Financial Data and Key Metrics Changes - Revenue for Q2 increased by 12% to $1.46 billion, while adjusted EBITDA rose by 17.2% to $318.6 million [12][17] - Total discharges for Q2 increased by 7.2%, with same-store discharges growing by 4.7% [5][12] - Net revenue per discharge increased by 4.2%, benefiting from a decrease in bad debt expense to 2% [12][14] Business Line Data and Key Metrics Changes - Discharges for neurological conditions and stroke grew by 126.7% in Q2 [6] - The discharge community rate was 84.8%, with discharge to acute and SNF rates at 8.5% and 5.8% respectively, outperforming industry averages [6][10] Market Data and Key Metrics Changes - The demand for inpatient rehabilitation services is significantly underserved, particularly as the U.S. population ages, with the Medicare beneficiary population projected to grow substantially [8][9] - The 65+ population is growing at a CAGR of approximately 3%, while the supply of licensed IRF beds has increased only nominally [9] Company Strategy and Development Direction - The company plans to open five additional hospitals and expand existing facilities, increasing total bed capacity significantly [7][17] - The focus remains on treating complex medical conditions, leveraging clinical expertise to develop best-in-class protocols [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of the inpatient rehabilitation market, citing a favorable regulatory environment and increasing demand [8][11] - The company is raising its 2025 guidance for net operating revenue and adjusted EBITDA based on strong Q2 performance [17] Other Important Information - The company repurchased approximately 232,000 shares for $24.7 million and increased its quarterly dividend to $0.19 per share [15] - Adjusted free cash flow increased by 30.5% to approximately $186 million, with year-to-date adjusted free cash flow up 31.7% [14][15] Q&A Session Summary Question: What are the occupancy rates and comfort levels for single bedroom facilities? - Occupancy in Q2 was 76.6%, up 210 basis points year-over-year, with plans to expand when occupancy stabilizes above 80% [20][22] Question: What are the company's thoughts on quality ratings and initiatives? - Management supports quality measurements and believes they would perform well if included in future regulations [24][25] Question: How does the company share quality results with stakeholders? - The company shares metrics like discharge community rates and patient satisfaction scores with referral sources and joint venture partners [30][31] Question: What is the story behind the increase in managed care pricing assumptions? - Growth in the VA Community Care Network has contributed to an increase in managed care pricing, now comprising almost 18% of the overall managed care business [34][36] Question: What are the expectations for EBITDA in the second half of the year? - The company anticipates incurring most preopening and ramp-up costs in the second half, with a slight increase in bad debt expected [40][41] Question: How is the company managing benefits expenses? - Benefits expenses increased by 18%, driven by high dollar medical claims, with a focus on managing these costs going forward [94][96] Question: What is the company's strategy regarding acquisitions? - Currently, there are no identified service lines for acquisition outside of inpatient rehab, with a focus on de novo expansions instead [68][69]

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]