Q2 2024 Earnings Summary
Reported on Aug 2, 2024 (After Market Close)
Pre-Earnings Price$18.41Last close (Aug 2, 2024)
Post-Earnings Price$18.41Last close (Aug 2, 2024)
Price Change
$0.00(0.00%)
- Efforts to Improve Margins in Outpatient Rehab Division: The company is focusing on clinical efficiencies by increasing the number of patients therapists see per day and enhancing scheduling processes with new modules. These initiatives are expected to yield significant benefits over the next two quarters, particularly starting in the new year.
- Labor Costs Returning to Pre-Pandemic Levels: The underlying wage rates for permanent staff in critical illness hospitals are trending at 3% to 3.5%, which is back to pre-pandemic levels. This stabilization in labor costs can positively impact profitability.
- Strong Underlying Performance in LTAC Hospitals Despite Seasonal Decline: The sequential decline in margins from Q1 to Q2 in the LTAC division is attributed to normal seasonality and the exceptionally high volumes in Q1. The company expects volumes to normalize, indicating a strong underlying business.
- Declining Margins in Outpatient Rehabilitation Division: The adjusted EBITDA for the outpatient rehab division decreased by 12% compared to the prior year, with the adjusted EBITDA margin dropping from 10.8% to 9.1%. Management indicated that improvements in clinical efficiencies and scheduling might take up to two quarters to materialize.
- Increased Borrowing Costs Expected: With the expiration of interest rate protections in the fourth quarter, the company anticipates a rise in borrowing costs. Borrowing costs are expected to increase from a 300 basis point spread plus 1% SOFR floor to SOFR plus 4%, given the current SOFR rate of approximately 5.3%, leading to higher interest expenses.
- Slight Decline in Occupancy Rates in Critical Illness Recovery Hospitals: Occupancy in the critical illness recovery hospital division decreased slightly to 67% in the second quarter, down from 68% in the same quarter last year. This could indicate potential challenges in maintaining patient volumes.
Research analysts covering SELECT MEDICAL HOLDINGS.