Select Medical Holdings Corp Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : Hey. Good morning, everyone. So I think there's a little confusion out there in the market because of what's in and out in consensus and Concentra is partially still in the numbers. Just to level set for 2025, I'm arriving at the midpoint of revenue growth of, call it, 6%, EBITDA growth of 4% and then EPS growth of 6% and a 4Q exit at, call it, 3.18 [turns] net leverage. Is that -- are those sort of the right metrics here?

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : All right. So on a consolidated basis -- go ahead. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 2:00PM, SEM.N - Q4 2024 Select Medical Holdings Corp Earnings Call

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : Okay. So just going back to all the development. I mean this is the most active that Select has been in company history, frankly, with all the development activity. You have -- you're increasing your IRF bed count by north of 30% over the next two years. Can you remind us how those facilities sort of mature? And also ballpark for us sort of the number of start-up costs maybe in the fourth quarter and 2025 as well?

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : Okay. That's helpful. And then with RemainCo, I'm just doing some math here on the development activity. I'm sort of arriving at like a new growth algo of top line growth, mid-single-digit plus EBITDA growth probably up in that high singles. And then EPS and free cash flow growth well in per share well into the double digits before really deploying any of the excess free cash flow. Is that the right neighborhood?

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : How do you think of the model over the next three years or so?

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : Okay. And that's consolidated?

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : In your segment, Okay. All right. Okay.

Question: Justin Bowers - Deutsche Bank Securities Inc - Analyst : All right. That is helpful. I will jump back in queue. Thank you.

Question: Benjamin Hendrix - RBC Capital Markets Wealth Management - Analyst : Hey. Thank you very much. I appreciate the color on your refinancing and year-end leverage, but in acknowledging that there's been some confusion kind of post spend. But maybe you can get an idea -- you can give us an idea of your kind of go-forward post-separation leverage targets, how you're thinking about the gearing for this company and kind of where we are versus the kind of the optimal debt load? Thanks.

Question: Benjamin Hendrix - RBC Capital Markets Wealth Management - Analyst : I appreciate that. And just to follow up a question on the inpatient, it looks like margins were a little lower this quarter. It sounds like there were some development costs in there, and maybe were there any other kind of headwinds, transitory or otherwise that may have kind of caused a little bit of a depression on the IRF side this quarter versus the last several? Thanks.

Question: Benjamin Hendrix - RBC Capital Markets Wealth Management - Analyst : Great. Thank you for that clarification.

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Hi. Good morning. Thanks so much for taking the question. So just, I guess, a little bit of a follow-up to that last comment about the IRF margins. And as it relates to the 2025 outlook, your guidance implies margins would decline about 20 basis points or so versus comparable, again, excluding consensual margin in 2024. So is that also what's driving that EBITDA consolidated -- EBITDA margin outlook for the slight decline because the IRF margins, I guess, are going to be still kind of constraint because of the startup losses. Is that the reason not for the consolidated margin to be lower? Or is there something else to be said about other segment margins for '25?

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Okay. So it's pretty much the IRF [because] start-up losses. And then for the LTAC, should we think about those margins relatively stable? Or how we should think about '25 versus '24?

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Because I guess in that segment, can you talk about the reimbursement change, the change that thresholds for the -- in Medicare, how are you, I guess, seeing this progress through the year, the impact of that change?

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Yes. Exactly.

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Okay. That's great. But I guess with those changes, you think margins should be relatively flat for the segment?

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Okay. And then last segment, the outpatient rehab. So these margins showed nice improvement in Q4. And it sounds like when you asked your question about kind of the long-term outlook, you expect outpatient rehab EBITDA to also grow double digits. So can you talk about your, I guess, activity there in terms of is it just kind of sounds like you're streamlining the portfolio, exiting some markets, maybe they don't make sense. Anything else to kind of plug in terms of like what's driving the expected growth in that segment EBITDA and also how to think about '25. Thank you.

Question: Joanna Gajuk - BofA Securities Inc - Analyst : Great. Thank you so much for taking the question.