Earnings call transcript: Select Medical Q4 2024 beats EPS, stock dips

Select Medical Holdings Corporation (SEM), a healthcare provider with a market capitalization of $2.23 billion, reported its fourth-quarter and full-year 2024 earnings, showcasing a notable earnings per share (EPS) beat. Despite this positive result, the company’s stock experienced a decline in after-hours trading. The actual EPS for the quarter was $0.18, surpassing the forecasted $0.16. However, revenue fell short of expectations, coming in at $1.31 billion against a forecast of $1.55 billion. The stock reacted negatively, dropping 8.97% to $17.35 in after-hours trading.

InvestingPro analysis reveals several important insights about Select Medical (TASE:BLWV), including management’s aggressive share buybacks and expectations for net income growth this year. Subscribers have access to 6 additional exclusive ProTips for deeper analysis.

Key Takeaways

• Select Medical reported an EPS of $0.18, beating the forecast of $0.16.
• Revenue for Q4 2024 was $1.31 billion, below the anticipated $1.55 billion.
• Stock price fell by 8.97% in after-hours trading following the earnings release.
• The company announced a 14% growth in adjusted EBITDA for 2024.
• Select Medical completed significant operational changes, including a spin-off and debt refinancing.

Company Performance

Select Medical demonstrated solid financial performance in 2024, with revenue from continuing operations growing by 7% year-over-year. The company also achieved a 14% increase in adjusted EBITDA, improving its margin from 9.2% to 9.8%. The earnings per share for the year rose to $0.51 from $0.46 in 2023, and adjusted EPS saw a substantial increase to $0.94 from $0.54. However, the company faces challenges with weak gross profit margins of 8.71%, according to InvestingPro data.

Financial Highlights

• Revenue: $1.31 billion in Q4 2024, 8% increase across divisions
• Full Year Revenue: 7% growth from continuing operations
• Adjusted EBITDA: $510.4 million, up 14% from $446.1 million
• Adjusted EBITDA Margin: Improved from 9.2% to 9.8%
• Earnings per share: $0.51 in 2024 vs. $0.46 in 2023
• Adjusted EPS: $0.94 in 2024 vs. $0.54 in 2023

Earnings vs. Forecast

Select Medical exceeded EPS expectations with a reported $0.18 compared to the forecasted $0.16, marking a positive surprise of 12.5%. However, the revenue miss, with actual figures at $1.31 billion versus the expected $1.55 billion, overshadowed the EPS beat and may have contributed to the negative market reaction.

Market Reaction

Despite the EPS beat, Select Medical’s stock fell by 8.97% in after-hours trading, closing at $17.35. This decline suggests investor concerns over the revenue miss, which was substantial compared to the forecast. Notably, analyst price targets range from $21 to $47, indicating potential upside opportunities. According to InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value. For more insights on stock valuations, visit our Most Overvalued Stocks list.

Outlook & Guidance

Select Medical provided a revenue outlook for 2025 between $5.4 billion and $5.6 billion, with adjusted EBITDA expected to range from $520 million to $540 million. InvestingPro data shows an impressive revenue growth forecast of 19% for FY2025, supporting management’s optimistic outlook. The company plans significant capital expenditures of $160 million to $200 million and aims to maintain leverage between 3.0x and 3.1x, with a decrease anticipated in 2026. Get access to our comprehensive Pro Research Report for Select Medical, part of our coverage of 1,400+ US stocks, for detailed analysis of growth prospects and financial health.

Executive Commentary

Martin Jackson, a key executive, highlighted the company’s expansion plans: "We’re north of 30% increase in beds over the next eighteen months." He also addressed financial stability, stating, "We expect to remain in that three times to 3.1 times for ’25 as far as leverage is concerned."

Risks and Challenges

• Revenue Miss: The significant shortfall in expected revenue could indicate challenges in market demand or operational execution.
• Debt Levels: With recent refinancing and new debt issuance, managing leverage will be crucial.
• Medicare Reimbursement: Changes in reimbursement policies could impact profitability.
• Market Confusion: The recent spin-off of Concentra may lead to temporary market uncertainty.
• Startup Costs: New facility openings may initially pressure margins.

