Select Medical (SEM) Q3 2024 earnings summary

Executive summary

• Completed Concentra's IPO in July 2024, issuing 23.25 million shares and raising $516.4 million in net proceeds; Select Medical retains 81.74% ownership and plans to distribute the remaining interest to shareholders within 12 months, pending lockup waiver and market conditions.

• Majority of Concentra IPO and debt proceeds used to pay down Select Medical's debt, significantly improving liquidity and leverage.

• Opened a new 48-bed inpatient rehab hospital in Jacksonville, FL, and announced several new rehab projects and acquisitions through 2026, adding 569 beds.

• All four divisions exceeded prior year Q3 results in both revenue and adjusted EBITDA, with rehabilitation hospital segment leading at 13.5% year-over-year growth.

• Declared quarterly dividends of $0.125 per share and maintained a strong liquidity position with $191.5 million in cash and $883.0 million in revolving credit availability at quarter-end.

Financial highlights

• Consolidated adjusted EBITDA for Q3 2024 was $205.5 million, up 6% year-over-year, with margin at 11.7%.

• Revenue for Q3 2024 increased 5.7% year-over-year to $1,761.2 million; nine-month revenue rose 6.1% to $5,309.7 million.

• EPS was $0.43, up from $0.38 prior year; adjusted EPS was $0.50, up from $0.46.

• Interest expense for the nine months ended September 30, 2024, decreased to $143.3 million from $147.8 million year-over-year.

• Operating cash flow was $181 million for Q3 and $392.4 million for the nine months ended September 30, 2024.

Outlook and guidance

• Updated 2024 guidance: revenue $6.95–$7.15 billion, adjusted EBITDA $865–$885 million, fully diluted EPS $2.01–$2.12, adjusted EPS $2.09–$2.20.

• Capital expenditures expected at $200–$250 million for 2024.

• Management expects continued improvement in days sales outstanding and further reduction in claims processing backlog in Q4 2024.

• Select intends to distribute its remaining equity interest in Concentra to shareholders within 12 months of the IPO, aiming for a tax-free transaction.

• The company plans to continue expanding through new joint ventures, outpatient clinics, and opportunistic acquisitions.