MECHANICSBURG, Pa., Aug. 1, 2024 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM) today announced results for its second quarter ended June 30, 2024, and the declaration of a cash dividend.

For the second quarter ended June 30, 2024, revenue increased 5.1% to $1,759.7 million, compared to $1,674.5 million for the same quarter, prior year. Income from operations was $157.8 million for the second quarter ended June 30, 2024, compared to $159.2 million for the same quarter, prior year. Net income increased 3.2% to $94.8 million for the second quarter ended June 30, 2024, compared to $91.9 million for the same quarter, prior year. Adjusted EBITDA increased 3.1% to $226.3 million for the second quarter ended June 30, 2024, compared to $219.5 million for the same quarter, prior year. Earnings per common share and adjusted earnings per common share was $0.60 for the second quarter ended June 30, 2024, compared to $0.61 for the same quarter, prior year. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are presented in table IX of this release. A reconciliation of earnings per common share to adjusted earnings per common share is presented in table X of this release.

For the six months ended June 30, 2024, revenue increased 6.3% to $3,548.5 million, compared to $3,339.5 million for the same period, prior year. Income from operations increased 13.2% to $351.8 million for the six months ended June 30, 2024, compared to $310.7 million for the same period, prior year. Net income increased 19.7% to $211.9 million for the six months ended June 30, 2024, compared to $177.1 million for the same period, prior year. Adjusted EBITDA increased 12.6% to $488.2 million for the six months ended June 30, 2024, compared to $433.5 million for the same period, prior year. Earnings per common share increased 15.4% to $1.35 for the six months ended June 30, 2024, compared to $1.17 for the same period, prior year. Adjusted earnings per common share increased 17.1% to $1.37 for the six months ended June 30, 2024, compared to $1.17 for the same period, prior year. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are presented in table IX of this release. A reconciliation of earnings per common share to adjusted earnings per common share is presented in table X of this release.

Company Overview

Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on number of facilities.  Select Medical's reportable segments include the critical illness recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment. As of June 30, 2024, Select Medical operated 107 critical illness recovery hospitals in 29 states, 33 rehabilitation hospitals in 13 states, 1,925 outpatient rehabilitation clinics in 39 states and the District of Columbia, and 547 occupational health centers in 41 states. At June 30, 2024, Select Medical had operations in 46 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.com.

Critical Illness Recovery Hospital Segment

For the second quarter ended June 30, 2024, revenue for the critical illness recovery hospital segment increased 5.2% to $604.9 million, compared to $575.1 million for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 9.7% to $71.8 million for the second quarter ended June 30, 2024, compared to $65.5 million for the same quarter, prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 11.9% for the second quarter ended June 30, 2024, compared to 11.4% for the same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table VII of this release for the second quarters ended June 30, 2024 and 2023.

For the six months ended June 30, 2024, revenue for the critical illness recovery hospital segment increased 7.9% to $1,260.8 million, compared to $1,169.0 million for the same period, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 32.0% to $187.8 million for the six months ended June 30, 2024, compared to $142.3 million for the same period, prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 14.9% for the six months ended June 30, 2024, compared to 12.2% for the same period, prior year. Certain critical illness recovery hospital key statistics are presented in table VIII of this release for the six months ended June 30, 2024 and 2023.

Rehabilitation Hospital Segment

For the second quarter ended June 30, 2024, revenue for the rehabilitation hospital segment increased 11.2% to $267.8 million, compared to $240.9 million for the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 13.3% to $62.0 million for the second quarter ended June 30, 2024, compared to $54.7 million for the same quarter, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 23.1% for the second quarter ended June 30, 2024, compared to 22.7% for the same quarter, prior year. Certain rehabilitation hospital key statistics are presented in table VII of this release for the second quarters ended June 30, 2024 and 2023.

For the six months ended June 30, 2024, revenue for the rehabilitation hospital segment increased 13.0% to $533.5 million, compared to $472.3 million for the same period, prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 21.0% to $123.4 million for the six months ended June 30, 2024, compared to $101.9 million for the same period, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 23.1% for the six months ended June 30, 2024, compared to 21.6% for the same period, prior year. Certain rehabilitation hospital key statistics are presented in table VIII of this release for the six months ended June 30, 2024 and 2023.

Outpatient Rehabilitation Segment

For the second quarter ended June 30, 2024, revenue for the outpatient rehabilitation segment increased 4.1% to $315.5 million, compared to $303.0 million for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $28.8 million for the second quarter ended June 30, 2024, compared to $32.9 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 9.1% for the second quarter ended June 30, 2024, compared to 10.8% for the same quarter, prior year. Certain outpatient rehabilitation key statistics are presented in table VII of this release for the second quarters ended June 30, 2024 and 2023.

