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]

[Company Announcement and First Quarter 2025 Highlights](index=1&type=section&id=Company%20Announcement%20and%20First%20Quarter%202025%20Highlights) Select Medical reported Q1 2025 revenue growth and increased income from continuing operations, despite a decline in Adjusted EBITDA, following the Concentra spin-off [First Quarter 2025 Financial Performance](index=1&type=section&id=First%20Quarter%202025%20Financial%20Performance) Q1 2025 saw **2.4% revenue growth** and a **21.5% rise in income from continuing operations**, with an **8.7% Adjusted EBITDA decrease** Q1 2025 vs Q1 2024 Key Financial Performance (Continuing Operations, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :--------------------------------- | :----------------- | :----------------- | :------- | | Revenue | $1,353.2 | $1,321.2 | 2.4% | | Income from continuing operations before other income and expense | $112.7 | $118.5 | (4.8)% | | Income from continuing operations, net of tax | $74.7 | $61.5 | 21.5% | | Adjusted EBITDA | $151.4 | $165.8 | (8.7)% | | Earnings per common share from continuing operations | $0.44 | $0.33 | 33.3% | [Company Overview](index=1&type=section&id=Company%20Overview) Select Medical is a leading operator of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States, with a significant presence across 40 states and the District of Columbia - 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[5](index=5&type=chunk) [Concentra Spin-off Impact](index=1&type=section&id=Concentra%20Spin-off%20Impact) On November 25, 2024, Select Medical completed a tax-free distribution of Concentra Group Holdings Parent, Inc. shares to its stockholders, leading to Concentra's results being reclassified and presented as discontinued operations - Select Medical completed a tax-free distribution of **104,093,503 shares** of common stock of Concentra Group Holdings Parent, Inc. to its stockholders on November 25, 2024[4](index=4&type=chunk) - The results of Concentra are presented as discontinued operations and have been excluded from both continuing operations and segment results for the three months ended March 31, 2024[4](index=4&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) An overview of Q1 2025 performance across Critical Illness Recovery, Rehabilitation, and Outpatient Rehabilitation segments, highlighting varied revenue and Adjusted EBITDA trends [Critical Illness Recovery Hospital Segment](index=2&type=section&id=Critical%20Illness%20Recovery%20Hospital%20Segment) The Critical Illness Recovery Hospital segment experienced a decline in Q1 2025, with revenue decreasing by 2.9% and Adjusted EBITDA falling by 25.3%, resulting in a lower Adjusted EBITDA margin Critical Illness Recovery Hospital Segment Performance (Q1 2025 vs Q1 2024, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------- | :----------------- | :----------------- | :------- | | Revenue | $637.0 | $655.9 | (2.9)% | | Adjusted EBITDA | $86.6 | $115.9 | (25.3)% | | Adjusted EBITDA margin | 13.6% | 17.7% | | [Rehabilitation Hospital Segment](index=2&type=section&id=Rehabilitation%20Hospital%20Segment) The Rehabilitation Hospital segment showed strong growth in Q1 2025, with revenue increasing by 15.7% and Adjusted EBITDA rising by 14.7%, while maintaining a stable Adjusted EBITDA margin Rehabilitation Hospital Segment Performance (Q1 2025 vs Q1 2024, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------- | :----------------- | :----------------- | :------- | | Revenue | $307.4 | $265.7 | 15.7% | | Adjusted EBITDA | $70.4 | $61.4 | 14.7% | | Adjusted EBITDA margin | 22.9% | 23.1% | | [Outpatient Rehabilitation Segment](index=2&type=section&id=Outpatient%20Rehabilitation%20Segment) The Outpatient Rehabilitation segment reported modest revenue growth of 1.4% in Q1 2025, but experienced a slight decrease in Adjusted EBITDA and its corresponding margin Outpatient Rehabilitation Segment Performance (Q1 2025 vs Q1 2024, Millions) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------- | :----------------- | :----------------- | :------- | | Revenue | $307.3 | $303.2 | 1.4% | | Adjusted EBITDA | $24.3 | $24.9 | (2.6)% | | Adjusted EBITDA margin | 7.9% | 8.2% | | [Shareholder Actions](index=2&type=section&id=Shareholder%20Actions) Details the company's Q1 2025 cash dividend declaration and ongoing common stock repurchase program, reflecting capital allocation strategies [Cash Dividend