Core Viewpoint - Select Medical Holdings Corporation (SEM) has experienced significant underperformance in 2025, with shares down 33.4% year to date, compared to the industry's 29.7% gain and the S&P 500's 14.2% growth. The stock is currently trading at $12.55, which is 69.4% below its 52-week high of $40.98 [1]. Group 1: Challenges Facing SEM - The Critical Illness Recovery Hospital unit has shown weakness, with admissions declining by 1% in 2023, 1.2% in 2024, and 0.5% in the first half of 2025. This has led to lower patient days and revenue per patient day, resulting in a 28% year-over-year decrease in operating income [3]. - Rising costs are a concern, with expenses increasing by 7.9% in 2024 and 3.4% in the first half of 2025, with no signs of slowing down. Additionally, uncertainty regarding future government medical aid adds pressure [4]. - SEM's trailing 12-month return on equity is 8.9%, significantly below the industry average of 21.1%, indicating weak capital efficiency [4]. - The company's net debt-to-capital ratio is high at 47.2%, with long-term debt at $1.8 billion and only $52.3 million in cash as of June 30, 2025 [5]. Group 2: Financial Projections - The Zacks Consensus Estimate projects SEM's 2025 revenues at $5.37 billion, reflecting an 18.9% year-over-year decline, followed by a 4.9% recovery in 2026. EPS is expected to be $1.17 in 2025, up 24.5%, with an additional 14.3% increase in 2026 [6][7]. Group 3: Positive Aspects - The Rehabilitation Hospital segment is performing well, with occupancy at 82% in the first half of 2025. Admissions and patient days increased by 8.1% and 6.4%, respectively, while operating income rose by 12.1% in 2024 and 16.1% in the first half of 2025, maintaining margins above 20% [8]. - Operating cash flow was strong, at $517.9 million in 2024 and $106.8 million in the first half of 2025. The company plans to add 412 more beds between 2025 and mid-2027, which could enhance growth [9]. - SEM's valuation appears attractive, trading at a forward P/E of 9.69X, below its five-year median of 12.75X and the industry average of 13.55X, suggesting potential for a rebound as fundamentals stabilize. The company currently holds a Value Score of A [10]. Group 4: Overall Assessment - SEM is facing significant challenges, including poor performance in its Critical Illness Recovery Hospitals, rising costs, high leverage, and lower returns compared to peers. However, the Rehabilitation Hospital segment shows promise with healthy occupancy and cash generation. The company's undervalued trading multiples indicate potential upside if execution improves. The stock is rated Zacks Rank 3 (Hold), suggesting that investors may consider maintaining their current positions [11].

Financial Data and Key Metrics Changes - EBITDA increased from €11.1 million in Q1 to €19.6 million in Q2, representing a 77% improvement [2] - Overall sales declined by 7%, leading to a 35% decrease in EBITDA and a margin drop from 13.7% to 9.6% year on year [3][4] - Earnings after taxes turned negative at €11.2 million, but the company maintains a solid financial footing with an equity ratio of 45.5% and cash reserves of approximately €113 million [4][12] Business Line Data and Key Metrics Changes - Semperit Industrial Applications saw a 4.7% decline in sales and a 19.2% decrease in EBITDA year on year, with margins at 18.1% [5] - Semperit Engineered Applications experienced a 9% drop in sales and a 46.9% decline in EBITDA compared to the previous year [7][8] - The hoses business showed signs of recovery with improved order intake, while the profiles segment continues to struggle due to a weak construction industry [6][9] Market Data and Key Metrics Changes - The overall order book and order intake for the first six months are higher than last year's comparable figures, indicating a recovery trend [3][24] - The construction industry is expected to turn around in 2026, but short-term benefits are not anticipated [25] Company Strategy and Development Direction - The company is focused on optimizing costs and expanding its profile business in the U.S. market [25][26] - There is an ongoing effort to explore inorganic growth opportunities through potential acquisitions that can leverage existing business [28] - The company aims to maintain a resilient balance sheet while investing in digitalization projects [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a recovery in the second half of the year, driven by improved order intake and market dynamics [24][27] - The company confirmed its guidance for operating EBITDA in the range of €65 million to €85 million for 2025 [4][27] - Management acknowledged uncertainties but emphasized a positive momentum in customer restocking and order processing [24][27] Other Important Information - The company paid a dividend of $0.50 per share, totaling $10.3 million, signaling confidence in its business model [13][22] - Free cash flow was reported at €13.9 million, with capital expenditures halved to €18.5 million year on year [17][22] Q&A Session Summary Question: Order dynamics in Q2 and summer months - Management noted a gradual increase in order intake starting in