Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Investor Presentation (February 2016)
40 slides from Select Medical's investor presentation, Feb 29, 2016
Slide 1: Forward-Looking Statements
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 Commission, may
Slide 2: Select Medical Overview
Headquartered in Mechanicsburg, Pennsylvania, Select Medical employs approximately 41,000 staff in the United States. SCALE AND EXPERTISE Leading provider of post-acute services with operations in 46 states and D.C. $3.7 Billion Net Revenue 2015 $399 Million Adjusted EBITDA 2015(1) 10.7% Adjusted EB
Slide 3: Select Medical's National Footprint
Select Medical’s National Footprint 109 Long-Term Acute Care Hospitals (LTACH) (27 States) 18 Inpatient Rehabilitation Hospitals (8 States) 1,038 Outpatient Rehabilitation Centers (31 States and D.C.) 419 Contract Therapy Locations (30 States and D.C.) 300 Concentra Centers (38 States) 4
Slide 4: Strategy
Strategy Be the “preferred” provider of post acute care services in our markets Structured relationships to align with patients Partner with academic/major medical institutions Hospital in hospital model in LTACH Experts in our fields – LTACH, Inpatient Rehab, Outpatient Rehab and Occupational Medic
Slide 5: Recent Developments
Recent Developments Physiotherapy Acquisition (“Physio”) On January 25, 2016, announced the acquisition of Physio for $400 million Physio 2015 Adjusted EBITDA of $32.7 million and expected synergies of $20.4 million Kindred Healthcare (“Kindred”) Hospital Swaps In February, agreement with Kindred to
Slide 6: Revenue Mix
Revenue Mix 2014 2015 2015 (PF) 7 Note: 2015(PF) is proforma to include full year ownership of Concentra plus Physiotherapy Associates Specialty Hospitals 73% Outpatient 27% Specialty Hospitals 63% Outpatient 22% Concentra 15% Specialty Hospitals 53% Outpatient 25% Concentra 22%
Slide 7: Payor Mix
Payor Mix 2014 2015 2015 (PF) 8 Note: 2015(PF) is proforma to include full year ownership of Concentra plus Physiotherapy Associates Medicare 45% Non Medicare 55% Medicare 37% Non Medicare 63% Medicare 32% Non Medicare 68%
Slide 8: Long-Term Acute Care Specialty Hospitals
Long-Term Acute Care Specialty Hospitals
Slide 9: Select Medical LTAC Hospitals
3 2 2 1 1 2 2 2 9 2 3 3 11 5 15 9 1 1 1 3 2 5 2 6 1 5 10 Select Medical LTAC Hospitals 10 109 Long-Term Acute Care Hospitals (LTACH) (27 States) As of 12/31/15 1 1 As of 12/31/15
Slide 10: LTACH Overview
LTACH Overview Major provider of LTACH services in U.S. 109 hospitals 80 hospital-in-hospital (2,885 beds); average size 36 beds 28 freestanding (1,563 beds); average size 56 beds 1 managed hospital Ownership of freestanding LTACHs 17 owned 11 leased 11
Slide 11: LTACH Legislation
LTACH Legislation LTACH Patient Criteria passed in late December 2013 as part of Budget bill and SGR - effective beginning Q4 2015 LTACH Rates for patients with; 3 day prior short term acute hospital ICU/CCU stay or Ventilation patients for > 96 hours in the LTACH Other patients receive “site neutra
Slide 12: Patient Criteria Phase-In
Patient Criteria Phase-In 13 HOSPITALS MOVING TO CRITERIA >>> Note: Hospitals as of 12/31/15 2015 2016 36 HOSPITALS 1,567 BEDS Q4 ‘15 Q1 ‘16 Q2 ‘16 Q3 ‘16 16 HOSPITALS 715 BEDS 37 HOSPITALS 1,343 BEDS 19 HOSPITALS 823 BEDS
Slide 13: LTACH Regulatory Impact
LTACH Regulatory Impact Well-positioned to succeed in an evolving landscape Patient criteria in place since October 1, 2015 34 hospitals under criteria as of January SEM hospitals are largely compliant 1/31/2016 compliance for all SEM LTACHs at 86.0% 34 hospitals pre vs post criteria occupancy chang
