Select Medical(SEM) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's net revenue for Q2 2020 decreased by 9.4% to $1.23 billion compared to the same quarter last year [13] - Adjusted EBITDA for the second quarter was down 4% to $178.8 million, with an adjusted EBITDA margin of 14.5%, up from 13.7% in the same quarter last year [20][29] - Earnings per fully diluted share increased over 18% to $0.39 for the second quarter compared to $0.33 for the same quarter last year [26] Business Line Data and Key Metrics Changes - Critical illness recovery hospital segment net revenue increased by 12.7% to $520 million, with patient days up 5.3% and occupancy at 72% [14] - Rehabilitation hospital segment net revenue increased by 5.2% to $169 million, with a decline in patient days by 2.8% and occupancy at 71% [15] - Outpatient rehabilitation segment net revenue decreased by 36.2% to $167 million, with patient visits down 39.1% [16] - Concentra segment net revenue decreased by 24.5% to $312 million, with patient visits down 30.7% [18] Market Data and Key Metrics Changes - In June, outpatient rehabilitation volumes improved, with revenue down only 19.7% year-over-year compared to a 48% decline in April [11] - Concentra segment saw a decline of only 12.4% in June compared to prior year, showing recovery as restrictions eased [12] Company Strategy and Development Direction - The company continues to adapt and innovate in response to the COVID-19 pandemic, focusing on maintaining high-quality care while ensuring safety [6] - Management indicated that the pandemic has solidified the value of critical illness recovery hospitals and the continuum of care [102] - There are no significant M&A activities planned outside of acquiring remaining minority interests in Concentra, expected to occur in early 2022 [110] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of outpatient and Concentra segments, although they noted that outpatient rehab is more discretionary compared to Concentra [50] - The company anticipates strong cash flow for the remainder of the year, despite the repayment of Medicare advance payments starting in September [52] - Management highlighted the importance of relationships with referral sources, which have strengthened during the pandemic [96] Other Important Information - The company recorded $55 million in other operating income related to provider relief funds, with expectations of additional funds in the second half of the year [21][71] - Total available liquidity at the end of Q2 was over $1 billion, split between cash on hand and revolver availability [37] Q&A Session Summary Question: How is July trending across segments? - Management reported that July volumes are improving, with outpatient business down about 16% compared to June [40] Question: What is the mix driving strong pricing growth in critical illness recovery hospitals? - The increase in acuity of patients has contributed to the strong pricing growth, with a case mix index of 1.3 this quarter [42] Question: What are the main uncertainties holding back guidance for the second half? - The uncertainties mainly revolve around the outpatient side and the impact of COVID flare-ups [62] Question: How is the company managing labor force and telehealth utilization? - Telehealth visits increased significantly during the pandemic, but are now decreasing as in-person visits resume [55] Question: What is the company's outlook on M&A opportunities? - The company is focusing on internal development opportunities rather than significant acquisitions in the near term [110]