Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Investor Presentation (January 2017)
37 slides from Select Medical's investor presentation, Jan 9, 2017
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 41,400 staff in the United States. SCALE AND EXPERTISE Leading provider of post-acute services with operations in 46 states and D.C. Note: (1) See Slide 35 for non-GAAP reconciliation Founded in 1996 $4.3 Billion Net
Slide 3: Select Medical's National Footprint
Select Medical’s National Footprint 104 Long-Term Acute Care Hospitals (LTACH) (26 States) 19 Inpatient Rehabilitation Hospitals (9 States) 1,603 Outpatient Rehabilitation Clinics (37 States and D.C.) 301 Concentra Centers (38 States) As of 9/30/16 4 17 4 7 19 2 4 12 1 45 4 2 7 2 11 3 3 8 12 3 18 14
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
Physiotherapy Acquisition (“Physio”) March 2016 acquired Physiotherapy Associates for $408.7 million 2015 Adjusted EBITDA of $32.7 million and expected synergies of $20.4 million Sale of Contract Therapy Business On March 31, 2016, completed the sale for $65.0 million Kindred Hospital Swaps In June,
Slide 6: Revenue Mix
2014 2015 2016 (Q3 YTD) Revenue Mix Specialty Hospitals 73% Outpatient 27% Specialty Hospitals 63% Outpatient 22% Concentra 15% Specialty Hospitals 53% Outpatient 23% Concentra 24%
Slide 7: Payor Mix
2014 2015 2016 (Q3 YTD) Payor Mix Medicare 45% Non Medicare 55% Medicare 30% Non Medicare 70% Medicare 37% Non Medicare 63%
Slide 8: Payor Mix
Payor Mix 2014 Non Medicare Medicare 45% 55% Select Medical: impr 2015 Medicare Non 37% Medicare 63% lect AEDICAL 4 2016 (Q3 YTD) Non Medicare 70% Medicare 30%
Slide 9: Long-Term Acute Care Hospitals (LTACH) (26 States)
10 104 Long-Term Acute Care Hospitals (LTACH) (26 States) 2 2 2 1 1 2 2 5 2 5 1 5 10 7 2 3 1 2 4 3 11 17 9 1 1 3 As of 9/30/16 Select Medical LTAC Hospitals
Slide 10: LTACH Overview
Major provider of LTACH services in U.S. 104 hospitals 77 hospital-in-hospital (2,814 beds); average size 37 beds 26 freestanding (1,472 beds); average size 57 beds 1 managed hospital Ownership of freestanding LTACHs 15 owned 11 leased LTACH Overview
Slide 11: 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 neutral” rate which is l
Slide 12: Patient Criteria Phase-In
HOSPITALS MOVING TO CRITERIA >>> NOTE: Owned LTACs as of 9/30/16 2015 2016 14 HOSPITALS 651 BEDS 36 HOSPITALS 1,309 BEDS 19 HOSPITALS 921 BEDS 34 HOSPITALS 1,405 BEDS Q4 ‘15 Q1 ‘16 Q2 ‘16 Q3 ‘16 Patient Criteria Phase-In
Slide 13: LTACH Regulatory Impact
Well-positioned to succeed in an evolving landscape Patient criteria in place since October 1, 2015 All LTACHs under criteria as of September 2016 SEM hospitals are focused on compliant patients Compliance at 12/31/2016 for all SEM LTACHs at 99.1% Hospitals pre vs post criteria occupancy change (8.7
Slide 14: Status of LTACHs in Criteria
Status of LTACHs in Criteria Key Pricing Indicators from Sample Medicare CMI change from non-compliance (pre-criteria) to compliant (post-criteria) 30 pts (3) Non-compliant CMI: 0.99 DRG Payment: $40k x .99 $40K Impact of a 30% Increase in CMI Index Compliant CMI: 1.30 DRG Payment: $40k x 1.30 $52K
Slide 15: Status of LTACHs in Criteria
Status of LTACHs in Criteria ae... MEDICAL. # of Hospital (as of 12/31/2016) 102 Post-Criteria Hospital >= to pre-criteria census 27 Post-Criteria Hospital <= to pre-criteria census 75 % of total compliant patients to total patients 99.1% (2) Key Volume Indicators Key Pricing Indicators from Sample
Slide 16: Inpatient Rehabilitation Hospitals
Acquired Kessler Institute in September 2003 The Kessler Rehabilitation network: Three freestanding inpatient rehab hospitals (336 total beds) 94 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: Consolidated Joint Ventures
Consolidated Joint Ventures Harrisburg, PA 55 bed IRF 21 outpatient clinics Cincinnati, OH 60 bed IRF Los Angeles, CA 138 bed IRF Cleveland, OH 4 LTACHs 230 Beds Hershey, PA 76 bed IRF 22 bed TCU San Antonio, TX 42 bed IRF St. Louis, MO 2 IRFs (95 beds) 1 managed unit 48 outpatient clinics Gainesvil
Slide 18: Non-Consolidating Joint Ventures
Non-Consolidating Joint Ventures Columbus, OH 74 bed IRF Dallas, TX 3 IRFs (178 beds) 2 managed units 63 outpatient clinics Scottsdale, AZ 50 bed IRF Atlanta, GA 56 bed IRF 22 outpatient clinics
Slide 19: Growing Rehabilitation Network
Growing Rehabilitation Network Partner in joint ventures with premier acute care hospitals and systems to build post acute networks
