Select Medical Holdings Corporation · NYSE:SEM
Select Medical — J.P. Morgan Global High Yield & Leveraged Finance Conference 2020
37 slides from Select Medical's conference presentation, Feb 24, 2020
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. MORGAN GLOBAL HIGH YIELD & LEVERAGED FINANCE CONFERENCE FEBRUARY 24 - 26, 2020
Slide 2: Forward-Looking Statements
2 Forward - Looking Statements This presentation may contain forward - looking statements based on current management expectations . Numerous factors, including those related to market conditions and those detailed from time - to - time in the Company’s filings with the Securities and Exchange Commi
Slide 3: Select Medical Overview
3 Headquartered in Mechanicsburg, Pennsylvania, Select Medical employs approximately 49,900 staff in the United States as of 12/31/2019. SCALE AND EXPERTISE L eading provider of post - acute services with operations in 47 states and D.C. Note : (1) See Slide 34 for non - GAAP reconciliation Founded
Slide 4: Leading Post Acute Care Provider
4 Leading Post Acute Care Provider 4 5 Largest operator of Critical Illness Recovery Hospitals (formerly referred to as LTACH ) • 101 Critical Illness Recovery Hospitals operating in 28 states. Second largest operator of Rehabilitation Hospitals (IRF) • 29 IRF’s operating in 12 states . Largest oper
Slide 5: Revenue Mix
5 LTACH 42% IRF 12% Outpatient 23% Occ Med 23% 2014 2016 2019 Revenue Mix LTACH 60% IRF 13% Outpatient 20% Contract Therapy 7% LTACH 34% IRF 12% Other 5% Outpatient 19% OCC Med 30%
Slide 6: Payor Mix
6 Medicare 45% Non Medicare 55% Medicare 30% Non Medicare 70% 2014 2016 Payor Mix Medicare 26% Non Medicare 74% 2019
Slide 7: Payor Mix
7 Medicare 45% Non Medicare 55% Medicare 30% Non Medicare 70% 2014 2017 Payor Mix Medicare 27% Non Medicare 73%
Slide 8: LTCH Legislation
8 LTCH Patient Criteria passed in late December 2013 as part of Budget bill and SGR - effective beginning Q4 2015 – All LTCH’s under criteria as of September 2016. • LTCH Rates for patients with; – 3 day prior short term acute hospital ICU/CCU stay or – Ventilation patients for > 96 hours in the LTC
Slide 9: LTCH Medicare Annual Spending
9 LTCH Medicare Annual Spending Source: MedPAC Data (2018 Figures estimated by MedPac ) ($ in billions ) 5.0 5.2 5.3 5.2 5 .0 5 .0 4.7 4.3 4.2 4.0 4.4 4.8 5.2 5.6 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 10: LTCH case mix index, occupancy and revenue per patient day
10 1.19 1.19 1.2 0 1.26 1.27 1.26 1.26 70% 68% 70% 65% 66% 67% 68% 60% 64% 68% 72% 76% 80% 1.15 1.18 1.21 1.24 1.27 1.30 2013 2014 2015 2016 2017 2018 2019 Case Mix Index Occupancy Percentage $1,520 $1,558 $1,570 $1,663 $1,704 $1,716 $1,753 $1,425 $1,500 $1,575 $1,650 $1,725 $1,800 LTCH Criteria Imp
Slide 11: Inpatient Rehabilitation Hospitals
INPATIENT REHABILITATION HOSPITALS
Slide 12: Our Rehabilitation Model
12 Our Rehabilitation “Model” • Partner with leading h ealth s ystems through joint venture relationships – Inpatient rehab is the basis of “model” but can include other post acute network of services. ▪ Outpatient Rehab ▪ Critical Illness Recovery Hospitals (LTCH) ▪ Day Rehab ▪ Occupational Medicin
Slide 13: Current Rehabilitation Operations
13 Current Rehabilitation Operations Wholly Owned Consolidated Joint Venture Non - Consolidated Joint Venture
Slide 14: Rehabilitation Network Growth
14 Rehabilitation Network Growth New JV Partnerships: 2019 Openings • UF Health – Gainesville, FL – 60 bed IRF • Opened March 2019 • Dignity Las Vegas, NV – 60 bed IRF • Opened May 2019 • Riverside Health – Newport News, VA • New 50 bed IRF (replaced existing hospital) • Opened August 2019 • Ochsner
Slide 15: Our Post Acute Partners
15 Our Post Acute Partners 2011 Multi - billion dollar health system with 52 acute care hospitals and over 4,800 staffed acute beds. Net patient revenues of approximately $7 billion Four IRFs with 214 beds and two managed rehab units, 91 outpatient clinics and home health services Multi - billion do
Slide 16: Physical Therapy Outpatient Clinics
PHYSICAL THERAPY OUTPATIENT CLINICS
Slide 17: Outpatient Rehabilitation
17 Outpatient Rehabilitation • Largest operator of outpatient rehab clinics in U.S. • March 2016 acquired Physiotherapy Associates (second largest at time of acquisition) • Growth through denovo clinics and tuck - in acquisitions • Bipartisan Budget Act of 2018 repealed annual limits on outpatient t
Slide 18: Outpatient Rehabilitation - Industry
18 Outpatient Rehabilitation - Industry ATHLETICO ( ≈500) Source: Company public filings and websites as of December 31, 2019 Select (1,740) USPH ( ≈580) ATI (≈900) 1,740 Outpatient Rehabilitation Clinics (37 States and D.C.)
