Select Medical(US:SEM)2024-10-31 20:41markdown [Financial Highlights](index=1&type=section&id=Financial%20Highlights) This section presents the company's key financial performance metrics for the third quarter and first nine months of 2024 [Third Quarter 2024 Performance](index=1&type=section&id=Third%20Quarter%202024%20Performance) Select Medical reported strong growth in the third quarter of 2024, with revenue increasing 5.7% year-over-year to $1,761.2 million. Net income saw a significant rise of 33.2% to $81.0 million, and Adjusted EBITDA grew by 6.0% to $205.5 million. Adjusted earnings per common share increased by 8.7% to $0.50 Q3 2024 Financial Performance vs. Q3 2023 | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $1,761.2 M | $1,665.7 M | +5.7% | | Income from Operations | $141.1 M | $130.0 M | +8.6% | | Net Income | $81.0 M | $60.8 M | +33.2% | | Adjusted EBITDA | $205.5 M | $193.8 M | +6.0% | | Earnings Per Share (EPS) | $0.43 | $0.38 | +13.2% | | Adjusted EPS | $0.50 | $0.46 | +8.7% | [Nine Months 2024 Performance](index=1&type=section&id=Nine%20Months%202024%20Performance) For the first nine months of 2024, the company demonstrated consistent growth with revenue up 6.1% to $5,309.7 million compared to the same period in the prior year. Net income increased by 23.1% to $292.9 million, and Adjusted EBITDA rose 10.6% to $693.7 million, reflecting solid year-to-date operational performance Nine Months 2024 Financial Performance vs. Nine Months 2023 | Metric | Nine Months 2024 | Nine Months 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $5,309.7 M | $5,005.2 M | +6.1% | | Income from Operations | $492.9 M | $440.6 M | +11.9% | | Net Income | $292.9 M | $237.9 M | +23.1% | | Adjusted EBITDA | $693.7 M | $627.4 M | +10.6% | | Earnings Per Share (EPS) | $1.78 | $1.55 | +14.8% | | Adjusted EPS | $1.86 | $1.63 | +14.1% | [Segment Performance](index=1&type=section&id=Segment%20Performance) This section details the financial and operational performance of the company's distinct business segments [Critical Illness Recovery Hospital Segment](index=1&type=section&id=Critical%20Illness%20Recovery%20Hospital%20Segment) This segment's revenue grew 3.4% in Q3 and 6.4% for the nine-month period year-over-year. Adjusted EBITDA margin improved in both periods, rising to 8.7% for the quarter and 12.9% for the nine months, driven by higher revenue per patient day Q3 2024 Performance | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $583.0 M | $563.6 M | +3.4% | | Adjusted EBITDA | $50.8 M | $46.4 M | +9.5% | | Adjusted EBITDA Margin | 8.7% | 8.2% | +50 bps | Nine Months 2024 Performance | Metric | Nine Months 2024 | Nine Months 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $1,843.8 M | $1,732.6 M | +6.4% | | Adjusted EBITDA | $238.5 M | $188.6 M | +26.5% | | Adjusted EBITDA Margin | 12.9% | 10.9% | +200 bps | [Rehabilitation Hospital Segment](index=2&type=section&id=Rehabilitation%20Hospital%20Segment) The Rehabilitation Hospital segment delivered strong double-digit revenue growth of 14.4% in Q3 and 13.5% for the nine months. Adjusted EBITDA also increased significantly, with the nine-month margin expanding to 22.5% from 21.6% in the prior year Q3 2024 Performance | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $282.7 M | $247.1 M | +14.4% | | Adjusted EBITDA | $60.1 M | $53.6 M | +12.1% | | Adjusted EBITDA Margin | 21.3% | 21.7% | -40 bps | Nine Months 2024 Performance | Metric | Nine Months 2024 | Nine Months 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $816.2 M | $719.4 M | +13.5% | | Adjusted EBITDA | $183.5 M | $155.5 M | +18.0% | | Adjusted EBITDA Margin | 22.5% | 21.6% | +90 bps | [Outpatient Rehabilitation Segment](index=2&type=section&id=Outpatient%20Rehabilitation%20Segment) This segment's revenue increased by 6.9% in Q3, with a slight improvement in Adjusted EBITDA margin to 9.1%. However, for the nine-month period, Adjusted EBITDA declined by 8.3% year-over-year, causing the margin to contract to 8.8% from 10.0% Q3 2024 Performance | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $312.0 M | $291.8 M | +6.9% | | Adjusted EBITDA | $28.3 M | $26.3 M | +7.5% | | Adjusted EBITDA Margin | 9.1% | 9.0% | +10 bps | Nine Months 2024 Performance | Metric | Nine Months 2024 | Nine Months 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $930.7 M | $890.7 M | +4.5% | | Adjusted EBITDA | $82.0 M | $89.4 M | -8.3% | | Adjusted EBITDA Margin | 8.8% | 