Select Medical Holdings Corp (SEM) Q3 2025 Earnings Call Highlights: Strong Revenue Growth Amid ...

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Revenue: Increased over 7% to $1.36 billion compared to $1.27 billion in the prior year. Adjusted EBITDA: Increased over 7% to $111.7 million, up from $103.9 million. Earnings per Share: Rose over 21% to $0.23 compared to $0.19 per share in the same quarter last year. Inpatient Rehab Hospital Revenue: Increased 16% year over year to $328.6 million. Inpatient Rehab Hospital Adjusted EBITDA: Up 13% to $68 million. Outpatient Rehab Revenue: Increased 4% to $325.4 million. Outpatient Rehab Adjusted EBITDA: Decreased over 14% to $24.2 million. Critical Illness Recovery Hospital Revenue: Increased over 4% to $609.9 million. Critical Illness Recovery Hospital Adjusted EBITDA: Rose over 10% to $56.1 million. Debt Outstanding: $1.8 billion at the end of the quarter. Cash on Balance Sheet: $60.1 million. Cash Flow from Operating Activities: $175.3 million. Interest Expense: $30 million compared to $31.4 million in the same quarter last year. Capital Expenditures: Expected to be in the range of $180 million to $200 million. 2025 Revenue Outlook: Expected to be in the range of $5.3 billion to $5.5 billion. 2025 Adjusted EBITDA Outlook: Expected to be in the range of $510 million to $530 million. 2025 Earnings per Share Outlook: Increased estimate to be in the range of $1.14 to $1.24.

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Release Date: October 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Revenue grew over 7% to $1.36 billion compared to the previous year. Adjusted EBITDA increased over 7% to $111.7 million. Earnings per common share from continuing operations rose over 21% to $0.23. Inpatient rehab hospital division revenue increased 16% year over year. The company plans to add 395 inpatient rehabilitation beds by the first half of 2027.

Negative Points

Net revenue per visit in the outpatient rehab division decreased due to a reduction in Medicare reimbursement and an unfavorable shift in payer mix. Adjusted EBITDA in the outpatient rehab division decreased over 14%, with margin declining from 9.1% to 7.4%. The high cost outlier threshold continues to negatively impact the LTAC business. The outpatient segment experienced softness, impacting overall guidance. The company faces ongoing challenges with Medicare reimbursement cuts in the outpatient rehab segment.

Q & A Highlights

Q: Can you discuss the ongoing impact of the high-cost outlier and what mitigation tactics you can employ? A: Thomas Mullin, CEO: The high-cost outlier and the fixed loss threshold have negatively impacted our LTAC business, limiting our ability to accommodate acutely ill patients. We've mitigated this by using inpatient rehab hospitals in shared markets to transition patients. Our admissions are up, but our average daily census is slightly down. Robert Ortenzio, Executive Chairman: In DC, we have more open channels with CMS and committees. We successfully deferred the 20% transmittal rule, but long-term challenges remain due to the rising fixed loss threshold.

Story Continues

Q: Has there been any discussion about raising the 8% threshold for outlier payments? A: Robert Ortenzio, Executive Chairman: We propose various options for relief, including adjusting the fixed loss threshold and other levers. The LTAC reimbursement system is complex, and we work with the industry to present options to policymakers. The fixed loss threshold has been a significant challenge, but we continue to advocate for changes.

Q: What was the revenue and EBITDA impact from the delay of the 20% transmittal rule? A: Michael Malatesta, CFO: The net impact, including revenue and expense reversals, was in the $12 to $15 million range for the quarter. For the year, the impact was negligible, as the timeline progression reduced its significance.

Q: Can you provide more detail on the softness in the outpatient segment? A: Michael Malatesta, CFO: We saw a 5% increase in volume but faced pressure on rates due to Medicare headwinds and a shift in payer mix. We aim to address this with investments in our systems and scheduling modules to improve productivity.

Q: How do you view the labor environment going into 2026? A: Michael Malatesta, CFO: The labor environment is more stable than in previous years. Agency utilization in our critical illness division is stable at around 15%, and agency rates are back to pre-COVID levels. Full-time equivalent increases are consistent, slightly under 3%.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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