SEM - Earnings call transcript Q3 2024 | Select Medical Holdings Corporation

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Operator

Good morning, and thank you for joining us today for the Select Medical Holdings Corporation's Earnings Conference Call to discuss the third quarter 2024 results and 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 up 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 the other statements that refer to the Select Medical's plans, expectations, strategies, intentions and beliefs.

These forward-looking statements are based on the information available to the management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change. At this time, I would like to turn the call over to Mr. Ortenzio. Robert ahead. go Please

Robert Ortenzio

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

shares offering. As this most the owns issued New public Medical Exchange. CON XX.XX% quarter, aware, trades XX,XXX,XXX Concentra now we successfully York the of completed Concentra's on you symbol and now are of Select stock. under Stock initial Concentra

of the to the end based conditions. in shareholders Concentra expect to receiving is interest the lockup, distribute upon IPO remaining waiver the which on of by its year, contingent We our market

at majority into debt last net arrangements, credit X.XXX% more Eastern of As down earnings QX $XXX a regarding which noted on due related closing, performance at this quarter's the notes of Concentra's transactions to senior for detailed undrawn X-year consisting their IPO included will morning call, million were conference The be of senior and and pay proceeds will provide Concentra new $XXX million Select their where entered they term loan, quarter. facility, holding $XXX later financing million a debt. Concentra by the information of call X-year XXXX. an Time, third which revolving facility used XX:XX was

branded Texas. a few tower the September, to pleased as new Health the Oklahoma be County, SSM. with in opening XX-bed hospital December. venture an is Health year, XXXX. in in also new Kessler joint Hudson plan Early a Rehabilitation a a Temple, our The rehab resides Select Jacksonville, joint is Contingent partner, on our Hospital UF projects that and City in with hospital upon Jersey, new partner, regulatory scheduled front, City, we On UF acquisition inpatient is late development including close New XX-bed North. We're in hospital of announce venture which Florida, a on opened XX-bed in North approval, in branded plan The opening we Medical inpatient rehab facility of hospital next Jersey XX-bed current UF rehab a hospital in also Health. to will

rehab our a track as in New a rehabilitation Southern division. our venture slated and to of in In with Ozark, rehab to XX-bed with Pennsylvania, QX for open Missouri, QX in Fairhill, with line second in part development with Health Cox is on rehab our AtlantiCare new freestanding UPMC rehab partnership XXXX Clinic open We're hospital In of fourth XX-bed QX the we joint inpatient XXXX in Institute number for have Ohio, inpatient to in and We hospital are in Arizona, XXXX of Rehab scheduled of our in with hospital hospital QX our in in fourth open. Tucson, of Banner XXXX. Bacharach projects Cleveland XXXX, Central new XXXX, Jersey, Systems. and

which number a inpatient further are There consideration, our which of beds other consist hospital under care include rehab would XXX Specialty of acute remainder beds of as add Between we XXXX. as distinct operations beds for units XXX XXXX the new just and hospitals, through other additional through expansions the beds. beds, Select additional long-term XX also smaller projects footprint. existing nonconsolidating Hospital will and opportunities I specific rehab and plan some mentioned part our to XXX The well increase

the forwarding X X for as novos open This de as later of quarter, acquisition. One outpatient upon this clinics well operations terminated The existing pipeline and scheduled XX into X XXXX. X management includes growth for division clinics de Clinic of lease the novo clinics expiration. closure future executed rehab for year clinics X leases This agreements, to underperforming via and our added offset X

third revenue quarter revenue this both and with exceed growth the and consecutive hospital strong clinics X acquire continued adjusted with prior all QX We third in divisions expectations to exceeding X also The plan of inpatient divisions double-digit had EBITDA. year EBITDA the both year. in returning quarter this for XXXX adjusted a division later to we results year. Overall, rehab

grew our QX Overall, EBITDA grew X% million from X% $XXX.X year. of year adjusted consolidated prior compared QX. million compared the adjusted XX.X% margin EBITDA in prior an with $XXX.X to XX.X% to by to Revenue of

in quarter a of adjusted to Our increase Rush critical same to April. to well start-up prior losses in $X a Specialty year. compared X% perform related division quarter illness and to start-up year. continues this in in hospital quarter primarily same million $X.X Chicago Hospital new incurred revenue quarter Current the Critical relate the X% losses opening prior EBITDA to with illness recovery compared hospitals million the in in increase

and XX%. occupancy X% average occupancy daily both increased XX%, year, up same from Our from last census by from quarter

patient Our per rate day increased X%.

