These are top 10 stocks traded on the Robinhood UK platform in July
Select Medical Holdings Corporation (SEM) reported its first-quarter earnings for 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $0.75, significantly higher than the forecasted $0.37. Despite this earnings beat, the company’s revenue fell short of expectations, coming in at $1.35 billion against a forecast of $1.39 billion. Following the earnings announcement, Select Medical’s stock price fell by 13.38% in after-hours trading, closing at $15.80, down from the previous close of $18.24. According to InvestingPro analysis, the company maintains a GOOD overall financial health score, with particularly strong marks in profitability metrics. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, presenting a potential opportunity for value investors.
Key Takeaways
- Select Medical’s EPS of $0.75 exceeded the forecast by more than double.
- Revenue of $1.35 billion missed expectations by approximately $40 million.
- Stock price declined by 13.38% after the earnings call, indicating investor concerns.
- Revised 2025 guidance projects revenue between $5.3 billion and $5.5 billion.
- Inpatient rehab division showed strong growth with a 16% revenue increase.
Company Performance
Select Medical reported a mixed performance for Q1 2025. While the company achieved a significant increase in EPS, revenue growth was modest, and adjusted EBITDA declined by 9% to $151.4 million. The inpatient rehabilitation division was a bright spot, with revenue rising by 16%. However, challenges in other segments, such as a 3% revenue decrease in critical illness recovery hospitals, tempered overall growth.
Financial Highlights
- Revenue: $1.35 billion, a 2% increase from the previous year.
- Earnings per share: $0.75, a 33% increase YoY.
- Adjusted EBITDA: $151.4 million, down from $165.8 million YoY.
- Net debt: $1.8 billion, with $53.2 million in cash.
Earnings vs. Forecast
Select Medical’s actual EPS of $0.75 significantly outperformed the forecast of $0.37, representing a surprise of over 100%. However, revenue fell short by about $40 million, which may have contributed to the negative market reaction. The magnitude of the EPS beat is notable compared to previous quarters, indicating strong operational performance despite revenue challenges.
Market Reaction
Following the earnings announcement, Select Medical’s stock fell by 13.38%, closing at $15.80 in after-hours trading. This drop reflects investor concerns over the revenue miss and the company’s ability to meet future growth targets. The stock’s decline contrasts with its 52-week high of $40.98, indicating a cautious market sentiment. InvestingPro data shows analyst price targets ranging from $19 to $25, suggesting potential upside from current levels. The company is among 1,400+ US stocks covered by comprehensive Pro Research Reports, which provide detailed analysis and actionable insights for investors.
Outlook & Guidance
Select Medical revised its 2025 guidance, projecting revenue between $5.3 billion and $5.5 billion, and adjusted EPS between $1.09 and $1.19. The company plans to continue expanding its inpatient rehabilitation facilities, with several new units expected to open by 2027. Despite the current challenges, Select Medical remains focused on strategic growth and regulatory engagement.
Executive Commentary
Robert Ortenzio, Executive Chairman, emphasized the company’s proactive approach to regulatory challenges: "We are constantly having conversations both on the regulatory side with the new CMS administration and on the legislative side." Martin Jackson, SVP Strategic Finance, highlighted operational efforts: "Our operators are doing the best job that they can."
Risks and Challenges
- Regulatory changes in Medicare reimbursement could impact profitability.
- Revenue challenges in critical illness recovery hospitals.
- Potential cost pressures from expanding rehab facilities.
- Macroeconomic factors affecting healthcare spending.
- Competition in the rehabilitation sector.
Q&A
During the earnings call, analysts inquired about the impact of regulatory changes on the LTACH segment and the company’s strategy for outpatient rehab improvements. Executives confirmed ongoing efforts to enhance technology and contracts in outpatient services and explored the potential for accelerated growth in inpatient rehabilitation.
Full transcript - Select Medical Holdings Corp (SEM) Q1 2025:
Conference Call Operator, 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 first quarter twenty twenty five results at the company’s and the company’s business outlook. Presenting today are the company’s Executive Chairman and Co Founder, Robert Ortenzio and the company’s Senior Executive Vice President of Strategic finance and operations, Martin Jackson. Also on the conference line are on the are the company’s executive vice president and chief financial officer, Michael Malatesta, and the company’s senior vice president, controller, and chief accounting officer, Christopher Wiegel. Management will give you an overview of the quarter and then open 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 plans, expectations, strategies, intentions, and beliefs.
