Select Medical Holdings Corp. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Spin-off and Refinancing: Completed spin-off of Concentra on Nov 25, 2024, with Concentra results as discontinued operations. Completed $1.6B debt refinancing on Dec 3, 2024, including $1.05B term loans and $550M senior notes, extending revolver maturity to 2029 with increased availability from $550M to $600M.
• Development Activity: Added 94 inpatient rehab beds in Q4, including acquisition of 50-bed hospital in OKC, opening of neuro transitional units, and planned expansions in 2025-2026 with 481 additional beds.
• Financial Results: Fourth quarter combined revenue up 8% to [specific amount], adjusted EBITDA up 4% to $116M. Full year revenue from continuing ops up 7% to [specific amount], adjusted EBITDA up 14% to $510.4M with 9.8% margin (vs 9.2% in 2023).

Segment Performance

• Critical Illness Recovery Hospital Division: Fourth quarter revenue up 6% to [specific amount], adjusted EBITDA up 10% to [specific amount], adjusted EBITDA margin up 4% to 10.5%. Occupancy rate 67% (up from 66% prior year), rate per day up 7%. SW and B as a percentage of revenue 56.9% (down from 57.6% Q4 prior year). Nursing agency utilization 14%, sign-on bonus dollars down 15% Q4 and 20% year over year.
• Inpatient Rehab Hospital Division: Fourth quarter revenue up 13% to [specific amount], but adjusted EBITDA down 6% to [specific amount], margin 21.2% (down from 25.5% prior period). Primary reasons: startup losses at new facilities, integration costs from Oklahoma City acquisition, and referral drop from a key partner impacted by Hurricane Helene. Average daily census up 3%, rate per patient day up 6%, occupancy 81% (down from 85% prior year).
• Outpatient Rehab Division: Fourth quarter revenue up 7% to [specific amount], patient volume up 4%, net revenue per visit up 2% to $102, adjusted EBITDA up 18% to [specific amount]. Margin up from 7.5% to 8.3%. Impacted by two hurricanes but negative EBITDA impact slightly over $1M with no major property damage or clinic closures.

Guidance

• 2025 revenue expected $5.4B-$5.6B, adjusted EBITDA $520M-$540M, adjusted EPS $1.09-$1.19, capital expenditures $160M-$200M.

Risks

• Impact of hurricanes on outpatient markets, causing slight negative EBITDA impact.
• Startup losses and integration costs affecting inpatient rehab margins.
• Nursing agency rate fluctuations (though stabilized) and potential challenges with Medicare reimbursement changes.

Question and Answer

• Q: Justin Bowers on market confusion and development activity A: Robert Ortenzio addressed market confusion due to Concentra's exclusion, mentioned inpatient rehab beds increasing over 30% in next 18 months, and expected double-digit EBITDA growth in 2026-2027.
• Q: Ben Hendrix on leverage and inpatient rehab margins A: Robert Ortenzio stated expected leverage to remain 3-3.1 times in 2025, with improvement post-2026; inpatient rehab margin decline due to startup losses, integration costs, and referral drop from Hurricane Helene.
• Q: Joanna Gashnik on margins and outpatient rehab A: Robert Ortenzio said inpatient rehab margin decline is primary driver for consolidated EBITDA margin outlook; LTACH margins relatively stable; outpatient rehab growth driven by net revenue per visit increase and clinical productivity improvements.