For the six months ended June 30, 2024, revenue for the outpatient rehabilitation segment increased 3.3% to $618.7 million, compared to $598.9 million for the same period, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $53.7 million for the six months ended June 30, 2024, compared to $63.0 million for the same period, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 8.7% for the six months ended June 30, 2024, compared to 10.5% for the same period, prior year. Certain outpatient rehabilitation key statistics are presented in table VIII of this release for the six months ended June 30, 2024 and 2023.

Concentra Segment

For the second quarter ended June 30, 2024, revenue for the Concentra segment increased 2.3% to $477.9 million, compared to $467.1 million for the same quarter, prior year. Adjusted EBITDA for the Concentra segment increased 1.2% to $101.6 million for the second quarter ended June 30, 2024, compared to $100.4 million for the same quarter, prior year. The Adjusted EBITDA margin for the Concentra segment was 21.3% for the second quarter ended June 30, 2024, compared to 21.5% for the same quarter, prior year. Certain Concentra key statistics are presented in table VII of this release for the second quarters ended June 30, 2024 and 2023.

For the six months ended June 30, 2024, revenue for the Concentra segment increased 2.4% to $945.5 million, compared to $923.4 million for the same period, prior year. Adjusted EBITDA for the Concentra segment increased 1.9% to $197.7 million for the six months ended June 30, 2024, compared to $194.1 million for the same period, prior year. The Adjusted EBITDA margin for the Concentra segment was 20.9% for the six months ended June 30, 2024, compared to 21.0% for the same period, prior year. Certain Concentra key statistics are presented in table VIII of this release for the six months ended June 30, 2024 and 2023.

Dividend

On July 31, 2024, Select Medical's Board of Directors declared a cash dividend of $0.125 per share. The dividend will be payable on or about August 30, 2024, to stockholders of record as of the close of business on August 14, 2024.

There is no assurance that future dividends will be declared. The declaration and payment of dividends in the future are at the discretion of Select Medical's Board of Directors after taking into account various factors, including, but not limited to, Select Medical's financial condition, operating results, available cash and current and anticipated cash needs, the terms of Select Medical's indebtedness, and other factors Select Medical's Board of Directors may deem to be relevant.

Stock Repurchase Program

The Board of Directors of Select Medical has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock. The common stock repurchase program will remain in effect until December 31, 2025, unless further extended or earlier terminated by the Board of Directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Select Medical deems appropriate. Select Medical funds this program with cash on hand and borrowings under its revolving credit facility.

Select Medical did not repurchase shares under its authorized stock repurchase program during the six months ended June 30, 2024. Since the inception of the common stock repurchase program through June 30, 2024, Select Medical has repurchased 48,234,823 shares at a cost of approximately $600.3 million, or $12.45 per share, which includes transaction costs.

Concentra Group Holdings Parent Initial Public Offering and Debt Transactions

On July 26, 2024, Concentra Group Holdings Parent ("Concentra"), a wholly-owned subsidiary of Select, completed an initial public offering ("IPO") of 22,500,000 shares of its common stock, par value $0.01 per share, at an initial public offering price of $23.50 per share for gross proceeds of $528.8 million. In addition, Concentra has granted the underwriters a 30-day option to purchase up to an additional 3,375,000 shares of its common stock. Concentra shares began trading on the New York Stock Exchange under the symbol "CON" on July 25, 2024. In connection with the offering, Concentra Health Services, Inc. ("CHSI"), a wholly-owned subsidiary of Concentra, entered into certain financing arrangements which include Credit Facilities and $650.0 million aggregate principal amount of 6.875% Senior Notes due 2032 (the "Notes"). The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Concentra and certain of its wholly-owned subsidiaries. The Notes bear interest at a rate of 6.875% per annum and mature on July 15, 2032. The Credit Facilities consist of a $850.0 million Term Loan and a $400.0 million Revolving Credit Facility. The Term Loan matures on July 26, 2031, and has an interest rate of Term SOFR plus 2.25%, subject to a leverage-based pricing grid. The Revolving Credit Facility matures on July 26, 2029, and has an interest rate of Term SOFR plus 2.50%, subject to a leverage-based pricing grid.

The net proceeds of the IPO and the debt financing transactions, except for $34.7 million, were used to repay $1.9 billion of Select's Credit Facilities.

Business Outlook

Select Medical is reaffirming its 2024 business outlook, which was provided most recently in its May 2, 2024, press release. Select Medical expects revenue to be in the range of $6.9 billion to $7.1 billion, Adjusted EBITDA to be in the range of $845 million to $885 million, fully diluted earnings per share to be in the range of $1.95 to $2.19 and adjusted earnings per share to be in the range of $1.96 to $2.20. Reconciliations of full year 2024 Adjusted EBITDA expectations to net income and adjusted earnings per share to fully diluted earnings per share are presented in table XI of this release.

Conference Call

Select Medical will host a conference call regarding its second quarter results and its business outlook on Friday, August 2, 2024, at 9:00am ET. The conference call will be a live webcast and can be accessed at Select Medical Holdings Corporation's website at www.selectmedicalholdings.com. A replay of the webcast will be available shortly after the call through the same link.