These forward looking statements are based on 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 now turn the call over to Mr. Robert Ortanzio.
Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Thank you, operator. Good morning, everyone. Welcome to Select Medical’s earnings call for the first quarter of twenty twenty five. This was our first full quarter since our spin of Concentra this past November. As most of you know, we now have three remaining lines of business.
Our inpatient rehab division had a very good first quarter and continues to exceed our expectations. We’re very excited about the significant growth of this business line for this foreseeable future. This past quarter presented challenges for both our outpatient and critical illness recovery hospital lines of business. Our outpatient division was impacted by severe weather events in the South And Central Regions along with a 3% reduction in Medicare reimbursement. The outpatient division however, had a strong finish to the quarter, which is carried over into the second quarter.
The outpatient division would have exceeded prior year adjusted EBITDA performance for the quarter, if not for the impact of the severe weather events. We are confident in the outlook for outpatient as the division continues to focus improving patient access, productivity and investing in technology. The critical illness recovery hospital division was impacted by a late start to the flu season, another increase in the high cost outlier threshold, which is almost doubled over the last two years and the twenty percent transmittal rule. Approximately two third of critical illness EBITDA miss to prior year was a result of the regulatory changes the increase to the outlier threshold and the 20% transmittal rule. In spite of these challenges, the division also had a strong finish to the quarter, which is carried into the second quarter.
I’m very proud of how our operators were able to finish the quarter, which resulted in each division exceeding prior year adjusted EBITDA performance for the month of March. Our development pipeline remains strong primarily in our inpatient rehab division. In January, we opened a rehab unit in Madison, Wisconsin with 18 beds. In April, we opened a 12 bed unit in Tallahassee, Florida and our second rehab hospital with UPMC in Central Pennsylvania comprised of 20 beds. We have additional development projects in various stages for the inpatient rehab division, which I will summarize.
Later in Q2, we plan on opening a 45 bed rehab hospital in Temple, Texas. In the last half of this year, we will open our fourth rehab hospital with the Cleveland Clinic in Fair Hill, Ohio with 32 beds and a rehab unit in Orlando, Florida also with 32 beds. In Q1 of twenty twenty six, we plan to open our fourth rehabilitation hospital as part of our joint venture with Banner in Tucson, Arizona and a new freestanding 63 bed rehab hospital in Ozark, Missouri with Cox Health Systems. In Q4, twenty twenty six, our 60 bed rehab hospital in Southern New Jersey, branded as Atlantica Rehabilitation Hospital is scheduled to open as well as a 76 bed facility in Jersey City, New Jersey branded as Kessler. Between the specific projects just mentioned, as well as some other smaller expansions and new rehabilitation units in existing hospitals, we plan to add four forty additional beds to our operations from Q2 twenty twenty five through the end of twenty twenty seven.
The additional beds primarily consist of rehab hospital beds, which includes 68 non consolidating beds. There are also a number of opportunities under evaluation that would further increase our select specialty hospital footprint. This quarter, our outpatient division added 10 de novo clinics. This was offset by the strategic closure or consolidation of 13 locations, further optimizing our existing resources and clinical capacity. This activity aligns with our strategic vision to identify areas of opportunity, serving our patient population and targeted demographics.
Now turning to our first quarter financial results and highlights. On a consolidated basis, our revenue increased over 2% while adjusted EBITDA declined by 9% from $165,800,000 to $151,400,000 Earnings per common share from continuing operations increased by 33% to $0.44 for the first quarter compared to $0.33 per share in the same quarter prior year. We are extremely pleased with the first quarter performance of our inpatient rehab hospital division with increases of 16% in revenue, 15% in adjusted EBITDA and 6% in average daily census when compared to the first quarter of last year. The adjusted EBITDA margin was 23%, which was in line with the prior year same quarter. Our rate per patient day increased by 7%.
Our occupancy was 82%, was 5% lower than prior year of 87%, which was primarily the result of new hospitals. Same store occupancy was 87%. In April, CMS issued their proposed rule for fiscal year twenty twenty six and if adopted, we would see an increase of 2.4% in the standard federal payment rate. The final rule is expected in late July, early August after the required comment period. As previously mentioned, our outpatient rehab division had a challenging quarter due to winter storms in the South And Central regions.
