Company Overview - Select Medical Holdings Corporation is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on the number of facilities [3] - As of March 31, 2024, Select Medical operated 107 critical illness recovery hospitals in 28 states, 33 rehabilitation hospitals in 12 states, 1,922 outpatient rehabilitation clinics in 39 states and the District of Columbia, 547 occupational health centers in 41 states, and 151 onsite clinics at employer worksites [3] - The company has operations in 46 states and the District of Columbia [3] Financial Results Announcement - Select Medical will release its financial results for the second quarter ended June 30, 2024, on Thursday, August 1, 2024, after the market closes [2] - A conference call regarding the second quarter results and business outlook will be hosted on Friday, August 2, 2024, at 9:00 am ET [4] - The conference call will be available as a live webcast and a replay will be accessible shortly after the call [4]

The popular research service can help you become a smarter, more self-assured investor, giving you access to daily updates of the Zacks Rank and Zacks Industry Rank, the Zacks #1 Rank List, Equity Research reports, and Premium stock screens. What are the Zacks Style Scores? Based on their value, growth, and momentum characteristics, each stock is assigned a rating of A, B, C, D, or F. The better the score, the better chance the stock will outperform; an A is better than a B, a B is better than a C, and so o ...

Core Viewpoint - Select Medical Holdings Corporation and Concentra Group Holdings Parent, Inc. announced the pricing of $650 million aggregate principal amount of 6.875% senior notes due 2032 as part of a plan to separate Concentra, its occupational health services business [1] Group 1: Offering Details - The offering consists of senior notes priced at 6.875% and is due in 2032 [1] - Concentra plans to use $50 million of the net proceeds for general corporate purposes, with the remainder to be paid to Select Medical Corporation as a dividend [2] - The closing of the offering is not conditioned on the consummation of the Merger, which is expected in the third quarter of 2024 [6] Group 2: Merger and Separation - The notes will be guaranteed by Concentra and certain subsidiaries upon the consummation of the Merger, which involves merging Concentra Escrow Issuer Corporation with Concentra Health Services, Inc. [1] - If the Merger is not completed by September 30, 2024, the notes will be subject to a special mandatory redemption at 100% of the initial issue price plus accrued interest [6] Group 3: Regulatory and Compliance - The notes are being offered in a private placement to qualified institutional buyers under Rule 144A and to non-U.S. persons outside the United States under Regulation S [7] - The notes and related guarantees have not been registered under the Securities Act and may not be offered or sold in the U.S. without registration or an exemption [7]

Cautionary Statement Regarding Forward-Looking Statements Joel T. Veit 717-972-1100 [email protected] The notes and related guarantees are being offered in a private placement, solely to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), or to persons other than "U.S. persons" outside the United States in compliance with Regulation S under the Securities Act. The notes and related guarantees have not ...

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Core Viewpoint - The increase in patient days and admissions in the Critical Illness Recovery Hospital and Rehabilitation Hospital segments is expected to enhance investor confidence, leading to a recommendation for investors to maintain their current stock positions [1]. Group 1: Company Performance - Select Medical Holdings Corporation (SEM) has shown strong performance, with a year-to-date stock return of 42.4%, significantly outperforming the industry decline of 5.8% and the S&P 500 Index growth of 12.4% [7]. - The Zacks Consensus Estimate for SEM's 2024 earnings indicates a 5.5% year-over-year increase to $2.10 per share, with a projected 12.5% growth for 2025 [8]. - Revenue per visit is expected to rise, contributing to an anticipated 4.1% year-over-year growth in SEM's 2024 top line, reaching over $6.9 billion [16]. Group 2: Market Trends - The strategic expansion of facilities is allowing SEM to capture a larger market share, with expected growth in patient admissions of 1.5% and 3.3% year-over-year for its Critical Illness Recovery and Rehabilitation Hospital segments, respectively [2]. - The Outpatient Rehabilitation and Concentra units are projected to see nearly 2% and 1% growth in the number of visits from the previous year [2]. Group 3: Financial Health - SEM's long-term debt-to-capital ratio stands at 69.8%, significantly higher than the industry average of 38.4%, indicating potential financial leverage concerns [4]. - The company exited the first quarter with cash and cash equivalents of $92.6 million, while long-term debt increased to $3.8 billion from $3.6 billion at the end of 2023 [4]. Group 4: Analyst Sentiment - Analysts have shown confidence in SEM, with one upward estimate revision for the 2024 bottom line in the past 30 days, resulting in a 2.9% increase in the Zacks Consensus Estimate for 2024 earnings [15]. - The company has beaten earnings estimates three times in the past four quarters, with an average surprise of 19.3% [8].