April, continuing through July, with a stronger order book compared to the previous year [31][32] Question: Revenue generation expectations for Q3 - Management is hopeful for a good Q3 and Q4, but noted potential impacts from weather and shipping activities [33] Question: CapEx reduction from €60 million to €50 million - The reduction is primarily a period shift related to specific growth projects, particularly in the U.S. railway systems [34] Question: Pricing dynamics and revenue increase - Pricing management has been proactive, with approximately €3 million of revenue attributed to price increases, though some businesses experienced price decreases [40][41] Question: Working capital development and operating cash flow - Management is confident in maintaining tight working capital targets and believes operating cash flow will cover the €50 million CapEx [42][44] Question: Impairment in the LSI business - Management provided assurance that the impairment was based on a comprehensive review and that there is remaining headroom for the Ricoh business [51][52] Question: Impact of Continental's spin-off on business - No concrete evidence of impact was reported, but management suggested it could be positive [56] Question: Current situation in the hoses business - The company is building up capacity and hiring to meet increased demand [60][61] Question: Margin quality of belting orders - Margin quality remains volatile, with improvements noted in the second quarter, but still lower than two to three years ago [67][70] Question: Impact of U.S. tariffs on business - The uncertainty from tariffs had a significant impact, but the current situation allows for better planning and has led to an uptick in order activity [76][78]

Financial Performance - Semperit Group's H1 2025 revenue decreased by 72% to EUR 3205 million compared to EUR 3455 million in H1 2024 [23] - EBITDA decreased by 352% to EUR 307 million, with a margin of 96% compared to 137% in H1 2024 [23] - Earnings after tax turned negative to EUR -112 million, compared to a positive EUR 96 million in H1 2024 [6] - Free cash flow decreased by 411% to EUR 139 million [22, 23] - CAPEX decreased by 514% to EUR 185 million [23] Segment Performance - Semperit Industrial Applications (SIA) revenue decreased by 47% to EUR 1336 million [50] - SIA EBITDA decreased by 192% to EUR 242 million, with a margin of 181% [50] - Semperit Engineered Applications (SEA) revenue decreased by 90% to EUR 1869 million [50] - SEA EBITDA decreased by 469% to EUR 147 million, with a margin of 79% [50] Balance Sheet - Cash and cash equivalents stood at EUR 1129 million [6, 22, 38] - Equity ratio was 455% [6, 38] - Net financial debt was EUR 1186 million, with a net financial debt/EBITDA ratio of 17x [22, 38] Outlook - The company confirmed its FY 2025 operational EBITDA guidance of EUR 65 million - EUR 85 million [6, 43] - CAPEX is expected to be around EUR 50 million [43]

Core Insights - Select Medical Holdings Corporation (SEM) shares have decreased by 20.4% since the release of Q2 2025 results on July 31, primarily due to lower occupancy rates in the Rehabilitation Hospital segment and increased costs, although improved revenue per patient day and higher admissions in the Critical Illness Recovery Hospital segment provided some offset [1] Financial Performance - Adjusted earnings per share (EPS) for Q2 2025 were reported at 32 cents, surpassing the Zacks Consensus Estimate of 28 cents, but down from 60 cents year-over-year [2][9] - Net operating revenues reached $1.3 billion, reflecting a 4.5% increase from the previous year and exceeding the consensus estimate by 1.5% [2][9] - Total costs and expenses rose by 3.9% year-over-year to $1.3 billion, driven by increasing service costs, which was above the estimated $1.2 billion [3][9] Segment Performance - **Critical Illness Recovery Hospital**: Revenues were $601.1 million, down 0.6% year-over-year, missing the consensus estimate of $641.4 million. Revenue per patient day decreased by 0.5%, while patient days fell by 0.1%, although admissions increased by 0.9% [4] - Adjusted EBITDA for this segment was $56.3 million, a decline of 21.6% year-over-year, missing estimates [5] - **Rehabilitation Hospital**: Revenues increased by 17.2% year-over-year to $313.8 million, exceeding the consensus estimate of $264.8 million, supported by a 9.3% rise in admissions and a 7.6% increase in patient days, despite a 200 basis point decline in occupancy rate [6] - Adjusted EBITDA rose to $71 million, a 14.7% increase year-over-year, beating the Zacks Consensus Estimate [7] - **Outpatient Rehabilitation**: Revenues were $327.6 million, up 3.8% year-over-year, surpassing the consensus estimate of $318.2 million. Adjusted EBITDA increased by 6.1% year-over-year to $30.5 million, although it missed estimates [8] Financial Position - As of June 30, 2025, cash and cash equivalents stood at $52.3 million, down from $59.7 million at the end of 2024. Total assets increased to $5.7 billion from $5.6 billion, while long-term debt rose to $1.8 billion from $1.7 billion [10] - Total equity increased by 2.4% to $2 billion [10] - Net cash provided by operations was $110.3 