Select Medical (SEM) Q1 2025 Earnings Call May 02, 2025 09:00 AM ET Speaker0 Good morning, and thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the first quarter twenty twenty five results at the company's and the company's business outlook. Presenting 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. Also on the conferenc ...

Select Medical (SEM) came out with quarterly earnings of $0.44 per share, missing the Zacks Consensus Estimate of $0.45 per share. This compares to earnings of $0.77 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -2.22%. A quarter ago, it was expected that this hospital and rehabilitation center operator would post earnings of $0.19 per share when it actually produced earnings of $0.18, delivering a surprise of -5.26%.Over th ...

Select Medical Holdings Corporation Announces Results For Its First Quarter Ended March 31, 2025 and Cash Dividend MECHANICSBURG, PENNSYLVANIA — May 1, 2025 — Select Medical Holdings Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM) today announced results for its first quarter ended March 31, 2025, and the declaration of a cash dividend. For the first quarter ended March 31, 2025, revenue increased 2.4% to $1,353.2 million, compared to $1,321.2 million for the same quarter, prior year. Incom ...

Financial Performance - For the three months ended March 31, 2025, the company reported total revenue of $1,353.2 million, a 2.4% increase compared to $1,321.2 million for the same period in 2024[78]. - Income from continuing operations, net of tax, was $74.7 million for the three months ended March 31, 2025, compared to $61.5 million for the same period in 2024, representing a 21% increase[78]. - Adjusted EBITDA for the three months ended March 31, 2025, was $151.4 million, down 8.6% from $165.8 million in the same period in 2024[78]. - Revenue for the three months ended March 31, 2025, was $1,353.2 million, a 2.4% increase from $1,321.2 million in the same period of 2024[108]. - Income from continuing operations before other income and expense decreased to $112.7 million in Q1 2025, down from $118.5 million in Q1 2024[108]. - Adjusted EBITDA for Q1 2025 was $151.4 million, with an Adjusted EBITDA margin of 11.2%, compared to $165.8 million and 12.5% in Q1 2024[108]. - Total operating expenses for Q1 2025 were $1,205.6 million, or 89.1% of revenue, compared to $1,169.2 million, or 88.5% of revenue in Q1 2024[112]. - Cost of services for Q1 2025 was $1,172.6 million, representing 86.7% of revenue, up from 84.8% in Q1 2024[112]. - General and administrative expenses decreased to $33.0 million, or 2.4% of revenue, from $48.4 million, or 3.7% of revenue in Q1 2024[112]. - Net income attributable to Select Medical Holdings Corporation was 4.2% in Q1 2025, down from 7.3% in Q1 2024[103]. Segment Performance - The critical illness recovery hospital segment generated revenue of $637.0 million, accounting for approximately 47% of total revenue, while the rehabilitation hospital and outpatient rehabilitation segments each contributed approximately 23%[73]. - The company experienced a 29.1% decrease in income from continuing operations before other income and expense in the critical illness recovery hospital segment compared to the previous year[79]. - The rehabilitation hospital segment saw a 15.7% increase in revenue, while the outpatient rehabilitation segment experienced a 1.4% increase[79]. - Critical illness recovery hospital revenue decreased by 2.9% to $637.0 million in Q1 2025, primarily due to a decrease in revenue per patient day from $2,219 to $2,179[109]. - Rehabilitation hospital revenue increased by 15.7% to $307.4 million in Q1 2025, with revenue per patient day rising 6.6% to $2,234[110]. - Outpatient rehabilitation revenue increased by 1.4% to $307.3 million in Q1 2025, driven by a 3.0% increase in revenue per visit to $102[111]. - Adjusted EBITDA for the Critical Illness Recovery Hospital Segment decreased to $86.6 million for the three months ended March 31, 2025, down from $115.9 million for the same period in 2024, resulting in a margin drop from 17.7% to 13.6%[114]. - Adjusted EBITDA for the Rehabilitation Hospital Segment increased by 14.7% to $70.4 million for the three months ended March 31, 2025, with a margin of 22.9%, slightly down from 23.1% in 2024[115]. - Adjusted EBITDA for the Outpatient Rehabilitation Segment was $24.3 million for the three months ended March 31, 2025, compared to $24.9 million in 2024, with a margin decrease from 8.2% to 7.9%[116]. Cash Flow and Capital Management - Net cash used in operating activities significantly improved to $(3.5) million for the three months ended March 31, 2025, compared to $(66.7) million in 2024, driven by a normalization of accounts receivable[125]. - Net working capital increased to $147.5 million at March 31, 2025, compared to $42.1 million at December 31, 2024, mainly due to higher accounts receivable[130]. - The company authorized a common stock repurchase program of up to $1.0 billion, with 649,804 shares repurchased at a cost of approximately $11.4 million during the three months ended March 31, 2025[132]. - As of March 31, 2025, the company had cash and cash equivalents of $53.2 million and $377.5 million of availability under its revolving facilities[134]. Market and Regulatory Environment - The company faces various risks, including changes in government reimbursement policies and shortages of qualified healthcare professionals, which could negatively impact revenue and profitability[68]. - Revenue from the Medicare program accounted for approximately 29% of the company's total revenue for both Q1 2025 and the year 2024[81]. - The standard federal rate for LTCH-PPS for fiscal year 2024 increased to $48,117 from $46,433 in fiscal year 2023, reflecting a market basket increase of 3.5%[86]. - The fixed-loss amount for high cost outlier cases under LTCH-PPS for fiscal year 2024 rose to $59,873, up from $38,518 in fiscal year 2023[86]. - The standard payment conversion factor for IRF-PPS for fiscal year 2024 was set at $18,541, an increase from $17,878 in fiscal year 2023[94]. - The outlier threshold amount for IRF-PPS decreased to $10,423 for fiscal year 2024 from $12,526 in fiscal year 2023[94]. - The proposed standard federal rate for LTCH-PPS for fiscal year 2026 is $50,729, an increase from $49,383 in fiscal year 2025[88]. - The proposed fixed-loss amount for high cost outlier cases under LTCH-PPS for fiscal year 2026 is $91,247, up from $77,048 in fiscal year 2025[88]. - The standard payment conversion factor for IRF-PPS for fiscal year 2026 is proposed to be $19,364, an increase from $18,907 in fiscal year 2025[96]. - CMS expects a 3% decrease in Medicare payments for physical and occupational therapy services in 2025[98]. - The criteria for outlier payment reconciliation were modified to a change in the LTCH's CCR of 20% or more, effective for cost reporting periods beginning on or after October 1, 2024[91]. Future Growth Strategies - The company plans to pursue new joint venture relationships and open new outpatient rehabilitation clinics to drive incremental growth[133].

