Core Points - Select Medical Holdings Corporation reported a revenue increase of 4.5% to $1,339.6 million for Q2 2025 compared to Q2 2024 [2] - Income from continuing operations, net of tax, rose 53.8% to $57.9 million for Q2 2025 [2] - The company declared a cash dividend of $0.0625 per share, payable on August 28, 2025 [13] Financial Performance - For the six months ended June 30, 2025, revenue increased 3.4% to $2,692.8 million compared to the same period in the prior year [3] - Adjusted EBITDA for the six months was $276.9 million, down from $290.5 million in the prior year [3] - Earnings per common share from continuing operations increased 52.0% to $0.76 for the six months ended June 30, 2025 [3] Segment Performance - Critical Illness Recovery Hospital Segment revenue decreased to $601.1 million for Q2 2025, down from $604.9 million in Q2 2024 [6] - Rehabilitation Hospital Segment revenue increased 17.2% to $313.8 million for Q2 2025 compared to Q2 2024 [8] - Outpatient Rehabilitation Segment revenue increased 3.8% to $327.6 million for Q2 2025 compared to Q2 2024 [11] Stock Repurchase and Dividend - The Board of Directors authorized a stock repurchase program of up to $1.0 billion [15] - During the first half of 2025, Select Medical repurchased 6,375,512 shares at a cost of approximately $96.5 million [16] Business Outlook - Select Medical expects revenue for fiscal year 2025 to be in the range of $5.3 billion to $5.5 billion [17] - Adjusted EBITDA is projected to be between $510.0 million and $530.0 million for 2025 [17]

Company Overview - Select Medical Holdings Corporation is one of the largest operators of critical centers, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the US [1] Investment Focus - Crude Value Insights emphasizes an investment service and community centered on oil and natural gas, focusing on cash flow and companies that generate it, which leads to value and growth prospects with real potential [1]

Core Insights - Select Medical Holdings Corporation (SEM) has entered into a membership interest purchase agreement with Ballad Health to jointly operate a critical illness recovery hospital in Kingsport, TN [1][2][8] - The new facility will be a 46-bed hospital, relocating from Bristol Regional Medical Center to Indian Path Community Hospital after regulatory approvals [2][4] - This partnership aims to enhance care delivery and broaden access to specialized recovery services in the Tri-Cities region, addressing the growing demand for such services [3][4] Company Expansion - The initiative represents a significant investment by SEM to improve accessibility to long-term acute care services in Tennessee, with the company already operating six other critical illness recovery hospitals in the state [4][5] - As of March 31, 2025, SEM operates a total of 104 critical illness recovery hospitals across 29 states, along with 35 rehabilitation hospitals and 1,911 outpatient rehabilitation clinics [5][8] - The expansion initiatives are expected to allow SEM to cater more effectively to an increasing patient base and enhance revenue generation [5][6] Market Performance - SEM's shares have increased by 0.9% over the past month, compared to the industry's growth of 1.8% [7] - The company currently holds a Zacks Rank of 3 (Hold), indicating a stable outlook in the market [7]

Company Overview - Select Medical Holdings Corporation is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States based on the number of facilities [4] - As of March 31, 2025, Select Medical operated 104 critical illness recovery hospitals in 29 states, 35 rehabilitation hospitals in 14 states, and 1,911 outpatient rehabilitation clinics in 39 states and the District of Columbia [4] - The company has operations in 41 states and the District of Columbia [4] Financial Results Announcement - Select Medical will release its financial results for the second quarter ended June 30, 2025, on Thursday, July 31, 2025, after the market closes [1] - A conference call regarding the second quarter results and business outlook will be hosted on Friday, August 1, 2025, at 9:00 am ET [2] - The conference call will be available as a live webcast and can be accessed through the company's website [2]