Declaration](index=2&type=section&id=Cash%20Dividend%20Declaration) Select Medical's Board of Directors declared a cash dividend of $0.0625 per share, payable in May 2025, with future declarations subject to various financial and operational factors - On April 30, 2025, Select Medical's Board of Directors declared a cash dividend of **$0.0625 per share**, payable on or about May 29, 2025, to stockholders of record as of May 15, 2025[9](index=9&type=chunk) - The declaration and payment of future dividends are at the discretion of the Board, considering factors such as financial condition, operating results, available cash, and indebtedness[10](index=10&type=chunk) [Stock Repurchase Program](index=3&type=section&id=Stock%20Repurchase%20Program) The company has an authorized common stock repurchase program of up to $1.0 billion, which remains in effect until December 31, 2025. In Q1 2025, Select Medical repurchased 649,804 shares for approximately $11.4 million - The Board of Directors authorized a common stock repurchase program to repurchase up to **$1.0 billion** worth of shares, remaining in effect until December 31, 2025[11](index=11&type=chunk) Stock Repurchase Activity (Q1 2025 and Inception-to-date, Millions) | Period | Shares Repurchased | Cost (Millions) | Average Price Per Share | | :-------------------------- | :----------------- | :---------------- | :---------------------- | | Q1 2025 | 649,804 | $11.4 | $17.52 | | Inception through March 31, 2025 | 48,884,627 | $611.7 | $12.51 | [Business Outlook](index=3&type=section&id=Business%20Outlook) Select Medical's updated fiscal year 2025 projections for revenue and Adjusted EBITDA, alongside reaffirmed earnings per share guidance [Fiscal Year 2025 Outlook](index=3&type=section&id=Fiscal%20Year%202025%20Outlook) Select Medical adjusted its 2025 business outlook for revenue and Adjusted EBITDA, while reaffirming its guidance for fully diluted earnings per share Fiscal Year 2025 Business Outlook (Billions/Millions) | Metric | Range (Billions/Millions) | | :-------------------------- | :------------------------ | | Revenue | $5.3 to $5.5 billion | | Adjusted EBITDA | $510.0 to $530.0 million | | Fully diluted earnings per share | $1.09 to $1.19 | [Additional Information](index=3&type=section&id=Additional%20Information) Provides details for the upcoming Q1 earnings conference call and outlines significant forward-looking statements and associated risk factors [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Select Medical will host a conference call on May 2, 2025, to discuss its first quarter results and business outlook, accessible via live webcast or telephone dial-in - A conference call regarding Q1 results and business outlook will be held on **Friday, May 2, 2025, at 9:00 am ET**[14](index=14&type=chunk) - The conference call will be a live webcast accessible at www.selectmedicalholdings.com, with a replay available shortly after[14](index=14&type=chunk) - Listeners can pre-register for the call to obtain dial-in numbers and unique passcodes for telephone participation and Q&A[15](index=15&type=chunk) [Forward-Looking Statements and Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) The report contains forward-looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from expectations. Key risks include changes in government reimbursement, adverse economic conditions, and shortages in qualified healthcare professionals - Statements not describing historical facts are 'forward-looking' and actual results may differ materially due to various risks and uncertainties[17](index=17&type=chunk)[19](index=19&type=chunk) - Key risk factors include changes in government reimbursement, adverse economic conditions (including inflation), shortages in qualified healthcare professionals, and the failure to maintain Medicare certifications[18](index=18&type=chunk) - Other risks involve potential negative impacts from public threats like pandemics, government investigations, difficulties with acquisitions or joint ventures, and the loss of key management team members[18](index=18&type=chunk)[20](index=20&type=chunk) [Financial Tables](index=6&type=section&id=Financial%20Tables) Comprehensive financial statements and key operational statistics for Q1 2025, including income, balance sheet, cash flow, and segment-specific performance data [I. Condensed Consolidated Statements of Operations](index=6&type=section&id=I.