8-K: Select Medical Holdings Corporation Announces Q4 and Full Year 2024 Results, Issues 2025 Outlook, and Declares Cash Dividend

Select Medical Holdings Corporation reports a revenue increase for Q4 and full year 2024, announces its 2025 business outlook, and declares a cash dividend of $0.0625 per share.

Summary

• Select Medical Holdings Corporation announced its financial results for the fourth quarter and fiscal year ended December 31, 2024.
• The company completed a tax-free distribution of Concentra Group Holdings Parent, Inc. shares to its stockholders on November 25, 2024.
• For the fourth quarter, revenue increased by 7.8% to $1,312.6 million, compared to $1,218.1 million in the same quarter of the prior year.
• Loss from continuing operations, net of tax, was $10.5 million for the fourth quarter, compared to income of $30.3 million in the prior year, impacted by a one-time acceleration of $45.9 million in stock compensation expense and a $17.9 million loss on early retirement of debt.
• Adjusted EBITDA increased 3.8% to $116.0 million for the fourth quarter, compared to $111.8 million in the prior year.
• For the full year, revenue increased by 7.5% to $5,187.1 million, compared to $4,826.0 million in the prior year.
• Income from continuing operations, net of tax, increased 17.7% to $130.0 million for the year, compared to $110.5 million in the prior year.
• Adjusted EBITDA increased 14.4% to $510.4 million for the year, compared to $446.1 million in the prior year.
• As of December 31, 2024, Select Medical operated 104 critical illness recovery hospitals, 35 rehabilitation hospitals, and 1,914 outpatient rehabilitation clinics.
• The board of directors declared a cash dividend of $0.0625 per share, payable on or about March 13, 2025, to stockholders of record as of March 3, 2025.
• Select Medical expects 2025 revenue to be in the range of $5.4 billion to $5.6 billion, Adjusted EBITDA to be in the range of $520.0 million to $540.0 million, and fully diluted earnings per share to be in the range of $1.09 to $1.19.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to revenue and adjusted EBITDA growth, a dividend declaration, and a positive 2025 outlook, although there are some concerns about margin compression and increased expenses.

Positives

• Revenue increased for both the fourth quarter and the full year of 2024.
• Adjusted EBITDA increased for both the fourth quarter and the full year of 2024.
• The company declared a cash dividend of $0.0625 per share.
• The company has issued a positive business outlook for 2025, projecting continued revenue and EBITDA growth.
• The critical illness recovery hospital segment saw a 22.6% increase in Adjusted EBITDA for the year ended December 31, 2024.
• The rehabilitation hospital segment saw a 13.4% increase in revenue for the year ended December 31, 2024.
• The outpatient rehabilitation segment saw a 7.2% increase in revenue for the fourth quarter ended December 31, 2024.

Negatives

• Loss from continuing operations, net of tax, was $10.5 million for Q4 2024, compared to income of $30.3 million in the same quarter of the prior year.
• The rehabilitation hospital segment's Adjusted EBITDA margin decreased from 25.5% to 21.2% for the fourth quarter ended December 31, 2024.
• The outpatient rehabilitation segment's Adjusted EBITDA margin decreased from 9.4% to 8.7% for the year ended December 31, 2024.
• Net income attributable to Select Medical decreased by 12.1% for the year ended December 31, 2024.

Risks

• Changes in government reimbursement policies could reduce revenue and profitability.
• Adverse economic conditions, including inflation, could increase labor and other costs.
• Shortages in qualified healthcare professionals could limit the ability to staff facilities.
• Public health threats, such as pandemics, could have a negative impact.
• Failure to maintain Medicare certifications could cause revenue and profitability to decline.
• Government investigations or regulatory violations could result in sanctions or reputational harm.
• Acquisitions or joint ventures may prove difficult or unsuccessful.
• Private third-party payors may adopt payment policies that limit future revenue and profitability.
• Loss of key management team members could disrupt operations.
• Security breaches of information technology systems could result in legal and reputational harm.

Future Outlook

Select Medical expects revenue to be in the range of $5.4 billion to $5.6 billion, Adjusted EBITDA to be in the range of $520.0 million to $540.0 million, and fully diluted earnings per share to be in the range of $1.09 to $1.19 for the year 2025.

Industry Context

The healthcare industry is currently facing challenges related to reimbursement, labor costs, and staffing shortages, which are reflected in Select Medical's discussion of risks and uncertainties. The company's focus on critical illness recovery, rehabilitation, and outpatient services positions it to capitalize on the growing demand for these services as the population ages and the need for post-acute care increases.

Comparison to Industry Standards

• Select Medical's revenue growth of 7.5% for the year ended December 31, 2024, is comparable to that of other large healthcare providers such as Encompass Health (EHC), which reported revenue growth of 10.8% for the year ended December 31, 2023.
• The Adjusted EBITDA margin for Select Medical's rehabilitation hospital segment was 22.1% for the year ended December 31, 2024, which is in line with industry standards for inpatient rehabilitation facilities.
• The company's focus on expanding its outpatient rehabilitation segment is consistent with the trend of healthcare providers shifting towards lower-cost, community-based care settings.

Stakeholder Impact

• Shareholders will benefit from the cash dividend and potential stock appreciation.
• Employees may see opportunities for growth and development as the company expands.
• Customers will have access to a wider range of healthcare services.
• Suppliers will benefit from increased demand for their products and services.
• Creditors will be reassured by the company's strong financial performance.

Next Steps

• Select Medical will host a conference call on February 21, 2025, to discuss the results and outlook.
• The company will continue to execute its stock repurchase program.
• The company will focus on achieving its 2025 revenue and EBITDA targets.

Key Dates