Select Medical(US:SEM)2025-02-21 15:00Financial Data and Key Metrics Changes - The company reported a combined revenue increase of 8% in Q4 2024, with adjusted EBITDA growing by 4% from $111.8 million to $116 million [10] - For the full year, revenue from continuing operations grew by 7%, and adjusted EBITDA increased by 14%, reaching $510.4 million with a 9.8% adjusted EBITDA margin compared to 9.2% in 2023 [10][15] - The diluted loss per common share from continuing operations was $0.19 for Q4, compared to earnings of $0.12 in the same quarter last year [14] Business Line Data and Key Metrics Changes - The Critical Illness Recovery Hospital division saw a 6% increase in revenue and a 10% increase in adjusted EBITDA, with an adjusted EBITDA margin of 10.5% for Q4 [11] - The Inpatient Rehab Hospital division experienced a 13% revenue increase, but adjusted EBITDA declined by 6%, resulting in a margin of 21.2% [12] - The Outpatient Rehab division reported a 7% revenue increase and an 18% rise in adjusted EBITDA, with the adjusted EBITDA margin improving from 7.5% to 8.3% [13][14] Market Data and Key Metrics Changes - The company added 94 inpatient rehabilitation beds in Q4, with plans to add 481 additional beds in 2025 and 2026 [6][8] - The average daily census for the entire rehab division increased by 3%, while the occupancy rate was 81%, down from 85% in the prior year [12] Company Strategy and Development Direction - The company completed the spin-off of Concentra, focusing on its remaining three lines of business [3][4] - The company plans to open multiple new facilities, including a 45-bed rehab hospital in Temple, Texas, and a 63-bed rehab hospital in Ozark, Missouri, among others [7][8] - The company aims to optimize resources and serve targeted demographics through strategic closures and acquisitions in the outpatient division [9] Management Comments on Operating Environment and Future Outlook - Management noted that nursing agency rates have stabilized and utilization has returned to pre-COVID levels, with expectations for continued improvement in labor costs [11][17] - The company anticipates revenue for 2025 to be in the range of $5.4 billion to $5.6 billion, with adjusted EBITDA expected between $520 million and $540 million [22] - Management acknowledged confusion in the market regarding the impact of the Concentra spin-off on financial metrics [25][26] Other Important Information - The company refinanced $1.6 billion of outstanding debt, extending the maturity of its revolving credit facility to 2029 and increasing availability [4][5] - The company declared a cash dividend of $0.0625 per share payable on March 13, 2025 [16] Q&A Session Summary Question: Clarification on 2025 metrics - Analyst Justin Bowers inquired about revenue growth, EBITDA growth, and net leverage metrics for 2025, to which Martin Jackson confirmed the calculations and acknowledged market confusion regarding Concentra [25][26] Question: Development activity and startup costs - Bowers asked about the maturation of new facilities and associated startup costs, with Jackson indicating that the new beds would have a dampening effect on inpatient rehab margins for 2025 but expect significant growth in 2026 and 2027 [30][31] Question: Inpatient rehab margins and headwinds - Ben Hendrix questioned the lower margins in the inpatient rehab segment, with Robert Ortenzio explaining that hurricane impacts and startup losses contributed to the decrease [45][46] Question: 2025 outlook for IRF margins - Joanna Gajuk asked about the expected decline in IRF margins for 2025, with Jackson confirming that startup losses were the primary driver [50][51] Question: Outpatient rehab growth drivers - Gajuk also inquired about the expected growth in outpatient rehab EBITDA, with Jackson attributing it to increased rates from commercial contracts and improved clinical productivity [58][59]