Q&A

During the earnings call, analysts focused on the implications of the Concentra spin-off and the company’s strategy to manage Medicare reimbursement changes. Executives confirmed the development of new rehabilitation facilities and addressed concerns about margin impacts from these startups.

Full transcript - Select Medical Holdings Corp (NYSE:SEM) Q4 2024:

Conference Call Operator: Good morning, and thank you for joining us today for Select Medical Holdings Corporation’s Earnings Conference Call to discuss the Fourth quarter and full year ’20 ’20 ’4 results and the company’s business outlook. Speaking today are the company’s Executive Chairman and Co Founder, Robert Ortenzio the company’s Senior Executive Vice President of Strategic Finance and Operations, Martin Jackson and Executive Vice President and CFO, Michael Malatesta. Management will give you an overview of the quarter and then open the call for questions. Before we get started, we would like to remind you that this conference call may contain forward looking statements regarding future events or the future financial performance of the company, including without limitation, statements regarding operating results, growth opportunities and other statements that refer to Select Medical’s plans, expectations, strategies, intentions and beliefs. These forward looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change.

At this time, I will turn the conference call over to Mr. Robert Ortenzio.

Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Thank you, operator. Good morning, everyone. Welcome to Select Medical’s earnings call for the fourth quarter twenty twenty four. The fourth quarter concluded a very busy year at Select. On November 25, we completed the spin off of Concentra via special stock distribution to Select Medical shareholders.

I’d like to thank all of our colleagues at Select and Concentra for their tremendous dedication and hard work to complete this transaction. The historical results of Concentra are now reflected as discontinued operation in Select’s consolidated financial statements. We will focus our results for the fourth quarter on the remaining three lines of business, which exclude Concentra. Also during the quarter, on December 3, we completed a refinancing of $1,600,000,000 of Select Medical’s outstanding debt. We issued $1,050,000,000 in new seven year term loans and $550,000,000 in 6.25 senior notes due 02/1932.

We used the proceeds together with cash on hand to repay our then existing $373,000,000 in term loans and 1,225,000,000 in senior notes due August 2026. We also paid related fees and expenses associated with the financing. The interest rate on the new term loans is SOFR plus 2%. In addition, we extended the maturity of our revolving credit facility to twenty twenty nine and increase the availability on the revolver from $550,000,000 to $600,000,000 Our credit agreement leverage was 3.18 times at 12/31/2024. On the development front, we added 94 inpatient rehabilitation beds in the fourth quarter.

We acquired a 50 bed inpatient rehab hospital in Oklahoma City on December 10 with our joint venture partner SSM. We also opened two Neuro Transitional units with 12 beds each, one in Dallas with our joint venture partner Baylor Scott and White and the other in Dublin, Ohio with our joint venture partner OhioHealth. And currently with the opening of the Dublin Neuro Transitional Center, we also added 20 rehab beds to the Dublin Rehab Hospital, which is also part of our joint venture with OhioHealth. As mentioned on our last call, we have additional development projects in various stages for the inpatient rehab division, which I will summarize again. In January, we opened acute rehab unit in Madison, Wisconsin with 18 beds.

In Q2, we plan on opening a 45 bed rehab hospital in Temple, Texas, as well as our second hospital with UPMC, twenty beds in Central Pennsylvania. In Q3, we’ll open our fourth rehab hospital with the Cleveland Clinic in Fair Hill, Ohio with 32 beds. In Q1 of twenty twenty six, we plan to open our fourth rehab hospital as part of our joint venture with Banner (NASDAQ:BANR) in Tucson, Arizona, which will be 58 beds and a new freestanding 63 bed rehab hospital in Ozark, Missouri with Cox Health Systems. In Q4 twenty twenty six, our new 60 bed rehab hospital in Southern New Jersey, the Bacharach Institute for Rehab in partnership with AtlantiCare is scheduled to open as well as a new 68 bed facility in Jersey City, New Jersey branded as Kessler. Between the specific projects just mentioned as well as some other smaller expansions and new acute rehab units in existing hospitals, we plan to add four eighty one additional beds to our operations in 2025 and 2026.