MECHANICSBURG, Pa., May 1, 2025 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM) today announced results for its first quarter ended March 31, 2025, and the declaration of a cash dividend.For the first quarter ended March 31, 2025, revenue increased 2.4% to $1,353.2 million, compared to $1,321.2 million for the same quarter, prior year. Income from continuing operations before other income and expense was $112.7 million for the first quarter ended Marc ...

MECHANICSBURG, Pa., April 8, 2025 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM), will release the financial results for its first quarter ended March 31, 2025 on Thursday, May 1, 2025 after the market closes. Select Medical will host a conference call regarding its first quarter results, as well as its business outlook, on Friday, May 2, 2025, at 9:00am ET. The conference call will be a live webcast and can be accessed at via this Earnings Call Webcast Link or via link a ...

Core Insights - Select Medical Holdings Corporation (SEM) experienced a 7.2% decline in stock price following the release of its fourth-quarter 2024 results, primarily due to reduced occupancy rates and lower admissions in key segments, alongside increased costs [1] Financial Performance - SEM reported adjusted earnings per share (EPS) of 18 cents, missing the Zacks Consensus Estimate by 5.3%, but showing a 50% increase year over year [2] - Net operating revenues reached $1.31 billion, reflecting a 7.8% year-over-year growth and surpassing the consensus estimate by 1.2% [2] - Total costs and expenses rose 12% year over year to $1.29 billion, lower than the estimated $1.62 billion, driven by increased service costs and administrative expenses [3] - Adjusted EBITDA was $116 million, a 3.8% increase year over year, but fell short of the estimate of $187 million [3] Segment Performance - **Critical Illness Recovery Hospital**: Revenues were $600.4 million, up 5.9% year over year, but below the consensus estimate of $612.5 million. Revenue per patient day increased by 7.2%, while patient days and admissions declined by 1.2% and 4.8%, respectively [4] - Adjusted EBITDA for this segment was $63.1 million, a 10% year-over-year increase, but missed the consensus estimate of $64.7 million [5] - **Rehabilitation Hospital**: Revenues grew 13.1% year over year to $294.4 million, exceeding the consensus mark of $286 million. Admissions and patient days increased by 4.4% and 3.3%, respectively [6] - Adjusted EBITDA declined 6.1% year over year to $62.3 million, although it surpassed the Zacks Consensus Estimate of $51.8 million [6] - **Outpatient Rehabilitation**: Revenues reached $319.6 million, a 7.2% year-over-year increase, beating the consensus estimate of $308.4 million. Patient visits rose by 5.2% [7] - Adjusted EBITDA improved 18.2% year over year to $26.6 million, exceeding estimates [7] Financial Position - As of December 31, 2024, SEM had cash and cash equivalents of $59.7 million, up from $52.6 million at the end of 2023. Total assets decreased to $5.6 billion from $7.7 billion [9] - Long-term debt was $1.7 billion, down from the previous year, while total equity increased to $2 billion from $1.5 billion [9] Cash Flow and Full-Year Highlights - Cash flow from operations was $125.4 million, a decline of 30.1% year over year [10] - For the full year 2024, EPS was 94 cents compared to 54 cents in 2023, with total revenue rising to $5.2 billion from $4.8 billion [11] Future Outlook - Management projects revenues for 2025 to be between $5.4 billion and $5.6 billion, indicating a potential growth of 5.8% from 2024 [13] - Expected adjusted EBITDA for 2025 is between $520 million and $540 million, suggesting a 3.8% increase from 2024 [13] - EPS is anticipated to range from $1.09 to $1.19 [13]