Slide 14: Patient criteria hospital census and pricing impact
Number of Hospitals: 34 Post-criteria hospitals equal to or above pre-criteria census: 21 Post-criteria hospitals below pre-criteria census: 13 % of total compliant patients to total patients: 86.0%(1) Key volume indicators from sample Total post -criteria Average Daily Census (“ADC”): ~1,033 patien
Slide 15: Inpatient Rehabilitation Specialty Hospitals
Inpatient Rehabilitation Specialty Hospitals
Slide 16: Inpatient Rehabilitation Hospitals
Acquired Kessler Institute in September 2003 The Kessler Rehabilitation network: Three freestanding inpatient rehab hospitals (336 total beds) 89 outpatient rehab clinics Largest licensed rehab hospital in U.S. U.S. News & World Report has recognized Kessler Institute as one of the nation’s best in
Slide 17: Operational Joint Ventures
Operational Joint Ventures Consolidated Joint Ventures: Non-Consolidating Joint Ventures: Dallas, TX 4 IRFs (220 beds) 2 managed units 52 outpatient clinics Scottsdale, AZ 50 bed IRF Columbus, OH 44 bed IRF Atlanta, GA 56 bed IRF 22 outpatient clinics Hershey, PA 76 bed IRF 22 bed TCU St. Louis, MO
Slide 18: JVs Under Construction
JVs Under Construction Los Angeles, CA 138 bed IRF (opening Q2 2016) Cincinnati, OH 60 bed IRF (opening Q2 2016) Currently managing 2 units with 46 total beds New Orleans, LA 60 bed IRF (opening 2017) Currently managing 1 unit with 29 total beds 19
Slide 19: Growing Rehabilitation Network
Growing Rehabilitation Network Partner in joint ventures with premier acute care hospitals and systems to build post acute networks 20
Slide 20: Specialty Hospitals Poised for Growth
Specialty Hospitals Poised for Growth LTACH REHAB 2014 2015 2016 2 new LTACHs 1 new LTACH 3 new LTACHs 1 new LTACH 1 new LTACH Begin phase-in of LTACH patient criteria 21
Slide 21: Outpatient Rehabilitation
Outpatient Rehab Clinics Outpatient Rehabilitation
Slide 22: Outpatient Rehabilitation - Industry
Outpatient Rehabilitation - Industry 1,038 Outpatient Rehabilitation Clinics (31 States and D.C.) Source: Company public filings and websites as of Dec. 31, 2015 Select (1,038) Physiotherapy Associates (558) USPH (508) ATI (~500) 12 7 7 15 2 17 25 15 20 93 1 63 10 47 19 60 7 45 153 2 20 2 21 32 46 1
Slide 23: Outpatient Rehab Clinics
Outpatient Rehab Clinics 42% 13% 22% 23% 24 YEAR 2010 2011 2012 2013 2014 VISITS (000’s) REVENUE PER VISIT $101 4,567 $103 4,470 $103 4,569 $104 4,781 $103 4,971 2015 $103 5,219 CAGR 4.0%
Slide 24: 2016 Outpatient Initiatives
2016 Outpatient Initiatives Continued growth in workers’ comp business by illustrating historical ROI benefits of working with Select Payors/Employers Expand hand therapy services Expand concussion management program Continued development of start-up clinics Integration of Physio clinics 25
Slide 25: 2016 Outpatient Initiatives
. wee as ah 2016 Outpatient Initiatives Select * Continued growth in workers’ comp business by illustrating historical ROI benefits of working with Select * Payors/Employers * Expand hand therapy services * Expand concussion management program * Continued development of start-up clinics * Integratio
Slide 26: Concentra Investment Rationale
Concentra Investment Rationale Business well known by both WCAS and Select Complementary to Select’s outpatient rehabilitation business Significant geographic overlap of Concentra centers and Select outpatient clinics Select’s track record of successful acquisitions combined with WCAS’s historical k
Slide 27: Concentra acquired 6/01/15