The estimated impact of these events is approximately $4,000,000 Notwithstanding the weather events and one less workday for the first quarter compared to prior year, revenue increased 1% driven by an increase in our net revenue per visit compared to the first quarter of prior year. Net revenue per visit increased from $99 prior Q1 up to $102 in Q1 of this year with continued improvements in managed care commercial rates, which was offset by the decline in our Medicare rate. The decrease in the Medicare fee schedule was 3.2% to our outpatient division or approximately 2,600,000 in the first quarter. Total visits declined by 1% from prior year same quarter due to the one less workday. However, there was an increase of 1% in visits per day.
Adjusted EBITDA declined 3% from Q1 of prior year and the division’s adjusted EBITDA margin decreased from 8.2% to 7.9%. Our critical illness recovery hospitals as previously noted had a challenging quarter primarily related to the large increase in the high cost outlier threshold for the second year in a row and the twenty percent transmittal rule as previously noted. The impact of the regulatory changes in the first quarter were especially challenging when this is when we treat our highest acuity patient population during respiratory season. Revenue decreased from the first quarter of prior year by 3%, driven by 2% decline in rate per patient day coupled with a 1% decline in patient days. While our occupancy rate increased from 71% to 73% and our average daily census was consistent with prior year Q1, the volume decline was primarily a function of one less calendar day compared to prior year.
The decrease in net revenue per patient day was driven by a decrease in our Medicare rate, which was primarily a function of the increase in the high cost outlier threshold. Critical illness, salary, wage and benefit to revenue ratio was 54% compared to 53% in prior year Q1. Adjusted EBITDA declined by 25% from prior year and our adjusted EBITDA margin was 14% for the quarter compared to 18% in the prior year Q1. In April, CMS issued their LTACH proposed rule for fiscal year twenty six and if adopted, we would see an increase of 2.7% in the standard federal payment rate and an increase in the high cost outlier threshold. The final rule is expected in late July or early August after the required comment period.
During the quarter, we repurchased almost 650,000 shares of our stock at an average price per share of $17.52 under our board authorized stock repurchase program for a total of $11,400,000 In regards to our deployment of capital, the board of directors declared a cash dividend of 6.625 per share payable on 05/29/2025 to stockholders of record as of the close of business on 05/15/2025. Going forward, we will continue to evaluate stock repurchases, reduction of debt and development opportunities. This concludes my formal remarks. I’ll turn the call over to Marty Jackson for additional financial detail before we open the call up for questions.
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Thank you, Bob, and good morning, everyone. At the end of the quarter, we had $1,800,000,000 of debt outstanding and $53,200,000 of cash on the balance sheet. Our debt balance at the end of the quarter included $1,050,000,000 in term loans, which are due 2,031, dollars 1 hundred and 80 million in revolving loans, dollars $550,000,000 of six and a quarter senior notes due 2,032, and $37,000,000 of other miscellaneous debt. We ended the quarter with net leverage for our senior secured credit agreement of 3.4 times. As of March 31, we had $377,500,000 of availability on our revolving loans.
The interest rate on our term loan SOFR plus 200, basis points. Interest expense was $29,100,000 in the first quarter. This compares to $40,700,000 in the same quarter prior year. The decrease in interest expense was due to the reduction of select debt resulting from the Concentra IPO and related debt transactions last year. For the quarter, operating activities used 3,500,000.0 in cash flows.
Our days sales outstanding on DSO for continued operations was sixty days at 03/31/2025. This compares to sixty two days as of 03/31/2024 and fifty eight days as of 12/31/2024. Investing activities used $52,300,000 of cash in the first quarter for purchase of property and equipment. Financing activities provided $49,300,000 of cash in the first quarter. This includes $75,000,000 net borrowings on our revolving line of credit and $3,200,000 net borrowings on the other debt.
This activity was offset by 11,400,000.0 in common stock repurchases, $8,100,000 in dividends of our common stock, $6,800,000 in net distributions and purchases of non controlling interests, and a $2,600,000 payment on our term loan. We are slightly adjusting our business outlook for 2025 and now expect revenue to be in the range of 5,300,000,000.0 to $5,500,000,000 adjusted EBITDA is expected to be in the range of $510,000,000 to $530,000,000 and finally adjusted earnings per common share is still expected to fall in the range of 1.9 to $1.19 Capital expenditures are expected to be in the range of 160 to $200,000,000. This concludes our prepared remarks. And at this time, we would like to turn it back to the operator to open up the call for questions.