Slide 20: Growing Rehabilitation Network
Growing Rehabilitation Network r | 4 Partner joint ventures with premier acute cre hospitals and systems to bull post acute networks Select MEDICAL / A PENNSTATE HERSHEY EE Rehabilitation Bic Kessler California Rehabilitation ES Hel asco 7 TGA Ooses Qpaytor Ochsner: Select Medical:
Slide 21: Outpatient Rehabilitation - Industry
Source: Company public filings and websites as of September 30, 2016 Select (1,603) USPH (524) ATI (645) 11 7 6 14 2 17 24 15 20 93 1 66 13 45 17 57 152 1 21 2 21 33 42 12 15 24 3 98 12 131 1,603 Outpatient Rehabilitation Centers (37 States and D.C.) 12 27 2 46 3 69 17 27 38 61 88 29 27 69 119 32 46
Slide 22: Outpatient Rehab Clinics
42% 13% 22% 23% YEAR 2011 2012 2013 2014 2015 VISITS (000’s) REVENUE PER VISIT $102 7,091 $103 4,470 $103 4,569 $104 4,781 $103 4,971 LTM Q3 ‘16 $103 5,219 CAGR 10.2% Outpatient Rehab Clinics
Slide 23: 2016 Outpatient Initiatives
Continued growth in workers’ comp business by illustrating historical ROI benefits of working with Select Payors/Employers Expand hand therapy services to more clinics Expand concussion management program Continued development of start-up clinics Integration of Physio clinics 2016 Outpatient Initiat
Slide 24: 2016 Outpatient Initiatives
2016 Outpatient Initiatives ae... * Continued growth in workers’ comp business by illustrating historical ROI benefits of working with Select * Payors/Employers * Expand hand therapy services to more clinics * Expand concussion management program * Continued development of start-up clinics * Integra
Slide 25: Concentra
Concentra is the leading provider of occupational health with 441 locations across 43 states Service Lines: Centers: 301 occupational health locations, with some consumer health Onsite Clinics: 108 locations at employer locations CBOCs: 32 Community Based Outpatient Clinics serving Veterans Health A
Slide 26: Post-Acquisition Update
Management transition Earnings LTM - September 2016 Revenue = $1.0 billion Adjusted EBITDA = $129.6 million Adjusted EBITDA margin = 12.9% Identification of $46 million of cost saving synergies Post-Acquisition Update
Slide 27: Post-Acquisition Update
we ak Post-Acquisition Update Select * Management transition ¢ Earnings LTM - September 2016 — Revenue = $1.0 billion — Adjusted EBITDA = $129.6 million — Adjusted EBITDA margin = 12.9% * Identification of $46 million of cost saving synergies Select Medical: |
Slide 28: Financial Metric Trends
Net Revenue Adjusted EBITDA CAGR 10.7% CAGR 7.6% ($ in millions) ($ in millions) Financial Metric Trends $307 $386 $406 $373 $364 $399 $469 2010 2011 2012 2013 2014 2015 LTM Q3 '16 Hospitals Outpatient Concentra $2,390 $2,805 $2,949 $2,976 $3,065 $3,743 $4,279 2010 2011 2012 2013 2014 2015 LTM Q3 '1
Slide 29: Annual Capital Expenditures
Annual Capital Expenditures Accelerated development spending expected 2014-2016 ($ in millions
Slide 30: 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 35 for non-GAAP reconciliation Focus on Free Cash Flow Generation Free Cash Flow $93 $171 $231 $119 $75 $25 $98 2010 2011 2012 2013 2014 2015 LTM Q3 '16
Slide 31: Financial Policy
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) ACQUISITION STRATEGY STOCK B
Slide 32: Financial Guidance 2017
Net Revenue $4,400M - $4,600M Adjusted EBITDA $540M - $580M EPS $0.73 - $0.91 Financial Guidance 2017 Note: See Slide 36 for non-GAAP reconciliation
Slide 33: Appendix: Additional Materials
Appendix: Additional Materials
Slide 34: Non-GAAP Reconciliation
($ in millions) 2010 2011 2012 2013 2014 2015 Q3 ’15 YTD Q3 ’16 YTD LTM Q3 ‘16 Net Income $82 $113 $154 $123 $128 $136 $110 $105 $131 (+) Income tax 42 71 90 75 76 72 65 52 59 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries 1 (3) (8) (2) (7) (17) (13) (14) (18) (+) Interest expense,
Slide 35: Non-GAAP Reconciliation – Financial Guidance 2017
($ in millions) Low High Net Income $135 $159 (+) Income tax 90 106 (+) Interest expense 173 173 (-) Equity in earnings of unconsolidated subsidiaries (23) (23) (+) Stock Based Compensation 15 15 (+) Depreciation and Amortization 150 150 Adjusted EBITDA $540 $580 Non-GAAP Reconciliation – Financial
Slide 36: selectmedical.com/investor-relations/for-investors
selectmedical.com/investor-relations/for-investors
Slide 37: Improving Quality of Life
SP... MEDICAL Improving Quality of Life selectmedical.com/investor-relations/for-investors
Select Medical Holdings — Investor Presentation (January 2017) on 6ix