%20Condensed%20Consolidated%20Statements%20of%20Operations) This table presents the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2025, detailing revenue, costs, income from continuing operations, and net income, highlighting a 2.4% revenue increase and a 21.5% rise in income from continuing operations, net of tax Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2024 and 2025, Thousands) | | | 2024 | 2025 | % Change | |:---|:---|:---|:---|:---|\ | Revenue | $ | 1,321,211 | $ 1,353,172 | 2.4% | | Costs and expenses: | | | | | | Cost of services, exclusive of depreciation and amortization | | 1,120,711 | 1,172,611 | 4.6 | | General and administrative | | 48,447 | 33,008 | (31.9) | | Depreciation and amortization | | 35,584 | 34,808 | (2.2) | | Total costs and expenses | | 1,204,742 | 1,240,427 | 3.0 | | Other operating income | | 2,000 | — | N/M | | Income from continuing operations before other income and expense | | 118,469 | 112,745 | (4.8) | | Other income and expense: | | | | | | Equity in earnings of unconsolidated subsidiaries | | 10,421 | 12,512 | 20.1 | | Interest expense | | (40,681) | (29,072) | (28.5) | | Income from continuing operations before income taxes | | 88,209 | 96,185 | 9.0 | | Income tax expense from continuing operations | | 26,680 | 21,453 | (19.6) | | Income from continuing operations, net of tax | | 61,529 | 74,732 | 21.5 | | Discontinued operations: | | | | | | Income from discontinued business | | 65,416 | — | N/M | | Income tax expense from discontinued business | | 9,778 | — | N/M | | Income from discontinued operations, net of tax | | 55,638 | — | N/M | | Net income | | 117,167 | 74,732 | (36.2) | | Less: Net income attributable to non-controlling interests | | 20,270 | 18,051 | (10.9) | | Net income attributable to Select Medical | $ | 96,897 | $ 56,681 | (41.5)% | | Net income attributable to Select Medical's common stockholders: | | | | | | Income from continuing operations, net of tax | $ | 42,582 | $ 56,681 | | | Income from discontinued operations, net of tax | | 54,315 | — | | | Net income attributable to Select Medical's common stockholders | $ | 96,897 | $ 56,681 | | | Earnings per common share: | | | | | | Continuing operations - basic and diluted | $ | 0.33 | $ 0.44 | | | Discontinued operations - basic and diluted | | 0.42 | — | | | Total earnings per common share - basic and diluted | $ | 0.75 | $ 0.44 | | [II. Earnings per Share](index=7&type=section&id=II.%20Earnings%20per%20Share) This section details the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2025, applying the two-class method due to participating unvested restricted stock awards Income from Continuing Operations, Net of Tax, Attributable to Select Medical and Participating Securities (Thousands) | | Three Months Ended March 31, | | |:---|:---|:---|\ | | 2024 | 2025 | | Income from continuing operations, net of tax | $ 61,529 | $ 74,732 | | Less: net income attributable to non-controlling interests | 18,947 | 18,051 | | Income from continuing operations, net of tax, attributable to Select Medical's common stockholders | 42,582 | 56,681 | | Less: distributed and undistributed net income attributable to participating securities | 1,493 | 1,145 | | Distributed and undistributed income from continuing operations, net of tax, attributable to common shares | $ 41,089 | $ 55,536 | Computation of EPS Under Two-Class Method (Three Months Ended March 31, 2024 and 2025, Thousands) | | 2024 | | | | 2025 | | | | |:---|:---|:---|:---|:---|:---|:---|:---|:---|\ | | Income from Continuing Operations, Net of Tax, Allocation | Shares | Basic and Diluted EPS | Income from Continuing Operations, Net of Tax, Allocation | Shares | Basic and Diluted EPS | | Common shares | $ 41,089 | 123,859 | $ 0.33 | $ 55,536 | 126,205 | $ 0.44 | | Participating securities | 1,493 | 4,501 | $ 0.33 | 1,145 | 2,602 | $ 0.44 | | Total | $ 42,582 | | | $ 56,681 | | | [III. Condensed Consolidated Balance Sheets](index=8&type=section&id=III.