Concentra acquired 6/01/15 Concentra is the leading provider of occupational health with 471 locations across 43 states Service lines: Centers: 300 occupational health locations, with some consumer health Onsite Clinics: 138 locations at employer locations CBOCs: 33 Community Based Outpatient Clinic
Slide 28: Post-Acquisition Update
Post-Acquisition Update Management transition Earnings June – December 2015 Revenue = $585.2 million Adjusted EBITDA = $48.3 million Adjusted EBITDA margin = 8.3% Identification of $36 million of cost saving synergies 29
Slide 29: Post-Acquisition Update
; isiti F | Y Post-Acquisition Update Sclect * Management transition * Earnings June — December 2015 — Revenue = $585.2 million — Adjusted EBITDA = $48.3 million — Adjusted EBITDA margin = 8.3% * Identification of $36 million of cost saving synergies Select Medical: Improving Quality of Life
Slide 30: Financial Metric Trends
Financial Metric Trends Net Revenue Adjusted EBITDA CAGR 9.4% CAGR 5.4% $2,390 $2,805 $2,949 $2,976 $3,065 $307 $386 $406 $373 $364 ($ in millions) ($ in millions) 31 $3,743 $399 2010 2011 2012 2013 2014 2015 Hospitals Outpatient Concentra 2010 2011 2012 2013 2014 2015 Hospitals Outpatient Concentra
Slide 31: Annual Capital Expenditures
Annual Capital Expenditures Accelerated development spending in 2014-2015 $52 $46 $68 $74 $183 32 $95 ($ in millions) $0 $25 $50 $75 $100 $125 $150 2010 2011 2012 2013 2014 2015 Maintenance Concentra Development
Slide 32: Debt Maturities
Debt Maturities 33 ($ in millions) As of December 31, 2015 $229 $10 $824 $5 $10 $715 $421 $200 $0 $200 $400 $600 $800 $1,000 2016 2017 2018 2019 2020 2021 2022 2023 SEM Revolver (L + 3.75%) SEM Term Loan E (L + 4.00% - 1% floor) SEM Term Loan D (L + 2.75%) SEM Senior Notes 6.375% Concentra 1st Lien
Slide 33: Free Cash Flow
Free Cash Flow Focus on Free Cash Flow Generation ($ in millions) Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment See Slide 38 for non-GAAP reconciliation 34 $93 $171 $231 $119 $75 $25 2010 2011 2012 2013 2014 2015
Slide 34: Financial Policy
Financial Policy 35 Highly accretive upon execution of synergies Only in existing and related businesses Execution of put / call to begin end of FY18 (max 33.3% per year) Board decision but none for the foreseeable future MINORITY EQUITY IN CONCENTRA DIVIDENDS USE OF CAPITAL (OPPORTUNISTIC) ACQUISIT
Slide 35: Financial Guidance 2016
Financial Guidance 2016 Net Revenue $4,000M - $4,200M Adjusted EBITDA $470M - $510M Adjusted EPS $0.72 - $0.91 36 Excludes acquisition of Physiotherapy Associates
Slide 36: Appendix: Additional Materials
Appendix: Additional Materials
Slide 37: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) 38 2010 2011 2012 2013 2014 2015 Net Income $82 $113 $154 $123 $128 $136 (+) Income tax 42 71 90 75 76 72 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries 1 (3) (8) (2) (7) (17) (+/-) Other expense / (income) (1) - - - - - (+) Interest expense,
Slide 38: Consolidated Pro Forma 2015 EBITDA Bridge
Consolidated Pro Forma 2015 EBITDA Bridge Note: Physio run-rate synergies to be achieved by 2018 = SEM 2015 Credit Agreement EBITDA = $368.3mm = PF Physio Acquisition 2015 Credit Agreement EBITDA = $421.4mm = Concentra Adjusted 2015 EBITDA = $130.6 mm 1 2 3 4 5 6 7 8 1 6 1 6 7 8 2 4 5 + + + + + + 39
Slide 39: selectmedical.com/investor-relations/for-investors
selectmedical.com/investor-relations/for-investors
Slide 40: Improving Quality of Life
z . MEDICAL = Improving Quality of Life selectmedical.com/investor-relations/for-investors
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