- Revenue: Increased by 5% compared to Q2 of the prior year.
- Adjusted EBITDA: Grew 3% to $226.3 million compared to $219.5 million in the prior year.
- Adjusted EBITDA Margin: 12.9% for Q2 compared to 13.1% in the prior year.
- Critical Illness Recovery Hospital Revenue: Increased by 5% compared to the same quarter prior year.
- Critical Illness Recovery Hospital Adjusted EBITDA: Increased by 10% compared to the same quarter prior year.
- Inpatient Rehabilitation Division Revenue: Increased by 11% compared to Q2 prior year.
- Inpatient Rehabilitation Division Adjusted EBITDA: Increased by 13% compared to Q2 prior year.
- Inpatient Rehabilitation Division Adjusted EBITDA Margin: 23.1% for Q2 compared to 22.7% in the prior year.
- Concentra Net Revenues: Increased by 2% over prior year same quarter.
- Concentra Adjusted EBITDA: Increased by 1% over prior year same quarter.
- Outpatient Rehab Division Revenue: Increased by 4% compared to prior year.
- Outpatient Rehab Division Adjusted EBITDA Margin: Decreased from 10.8% to 9.1% compared to prior year.
- Earnings Per Share: $0.6 for the second quarter compared to $0.61 per share in the same quarter prior year.
- Cash Dividend: $0.125 payable on August 30th to stockholders of record as of August 14th.
- Interest Expense: $37.1 million in the second quarter compared to $49 million in the same quarter prior year.
- Debt Outstanding: $3.6 billion at the end of the quarter.
- Cash on Balance Sheet: $111.2 million at the end of the quarter.
- Operating Cash Flow: $278.2 million provided by operating activities in Q2.
- Days Sales Outstanding (DSO): 56 days at June 30th, 2024, compared to 52 days at June 30th, 2023.
- Capital Expenditures: Expected to be in the range of $225 to $275 million for 2024.
Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successful completion of Concentra's IPO, raising significant capital and reducing debt.
- Recognition of six Select Medical rehabilitation hospitals in U.S. News & World Report's Best Hospitals list.
- Opening of new critical illness recovery hospital and rehabilitation units, with plans for further expansions.
- Double-digit growth in revenue and adjusted EBITDA for the inpatient rehabilitation division.
- Overall consolidated adjusted EBITDA grew by 3% and revenue by 5% compared to the prior year.
Negative Points
- Occupancy rates slightly down from the previous year, impacting revenue.
- Start-up losses incurred in new hospitals, affecting overall profitability.
- Outpatient rehab division's adjusted EBITDA decreased by 12%, with a drop in EBITDA margin.
- Increased interest expenses expected in Q4 due to changes in borrowing costs.
- Equity earnings of unconsolidated subsidiaries declined due to a write-off of an impaired business.
Q & A Highlights
Highlights from Select Medical Holdings Corp (SEM, Financial) Q2 2024 Earnings Call
Q: Can you provide more information on the ILTAC margin and any one-time factors affecting it?
A: Martin Jackson (SVP, Strategic Finance and Operations): The drop in occupancy was only 1% year-over-year, and we don't see much seasonality. Q1 is typically our highest quarter, and Q2 sees a drop in census. Robert Ortenzio (Executive Chairman and Co-Founder) added that Q1 had exceptionally high ICU volumes, explaining the sequential differences.
Q: Regarding the outpatient rehab business, are there opportunities to improve margins through efficiencies or rate adjustments?
A: Martin Jackson (SVP, Strategic Finance and Operations): Rate improvements would help, but we are also focusing on clinical efficiencies and scheduling. We expect to see benefits from these efforts over the next two quarters, particularly starting in the new year.
Q: What are the underlying wage rates for permanent staff in critical illness hospitals?
A: Martin Jackson (SVP, Strategic Finance and Operations): Wage rates for permanent staff are currently in the 3% to 3.5% range, which is back to pre-pandemic levels.
Q: What are the assumptions for borrowing costs or interest expense in Q3 and Q4?
A: Martin Jackson (SVP, Strategic Finance and Operations): We have included a step-up in borrowing costs in our guidance. Our all-in costs will go from a 300 basis points spread plus 1% to around 5.3% in the fourth quarter, which will have a negative impact.
Q: Can you elaborate on the impact of the Concentra IPO and related debt transactions?
A: Robert Ortenzio (Executive Chairman and Co-Founder): The Concentra IPO and related debt transactions allowed us to pay down $1.64 billion of our term loan and $300 million on our revolver. This has reduced our consolidated debt balance to approximately $3.1 billion.
Q: How is the outpatient rehab division performing in terms of revenue and patient volumes?
A: Robert Ortenzio (Executive Chairman and Co-Founder): The outpatient rehab division saw a 4% increase in revenue and patient volumes. Net revenue per visit was consistent with the prior year at $100. However, adjusted EBITDA decreased by 12% compared to the prior year.
Q: What are the plans for capital expenditures and development in 2024?
A: Martin Jackson (SVP, Strategic Finance and Operations): We expect capital expenditures to be in the range of $225 to $275 million for 2024, with the majority allocated towards development.
Q: How is the company addressing labor costs within the critical illness recovery hospital division?
A: Martin Jackson (SVP, Strategic Finance and Operations): We have seen a decrease in agency costs and utilization, with RN agency costs down 16% and utilization down from 18% to 16%. Nursing sign-on incentive bonuses also decreased by 18% from Q2 of the prior year.
Q: What is the outlook for revenue and adjusted EBITDA for 2024?
A: Martin Jackson (SVP, Strategic Finance and Operations): We are reaffirming our business outlook for 2024, expecting revenues in the range of $6.9 billion to $7.1 billion and adjusted EBITDA in the range of $845 million to $885 million.
Q: How did the inpatient rehabilitation division perform in Q2 2024?
A: Robert Ortenzio (Executive Chairman and Co-Founder): The inpatient rehabilitation division saw an 11% increase in revenue and a 13% increase in adjusted EBITDA compared to Q2 of the prior year. The adjusted EBITDA margin was 23.1%, up from 22.7% in the prior year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
