Select Medical ((SEM)) has held its Q1 earnings call. Read on for the main highlights of the call.
Select Medical’s Recent Earnings Call: Growth Amidst Challenges
The recent earnings call for Select Medical highlighted a mixed sentiment, with notable growth in the inpatient rehab division and a strong finish in the outpatient division, despite facing significant challenges. The company demonstrated resilience and strategic growth plans, even as it navigated substantial hurdles in its critical illness recovery hospital division due to regulatory changes.
Inpatient Rehab Division Growth
The inpatient rehab division of Select Medical reported impressive growth, with a 16% increase in revenue and a 15% rise in adjusted EBITDA. Additionally, there was a 6% increase in the average daily census compared to the previous year, maintaining a robust adjusted EBITDA margin of 23%.
Expansion in Rehabilitation Facilities
Select Medical is aggressively expanding its inpatient rehab division, planning to open new facilities and add 440 additional beds by the end of 2027. Recent facility openings in Madison, Wisconsin, and Tallahassee, Florida, underscore this ongoing growth trajectory.
Earnings Per Share Increase
The company saw a significant increase in earnings per share from continuing operations, which rose by 33% to $0.44 for the first quarter, up from $0.33 in the same quarter of the previous year.
Outpatient Division Resilience
Despite facing challenges, the outpatient division concluded the quarter on a strong note, with revenue per visit increasing from $99 to $102. The division remains committed to enhancing patient access and investing in technology to drive further growth.
Share Repurchase Program
Select Medical executed a share repurchase program, buying back 650,000 shares at an average price of $17.52 per share, amounting to a total of $11.4 million, as authorized by the board.
Challenges in Critical Illness Recovery Hospital Division
The critical illness recovery hospital division faced significant challenges due to a late flu season and regulatory hurdles, including an increase in the high-cost outlier threshold and the 20% transmittal rule, leading to a 25% decline in adjusted EBITDA.
Outpatient Division Impacted by Weather and Medicare Reductions
Severe weather events in the South and Central regions, along with a 3% reduction in Medicare reimbursement, negatively impacted the outpatient division’s performance.
Decline in Adjusted EBITDA
Overall, Select Medical experienced a 9% decline in adjusted EBITDA, dropping from $165.8 million to $151.4 million, primarily due to challenges in the outpatient and critical illness recovery hospital divisions.
Regulatory Challenges in Critical Illness Recovery Hospitals
The critical illness recovery hospital division was adversely affected by regulatory changes, including a 20% increase in the high-cost outlier threshold and new rules, significantly impacting its performance.
Forward-Looking Guidance
Looking ahead, Select Medical provided guidance for 2025, anticipating revenue between $5.3 billion and $5.5 billion, with adjusted EBITDA expected to range from $510 million to $530 million. Capital expenditures are projected to be between $160 million and $200 million. Despite the challenges, the company remains optimistic, with a revenue increase of over 2% and a 33% rise in earnings per share.
In conclusion, Select Medical’s earnings call painted a picture of resilience and strategic growth amidst challenges. The company is poised for continued expansion, particularly in its inpatient rehab division, while navigating regulatory and environmental hurdles in other areas. Investors will be keenly watching how these strategies unfold in the coming quarters.