Select Medical Holdings Corporation (SEM) Q2 2021 Earnings Report, Transcript and Summary

Good morning, and thank you for joining us today for the Select Medical Holdings Corporation's Earnings Conference Call to discuss the Second Quarter 2021 Results and the company's Business Outlook. Speaking today are the company's Executive Chairman and Co-Founder, Robert Ortenzio; and the company's Executive Vice President and Chief Financial Officer, Martin Jackson. 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 future financial performance of the company, including, without limitation, statements regarding operating results, growth opportunities and other statements that refer to the Select Medical's plans, expectations, strategies, intentions and beliefs. These forward-looking statements are based on the information available to the management of the 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.

Thank you, operator. Good morning, everyone. Thanks for joining us for Select Medical's second quarter earnings conference call for 2021. We are very pleased with the financial results of the quarter, as well as the number of other business goals that we accomplished during the quarter. We experienced top line growth in all four of our business segments compared to both the same quarter last year and pre-pandemic same quarter in 2019. The volumes in our inpatient, outpatient business segments are trending very nicely and are well above pre-pandemic volume numbers. In addition to the volume growth, the inpatient and outpatient rehabilitation hospitals and clinics posted their highest quarters for adjusted EBITDA in the history of the company. Concentra has made nice strides with volume improvement as more industries, such as airlines, hospitality, municipalities, and schools reopen. On the development front, on May 1st, Scripps Healthcare entered into our existing joint venture partnership with UC San Diego Health on our 110-bed critical illness recovery hospital in San Diego, California. In June, we closed on a new outpatient joint venture with Mon Health in West Virginia, which marked our entry into the state for outpatient rehab. On July 1st, we entered into a new long-term acute care hospital joint venture with Ascension Saint Thomas in Nashville contributing our 70-bed Nashville hospital to the joint venture and moving forward with plans to add a 30-bed satellite hospital within a hospital at their Saint Thomas West Campus later this year. Also in July 1st, we entered into a new joint venture with CHS Northwest Healthcare in Tucson, Arizona, and acquired a 47-bed long-term acute care hospital, Curahealth Tucson, which we plan to relocate to Northwest Medical Center later this year. And earlier this week, we entered into a new outpatient rehab joint ventures with Cedars-Sinai in Los Angeles, California, contributing our 26 outpatient clinics in that market to the joint venture. We continue to work on finalizing the acquisition of Acuity Healthcare, which operates five long-term acute care hospitals through joint venture partnerships in New Jersey and West Virginia. We expect the deal to close sometime late Q3 or early Q4. Our development pipeline remained strong, as we continue to look for opportunities to expand our footprint and partner with leading healthcare institutions throughout the country. In addition, last week, U.S. News and World Report released their annual rankings of top rehabilitation hospitals in the country. Our Kessler Institute of Rehabilitation in New Jersey was ranked number four in the country, its 29th consecutive year of being named among the nation's top. In addition, this year for the first time, we have three of our joint venture partner hospitals making the list. They are Baylor Scott & White Institute for Rehabilitation in Dallas at number 13, Emory Rehabilitation Hospital in Atlanta at number 26, and Ohio Health Rehabilitation Hospital in Columbus, Ohio at number 34. I couldn't be more proud of our clinical and operational teams at these hospitals and throughout the rest of our portfolio of hospitals for their hard work expertise and dedication to the care and treatment of our patients. Two other items I wanted to note are the Centers for Disease Control, the CDC, and Select Medical collaborated on a clinical study regarding the long-term impact of COVID-19, which was recently published in the more morbidity and mortality weekly report. Finally, as noted in our earnings press release yesterday, our Board has declared a $0.125 per share dividend that will be payable August 30th to shareholders of record on August 18th. As we've done over the past year, we have outlined our business segment monthly revenue, volume and occupancy statistics in our earnings press release and public filings. This quarter, we also included monthly results from 2019 to provide a data point of where each of our business segments were prior to the pandemic compared to where they are currently. We will continue to include this information as long as it provides meaningful insight to the impact of COVID-19 on the company's financial performance. Overall, for the second -- revenue for the second quarter increased 26.9% to $1.56 billion and for year-to-date has increased 17.5% to $3.11 billion. Revenue in our Critical Illness Recovery Hospital segment in the second quarter increased 4.7% to $544 million compared to $520 million in the same quarter last year. Patient days were down 1.4% compared to the same quarter last year with 273,000 patient days in the quarter. Occupancy in our Critical Illness Recovery Hospital segment was 69% in the second quarter compared to 72% in the same quarter last year and 69% in the second quarter of 2019. Revenue per patient day increased 6.4% to $1,986 per patient day in the second quarter. Case mix index in our Critical Illness Recovery Hospital was 1.33 in the second quarter compared to 1.32 in the same quarter last year. As we had mentioned our most recent