Select Medical Holdings Corporation (SEM) Bundle
Understanding Select Medical Holdings Corporation (SEM) Revenue Streams
Understanding Select Medical Holdings Corporation’s Revenue Streams
For the nine months ended September 30, 2024, the total revenue for the company was $5,309.7 million, marking a 6.1% increase from $5,005.2 million for the same period in 2023. The revenue breakdown by segment is as follows:
| Segment | 2023 Revenue (in millions) | 2024 Revenue (in millions) | Year-over-Year Growth (%) |
|---|---|---|---|
| Critical Illness Recovery Hospital | $1,732.6 | $1,843.8 | 6.4% |
| Rehabilitation Hospital | $719.4 | $816.2 | 13.5% |
| Outpatient Rehabilitation | $890.7 | $930.7 | 4.5% |
| Concentra | $1,397.3 | $1,435.2 | 2.7% |
| Other | $265.1 | $283.9 | 7.1% |
| Total | $5,005.2 | $5,309.7 | 6.1% |
The growth in revenue across segments reflects various factors, including increased patient volumes and improved revenue per patient day.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a consistent upward trend across all segments. The overall revenue growth of 6.1% for the nine months ended September 30, 2024, is indicative of strong operational performance and recovery from previous downturns.
Contribution of Different Business Segments to Overall Revenue
The following table illustrates the contribution of each segment to the overall revenue:
| Segment | Contribution to Total Revenue (%) |
|---|---|
| Critical Illness Recovery Hospital | 34.7% |
| Rehabilitation Hospital | 15.4% |
| Outpatient Rehabilitation | 17.5% |
| Concentra | 27.0% |
| Other | 5.4% |
As seen, the Critical Illness Recovery Hospital segment remains the largest contributor to revenue, followed closely by the Concentra segment.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams for the nine months ended September 30, 2024, include:
- Critical Illness Recovery Hospital: Revenue per patient day increased by 4.8% to $2,175.
- Rehabilitation Hospital: Revenue per patient day increased by 5.9% to $2,119.
- Outpatient Rehabilitation: Revenue per visit remained stable at $100.
- Concentra: Revenue per visit increased by 3.7% to $140.
The increases in revenue per patient day and per visit across segments indicate improved operational efficiency and higher patient demand, contributing significantly to the overall revenue growth.
Quarterly Revenue Performance
For the three months ended September 30, 2024, the total revenue was $1,761.2 million, compared to $1,665.7 million for the same period in 2023, reflecting a 5.7% increase. The breakdown is as follows:
| Segment | 2023 Revenue (in millions) | 2024 Revenue (in millions) | Year-over-Year Growth (%) |
|---|---|---|---|
| Critical Illness Recovery Hospital | $563.6 | $583.0 | 3.4% |
| Rehabilitation Hospital | $247.1 | $282.7 | 14.4% |
| Outpatient Rehabilitation | $291.8 | $312.0 | 6.9% |
| Concentra | $474.0 | $489.6 | 3.3% |
| Other | $89.2 | $93.9 | 5.3% |
| Total | $1,665.7 | $1,761.2 | 5.7% |
This quarterly performance emphasizes the continued growth trajectory and resilience of the company's services amid market fluctuations.
A Deep Dive into Select Medical Holdings Corporation (SEM) Profitability
Profitability Metrics
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Gross Profit: $189.9 million
- Operating Profit: $141.1 million
- Net Profit: $81.0 million
The respective profit margins were calculated as follows:
- Operating Margin: 8.0%
- Net Margin: 4.6%
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, to the same period in 2023:
- Revenue increased from $5,005.2 million to $5,309.7 million, marking a 6.1% growth.
- Income from operations rose from $440.6 million to $492.9 million, indicating an 11.9% increase.
- Net income grew from $237.9 million to $292.9 million, reflecting a 23.1% increase.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the company’s profitability ratios were compared to industry averages:
- Operating Margin: 8.0% vs. Industry Average: 7.5%
- Net Margin: 4.6% vs. Industry Average: 4.0%
Analysis of Operational Efficiency
For the nine months ended September 30, 2024:
- Operating expenses were $4,662.2 million, representing 87.8% of revenue.
- Cost of services was $4,516.6 million, or 85.1% of revenue.
- General and administrative expenses totaled $145.7 million, or 2.7% of revenue.
| Metric | Q3 2023 | Q3 2024 | Change (%) |
|---|---|---|---|
| Revenue | $1,665.7 million | $1,761.2 million | 5.7% |
| Operating Profit | $129.96 million | $141.13 million | 8.6% |
| Net Profit | $60.8 million | $81.0 million | 33.6% |
| Adjusted EBITDA | $193.8 million | $205.5 million | 6.0% |
Adjusted EBITDA margins for the segments were:
- Critical Illness Recovery Hospital: 8.7%
- Rehabilitation Hospital: 21.3%
- Outpatient Rehabilitation: 9.1%
- Concentra: 20.7%
Debt vs. Equity: How Select Medical Holdings Corporation (SEM) Finances Its Growth
Debt vs. Equity: How Select Medical Holdings Corporation Finances Its Growth
As of September 30, 2024, Select Medical Holdings Corporation reported total long-term debt of $3,642 million and short-term debt of $176 million, leading to a total debt of $3,818 million.
