in division in his performance with related to the revenue increase salary, experienced increase a commentary. net EBITDA this

Unit hospital of previously part] with University to for mentioned, QX our joint venture recovery partner, illness Rush a open Rehabilitation a XXXX. in agreement As Chicago an [distinct System critical in we with Health have

expansions hospital opportunities North, expected have will additional rehab completed unit. pipeline strong under are consideration. of growth also the are Orlando a XX-bed include that including distinct in also a for in There that which work is be We to XXXX,

On September into the hospital front, inpatient joint development majority in and we a with on XX-bed entered purchased rehab CHS in a Indiana. X, Fort interest rehab inpatient Wayne, venture a

reached XXXX, open agreement majority in inpatient of We've a where our Shands of XX-bed Florida hospital with to in will University rehab QX we have at to projected Florida, venture open joint a partner Health Jacksonville, interest.

We are partner, with in the Cleveland joint open to planning venture beds first XXXX. rehab the a inpatient XX projected is to our that also of Clinic open fourth half hospital,

inpatient contingent with As Bacharach for in Jersey, rehab New regulatory new build we will XXXX. Southern Rehab noted, approval, have slated a upon is to previously XXXX, open called in the the Institute to either and hospital AtlantiCare partnered hospital be

prior year the Concentra of exceeding EBITDA patient their The anticipate revenue, is for strong, performance we pipeline remainder exceptional and the strong and volume. year. continued throughout performance growth

October on occupational X to and Concentra novos. located in in medicine de practices on and During X various for Concentra Delaware bolster Maryland XX. acquisitions and pipeline make continued Northeast progress the its acquired closed quarter, that ongoing with future transactions X

opened Northrop, addition Columbus, XXXX. Virginia; Myers, In and October X acquisition efforts, in in Florida Ohio to Fort de novos

we de leases novos is in acquisitions that slated X for de continue and other strong There to a signed We evaluate. to pipeline have of open novos XXXX.

added novos. This the via with scheduled under clinics XX consideration. for leases remains XX are XX outpatient additional strong acquisitions quarter, surpassed volumes. for also patient of are The de de pipeline quarter with rehab also XXXX, and and open in that prior our division to growth EBITDA executed many development remainder additional revenue, The de novo which in division for There of this novos opportunities clinics open acquisitions be to are XXXX. year QX in

I'll this on each point, points operating provide further our some of divisions. data At

illness hospital division increases recovery net and quarter. in successful for adjusted X% revenue EBITDA of critical Our experienced of another XXX%

a from While revenue contributed index in threshold at our in our case an last XX%, occupancy our was days per XX%, day. down down mix to from year an increase increase in and patient decrease

the quarter compared Our year margin X.X% was adjusted EBITDA in QX. prior to the for X.X%

to Our in in ratio. nursing wage EBITDA decreased benefit significant revenue salary, the reduction and Nursing margin our when to decreased compared year year agency a add Orientation we XX% reductions rates labor nurses. as improvement QX, compared positive to XXXX QX but compared and in utilization decreased X% prior increased contributed with to to QX. X% hours XX% agency XX% continue prior to full-time

decreased from bonuses, with Nursing dollar remained prior year prior XX% sign-on incentive QX, sequential quarter. but consistent

increase X% EBITDA. X% increased and net volumes hospital increased adjusted our in day Our patient X%. rehab rate and inpatient by revenue Patient experienced an per division

Our year. occupancy QX, rate. an was was margin XX% X% in of primarily increase which Concentra inpatient for revenue, adjusted experienced The rehab for consistent driven year. was net EBITDA to compared XX% by XX% prior with prior

employer services Our by increased increased comp revenue and net per rates work X% visit X%. our

last increasing compared same quarter increased XX.X% to margin for EBITDA to quarter adjusted by XX.X% with year. in Concentra's the the XX%

was rate in prior in Our by division net QX. revenue to rehab what increase revenue X% visit by saw compared offset net $XXX in consistent an by revenue decrease volumes per offset The increase decrease XX%, with experienced in patient from visit. net volume rate with $XXX a we to per year increasing outpatient when

access and per compared quarter mix to adjusted the on patient per year related outpatient X% $X.XX EBITDA rate prior fully per share in in share decline tax The where third due consistent clinical early a debt productivity earnings to payer X%. compared cost the excludes outpatient at the by discounts. diluted initiatives of Adjusted decline to EBITDA retirement the via was margin same the focusing to effects. were quarter division's $X.XX. increased earnings Earnings fee fully year. contribute while share variable diluted additional Medicare for and schedule, loss Organizational on improving remained volume Adjusted were per share $X.XX its prior and

regards Board a capital, This business of deployment Directors to of $X.XXX, of In did allocation quarter, XXXX. dividend our repurchase under shareholders we shares on as share record declared our our XX, XXXX, repurchase of of cash the past program. and XX, close Board-authorized payable on not November November of

reduction to repurchases, We prepared will remarks. of concludes continue my debt development evaluate This stock opportunities. and

details questions. to for call the for before turn I'll that, Jackson Marty up open it With over we additional some financial