earnings call, staffing remains an issue in the Critical Illness Recovery Hospital. And it did have an impact on the number of patients we were able to admit for the quarter. We had a number of our hospitals that were unable to accept patients due to lack of clinician availability. This captain census represents a reduction of occupancy of approximately 1.5%. I would like to point out the destaffing challenges have been isolated to our Critical Illness Recovery Hospital, and we have not experienced this issue in any of our other business segments. Revenue in our Rehabilitation Hospital segment in the second quarter increased 26.1% to $213 million compared to $169 million in the same quarter last year. Patient days increased 24.8% compared to the same quarter last year, with almost 105,000 patient days. Occupancy in our Rehab Hospital was 85% in the second quarter compared to 71% in the same quarter last year and 75% in the second quarter of 2019. Revenue per patient day increased 1% to $1,849 per day in the second quarter. Revenue in our Outpatient Rehab segment in the second quarter increased 67.8% to $280 million compared to $167 million in the same quarter last year. Patient visits were up 79.2%, with 2.4 million visits in the quarter compared to 1.3 million visits in the same quarter last year, and 2.2 million visits in the second quarter of 2019. Our revenue per visit was $102 in the second quarter compared to $106 per visit in the same quarter last year. This reduction in rate is due to a change in our payer mix caused by the pandemic and related lockdowns. Revenue in our Concentra segment in the second quarter increased 46.1% to $456 million compared to $312 million in the same quarter last year. For the centers, patient visits were up 40.9% to 3 million visits compared to 2.15 million visits in the same quarter last year, and 3.1 million visits in the second quarter of 2019. Revenue per visit in the centers increased to $125 in the second quarter compared to $124 in the same quarter last year. I also want to highlight that we recognized $98 million in other operating income in the second quarter related to funds that we received under the CARES Act Provider Relief for incremental costs and lost revenues incurred as a result of the COVID pandemic. Last year, we recognized $55 million in other operating income related to these funds. The adjusted EBITDA results for our Critical Illness Recovery Hospital, Rehabilitation Hospital, and Outpatient Rehab segments do not include any recognition of this income. We record other operating income related to those segments under our other activities. Adjusted EBITDA results for our Concentra segment included recognition of this income, including $32.3 million in the second quarter of this year and $800,000 in the same quarter last year. Total company adjusted EBITDA for the second quarter increased 91.3% to $342 million compared to $178.8 million in the same quarter last year. Our consolidated adjusted EBITDA margin was 21.9% for the second quarter compared to 14.5% for the same quarter last year. Our Critical Illness Recovery Hospital segment adjusted EBITDA was $72.9 million in the second quarter compared to $89.7 million in the same quarter last year. Adjusted EBITDA margin for the segment was 13.4% in the second quarter compared to 17.3% in the same quarter last year. We experienced a deterioration of EBITDA margin in the quarter due to significantly higher nursing costs, which was driven by both an increase of both hours and rates of agency staffing. Our Rehabilitation Hospital segment adjusted EBITDA increased 83.9% to $50.8 million in the second quarter compared to $27.6 million in the same quarter last year. Adjusted EBITDA margin for the Rehab Hospital segment was 23.9% in the second quarter compared to 16.4% in the same quarter last year. Our Outpatient Rehab adjusted EBITDA was $45.6 million in the second quarter compared to adjusted EBITDA loss of $6.3 million in the same quarter last year. Adjusted EBITDA margin for the Outpatient segment was 16.3% in the second quarter. Our Concentra adjusted EBITDA increased 230.3% to $137.1 million in the second quarter, including the $32 million in CARES Act payments recognizing the quarter, this compares to $41 million in the same quarter last year, which included $800,000 in CARES payment recognition. Adjusted EBITDA margin was 30% in the second quarter compared to 13.3% in the same quarter last year. Excluding the $32.3 million of CARES Act payments, the adjusted EBITDA margin would have been 23% for the quarter. Earnings for common share increased 213% to $1.22 for the second quarter compared to $0.39 for the same quarter last year. In both periods, our earnings per common share was positively affected by the CARES Act Provider Relief Funds recognized in the respective quarters. Excluding the CARES Act income, earnings per share would have been $0.72 in the second quarter this year and $0.09 per share in the same quarter last year. On the regulatory front, last week, CMS issued the final inpatient rehab rules for fiscal 2022 effective October 1st of this year. The final rule includes a 2.3% increase in the standard payment amount, which is slightly less than the 2.5% included in the proposal. In addition, the high cost outlier threshold increased by 20%, which was slightly worse than what was in the proposed rule. The CMG relative wait and average length of stay values were also updated in the final rule. Finally, this week, CMS also issued the final LTAC rules for fiscal 2022. The final rule included a 2.2% increase in the federal base rate. Again, slightly less than the 2.5% increased outlined in the proposal. The high cost outlier threshold was increased 21% and the MS-LTC-DRG relative wait and expected length of stays were also updated in the final rule. That concludes my remarks and I'll turn it over to Marty Jackson from some additional financial details before we open the call for questions.

