Select Medical (SEM) Q3 2024 earnings summary

Executive summary

• Completed Concentra's IPO in July 2024, retaining 81.74% ownership, with plans to distribute the remaining interest to shareholders within 12 months, pending lockup waiver and market conditions.

• Majority of Concentra IPO and related debt proceeds used to pay down debt, significantly reducing leverage.

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

• All operating segments reported revenue growth, with the rehabilitation hospital segment leading at 13.5% year-over-year.

• Declared quarterly dividends of $0.125 per share and maintained strong liquidity 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 a margin of 11.7%.

• Revenue for Q3 2024 increased 6% year-over-year to $1,761.2 million.

• EPS was $0.43 per share, up from $0.38; adjusted EPS was $0.50, up from $0.46 year-over-year.

• 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.

• Plans to expand through new joint ventures, outpatient clinics, and opportunistic acquisitions.

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