Select Medical Holdings Corporation (NYSE:SEM) Q4 2022 Earnings Call Transcript

Justin Bowers: Appreciate it. I’ll jump back in queue.

Robert Ortenzio: Thanks. Operator, do you want to let the next question through? Operator, are you there? For the participants on the call, we’re showing – the call is still connected. So if you bear with us as we get the operator to let the next question in the queue through. For the participants on the call, it looks like we’re having a problem with the operator, the manager of the call. So why don’t we give it another minute or two, if we can get – admit people into the call to ask questions. Okay. For those on the call, while we’re waiting to admit more questions, why don’t — Marty and I give some more commentary and maybe we anticipate some of the questions that we’ve got – we have gotten some questions in the past about the seasonality of the Concentra segment. And Marty, you want to address that?

Martin Jackson: Sure. One of the things we’ve noted with some of the analyst reports that they’re talking about the drop-off from Q3 to Q4. If you take a look at Concentra pre – the pandemic, historically, what we’ve seen is about a 390 basis point drop. So – and when I say that, I take a look at years 2016 to 2019. And that’s really just a reflection of seasonality. So we thought that was important.

Robert Ortenzio: The other question that we typically get – and just as an update, we do have some people on the call line that are working on restoring the ability to let questions in. But while we continue – we think – Marty, I do get questions from time-to-time about allocation of capital. Certainly, as we progress through 2023 with the increased EBITDA generation over last year, we do expect that leverage will continue to come down. But we do have a target over the next year or two to bring leverage down considerably from where we are right now. At the same time, we do have – we are allocating capital to development activities. And I think what you can expect to see through 2023 is not any big transactions, anything that could in any way be perceived as transformational, but we’re seeing great opportunities for one-off transactions in each of our divisions.

You noticed I commented on the individual transactions and deals that Concentra is doing with fold-ins. We certainly would like to sign a couple of the big rehab joint ventures with large systems. And on the LTAC side, we’ll continue to see opportunities to do a hospital within a hospital and outpatient can continue to grow through de novo, signed leases as well as small acquisitions. So I think we’re ready to let in the next question. So if someone’s in the queue. I think we’ve restored the question line.

Operator: Thank you. Our next question comes from Ben Hendrix from RBC Capital Markets. Your line is open.

Ben Hendrix: Hey thanks guys. Given the staffing progress and critical illness and the roll-off of training hours, how do we think about the time line from here to pre-pandemic margins? And what are those key levers that you can pull to affect that timing then related? What do we need to see before you get enough comfort to provide full year guidance? Thanks.