Core Viewpoint - Select Medical Corporation has entered into a partnership with Ballad Health to jointly operate Select Specialty Hospital – Tri-Cities, enhancing critical illness recovery services in the region [1][3]. Group 1: Partnership Details - Select Medical will be the majority owner and managing partner of the 46-bed joint venture hospital, which will relocate from Bristol Regional Medical Center to Indian Path Community Hospital after regulatory approval [2]. - The partnership aims to expand access to critical illness recovery services, aligning with Ballad Health's commitment to high-quality, specialized care [3]. Group 2: Operational Impact - The relocation of Select Specialty Hospital – Tri-Cities to Kingsport is expected to improve post-acute care and ensure patients receive specialized care closer to home [3]. - Select Medical operates six additional critical illness recovery hospitals across Tennessee, indicating a strong presence in the state [3]. Group 3: Company Background - As of March 31, 2025, Select Medical operates 104 critical illness recovery hospitals, 35 rehabilitation hospitals, and 1,911 outpatient rehabilitation clinics across the United States [5]. - The company has a significant operational footprint, with facilities in 41 states and the District of Columbia [5].

Core Viewpoint - Select Medical Holdings Corporation's shares have declined 17.6% following disappointing first-quarter 2025 results, primarily due to reduced occupancy and admissions in key segments, despite some revenue improvements per patient day [1] Financial Performance - Adjusted earnings per share (EPS) for Q1 2025 were 44 cents, missing the Zacks Consensus Estimate of 45 cents, but up from 33 cents a year ago [2] - Net operating revenues reached $1.35 billion, a 2.4% increase year-over-year, but fell short of the consensus by 0.8% [2] - Total costs and expenses rose 3% year-over-year to $1.2 billion, consistent with estimates, driven by higher service costs [3] Segmental Update Critical Illness Recovery Hospital - Revenues decreased 2.9% year-over-year to $637 million, missing the consensus of $667 million, with a 1.8% decline in revenue per patient day [4] - Patient days fell 1.1% and admissions dropped 1.9% year-over-year, although occupancy improved by 200 basis points [4] - Adjusted EBITDA was $86.6 million, down 25.3% year-over-year, missing estimates [5] Rehabilitation Hospital - Revenues increased 15.7% year-over-year to $307.4 million, surpassing the consensus of $292.1 million, supported by 6.9% growth in admissions [6] - Adjusted EBITDA rose 14.7% year-over-year to $70.4 million, exceeding estimates, though the adjusted EBITDA margin decreased by 20 basis points [6] Outpatient Rehabilitation - Revenues were $307.3 million, a 1.4% year-over-year increase, beating the consensus of $303.8 million [7] - Adjusted EBITDA decreased 2.6% year-over-year to $24.3 million, missing estimates, with a margin decline of 30 basis points [7] Financial Position - As of March 31, 2025, cash and cash equivalents were $53.2 million, down from $59.7 million at the end of 2024 [8] - Total assets increased to $5.7 billion from $5.6 billion at the end of 2024, while long-term debt decreased to $1.8 billion [9] - Total equity rose 2.5% to $2 billion, with net cash used in operations improving to $3.5 million from $66.7 million a year ago [9] Share Repurchase & Dividend Update - In Q1 2025, Select Medical repurchased shares worth $11.4 million, totaling approximately $611.7 million since the program's inception [10] - A cash dividend of 6.25 cents per share was approved, to be paid on May 29 to shareholders of record as of May 15 [10] 2025 Outlook - Management revised revenue expectations to between $5.3 billion and $5.5 billion, down from the previous range of $5.4 billion to $5.6 billion [11] - Adjusted EBITDA is now expected to be between $510 million and $530 million, lower than the earlier estimate of $520 million to $540 million [11] - EPS guidance remains unchanged at between $1.09 and $1.19 [11]