million, a decline from $278.2 million a year ago [11] Shareholder Returns - In the first half of 2025, Select Medical repurchased shares worth $96.5 million, totaling approximately $696.8 million since the inception of the repurchase program [12] - A cash dividend of 6.25 cents per share was approved, to be paid on August 28, 2025 [12] Outlook - Management maintains revenue guidance for 2025 between $5.3 billion and $5.5 billion, with adjusted EBITDA expected between $510 million and $530 million, and EPS projected between $1.09 and $1.19 [13]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Select Medical (SEM) as a potentially undervalued stock based on various financial metrics [2][7]. Company Metrics - Select Medical (SEM) has a Zacks Rank of 2 (Buy) and a Value grade of A, indicating it is a high-quality value stock [3]. - SEM's PEG ratio is 0.71, which is lower than the industry's average PEG of 0.98, suggesting it may be undervalued [4]. - The P/B ratio for SEM is 0.93, significantly lower than the industry's average P/B of 1.68, indicating attractive valuation [5]. - SEM's P/CF ratio stands at 5.16, compared to the industry's average P/CF of 7.06, further supporting the notion of undervaluation [6]. - Over the past year, SEM's PEG has fluctuated between 0.38 and 2.22, with a median of 0.76, while its P/B has ranged from 0.89 to 3.03, with a median of 1.18 [4][5]. - The P/CF ratio for SEM has varied from 4.63 to 10.57, with a median of 5.52, reinforcing its potential as a value stock [6].

Financial Data and Key Metrics Changes - The company's consolidated revenue grew nearly 5% to $1.3 billion, and adjusted EBITDA increased to $125.4 million from $124.7 million in the prior year [9][10] - Earnings per common share from continuing operations rose 88% to $0.32 from $0.17 per share in the same quarter prior year [9] Business Line Data and Key Metrics Changes - Inpatient rehab hospital division revenue rose 17% year over year to $313.8 million, with adjusted EBITDA increasing nearly 15% to $71 million [10] - Outpatient rehabilitation division revenue increased 3.8%, driven by a corresponding 3.8% increase in patient volume [11] - Critical illness recovery hospital division revenue was $601.1 million, a decline of 1% from the same quarter last year [13][14] Market Data and Key Metrics Changes - The occupancy rate for inpatient rehab hospitals was lower than the prior year at 82%, while the same store occupancy rate remained stable at 86% [10] - The occupancy rate for critical illness recovery hospitals improved to 69% from 67% in the prior year [13] Company Strategy and Development Direction - The company plans to add 382 rehab beds by the end of 2027, with a focus on expanding in key markets [6][8] - Upcoming openings include a 45-bed hospital in Temple, Texas, and a 30-bed critical illness recovery hospital in Memphis, Tennessee [7][8] - The company remains committed to delivering value to shareholders through stock repurchases and dividends [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of the inpatient rehab division, particularly in states with favorable regulatory environments [25] - The company is optimistic about the outpatient division's prospects, expecting improvements in EBITDA margins [31] - Management acknowledged ongoing challenges with the reimbursement system but remains hopeful for policy reforms [12][45] Other Important Information - The company repurchased over 5.7 million shares at an average price of $14.86, totaling $85.1 million [9] - A cash dividend of $0.0625 per share was declared, payable on August 28, 2025 [9] Q&A Session Summary Question: How did EBITDA per segment come in line versus internal expectations? - Management indicated that critical illness EBITDA came in slightly lower than expectations, while inpatient rehab exceeded expectations, leading to comfort with reaffirmed guidance [22] Question: What is the strategy in states with favorable environments for inpatient rehab? - The company plans to engage with major systems in states like North Carolina to grow their post-acute network without immediate construction [25] Question: How is the outpatient rehab business expected to evolve? - Management expects continued improvement in outpatient rehab, with initiatives aimed at increasing EBITDA margins approaching 10% [29][31] Question: What is the impact of the outlier threshold? - Management noted that the impact was around $60 million in Q1, with expectations of facing headwinds throughout the year but less significant than in Q1 [34] Question: What is the supply-demand picture in the critical illness recovery hospitals? - Demand remains strong due to demographics and medical technology advances, although challenges with reimbursement persist [50][52] Question: What are the trends in labor costs across business lines? - Employee rate increases have improved from 5% to below 3%, indicating a positive trend in labor costs [53]