The additional beds will consist of four fifty five inpatient rehab beds, which includes 68 non consolidating beds and 26 long term acute care hospital beds. There are also a number of other opportunities under evaluation that would further increase our select specialty hospital footprint. This quarter, our outpatient rehab division added three de novo clinics and four clinics through acquisition. This was offset by the strategic closure or consolidation of 18 locations with limited growth potential. We’re continually evaluating and identifying areas of opportunity to optimize resources and serving our patient population and targeted demographics.

Now I’ll turn to our financial results. Overall, we had another strong quarter with all three lines all three of our divisions exceeding prior year revenue in the fourth quarter with combined revenue increase of 8%. Adjusted EBITDA also grew by 4% from 111,800,000 to $116,000,000 The three remaining divisions returned impressive growth year over year. For the full year, revenue grew from continuing operations was 7% and adjusted EBITDA growth was 14%. Adjusted EBITDA from continuing operations was 510,400,000 with a 9.8% adjusted EBITDA margin compared to $446,100,000 and 9.2% margin in 2023.

We are very pleased with the Q4 performance of our Critical Illness Recovery Hospital division with a 6% increase in revenue, a 10% increase in adjusted EBITDA and a 4% increase in adjusted EBITDA margin compared to the same quarter prior year. Our occupancy rate increased from 66% to 67% compared to prior year Q4. Rate per day increased by 7%.

Justin Bowers, Analyst, Deutsche Bank (ETR:DBKGn): And

Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: our adjusted EBITDA margin was 10.5% for the quarter compared to 10.1% in prior year Q4. Critical wellness salary wages and benefits to revenue ratio was 57%, an improvement of 1.2% compared to prior year Q4. As we have mentioned previously, we have seen nursing agency rates stabilize and utilization return to pre COVID levels. Our utilization of agency nurses remained the same as prior year Q4 at 14%. Nursing sign on and incentive bonus dollars are again lower than prior year showing a 15% reduction for the fourth quarter and a 20% reduction year over year.

We continue to expand our inpatient rehab hospital division with three additional facilities and a 13% increase in revenue when compared to prior year Q4. Adjusted EBITDA declined by 6% and adjusted EBITDA margin was 21.2%, which was lower than the prior period margin of 25.5%. The primary reason for the reduction of EBITDA compared to prior year is related to startup losses at our new facilities. Integration costs related to our acquisition in Oklahoma City and a drop in referrals from one of our key partners that was impacted by Hurricane Helene. Thus far in Q1 of twenty twenty five, referrals from this partner are back to normal.

Average daily census for the entire rehab division increased 3% and our rate per patient day increased 6%. Our occupancy of 81% was 4% lower than prior year of 85%, which is primarily a result of our new hospitals. Our outpatient rehab division continues to improve from prior year with increases in all areas for the final quarter of twenty twenty four. The division saw an increase of 7% in revenue, 4% in patient volume, 2% in net revenue per visit and 18% in adjusted EBITDA from prior year Q4. Net revenue per visit increased from $100 prior year Q4 to $102 in Q4 this year with the continued improvements in commercial rates despite declines in Medicare reimbursement.

The outpatient division’s adjusted EBITDA margin increased from 7.5% to 8.3% as the team continues to focus on improving patient access, productivity and staffing. We were able to see positive results despite two hurricanes, Helene and Milton in the fourth quarter of this year, impacting a number of our southern outpatient markets. We believe the negative EBITDA impact to be slightly over $1,000,000 with thankfully no material property damage or extended clinic closures. Our dilution loss per common share from continuing operations was $0.19 for the fourth quarter compared to earnings per common share from continuing operations of $0.12 in the same quarter prior year. Adjusted EBITDA adjusted EPS from continuing operations was $0.18 compared to adjusted EPS of $0.12 for the same quarter prior year.