Financial Data and Key Metrics Changes - The company's consolidated revenue increased by over 2% while adjusted EBITDA declined by 9% from $165.8 million to $151.4 million [9] - Earnings per common share from continuing operations increased by 33% to $0.44 compared to $0.33 in the same quarter of the prior year [9] - The company ended the quarter with $1.8 billion of debt outstanding and $53.2 million of cash on the balance sheet [16] Business Line Data and Key Metrics Changes - The inpatient rehab division saw a 16% increase in revenue, 15% in adjusted EBITDA, and a 6% increase in average daily census compared to the first quarter of last year [9] - The outpatient division's revenue increased by 1% despite challenges, with net revenue per visit rising from $99 to $102 [11] - The critical illness recovery hospitals experienced a 3% decline in revenue, driven by a 2% decrease in rate per patient day and a 1% decline in patient days [12] Market Data and Key Metrics Changes - The outpatient division was impacted by severe weather events, estimated to have a $4 million effect on revenue [11] - The critical illness recovery hospital division faced challenges due to regulatory changes, including a significant increase in the high-cost outlier threshold [5][12] Company Strategy and Development Direction - The company plans to open several new rehab hospitals and units, including a 45-bed rehab hospital in Temple, Texas, and a 63-bed rehab hospital in Ozark, Missouri, among others [7][8] - The outpatient division added 10 de novo clinics while strategically closing or consolidating 13 locations to optimize resources [8] - The company is focused on improving patient access, productivity, and investing in technology within the outpatient division [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outpatient division's outlook despite recent challenges, citing a strong finish to the quarter [5] - The company is adjusting its 2025 revenue outlook to a range of $5.3 billion to $5.5 billion, with adjusted EBITDA expected between $510 million and $530 million [19] - Management is actively engaging with regulatory bodies to address challenges related to high-cost outlier impacts and transmittal rules [33][50] Other Important Information - The company repurchased almost 650,000 shares at an average price of $17.52, totaling $11.4 million [14] - A cash dividend of $6.625 per share was declared, payable on May 29, 2025 [15] Q&A Session Summary Question: Outlook for inpatient rehab occupancy - Management expects occupancy to remain around 85% even with new business coming online [21] Question: Impact of regulatory changes on LTACH - The impact of high-cost outlier changes was greater than anticipated, with a 100% increase compared to the previous year [22][24] Question: Mitigation strategies for high-cost outlier and transmittal rule - Management is in ongoing discussions with regulatory bodies to address these challenges [33] Question: Start-up costs comparison - Start-up losses are relatively the same compared to last year [37] Question: Initiatives to improve outpatient rehab margins - The company is implementing technology changes and seeing improvements in commercial contracting rates [41][42] Question: Plans for accelerating growth in rehab - Management confirmed plans to accelerate growth in the rehab division beyond current projects [48]

Financial Data and Key Metrics Changes - The company's consolidated revenue increased by over 2% while adjusted EBITDA declined by 9% from $165.8 million to $151.4 million [9] - Earnings per common share from continuing operations increased by 33% to $0.44 compared to $0.33 in the same quarter of the prior year [9] - The company ended the quarter with $1.8 billion of debt outstanding and $53.2 million of cash on the balance sheet [16] Business Line Data and Key Metrics Changes - The inpatient rehab division saw a 16% increase in revenue, 15% in adjusted EBITDA, and a 6% increase in average daily census compared to the first quarter of last year [9] - The outpatient division's revenue increased by 1% despite challenges, with net revenue per visit rising from $99 to $102 [11] - The critical illness recovery hospitals experienced a 3% decline in revenue, driven by a 2% decrease in rate per patient day and a 1% decline in patient days [12] Market Data and Key Metrics Changes - The outpatient division was impacted by severe weather events, estimated to have a $4 million effect on revenue [11] - The critical illness recovery hospital division faced challenges due to regulatory changes, including a significant increase in the high-cost outlier threshold [5][12] Company Strategy and Development Direction - The company plans to open several new rehab hospitals and units, including a 45-bed rehab hospital in Temple, Texas, and a 63-bed rehab hospital in Ozark, Missouri, among others [7][8] - The outpatient division added 10 de novo clinics while strategically closing or consolidating 13 locations to optimize resources [8] - The company is focused on improving patient access, productivity, and investing in technology within the outpatient division [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outpatient division's outlook despite recent challenges, citing a strong finish to the quarter [5] - The company is adjusting its business outlook for 2025, expecting revenue in the range of $5.3 billion to $5.5 billion and adjusted EBITDA between $510 million and $530 million [19] - Management is actively engaging with regulatory bodies to address challenges related to high-cost outlier impacts and transmittal rules [33][50] Other Important Information - The company repurchased almost 650,000 shares at an average price of $17.52, totaling $11.4 million [14] - A cash dividend of $6.625 per share was declared, payable on May 29, 2025 [15] Q&A Session Summary Question: How should occupancy be thought of for the rest of the year with new capacity coming online? - Management expects occupancy to remain around 85% plus, even with new business coming online [21] Question: Was the miss in LTACH related to internal expectations or consensus? - The impact from high-cost outlier was higher than anticipated, with a 100% increase compared to the previous year [22][24] Question: Any updates on mitigation strategies regarding high-cost outlier and transmittal rule? - Management indicated that Q1 typically has higher acuity patients, and they expect a drop in high-cost outlier impacts as the year progresses [30][31] Question: What do startup costs look like this year versus last year? - Startup losses are relatively the same from last year to this year [38] Question: Any initiatives in outpatient rehab to improve margins? - The company is implementing technology changes and seeing benefits, with expected increases in commercial rates [42][44] Question: Plans to accelerate growth in rehab to diversify away from LTACH? - Management confirmed that there are plans to accelerate growth in rehab, with several projects already signed and under construction [48]

