Select Medical(SEM) - 2025 Q1 - Quarterly Results

Company Announcement and First Quarter 2025 Highlights Select Medical reported Q1 2025 revenue growth and increased income from continuing operations, despite a decline in Adjusted EBITDA, following the Concentra spin-off First Quarter 2025 Financial Performance Q1 2025 saw 2.4% revenue growth and a 21.5% rise in income from continuing operations, with an 8.7% Adjusted EBITDA decrease Q1 2025 vs Q1 2024 Key Financial Performance (Continuing Operations, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :--------------------------------- | :----------------- | :----------------- | :------- | | Revenue | $1,353.2 | $1,321.2 | 2.4% | | Income from continuing operations before other income and expense | $112.7 | $118.5 | (4.8)% | | Income from continuing operations, net of tax | $74.7 | $61.5 | 21.5% | | Adjusted EBITDA | $151.4 | $165.8 | (8.7)% | | Earnings per common share from continuing operations | $0.44 | $0.33 | 33.3% | Company Overview Select Medical is a leading operator of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States, with a significant presence across 40 states and the District of Columbia - As of March 31, 2025, Select Medical operated 104 critical illness recovery hospitals in 29 states, 35 rehabilitation hospitals in 14 states, and 1,911 outpatient rehabilitation clinics in 39 states and the District of Columbia[5] Concentra Spin-off Impact On November 25, 2024, Select Medical completed a tax-free distribution of Concentra Group Holdings Parent, Inc. shares to its stockholders, leading to Concentra's results being reclassified and presented as discontinued operations - Select Medical completed a tax-free distribution of 104,093,503 shares of common stock of Concentra Group Holdings Parent, Inc. to its stockholders on November 25, 2024[4] - The results of Concentra are presented as discontinued operations and have been excluded from both continuing operations and segment results for the three months ended March 31, 2024[4] Segment Performance An overview of Q1 2025 performance across Critical Illness Recovery, Rehabilitation, and Outpatient Rehabilitation segments, highlighting varied revenue and Adjusted EBITDA trends Critical Illness Recovery Hospital Segment The Critical Illness Recovery Hospital segment experienced a decline in Q1 2025, with revenue decreasing by 2.9% and Adjusted EBITDA falling by 25.3%, resulting in a lower Adjusted EBITDA margin Critical Illness Recovery Hospital Segment Performance (Q1 2025 vs Q1 2024, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------- | :----------------- | :----------------- | :------- | | Revenue | $637.0 | $655.9 | (2.9)% | | Adjusted EBITDA | $86.6 | $115.9 | (25.3)% | | Adjusted EBITDA margin | 13.6% | 17.7% | | Rehabilitation Hospital Segment The Rehabilitation Hospital segment showed strong growth in Q1 2025, with revenue increasing by 15.7% and Adjusted EBITDA rising by 14.7%, while maintaining a stable Adjusted EBITDA margin Rehabilitation Hospital Segment Performance (Q1 2025 vs Q1 2024, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------- | :----------------- | :----------------- | :------- | | Revenue | $307.4 | $265.7 | 15.7% | | Adjusted EBITDA | $70.4 | $61.4 | 14.7% | | Adjusted EBITDA margin | 22.9% | 23.1% | | Outpatient Rehabilitation Segment The Outpatient Rehabilitation segment reported modest revenue growth of 1.4% in Q1 2025, but experienced a slight decrease in Adjusted EBITDA and its corresponding margin Outpatient Rehabilitation Segment Performance (Q1 2025 vs Q1 2024, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------- | :----------------- | :----------------- | :------- | | Revenue | $307.3 | $303.2 | 1.4% | | Adjusted EBITDA | $24.3 | $24.9 | (2.6)% | | Adjusted EBITDA margin | 7.9% | 8.2% | | Shareholder Actions Details the company's Q1 2025 cash dividend declaration and ongoing common stock repurchase program, reflecting capital allocation strategies Cash Dividend Declaration Select Medical's Board of Directors declared a cash dividend of $0.0625 per share, payable in May 