Financial Data and Key Metrics Changes - The company's consolidated revenue grew nearly 5% to $1.3 billion, and adjusted EBITDA increased to $125.4 million from $124.7 million in the prior year [9] - Earnings per common share from continuing operations rose 88% to $0.32 from $0.17 per share in the same quarter prior year [9] Business Line Data and Key Metrics Changes - Inpatient rehab hospital division revenue rose 17% year over year to $313.8 million, with adjusted EBITDA increasing nearly 15% to $71 million [10] - Outpatient rehabilitation division revenue increased 3.8%, driven by a corresponding 3.8% increase in patient volume [11] - Critical illness recovery hospital division revenue was $601.1 million, a decline of 1% from the same quarter last year [13] Market Data and Key Metrics Changes - The occupancy rate for inpatient rehab hospitals was lower than the prior year at 82%, while the same store occupancy rate remained stable at 86% [10] - The critical illness recovery hospital division's occupancy rate improved to 69% from 67% in the prior year [13] Company Strategy and Development Direction - The company plans to add 382 rehab beds by the end of 2027, with a focus on markets with strong volume and occupancy rates [6] - Upcoming openings include a 45-bed hospital in Temple, Texas, and a 30-bed critical illness recovery hospital in Memphis, Tennessee [6][7] - The company remains committed to delivering value to shareholders through stock repurchases and dividends [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the development pipeline and growing demand for inpatient rehab services [6] - The company is optimistic about the outpatient division's prospects, expecting improvements in EBITDA margins [29] - Management noted ongoing challenges with the LTACH reimbursement system but is hopeful for positive changes through dialogue with regulators [12][39] Other Important Information - The company repurchased over 5.7 million shares at an average price of $14.86, totaling $85.1 million [9] - A cash dividend of $0.0625 per share was declared, payable on August 28, 2025 [9] Q&A Session Summary Question: How did EBITDA per segment come in line versus internal expectations? - Management indicated that critical illness came in slightly lower than expectations, while inpatient rehab exceeded expectations, and they are comfortable with the reaffirmed guidance [22] Question: What is the strategy in states with favorable environments for inpatient rehab? - The company plans to engage with major systems in states like North Carolina to grow their post-acute network without immediate construction [24][26] Question: How is outpatient rehab expected to evolve throughout the year? - Management expects outpatient rehab to improve, with initiatives in scheduling expected to enhance EBITDA margins towards 10% [28][29] Question: What is the impact of the outlier threshold? - Management noted that the final rule for LTACHs included a slight improvement in the rate, but challenges remain with the reimbursement system [30][40] Question: What is the supply-demand picture in the critical illness recovery hospitals? - Management stated that demand for services remains strong, driven by demographics and medical technology, despite challenges with reimbursement [44] Question: What are the trends in labor costs across business lines? - Management reported improvements in employee rate increases, with a decrease in pressures from agency costs compared to previous years [48]

Core Viewpoint - Select Medical (SEM) reported quarterly earnings of $0.32 per share, exceeding the Zacks Consensus Estimate of $0.28 per share, but down from $0.6 per share a year ago, indicating a mixed performance in earnings [1][2] Financial Performance - The company achieved revenues of $1.34 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.50%, but down from $1.76 billion year-over-year [2] - Over the last four quarters, Select Medical has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Select Medical shares have declined approximately 23.2% since the beginning of the year, contrasting with the S&P 500's gain of 8.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.20 on revenues of $1.32 billion, and for the current fiscal year, it is $1.14 on revenues of $5.37 billion [7] - The trend of estimate revisions for Select Medical was mixed ahead of the earnings release, which may change following the recent report [6] Industry Context - The Medical - HMOs industry, to which Select Medical belongs, is currently ranked in the bottom 5% of over 250 Zacks industries, suggesting potential challenges ahead [8]

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) [Second Quarter 2025 Performance](index=1&type=section&id=Second%20Quarter%202025%20Performance) In the second quarter of 2025, Select Medical reported a 4.5% increase in revenue to $1,339.6 million. Income from continuing operations saw substantial growth of 53.8% to $57.9 million, and earnings per share from continuing operations rose by 88.2% to $0.32. Adjusted EBITDA remained relatively flat with a 0.5% increase to $125.4 million Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $1,339.6 M | $1,281.7 M | +4.5% | | Income from continuing operations, net of tax | $57.9 M | $37.6 M | +53.8% | | Adjusted EBITDA | $125.4 M | $124.7 M | +0.5% | | EPS from continuing operations | $0.32 | $0.17 | +88.2% | [First Half 2025 