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)

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]