Select Medical(US:SEM)2024-08-03 15:00Financial Data and Key Metrics Changes - The company reported a consolidated adjusted EBITDA growth of 3% and revenue growth of 5% compared to Q2 of the prior year, with total adjusted EBITDA at $226.3 million compared to $219.5 million in the prior year [9][14] - The consolidated adjusted EBITDA margin was 12.9% for Q2 compared to 13.1% in the prior year [9] - Earnings per share and adjusted earnings per share were $0.60 for the second quarter compared to $0.61 per share in the same quarter prior year [14] Business Line Data and Key Metrics Changes - The critical illness recovery hospital division saw a 5% increase in revenue and a 10% increase in adjusted EBITDA compared to the same quarter prior year [10] - The inpatient rehab hospital division experienced an 11% increase in revenue and a 13% increase in adjusted EBITDA compared to Q2 of the prior year [12] - The outpatient rehab division had a 4% increase in revenue, but adjusted EBITDA decreased by 12% compared to the prior year [14] Market Data and Key Metrics Changes - Concentra experienced a 2% increase in net revenues and a 1% increase in adjusted EBITDA over the prior year same quarter, driven by a 4% increase in rate [13] - The average daily census in the critical illness recovery division increased by 1%, while occupancy was slightly down at 67% compared to 68% in the prior year [10] - The outpatient division's patient volumes increased by 4%, maintaining an upward trend [14] Company Strategy and Development Direction - The company plans to open several new rehabilitation hospitals and expand its operations, adding 449 additional beds from 2024 through 2026 [8][6] - The company is focusing on improving clinical efficiencies and scheduling within the outpatient rehab business to enhance margins [28] - The company expects to distribute its remaining interest in Concentra to shareholders within 12 months of the IPO [3] Management Comments on Operating Environment and Future Outlook - Management noted that Q1 was an extraordinary year in terms of volume, which explains the sequential differences in performance between Q1 and Q2 [25] - The company reaffirmed its business outlook for 2024, expecting revenues in the range of $6.9 billion to $7.1 billion and adjusted EBITDA between $845 million to $885 million [22] - Management indicated that borrowing costs are expected to increase in Q4 due to changes in interest rate spreads [32] Other Important Information - The company declared a cash dividend of $0.125, payable on August 30 to stockholders of record as of August 14 [15] - The company did not repurchase shares under its authorized share repurchase program during the quarter [21] - The company ended the quarter with $3.6 billion of debt outstanding and $111.2 million of cash on the balance sheet [18] Q&A Session Summary Question: Inquiry about LTAC margin and sequential decline - Management explained that the sequential decline from Q1 to Q2 is typical, with Q1 usually being the highest quarter due to extraordinary volumes [24][25] Question: Outpatient rehab business margins and efficiencies - Management indicated that while rate increases would positively impact margins, they are also focusing on clinical efficiencies and scheduling improvements [28][30] Question: Trends in underlying wage rates for permanent staff - Management reported that underlying wage rates are trending in the 3% to 3.5% range, returning to pre-pandemic levels [31] Question: Guidance assumptions for borrowing costs - Management confirmed that guidance includes an increase in borrowing costs, particularly in Q4, due to changes in interest rate spreads [32]