Performance](index=1&type=section&id=First%20Half%202025%20Performance) For the six months ended June 30, 2025, revenue grew by 3.4% to $2,692.8 million. Income from continuing operations increased by 33.7% to $132.6 million, and EPS from continuing operations grew 52.0% to $0.76. However, Adjusted EBITDA for the period declined to $276.9 million from $290.5 million in the prior year H1 2025 Financial Highlights (vs. H1 2024) | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $2,692.8 M | $2,603.0 M | +3.4% | | Income from continuing operations, net of tax | $132.6 M | $99.2 M | +33.7% | | Adjusted EBITDA | $276.9 M | $290.5 M | -4.7% | | EPS from continuing operations | $0.76 | $0.50 | +52.0% | - The results of Concentra are presented as discontinued operations following its tax-free distribution in November 2024 and are excluded from continuing operations and segment results for 2024 periods[7](index=7&type=chunk) [Company and Segment Performance](index=2&type=section&id=Company%20and%20Segment%20Performance) [Company Overview](index=2&type=section&id=Company%20Overview) Select Medical is a major US operator of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics. As of June 30, 2025, the company operated 104 critical illness recovery hospitals, 36 rehabilitation hospitals, and 1,919 outpatient rehabilitation clinics across 40 states and the District of Columbia Facilities Operated as of June 30, 2025 | Facility Type | Count | States | | :--- | :--- | :--- | | Critical Illness Recovery Hospitals | 104 | 29 | | Rehabilitation Hospitals | 36 | 14 | | Outpatient Rehabilitation Clinics | 1,919 | 39 + DC | [Critical Illness Recovery Hospital Segment](index=2&type=section&id=Critical%20Illness%20Recovery%20Hospital%20Segment) The Critical Illness Recovery Hospital segment experienced a slight revenue decline and a significant drop in Adjusted EBITDA for both the second quarter and first half of 2025. The Adjusted EBITDA margin contracted to 9.4% in Q2 and 11.5% in H1, compared to 11.9% and 14.9% in the respective prior-year periods Q2 Segment Performance (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $601.1 M | $604.9 M | -0.6% | | Adjusted EBITDA | $56.3 M | $71.8 M | -21.6% | | Adjusted EBITDA Margin | 9.4% | 11.9% | -250 bps | H1 Segment Performance (vs. H1 2024) | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $1,238.2 M | $1,260.8 M | -1.8% | | Adjusted EBITDA | $142.9 M | $187.8 M | -23.9% | | Adjusted EBITDA Margin | 11.5% | 14.9% | -340 bps | [Rehabilitation Hospital Segment](index=2&type=section&id=Rehabilitation%20Hospital%20Segment) The Rehabilitation Hospital segment demonstrated strong growth in the second quarter and first half of 2025, with double-digit increases in both revenue and Adjusted EBITDA. Revenue growth was 17.2% in Q2 and 16.4% in H1, while Adjusted EBITDA grew 14.7% in both periods. The Adjusted EBITDA margin remained robust but saw a slight decline Q2 Segment Performance (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $313.8 M | $267.8 M | +17.2% | | Adjusted EBITDA | $71.0 M | $62.0 M | +14.7% | | Adjusted EBITDA Margin | 22.6% | 23.1% | -50 bps | H1 Segment Performance (vs. H1 2024) | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $621.2 M | $533.5 M | +16.4% | | Adjusted EBITDA | $141.5 M | $123.4 M | +14.7% | | Adjusted EBITDA Margin | 22.8% | 23.1% | -30 bps | [Outpatient Rehabilitation Segment](index=2&type=section&id=Outpatient%20Rehabilitation%20Segment) The Outpatient Rehabilitation segment posted modest growth in revenue and Adjusted EBITDA for both the second quarter and first half of 2025. Q2 revenue increased by 3.8% and Adjusted EBITDA by 6.1%, leading to a slight margin expansion to 9.3%. First-half results showed similar modest growth trends Q2 Segment Performance (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $327.6 M | $315.5 M | +3.8% | | Adjusted EBITDA | $30.5 M | $28.8 M | +6.1% | | Adjusted EBITDA Margin | 9.3% | 9.1% | +20 bps | H1 Segment Performance (vs. H1 2024) | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $634.9 M | $618.7 M | +2.6% | | Adjusted EBITDA | $54.8 M | $53.7 M | +2.0% | | Adjusted EBITDA Margin | 8.6% | 8.7% | -10 bps | [Capital Management and Outlook](index=3&type=section&id=Capital%20Management%20and%20Outlook) [Dividend](index=3&type=section&id=Dividend) On July 30, 2025, Select Medical's Board of Directors declared a quarterly cash dividend of $0.0625 per share, payable around August 28, 2025, to stockholders of record as of August 13, 2025. Future dividends are not guaranteed and remain at the discretion of the Board - A cash dividend of **$0.0625** per share was declared on July 30, 2025[15](index=15&type=chunk) - The dividend is payable on or about August 28, 2025, to stockholders of record on August 13, 2025[15](index=15&type=chunk) [Stock Repurchase Program](index=3&type=section&id=Stock%20Repurchase%20Program) The company has a $1.0 billion stock repurchase program authorized through December 31, 2025. During the first six months of 2025, Select Medical repurchased 6.4 million shares for approximately $96.5 million. Since the program's inception, a total of 54.6 million shares have been