Select Medical Holdings Corporation Announces Results For Its First Quarter Ended March 31, 2022 and Cash Dividend
05/05/2022 - 04:30 PM
MECHANICSBURG, Pa. May 5, 2022
For the first quarter ended March 31, 2022, revenue increased 3.4% to $1,599.5 million $1,546.5 million $104.0 million $202 $16.1 million $55.9 million $137.2 million $163.8 million $258.3 million $0.37 $0.82
In addition to providing key statistics in table V of this release for both the first quarters ended March 31, 2022 and 2021, Select Medical also provided statistics for the comparable period in 2019. Select Medical believes this additional data provides insight into how it has performed in comparison to the year prior to the widespread emergence of the coronavirus disease 2019 ("COVID-19") in the United States . The effects of the COVID-19 pandemic, including the duration and extent of disruption on our operations, continues to create uncertainties about Select Medical's future operating results and financial condition. Please refer to the risk factors in Item 1A and the section titled "Effects of the COVID-19 Pandemic on our Results of Operations " in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion.
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 March 31, 2022, Select Medical operated 105 critical illness recovery hospitals in 28 states, 30 rehabilitation hospitals in 12 states, and 1,901 outpatient rehabilitation clinics in 38 states and the District of Columbia . Concentra operated 518 occupational health centers in 41 states. At March 31, 2022, 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 first quarter ended March 31, 2022, revenue for the critical illness recovery hospital segment increased 1.2% to $601.8 million $594.9 million $36.0 million $113.3 million March 31, 2021 , Adjusted EBITDA included $17.9 million 6.0% for the first quarter ended March 31, 2022, compared to 19.0% for the same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table V of this release for the first quarters ended March 31, 2022 and 2021.
Rehabilitation Hospital Segment
For the first quarter ended March 31, 2022, revenue for the rehabilitation hospital segment increased 6.2% to $220.6 million $207.8 million $42.4 million $50.5 million 19.2% for the first quarter ended March 31, 2022, compared to 24.3% for the same quarter, prior year. Certain rehabilitation hospital key statistics are presented in table V of this release for the first quarters ended March 31, 2022 and 2021.
Outpatient Rehabilitation Segment
For the first quarter ended March 31, 2022, revenue for the outpatient rehabilitation segment increased 7.9% to $271.9 million $252.0 million 1.0% to $26.6 million $26.3 million 9.8% for the first quarter ended March 31, 2022, compared to 10.4% for the same quarter, prior year. Certain outpatient rehabilitation key statistics are presented in table V of this release for the first quarters ended March 31, 2022 and 2021.
Concentra Segment
For the first quarter ended March 31, 2022, revenue for the Concentra segment increased to $423.4 million $422.8 million 9.1% to $89.5 million $82.0 million 21.1% for the first quarter ended March 31, 2022, compared to 19.4% for the same quarter, prior year. Certain Concentra key statistics are presented in table V of this release for the first quarters ended March 31, 2022 and 2021.
Dividend
On May 5, 2022, Select Medical's board of directors declared a cash dividend of $0.12 5
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
During the first quarter ended March 31, 2022, Select Medical repurchased 2,128,494 shares at a cost of approximately $51 $24.28 $466.9 million $10.99
Business Outlook for Revenue
Select Medical reaffirms its 2022 business outlook for revenue, which was provided most recently in its February 24, 2022 press release. Select Medical continues to expect consolidated revenue to be in the range of $6.25 billion $6.40 billion 4% to 6% for 2021 through 2023.
Select Medical intends to address its business outlook and target compound annual growth rates for Adjusted EBITDA and earnings per common share when the labor climate stabilizes.