Core Insights - Zacks Premium provides tools for investors to enhance their stock market strategies, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that help investors select stocks likely to outperform the market in the next 30 days, rated from A to F based on value, growth, and momentum [2][9] Value Score - The Value Style Score focuses on identifying undervalued stocks using ratios like P/E, PEG, and Price/Sales to find attractive investment opportunities [3] Growth Score - The Growth Style Score assesses a company's financial health and future outlook by analyzing projected and historical earnings, sales, and cash flow [4] Momentum Score - The Momentum Style Score capitalizes on price trends, using factors like one-week price changes and monthly earnings estimate changes to identify high-momentum stocks [5] VGM Score - The VGM Score combines the Value, Growth, and Momentum Scores to identify stocks with the best overall potential, serving as a strong indicator alongside the Zacks Rank [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks averaging a +25.41% annual return since 1988 [7][8] Stock to Watch: Select Medical (SEM) - Select Medical is a healthcare company with around 53,800 employees, operating long-term acute care and rehabilitation hospitals, and has a Zacks Rank of 3 (Hold) with a VGM Score of A [12] - The company has a forward P/E ratio of 15.75, indicating attractive valuation metrics, and has seen an upward revision in earnings estimates for fiscal 2024, with the consensus estimate increasing by $0.07 to $2.10 per share [12][13]

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Financial Data and Key Metrics Changes - Total company adjusted EBITDA for Q1 2024 was $261.9 million, compared to $214.1 million in the prior year, reflecting a 22% increase [40] - Revenue increased by 10% year-over-year, with adjusted EBITDA margin rising to 17.7% from 12.9% in the prior year [46] - Earnings per fully diluted share were $0.75 for Q1 2024, up from $0.56 in the same quarter prior year [52] Business Line Data and Key Metrics Changes - The critical illness recovery hospital division reported adjusted EBITDA of $115.9 million, a 51% increase compared to Q1 of the prior year [34] - Inpatient rehabilitation hospitals saw a 15% increase in revenue and a 30% increase in adjusted EBITDA compared to Q1 of the prior year, with occupancy rising to 87% from 86% [48] - Concentra experienced a 2% increase in net revenues and a 3% increase in adjusted EBITDA over the prior year, driven by a 4% increase in rate [49] Market Data and Key Metrics Changes - The outpatient division's adjusted EBITDA decreased by 17% compared to the prior year, with adjusted EBITDA margin dropping from 10.2% to 8.2% [51] - Workers' compensation volume increased by 3%, but was offset by a 6% decrease in employer-based visits, leading to an overall visit decline of 2% [81] - Average daily census in the critical illness recovery hospitals increased by 2%, while the rate per patient day increased by 8% [77] Company Strategy and Development Direction - The company plans to open a 48-bed hospital in Jacksonville, Florida in Q3 2024 and has a strong pipeline for additional growth opportunities [35] - Concentra is actively pursuing acquisitions and has a strong pipeline of potential de novo sites under evaluation [43] - The company aims to separate its occupational health services business, Concentra, with an IPO expected to occur after SEC review [33] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong performance of the critical illness recovery hospital division, attributing it to improved labor costs and operational efficiencies [34][85] - The company anticipates revenue for 2024 to be in the range of $6.9 billion to $7.1 billion, with adjusted EBITDA expected between $845 million and $885 million [91] - Management noted that the demand for Concentra's services is expected to normalize as hiring levels stabilize [19] Other Important Information - The company ended the quarter with $3.8 billion in debt and $93 million in cash, with a net leverage of 4.4 times [57][88] - Capital expenditures for 2024 are expected to be between $225 million and $275 million, with a focus