Thanks Bob. Good morning, everyone. For the second quarter, our operating expenses, which include our cost of services and general and administrative expense, were $1.33 billion or 84.9% of revenue. For the same quarter last year, operating expenses were $1.12 billion and 90.5% of revenues. Cost of services were $1.29 billion for the second quarter, this compares to $1.08 billion in the same quarter last year. As a percent of revenue cost of services were 82.6% for the second quarter, this compares to 87.8% in the same quarter last year. G&A expense was $35.7 million in the second quarter, this compares to $33.5 million in the same quarter last year. G&A as a percent of revenue was 2.3% in the second quarter compared to 2.7% of revenue for the same quarter last year. As Bob mentioned, total adjusted EBITDA was $342 million and adjusted EBITDA margin was $21.9 million for the second quarter. This compares to total adjusted EBITDA of $178.8 million and an adjusted EBITDA margin of 14.5% in the same quarter last year. Excluding the CARES Act income recognized in the quarter, adjusted EBITDA margins would have been 15.6% in the second quarter this year and 10% in the same quarter last year. Depreciation and amortization was $51 million in the second quarter. This compares to $52.3 million in the same quarter last year. We generated $11.8 million in equity and earnings of unconsolidated subsidiaries during the second quarter. This compares to $8.3 million in the same quarter last year. Interest expense was $33.9 million in the second quarter, this compares to $37.4 million in the same quarter last year. We recorded income tax expense of $65.7 million in the second quarter of this year, which represents an effective tax rate of 25.1%. This compares to the tax expense at $23.3 million and an effective rate of 25.7% in the same quarter last year. Net income attributable to non-controlling interest were $31.3 million in the second quarter. This compares to $15.8 million in the same quarter last year. Net income attributable to select medical holdings was $164.9 million in the second quarter. And earnings per common share were $1.22. At the end of the second quarter, we had $3.4 billion of debt outstanding, and over $800 million of cash on the balance sheet. Our debt balance at the end of the quarter included $2.1 billion in term loans, $1.2 billion 6.25senior notes and $70 million of other miscellaneous debt. Net leverage based on the credit agreement, EBITDA dropped to 2.51 times at the end of the second quarter. This is down from 3.02 times at the end of the first quarter, and 3.48 times at the end of the year. On June 2, we completed an amendment to Select and Concentra revolving loans. We increase the availability on Selects revolving loan from $450 million to $650 million and simultaneously cancelled the $100 million Concentra revolving loan, which was set to mature in March of next year. Neither revolving loans had any borrowings outstanding. Operating -- operating activities provided $123.1 million of cash flow in the second quarter. Our day sales outstanding or DSO was 54 days at June 30 2021 is compared to 56 days at both March 31, 2021 and December 31, 2020. During the second quarter, we repaid $73 million of Medicare advances. And as of June 30, 2021, we have $251 million remaining on the balance sheet. We expect similar quarterly recruitments until the advancements are fully repaid. Investment activities use $35.7 million of cash in the second quarter. The use of cash included $36.7 million in the purchase of property and equipment and $8.4 million acquisition investment activity in the quarter. We also generated $9.4 million in proceeds from the sale of assets in the quarter. Financing activities used $34.3 million of cash in the second quarter. This included $16.9 million in dividend payments $9.8 million in net payments and distributions to non-controlling interest and $6 million repayments of other debt in the quarter. Our total available liquidity at the end of the second quarter was almost $1.4 billion, which includes the $800 million of cash and close to $595 million in revolver availability under the Select credit agreement. Additionally, in our earnings press release, we provided an updated business outlook for calendar year 2021. For the full year of 2021, we now expect revenue in the range of $5.85 to $6.05 billion dollars, expected adjusted EBITDA to be in the range of $970 million to $1 billion and expected earnings per common share to be in the range of $2.91 to $3.08. This concludes our prepared remarks and at this time, we'd like to turn it back over to the operator to open up the call for questions.