Adjusted EPS excludes the loss on early retirement of debt, the one time acceleration of stock comp, expense and costs related to the Concentra transaction. For the full year, earnings per share from continuing operations was $0.51 compared to $0.46 per share in the prior year and adjusted earnings per share from continuing operations was $0.94 compared to adjusted EPS of $0.54 in the prior year. In regard to our allocation and deployment of capital, our Board has declared a cash dividend of $0.0625 per share payable on 03/13/2025 to stockholders of record as of the close of business on 03/03/2025. This past quarter, we did not repurchase shares under our board authorized share repurchase program and we’ll continue to evaluate stock repurchases reduction of debt and development opportunities. At this point, I’ll turn it over to Marty Jackson, who’ll continue to provide some details.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Thanks, Bob. Good morning, everyone. I will begin by providing additional details on the progress we continue to make regarding labor costs with the critical recovery hospital. As mentioned above, we believe that the cost and utilization of agency nurses has normalized. Overall, our SW and B as a percentage of revenue was 56.9% this quarter, which is decreased from 57.6% in Q4 prior year.

The improvement in the margin was driven by controlling internal labor costs and an increase in the net revenue per patient day. Nursing sign on and incentive bonus dollars decreased by 15% from Q4 of prior year from $7,400,000 to $6,300,000 We are pleased with the continued progress we have made in regards to labor costs in critical illness and finished the year with SWNB as a percentage of revenue at 55.9% compared to 57.2% in 2023. Moving on to our financials. At the end of the quarter, we had $1,700,000,000 of debt outstanding and $59,700,000 of cash on the balance sheet. Our debt balance at the end of the quarter included $1,050,000,000 in term loans, $105,000,000 in revolving loans, dollars $550,000,000 in 6.25 senior notes, which are due February of other miscellaneous debt.

As previously mentioned, we ended the quarter with net leverage for our senior secured credit agreement of 3.18 times. As of December 31, we had $453,300,000 of availability on our revolving loans. The interest rate on our term loan is SOFR plus 200 basis points and this matures 12/03/2031. Interest expense was $28,600,000 in the fourth quarter. This compares to $40,300,000 in the same quarter prior year.

The decrease in interest expense was due to the reduction of Select’s debt resulting from the Concentra IPO and related debt transaction in the third quarter of this year. Using the proceeds of these transactions, we were able to prepay $1,600,000,000 on the existing term loan and pay down the revolver balance. For the fourth quarter, operating activities provided $125,400,000 in cash flow. Our day sales outstanding or DSO for continued operations excluding Concentra was fifty eight days at 12/31/2024. This compares to fifty five days at 12/31/2023 ’60 days at 09/30/2024 ’60 ’2 days at 03/31/2024.

We continue to see improvement in our DSO every quarter as the claims processing backlog that resulted from the change healthcare cyber incident earlier in 2024 resolved itself. Investing activities used $74,200,000 of cash in the fourth quarter. This includes $63,400,000 in purchases of property and equipment and $10,800,000 in acquisition and investment activity. Financing activities used $183,000,000 of cash in the fourth quarter. The use of cash included all of the net financing transactions described above as well as cash transferred to Concentra at separation.

Additional activity include $16,000,000 in dividends of our common stock, $20,000,000 in repurchases of common stock, $25,000,000 in net repayments on other debt and $18,000,000 in net distributions and purchases of non controlling interest. As stated previously, we did not repurchase any shares under our Board authorized repurchase program this quarter. The Board approved share repurchase program remains in effect until 12/31/2025, unless further extended or earlier terminated by the Board. We are issuing our business outlook for 2025 and expect revenue to be in the range of $5,400,000,000 to $5,600,000,000 Adjusted EBITDA is expected to be in the range of $520,000,000 to $540,000,000 And finally, adjusted earnings per common share is expected to fall in the range of $1.09 to $1.19 Capital expenditures are expected to be in the range of $160,000,000 to $200,000,000 This concludes our prepared remarks. And at this time, we would like to turn it back to the operator to open up the call for questions.

Conference Call Operator: Our first question comes from Justin Bowers with Deutsche Bank.