on both maintenance and development [61] - The company did not repurchase shares during the quarter but continues to evaluate stock repurchases and debt reduction [53][60] Q&A Session Summary Question: Can you provide insights on the $3.8 billion in debt ahead of the spin? - Management indicated that both entities will ultimately have about 4 times leverage on the balance sheet [100] Question: What are the trends in employer demand for Concentra? - Management noted that the demand is decreasing as hiring normalizes, which was expected [19] Question: Can you elaborate on the agency costs and their impact? - Agency costs decreased by 23%, translating to a net reduction of about $4 million to $5 million after taxes [96]

[Executive Summary & First Quarter Financial Highlights](index=1&type=section&id=Executive%20Summary%26%20First%20Quarter%20Financial%20Highlights) Select Medical reported strong financial results for Q1 2024, with significant year-over-year increases across key metrics including revenue, income from operations, net income, Adjusted EBITDA, and earnings per common share [Overall Financial Performance](index=1&type=section&id=Overall%20Financial%20Performance) Select Medical reported strong financial results for Q1 2024, with significant year-over-year increases across key metrics including revenue, income from operations, net income, Adjusted EBITDA, and earnings per common share Q1 2024 Consolidated Financial Highlights (YoY Growth) | Metric | Q1 2023 (Millions) | Q1 2024 (Millions) | % Change | | :------------------------- | :----------------- | :----------------- | :------- | | Revenue | $1,665.0 | $1,788.8 | 7.4% | | Income from operations | $151.5 | $194.0 | 28.1% | | Net income | $85.3 | $117.2 | 37.4% | | Adjusted EBITDA | $214.1 | $261.9 | 22.4% | | Earnings per common share | $0.56 | $0.75 | 33.9% | | Adjusted earnings per common share | $0.56 | $0.77 | 37.5% | [Company Overview](index=1&type=section&id=Company%20Overview) Select Medical is a leading operator of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States [Business Description and Facilities](index=1&type=section&id=Business%20Description%20and%20Facilities) Select Medical is a leading operator of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States, with operations in 46 states and D.C - Select Medical operates **107 critical illness recovery hospitals**, **33 rehabilitation hospitals**, **1,922 outpatient rehabilitation clinics**, and **547 occupational health centers** as of March 31, 2024[4](index=4&type=chunk) [Segment Performance Review](index=1&type=section&id=Segment%20Performance%20Review) This section reviews the financial and operational performance of Select Medical's critical illness recovery, rehabilitation, outpatient, and Concentra segments [Critical Illness Recovery Hospital Segment](index=1&type=section&id=Critical%20Illness%20Recovery%20Hospital%20Segment) This segment experienced robust growth in Q1 2024, with significant increases in revenue and Adjusted EBITDA, driven by higher revenue per patient day and a slight increase in admissions, despite a minor dip in occupancy rate Critical Illness Recovery Hospital Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2023 | Q1 2024 | % Change | | :------------------------ | :------ | :------ | :------- | | Revenue (Millions) | $593.9 | $655.9 | 10.4% | | Adjusted EBITDA (Millions) | $76.8 | $115.9 | 51.0% | | Adjusted EBITDA margin | 12.9% | 17.7% | +4.8 pp | | Number of hospitals | 105 | 107 | - | | Number of patient days | 286,746 | 294,622 | 2.7% | | Number of admissions | 9,438 | 9,529 | 1.0% | | Revenue per patient day | $2,058 | $2,219 | 7.8% | | Occupancy rate | 72% | 71% | (1.4)% | [Rehabilitation Hospital Segment](index=2&type=section&id=Rehabilitation%20Hospital%20Segment) The rehabilitation hospital segment demonstrated strong performance in Q1 2024, with double-digit growth in revenue and Adjusted EBITDA, supported by increases in patient days, admissions, and revenue per patient day, alongside an improved occupancy rate Rehabilitation Hospital Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2023 | Q1 2024 | % Change | | :------------------------ | :------ | :------ | :------- | | Revenue (Millions) | $231.5 | $265.7 | 14.8% | | Adjusted EBITDA (Millions) | $47.2 | $61.4 | 30.0% | | Adjusted EBITDA margin | 20.4% | 23.1% | +2.7 pp | | Number of hospitals | 32 | 33 | - | | Number of patient days | 107,910 | 116,844 | 8.3% | | Number of admissions | 7,620 | 8,275 | 8.6% | | Revenue per patient day | $1,969 | $2,096 | 6.4% | | Occupancy rate | 86% | 87% | 1.2% | [Outpatient Rehabilitation Segment](index=2&type=section&id=Outpatient%20Rehabilitation%20Segment) The outpatient rehabilitation segment saw modest revenue growth in Q1 2024, but experienced a decline in Adjusted EBITDA and margin, despite an increase in the number of patient visits Outpatient Rehabilitation Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2023 | Q1 2024 | % Change | | :------------------------ | :------ | :------ | :------- | | Revenue (Millions) | $295.9 | $303.2 | 2.5% | | Adjusted EBITDA (Millions) | $30.2 | $24.9 | (17.5)% | | Adjusted EBITDA margin | 10.2% | 8.2% | (2.0) pp | | Number of clinics | 1,936 | 1,922 | - | | Number of visits | 2,636,770 | 2,735,126 | 3.7% | | Revenue per visit | $101 | $99 | (2.0)% | [Concentra Segment](index=2&type=section&id=Concentra%20Segment) The Concentra segment reported slight increases in revenue and Adjusted EBITDA for Q1 2024, maintaining a stable Adjusted EBITDA margin, despite a decrease in the total number of visits Concentra Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2023 | Q1 2024 | % Change | | :------------------------ | :------ | :------ | :------- | | Revenue (Millions) | $456.3 | $467.6 | 2.5% | | Adjusted EBITDA (Millions) | $93.7 | $96.1 | 2.6% | | Adjusted EBITDA margin | 20.5% | 20.6% | +0.1 pp | | Number of centers | 539 | 547 | - | | Number of visits | 3,217,945 | 3,155,655 | (1.9)% | | Revenue per visit | $133 | $139 | 4.5% | [Capital Allocation & Shareholder Returns](index=2&type=section&id=Capital%20Allocation%20%26%20Shareholder%20Returns) This section outlines Select Medical's capital allocation strategies, including cash dividends and the stock repurchase program [Cash Dividend Declaration](index=2&type=section&id=Cash%20Dividend%20Declaration) Select Medical's Board of Directors declared a quarterly cash dividend of $0.125 per share, payable in May 2024 - A cash dividend of **$0.125 per share** was declared on May 1, 2024, payable on or about May 30, 2024, to stockholders of record as of May 16, 2024[9](index=9&type=chunk) - Future dividend declarations are at the discretion of the Board of Directors, considering financial condition, operating results, cash needs, and indebtedness[10](index=10&type=chunk) [Stock Repurchase Program](index=3&type=section&id=Stock%20Repurchase%20Program) The company has an authorized stock repurchase program of up to $1.0 billion, which remains in effect until December 31, 2025. No shares were repurchased during Q1 2024 - The Board of Directors authorized a common stock repurchase program of up to **$1.0 billion**, effective until December 31, 2025[11](index=11&type=chunk) - No shares were repurchased under the program during the three months ended March 31, 2024[12](index=12&type=chunk) - Since inception through March 31, 2024, Select Medical has repurchased **48,234,823 shares** at a cost of approximately **$600.3 million**, averaging **$12.45 per share**[12](index=12&type=chunk) [Business Outlook for 2024](index=3&type=section&id=Business%20Outlook%20for%202024) This section provides Select Medical's financial guidance and non-GAAP reconciliations for the full year 2024 [2024 Financial Guidance](index=3&type=section&id=2024%20Financial%20Guidance) Select Medical reaffirmed its 2024 revenue outlook and adjusted its guidance for Adjusted EBITDA, fully diluted earnings per share, and issued guidance for adjusted earnings per share 2024 Business Outlook | Metric | Range | | :-------------------------- | :------------------- | | Revenue | $6.9 billion to $7.1 billion | | Adjusted EBITDA | $845 million to $885 million | | Fully diluted earnings per share | $1.95 to $2.19 | | Adjusted earnings per share | $1.96 to $2.20 | [Outlook Non-GAAP Reconciliations](index=14&type=section&id=Outlook%20Non-GAAP%20Reconciliations) The company provided reconciliations