Financial Data and Key Metrics Changes - The company's consolidated revenue increased by over 2% while adjusted EBITDA declined by 9% from $165.8 million to $151.4 million [9] - Earnings per common share from continuing operations increased by 33% to $0.44 compared to $0.33 in the same quarter of the prior year [9] - The company ended the quarter with $1.8 billion of debt outstanding and $53.2 million of cash on the balance sheet [15] Business Line Data and Key Metrics Changes - The inpatient rehab division saw a revenue increase of 16%, adjusted EBITDA increase of 15%, and a 6% increase in average daily census compared to the first quarter of last year [9] - The outpatient division faced challenges due to severe weather events and a 3% reduction in Medicare reimbursement, but had a strong finish to the quarter [4][11] - The critical illness recovery hospital division experienced a revenue decrease of 3% driven by a 2% decline in rate per patient day and a 1% decline in patient days [12] Market Data and Key Metrics Changes - The outpatient division's net revenue per visit increased from $99 to $102, while total visits declined by 1% due to one less workday [11] - The critical illness recovery hospitals' occupancy rate increased from 71% to 73%, but adjusted EBITDA declined by 25% from the prior year [13] Company Strategy and Development Direction - The company plans to open several new rehab hospitals and units, including a 45-bed rehab hospital in Temple, Texas, and a 63-bed rehab hospital in Ozark, Missouri, among others [7][8] - The outpatient division added 10 de novo clinics while strategically closing or consolidating 13 locations to optimize resources [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outpatient division's outlook despite recent challenges, focusing on improving patient access and investing in technology [4] - The company is adjusting its business outlook for 2025, expecting revenue in the range of $5.3 billion to $5.5 billion and adjusted EBITDA between $510 million and $530 million [19] Other Important Information - The company repurchased almost 650,000 shares at an average price of $17.52, totaling $11.4 million [14] - A cash dividend of $6.625 per share was declared, payable on May 29, 2025 [14] Q&A Session Summary Question: How should occupancy be thought about for the rest of the year with new capacity coming online? - Management expects occupancy to stay around 85% plus even with new business coming online [21] Question: Was the miss in LTACH related to internal expectations or consensus? - The impact from high cost outlier was higher than anticipated, with a 100% increase compared to the previous year [22][23] Question: Any updates on mitigation strategies regarding high cost outlier and transmittal rule? - Management is in ongoing conversations with regulatory bodies to address these issues and mitigate impacts [34] Question: What do startup costs look like this year versus last year? - Startup losses are relatively the same from last year to this year [38] Question: Any initiatives in outpatient rehab to improve margins? - The company is implementing technology changes and seeing benefits, with expected increases in commercial rates [42][44] Question: Plans to accelerate growth in rehab to diversify away from LTACH? - There are plans to accelerate growth in rehab, with several projects already signed and under construction [49]

Company Performance - Select Medical reported quarterly earnings of $0.44 per share, missing the Zacks Consensus Estimate of $0.45 per share, and down from $0.77 per share a year ago, representing an earnings surprise of -2.22% [1] - The company posted revenues of $1.35 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.83%, and down from $1.79 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 lost about 3.2% since the beginning of the year, compared to the S&P 500's decline of -5.3% [3] - The current consensus EPS estimate for the coming quarter is $0.25 on revenues of $1.33 billion, and for the current fiscal year, it is $1.14 on revenues of $5.39 billion [7] Industry Outlook - The Medical - HMOs industry, to which Select Medical belongs, is currently in the top 15% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Select Medical's stock performance [5][6]