Martin Jackson

throughout labor increase agency RN Bob, quarter, with our provide experienced but we in versus within rate RN XX%. agency from from million would to slight RN and X% illness rate very utilization drop we change past we little by the good reduction had additional and Consistent agency had everyone. and QX to to a increased $XX.X the in you, million division. and year, a Thank a RN QX. morning, $XX continue with hospital Great. in this recovery only I The This costs the critical agency sequential utilization, XX% inched $XX, $X.X $X.X to million $XX.X make quarter regarding costs details XX% million quarter September. the the we related August the the past in August were and during million reductions like costs rate. in in XX.X% from July, XX.X% in costs, progress and down The from RN having in in QX and utilization $X.X agency in were in July, September realized to XX.X%

fluctuation at million, August orientation the consistent in from sign-on Nursing dollars XX,XXX the while hours XX,XXX hours, $X.X XXX,XXX XX,XXX increase and hours QX quarter hours a in July, incentive bonus XX% compared with had we with in remained to September. in and XXX,XXX during in

was Net in prior of This again, year. due was a were joint noncontrolling our joint $XX improved same QX, Moving equity unconsolidated of quarter increase attributable And compares million our the this $X.X last earnings quarter few in to increased of earnings increase million consolidated to the our This of compared income ventures. subsidiaries to in million. ventures. same performance interest in the $XX.X and earnings primarily on to million to In result year. unconsolidated financials. in was the $XX.X

$XX.X was of primarily of expense second in balance quarter. million the same QX $XX.X and compares in the in we outstanding debt increase the $X.X to increase the XXXX. end billion expense the sheet. had cash million to an interest This The attributable $XX.X of in of Interest quarter the on quarter, compared was At prior million to rates year. interest

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

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

a X As is March XXXX. we of May to the $X.X term a reported and will XXXX, revolving million. of down step extended outstanding along amended facility extended credit triggered by call, to quarter. if SOFR+ maturity billion prior years XX early and senior points below term days million more X% last our senior has mature increasing remains X, million $XXX senior falls we We revolver of $XXX than at notes XX, refinancing priced Xx. $XXX transaction secured leverage with in XX refinanced term our on the with our the an been the on the $XXX with ratio notes loan maturity completed loans, that from million third loan basis springing Both and on net The

X% $X priced rate to notes XXXX, The cap senior been in points $X.X with SOFR August to the X.XX% through remain XX, our XX revolver XX, falls in our senior our term that step -- leverage, loans if on will note September below XXXX. billion important interest X.X% matures It's has Xx. in net place billion of again, basis down at a SOFR+

amendment recognized we retirement credit of of million debt loss the on QX, result a $XX.X During to agreement. the the of as early

$XXX in third the activities quarter, operating provided flow. For million cash

acquisition compared outstanding 'XX. million and This XX $XX.X used quarter. days XX the in cash Our in million XX, DSO or at 'XX of of $XX.X activity. third XX September 'XX equipment investment XX purchases includes in of day days in and million sales of and June $XX XX September property was activities to and days at Investing

term used on million of net We noncontrolling credit. million distributions result revolving $XX Financing payments $X dividends and on interests, our share our in in payments $XX the payments our in in net stock, line $X.X million of cash repurchases million had common net million a $XX.X activities refinancing, in quarter. $XX.X third million in as and the loans to of on

revenue expects in for earlier a the the loss early or by of the in was approved our X-year be effect. repurchase As range share range repurchase $XXX adjusted $X.XX range Capital earnings expected debt the repurchase of authorization retirement diluted XX, and related stated XXXX. any excluding business fully to the $XXX of share, per in $X.XX did program at to in until which remain loss Board. We the expenditures million million earnings terminated actual Adjusted its of Board revised the tax share, we million to of this share the extension earnings now XXXX outlook $XXX previously, to adjusted exclude retirement has will in and our debt billion to range effect further $XXX of under in are tax to and to to expected on The per effect quarter. $X.XX Medical which unless not cost be $X.X the shares be program, December million XXXX, billion, extended to EBITDA of maintain $X.XX. to $X.XX. for be range expected with per of Board Select on

to to prepared turn call questions. time, over operator open the the This At this concludes to our like we'd up for back remarks. it

Operator

Justin Instructions] [Operator question from Our DB. first with Bowers comes

Justin Bowers

or this any Bob, online year Is additional XXXX of the there announced the into coming there I this in additional may deals have rest the quarter? and that prepared missed in capacity you any or LTAC? LTAC remarks. -- are But

Robert Ortenzio

any we next it's combined a they're hospital until it possible critical hospital haven't end announce is I Orlando that the illness critical between have is that announced. I will have don't deals but which could critical now typically I year building, post-acute be it's illness a But next that we year don't will other XXXX. and year. year, of do could and we've Rush we a mean any. the next those the sign would we illness be if signed. know potentially mean that service be year, possible. announced within in openings we and we next Well, rehab that

Justin Bowers

year, with into in rest then And swing you some big factors of the what the XQ? guide guide, in as it. factors the are respect the of to the swing the Got look

Martin Jackson

you that quarter balance the we the have Justin, for guidance And guidance and it of provide on good that an there that you basis we as an from annual guidance quarterly have keep We I in for do anticipated a annual basis. would that on Yes, know a the QX think we're the the that's we guys we guide going year. out on is perspective, the Street. we know, did And basis. to provided.