year Our XX% margin experienced QX. Critical QX to their ] adjusted illness in ranges prior prior X.X% X.X% compared margin. [ reduction, a ratio the salary and EBITDA benefit X.X% a was with slight revenue the in to to for compared quarter

nursing stabilize prior continues have rates utilization agency while seen year. We from to decrease

from decreases also reduction orientation and prior hours, year XX% We see on sign in from bonus an incentive QX and dollars, nursing XX% QX. to prior continue year reduction

in UF quarter a our start-up compared in rehab Jacksonville unit late quarter, Rush and incurred primarily Inpatient adjusted QX QX. a Our opening a not hospital very increase Specialty Health the million September prior division of inpatient incur this rehab had any within to in losses start-up revenue We losses the did EBITDA with rehab and year. April. XX% related prior to the rehab in XX% hospital $X.X increase division in strong of

rate X%. X% increased and patient our census day daily increased per Average

which The year XX.X% to new for was losses. XX.X%, a XX% X% lower than year than for of new is was lower which margin of of was prior occupancy prior XX%, start-up QX, Our EBITDA hospitals. again, inpatient rehab margin result our hospital adjusted due

quarter. for was Our the XX.X% same-store adjusted EBITDA margin

an lower with both primarily This reimbursed by a X% workers' in strong volume increases, X% driven state force was labor increase stabilized significant the in and X% prior of The churn to the prior The consistent base visits in are by employer of years compared labor rates. COVID increases at remained net QX. over increase same was first EBITDA we visits, as offset rate, to which which decrease where experienced revenue half in X% with comp force. workers' the demand comp Concentra of increase year from adjusted normalized in quarter. fee year, experienced volume for a have employer-based has was attributable revenue Concentra schedule year the

quarter was to same EBITDA Concentra's adjusted margin prior compared year. XX.X% the for quarter XX.X%

an QX of in with patient year X% volumes per this division increase our rehab from to outpatient $XXX, revenue and increasing revenue by increasing QX year. of prior Our visit $XXX X% experienced net

in to offset managed upward volumes decrease and by per the net care revenue improvement Medicare continues maintain rates. Our commercial trend and with rates, visit has an increased in our continued

EBITDA X.X%. adjusted The quarter outpatient focus prior was to quarter access, EBITDA outpatient $X.XX improving by the adjusted in division's per compared The X% team EPS productivity margin and from continues X%, per per the compared adjusted to to $X.XX of same year. of the increased $X.XX share for EPS QX to year. EPS $X.XX staffing. share to prior increased year, prior per compared was Adjusted third share the on and patient share

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

reduction repurchases, of opportunities. to We debt stock will and continue evaluate development

like visionary in the past my was where over care I'd last and success. years Chairman force at Rocco in he company's acknowledge week health Select closing, industry In co-founder passing for a the our to decades. Medical, this our and father, was Ortenzio. Rocco guiding X instrumental Emeritus, The of XX my

be but deeply legacy his of missed, leadership forward. will will carry You

That additional open for concludes details to over now call before and financial it the remarks, Jackson we my some questions. I'll up for Marty turn

