Financial Data and Key Metrics Changes - Revenue in Q3 2025 increased by 9.4%, with year-to-date revenue growth of 10.6% [4] - Adjusted EBITDA grew by 11.4% in Q3 2025, contributing to a year-to-date growth of 14.5% [4][12] - Q3 adjusted free cash flow decreased by 8.2% to $174.2 million, primarily due to a $55.8 million increase in working capital [14] - Free cash flow increased by 16.5% to $582.5 million, with an increased full-year adjusted free cash flow estimate of $730 to $810 million [14][15] Business Line Data and Key Metrics Changes - Q3 community discharge rate was 84.6%, with a discharge to acute rate of 8.6% and a discharge to SNF rate of 6% [5] - Total discharges increased by 5% in Q3, with a 3.3% increase in net revenue per discharge [9] - Q3 same-store discharge growth was 6.8%, the highest since Q2 2021 [10] Market Data and Key Metrics Changes - The demand for inpatient rehabilitation services remains significantly underserved, particularly as the U.S. population ages [6][8] - The Medicare beneficiary population is projected to grow significantly, with one in five Americans expected to be aged 65 or older by 2030 [6][7] Company Strategy and Development Direction - The company plans to open two additional 50-bed hospitals in Q4 and expects to add approximately 127 beds to existing hospitals in 2025 [6][12] - The company has a pipeline of 14 announced new hospitals with 690 beds, with more than 40 projects in the active pipeline [9] - The strategy includes maintaining a balance between de novo hospital openings and bed expansions to meet the growing demand for IRF services [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market for IRF services, citing a unique position to add capacity in response to unmet needs [18] - The company has not seen any negative impact on referral patterns despite external challenges and remains proactive in communication with partners [62] - Management noted that the overall occupancy rates are on an upward trajectory, with expectations for fluctuations based on capacity additions [60] Other Important Information - The company successfully converted its ERP system to Oracle Fusion without significant operational disruptions [9][55] - The average age of Medicare beneficiary patients is 77 years, with the 75-plus population growing at approximately 4% [7] Q&A Session Summary Question: How should we think about the accelerated bed addition plan impacting volume growth going forward? - Management indicated that the increase in bed expansions reflects the strong performance of de novos and the unmet need for IRF services across the country [18] Question: What level of capex as a percent of revenue should we be modeling to maintain discharge growth? - Growth capex this year is estimated at about $580 million, with an average cost of $800,000 per bed addition [20] Question: What is the target occupancy before expanding a facility? - Facilities typically consider expansion after reaching 80% sustained occupancy, with private room hospitals able to operate efficiently at mid-90% occupancy [22] Question: Did anything surprise you in the quarter versus expectations? - Management noted no surprises other than retro payments and a property assessment, with overall performance aligning with expectations [26] Question: How has the payer mix evolved in Q3 compared to the first half? - Medicare and Medicare Advantage both saw growth, with managed care increasing by 9.2% [28] Question: What are the implications of the Medicare landscape changes? - Management believes that a slowdown in Medicare Advantage growth could lead to greater opportunities in fee-for-service, which pays at a higher rate [40]