Select Medical(US:SEM)2024-05-03 19:18Financial Data and Key Metrics Changes - Total company adjusted EBITDA for Q1 2024 was $261.9 million, compared to $214.1 million in the prior year, reflecting a 22% increase [40] - Revenue increased by 10% year-over-year, with adjusted EBITDA margin rising to 17.7% from 12.9% in the prior year [46] - Earnings per fully diluted share were $0.75 for Q1 2024, up from $0.56 in the same quarter prior year [52] Business Line Data and Key Metrics Changes - The critical illness recovery hospital division reported adjusted EBITDA of $115.9 million, a 51% increase compared to Q1 of the prior year [34] - Inpatient rehabilitation hospitals saw a 15% increase in revenue and a 30% increase in adjusted EBITDA compared to Q1 of the prior year, with occupancy rising to 87% from 86% [48] - Concentra experienced a 2% increase in net revenues and a 3% increase in adjusted EBITDA over the prior year, driven by a 4% increase in rate [49] Market Data and Key Metrics Changes - The outpatient division's adjusted EBITDA decreased by 17% compared to the prior year, with adjusted EBITDA margin dropping from 10.2% to 8.2% [51] - Workers' compensation volume increased by 3%, but was offset by a 6% decrease in employer-based visits, leading to an overall visit decline of 2% [81] - Average daily census in the critical illness recovery hospitals increased by 2%, while the rate per patient day increased by 8% [77] Company Strategy and Development Direction - The company plans to open a 48-bed hospital in Jacksonville, Florida in Q3 2024 and has a strong pipeline for additional growth opportunities [35] - Concentra is actively pursuing acquisitions and has a strong pipeline of potential de novo sites under evaluation [43] - The company aims to separate its occupational health services business, Concentra, with an IPO expected to occur after SEC review [33] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong performance of the critical illness recovery hospital division, attributing it to improved labor costs and operational efficiencies [34][85] - The company anticipates revenue for 2024 to be in the range of $6.9 billion to $7.1 billion, with adjusted EBITDA expected between $845 million and $885 million [91] - Management noted that the demand for Concentra's services is expected to normalize as hiring levels stabilize [19] Other Important Information - The company ended the quarter with $3.8 billion in debt and $93 million in cash, with a net leverage of 4.4 times [57][88] - Capital expenditures for 2024 are expected to be between $225 million and $275 million, with a focus on both maintenance and development [61] - The company did not repurchase shares during the quarter but continues to evaluate stock repurchases and debt reduction [53][60] Q&A Session Summary Question: Can you provide insights on the $3.8 billion in debt ahead of the spin? - Management indicated that both entities will ultimately have about 4 times leverage on the balance sheet [100] Question: What are the trends in employer demand for Concentra? - Management noted that the demand is decreasing as hiring normalizes, which was expected [19] Question: Can you elaborate on the agency costs and their impact? - Agency costs decreased by 23%, translating to a net reduction of about $4 million to $5 million after taxes [96]