Our first question comes from Frank Morgan of RBC Capital Markets. Please proceed.

Good morning, and good results. First question on labor, certainly a common thing this quarter across earnings calls. I'm just curious, when you -- you identified this issue to be specific to your critical care units. Just curious is, why do you think it's more prevalent in that particular area versus other settings and then -- and then maybe talk about the contract labor usage. You said it was the continued during the quarter to be higher, but maybe any more recent transcripts in the -- it says the end of the quarter related to either usage or rate.

Thanks, Frank. It's Bob. Yeah. It is curious. I think a lot of people assume that in a specialty hospital environment, whether it's rehab or LTAC, you'd experience the same nurse or same staffing challenges, its really not the case. You know, in the critical illness recovery hospitals, we really compete with the general acute care hospitals. And we have a -- typically a higher threshold for nurses. Oftentimes, they're critical care nurses and they're being recruited heavily by acute care hospital industry. And there's just a -- it's a difficult environment and many nurses are leaving that environment. And I think that's probably consistent with what you've heard from kind of other providers. So that's really the reason why the clinical shortage primarily nursing is -- has been isolated to our Critical Illness Recovery Hospital, and not the Rehab Hospitals or our Outpatient or the Concentra segments. As to the agency use, I'll let Marty to make a few comments on that.

Yeah. Frank, what we have seen is in the first quarter of 2021, we had really peaked with regards to the increase in the nursing rates. There was a significant increase from Q3 of 2020 to Q4 of 2020, and then Q1, we really saw the increase. We saw that drop this quarter. Now having said that, I would anticipate that we would see it either be flat or start to increase a little bit. We are starting to see significant referrals that our operators are telling us are related to the Delta variant. So, which just means we're going to need more nurses. So, I would expect that to continue probably at least through the next quarter.

Gotcha. And then, on the rate side for the contract labor, I'm guessing that's probably still elevated.

Yes. It is.

Gotcha. And then, any change in the -- I think you called out some admission holes, maybe no specific numbers. But just generally speaking, has that gotten any better or is it about the same?

