Select Medical(US:SEM)2026-02-20 15:00Financial Data and Key Metrics Changes - Total revenue grew more than 6% year-over-year in Q4 2025, with full-year revenue growth exceeding 5% [6][8] - Adjusted EBITDA declined 10% to $104.7 million from $116 million in the prior year, impacted by increased health insurance expenses [7][8] - Earnings per common share from continuing operations was $0.16, compared to a diluted loss per common share of $0.19 in the prior year [7] - Adjusted earnings per common share from continuing operations was $0.16, down from $0.18 last year [8] - For the full year, adjusted EBITDA was $493.2 million, with a 9% margin, compared to $510.4 million and a 9.8% margin in 2024 [9] Business Line Data and Key Metrics Changes - Inpatient Rehab Hospital Division revenue increased over 15% year-over-year to $339.2 million, with adjusted EBITDA rising 11% to $69.2 million [9] - Critical Illness Recovery Hospital Division revenue increased nearly 5% to $629.7 million, with adjusted EBITDA growing 5% to $66.4 million [10] - Outpatient Rehab Division revenue increased to $324.6 million from $319.6 million, driven by nearly 5% growth in patient visits, but net revenue per visit declined to $98 from $102 [10][11] Market Data and Key Metrics Changes - The company added 150 beds in Q4 2025, contributing to a total of 212 rehab beds added for the full year [4] - The company expects to add 399 beds across 2026 and 2027, with several new hospitals and rehab units planned [5] Company Strategy and Development Direction - The company is focused on expanding its inpatient rehabilitation business and has a robust pipeline for growth in 2026 [20] - A cash dividend of $0.0625 per share was approved, reflecting the company's commitment to returning value to shareholders [6] - The company is evaluating strategic alternatives following a take-private proposal from its executive chairman [3] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the outpatient division's recovery, attributing recent challenges to one-time factors [20] - The company anticipates a 2% increase in Medicare rates for 2026, which is expected to positively impact margins [41] - Labor costs have stabilized, and the company is focused on improving staffing levels in certain markets [66] Other Important Information - The company ended the quarter with $1.8 billion of debt and $26.5 million of cash on the balance sheet [12] - Interest expense for the quarter was $28.9 million, slightly up from the previous year [13] - The company expects capital expenditures in the range of $200 million-$220 million for 2026 [14] Q&A Session Summary Question: Can you provide details on the higher health costs and their impact on the outpatient business? - Management indicated that health insurance expenses impacted the outpatient division by approximately $5 million, with variable discounts adding around $6 million, totaling about $11 million in impact [18] Question: What are the expectations for guidance going forward? - Management expressed confidence in the inpatient rehab division and cautiously optimistic outlook for outpatient improvements, noting that the $11 million impact was likely a one-time event [20] Question: Can you elaborate on the special committee's review process? - Management stated they could not comment further on the process beyond the initial update provided [24] Question: Was there any impact from weather in Q1? - Management confirmed that there was no significant impact on inpatient divisions, but outpatient experienced some effects due to weather conditions [25] Question: Can you clarify the outpatient issues and payer mix? - Management noted that the outpatient division faced challenges due to a shift in payer mix and an uptick in managed Medicare population, which impacted net revenue per visit [39] Question: What are the expectations for margins in the outpatient division? - Management expects margins to improve year-over-year in the outpatient division, aided by regulatory changes in Medicare [43]