repurchased for $696.8 million - The Board has authorized a common stock repurchase program of up to **$1.0 billion**, effective until December 31, 2025[17](index=17&type=chunk) Stock Repurchase Activity | Period | Shares Repurchased | Cost | Average Price/Share | | :--- | :--- | :--- | :--- | | H1 2025 | 6,375,512 | ~$96.5 M | $15.13 | | Program Inception to June 30, 2025 | 54,610,335 | ~$696.8 M | $12.76 | [Business Outlook](index=3&type=section&id=Business%20Outlook) Select Medical reaffirmed its full-year 2025 business outlook, expecting revenue between $5.3 billion and $5.5 billion, Adjusted EBITDA between $510.0 million and $530.0 million, and fully diluted earnings per share in the range of $1.09 to $1.19 Full Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $5.3 B - $5.5 B | | Adjusted EBITDA | $510.0 M - $530.0 M | | Fully Diluted EPS | $1.09 - $1.19 | [Financial Statements and Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Reconciliations) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements show a 4.5% revenue increase for Q2 2025 and a 3.4% increase for H1 2025. Net income attributable to Select Medical decreased significantly in both periods, primarily due to the absence of income from discontinued operations (Concentra) in 2025, which was present in 2024. Income from continuing operations, however, showed strong growth Q2 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $1,339,579 | $1,281,748 | | Income from continuing operations, net of tax | $57,879 | $37,638 | | Income from discontinued operations, net of tax | $0 | $57,128 | | Net income attributable to Select Medical | $40,571 | $77,563 | H1 Statement of Operations Highlights (in thousands) | Line Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenue | $2,692,751 | $2,602,959 | | Income from continuing operations, net of tax | $132,611 | $99,167 | | Income from discontinued operations, net of tax | $0 | $112,766 | | Net income attributable to Select Medical | $97,252 | $174,460 | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Select Medical's total assets increased to $5.74 billion from $5.61 billion at year-end 2024. The increase was driven by higher accounts receivable and property and equipment. Total liabilities also rose to $3.74 billion, primarily due to an increase in long-term debt Balance Sheet Summary (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,080,890 | $1,019,777 | | Total Assets | $5,742,250 | $5,607,951 | | Total Current Liabilities | $938,990 | $977,651 | | Long-term debt, net of current portion | $1,839,631 | $1,691,546 | | Total Liabilities | $3,742,988 | $3,610,856 | | Total Equity | $1,990,769 | $1,986,928 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $106.8 million, a decrease from $211.5 million in the prior year. Net cash used in investing activities was $117.0 million, mainly for property and equipment purchases. Financing activities provided a net cash inflow of $2.8 million, reflecting significant borrowing on revolving facilities offset by stock repurchases and debt payments Six Months Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $106,835 | $211,463 | | Net cash used in investing activities | ($116,984) | ($111,725) | | Net cash provided by (used in) financing activities | $2,804 | ($72,584) | | Net (decrease) in cash and cash equivalents | ($7,345) | $27,154 | [Key Statistics](index=12&type=section&id=Key%20Statistics) Key operating statistics for Q2 2025 show mixed results across segments. The Critical Illness Recovery segment saw a higher occupancy rate (69%) but lower revenue per patient day. The Rehabilitation Hospital segment experienced strong growth in admissions (+9.3%) and revenue per patient day (+5.8%). The Outpatient Rehabilitation segment's performance was driven by a 3.8% increase in patient visits Q2 2025 Key Segment Metrics (vs. Q2 2024) | Segment / Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Critical Illness Recovery** | | | | | Occupancy Rate | 69% | 67% | +3.0% | | Revenue per patient day | $2,148 | $2,159 | -0.5% | | **Rehabilitation Hospital** | | | | | Admissions | 9,102 | 8,325 | +9.3% | | Revenue per patient day | $2,236 | $2,113 | +5.8% | | **Outpatient Rehabilitation** | | | | | Number of visits | 2,934,026 | 2,827,625 | +3.8% | | Revenue per visit | $100 | $100 | 0.0% | [Adjusted EBITDA Reconciliation](index=14&type=section&id=Adjusted%20EBITDA%20Reconciliation) The company provides a reconciliation from income from continuing operations to Adjusted EBITDA. For Q2 2025, income from continuing operations of $57.9 million reconciled to an Adjusted EBITDA of $125.4 million. For H1 2025, income from continuing operations of $132.6 million reconciled to an Adjusted EBITDA of $276.9 million. The reconciliation details adjustments for taxes, interest, depreciation, stock compensation, and other items - Adjusted EBITDA is defined as earnings from continuing operations excluding interest, taxes, D&A, stock compensation, and other specific items like transaction costs and equity in earnings of unconsolidated subsidiaries[39](index=39&type=chunk)[40](index=40&type=chunk) Adjusted EBITDA Reconciliation Summary (in thousands) | Period | Income from Continuing Ops, Net of Tax | Adjusted EBITDA | | :--- | :--- | :--- | | Q2 2025 | $57,879 | $125,411 | | Q2 2024 | $37,638 | $124,729 | | H1 2025 | $132,611 | $276,856 | | H1 2024 | $99,167 | $290,504 | 2025 Full Year Outlook Reconciliation (in millions) | Metric | Low Range | High Range | | :--- | :--- | :--- | | Income from continuing operations, net of tax | $214 | $230 | | Adjusted EBITDA | $510 | $530 |