We think it's gotten better. What we've done as we've increased the rates that we'll pay for agency nurses. So we have started to see that flow.

Gotcha. And then, maybe switching over -- I guess, staying on labor, you did have a competitor who specifically called out labor shortages issues in the outpatient setting, but just wanted to maybe get a reiteration on that side, specifically in the outpatient clinic or the Concentra business. No PT staffing issues.

Well, there are shortages, but I think our team has handled it quite well and it is -- has not resulted in us not being able to see patients. And that -- and I think that you can tie that just to overall employment difficulty attracting people in the general employment market.

Gotcha. Maybe just last one on the guidance and I'll hop back in the queue. When you think about the second half of the year, I'm assuming that you're looking for a more normal seasonal pattern in the second half of the year, and maybe just -- when you think about between third and fourth quarters, could you maybe give us some relative weighting between those two when you think about where you're getting things? Thanks.

Yeah. Frank, what we have done in our expectations for Q3 and Q4 should really be based off of what we've seen historically. If you go back and you take a look at, through 2019, typically first and second quarters were higher than the third and the fourth quarter. So what we've basically forecasted is that third and fourth quarter is going to go back more towards 2019 as opposed to 2020.

Okay. Thank you.

Thank you. Our next question comes from Justin Bowers of Deutsche Bank. Please proceed.

Hey, good morning, everyone. So, just sticking with the guide there. Is there other -- I understand there's a -- you're looking for a normal return of seasonality, but are there any other kind of notable items to call out either in 3Q or 4Q. And then the follow-up to that would be, are you -- is there any relief funds assumed in the back half of this year as well? I know that there's still some on the balance sheet.

Yeah. Justin, that there are no additional CARES dollars that are included in Q3 and Q4. Most of those have been -- as a matter of fact, almost all of those have been taken in the second quarter. With regards to pointing out the third and the fourth quarter, all of the businesses are doing very well from a volume perspective. We're very pleased with what we see on Inpatient Rehab, on Outpatient Rehab. Concentra has done a great job and we're starting to see some traction on the Critical Illness Recovery Hospitals, as I just mentioned. So, no. We feel pretty confident with what is out there as far as the guidance is concerned for the full year.

Got it. And then -- yeah, there was definitely impressive performance on the Outpatient side and both on PT and in Concentra. As we think about those businesses kind of like 2022, 2023, what's -- where do you think normalized margins can settle in kind of either segment? And then, Concentra, there's just a lot of moving parts with that right now. And you have kind of potential opportunities from what's return to work and return to school. So just, can you help us think about kind of how you see that business in the back half of the year as well?

I'll Marty comment on margins. I will say, and it's a good call out to Concentra that they had just done a remarkable job. Now, this is a business that historically has been very sensitive to employment and you saw them be able to be pretty nimble during COVID when visits were down dramatically and still post some pretty impressive numbers through testing and vaccination and working with employers, even when employment -- when people were not back to work. At this point, they are really enjoying the benefits of the -- a really strong employment environment. So, a lot of our employer clients are hiring and are back to work and you see visits starting to pop back up. So we expect Concentra just to continue to capitalize on the market share and the relationships that they built through COVID. So, I'm very optimistic about that business. Now, it'll continue to be seasonal as it always has been, but that business is as strong as it has ever been. And also on the Outpatient Rehab side of the business, which was the segment that was the most significantly affected as you can see from a quarter, a year ago, and you've seen visits come back very strong there. And from what we're seeing and assuming that we don't have further shutdowns, and you're looking at surgeries, orthopedic, electives coming back to the acute care hospitals, that's good for our Outpatient Rehab segment. And we feel very good about where they are as well. Marty, do you want to any comments on margins for that business on a go forward?