%20Condensed%20Consolidated%20Balance%20Sheets) This table provides the condensed consolidated balance sheets as of December 31, 2024, and March 31, 2025, outlining current and non-current assets, liabilities, and total equity, showing an increase in total assets and total equity Condensed Consolidated Balance Sheets (December 31, 2024 and March 31, 2025, Thousands) | | December 31, 2024 | March 31, 2025 | |:---|:---|:---|\ | Assets | | | | Current Assets: | | | | Cash and cash equivalents | $ 59,694 | $ 53,213 | | Accounts receivable | 821,385 | 908,185 | | Other current assets | 138,698 | 130,894 | | Total Current Assets | 1,019,777 | 1,092,292 | | Operating lease right-of-use assets | 908,095 | 909,180 | | Property and equipment, net | 872,185 | 894,920 | | Goodwill | 2,331,898 | 2,331,898 | | Identifiable intangible assets, net | 103,183 | 102,544 | | Other assets | 372,813 | 365,169 | | Total Assets | $ 5,607,951 | $ 5,696,003 | | Liabilities and Equity | | | | Current Liabilities: | | | | Payables and accruals | $ 777,781 | $ 734,841 | | Current operating lease liabilities | 179,601 | 181,605 | | Current portion of long-term debt and notes payable | 20,269 | 28,353 | | Total Current Liabilities | 977,651 | 944,799 | | Non-current operating lease liabilities | 787,124 | 787,861 | | Long-term debt, net of current portion | 1,691,546 | 1,767,409 | | Non-current deferred tax liability | 81,497 | 75,245 | | Other non-current liabilities | 73,038 | 74,652 | | Total Liabilities | 3,610,856 | 3,649,966 | | Redeemable non-controlling interests | 10,167 | 9,021 | | Total equity | 1,986,928 | 2,037,016 | | Total Liabilities and Equity | $ 5,607,951 | $ 5,696,003 | [IV. Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=IV.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table presents the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2025, showing a significant reduction in net cash used in operating activities and a decrease in net cash provided by financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2024 and 2025, Thousands) | | 2024 | 2025 | |:---|:---|:---|\ | Operating activities | | | | Net income | $ 117,167 | $ 74,732 | | Adjustments to reconcile net income to net cash used in operating activities: | | | | Distributions from unconsolidated subsidiaries | 12,374 | 20,145 | | Depreciation and amortization | 54,069 | 34,808 | | Provision for expected credit losses | 854 | 2,283 | | Equity in earnings of unconsolidated subsidiaries | (10,421) | (12,512) | | (Gain) loss on sale or disposal of assets | 44 | (23) | | Stock compensation expense | 11,610 | 3,892 | | Amortization of debt discount, premium, and issuance costs | 750 | 783 | | Deferred income taxes | (6,891) | (5,655) | | Changes in operating assets and liabilities, net of effects of business combinations: | | | | Accounts receivable | (195,308) | (89,083) | | Other current assets | (9,611) | (12,230) | | Other assets | 2,363 | 2,127 | | Accounts payable and accrued expenses | (43,689) | (22,724) | | Net cash used in operating activities | (66,689) | (3,457) | | Investing activities | | | | Business combinations, net of cash acquired | (5,405) | — | | Purchases of property and equipment | (52,517) | (52,339) | | Proceeds from sale of assets | 265 | 24 | | Net cash used in investing activities | (57,657) | (52,315) | | Financing activities | | | | Borrowings on revolving facilities | 495,000 | 405,000 | | Payments on revolving facilities | (265,000) | (330,000) | | Payments on term loans | (79,085) | (2,625) | | Borrowings of other debt | 17,728 | 16,015 | | Principal payments on other debt | (9,061) | (7,729) | | Dividends paid to common stockholders | (16,045) | (8,060) | | Repurchases of common stock | — | (11,389) | | Decrease in overdrafts | (1,740) | (5,120) | | Proceeds from issuance of non-controlling interests | 4,002 | 7,944 | | Distributions to and purchases of non-controlling interests | (12,839) | (14,745) | | Net cash provided by financing activities | 132,960 | 49,291 | | Net increase (decrease) in cash and cash equivalents | 8,614 | (6,481) | | Cash and cash equivalents at beginning of period | 84,006 | 59,694 | | Cash and cash equivalents at end of period | $ 92,620 | $ 53,213 | | Supplemental information | | | | Cash paid for interest, excluding amounts received of $22,515 under the interest rate cap contract during the three months ended March 31, 2024 | $ 88,834 | $ 23,772 | | Cash paid for taxes | 604 | 1,472 | [V. Key Statistics](index=10&type=section&id=V.