Conference Call
Select Medical will host a conference call regarding its first quarter results, as well as its business outlook for revenue and the impact of the COVID-19 pandemic on each of its reportable segments, on Friday, May 6, 2022 , at 9:00am ET . The domestic dial in number for the call is 1-866-440-2669. The international dial in number is 1-409-220-9844. The conference ID for the call is 5892378. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation's website www.selectmedicalholdings.com
For those unable to participate in the conference call, a replay will be available until 12:00pm ET , May 13, 2022 . The replay number is 1-855-859-2056 (domestic) or 1-404-537-3406 (international). The conference ID for the replay will be 5892378. The replay can also be accessed at Select Medical Holdings Corporation's website, www.selectmedicalholdings.com
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 2022 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:
developments related to the COVID-19 pandemic including, but not limited to, the duration and severity of the pandemic, additional measures taken by government authorities and the private sector to limit the spread of COVID-19, and further legislative and regulatory actions which impact healthcare providers, including actions that may impact the Medicare program; 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; 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; 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; shortages in qualified nurses, therapists, physicians, or other licensed providers, or the inability to attract or retain healthcare professionals due to the heightened risk of infection related to the COVID-19 pandemic, could increase our operating costs significantly or limit our ability to staff our facilities; 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 quarterly reports on Form 10-Q and of the annual report on Form 10-K for the year ended December 31, 2021 . 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 ir@selectmedical.com
I. Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2021 and 2022
(In thousands, except per share amounts, unaudited)
2021
2022
% Change
Revenue
$ 1,546,463
$ 1,599,547
3.4%
Costs and expenses:
Cost of services, exclusive of depreciation and amortization
1,293,449
1,407,010
8.8
General and administrative
35,403
37,513
6.0
Depreciation and amortization
49,620
51,039
2.9
Total costs and expenses
1,378,472
1,495,562
8.5
Other operating income
34,021
—
N/M
Income from operations
202,012
103,985
(48.5)
Other income and expense:
Equity in earnings of unconsolidated subsidiaries
9,919
5,397
(45.6)
Interest income
4,749
—
N/M
Interest expense
(34,402)
(35,514)
3.2
Income before income taxes
182,278
73,868
(59.5)
Income tax expense
45,064
17,942
(60.2)
Net income
137,214
55,926
(59.2)
Less: Net income attributable to non-controlling interests
26,668
6,809
(74.5)
Net income attributable to Select Medical
$ 110,546
$ 49,117
(55.6)%
Basic and diluted earnings per common share:(1)
$ 0.82
$ 0.37
(1) Refer to table II for calculation of earnings per common share.
N/M Not meaningful.
II. Earnings per Share For the Three Months Ended March 31, 2021 and 2022 (In thousands, except per share amounts, unaudited)
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 months ended March 31, 2021 and 2022:
Basic and Diluted EPS
Three Months Ended March 31,
2021
2022
Net income
$ 137,214
$ 55,926
Less: net income attributable to non-controlling interests
26,668
6,809
Net income attributable to Select Medical
110,546
49,117
Less: net income attributable to participating securities
3,698
1,643
Net income attributable to common shares
$ 106,848
$ 47,474
The following tables set forth the computation of EPS under the two-class method for the three months ended March 31, 2021 and 2022:
Three Months Ended March 31,
2021
2022
Net Income
Shares(1)
Basic and
Net Income
Shares(1)
Basic and
Common shares
$ 106,848
130,329
$ 0.82
$ 47,474
129,010
$ 0.37
Participating securities
3,698
4,511
$ 0.82
1,643
4,464
$ 0.37
Total
$ 110,546
$ 49,117
(1) Represents the weighted average share count outstanding during the period.
III. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
December 31, 2021
March 31, 2022
Assets
Current Assets:
Cash and cash equivalents
$ 74,310
$ 130,881
Accounts receivable
889,303
941,434
Other current assets
175,826
178,536
Total Current Assets
1,139,439
1,250,851
Operating lease right-of-use assets
1,078,754
1,102,710
Property and equipment, net
961,467
952,926
Goodwill
3,448,912
3,465,456
Identifiable intangible assets, net
374,879
368,850
Other assets
356,720
395,151
Total Assets
$ 7,360,171
$ 7,535,944
Liabilities and Equity
Current Liabilities:
Payables and accruals
$ 942,288
$ 909,162
Government advances
83,790
20,862
Unearned government assistance
93
194
Current operating lease liabilities
229,334
234,420
Current portion of long-term debt and notes payable
17,572
24,513
Total Current Liabilities
1,273,077
1,189,151
Non-current operating lease liabilities
916,540
938,423
Long-term debt, net of current portion
3,556,385
3,738,299
Non-current deferred tax liability
142,792
156,407
Other non-current liabilities
106,442
105,098
Total Liabilities
5,995,236
6,127,378
Redeemable non-controlling interests
39,033
41,670
Total equity
1,325,902
1,366,896
Total Liabilities and Equity
$ 7,360,171
$ 7,535,944
IV. Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2021 and 2022
(In thousands, unaudited)
2021
2022
Operating activities
Net income
$ 137,214
$ 55,926
Adjustments to reconcile net income to net cash provided by operating
Distributions from unconsolidated subsidiaries
11,633
7,486
Depreciation and amortization
49,620
51,039
Provision for expected credit losses
67
94
Equity in earnings of unconsolidated subsidiaries
(9,919)
(5,397)
Loss (gain) on sale or disposal of assets
72
(23)
Stock compensation expense
6,709
8,823
Amortization of debt discount, premium and issuance costs
543
558
Deferred income taxes
(897)
420
Changes in operating assets and liabilities, net of effects of business
Accounts receivable
(60,142)
(52,225)
Other current assets
(4,425)
(1,819)
Other assets
961
2,686
Accounts payable and accrued expenses
44,627
(15,002)
Government advances
—
(62,928)
Unearned government assistance
19,207
101
Income taxes
44,618
16,598
Net cash provided by operating activities
239,888
6,337
Investing activities
Business combinations, net of cash acquired
(6,314)
(5,186)
Purchases of property and equipment
(39,719)
(46,845)
Investment in businesses
(6,571)
(3,337)
Proceeds from sale of assets
19
37
Net cash used in investing activities
(52,585)
(55,331)
Financing activities
Borrowings on revolving facilities
—
280,000
Payments on revolving facilities
—
(100,000)
Borrowings of other debt
8,915
15,794
Principal payments on other debt
(9,342)
(9,188)
Dividends paid to common stockholders
—
(16,691)
Repurchase of common stock
—
(51,676)
Decrease in overdrafts
—
(7,608)
Proceeds from issuance of non-controlling interests
—
5,229
Distributions to and purchases of non-controlling interests
(13,663)
(10,295)
Net cash provided by (used in) financing activities
(14,090)
105,565
Net increase in cash and cash equivalents
173,213
56,571
Cash and cash equivalents at beginning of period
577,061
74,310
Cash and cash equivalents at end of period
$ 750,274
$ 130,881
Supplemental information
Cash paid for interest
$ 52,470
$ 53,517
Cash paid for taxes
1,343
923
V. Key Statistics For the Three Months Ended March 31, 2019, 2021, and 2022 (unaudited)
2019
2021
2022
%
Critical Illness Recovery Hospital
Number of hospitals operated – end of period(a)
97
99
105
Revenue (,000)
$ 457,534
$ 594,872
$ 601,755
1.2%
Number of patient days(b)(c)
258,129
293,118
289,217
(1.3)%
Number of admissions(b)(d)
9,456
9,859
9,457
(4.1)%
Revenue per patient day(b)(e)
$ 1,759
$ 2,024
$ 2,075
2.5%
Occupancy rate(b)(f)
71%
75%
71%
(5.3)%
Adjusted EBITDA (,000)
$ 72,998
$ 113,272
$ 35,967
(68.2)%
Adjusted EBITDA margin
16.0%
19.0%
6.0%
Rehabilitation Hospital
Number of hospitals operated – end of period(a)
27
30
30
Revenue (,000)
$ 154,558
$ 207,804
$ 220,634
6.2%
Number of patient days(b)(c)
82,816
102,439
103,802
1.3%
Number of admissions(b)(d)
5,836
7,131
7,182
0.7%
Revenue per patient day(b)(e)
$ 1,633
$ 1,853
$ 1,943
4.9%
Occupancy rate(b)(f)
76%
84%
84%
0.0%
Adjusted EBITDA (,000)
$ 25,797
$ 50,534
$ 42,379
(16.1)%
Adjusted EBITDA margin
16.7%
24.3%
19.2%
Outpatient Rehabilitation
Number of clinics operated – end of period(a)
1,684
1,809
1,901
Working days(g)
63
63
64
Revenue (,000)
$ 246,905
$ 251,961
$ 271,940
7.9%
Number of visits(b)(h)
2,054,483
2,100,154
2,310,086
10.0%
Revenue per visit(b)(i)
$ 103
$ 104
$ 102
(1.9)%
Adjusted EBITDA (,000)
$ 28,991
$ 26,329
$ 26,596
1.0%
Adjusted EBITDA margin
11.7%
10.4%
9.8%
Concentra
Number of centers operated – end of period(b)
525
519
518
Working days(g)
63
63
64
Revenue (,000)
$ 396,321
$ 422,840
$ 423,423
0.1%
Number of visits(b)(h)
2,911,607
2,795,574
3,116,898
11.5%
Revenue per visit(b)(i)
$ 124
$ 125
$ 125
0.0%
Adjusted EBITDA (,000)
$ 66,258
$ 82,015
$ 89,469
9.1%
Adjusted EBITDA margin
16.7%
19.4%
21.1%
(a)
Includes managed locations.