Sure. Justin, on the Concentra side, our thoughts are, on a longer term basis, you're going to have very high-teens margins in that business segment. As Bob had mentioned, the operators have done just a terrific job and we expect that to continue. On the Outpatient side, we think margins in that 15% to 17% are achievable. You're seeing -- on the Inpatient Rehab side, we would expect to see those margins continue, north of 20%. And then on the Critical Illness Recovery Hospitals, it's really a function of what's going on with the labor markets. And we think it would certainly will remain in the teens. And if we see an alleviation of the shortages on the clinical side, that could be in the higher teens.

Understood. And then, just one more quick one. In terms of the guidance -- actually I'll hop back in queue. Thank you.

Okay. Thanks.

Thank you. Our next question comes from Kevin Fischbeck of Bank of America. Please proceed.

Hey, guys. This is Courtney on for Kevin today. Thanks for taking my question. I guess just to continue some of the conversation on the guidance. I wanted to clarify, what assumptions you guys are baking in, in terms of how COVID is going to pan out in the back half of the year. And just wondering, are you seeing any markets with more COVID or Delta varied impact than others in Q3 to date?

The only thing we've heard from our operators is on the Critical Illness Recovery Hospital side. And that is, they're seeing some impact from that, which would mean increased census for us. We've seen referrals from the short-term acute care hospitals really start decline.

Okay. Yeah. That's helpful. And then just to clarify, I guess, one thing on the labor comments you gave. I guess the prepared remarks you guys gave were really helpful. But I'm curious to know, if you're seeing issues more so on the actual sourcing spot for labor or on the retention front?

It's a very good question, Courtney. It's really both. I mean, what's interesting is when you take a look at retention, our people have done a very, very good job retaining nurses, but when you start to see nurses have the ability to make double their income, if they go to agency, there is some clinicians that are jumping for that. And we've seen that third, fourth quarter of 2020, and then certainly the first and second quarter of 2021.

Okay. Yeah. That's really helpful. And then, I guess, one last question I'd squeeze in. You guys aren't the announced a whole bunch of JV partnerships and then the Acuity Healthcare acquisition a little over a month ago. So just any update on how the JV and deal pipeline are looking today.

Well, I think it's very strong. And as you know, we don't announce any of our joint ventures until they're signed. And so, I mentioned a number of them today in the prepared remarks, but I would say that the pipeline is very good. And one of the things, if you go back a year or so ago, mostly all of the joint ventures that were announced were rehabilitation only, and typically rehab hospitals, and then sometimes outpatient. And now what we're seeing as we've become, I think, a provider of choice to partner in all of our segments, seen more joint ventures in the Critical Illness Recovery Hospitals, which you really didn't see a year or two ago and announcing more Outpatient joint ventures. I think our Outpatient joint venture with Cedars in Los Angeles is a particular note. And so that's really our opportunity for growth and it is filling the pipeline more because there's joint ventures across all of our business segments.

Okay. Thanks guys. That's really helpful.

Thank you. Our next question comes from Bill Sutherland of the Benchmark Company. Please proceed.

Hey, good morning. Hope everyone's doing well. I was curious on all the activity, Bob, that you guys are doing now with various JV developments. Is there a way for us to get a -- just a very general sense of the implications for growth as you look into next year? To what degree does this add a few points to your total growth outlook?

Yeah. We -- I think it wouldn't be difficult for you to do that. The nature of our partnerships because of the profile of the systems that should say, it's really hard for us to predict when they come in. I mean, so I can report to you that we have a robust pipeline, but it's difficult to project when they will actually be signed and then put into place. So, even for example, our joint venture that we did with Rush in Chicago, which is very large and very important to us, it does also have CON in the state, which the timeline is somewhat uncertain, then we have construction. And so, it is more difficult for us to give any kind of a guidance on that. We do think about our pipeline and what we have in our guidance. So we -- as you note that -- and when Marty gives guidance, we don't exclude acquisitions or development or include them, but the guidance does take into account our sense. And I think it would be difficult to guide more than that.