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the company's interim financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents the unaudited interim financial statements for the periods ended June 30, 2025, along with accompanying notes detailing accounting policies, dispositions, segment information, debt, and legal contingencies [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, including assets, liabilities, and equity, as of June 30, 2025, and December 31, 2024 Balance Sheet Highlights (in thousands) | Balance Sheet Highlights (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $1,080,890 | $1,019,777 | | **Total Assets** | $5,742,250 | $5,607,951 | | **Total Current Liabilities** | $938,990 | $977,651 | | **Long-term debt, net of current portion** | $1,839,631 | $1,691,546 | | **Total Liabilities** | $3,742,988 | $3,610,856 | | **Total Equity** | $1,990,769 | $1,986,928 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement presents the company's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Income Statement (in thousands) | Income Statement (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $1,339,579 | $1,281,748 | $2,692,751 | $2,602,959 | | **Income from continuing operations, net of tax** | $57,879 | $37,638 | $132,611 | $99,167 | | **Income from discontinued operations, net of tax** | $0 | $57,128 | $0 | $112,766 | | **Net income attributable to Holdings** | $40,571 | $77,563 | $97,252 | $174,460 | | **EPS from continuing operations (basic & diluted)** | $0.32 | $0.17 | $0.76 | $0.50 | | **Total EPS (basic & diluted)** | $0.32 | $0.60 | $0.76 | $1.35 | - Net income and total EPS decreased significantly in 2025 due to the absence of discontinued operations, while continuing operations showed strong growth[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Highlights (in thousands) | Cash Flow Highlights (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $106,835 | $211,463 | | **Net cash used in investing activities** | ($116,984) | ($111,725) | | **Net cash provided by (used in) financing activities** | $2,804 | ($72,584) | | **Net (decrease) increase in cash** | ($7,345) | $27,154 | - Net cash from operating activities significantly decreased in the first six months of 2025 due to the Concentra spin-off, while financing activities included **$97.6 million** in common stock repurchases[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the accounting policies, significant transactions, and other disclosures supporting the financial statements - **Dispositions (Note 3):** The tax-free distribution of Concentra was completed in November 2024, with its 2024 financial results presented as discontinued operations[31](index=31&type=chunk)[33](index=33&type=chunk) - **Segment Information (Note 10):** In Q2 2025, Rehabilitation Hospital revenue grew **17.2%** to **$313.8 million**, Outpatient Rehabilitation revenue grew **3.8%** to **$327.6 million**, while Critical Illness Recovery Hospital revenue decreased **0.6%** to **$601.1 million**[55](index=55&type=chunk) - **Long-Term Debt (Note 9):** Total debt as of June 30, 2025, was approximately **$1.88 billion**, comprising a **$1.04 billion** term loan, **$250 million** revolving facility, and **$550 million** in senior notes[47](index=47&type=chunk) - **Legal Proceedings (Note 13):** The company faces ongoing U.S. Department of Justice investigations concerning billing practices for physical and respiratory therapy services at certain locations[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - **Subsequent Events (Note 14):** On July 30, 2025, the Board of Directors declared a quarterly cash dividend of **$0.0625** per share[69](index=69&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's operational and financial performance, including segment results, regulatory changes, liquidity, and capital resources [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance across its operating segments for the quarter and year-to-date periods Segment Performance (Q2 2025 vs Q2 2024) | Segment Performance (Q2 2025 vs Q2 2024) | Revenue Change | Adjusted EBITDA Change | Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | | **Critical illness recovery hospital** | (0.6)% | (21.6)% | 9.4% (vs 11.9%) | | **Rehabilitation hospital** | 17.2% | 14.7% | 22.6% (vs 23.1%) | | **Outpatient rehabilitation** | 3.8% | 6.1% | 9.3% (vs 9.1%) | | **Total Company** | 4.5% | 0.5% | 9.4% (vs 9.7%) | - The Critical Illness segment experienced revenue and profitability declines in Q2 2025 due to lower revenue per patient day, higher Medicare high-cost outlier thresholds, and increased labor expenses[119](index=119&type=chunk)[124](index=124&type=chunk) - The Rehabilitation Hospital segment demonstrated strong performance