10.0% | -120 bps | [Concentra Segment](index=3&type=section&id=Concentra%20Segment) The Concentra segment posted modest revenue growth of 3.3% in Q3 and 2.7% for the nine months. Adjusted EBITDA margins remained relatively stable, slightly decreasing to 20.7% for the quarter and 20.9% for the nine-month period Q3 2024 Performance | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $489.6 M | $474.0 M | +3.3% | | Adjusted EBITDA | $101.6 M | $98.9 M | +2.7% | | Adjusted EBITDA Margin | 20.7% | 20.9% | -20 bps | Nine Months 2024 Performance | Metric | Nine Months 2024 | Nine Months 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $1,435.2 M | $1,397.3 M | +2.7% | | Adjusted EBITDA | $299.3 M | $293.0 M | +2.1% | | Adjusted EBITDA Margin | 20.9% | 21.0% | -10 bps | [Corporate Actions and Outlook](index=3&type=section&id=Corporate%20Actions%20and%20Outlook) This section outlines recent corporate financial activities, including dividends, share repurchases, debt transactions, and future business projections [Dividend and Stock Repurchase Program](index=3&type=section&id=Dividend%20and%20Stock%20Repurchase%20Program) The Board of Directors declared a quarterly cash dividend of $0.125 per share. The company did not repurchase any shares in the first nine months of 2024 under its $1.0 billion authorization, which remains effective until December 31, 2025. Since inception, approximately $600.3 million has been spent on repurchases - A cash dividend of **$0.125** per share was declared, payable on or about **November 26, 2024**[13](index=13&type=chunk) - **No shares were repurchased** under the authorized stock repurchase program during the nine months ended September 30, 2024[16](index=16&type=chunk) - The company has a common stock repurchase program authorized up to **$1.0 billion**, effective until **December 31, 2025**[15](index=15&type=chunk) [Concentra IPO and Debt Transactions](index=4&type=section&id=Concentra%20IPO%20and%20Debt%20Transactions) In July 2024, the Concentra subsidiary completed its Initial Public Offering (IPO), raising net proceeds of $499.7 million. In conjunction with the IPO, Concentra entered into new financing arrangements, including issuing $650.0 million in senior notes and securing new credit facilities. The combined proceeds were primarily used to repay approximately $1.9 billion of Select Medical's existing debt - Concentra completed its IPO on **July 26, 2024**, raising net proceeds of **$499.7 million**, plus an additional **$16.7 million** from the underwriters' option exercise[17](index=17&type=chunk) - In connection with the IPO, Concentra issued **$650.0 million** of **6.875% Senior Notes due 2032** and entered into new credit facilities consisting of an **$850.0 million Term Loan** and a **$400.0 million Revolving Credit Facility**[18](index=18&type=chunk) - The net proceeds from the IPO and debt financing were used to repay approximately **$1.9 billion** of Select's Credit Facilities[19](index=19&type=chunk) [2024 Business Outlook](index=4&type=section&id=2024%20Business%20Outlook) Select Medical has updated its full-year 2024 guidance. The company now expects revenue to be in the range of $6.95 billion to $7.15 billion, Adjusted EBITDA between $865.0 million and $885.0 million, and adjusted earnings per share in the range of $2.09 to $2.20 Updated Full-Year 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $6.95 B - $7.15 B | | Adjusted EBITDA | $865.0 M - $885.0 M | | Fully Diluted EPS | $2.01 - $2.12 | | Adjusted EPS | $2.09 - $2.20 | [Financial Statements and Reconciliations](index=7&type=section&id=Financial%20Statements%20and%20Reconciliations) This section provides the company's consolidated financial statements and reconciliations of non-GAAP financial measures [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements detail the company's revenues, costs, and expenses, leading to net income for the three and nine months ended September 30, 2024. For the nine-month period, revenue grew 6.1% to $5.31 billion, and net income increased 23.1% to $292.9 million, benefiting from operational growth and a significant increase in equity earnings from unconsolidated subsidiaries Q3 2024 Statement of Operations Highlights (in thousands) | Line Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Revenue | $1,761,220 | $1,665,694 | | Income from Operations | $141,133 | $130,000 | | Net Income | $81,015 | $60,816 | Nine Months 2024 Statement of Operations