for its full-year 2024 Adjusted EBITDA and adjusted earnings per common share expectations to the closest comparable GAAP financial measures 2024 Business Outlook: Net Income to Adjusted EBITDA Reconciliation (Millions) | Metric | Low Range | High Range | | :------------------------------------ | :-------- | :--------- | | Net income attributable to Select Medical | $252 | $284 | | Net income attributable to non-controlling interests | $68 | $69 | | Net income | $320 | $353 | | Income tax expense | $96 | $105 | | Interest expense | $218 | $218 | | Equity in earnings of unconsolidated subsidiaries | ($43) | ($45) | | Income from operations | $591 | $631 | | Stock compensation expense | $48 | $48 | | Depreciation and amortization | $204 | $204 | | Concentra separation transaction costs | $2 | $2 | | **Adjusted EBITDA** | **$845** | **$885** | 2024 Business Outlook: Earnings per Common Share to Adjusted Earnings per Common Share Reconciliation | Metric | Low Range | High Range | | :------------------------------------------ | :-------- | :--------- | | Basic and diluted earnings per common share | $1.95 | $2.19 | | Adjustments: | | | | Concentra separation transaction costs, net of tax | $0.01 | $0.01 | | **Adjusted earnings per common share** | **$1.96** | **$2.20** | [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents Select Medical's key condensed consolidated financial statements for the reporting period [Condensed Consolidated Statements of Operations](index=6&type=section&id=I.%20Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations show a significant increase in revenue and net income for Q1 2024 compared to the prior year, reflecting improved operational efficiency and financial performance Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2023 and 2024) | | 2023 (Thousands) | 2024 (Thousands) | % Change | | :------------------------------------------ | :--------------- | :--------------- | :------- | | Revenue | $1,664,980 | $1,788,809 | 7.4% | | Costs and expenses: | | | | | Cost of services, exclusive of depreciation and amortization | 1,418,819 | 1,494,610 | 5.3 | | General and administrative | 42,279 | 48,447 | 14.6 | | Depreciation and amortization | 52,425 | 54,069 | 3.1 | | Total costs and expenses | 1,513,523 | 1,597,126 | 5.5 | | Other operating income | — | 2,284 | N/M | | Income from operations | 151,457 | 193,967 | 28.1 | | Other income and expense: | | | | | Equity in earnings of unconsolidated subsidiaries | 8,556 | 10,421 | 21.8 | | Interest expense | (48,571) | (50,763) | 4.5 | | Income before income taxes | 111,442 | 153,625 | 37.9 | | Income tax expense | 26,185 | 36,458 | 39.2 | | Net income | 85,257 | 117,167 | 37.4 | | Less: Net income attributable to non-controlling interests | 14,452 | 20,270 | 40.3 | | Net income attributable to Select Medical | $70,805 | $96,897 | 36.9% | | Basic and diluted earnings per common share | $0.56 | $0.75 | - | [Earnings per Share Calculation](index=7&type=section&id=II.%20Earnings%20per%20Share) The company calculates earnings per share using the two-class method, accounting for common stock and unvested restricted stock awards as participating securities - Select Medical applies the two-class method for EPS calculation due to unvested restricted stock awards being participating securities[23](index=23&type=chunk) Earnings per Share Computation (Three Months Ended March 31, 2023 and 2024) | | 2023 (Thousands, except per share) | 2024 (Thousands, except per share) | | :------------------------------------------ | :--------------------------------- | :--------------------------------- | | Net income attributable to Select Medical | $70,805 | $96,897 | | Less: net income attributable to participating securities | 2,573 | 3,398 | | Net income attributable to common shares | $68,232 | $93,499 | | Common shares (weighted average) | 122,553 | 123,859 | | Basic and Diluted EPS (Common shares) | $0.56 | $0.75 | | Participating securities (weighted average) | 4,622 | 4,501 | | Basic and Diluted EPS (Participating securities) | $0.56 | $0.75 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=III.