Justin Bowers, Analyst, Deutsche Bank: Hey, good morning, everyone. So I think there’s a little confusion out there in the market because of what’s in and out of consensus and Concentra is partially still in the numbers. Just to level set for 2025, I’m arriving at the midpoint of revenue growth of call it 6%, EBITDA growth of 4% and then EPS growth of 6% and a 4Q exit at, call it, 3.18 turns net leverage. Is that are those sort of the right metrics here?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. Justin, hold on just for a second. We’ll go through the calculations to make sure that your numbers are correct. But as we do that, let me address I’m glad you brought it up. We do believe that there’s some significant confusion in the marketplace at this time.

And I think what the issue is, is I think a number of people have added have not removed Concentra from consensus. So I mean, if you take a look at as you know, Concentra had announced pre announced their numbers. If you take a look at those numbers on an annual basis, you would have 800 on a revenue basis north of $7,000,000,000 7 point 0 8 7 billion dollars which exceeds consensus by 8%. On an EBITDA basis, you would have $887,400,000 which exceeds consensus by 6%. And I’ll also point out that it exceeds our if you recall, we gave annual estimates.

It exceeds those estimates on both revenue and EBITDA, the top of the revenue and the EBITDA line. So from that perspective, yes, there is some confusion.

Justin Bowers, Analyst, Deutsche Bank: All right. So on a consolidated basis go ahead.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. The combined revenue increase that we have is about we’re talking about 25. Yes, we’re talking about 25. So we’re going to have to get those calculations. So go ahead with your question.

Justin Bowers, Analyst, Deutsche Bank: Okay. So just going back to all the development, I mean, this is the most active that Select has been in company history, frankly, with all the development activity. You have you’re increasing your IRF bed count by north of 30% over the next two years. Can you remind us how those facilities sort of mature and also ballpark for us sort of the number of startup costs maybe in the fourth quarter and 2025 as well?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. That’s a very good point. And you’re right. I mean, the we’re north of 30% increase in beds over the next eighteen months. And, but candidly, that’s really having a dampening effect in particular on the inpatient rehab margins for ’25.

And what you’ll see is that they actually because of the model that we have, the joint venture model, they mature pretty quickly. So you can expect to see those turnaround and see some very significant double digit EBITDA growth in 2026 and 2027.

Justin Bowers, Analyst, Deutsche Bank: Okay. That’s helpful. And then with RemainCo, I’m just doing some math here on the development activity. I’m sort of arriving at like a new growth algo of top line growth, mid single digit plus, EBITDA growth probably up in that high singles and then EPS and free cash flow growth well into per share, well into the double digits before really deploying any of the excess free cash flow. Is that the right neighborhood?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes, I think that sounds good.

Justin Bowers, Analyst, Deutsche Bank: How do you think of the model over the next three years or so?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: I would the way I like to take a look at it, Justin, I’d like to take a look at off of $25,000,000 I would expect to see double digit EBITDA growth. And I think in the teens range because of all the new beds coming on board.

Justin Bowers, Analyst, Deutsche Bank: Okay. And that’s consolidated?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: That’s just for the inpatient rehab side.

Justin Bowers, Analyst, Deutsche Bank: In your segment. Okay. All right. Okay.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. Got it. We also expect we I would think on the in pay or on the LTACH side, you should expect some pretty slow growth there. I mean, I would expect low single digit growth. And then on the outpatient side, I would also expect to see some double digit growth on EBITDA in ’25 and ’26.

Justin Bowers, Analyst, Deutsche Bank: All right. That is helpful. I will jump back in queue. Thank you.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Thanks Justin.

Conference Call Operator: Our next question will come from the line of Ben Hendricks with RBC Capital Markets.

Ben Hendricks, Analyst, RBC Capital Markets: Hey, thank you very much. I appreciate the color on your refinancing and year end leverage, but in acknowledging that there’s been some confusion kind of post spin, but maybe you can get an idea you can give us an idea of your kind of go forward post separation leverage targets, how you’re thinking about the gearing for this company and kind of where we are versus the kind of the optimal debt load? Thanks.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes, Ben. Thanks for the question. Our expectation is given the high activity in particular in the inpatient rehab side, I mean, we expect to remain in that three times to 3.1 times for 25 times as far as leverage is concerned, but we would expect to be well below that come ’26 and beyond.

