8-K: Select Medical Reports Strong Q3 Growth, Boosts EPS Outlook

Select Medical Holdings Corporation announced a 7.2% revenue increase and a 21.1% rise in EPS for Q3 2025, while also extending its stock repurchase program and raising its full-year EPS guidance.

Summary

• Q3 2025 revenue increased 7.2% to $1,363.4 million, compared to $1,271.6 million for the same quarter in the prior year.
• Q3 2025 income from continuing operations, net of tax, rose 7.0% to $44.2 million, compared to $41.3 million for the same quarter in the prior year.
• Q3 2025 earnings per common share from continuing operations increased 21.1% to $0.23, compared to $0.19 for the same quarter in the prior year.
• For the nine months ended September 30, 2025, revenue grew 4.7% to $4,056.2 million, compared to $3,874.5 million for the same period in the prior year.
• For the nine months ended September 30, 2025, income from continuing operations, net of tax, increased 25.9% to $176.8 million, compared to $140.4 million for the same period in the prior year.
• For the nine months ended September 30, 2025, earnings per common share from continuing operations surged 44.9% to $1.00, compared to $0.69 for the same period in the prior year.
• The Board declared a cash dividend of $0.0625 per share on October 29, 2025, payable on or about November 25, 2025, to stockholders of record as of November 12, 2025.
• The common stock repurchase program, authorized for up to $1.0 billion, was extended from December 31, 2025, to December 31, 2027.
• During the nine months ended September 30, 2025, 6,375,512 shares were repurchased at a cost of approximately $96.5 million, or $15.13 per share.
• The 2025 business outlook for fully diluted earnings per share was increased to a range of $1.14 to $1.24.
• The 2025 business outlook for revenue ($5.3 billion to $5.5 billion) and Adjusted EBITDA ($510.0 million to $530.0 million) was reaffirmed.

Sentiment

Score: 8

Explanation: The company reported strong overall revenue and earnings growth for both the quarter and year-to-date, and increased its full-year EPS outlook. The extension of the stock repurchase program and dividend declaration are positive for shareholders. However, some segment-level Adjusted EBITDA margins and patient day metrics showed declines, and overall nine-month Adjusted EBITDA was slightly down, tempering the overall positive sentiment.

Positives

• Q3 2025 revenue increased 7.2% to $1,363.4 million.
• Q3 2025 income from continuing operations before other income and expense increased 32.9% to $73.0 million.
• Q3 2025 income from continuing operations, net of tax, increased 7.0% to $44.2 million.
• Q3 2025 Adjusted EBITDA increased 7.5% to $111.7 million.
• Q3 2025 earnings per common share from continuing operations increased 21.1% to $0.23.
• Nine-month 2025 revenue increased 4.7% to $4,056.2 million.
• Nine-month 2025 income from continuing operations before other income and expense increased 10.1% to $272.2 million.
• Nine-month 2025 income from continuing operations, net of tax, increased 25.9% to $176.8 million.
• Nine-month 2025 earnings per common share from continuing operations increased 44.9% to $1.00.
• Nine-month 2025 adjusted earnings per common share from continuing operations, net of tax, increased 31.6% to $1.00.
• Critical Illness Recovery Hospital segment Q3 revenue increased 4.6% to $609.9 million and Adjusted EBITDA increased 10.5% to $56.1 million, with margin improving to 9.2%.
• Rehabilitation Hospital segment Q3 revenue increased 16.2% to $328.6 million and Adjusted EBITDA increased 13.0% to $68.0 million.
• Rehabilitation Hospital segment nine-month revenue increased 16.4% to $949.8 million and Adjusted EBITDA increased 14.1% to $209.4 million.
• Outpatient Rehabilitation segment Q3 revenue increased 4.3% to $325.4 million, and visits increased 5.5%.
• Outpatient Rehabilitation segment nine-month revenue increased 3.2% to $960.3 million, and visits increased 2.8%.
• Increased 2025 business outlook for fully diluted earnings per share to $1.14 to $1.24.
• Reaffirmed 2025 revenue outlook of $5.3 billion to $5.5 billion and Adjusted EBITDA outlook of $510.0 million to $530.0 million.
• Extension of the common stock repurchase program until December 31, 2027, demonstrating confidence and commitment to shareholder returns.
• Declaration of a cash dividend of $0.0625 per share.