%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows an increase in total assets and total equity from December 31, 2023, to March 31, 2024, with a notable rise in accounts receivable and long-term debt Condensed Consolidated Balance Sheets (December 31, 2023 and March 31, 2024) | | December 31, 2023 (Thousands) | March 31, 2024 (Thousands) | | :------------------------------------------ | :---------------------------- | :--------------------------- | | **Assets** | | | | Total Current Assets | $1,257,646 | $1,440,340 | | Operating lease right-of-use assets | 1,188,616 | 1,176,713 | | Property and equipment, net | 1,023,561 | 1,024,626 | | Goodwill | 3,513,170 | 3,517,071 | | Identifiable intangible assets, net | 329,916 | 324,125 | | Other assets | 376,722 | 375,388 | | **Total Assets** | **$7,689,631** | **$7,858,263** | | **Liabilities and Equity** | | | | Total Current Liabilities | $1,248,465 | $1,184,377 | | Non-current operating lease liabilities | 1,025,867 | 1,015,160 | | Long-term debt, net of current portion | 3,587,675 | 3,758,631 | | Non-current deferred tax liability | 143,306 | 133,987 | | Other non-current liabilities | 110,303 | 100,175 | | **Total Liabilities** | **$6,115,616** | **$6,192,330** | | Redeemable non-controlling interests | 26,297 | 28,290 | | **Total equity** | **1,547,718** | **1,637,643** | | **Total Liabilities and Equity** | **$7,689,631** | **$7,858,263** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=IV.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statement indicates a shift from net cash provided by operating activities in Q1 2023 to net cash used in Q1 2024, primarily due to changes in accounts receivable. Financing activities provided significant cash in Q1 2024, largely from revolving facilities Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2023 and 2024) | | 2023 (Thousands) | 2024 (Thousands) | | :------------------------------------------ | :--------------- | :--------------- | | **Operating activities** | | | | Net income | $85,257 | $117,167 | | Changes in operating assets and liabilities, net | (90,819) | (246,645) | | **Net cash provided by (used in) operating activities** | **$51,440** | **($66,689)** | | **Investing activities** | | | | Business combinations, net of cash acquired | (397) | (5,405) | | Purchases of property, equipment, and other assets | (58,885) | (52,517) | | Investment in businesses | (9,800) | — | | Proceeds from sale of assets and businesses | 20 | 265 | | **Net cash used in investing activities** | **($69,062)** | **($57,657)** | | **Financing activities** | | | | Borrowings on revolving facilities | 225,000 | 495,000 | | Payments on revolving facilities | (210,000) | (265,000) | | Payments on term loans | — | (79,085) | | Dividends paid to common stockholders | (15,897) | (16,045) | | **Net cash provided by financing activities** | **$3,419** | **$132,960** | | Net increase (decrease) in cash and cash equivalents | ($14,203) | $8,614 | | Cash and cash equivalents at beginning of period | 97,906 | 84,006 | | **Cash and cash equivalents at end of period** | **$83,703** | **$92,620** | [Non-GAAP Financial Measures Reconciliations](index=12&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliations) This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures [Net Income to Adjusted EBITDA Reconciliation](index=12&type=section&id=VI.%20Net%20Income%20to%20Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA is presented as a key analytical indicator for performance evaluation and resource allocation, excluding interest, income taxes, depreciation, amortization, and other non-operating items from net income - Adjusted EBITDA is a non-GAAP measure used by investors and management to evaluate financial performance and allocate resources, excluding specific non-operating and non-cash items[30](index=30&type=chunk)[31](index=31&type=chunk) Net Income to Adjusted EBITDA Reconciliation (Three Months Ended March 31, 2023 and 2024) | | 2023 (Thousands) | 2024 (Thousands) | | :------------------------------------------ | :--------------- | :--------------- | | Net income | $85,257 | $117,167 | | Income tax expense | 26,185 | 36,458 | | Interest expense | 48,571 | 50,763 | | Equity in earnings of unconsolidated subsidiaries | (8,556) | (10,421) | | Income