(b)
Excludes managed locations. For purposes of the Concentra segment, onsite clinics and community-based outpatient clinics are excluded.
(c)
Each patient day represents one patient occupying one bed for one day during the periods presented.
(d)
Represents the number of patients admitted to Select Medical's hospitals during the periods presented.
(e)
Represents the average amount of revenue recognized for each patient day. Revenue per patient day is calculated by dividing patient service revenues, excluding revenues from certain other ancillary and outpatient services provided at Select Medical's hospitals, by the total number of patient days.
(f)
Represents the portion of our hospitals being utilized for patient care during the periods presented. Occupancy rate is calculated using the number of patient days, as presented above, divided by the total number of bed days available during the period. Bed days available is derived by adding the daily number of available licensed beds for each of the periods presented.
(g)
Represents the number of days in which normal business operations were conducted during the periods presented.
(h)
Represents the number of visits in which patients were treated at Select Medical's outpatient rehabilitation clinics and Concentra centers during the periods presented.
(i)
Represents the average amount of revenue recognized for each patient visit. Revenue per visit is calculated by dividing patient service revenue, excluding revenues from certain other ancillary services, by the total number of visits. For purposes of this computation for the Concentra segment, patient service revenue does not include onsite clinics.
VI. Net Income to Adjusted EBITDA Reconciliation For the Three Months Ended March 31, 2019 , 2021 and 2022 (In thousands, unaudited)
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, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
Three Months Ended March 31,
2019
2021
2022
Net income
$ 53,344
$ 137,214
$ 55,926
Income tax expense
18,467
45,064
17,942
Interest expense
50,811
34,402
35,514
Interest income
—
(4,749)
—
Gain on sale of businesses
(6,532)
—
—
Equity in earnings of unconsolidated subsidiaries
(4,366)
(9,919)
(5,397)
Income from operations
111,724
202,012
103,985
Stock compensation expense:
Included in general and administrative
4,748
5,460
6,949
Included in cost of services
1,507
1,249
1,874
Depreciation and amortization
52,138
49,620
51,039
Adjusted EBITDA
$ 170,117
$ 258,341
$ 163,847
Critical illness recovery hospital(a)
$ 72,998
$ 113,272
$ 35,967
Rehabilitation hospital
25,797
50,534
42,379
Outpatient rehabilitation
28,991
26,329
26,596
Concentra
66,258
82,015
89,469
Other(b)(c)
(23,927)
(13,809)
(30,564)
Adjusted EBITDA
$ 170,117
$ 258,341
$ 163,847
(a)
For the three months ended March 31, 2021, Adjusted EBITDA included other operating income of $17.9 million . The other operating income related to the outcome of litigation with the Centers for Medicare & Medicaid Services.
(b)
For the three months ended March 31, 2021, Adjusted EBITDA included other operating income of $16.1 million . The other operating income is related to the recognition of payments received under the Provider Relief Fund.
(c)
Other primarily includes general and administrative costs and other operating income, as discussed further above.
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