Overview

Select Medical Holdings Corporation (NYSE:SEM) is a leading operator of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States. Select Medical has demonstrated strong financial performance, reporting annual net income of $243,491,000, annual revenue of $6,664,058,000, annual operating cash flow of $582,058,000, and annual free cash flow of $352,858,000 in its most recent fiscal year.

Business Overview

Select Medical's business model is centered around providing specialized healthcare services through its four operating segments: critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation, and Concentra. Select Medical's critical illness recovery hospitals are designed to serve the needs of patients recovering from critical illnesses, often with complex medical needs. Its rehabilitation hospitals focus on providing intensive physical rehabilitation care to patients. The outpatient rehabilitation segment consists of clinics that provide physical, occupational, and speech rehabilitation services, while the Concentra segment operates occupational health centers that offer workers' compensation injury care, physical therapy, and consumer health services.

Financials

In the most recent reported quarter, Select Medical delivered impressive financial results, with revenue growing 7% to $1,788.8 million and Adjusted EBITDA increasing 22% to $261.9 million compared to the same period in the prior year. Select Medical's critical illness recovery hospital segment was a standout performer, with revenue increasing 10.4% and Adjusted EBITDA rising 51% year-over-year. The rehabilitation hospital segment also had a strong quarter, with revenue up 14.8% and Adjusted EBITDA increasing 30%.

Select Medical's Concentra segment, which provides occupational health services, saw revenue grow 2.5% and Adjusted EBITDA increase 2.6% in the most recent reported quarter. The outpatient rehabilitation segment experienced a 2.5% increase in revenue, but Adjusted EBITDA declined 17.5% due to higher labor costs.

Select Medical's geographic footprint is extensive, with operations in 46 states and the District of Columbia as of the latest reported date. Select Medical operated 107 critical illness recovery hospitals, 33 rehabilitation hospitals, 1,922 outpatient rehabilitation clinics, and 547 occupational health centers across the country.

Liquidity

Select Medical's financial position remains strong, with $92.6 million in cash and cash equivalents and $202.4 million of availability under its revolving facility as of the latest reported date. Select Medical's debt-to-equity ratio of 2.31 suggests a moderate level of leverage, which Select Medical has been actively managing.

Outlook

Looking ahead, Select Medical provided updated guidance for the current fiscal year, expecting revenue to be in the range of $6.9 billion to $7.1 billion and Adjusted EBITDA to be between $845 million and $885 million. Select Medical also plans to invest $225 million to $275 million in capital expenditures, with $123 million allocated towards maintenance and the remainder for development projects.

Recent Developments

One of the key strategic initiatives for Select Medical is the planned separation of its Concentra segment into a new, publicly traded company. In a recent announcement, Select Medical stated that Concentra had confidentially submitted a draft registration statement with the SEC for a proposed initial public offering. The separation is expected to be completed by the end of the current year, subject to market and other conditions.

Conclusion

Select Medical's diversified healthcare services, strong financial performance, and strategic initiatives position Select Medical well to continue delivering value to its shareholders. Select Medical's focus on operational excellence, disciplined capital allocation, and strategic growth opportunities make it an attractive investment opportunity in the healthcare sector.