from operations | 151,457 | 193,967 | | Stock compensation expense | 10,181 | 11,610 | | Depreciation and amortization | 52,425 | 54,069 | | Concentra separation transaction costs | — | 2,271 | | **Adjusted EBITDA** | **$214,063** | **$261,917** | | Critical illness recovery hospital Adjusted EBITDA | $76,773 | $115,940 | | Rehabilitation hospital Adjusted EBITDA | $47,216 | $61,400 | | Outpatient rehabilitation Adjusted EBITDA | $30,199 | $24,928 | | Concentra Adjusted EBITDA | $93,748 | $96,142 | | Other Adjusted EBITDA | ($33,873) | ($36,493) | [Earnings per Common Share to Adjusted Earnings per Common Share Reconciliation](index=13&type=section&id=VII.%20Reconciliation%20of%20Earnings%20per%20Common%20Share%20to%20Adjusted%20Earnings%20per%20Common%20Share) Adjusted earnings per common share is a non-GAAP measure provided to reflect the financial performance of ongoing operations and enhance comparability between periods, excluding specific adjustments like Concentra separation transaction costs - Adjusted net income attributable to common shares and adjusted EPS are non-GAAP measures used to reflect ongoing operational performance and improve comparability[35](index=35&type=chunk) Earnings per Common Share to Adjusted Earnings per Common Share Reconciliation (Three Months Ended March 31, 2023 and 2024) | | 2023 (Thousands, except per share) | 2024 (Thousands, except per share) | | :------------------------------------------ | :--------------------------------- | :--------------------------------- | | Net income attributable to common shares | $68,232 | $93,499 | | Earnings per common share | $0.56 | $0.75 | | Adjustments: | | | | Concentra separation transaction costs, net of tax | — | 1,619 | | Adjusted net income attributable to common shares | $68,232 | $95,118 | | Adjusted earnings per common share | $0.56 | $0.77 | [Forward-Looking Statements & Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) This section outlines the company's forward-looking statements and the various risks and uncertainties that could impact future results [Forward-Looking Statements and Associated Risks](index=4&type=section&id=Forward-Looking%20Statements%20and%20Associated%20Risks) The report contains forward-looking statements regarding future business outlook, which are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations[17](index=17&type=chunk)[19](index=19&type=chunk) - Key risk factors include changes in government reimbursement policies, adverse economic conditions (including inflation), shortages of qualified healthcare professionals, public health threats (like pandemics), failure to maintain Medicare certifications, government investigations, difficulties with acquisitions or joint ventures, and potential failure of the Concentra separation[18](index=18&type=chunk) - Additional risks include private third-party payor policies, loss of physician relationships, competition, loss of key management, substantial uninsured liabilities from claims, and security breaches of IT systems[18](index=18&type=chunk)[20](index=20&type=chunk) [Additional Information](index=3&type=section&id=Additional%20Information) This section provides details for the upcoming conference call and investor relations contact information [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Select Medical will host a conference call on May 3, 2024, to discuss its first-quarter results and business outlook, accessible via webcast or telephone - A conference call for Q1 results and business outlook will be held on **Friday, May 3, 2024, at 9:00 AM ET**[14](index=14&type=chunk) - The call will be a live webcast available on Select Medical Holdings Corporation's website, with a replay available shortly after[14](index=14&type=chunk) - Participants can pre-register for dial-in numbers and passcodes for the Q&A session[15](index=15&type=chunk) [Investor Relations Contact](index=5&type=section&id=Investor%20Relations%20Contact) Investor inquiries can be directed to Joel T. Veit, Senior Vice President and Treasurer - Investor inquiries should be directed to **Joel T. Veit, Senior Vice President and Treasurer**, at **717-972-1100** or **ir@selectmedical.com**[20](index=20&type=chunk)