Ben Hendricks, Analyst, RBC Capital Markets: I appreciate that. And just to follow-up a question on the inpatient. It looks like margins were a little lower this quarter. It sounds like there were some development costs in there. And maybe were there any other kind of headwinds, transitory or otherwise, that may have kind of caused a little bit of a depression on the IRF side this quarter versus last several?

Thanks.

Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Yes. At one of our hospitals, one of our referral sources was impacted by the hurricane Helene and their census was suppressed. So correspondingly, our census was suppressed at that facility. What we’ve seen in 2025 is census is back to normal. So we believe that was an anomaly.

But that along with the startup losses and the integration costs for our acquisition, that’s what contributed to the decrease in margin year over year for the inpatient rehab.

Ben Hendricks, Analyst, RBC Capital Markets: Great. Thank you for that clarification.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Thanks, Ben.

Conference Call Operator: Our next question comes from the line of Joanna Gadschik with Bank of America.

Joanna Gadschik, Analyst, Bank of America: Hi, good morning. Thanks so much for taking the question. So just I guess a little bit of follow-up to that last comment about the IRF margins. And as it relates to the 2025 outlook, your guidance implies margins would decline about 20 basis points or so versus comparable again excluding the central margin in 2024. So is that also what’s driving that EBITDA consolidated EBITDA margin outlook for this slight decline because the IRF margins, I guess, are going to be still kind of constrained because of the startup losses.

Is that the reason for the consolidated margin to be lower? Or is there something else to be said about other segment margins for 2025?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: No, that’s the primary driver, Joanna. You’re correct.

Joanna Gadschik, Analyst, Bank of America: Okay. So it’s pretty much the IRBs because start up losses. And then for the LTACs, should we think about those margins relatively stable? Or how we should think about 25% versus 24%?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. I think relatively stable is really the way to think about it.

Joanna Gadschik, Analyst, Bank of America: Because I guess in that segment, can you talk about the reimbursement change, the change to the thresholds for the in Medicare? How are you, I guess, seeing this progress through the year, the impact of that change?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. You’re talking about the high cost outlier threshold?

Joanna Gadschik, Analyst, Bank of America: Yes. Yes, exactly.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. I mean, our operators have done a tremendous job managing through the significant increases we’ve seen in that threshold. And so if you take a look at what transpired between $23 to $24 dollars there was about a $20,000 increase per patient and they’ve really been able to manage through that. As we take a look at it, I think it went into that the increase from twenty four percent to twenty five percent was also in that same magnitude. And that started October 1.

It looks like they’re doing a very good job of managing that too.

Joanna Gadschik, Analyst, Bank of America: Okay. That’s great. But I guess with those changes, you think margins should be relatively flat for the segment?

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes.

Joanna Gadschik, Analyst, Bank of America: Okay. And then last segment, the outpatient rehab, so these margins showed nice improvement in Q4. And sounds like to your when you were asked your question about kind of the long term outlook, you expect the outpatient rehab EBITDA to also grow double digits. So can you talk about your, I guess, activity there in terms of is it just kind of sounds like you’re streamlining the portfolio exiting some markets, maybe they don’t make sense. Anything else to kind of flag in terms of like what’s driving the expected growth in that segment EBITDA and also how to think about 25%?

Thank you.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes. I think there’s really two primary things that are driving that. Number one, we’ve mentioned there was an increase in the rate from 100 net revenue per visit up to $102 I think that’s a function of some negotiations going on with the commercial contracts. So that’s been very helpful despite what we’re seeing on Medicare cuts. So that’s been very good.

I think the other thing is that clinical productivity. We had mentioned, I think, in the last earnings call, we’ve been doing a lot of work on our technology. And we had a rollout in January that we think has been very good and would anticipate seeing additional improvement in our therapists’ productivity.

Joanna Gadschik, Analyst, Bank of America: Great. Thank you so much for taking the questions.

Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Thank you.

Conference Call Operator: That concludes today’s question and answer session. I’d like to turn the call back to management for closing remarks.

Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: No closing remarks. Thanks everybody for your attention focus on the quarter as we kind of unravel, unwind and with Concentra, so that we have a clear picture on what’s going on here at Select. We appreciate your efforts. Look forward to updating you next quarter.

Conference Call Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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