Select Medical Holdings Corporation

Good morning, and thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the third quarter 2025 results and the company's business outlook. Presenting today are the company's executive chairman and co-founder, Robert Ortizio, the company's chief executive officer, Thomas Mullen, and the company's executive vice president and chief financial officer, Michael Metesia. Also on the conference line is the company's Senior Executive Vice President of Strategic Finance and Operations, Martin Jackson. Management will give you an overview of the quarter and then open the call for questions. Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including, without limitation, statements regarding operating results, growth opportunities, and other statements that refer to Select Medical's plans, expectations, strategies, intentions, and beliefs. These forward-looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change. At this time, I will turn the conference over to Mr. Robert Ortizio. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to Select Medical's third quarter 2025 earnings call. As our custom, I'll provide some overview of the quarter and comment on our development efforts, and then I'll turn the call over to our CEO, Tom Mullen. Let me begin with a regulatory update that affects our critical illness recovery hospital segment. On September 22nd, CMS announced the deferment of its expanded Medicare outlier reconciliation criteria, what we commonly have referred to as the 20% transmittal rule. It was originally slated to apply to cost reporting periods beginning on or after October 1, 2024. This rule will now be effective for periods beginning on or after October 1, 2025. The rule's deferral resulted in a favorable revenue adjustment recorded this quarter. We are pleased with the delay of the transmittal and expect the rule to have much less of an impact as labor costs are more stabilized in the cost years now affected by the change. This should result in fewer of our hospitals subjected to an outlier payment reconciliation. While we are pleased with CMS's decision to delay the implementation of this 20% transmittal rule, we believe further reform is needed to ensure Medicare policy supports treatment of high acuity patients in our long-term acute care hospitals. We will continue to actively advocate for policies that enable us to provide critical care for these patients. I would now like to turn to an update on development. During the third quarter, we acquired a 30-bed critical illness recovery hospital in Memphis, Tennessee, and grew our outpatient portfolio by three clinics. Future development efforts remain focused on our inpatient rehabilitation segment. Between now and the first half of 2027, we expect to add 395 inpatient rehabilitation beds through a combination of new openings and strategic bed additions. This month, we opened our fourth rehab hospital with our joint venture partners, the Cleveland Clinic, which operates 32 new beds. By year end, we expect to open a 45-bed rehabilitation hospital in Temple, Texas, and a 32-bed acute rehab unit in Orlando, Florida. We also anticipate adding TED beds to an existing rehab hospital with our joint venture partner, Riverside, in Virginia. Moving to 2026, we expect to open three new inpatient rehab hospitals, including a 58-bed facility in Tucson, Arizona, in partnership with Banner Health, a 63-bed hospital in Ozark, Missouri, with Cox Health, and a 60-bed hospital with AtlantaCare in New Jersey. Additionally, we plan to add two acute rehab units and two neurotransitional units to further enhance our continuum of care and rehabilitation. Looking ahead to 2027, we're preparing to launch a 76-bed rehab hospital in Jersey City, New Jersey, under the Kessler brand. Beyond these projects, our pipeline remains active and promising with additional opportunities under various stages of development. As we advance these initiatives, we will remain focused on strategic investments that drive sustainable growth and long-term value for our shareholders. In addition to development, we continue to evaluate opportunities to increase the return on capital to our shareholders through share repurchase and cash dividends. This quarter, the Board of Directors approved a cash dividend of $0.0625 per share, which is payable on November 25th 2025 to stockholders of record as of November 12, 2025. These actions reflect our ongoing commitment to enhancing shareholder value and positioning the company for continued success. This concludes my remarks, and I'll now turn the call over to Tom Mullen for additional remarks regarding financial performance for the quarter of each of our segments.

Thank you, Bob, and good morning, everyone. On a consolidated basis, revenue grew over 7% to 1.36 billion, compared to 1.27 billion in the prior year. Adjusted EBITDA also increased over 7% to 111.7 million, up from 103.9 million. Earnings per common share from continuing operations rose over 21% to 23 cents, compared to 19 cents per share in the same quarter last year. Moving into our segment results, we will start with the inpatient rehab hospital division, where we delivered another strong quarter. Revenue increased 16% year over year to 328.6 million, and adjusted EBITDA was up 13% to 68 million. Our revenue per patient day increased nearly 5%, and our average daily census rose 11%. Occupancy improved to 83% from 82%, with same-store occupancy rising to 86% from 85%. Our adjusted EBITDA margin declined slightly to 20.7% from 21.3%. In our outpatient rehab division, revenue increased 4% to $325.4 million, which was driven by over 5% growth in our patient visits. Net revenue per visit decreased to 100 from $101 in the same quarter last year. The decrease in net revenue per visit was driven by a reduction in our Medicare reimbursement and an unfavorable shift in payer mix. Adjusted EBITDA decreased over 14% to $24.2 million, with margin declining from 9.1 to 7.4%. In our critical illness recovery hospital division, our revenue increased over 4% to $609.9 million, while adjusted EBITDA rose over 10%, to $56.1 million, up from $50.8 million in the same quarter of last year. Our adjusted EBITDA margin increased to 9.2% from 8.7%. Occupancy remained steady at 65%, with our admissions up 2.1%. That concludes my remarks, and I will turn the call over to Mike Malatesta for additional financial details before we open the call up for questions.