2025, with future declarations subject to various financial and operational factors - On April 30, 2025, Select Medical's Board of Directors declared a cash dividend of $0.0625 per share, payable on or about May 29, 2025, to stockholders of record as of May 15, 2025[9] - The declaration and payment of future dividends are at the discretion of the Board, considering factors such as financial condition, operating results, available cash, and indebtedness[10] Stock Repurchase Program The company has an authorized common stock repurchase program of up to $1.0 billion, which remains in effect until December 31, 2025. In Q1 2025, Select Medical repurchased 649,804 shares for approximately $11.4 million - The Board of Directors authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares, remaining in effect until December 31, 2025[11] Stock Repurchase Activity (Q1 2025 and Inception-to-date, Millions) | Period | Shares Repurchased | Cost (Millions) | Average Price Per Share | | :-------------------------- | :----------------- | :---------------- | :---------------------- | | Q1 2025 | 649,804 | $11.4 | $17.52 | | Inception through March 31, 2025 | 48,884,627 | $611.7 | $12.51 | Business Outlook Select Medical's updated fiscal year 2025 projections for revenue and Adjusted EBITDA, alongside reaffirmed earnings per share guidance Fiscal Year 2025 Outlook Select Medical adjusted its 2025 business outlook for revenue and Adjusted EBITDA, while reaffirming its guidance for fully diluted earnings per share Fiscal Year 2025 Business Outlook (Billions/Millions) | Metric | Range (Billions/Millions) | | :-------------------------- | :------------------------ | | Revenue | $5.3 to $5.5 billion | | Adjusted EBITDA | $510.0 to $530.0 million | | Fully diluted earnings per share | $1.09 to $1.19 | Additional Information Provides details for the upcoming Q1 earnings conference call and outlines significant forward-looking statements and associated risk factors Conference Call Details Select Medical will host a conference call on May 2, 2025, to discuss its first quarter results and business outlook, accessible via live webcast or telephone dial-in - A conference call regarding Q1 results and business outlook will be held on Friday, May 2, 2025, at 9:00 am ET[14] - The conference call will be a live webcast accessible at www.selectmedicalholdings.com, with a replay available shortly after[14] - Listeners can pre-register for the call to obtain dial-in numbers and unique passcodes for telephone participation and Q&A[15] Forward-Looking Statements and Risk Factors The report contains forward-looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from expectations. Key risks include changes in government reimbursement, adverse economic conditions, and shortages in qualified healthcare professionals - Statements not describing historical facts are 'forward-looking' and actual results may differ materially due to various risks and uncertainties[17][19] - Key risk factors include changes in government reimbursement, adverse economic conditions (including inflation), shortages in qualified healthcare professionals, and the failure to maintain Medicare certifications[18] - Other risks involve potential negative impacts from public threats like pandemics, government investigations, difficulties with acquisitions or joint ventures, and the loss of key management team members[18][20] Financial Tables Comprehensive financial statements and key operational statistics for Q1 2025, including income, balance sheet, cash flow, and segment-specific performance data I. Condensed Consolidated Statements of Operations This table presents the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2025, detailing revenue, costs, income from continuing operations, and net income, highlighting a 2.4% revenue increase and a 21.5% rise in income from continuing operations, net of tax Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2024 and 2025, Thousands) | | | 2024 | 2025 | % Change | |:---|:---|:---|:---|:---|\ | Revenue | $ | 1,321,211 | $ 1,353,172 | 2.4% | | Costs and expenses: | | | | | | Cost of services, exclusive of depreciation and amortization | | 1,120,711 | 1,172,611 | 4.6 | | General and administrative | | 48,447 | 33,008 | (31.9) | | Depreciation and amortization | | 35,584 | 34,808 | (2.2) | | Total costs and expenses | | 1,204,742 | 1,240,427 | 3.0 | | Other operating income | | 2,000 | — | N/M | | Income from continuing operations before other income and expense | | 118,469 | 112,745 | (4.8) | | Other income and expense: | | | | | | Equity in earnings of unconsolidated subsidiaries | | 10,421 | 12,512 | 20.1 | | Interest expense | | (40,681) | (29,072) | (28.5) | | Income from continuing operations before income taxes | | 88,209 | 96,185 | 9.0 | | Income tax expense from continuing operations | | 26,680 | 21,453 | (19.6) | | Income from continuing operations, net of tax | | 61,529 | 74,732 | 21.5 | | Discontinued operations: | | | | | | Income from discontinued business | | 65,416 | — | N/M | | Income tax expense from discontinued business | | 9,778 | — | N/M | | Income from discontinued operations, net of tax | | 55,638 | — | N/M | | Net income | | 117,167 | 74,732 | (36.2) | | Less: Net income attributable to non-controlling interests | | 20,270 | 18,051 | (10.9) | | Net income attributable to Select Medical | $ | 96,897 | $ 56,681 | (41.5)% | | Net income attributable to Select Medical's common stockholders: | | | | | | Income from continuing operations, net of tax | $ | 42,582 | $ 56,681 | | | Income from discontinued operations, net of tax | | 54,315 | — | | | Net income attributable to Select Medical's common stockholders | $ | 96,897 | $ 56,681 | | | Earnings per common share: | | | | | | Continuing operations - basic and diluted | $ | 0.33 | $ 0.44 | | | Discontinued operations - basic and diluted | | 0.42 | — | | | Total earnings per common share - basic and diluted | $ | 0.75 | $ 0.44 | | II. Earnings per Share This section details the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2025, applying the two-class method due to participating unvested restricted stock awards Income from Continuing Operations, Net of Tax, Attributable to Select Medical and Participating Securities (Thousands) | | Three Months Ended March 31, | | |:---|:---|:---|\ | | 2024 | 2025 | | Income from continuing operations, net of tax | $ 61,529 | $ 74,732 | | Less: net income attributable to non-controlling interests | 18,947 | 18,051 | | Income from continuing operations, net of tax, attributable to Select Medical's common stockholders | 42,582 | 56,681 | | Less: distributed and undistributed net income attributable to participating securities | 1,493 | 1,145 | | Distributed and undistributed income from continuing operations, net of tax, attributable to common shares | $ 41,089 | $ 55,536 | Computation of EPS Under Two-Class Method (Three Months Ended March 31, 2024 and 2025, Thousands) | | 2024 | | | | 2025 | | | | |:---|:---|:---|:---|:---|:---|:---|:---|:---|\ | | Income from Continuing Operations, Net of Tax, Allocation | Shares | Basic and Diluted EPS | Income from Continuing Operations, Net of Tax, Allocation | Shares | Basic and Diluted EPS | | Common shares | $ 41,089 | 123,859 | $ 0.33 | $ 55,536 | 126,205 | $ 0.44 | | Participating securities | 1,493 | 4,501 | $ 0.33 | 1,145 | 2,602 | $ 0.44 | | Total | $ 42,582 | | | $ 56,681 | | | III. Condensed Consolidated Balance Sheets This table provides the condensed consolidated balance sheets as of December 31, 2024, and March 31, 2025, outlining current and non-current assets, liabilities, and total equity, showing an increase in total assets and total equity Condensed Consolidated Balance Sheets (December 31, 2024 and March 31, 2025, Thousands) | | December 31, 2024 | March 31, 2025 | |:---|:---|:---|\ | Assets | | | | Current Assets: | | | | Cash and cash equivalents | $ 59,694 | $ 53,213 | | Accounts receivable | 821,385 | 908,185 | | Other current assets | 138,698 | 130,894 | | Total Current Assets | 1,019,777 | 1,092,292 | | Operating lease right-of-use assets | 908,095 | 909,180 | | Property and equipment, net | 872,185 | 894,920 | | Goodwill | 2,331,898 | 2,331,898 | | Identifiable intangible assets, net | 103,183 | 102,544 | | Other assets | 372,813 | 365,169 | | Total Assets | $ 5,607,951 | $ 5,696,003 | | Liabilities and Equity | | | | Current Liabilities: | | | | Payables and accruals | $ 777,781 | $ 734,841 | | Current operating lease liabilities | 179,601 | 181,605 | | Current portion of long-term debt and notes payable | 20,269 | 28,353 | | Total Current Liabilities | 977,651 | 944,799 | | Non-current operating lease liabilities | 787,124 | 787,861 | | Long-term debt, net of current portion | 1,691,546 | 1,767,409 | | Non-current deferred tax liability | 81,497 | 75,245 | | Other non-current liabilities | 73,038 | 74,652 | | Total Liabilities | 3,610,856 | 3,649,966 | | Redeemable non-controlling interests | 10,167 | 9,021 | | Total equity | 1,986,928 | 2,037,016 | | Total Liabilities and Equity | $ 5,607,951 | $ 5,696,003 | IV. Condensed Consolidated Statements of Cash Flows This table presents the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2025, showing a significant reduction in net cash used in operating activities and a decrease in net cash provided by financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2024 and 2025, Thousands) | | 2024 | 2025 | |:---|:---|:---|\ | Operating activities | | | | Net income | $ 117,167 | $ 74,732 | | Adjustments to reconcile net income to net cash used in operating activities: | | | | Distributions from unconsolidated subsidiaries | 12,374 | 20,145 | | Depreciation and amortization | 54,069 | 34,808 | | Provision for expected credit losses | 854 | 2,283 | | Equity in earnings of unconsolidated subsidiaries | (10,421) | (12,512) | | (Gain) loss on sale or disposal of assets | 44 | (23) | | Stock compensation expense | 11,610 | 3,892 | | Amortization of debt discount, premium, and issuance costs | 750 | 783 | | Deferred income taxes | (6,891) | (5,655) | | Changes in operating assets and liabilities, net of effects of business combinations: | | | | Accounts receivable | (195,308) | (89,083) | | Other current assets | (9,611) | (12,230) | | Other assets | 2,363 | 2,127 | | Accounts payable and accrued expenses | (43,689) | (22,724) | | Net cash used in operating activities | (66,689) | (3,457) | | Investing activities | | | | Business combinations, net of cash acquired | (5,405) | — | | Purchases of property and equipment | (52,517) | (52,339) | | Proceeds from sale of assets | 265 | 24 | | Net cash used in investing activities | (57,657) | (52,315) | | Financing activities | | | | Borrowings on revolving facilities | 495,000 | 405,000 | | Payments on revolving facilities | (265,000) | (330,000) | | Payments on term loans | (79,085) | (2,625) | | Borrowings of other debt | 17,728 | 16,015 | | Principal payments on other debt | (9,061) | (7,729) | | Dividends paid to common stockholders | (16,045) | (8,060) | | Repurchases of common stock | — | (11,389) | | Decrease in overdrafts | (1,740) | (5,120) | | Proceeds from issuance of non-controlling interests | 4,002 | 7,944 | | Distributions to and purchases of non-controlling interests | (12,839) | (14,745) | | Net cash provided by financing activities | 132,960 | 49,291 | | Net increase (decrease) in cash and cash equivalents | 8,614 | (6,481) | | Cash and cash equivalents at beginning of period | 84,006 | 59,694 | | Cash and cash equivalents at end of period | $ 92,620 | $ 53,213 | | Supplemental information | | | | Cash paid for interest, excluding amounts received of $22,515 under the interest rate cap contract during the three months ended March 31, 2024 | $ 88,834 | $ 23,772 | | Cash paid for taxes | 604 | 1,472 | V. Key Statistics This table provides detailed operational and financial key statistics for the Critical Illness Recovery Hospital, Rehabilitation Hospital, and Outpatient Rehabilitation segments for the three months ended March 31, 2024 and 2025, including revenue, patient days/visits, and Adjusted EBITDA Key Statistics by Segment (Three Months Ended March 31, 2024 and 2025, Thousands) | | | 2024 | | 2025 | % Change | |:---|:---|:---|:---|:---|:---|\ | Critical Illness Recovery Hospital | | | | | | | | Number of hospitals operated – end of period | | 107 | | 104 | | | | Revenue (,000) | $ | 655,880 | $ | 637,030 | (2.9)% | | Number of patient days | | 294,622 | | 291,324 | (1.1)% | | Number of admissions | | 9,529 | | 9,351 | (1.9)% | | Revenue per patient day | $ | 2,219 | $ | 2,179 | (1.8)% | | Occupancy rate | | 71% | | 73% | 2.8% | | Adjusted EBITDA (,000) | $ | 115,940 | $ | 86,649 | (25.3)% | | Adjusted EBITDA margin | | 17.7% | | 13.6% | | | | Rehabilitation Hospital | | | | | | | | Number of hospitals operated – end of period | | 33 | | 35 | | | | Revenue (,000) | $ | 265,700 | $ | 307,388 | 15.7% | | Number of patient days | | 116,844 | | 122,822 | 5.1% | | Number of admissions | | 8,275 | | 8,848 | 6.9% | | Revenue per patient day | $ | 2,096 | $ | 2,234 | 6.6% | | Occupancy rate | | 87% | | 82% | (5.7)% | | Adjusted EBITDA (,000) | $ | 61,400 | $ | 70,424 | 14.7% | | Adjusted EBITDA margin | | 23.1% | | 22.9% | | | | Outpatient Rehabilitation | | | | | | | | Number of clinics operated – end of period | | 1,922 | | 1,911 | | | | Working days | | 64 | | 63 | | | | Revenue (,000) | $ | 303,158 | $ | 307,342 | 1.4% | | Number of visits | | 2,735,126 | | 2,709,964 | (0.9)% | | Revenue per visit | $ | 99 | $ | 102 | 3.0% | | Adjusted EBITDA (,000) | $ | 24,928 | $ | 24,273 | (2.6)% | | Adjusted EBITDA margin | | 8.2% | | 7.9% | | | VI. Income from Continuing Operations, Net of Tax, to Adjusted EBITDA Reconciliation (Q1 2025) This section provides a reconciliation of income from continuing operations, net of tax, to Adjusted EBITDA for Select Medical for the three months ended March 31, 2024 and 2025, defining Adjusted EBITDA as a non-GAAP measure used for performance evaluation and resource allocation - Adjusted EBITDA is a non-GAAP measure commonly used as an analytical indicator of performance in the healthcare industry and by management to evaluate financial performance and determine resource allocation for each segment[28] - Adjusted EBITDA is defined as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries[29] Adjusted EBITDA Reconciliation (Three Months Ended March 31, 2024 and 2025, Thousands) | | Three Months Ended March 31, | | |:---|:---|:---|\ | | 2024 | 2025 | | Income from continuing operations, net of tax | $ 61,529 | $ 74,732 | | Income tax expense | 26,680 | 21,453 | | Interest expense | 40,681 | 29,072 | | Equity in earnings of unconsolidated subsidiaries | (10,421) | (12,512) | | Income from continuing operations, before other income and expense | 118,469 | 112,745 | | Stock compensation expense: | | | | Included in general and administrative | 9,682 | 3,108 | | Included in cost of services | 1,762 | 784 | | Depreciation and amortization | 35,584 | 34,808 | | Concentra separation transaction costs | 278 | — | | Adjusted EBITDA | $ 165,775 | $ 151,445 | | Critical illness recovery hospital | $ 115,940 | $ 86,649 | | Rehabilitation hospital | 61,400 | 70,424 | | Outpatient rehabilitation | 24,928 | 24,273 | | Other | (36,493) | (29,901) | | Adjusted EBITDA | $ 165,775 | $ 151,445 | VII. Income from Continuing Operations, Net of Tax, to Adjusted EBITDA Reconciliation (2025 Business Outlook) This table provides a reconciliation of the full year 2025 Adjusted EBITDA expectations to income from continuing operations, net of tax, presenting both low and high points of the projected range Adjusted EBITDA Reconciliation for Fiscal Year 2025 Business Outlook (Millions) | Non-GAAP Measure Reconciliation | Low (Millions) | High (Millions) | |:---|:---|:---|\ | Income from continuing operations, net of tax, attributable to Select Medical | $ 141 | $ 154 | | Net income attributable to non-controlling interests | 73 | 76 | | Income from continuing operations, net of tax | 214 | 230 | | Income tax expense | 64 | 70 | | Interest expense | 116 | 116 | | Equity in earnings of unconsolidated subsidiaries | (49) | (51) | | Income from continuing operations before other income and expense | 345 | 365 | | Stock compensation expense | 19 | 19 | | Depreciation and amortization | 146 | 146 | | Adjusted EBITDA | $ 510 | $ 530 |