Financial Data and Key Metrics Changes - The company reported a combined revenue increase of 8% in Q4 2024, with adjusted EBITDA growing by 4% from $111.8 million to $116 million [14][15] - For the full year, revenue from continuing operations grew by 7%, and adjusted EBITDA increased by 14%, reaching $510.4 million with a 9.8% adjusted EBITDA margin compared to 9.2% in 2023 [15][24] - The diluted loss per common share from continuing operations was $0.19 for Q4, compared to earnings of $0.12 in the same quarter last year [23] Business Line Data and Key Metrics Changes - The critical illness recovery hospital division saw a 6% increase in revenue and a 10% increase in adjusted EBITDA, with an adjusted EBITDA margin of 10.5% for Q4 [15][16] - The inpatient rehab hospital division experienced a 13% revenue increase, but adjusted EBITDA declined by 6%, with a margin of 21.2% [18] - The outpatient rehab division reported a 7% revenue increase, 4% increase in patient volume, and 18% increase in adjusted EBITDA, with net revenue per visit rising from $100 to $102 [20][21] Market Data and Key Metrics Changes - The company added 94 inpatient rehabilitation beds in Q4 and plans to add 481 additional beds in 2025 and 2026 [8][12] - The occupancy rate for the critical illness recovery hospital division increased from 66% to 67% year-over-year [16] - The average daily census for the entire rehab division increased by 3%, while the occupancy rate was 81%, down from 85% the previous year [19] Company Strategy and Development Direction - The company completed the spin-off of Concentra, which is now reflected as discontinued operations [5] - The company plans to continue expanding its inpatient rehab division with multiple new facilities scheduled to open through 2026 [12] - The company is focusing on optimizing resources by closing or consolidating underperforming outpatient clinics [13] Management's Comments on Operating Environment and Future Outlook - Management noted that nursing agency rates have stabilized and utilization has returned to pre-COVID levels, with a 15% reduction in nursing sign-on incentive bonus dollars [17][27] - The company expects revenue for 2025 to be in the range of $5.4 billion to $5.6 billion, with adjusted EBITDA projected between $520 million and $540 million [36] - Management acknowledged confusion in the market regarding the impact of the Concentra spin-off on consensus estimates [41] Other Important Information - The company did not repurchase shares in the last quarter but continues to evaluate stock repurchases and debt reduction opportunities [25][35] - A cash dividend of $0.0625 per share has been declared, payable on March 13, 2025 [24] Q&A Session Summary Question: Clarification on 2025 metrics - Management confirmed that there is confusion in the market regarding consensus estimates and emphasized the importance of excluding Concentra's numbers [40][41] Question: Development activity and startup costs - Management indicated that the increase in inpatient rehab beds will dampen margins in 2025 but expects significant EBITDA growth in 2026 and 2027 [47] Question: Post-separation leverage targets - Management expects to maintain leverage around 3 to 3.1 times for 2025, with a reduction anticipated in 2026 and beyond [57] Question: Inpatient rehab margins - Management attributed lower margins to startup losses and a referral source impacted by Hurricane Helene, which has since returned to normal [59] Question: Outpatient rehab growth drivers - Management highlighted increased net revenue per visit and improved clinical productivity as key drivers for expected growth in outpatient rehab EBITDA [78]