in Q2 2025 with a **17.2%** revenue increase, driven by a **7.6%** rise in patient days and a **5.8%** increase in revenue per patient day[120](index=120&type=chunk) - General and administrative expenses decreased to **2.7%** of revenue in Q2 2025 from **3.9%** in Q2 2024, primarily due to lower stock compensation expense post-Concentra spin-off[122](index=122&type=chunk) [Regulatory Changes](index=26&type=section&id=Regulatory%20Changes) This section outlines recent legislative and regulatory developments impacting the company's operations and reimbursement rates - The 'One Big Beautiful Bill Act' (OBBBA), enacted July 4, 2025, is projected to reduce federal Medicaid funding by approximately **$1 trillion** over 10 years, potentially leading to state-level reimbursement cuts[93](index=93&type=chunk) - For fiscal year 2025, the Medicare standard federal rate for Long-Term Care Hospitals (LTCHs) increased to **$49,383** from **$48,117**, though increased fixed-loss amounts for high-cost outlier cases may negatively impact revenue[96](index=96&type=chunk) - For fiscal year 2025, the Medicare standard payment conversion factor for Inpatient Rehabilitation Facilities (IRFs) increased to **$18,907** from **$18,541**[104](index=104&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows, debt, and available capital, including details on its stock repurchase program - Net cash from operating activities for the first six months of 2025 was **$106.8 million**, a significant decrease from **$211.5 million** in 2024, primarily due to the Concentra spin-off[150](index=150&type=chunk) - The company repurchased **6.4 million** shares of common stock for approximately **$96.5 million** during the first six months of 2025 under its **$1.0 billion** repurchase program[156](index=156&type=chunk) - As of June 30, 2025, the company held **$52.3 million** in cash and had **$319.1 million** available under its revolving credit facility[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the company's exposure to market risks, primarily interest rate fluctuations on variable-rate debt, and strategies for mitigation - The company is exposed to interest rate risk on its variable-rate credit facilities, totaling approximately **$1.29 billion** as of June 30, 2025[164](index=164&type=chunk)[165](index=165&type=chunk) - An interest rate cap agreement is in effect until March 31, 2028, which limits the Term SOFR rate to **4.5%** on **$1.0 billion** of the term loan principal[166](index=166&type=chunk) - A hypothetical **0.25%** increase in market interest rates would increase the company's annual interest expense by **$2.5 million**[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Based on an evaluation as of June 30, 2025, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures are effective - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[168](index=168&type=chunk) - There were no changes in internal control over financial reporting during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, these controls[169](index=169&type=chunk) [PART II: OTHER INFORMATION](index=42&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional disclosures on legal proceedings, risk factors, equity sales, and other corporate information [Item 1. Legal Proceedings](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section directs readers to Note 13 of the condensed consolidated financial statements for information regarding the company's ongoing legal matters and contingencies - For details on legal proceedings, the report refers to the 'Litigation' section within Note 13 – Commitments and Contingencies[171](index=171&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section provides an update to the company's risk factors, emphasizing the potential negative effects of changes in U.S. tariff and import/export regulations - The company highlights risks related to U.S. trade policy, including new tariffs and potential changes to treaties, which could materially affect global economic conditions and the business[173](index=173&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company details its stock repurchase activity under its authorized $1.0 billion program Share Repurchases (Q2 2025) | Share Repurchases (Q2 2025) | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | **April 2025** | 31,620 | $18.24 | | **May 2025** | 5,164,095 | $14.84 | | **June 2025** | 599,078 | $14.95 | | **Total Q2 2025** | **5,794,793** | **$14.87** | - The company's Board of Directors authorized a common stock repurchase program of up to **$1.0 billion**, effective until December 31, 2025[174](index=174&type=chunk) [Item 5. Other Information](index=44&type=section&id=ITEM%205.%20OTHER%20INFORMATION) During the second quarter of 2025, none of the company's directors or executive officers adopted or terminated a Rule 10b5-1 trading plan for the purchase or sale of company securities - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[180](index=180&type=chunk) [Item 6. Exhibits](index=45&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act of 2002 and XBRL data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[181](index=181&type=chunk)