Martin Jackson

to the progress will regarding within we continue illness additional labor Bob, our morning, Thanks, by providing begin the I and division. hospital details everyone. good make recovery on critical cost

quarter, revenue XX.X% year. XX.X% from a as Overall, this decrease a our is percentage QX prior SWB, of of which in ratio was

quarter at costs decreased utilization Agency agency for $XX saw the agency QX, decreased agency year of in decreases XX.X%. and and year quarter utilization In 'XX, costs hour. an utilization X%, consistent the of this from XX.X% the prior to from again also X% RN sequential The of dropped QX which by prior RNs with remained year, XX.X%. from we rate QX. third Compared to was

incentive from prior $X.X sign-on decreased to year, Nursing $X.X million from million. bonus of and XX% by QX dollars

have million arrangements we which costs. XX, revolver, on We're and is senior XX% into Bob in of million, these Finally, their pleased we continued to X-year saw is mentioned our entered in X.XX%] a with On which $XXX $XXX very the progress undrawn hours. due as orientation notes, labor $XXX regards [ financing had XXXX. July million term X-year loan, Concentra decrease made

At At in we IPO the $X.X by and billion $X.X the debt our revolver. The on July, September QX term $XXX balance $XXX of outstanding consolidated availability Using million. facility. $XXX cash of also Select had prepayments proceeds $XXX loan billion, our Concentra on we from of on facility million the balances million. And to in end from million as had credit we end $XXX.X balance the the sheet. quarter, voluntary these consolidated transactions, $XXX credit our debt of almost and of was XX, our revolving decreased revolving $XXX of decrease million made net repayment million our debt on million

last also $X.X end million leverage $XXX notes, compared debt. consolidated the X.XX% end term X.XXx Total the X.XXx loans in $XX had was other quarter million and million Select of of the quarter the miscellaneous the $XXX debt quarter. senior on included revolver. we And Our at our of at billion, to

loan, debt for with net the includes million the at net quarter X.XXx. other $XXX ] agreement senior of the Concentra of Select and ended million [ with Concentra the debt. X/X quarter term our of the senior ended end miscellaneous Total of million leverage credit X.Xx. leverage of $X.X $XXX notes, quarter

million quarter. and accelerated debt debt. September of lower interest XX, longer the This by interest designated year. prior increase our interest net the $XX.X $XX.X The in in to Concentra credit the $XX.X the term been third was which credit in expected quarter and rate hedge computations. an was is our Interest of Concentra no loan, compares XXXX, million gain due Select included in activity increase occurred expense under mitigated due on Concentra in was reduction recognition on prepayment principally in the the second the rates QX. This quarter million to the same reporting, to has subsidiary with agreement, Effective unrestricted agreement expense Select the

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

days of 'XX June This September XX outstanding, DSO, days sales days, of XX or XX, XX September as XX, and March XX days 'XX. of as was days, Our to on 'XX. XXXX. XX, compares XX

We resolves itself. the incident resulted change continue our DSO quarter claims every to as see improvement health from processing the that cyber backlog care in

see We expect to continue QX. to improvement in

Investing and assets, assets. offset in by activities third notes. third This primarily used purchases Concentra in net in term $XX.X the proceeds in $XXX of from senior closures million Concentra's $XX is million equipment used almost loan in quarter. Concentra million sales $XXX.X the proceeds quarter. million from the cash of net of IPO, activities from million other of to We cash Financing property, million had $XX.X issuance of almost the $XXX due and

net on debt. $XXX million and These our payments term million common other primarily on stock offset $X.X in on our proceeds were payment dividends $X.X Select payments by $XX.X net billion in in on used revolver, million to loan,

program, As Last extension previously, any authorized share under this not effect XXXX, stated the year, did terminated which further unless the in approved we the extended December program of a XX, until or earlier repurchase our remains quarter. by board Board Board. shares repurchase repurchase X-year

to $X.XX $XXX this million to range and the per expected the in range to million updating $XXX to the adjusted $X.XX share the are of our in now Fully in million $X.XX be the of to EBITDA $XXX $X.XX. $X.XX be $X.XX to expect earnings to in are for revenue to be of billion per earnings share range Capital in $XXX range year. to range for be of diluted million. to business We adjusted be billion, expenditures outlook 'XX. of We

like open would And That to our time, it up to the remarks. concludes call back prepared at we this to questions. for the operator turn

Operator

[Operator Instructions].