Conference Call Operator, Select Medical Holdings Corporation: Thank you. One moment for our first question. Our first question will come from the line of Justin Bowers from Deutsche Bank. Your line is open.
Justin Bowers, Analyst, Deutsche Bank: Hi, good morning, everyone. So in IRF, you had very strong results and a nice sequential increase in occupancy. Is that like how should we be thinking about occupancy for the rest of the year with the new capacity coming online?
Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: So I think it should stay around in that 85% plus capacity even with the new business coming online. As a new business comes online, we still have some other businesses still maturing. But again, on our mature hospitals have all been in that 85 plus percent range.
Justin Bowers, Analyst, Deutsche Bank: Okay, thanks. And then on LTACH, you mentioned that two thirds of the miss was related to regulatory and some of the outlier stuff. Was that versus like your internal expectations or consensus? Just trying to get a sense of what the magnitude there was and maybe you can quantify for us.
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yeah, Justin. It was higher than what we had anticipated. So for example, if you take a look at the high cost outlier impact from Q1 twenty five versus Q1 of twenty four, there was about 100% increase in the cost of high cost outlier. We thought it was going to be a little bit less than that. And the 20% impact, it was 480% from Q4 of twenty four.
That 20% impact didn’t go that wasn’t around Q1 of twenty four. First quarter we had it was actually in Q4 of last year.
Justin Bowers, Analyst, Deutsche Bank: Okay, understood. Thank you.
William Sutherland, Analyst, The Benchmark Company: Oh, go ahead.
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yeah, so Justin, from a quantification standpoint, we have we basically quantified that in the revised guidance.
Justin Bowers, Analyst, Deutsche Bank: Okay. Understood. Appreciate it.
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Thanks.
Conference Call Operator, Select Medical Holdings Corporation: One moment for our next question. Our next question will come from the line of Ben Hendrix from RBC Capital Markets. Your line is open.
Ben Hendrix, Analyst, RBC Capital Markets: Hey, thank you very much and congrats on the IRF performance. But just going back to LTACH, just wondering if you could provide any update or if you’re having any changing thoughts on mitigation strategies with regard to the high cost outlier and the transmittal rule, kind of anything you can do to kind of head off those headwinds operationally. And then second, just based on your flu commentary and guidance, is there a reason to expect maybe an easing of that year over year headwind as we kind of get into some of the lower acuity quarters? Thanks.
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes, Ben, to your and there’s two questions there to both questions. I think when you talk about high cost outliers, typically our Q1 is higher than the balance of the year just because the acuity of patient is pulmonary patients that we’re dealing with. So it’s typically higher during that period of time. So we should see that drop. So, you know, it’s part and parcel the same answer to your two questions.
Ben Hendrix, Analyst, RBC Capital Markets: Okay and then anything that you can do just strategically or is there it just something you have to write out or is there anything maybe from a legislation perspective any conversations in Washington that could help kind of cure this or get traction with revised regulations? Thanks.
Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Ben, this is Bob. We are constantly having conversations both on the regulatory side with the new CMS administration and on the legislative side. So that’s always ongoing, but I think that that has been stepped up and a little bit narrowed to this high cost outlier impact because from a policy standpoint, with the criteria for LTACHs that encourages taking the higher acuity patients, and not taking what they call the site neutral or the patients that are excluded by the criteria that was put in place some years ago, it is going to logically have more patients that reach high cost outlier status. So we’re trying to have the kind of conversations that explain that and look for ways that we might be able to propose some ideas and some changes on some of the policies that would help mitigate some of the severe impacts that we’re seeing.
Ben Hendrix, Analyst, RBC Capital Markets: Appreciate the color. Thank you.
Conference Call Operator, Select Medical Holdings Corporation: Thank you. One moment for our next question. Our next question comes from the line of William Sutherland from The Benchmark Company. Your line is open.
William Sutherland, Analyst, The Benchmark Company: Thanks, operator. Hey, everybody. What do start up costs look like this year and then versus last year? That would be helpful. Thank you.
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Bill, this is Marty. Good morning. Startup losses are relatively the same from, last year to this year.
