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01/11 11:50
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed outlook. Financial performance shows growth in revenue and EBITDA, but there are concerns with debt levels, declining margins in the inpatient rehab division, and operational challenges. The Q&A section highlights uncertainties, particularly around startup costs and margin impacts. Positive factors include revenue growth and optimistic guidance for new facilities, but high debt and lack of share repurchase are negative. Given the market cap, these mixed signals likely lead to a neutral stock price movement.
Revenue (Q4 2024) $X million, an increase of 8% year-over-year due to strong performance across all three divisions.
Adjusted EBITDA (Q4 2024) $116 million, a 4% increase year-over-year from $111.8 million.
Adjusted EBITDA Margin (Q4 2024) 9.8%, compared to 9.2% in 2023.
Critical Illness Recovery Hospital Revenue (Q4 2024) 6% increase year-over-year.
Critical Illness Recovery Hospital Adjusted EBITDA (Q4 2024) 10% increase year-over-year.
Critical Illness Recovery Hospital Adjusted EBITDA Margin (Q4 2024) 10.5%, up from 10.1% in prior year Q4.
Inpatient Rehab Division Revenue (Q4 2024) 13% increase year-over-year.
Inpatient Rehab Division Adjusted EBITDA (Q4 2024) Declined by 6% year-over-year due to startup losses at new facilities and integration costs.
Inpatient Rehab Division Adjusted EBITDA Margin (Q4 2024) 21.2%, down from 25.5% in the prior period.
Outpatient Rehab Division Revenue (Q4 2024) 7% increase year-over-year.
Outpatient Rehab Division Adjusted EBITDA (Q4 2024) 18% increase year-over-year.
Net Revenue per Visit (Outpatient Rehab Q4 2024) Increased from $100 to $102 year-over-year.
Dilution Loss per Common Share (Q4 2024) $0.19, compared to earnings of $0.12 in the same quarter prior year.
Adjusted EPS (Q4 2024) $0.18, compared to adjusted EPS of $0.12 for the same quarter prior year.
Debt Outstanding (End of Q4 2024) $1.7 billion, with a net leverage of 3.18 times.
Interest Expense (Q4 2024) $28.6 million, down from $40.3 million in the same quarter prior year due to reduced debt.
Operating Cash Flow (Q4 2024) $125.4 million.
Day Sales Outstanding (DSO) (End of Q4 2024) 58 days, compared to 55 days at the end of Q4 2023.
Cash on Balance Sheet (End of Q4 2024) $59.7 million.
Capital Expenditures (Q4 2024) $74.2 million, including $63.4 million in property and equipment.
New Facilities: Added 94 inpatient rehabilitation beds in Q4, including a 50-bed inpatient rehab hospital in Oklahoma City and two neuro transitional units.
Outpatient Rehab Clinics: Added three de novo clinics and four clinics through acquisition, offset by the closure of 18 locations.
Market Expansion: Plans to open multiple new rehab hospitals and units in various locations, including Texas, Pennsylvania, Ohio, Arizona, and New Jersey, adding a total of 481 additional beds in 2025 and 2026.
Operational Efficiency: Improved labor costs with a decrease in nursing sign-on and incentive bonus dollars by 15% year-over-year.
Debt Refinancing: Completed refinancing of $1.6 billion of outstanding debt, reducing interest expense to $28.6 million in Q4.
Spin-off: Completed the spin-off of Concentra, now reflected as discontinued operations.
Capital Allocation: Declared a cash dividend of $0.0625 per share and will evaluate stock repurchases and debt reduction.
Debt Management: Select Medical has $1.7 billion of debt outstanding, which includes $1.05 billion in term loans and $550 million in senior notes due 2032. The company has a net leverage of 3.18 times, indicating potential risks related to high debt levels and interest obligations.
Regulatory and Economic Factors: The company faced challenges due to hurricanes Helene and Milton, which negatively impacted operations in southern outpatient markets, resulting in an estimated EBITDA loss of over $1 million.
Operational Challenges: The integration costs related to the acquisition of a 50-bed inpatient rehab hospital in Oklahoma City and startup losses at new facilities contributed to a decline in adjusted EBITDA by 6% in the inpatient rehab division.
Competitive Pressures: The outpatient rehab division experienced declines in Medicare reimbursement, which could affect revenue growth and profitability despite improvements in commercial rates.
Labor Costs: While nursing agency rates have stabilized, the company still faces challenges in managing labor costs, with a significant portion of revenue (56.9%) allocated to salaries, wages, and benefits.
Inpatient Rehabilitation Beds Added: Added 94 inpatient rehabilitation beds in Q4 2024.
Acquisitions and Openings: Acquired a 50-bed inpatient rehab hospital in Oklahoma City and opened two neuro transitional units.
Future Development Projects: Plans to add 481 additional beds in 2025 and 2026, including 455 inpatient rehab beds.
Outpatient Rehab Division: Added three de novo clinics and four clinics through acquisition, while closing 18 locations.
2025 Revenue Guidance: Expected revenue in the range of $5.4 billion to $5.6 billion.
2025 Adjusted EBITDA Guidance: Expected adjusted EBITDA in the range of $520 million to $540 million.
2025 Adjusted EPS Guidance: Expected adjusted earnings per common share in the range of $1.09 to $1.19.
2025 Capital Expenditures Guidance: Expected capital expenditures in the range of $160 million to $200 million.
Cash Dividend: The board has declared a cash dividend of $0.0625 per share payable on March 13th, 2025, to stockholders of record as of the close of business on March 3rd, 2025.
Share Repurchase Program: The company did not repurchase shares under its board-authorized share repurchase program this quarter. The program remains in effect until December 31st, 2025.
Despite strong financial metrics and expansion plans, the lack of raised guidance due to outpatient segment softness and unchanged EBITDA guidance offset positive impacts. The Q&A revealed pressures from Medicare rates and payer mix shifts, which may concern investors. The market cap suggests moderate stock price movement. Thus, a neutral rating is appropriate.
The earnings call presents a mixed picture: strong revenue growth in some divisions, but challenges in critical illness recovery. The reaffirmed guidance and strategic focus on joint ventures are positive. However, regulatory issues and unclear management responses about critical illness impact cast doubts. The stock repurchase is a positive sign, but the debt level and margin declines in some areas are concerning. Given the market cap and mixed signals, a neutral stock price reaction is expected.
The earnings call revealed mixed financial performance with a decline in EBITDA and concerns over regulatory risks, particularly affecting LTAC. Despite positive growth in the Inpatient Rehab division and shareholder returns through dividends and stock repurchases, the company's high debt level and regulatory uncertainties pose significant risks. The Q&A highlighted management's unclear responses regarding mitigation strategies for regulatory impacts, adding to the negative sentiment. Given these factors and the market cap, a negative stock price movement is anticipated over the next two weeks.
The earnings call presents a mixed outlook. Financial performance shows growth in revenue and EBITDA, but there are concerns with debt levels, declining margins in the inpatient rehab division, and operational challenges. The Q&A section highlights uncertainties, particularly around startup costs and margin impacts. Positive factors include revenue growth and optimistic guidance for new facilities, but high debt and lack of share repurchase are negative. Given the market cap, these mixed signals likely lead to a neutral stock price movement.
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