The company's debt-to-equity ratio stands at 2.83, indicating a significant reliance on debt financing compared to equity. This ratio is notably higher than the healthcare industry average of approximately 1.5.
In recent activity, Select Medical issued $300 million in senior unsecured notes in March 2024, with a maturity date of 2029. The company holds a credit rating of B1 from Moody's and B+ from S&P Global.
To balance its capital structure, Select Medical has engaged in strategic refinancing activities. For instance, it executed a refinancing of its term loan, which reduced its interest expense from $147.8 million in the nine months ended September 30, 2023, to $143.3 million for the same period in 2024. This strategic move illustrates the company's efforts to manage debt levels while optimizing interest expenses.
| Category | Amount (in millions) |
|---|---|
| Total Long-Term Debt | $3,642 |
| Total Short-Term Debt | $176 |
| Total Debt | $3,818 |
| Debt-to-Equity Ratio | 2.83 |
| Credit Rating (Moody's) | B1 |
| Credit Rating (S&P) | B+ |
| Interest Expense (2024) | $143.3 |
| Interest Expense (2023) | $147.8 |
This financial structure positions Select Medical to leverage growth opportunities while managing its capital efficiently. The company's approach to balancing debt and equity funding reflects its strategic focus on sustainable growth and operational performance.
Assessing Select Medical Holdings Corporation (SEM) Liquidity
Assessing Select Medical Holdings Corporation's Liquidity
Current and Quick Ratios
The current ratio for Select Medical Holdings Corporation as of September 30, 2024, is calculated using the following data:
- Current Assets: $1,055.4 million
- Current Liabilities: $896.9 million
The current ratio is therefore 1.18.
The quick ratio, which excludes inventory from current assets, is calculated as follows:
- Quick Assets: $1,055.4 million - $207.6 million (inventory) = $847.8 million
- Current Liabilities: $896.9 million
The quick ratio is 0.95.
Analysis of Working Capital Trends
As of September 30, 2024, the net working capital stands at $158.5 million, a significant increase from $9.2 million at December 31, 2023. This improvement is primarily attributed to an increase in cash and accounts receivable.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $392.4 million, compared to $402.6 million for the same period in 2023. This decline is mainly due to an increase in accounts receivable driven by higher revenue.
Cash flows from investing activities for the same period were $(156.8 million), primarily from:
- Purchases of property and equipment: $(158.7 million)
- Acquisitions: $(2.3 million)
- Proceeds from asset sales: $4.2 million
Cash flows from financing activities were $(128.2 million), with principal uses including:
- Payments on term loan: $(1,719.5 million)
- Net repayments under revolving facilities: $(270.0 million)
- Dividend payments: $(48.5 million)
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds cash and cash equivalents of $191.5 million and has $496.6 million of availability under its revolving facilities after accounting for outstanding borrowings of $10.0 million and letters of credit of $57.0 million. This liquidity position suggests a robust ability to meet short-term obligations.
| Liquidity Metric | Amount (in millions) |
|---|---|
| Current Assets | $1,055.4 |
| Current Liabilities | $896.9 |
| Current Ratio | 1.18 |
| Quick Assets | $847.8 |
| Quick Ratio | 0.95 |
| Net Working Capital | $158.5 |
| Cash from Operating Activities | $392.4 |
| Cash from Investing Activities | $(156.8) |
| Cash from Financing Activities | $(128.2) |
| Cash and Cash Equivalents | $191.5 |
| Availability under Revolving Facilities | $496.6 |
| Outstanding Borrowings | $10.0 |
| Outstanding Letters of Credit | $57.0 |
Is Select Medical Holdings Corporation (SEM) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends and analyst consensus.
Valuation Ratios
The following table summarizes the valuation ratios for the company as of September 30, 2024:
| Valuation Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 18.5 |
| Price-to-Book (P/B) Ratio | 2.3 |
| Enterprise Value-to-EBITDA (EV/EBITDA) | 10.2 |
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- Stock Price as of September 30, 2024: $15.75
- Stock Price 12 Months Ago: $12.50
- Percentage Increase: 26.0%
- 52-Week High: $16.50
- 52-Week Low: $10.00
Dividend Yield and Payout Ratios
The company has declared a cash dividend of $0.125 per share. The relevant metrics are as follows:
| Dividend Metric | Value |
|---|---|
| Annual Dividend per Share | $0.50 |
| Dividend Yield | 3.2% |
| Payout Ratio | 27.5% |
Analyst Consensus
The consensus from financial analysts is as follows:
- Buy: 8
- Hold: 4
- Sell: 1
Overall, the analyst consensus leans positively towards the stock, suggesting a generally favorable outlook.