%20Key%20Statistics) This table provides detailed operational and financial key statistics for the Critical Illness Recovery Hospital, Rehabilitation Hospital, and Outpatient Rehabilitation segments for the three months ended March 31, 2024 and 2025, including revenue, patient days/visits, and Adjusted EBITDA Key Statistics by Segment (Three Months Ended March 31, 2024 and 2025, Thousands) | | | 2024 | | 2025 | % Change | |:---|:---|:---|:---|:---|:---|\ | Critical Illness Recovery Hospital | | | | | | | | Number of hospitals operated – end of period | | 107 | | 104 | | | | Revenue (,000) | $ | 655,880 | $ | 637,030 | (2.9)% | | Number of patient days | | 294,622 | | 291,324 | (1.1)% | | Number of admissions | | 9,529 | | 9,351 | (1.9)% | | Revenue per patient day | $ | 2,219 | $ | 2,179 | (1.8)% | | Occupancy rate | | 71% | | 73% | 2.8% | | Adjusted EBITDA (,000) | $ | 115,940 | $ | 86,649 | (25.3)% | | Adjusted EBITDA margin | | 17.7% | | 13.6% | | | | Rehabilitation Hospital | | | | | | | | Number of hospitals operated – end of period | | 33 | | 35 | | | | Revenue (,000) | $ | 265,700 | $ | 307,388 | 15.7% | | Number of patient days | | 116,844 | | 122,822 | 5.1% | | Number of admissions | | 8,275 | | 8,848 | 6.9% | | Revenue per patient day | $ | 2,096 | $ | 2,234 | 6.6% | | Occupancy rate | | 87% | | 82% | (5.7)% | | Adjusted EBITDA (,000) | $ | 61,400 | $ | 70,424 | 14.7% | | Adjusted EBITDA margin | | 23.1% | | 22.9% | | | | Outpatient Rehabilitation | | | | | | | | Number of clinics operated – end of period | | 1,922 | | 1,911 | | | | Working days | | 64 | | 63 | | | | Revenue (,000) | $ | 303,158 | $ | 307,342 | 1.4% | | Number of visits | | 2,735,126 | | 2,709,964 | (0.9)% | | Revenue per visit | $ | 99 | $ | 102 | 3.0% | | Adjusted EBITDA (,000) | $ | 24,928 | $ | 24,273 | (2.6)% | | Adjusted EBITDA margin | | 8.2% | | 7.9% | | | [VI. Income from Continuing Operations, Net of Tax, to Adjusted EBITDA Reconciliation (Q1 2025)](index=11&type=section&id=VI.%20Income%20from%20Continuing%20Operations%2C%20Net%20of%20Tax%2C%20to%20Adjusted%20EBITDA%20Reconciliation%20%28Q1%202025%29) This section provides a reconciliation of income from continuing operations, net of tax, to Adjusted EBITDA for Select Medical for the three months ended March 31, 2024 and 2025, defining Adjusted EBITDA as a non-GAAP measure used for performance evaluation and resource allocation - Adjusted EBITDA is a non-GAAP measure commonly used as an analytical indicator of performance in the healthcare industry and by management to evaluate financial performance and determine resource allocation for each segment[28](index=28&type=chunk) - Adjusted EBITDA is defined as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries[29](index=29&type=chunk) Adjusted EBITDA Reconciliation (Three Months Ended March 31, 2024 and 2025, Thousands) | | Three Months Ended March 31, | | |:---|:---|:---|\ | | 2024 | 2025 | | Income from continuing operations, net of tax | $ 61,529 | $ 74,732 | | Income tax expense | 26,680 | 21,453 | | Interest expense | 40,681 | 29,072 | | Equity in earnings of unconsolidated subsidiaries | (10,421) | (12,512) | | Income from continuing operations, before other income and expense | 118,469 | 112,745 | | Stock compensation expense: | | | | Included in general and administrative | 9,682 | 3,108 | | Included in cost of services | 1,762 | 784 | | Depreciation and amortization | 35,584 | 34,808 | | Concentra separation transaction costs | 278 | — | | Adjusted EBITDA | $ 165,775 | $ 151,445 | | Critical illness recovery hospital | $ 115,940 | $ 86,649 | | Rehabilitation hospital | 61,400 | 70,424 | | Outpatient rehabilitation | 24,928 | 24,273 | | Other | (36,493) | (29,901) | | Adjusted EBITDA | $ 165,775 | $ 151,445 | [VII. Income from Continuing Operations, Net of Tax, to Adjusted EBITDA Reconciliation (2025 Business Outlook)](index=12&type=section&id=VII.%20Income%20from%20Continuing%20Operations%2C%20Net%20of%20Tax%2C%20to%20Adjusted%20EBITDA%20Reconciliation%20%282025%20Business%20Outlook%29) This table provides a reconciliation of the full year 2025 Adjusted EBITDA expectations to income from continuing operations, net of tax, presenting both low and high points of the projected range Adjusted EBITDA Reconciliation for Fiscal Year 2025 Business Outlook (Millions) | Non-GAAP Measure Reconciliation | Low (Millions) | High (Millions) | |:---|:---|:---|\ | Income from continuing operations, net of tax, attributable to Select Medical | $ 141 | $ 154 | | Net income attributable to non-controlling interests | 73 | 76 | | Income from continuing operations, net of tax | 214 | 230 | | Income tax expense | 64 | 70 | | Interest expense | 116 | 116 | | Equity in earnings of unconsolidated subsidiaries | (49) | (51) | | Income from continuing operations before other income and expense | 345 | 365 | | Stock compensation expense | 19 | 19 | | Depreciation and amortization | 146 | 146 | | Adjusted EBITDA | $ 510 | $ 530 |