Our from will first coming RBC Ben of question Capital be Hendrix Markets.

Benjamin Hendrix

Rocco's Bob, First, to passing. deepest our condolences for

I just guess, wanted more And just for second with comments trends. there. a Marty, LTAC Our you thoughts question, are on I to certainly get some occupancy

some could just in It on an staffing case. outlier seeing occupancy trends you're sound think of as any some you occupancy kind misconstrued if that's related. seasonal there's your from Maybe And segment there. I the detail like doesn't have what versus we threshold may targets? more standpoint, that influence provide

Martin Jackson

for occupancy it third prior rate we were actually with was And Ben, the quarter. the higher really past this it. I Yes. of seasonality quarter, pretty It quarter. year same is than pleased mean,

it have So with staffing function just quarter. really do didn't to of really issues. anything the It's a

Benjamin Hendrix

And on anything that observations you segment thresholds all? impacting can comment outlier on at the

Martin Jackson

done have the through high-cost managing very job operators a good Our outlier.

really impact we an seen haven't too there. So much of

Operator

Justin be Bowers coming will question Deutsche next from Our of Bank.

Justin Bowers

lower a little number amount that I than all forma even The cash Bob, about the flow, condolences look leverage generate and laid a out. company spin, maybe around going I is post that. Xx, your after projects at When pro a arrive to of development free substantial of net to you you family.

on that X thoughts down the know to we even would sort level? company? that deployment, Any given Or or or take range of you And leverage sort preferences an is now? for optimal capital of what there

Robert Ortenzio

thanks capital on I Yes, for Marty our answer Thanks, deployment. our say I kind opportunistic been think mean on from dad. do on your to history my kind for We hate that always -- Justin, being ourselves similar and of has comments that of pride deployment. of I the

development deals of we saw my that. opportunities have, We there's the area, that fortunate from some and to are have behind on you comments others as lots in

with right options describe on always obviously hard to table all down or flow some the and like them. and the much So is priority and we I the worked to And have free gotten then Xx. -- it's a to like have And agencies seen. pleased uplift through that, stock now. opportunity leverage to I from our as we'd would robust we development there they as quite will pipeline is you've are would buybacks rating our that drive we've say deleverage to cash We're have that. as maintain very

of think us, all So us to is Xx positive keep good our leverage allows very open. I very for options a

as And I without think a maintain to as forward we smaller flexibility. company that we go Concentra, want

we where to we And then So we a free answer I say try be, to that's want of maintain is terms to where would want long to allocate in to Xx opportunistic say that. cash our and be want really we flow.

Justin Bowers

XXXX, clarifications. X there's XX Understood. least sounds beds? And like then just it have quick Is that through project On on LTAC at on. of right, sight you additional or that development, one line you program with there's have -- that

Robert Ortenzio

opportunities. listed levels, other only as even Well, business threshold there we is the with find are I evolving We've tougher. mean that business making that one.

Our operators are navigating.

very a have We big platform.

very our which become of to on inpatient that bleeding with perform well part our our outpatient development has we into continue new are ones that a partnerships, partners are as rehab. LTAC of We ones and finding lot a model, new like. existing and our projects we LTAC our

do will look also as relatively de where is some a not bigger outpatient, for across that's the then and modest. on some although deployment also business capital. we place rehab, segments won't it But We But hospitals, our spend opportunities we capital on on and novos.

looking not large to deployment would we On that like capital area. in have but the grow, are we side, to LTAC really

is hospital hospital within capital is way another saying the of So intensive. it's which we less model, a like

for will opportunities. we So those look

in LTAC continue primarily -- of platform, capital little of we So capital a on rehab on inpatient for more LTACs the will side. can opportunities a can without growth we grow that but our find us. continue segment allocate our judicious the lot space opportunities bit and a to with where because and then to And the right be be the now

Justin Bowers

And it. one then just one. Got quick

Medicare the rate. final the the rate like Can of of And sort about I market X call, funds those you the X% base then just least the basically way think in base basket you rates, On us, about think the like IRF at right productivity. X% XQ said to net federal side? on talked for rule X%? net square is Is for the