Negatives

• Q3 2025 adjusted earnings per common share from continuing operations, net of tax, decreased to $0.23 from $0.26 in the prior year.
• Nine-month 2025 Adjusted EBITDA decreased to $388.5 million from $394.4 million in the prior year.
• Critical Illness Recovery Hospital segment Q3 patient days decreased 1.9% to 265,730.
• Critical Illness Recovery Hospital segment Q3 number of hospitals operated decreased to 105 from 106.
• Critical Illness Recovery Hospital segment nine-month Adjusted EBITDA decreased 16.6% to $199.0 million, with margin decreasing to 10.8% from 12.9%.
• Critical Illness Recovery Hospital segment nine-month patient days decreased 1.0% to 835,970.
• Rehabilitation Hospital segment Q3 Adjusted EBITDA margin decreased to 20.7% from 21.3%.
• Rehabilitation Hospital segment nine-month Adjusted EBITDA margin decreased to 22.1% from 22.5%.
• Rehabilitation Hospital segment nine-month occupancy rate decreased to 82% from 84%.
• Outpatient Rehabilitation segment Q3 Adjusted EBITDA decreased 14.6% to $24.2 million, with margin decreasing to 7.4% from 9.1%.
• Outpatient Rehabilitation segment Q3 revenue per visit decreased 1.0% to $100.
• Outpatient Rehabilitation segment Q3 number of clinics operated decreased to 1,922 from 1,925.
• Outpatient Rehabilitation segment nine-month Adjusted EBITDA decreased 3.7% to $79.0 million, with margin decreasing to 8.2% from 8.8%.
• Net income decreased 45.5% for Q3 2025 to $44.180 million and 39.7% for the nine months ended September 30, 2025, to $176.791 million, primarily due to the exclusion of discontinued operations (Concentra).
• Net income attributable to Select Medical decreased 48.2% for Q3 2025 to $28.793 million and 45.2% for the nine months ended September 30, 2025, to $126.045 million, also due to discontinued operations.

Risks

• Changes in government reimbursement for services and/or new payment policies may result in a reduction in revenue, an increase in costs, and a reduction in profitability.
• Adverse economic conditions, including an inflationary environment, could cause continued increases in the prices of labor and other costs of doing business, negatively impacting business, operating results, cash flows, and financial condition.
• Changes to United States tariff and import/export regulations and their impact on global economic conditions may have a negative effect on business, financial condition, and results of operations.
• Shortages in qualified nurses, therapists, physicians, or other licensed providers, and/or the inability to attract or retain qualified healthcare professionals could limit the ability to staff facilities.
• Shortages in qualified health professionals could cause increased dependence on contract labor, increased efforts to recruit and train new employees, and expanded initiatives to retain existing staff, which could significantly increase operating costs.
• The negative impact of public threats such as a global pandemic or widespread outbreak of an infectious disease.
• The failure of Medicare-certified long-term care hospitals or inpatient rehabilitation facilities to maintain their Medicare certifications may cause revenue and profitability to decline.
• The failure of Medicare-certified long-term care hospitals and inpatient rehabilitation facilities operated as hospitals within hospitals to qualify as hospitals separate from their host hospitals may cause revenue and profitability to decline.
• A government investigation or assertion that applicable regulations have been violated may result in sanctions or reputational harm and increased costs.
• Acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources, or expose the company to unforeseen liabilities.
• Inability to realize anticipated synergies from acquisitions.
• Private third-party payors for services may adopt payment policies that could limit future revenue and profitability.
• The failure to maintain established relationships with the physicians in the areas served could reduce revenue and profitability.
• Competition may limit the ability to grow and result in a decrease in revenue and profitability.
• The loss of key members of the management team could significantly disrupt operations.
• The effect of claims asserted against the company could subject it to substantial uninsured liabilities.
• A security breach of the company's or third-party vendors' information technology systems may subject the company to potential legal and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology for Economic and Clinical Health Act.

Future Outlook

Select Medical is increasing its 2025 business outlook for fully diluted earnings per share to a range of $1.14 to $1.24. The company is reaffirming its 2025 revenue outlook to be in the range of $5.3 billion to $5.5 billion and its Adjusted EBITDA outlook to be in the range of $510.0 million to $530.0 million.

Industry Context

NA

Corporate Governance

Stakeholder Impact

• Shareholders are positively impacted by the increased EPS outlook, the declaration of a cash dividend, and the extension of the stock repurchase program, indicating a commitment to returning capital.
• Employees, particularly healthcare professionals, may face potential impacts from shortages, which could lead to increased workload or reliance on contract labor, as noted in the risk factors.
• Patients (customers) continue to have access to a broad network of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics across 40 states and the District of Columbia.
• Creditors may view the company's stable financial performance and reaffirmed outlook positively, though stock repurchases are funded by cash on hand and revolving credit facilities.

Next Steps

• Host a conference call on Friday, October 31, 2025, at 9:00 am ET to discuss third quarter results and business outlook.
• Pay the declared cash dividend on or about November 25, 2025.
• Continue the common stock repurchase program, which is now extended until December 31, 2027.

Key Dates

Recommendation

The company demonstrated strong financial performance in Q3 2025 with significant revenue and EPS growth, and it raised its full-year EPS outlook. The extension of the substantial stock repurchase program and consistent dividend payments signal management's confidence and commitment to shareholder returns. While some segment-level metrics show slight declines, the overall positive trajectory, strategic capital allocation, and reaffirmed revenue/EBITDA guidance suggest a favorable investment opportunity. The stock repurchase program, in particular, indicates a belief that the stock is undervalued.

Keywords

Healthcare services, Rehabilitation hospitals, Critical illness recovery, Outpatient rehabilitation, SEC filing, Financial results, Earnings, Dividend, Stock repurchase, SEM, Hospital operations, Patient care