Justin Bowers

critical normalization targets like thinking that? you've And it. next of laid couple that Okay. the out the years? Like . thinking of that how around of and are you of with sort to several Got may terms Any then what over the over trajectory sort look about updated next returning in illness. years SWB

Martin Jackson

Yes, end of anticipate SWB range all of the our by percentage XXXX, contracts, should Justin. XX%, in return renegotiated, revenue. of somewhere we expectation are I is to a payer of that mean we contracts of the the the when as all

Justin Bowers

of And Or like linear assumption? would that look a that reasonable from then? until a progression of sort sort Okay. now is

Robert Ortenzio

expectation be that the is contracts I mean specifically you sure or when will you last not I in years, end I the tell the X our assume the linear we've get left But be renegotiated. in -- I got can the Yes. those if that are X/X range. you think whether we'll 'XX, can't of I'm so not. that know to XX% when

Operator

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

Michael Murray

Michael This is Ben. Murray on for

would in is modeling, decline Just some what decline focusing than pre-pandemic. lower The labor XXX What sequentially, bps sequential typical the decline shed that we to Can workings larger inner continued sequential of than were occupancy the even seems on drove some the the see which you EBITDA occupancy steeper leverage? LTAC, on there. you improve. light agency

Robert Ortenzio

Yes.

you've I really a startup is got back to of you losses. things think the one do $X to million take and add of have that look

if XX if margins, back, basis a the those look added you improvement take had that at So a right? you you point basically margins, in

Michael Murray

sequentially? you talking Are

Robert Ortenzio

Well, sequentially mean, of you you of the realize is really that I look irrelevant because you a at historically seasonality for QX the when 'XX, if take business. in us, compare

a on basis. rate I have look it year-over-year a normally really we same to you what So a quarter do is in have mean, take at dip occupancy in QX.

Michael Murray

even sequential Yes, than that higher seems decline, the XXX even bps at a levels. pre-pandemic magnitude

-- So . what the we're drove lower occupancy driving levels. what

Robert Ortenzio

Yes.

through I think details. that sure this, to that to we're I we'll is do go there's [differentiator] that what a we'll off-line have have saying. on fully going to think the not we and talk you're understand I'm --

question. Next

Operator

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

William Sutherland

goalposts with the some in there just like for out Well, despite guys, And on outpatient can have have are -- -- -- can you kind maybe progress some think and do you trying of some you move I that year. business rate the heading productivity wondering outpatients? was good the the in headwind. think What insight you run had to you you've get a are I'm now. margins rates of where sense following color some to where that or

Martin Jackson

do we that year in regards the is productivity, expectation with you've our range. got I So assuming an of I'm rates, questions One And and then see see is the increase to over clinical somewhere X% improving area. that we're improvement continued in think X there. probably next going Bill, some to

William Sutherland

Okay.

be I mean, the commercial assume, a going to I -- that nice same negotiate? trend, your able and So been you've then be, is be your that to positive doing commercial you'll switch, will

Martin Jackson

Commercial that be commercial. that the Medicare. higher Yes, should we X% then mentioned, offset have than with I Bill, to but regards

William Sutherland

Right.

the is saying? you're X% is So what Marty blended,

Martin Jackson

That's correct.

William Sutherland

about when Are net the of you the Okay. like network improving the in is talk you quarter, pruning -- not you at just adds, add course those as each that's it? all adds clinics whole of

Martin Jackson

adds. would that net Yes, be

William Sutherland

up Okay. year-over-year what's sort a hair quarter-on-quarter. that wanted number enough this -- kind business behind Concentra, to a understand just better? I going of good and I And little been on on That's there. of then bit know just

Martin Jackson

we we a saw, saw in is the What though, change Yes. mix.

down comp we but volume bit, saw service employer workers' a So up.

nice the had impact So that a on rate.

William Sutherland

something Is this of to that's is think? year? occurring . that kind a Or just tail longer do you there that,

Martin Jackson

I think that significant saw prior a we additional employment. due to in increase period

in normalized, you becomes this quarter more And what so or saw think particular that's particular that actually. as I year-end this and

Operator

the Robert closing That to like concludes over I'd for back session. the Ortenzio turn to remarks. question-and-answer call

Robert Ortenzio

and remarks. No Thanks you updating participation, look we operator. you, closing quarter. to your for next Thank forward

Operator

your disconnect. great day. conclude the program, Everyone, does you have now This Thank may participation. and for you a

Select Medical (SEM) 3 Nov 232023 Q3 Earnings call transcript