Slide 19: Outpatient Rehab Clinics visits and revenue per visit
19 42% 13% 22% 23% Outpatient Rehab Clinics 2014 2015 2016 2017 2018 2019 REVENUE PER VISIT YEAR VISITS (000'S) 4,971 8,233 5,219 7,799 $101 $101 $101 $100 8,719 $103 8,356 $103
Slide 20: Concentra
CONCENTRA
Slide 21: Concentra/US HealthWorks
21 T he largest provider of occupational health services in the U.S. – 684 locations across 43 states and D.C. • Service Lines: – 521 occupational health centers – 131 onsite clinics at employer locations – 34 Community Based Outpatient Clinics (CBOC) serving Veterans Health Administration patients
Slide 22: Concentra/US HealthWorks Centers
22 Concentra/US HealthWorks Centers 521 Centers
Slide 23: Concentra Stand Alone Post-Acquisition from Humana
23 • Financial Information 2015 (acquired June 2015) – Revenue = $997 million – Adjusted EBITDA = $90 million – Adjusted EBITDA Margin = 9.0% • Financial Information 2017 – Revenue = $1.0 billion – Adjusted EBITDA = $157.6 million – Adjusted EBITDA Margin = 15.6% • Implemented $44 million of cost sa
Slide 24: US HealthWorks Acquisition
24 US HealthWorks Acquisition US HealthWorks was the second largest provider of occupational health with 220 centers in the United States. • Transaction closed February 1, 2018. Select retains its 50.1% voting ownership in combined company. • US HealthWorks Financial Performance 2017 – Revenue = $55
Slide 25: 2019 Financial Performance - Concentra/USHW Combined
25 2019 Financial Performance • Revenue = $1,629 million • Adjusted EBITDA = $276.5 million • Adjusted EBITDA Margin = 17.0% Concentra/USHW Combined
Slide 26: Put Option and Call Option
26 Put Option Call Option ▪ Beginning on the 2 nd , 3 rd and 4 th anniversary of the USHW acquisition, both Dignity and WCAS have annual rights to put up to 33.33% of their respective Class A equity interest to SEM based on an agreed upon investment bank valuation conducted 60 days after an annual C
Slide 27: Finance Overview
oly FINANCE OVERVIEW
Slide 28: Financial Metric Trends
28 $364 $399 $466 $538 $645 $711 2014 2015 2016 2017 2018 2019 LTCH IRF Outpatient Concentra $3,023 $3,684 $4,217 $4,365 $5,081 $5,454 2014 2015 2016 2017 2018 2019 LTCH IRF Outpatient Concentra Net Revenue Adjusted EBITDA (1) ($ in millions) ($ in millions) Financial Metric Trends Note: (1) See Sli
Slide 29: Capital Expenditures
29 Capital Expenditures ($ in millions) (1) Excludes development capital related to the recapture of capital expenditures of $7M from 2016 and $36M from 2017 that Select fu nded on an interim basis, which we were reimbursed in 2017. $95 $183 $155 (1) $197 (1) $167 $157 $0 $25 $50 $75 $100 $125 $150
Slide 30: Free Cash Flow
30 Free Cash Flow Note: Free cash flow is operating cash flow less all capital expenditures. See slide 35 for non - GAAP reconciliation. $75 $25 $185 $5 $327 $288 $0 $50 $100 $150 $200 $250 $300 $350 2014 2015 2016 2017 2018 2019 ($ in millions)
Slide 31: Debt Maturities as of 12/31/2018
31 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2018 2019 2020 2021 2022 2023 2024 2025 SEM Revolver (L + 2.50%) SEM Senior Notes 6.375% SEM Term Loans (L + 2.50%) Concentra 1st Lien (L + 2.75%) Concentra 2nd Lien (L + 6.50%) $ 3 $12 $18 $734 $1,233 $252 $1,060 $12 Debt Maturities as of 12/31/2018 No
Slide 32: Debt Maturities as of 12/31/19
32 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2020 2021 2022 2023 2024 2025 2026 Concentra Revolver (L + 2.50%) SEM Revolver (L + 2.50%) SEM Term Loan (L + 2.50%) SEM Senior Unsecured Notes (L + 6.25%) $1,225 $450 $2,143 $100 Debt Maturities as of 12/31/19 (Principal $ in millions) $300 No borrowing
Slide 33: Financial Guidance 2020
33 Financial Guidance 2020 Net Revenue $5,575M - $5,675M Adjusted EBITDA $725M - $760M EPS $1.27 - $1.46 Note: See Slide 36 for Financial Guidance 2020 non - GAAP reconciliation
Slide 34: Appendix: Additional Materials
A ppendix : A dditional M aterials
Slide 35: Non-GAAP Reconciliation
35 ($ in millions) 2014 2015 2016 2017 2018 2019 Net Income $128 $136 $125 $220 $177 $201 Income tax expense (benefit) 76 72 56 (18) 59 64 Equity in losses/(earnings) of unconsolidated subsidiaries (7) (17) (20) (21) (22) (25) Interest expense, net 86 113 170 155 198 201 Loss on debt retirement 2 -
Slide 36: Financial Guidance 2020 Non-GAAP Reconciliation
36 ($ in millions) Financial Guidance 2020 Non - GAAP Reconciliation Range Low High Net income attributable to Select Medical $ 171 $ 197 Net income attributable to non - controlling interests 72 72 Net income 243 269 Income tax expense 81 90 Interest expense 188 188 Equity in earnings of unconsolid
Slide 37: selectmedical.com/investor-relations/for-investors
selectmedical.com /investor - relations/for - investors
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