Martin Jackson

Marty. Yes, is range. Justin, Yes, think it in is that we this X%

Operator

Bill Company. Our the from of coming next will Benchmark question Sutherland be

William Sutherland

My a Noticing Rocco's LTAC. of condolences on was guy. question as one there on had passing, hospital from well great on a listed or portfolio? as last removal quarter, I fewer the something the

Martin Jackson

for on second, Hold Bill. just a

reduction a ago. saw year we think I from a

William Sutherland

XXX, XXX. at you you quarter maybe I it wrong. I thought was already was was okay, I is were wrong, -- the but -- Maybe second

Martin Jackson

Yes, we're right Bill. looking now,

in right. think We one you're close did I did Yes, close. Ohio. we

William Sutherland

Okay.

underperforming Just or...

Martin Jackson

Yes, it Bill. was consolidation, a

William Sutherland

while Marty, about additional thinking as you as can you chop? far right. All wood there of you, percent more a revenue? to Okay. SWB are what progress on got Is I've as make

Martin Jackson

-- there think, Bill. annual. targets XX% end that we our think year numbers provide We We Where Yes. that that the is, we this we'll for range. in are probably really

XX% you in started quarter off the in first that know, range. XX%, very well As we

And down. think so we see that next year, come can we

And there's single-digit that commercial will can If contracts. certainly have increases, number drive the on mid-range what to is really are that of X past year, we've come we that the going continue that. being help obtain to done points commercial One in contracts some down. we the that our negotiation success

Medicare Medicare increases preauthorization criteria The is down. number impact improvements has a the that Advantage CMS And traditional see follow we'll patient ability second the drive one rates -- of given is that the Volume hope volume admission approval the Advantage. increases. that Medicare big to that on mandate, in

So that revenue as continue will percentage occurs SWB of a if that drop. to

William Sutherland

progress planner what mid-teens the that a of kind step you not know what's you're the at here? from your for the making then I of And the -- run in in -- outpatient up? the keys I'm margin it. what's sort business area and that the progress past. forward it's are on sure steadily for rehab next Got looking here, on

Martin Jackson

Bill, really end technology one can that, kind be changer. -- year, on be we occurring of the clinical significant is therapists big efficiency. in will us release Clinical using that's that. We've a the number we've patients doing focused do of And a our That see will past Yes. major for being the think efficiency a for of a us. over game and in movers got that the us that help to very the help year of day.

nice in margins year. the see next anticipate, So we improvement we'll come some

William Sutherland

Was system curious? I'm that an internally developed -- or just

Martin Jackson

was. Yes. Yes, it

Operator

question Our next of Gajuk America. Bank comes from Joanna of

Christian Malachy Porter

Christian Porter I on wanted is condolences. This also add Joanna. for to my

Our rehab. question was about outpatient

just came of in much wanted saw than any your were your we contract One margins to you just in higher QX, around costs And could to and we improve better that volume, you our labor and if efficiency talk and pricing? know wondering trends were about estimate. So staffing efforts of seeing if peers

Martin Jackson

Yes. that I couple there. questions you there's of a mean, put

-- taking staffing, I look I'll staffing. what first seen a is the think supplemental we focus sequentially. the decline at really saw was one that We've agency on

I certainly help then that the we side margin. with talked the we're our helped so to think technology And Bill prior on systems And doing our efficiency. with clinical on the enhance through caller what

think recently, one think, both in help -- the has of future. will certainly So those, the helped them technology we we will just

Operator

to for like management call turn And the would back remarks. I closing to now

Robert Ortenzio

on, We was No operator. who Thank and appreciate questions remarks. condolences to closing your you, your Rocco. everybody

quarter. you updating to forward look We you. thank next So

Operator

concludes you for And today's conference. your participation. this Thank

You may now disconnect.

Select Medical (SEM) 1 Nov 242024 Q3 Earnings call transcript