Highlights (in thousands) | Line Item | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Revenue | $5,309,692 | $5,005,202 | | Income from Operations | $492,900 | $440,621 | | Net Income | $292,948 | $237,933 | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2024, total assets stood at $8.0 billion, an increase from $7.7 billion at year-end 2023. Total liabilities decreased to $5.7 billion from $6.1 billion, primarily due to a significant reduction in long-term debt from $3.6 billion to $3.1 billion, following the Concentra IPO and related debt transactions. Total equity increased substantially to $2.3 billion Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $8,002,661 | $7,689,631 | | Total Liabilities | $5,702,217 | $6,115,616 | | Long-term debt, net | $3,098,957 | $3,587,675 | | Total Equity | $2,269,989 | $1,547,718 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2024, net cash provided by operating activities was $392.4 million, a slight decrease from $402.6 million in the prior year period. Net cash used in financing activities was $128.2 million, significantly lower than the $224.2 million used in the prior year, mainly due to proceeds from the Concentra IPO offsetting debt repayments. The company's cash and cash equivalents increased by $107.5 million during the period Nine Months Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $392,432 | $402,616 | | Net cash used in investing activities | ($156,818) | ($198,893) | | Net cash used in financing activities | ($128,152) | ($224,189) | | Net increase (decrease) in cash | $107,462 | ($20,466) | | Cash at end of period | $191,468 | $77,440 | [Key Operating Statistics](index=13&type=section&id=Key%20Operating%20Statistics) The report provides detailed operating metrics for each segment. For Q3 2024, the Rehabilitation Hospital segment saw a strong 7.6% increase in admissions and a 6.1% rise in revenue per patient day. The Critical Illness Recovery segment's occupancy rate improved to 65%. In contrast, the Concentra segment experienced a slight 0.7% decrease in visits, which was offset by a 3.7% increase in revenue per visit - In Q3 2024, the Rehabilitation Hospital segment's admissions grew **7.6%** YoY to **8,439**, and revenue per patient day increased **6.1%** to **$2,148**[40](index=40&type=chunk) - The Critical Illness Recovery Hospital segment's occupancy rate increased to **65%** in Q3 2024 from **64%** in Q3 2023[40](index=40&type=chunk) - For the nine months ended Sep 30, 2024, the Outpatient Rehabilitation segment's number of visits increased by **4.4%** YoY, while revenue per visit **remained flat**[48](index=48&type=chunk) [Non-GAAP Reconciliations](index=17&type=section&id=Non-GAAP%20Reconciliations) The company provides detailed reconciliations for its non-GAAP measures, Adjusted EBITDA and Adjusted EPS, to the nearest GAAP equivalents. These adjustments primarily exclude items such as loss on early retirement of debt, stock compensation expense, and Concentra separation transaction costs to provide a clearer view of ongoing operational performance [Net Income to Adjusted EBITDA Reconciliation](index=17&type=section&id=Net%20Income%20to%20Adjusted%20EBITDA%20Reconciliation) Net income is reconciled to Adjusted EBITDA by adding back non-operating and non-cash expenses like interest, taxes, depreciation, and amortization - For Q3 2024, **Net Income of $81.0 million** was reconciled to **Adjusted EBITDA of $205.5 million** by adding back items including **$26.8 million in income tax**, **$55.4 million in interest expense**, and **$50.1 million in depreciation and amortization**[58](index=58&type=chunk) - For the nine months ended Sep 30, 2024, **Net Income of $292.9 million** was reconciled to **Adjusted EBITDA of $693.7 million**[58](index=58&type=chunk) [EPS to Adjusted EPS Reconciliation](index=18&type=section&id=EPS%20to%20Adjusted%20EPS%20Reconciliation) GAAP EPS is reconciled to Adjusted EPS by adjusting for specific non-recurring or non-operational items to reflect core earnings per share - Q3 2024 **GAAP EPS of $0.43** was adjusted by adding back **$0.06** for loss on early retirement of debt (net of tax) to arrive at an **Adjusted EPS of $0.50**[63](index=63&type=chunk) - For the nine months ended Sep 30, 2024, **GAAP EPS of $1.78** was adjusted by **$0.06** for loss on debt retirement and **$0.02** for Concentra separation costs to reach an **Adjusted EPS of $1.86**[64](index=64&type=chunk)