Okay. That makes sense. On occupancy issue in Critical Illness, do you -- have you all kind of made a decision to just go with the agent -- pay the agency rates so that you can fully staff and -- or how do you make that decision on the trade-off in terms of the EBITDA impact?

Yeah. So, we have made a decision that we're going to bring in all of the patients that we can, and we're going to staff, even if it means that the labor rates are higher. So, we have made that decision.

Okay. And by the way, on the labor front, across either of the businesses -- lost business lines. Have you seen any regional disparities, that were notable?

Absolutely. I mean, we've seen significant disparities to the tune of -- if you take a look at clinical costs on the agency side -- I mean, we've seen rates that are in the $76 an hour range all the way up to $166. So yes, significant variation.

And as far as being able to actually find people, just supply issue regionally.

It is. It's the typical supply and demand.

Okay. Make sense. And then last, I thought zoom out for a second. And you decided to address the Home, Hospice segment through a JV and wanting to see if there's anything to update there. And also, have -- are you finding that your proportion -- particularly in Outpatient Rehab, that proportion of visits that are virtual, is that remaining a little more meaningful or is it kind of revert -- have you kind of gone back to pre-COVID kinds of mix? Thank you.

Yeah. Bill, with regards to telemedicine, telerehab, that's really pretty much going back to pre-pandemic volumes. And you had mentioned something about Home Health. I'm not sure if you could be more specific there.

Yeah. You guys announced -- and this is a couple of years ago now, with Alternate Solutions Health Network, and you've called Selected Home, because it's just a collaboration you setup.

Yeah. It's very small and kind of not material. We've really brought that on, so that we'd have an option for our joint venture partners if they needed it. So, it still exists, but not material to our results.

I figured as much since I hadn't heard about it, but I wanted to ask. Thanks guys. Great quarter.

Sure.

Thank you. We have a follow-up question from Justin Bowers with Deutsche Bank. Please proceed.

Hey, thanks for letting me hop back on. So, just a couple of quick ones. With the JVs and the LTAC deal that you announced earlier this year, is that in the guide right now? And then kind of a follow-up to that would be the pipeline. How would you characterize the pipeline? Is it more heavily LTAC and earth related or what's kind of the mix there? And then I have one more follow-up after that.

I say the -- I commented on the pipe -- the pipeline, I think, is across the board. There's many deals in the pipeline, some which we'll get to the finish line and some won't. So, it's difficult to say whether it's more heavily weighted to a Critical Illness Rehab, Outpatient. I think it's fair to say that there are projects in the pipeline in each of those areas. And the second question Marty, was the …

Yeah. The second question was the joint ventures that we've announced, are those numbers in the back end of the year? They are, Justin. But I think it's important to know that for the most part, those are negative numbers. We're moving hospitals around. And at the end of the day, we're -- we also have to on the larger one acuity, we're going to be installing our systems. We're going to be doing a whole bunch of different things there. So you can assume that those are going to be losses for the back end of the year. For the most part, what you'll see is the benefit in 2022 and beyond.

Yeah. And that helps explain the back half guide a little bit. And then just a quick follow-up. I know that -- so last year you guys divested the CBAC , and that's been about $20-plus million quarterly drag in 1Q and 2Q. I was just curious about what the timing of that was. I remember the announcement in the fall, but I wasn't sure when that actually closed. So just trying to figure out when we lap that.

Yeah. I think it was the first of the second quarter of 2020. I think it was the first quarter of 2020 when it was -- third quarter. And the $20 million a quarter you're talking about is really on the top line basis.

Yeah.

Yes.

Okay. All right.

Yeah. But you're right. You're right on a year-over-year basis, that is -- that was a headwind.

Yeah. I mean, it was a couple points each quarter, like this year. All right. I appreciate the follow-ups.

All right, Justin.

Thank you. I would now like to turn the conference back to management for closing remarks. No closing remarks. Thanks everybody for joining us for the -- to the report on the quarter. Look forward to updating you next quarter.

This concludes today's conference call. Thank you for participating. And you may now disconnect.