Company Performance - Select Medical reported quarterly earnings of $0.18 per share, missing the Zacks Consensus Estimate of $0.19 per share, and down from $0.36 per share a year ago, representing an earnings surprise of -5.26% [1] - The company posted revenues of $1.31 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.18%, but down from $1.66 billion year-over-year [2] - Over the last four quarters, Select Medical has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Select Medical shares have increased by approximately 2.1% since the beginning of the year, compared to the S&P 500's gain of 4.5% [3] - The current Zacks Rank for Select Medical is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.41 on revenues of $1.37 billion, and for the current fiscal year, it is $1.17 on revenues of $5.37 billion [7] - The outlook for the Medical - HMOs industry, to which Select Medical belongs, is currently in the bottom 20% of over 250 Zacks industries, which may impact stock performance [8]

Hospital Operations - As of December 31, 2024, the company operated 104 critical illness recovery hospitals, with 38%, 37%, and 33% of revenue from Medicare reimbursement for the years ended December 31, 2022, 2023, and 2024, respectively[26]. - The rehabilitation hospital segment operated 35 hospitals as of December 31, 2024, with 46%, 47%, and 45% of revenue from Medicare reimbursement for the years ended December 31, 2022, 2023, and 2024, respectively[43]. - As of December 31, 2024, the company operated 1,914 outpatient rehabilitation clinics across 39 states and the District of Columbia, employing approximately 11,300 people[58]. - The company operates 35 rehabilitation hospitals in 14 states and 104 critical illness recovery hospitals in 29 states as of December 31, 2024[71]. - As of December 31, 2024, all critical illness recovery hospitals operated by the company were certified by Medicare as LTCHs, and 22 rehabilitation hospitals were certified as IRFs[110]. Patient Care Metrics - The average length of stay for patients in critical illness recovery hospitals was 31 days for the year ended December 31, 2024[28]. - The average length of stay for patients in rehabilitation hospitals was 14 days for the year ended December 31, 2024[44]. Workforce and Employment - The company employed approximately 16,500 people in its critical illness recovery hospital segment as of December 31, 2024[26]. - As of December 31, 2024, the company employed approximately 44,100 individuals, including 30,000 full-time and 14,100 part-time employees[83]. - The company has developed a cultural framework called "The Select Medical Way" to enhance employee experience and retention[86]. - The company employs various strategies for talent acquisition, including employee referral programs and partnerships with nursing and therapy schools[88]. Financial Performance and Revenue Sources - For the year ended December 31, 2024, approximately 82% of the company's revenue from outpatient rehabilitation came from commercial payors, with the remainder from Medicare and other government programs[60]. - The company's revenue by payor source for 2024 indicated that Medicare accounted for 28.8%, commercial insurance for 51.3%, and Medicaid for 3.0%[79]. - Revenue from workers' compensation programs accounted for approximately 15% of outpatient rehabilitation segment revenue, 2% of rehabilitation hospital segment revenue, and 1% of critical illness recovery hospital segment revenue for the year ended December 31, 2024[112]. - Revenues from Medicare-covered services represented approximately 31%, 31%, and 29% of total revenue for the years ended December 31, 2022, 2023, and 2024, respectively[209]. Strategic Initiatives - The company focuses on increasing admissions by demonstrating quality outcomes and improving relationships with referring physicians and hospitals[29]. - The company aims to control operating costs by centralizing administrative functions and standardizing operations[38]. - The company is pursuing opportunistic acquisitions to grow its network of critical illness recovery hospitals[41]. - The company has a strategy to pursue opportunistic acquisitions to grow its network of rehabilitation hospitals and outpatient facilities[57][67]. Quality Assurance and Compliance - The company maintains quality assurance programs to support and monitor care standards, ensuring compliance with regulatory requirements and Medicare certifications[51]. - The company maintains a Privacy and Security Committee to monitor compliance with HIPAA regulations[174]. - The compliance program includes a written code of conduct and is overseen by a compliance and audit committee that meets quarterly[188][189]. Regulatory and Payment System Challenges - The company faces risks from potential changes in Medicare reimbursement rates, which could adversely affect revenue and profitability[210]. - The company is exposed to risks from legislative and regulatory changes that could affect payment systems under the Medicare program[210]. - LTCHs and IRFs face a 2% reduction in annual payment updates if they fail to submit required quality data[158]. Operational Challenges - The company faced significant operating issues due to a shortage of clinical personnel, which may lead to increased reliance on costly temporary personnel[84]. - Increased labor costs due to shortages and high turnover rates are impacting profitability, with significant increases in operating costs expected[215]. - The company is experiencing challenges in attracting and retaining qualified healthcare personnel, which may limit operational capacity and increase costs[216]. Economic and Market Risks - Economic downturns or inflationary pressures could negatively impact patient volumes and overall financial performance[212]. - Public health threats, such as pandemics, may create uncertainties regarding future operating results and financial conditions[220]. - Global economic conditions, including geopolitical conflicts, may adversely affect the company's business and financial results[221].