For listeners wishing to dial-in via telephone, or participate in the question and answer session, you may pre-register for the call at Select Medical Earnings Call Registration to obtain your dial-in number and unique passcode.

Certain statements contained herein that are not descriptions of historical facts are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), including statements related to Select Medical's 2024 and long-term business outlook. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements due to factors including the following:

• changes in government reimbursement for our services and/or new payment policies may result in a reduction in revenue, an increase in costs, and a reduction in profitability;
• adverse economic conditions including an inflationary environment could cause us to continue to experience increases in the prices of labor and other costs of doing business resulting in a negative impact on our business, operating results, cash flows, and financial condition;
• shortages in qualified nurses, therapists, physicians, or other licensed providers, and/or the inability to attract or retain qualified healthcare professionals could limit our ability to staff our facilities;
• shortages in qualified health professionals could cause us to increase our dependence on contract labor, increase our efforts to recruit and train new employees, and expand upon our initiatives to retain existing staff, which could increase our operating costs significantly;
• public threats such as a global pandemic, or widespread outbreak of an infectious disease, similar to the COVID-19 pandemic, could negatively impact patient volumes and revenues, increase labor and other operating costs, disrupt global financial markets, and/or further legislative and regulatory actions which impact healthcare providers, including actions that may impact the Medicare program;
• the failure of our Medicare-certified long term care hospitals or inpatient rehabilitation facilities to maintain their Medicare certifications may cause our revenue and profitability to decline;
• the failure of our Medicare-certified long term care hospitals and inpatient rehabilitation facilities operated as "hospitals within hospitals" to qualify as hospitals separate from their host hospitals may cause our revenue and profitability to decline;
• a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs;
• acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources, or expose us to unforeseen liabilities;
• our plans and expectations related to our acquisitions and our ability to realize anticipated synergies;
• failure to complete or achieve some or all the expected benefits of the potential separation of Concentra;
• private third-party payors for our services may adopt payment policies that could limit our future revenue and profitability;
• the failure to maintain established relationships with the physicians in the areas we serve could reduce our revenue and profitability;
• competition may limit our ability to grow and result in a decrease in our revenue and profitability;
• the loss of key members of our management team could significantly disrupt our operations;
• the effect of claims asserted against us could subject us to substantial uninsured liabilities;
• a security breach of our or our third-party vendors' information technology systems may subject us to potential legal and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology for Economic and Clinical Health Act; and
• other factors discussed from time to time in our filings with the Securities and Exchange Commission (the "SEC"), including factors discussed under the heading "Risk Factors" of the annual report on Form 10-K for the year ended December 31, 2023.

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance.

Investor inquiries:
Joel T. Veit
Senior Vice President and Treasurer
717-972-1100
This email address is being protected from spambots. You need JavaScript enabled to view it.

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Select Medical's capital structure includes common stock and unvested restricted stock awards. To compute earnings per share ("EPS"), Select Medical applies the two-class method because its unvested restricted stock awards are participating securities which are entitled to participate equally with its common stock in undistributed earnings.

The following table sets forth the net income attributable to Select Medical, its common shares outstanding, and its participating securities outstanding for the three and six months ended June 30, 2023 and 2024:

The following tables set forth the computation of EPS under the two-class method for the three and six months ended June 30, 2023 and 2024:

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The presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of Select Medical's segments. Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America ("GAAP"). Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, income from operations, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying definitions, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

The following table reconciles net income to Adjusted EBITDA for Select Medical. Adjusted EBITDA is used by Select Medical to report its segment performance. Adjusted EBITDA is defined as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.

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Adjusted net income attributable to common shares and adjusted earnings per common share are not measures of financial performance under GAAP. Items excluded from adjusted net income attributable to common shares and adjusted earnings per common share are significant components in understanding and assessing financial performance. Select Medical believes that the presentation of adjusted net income attributable to common shares and adjusted earnings per common share are important to investors because they are reflective of the financial performance of Select Medical's ongoing operations and provide better comparability of its results of operations between periods. Adjusted net income attributable to common shares and adjusted earnings per common share should not be considered in isolation or as alternatives to, or substitutes for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because adjusted net income attributable to common shares and adjusted earnings per common share are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, adjusted net income attributable to common shares and adjusted earnings per common share as presented may not be comparable to other similarly titled measures of other companies.

The following tables reconcile net income attributable to common shares and earnings per common share on a fully diluted basis to adjusted net income attributable to common shares and adjusted earnings per common share on a fully diluted basis.

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The following are reconciliations of full year 2024 Adjusted EBITDA and adjusted earnings per common share expectations as computed at the low and high points of the range to the closest comparable GAAP financial measure. Refer to table IX and X for discussion of Select Medical's use of Adjusted EBITDA and adjusted earnings per common share in evaluating financial performance. Refer to table IX for the definition of Adjusted EBITDA. Each item presented in the below table is an estimation of full year 2024 expectations.