Key Risks Facing Select Medical Holdings Corporation (SEM)
Key Risks Facing Select Medical Holdings Corporation
Industry Competition: The healthcare sector, particularly rehabilitation services, is highly competitive. As of September 30, 2024, the company reported a revenue increase of 5.7% year-over-year, reaching $1,761.2 million for the quarter. The growth was driven by an increase in patient visits and revenue per patient day, but competition from other healthcare providers remains a significant risk.
Regulatory Changes: The company is subject to extensive healthcare regulations that can impact operations and profitability. Approximately 21% of the company's revenue for the nine months ended September 30, 2024, came from Medicare reimbursements. Changes in Medicare reimbursement rates or policies could adversely affect revenue streams.
Market Conditions: The economic environment can impact patient volumes and revenue. For instance, the company's Outpatient Rehabilitation segment saw revenue increase by 4.5%, reaching $930.7 million for the nine months ended September 30, 2024. However, any economic downturn could lead to decreased patient visits and revenue.
Operational Risks: The company faces risks related to operational efficiency and service delivery. In the third quarter of 2024, operating expenses totaled $1,571.2 million, accounting for 89.2% of total revenue. Managing these costs effectively is crucial to maintaining profitability.
Financial Risks: The company reported an increase in interest expenses, which rose to $55.4 million in Q3 2024, up from $50.3 million in Q3 2023. Rising interest rates or increased borrowing could strain financial resources. Total debt as of September 30, 2024, was $3,164.3 million.
Strategic Risks: The planned separation of the Concentra segment introduces strategic risks, including potential operational disruptions and market reception. The company incurred $3.3 million in separation transaction costs. Effective execution of this separation is critical for future performance.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition in rehabilitation services | Potential loss of market share |
| Regulatory Changes | Changes in Medicare reimbursement rates | Revenue volatility |
| Market Conditions | Economic downturn affecting patient volumes | Lower revenue |
| Operational Risks | High operating expenses | Profitability pressure |
| Financial Risks | Increased interest expenses | Strain on financial resources |
| Strategic Risks | Separation of Concentra segment | Operational disruption |
Litigation Risks: The company is involved in various legal actions and regulatory audits that could result in financial penalties. The potential for sanctions or fines could impact financial health.
Debt Covenants: The company must comply with leverage ratios in its credit agreements, currently requiring a maximum leverage ratio of 6.50 to 1.00. Non-compliance could lead to defaults and financial penalties.
Future Growth Prospects for Select Medical Holdings Corporation (SEM)
Future Growth Prospects for Select Medical Holdings Corporation
Analysis of Key Growth Drivers
Product innovations, market expansions, and strategic acquisitions are pivotal for driving future growth. The company has reported a significant increase in revenue across its segments, indicating robust demand for its services.
Revenue Growth Projections
For the nine months ended September 30, 2024, total revenue was $5,309.7 million, reflecting a growth from $5,005.2 million in the same period of 2023, representing a 6.1% increase. The breakdown of revenue by segment is as follows:
| Segment | Revenue 2023 (in thousands) | Revenue 2024 (in thousands) | Percentage Change |
|---|---|---|---|
| Critical Illness Recovery Hospital | $1,732,645 | $1,843,751 | 6.4% |
| Rehabilitation Hospital | $719,419 | $816,240 | 13.5% |
| Outpatient Rehabilitation | $890,679 | $930,696 | 4.5% |
| Concentra | $1,397,341 | $1,435,151 | 2.7% |
| Other | $265,118 | $283,854 | 7.1% |
Strategic Initiatives and Partnerships
The company is actively pursuing strategic initiatives, including the planned separation of the Concentra segment into a new publicly traded company. This move is expected to enhance operational focus and unlock shareholder value. Additionally, the company has been acquiring new clinics to expand its outpatient rehabilitation services.
Competitive Advantages
Competitive advantages that position the company for growth include:
- Strong Brand Recognition: Established reputation in rehabilitation services.
- Diverse Service Offerings: Comprehensive range of services across critical illness recovery, rehabilitation, and outpatient services.
- Operational Efficiency: Improved Adjusted EBITDA margin, which increased to 13.1% for the nine months ended September 30, 2024, up from 12.5% in 2023.
- Robust Financial Performance: Net income for the nine months ended September 30, 2024, was $292.9 million, an increase from $237.9 million in the prior year.
Future Revenue Growth Projections and Earnings Estimates
Analysts forecast continued revenue growth driven by increased patient volumes and revenue per patient day. For the nine months ended September 30, 2024, revenue per patient day in the Critical Illness Recovery Hospital segment rose to $2,175, up from $2,076 in the previous year, showcasing the potential for sustained revenue growth.
Summary of Key Financial Metrics
| Metric | 2023 | 2024 |
|---|---|---|
| Total Revenue (in millions) | $5,005.2 | $5,309.7 |
| Net Income (in millions) | $237.9 | $292.9 |
| Adjusted EBITDA (in millions) | $627.4 | $693.7 |
| Adjusted EBITDA Margin | 12.5% | 13.1% |
Select Medical Holdings Corporation (SEM) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Select Medical Holdings Corporation (SEM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Select Medical Holdings Corporation (SEM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Select Medical Holdings Corporation (SEM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.