William Sutherland, Analyst, The Benchmark Company: Okay. And nothing special in the quarter then? Okay. And then on I’m a little confused on the impact high cost outlier and transmittal rule in the sense that in terms of how it’s impacting guidance. So you had this big impact particularly in the first two months of the quarter that I think Bob you said that March was you were finishing up the year and March was I mean the quarter with March even a little ahead of plan.
So is the guidance change just reflect really the first two months of the year particularly for LTAC?
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yeah Bill, the first two it was actually like the first six weeks, we saw a slow first six weeks versus what we typically see as far as the flu is concerned. We saw that pick up the balance of the quarter. That’s basically what we were talking about. As far as the high cost outlier, high cost outlier, as I mentioned earlier, on a year over year basis, there was about 100% increase in the high cost outlier. So that’s And again, If you take a look, what we’ve seen, right, we’ve seen an increase of almost 100%, you know, from ’23.
We saw an increase from 38,000 to 57,000, I believe, is it 59,000. And then we saw an increase from the 59,000 up to $77,000 We did a pretty good job with this last year. And, you know, we’re going through that right now. Our operators, again, doing a very good job, the best job that they can. But those increases are very, very significant.
William Sutherland, Analyst, The Benchmark Company: Right, no, get it. Okay. And then lastly, in outpatient rehab, update us if you can on some of the initiatives you’ve got in place to improve the margins of the business?
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: The initiatives, I mean a couple of those, we’ve talked I think over the last two or three quarters about the change that we’re making in our technology. And we have rolled that out in the first quarter. We are seeing some benefits from that. We continue to have additional releases on that software. We think we’ll continue to see those benefits expand throughout the year.
And from a contracting perspective, know, we’re we’re continuing to see some nice increases, you know, in the range of four to to 6%, so on the commercial side.
William Sutherland, Analyst, The Benchmark Company: Okay. So you’ve got these progressive, you know, these these improvements kind of baked into your expectations then in the guide?
Martin Jackson, Senior Executive Vice President of Strategic Finance and Operations, Select Medical Holdings Corporation: Yes, we do.
William Sutherland, Analyst, The Benchmark Company: Okay. That’s I’ll jump off. Thanks guys.
Conference Call Operator, Select Medical Holdings Corporation: Thanks. One moment for our next question. Our next question will come from the line of Anne Hines from Mizuho. Your line is open.
Anne Hines, Analyst, Mizuho: Hi, thank you. Maybe we can shift to Earth. Obviously, was a shining star in the quarter. Is there any plans to actually I know you’re accelerating growth a lot. Is there any plans to even accelerate it more to further diversify your business away from LTACH given the regulatory challenges?
And I guess like internally, how much capacity can the organization support for that growth? Thanks.
Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Yeah, thanks, Anne. On the development side, I think it’s important to note that all the projects that we listed or that I talked about in my prepared remarks, those are projects that are signed under construction and will open. It doesn’t include all the other projects that are in our pipeline that will be signed, will be committed to and some of those could come in along those same timeframe. So, the short answer to your question is yes, there is more of an acceleration going on than even that you would see to drive more robust growth on the rehab side.
Anne Hines, Analyst, Mizuho: Okay, great, thanks. And my second question would just be just on the CMS front, obviously for the industry, the outlier and the transmittal rule is a pressure point. What type of advocacy do you have with CMS just to help the industry try to offset some of these pressures?
Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Well, you gotta remember that the new CMS team is just so recently installed. I mean, the new CMS administrator was just confirmed a couple of weeks ago. So it’s very early for them to be in place and to get their hands dirty on all the policies and they have obviously a lot of things going on that we can assume are bigger issues than the LTACH space, not even including what’s being talked about by Medicaid and all the issues with Medicare Advantage. And so, would be presumptuous of me to think that we could be moved to the top of their list. But we have a policy of always engaging with CMS.
We did with the last CMS administration, not with a lot of great success on these policies. So, I’m optimistic that maybe we can do better under the new administration.
Anne Hines, Analyst, Mizuho: Great, thank you.
Conference Call Operator, Select Medical Holdings Corporation: Thank you. I’m not showing any further questions in the queue. I would now like to turn the call back over to Mr. Ortenzio for closing remarks.
Robert Ortenzio, Executive Chairman and Co-Founder, Select Medical Holdings Corporation: Yeah. No closing comments. Thanks, for being with us and working through our quarter. Look forward to updating you next quarter.
Conference Call Operator, Select Medical Holdings Corporation: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.