8-K: Select Medical Reports Strong Q4, FY 2025 Earnings

Select Medical Holdings Corporation announced robust financial results for its fourth quarter and full year ended December 31, 2025, alongside a cash dividend declaration and a 2026 business outlook.

Summary

• Fourth quarter 2025 revenue increased 6.4% to $1,396.6 million, while full year 2025 revenue increased 5.1% to $5,452.8 million.
• Income from continuing operations, net of tax, surged 461.0% to $37.7 million in Q4 2025 (compared to a loss of $10.5 million in Q4 2024) and increased 65.0% to $214.5 million for the full year 2025.
• Diluted earnings per common share from continuing operations was $0.16 for Q4 2025 (up from a loss of $0.19 in Q4 2024) and $1.16 for FY 2025 (up from $0.51 in FY 2024).
• Adjusted EBITDA decreased by 9.8% to $104.7 million in Q4 2025 and by 3.4% to $493.2 million for the full year 2025.
• The Board of Directors declared a cash dividend of $0.0625 per share, payable on or about March 12, 2026, to stockholders of record as of March 2, 2026.
• The company repurchased 6,375,512 shares at a cost of approximately $96.5 million in 2025, as part of its $1.0 billion common stock repurchase program.
• Select Medical issued a 2026 business outlook, projecting revenue between $5.6 billion and $5.8 billion, Adjusted EBITDA between $520.0 million and $540.0 million, and fully diluted earnings per share between $1.22 and $1.32.
• Executive Chairman, Co-Founder, and Director, Robert A. Ortenzio, submitted a non-binding proposal on November 24, 2025, to acquire all outstanding shares for cash consideration of $16.00 to $16.20 per share, which is currently under review by an independent special committee of the Board.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a generally positive report, driven by strong net income and EPS growth, a declared dividend, and a positive 2026 outlook. However, the decline in Adjusted EBITDA and challenges in the outpatient rehabilitation segment temper the overall sentiment, indicating operational pressures.

Positives

• Strong revenue growth for Q4 2025 (+6.4% to $1,396.6 million) and FY 2025 (+5.1% to $5,452.8 million).
• Significant increase in income from continuing operations, net of tax, for Q4 2025 (+461.0% to $37.7 million) and FY 2025 (+65.0% to $214.5 million), benefiting from the absence of prior year's one-time expenses.
• Substantial improvement in diluted EPS from continuing operations for Q4 2025 ($0.16 vs. -$0.19) and FY 2025 ($1.16 vs. $0.51).
• The Rehabilitation Hospital segment demonstrated robust growth with Q4 revenue up 15.2% to $339.2 million and Adjusted EBITDA up 11.1% to $69.2 million.
• Declaration of a cash dividend of $0.0625 per share, indicating a return of capital to shareholders.
• Continued execution of the common stock repurchase program, with $96.5 million in shares repurchased in 2025.
• Positive 2026 business outlook with expected revenue of $5.6 billion to $5.8 billion and fully diluted EPS of $1.22 to $1.32, signaling anticipated future growth.

Negatives

• Adjusted EBITDA decreased by 9.8% to $104.7 million in Q4 2025 compared to $116.0 million in Q4 2024.
• Adjusted EBITDA for the full year 2025 decreased by 3.4% to $493.2 million compared to $510.4 million in FY 2024.
• The Outpatient Rehabilitation segment experienced a significant decline in Adjusted EBITDA for Q4 2025 (-57.9% to $11.2 million) and FY 2025 (-17.0% to $90.2 million), with its Adjusted EBITDA margin falling from 8.3% to 3.4% in Q4 and 8.7% to 7.0% for the full year.
• Adjusted earnings per common share from continuing operations for Q4 2025 decreased to $0.16 from $0.18 in the prior year.
• The Critical Illness Recovery Hospital segment's Adjusted EBITDA decreased by 12.0% for the full year 2025 to $265.4 million, with its margin declining from 12.3% to 10.7%.

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 increases in the prices of labor and other costs of doing business, negatively impacting business, operating results, cash flows, and financial condition.
• 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 and significantly increase operating costs.
• The negative impact of public threats such as a global pandemic or widespread outbreak of an infectious disease.
• Failure of Medicare-certified long term care hospitals or inpatient rehabilitation facilities to maintain their Medicare certifications may cause revenue and profitability to decline.
• A government investigation or assertion of violation of applicable regulations 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.
• Private third-party payors for services may adopt payment policies that could limit future revenue and profitability.
• The failure to maintain established relationships with physicians in the areas served could reduce revenue and profitability.
• The impact of the non-binding indication of interest from the Executive Chairman and the Board of Directors' evaluation of the proposal on the business and results of operations.
• 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 its third-party vendors' information technology systems may subject the company to potential legal and reputational harm and may result in a violation of HIPAA or HITECH Act.

Future Outlook

Select Medical projects 2026 revenue to be between $5.6 billion and $5.8 billion, with Adjusted EBITDA expected in the range of $520.0 million to $540.0 million. Fully diluted earnings per share are anticipated to be between $1.22 and $1.32 for the upcoming fiscal year.

Management Comments

• Select Medical is issuing its business outlook for 2026.
• The Special Committee is carefully reviewing and evaluating the Proposal in consultation with their advisors and will determine the appropriate course of action in the best interests of the Company and its stockholders. In connection therewith, the Special Committee is evaluating other potential strategic alternatives to maximize stockholder value.

Industry Context

StockSavvy.ai notes that the healthcare sector, particularly post-acute care and rehabilitation services, continues to navigate evolving reimbursement landscapes and persistent labor challenges. Select Medical's mixed performance, with strong revenue and net income growth but declining Adjusted EBITDA in certain segments, reflects the ongoing operational pressures and strategic adjustments within the industry. The take-private proposal highlights potential consolidation interest in the specialized healthcare services market.

Corporate Governance

Related Party Transactions

• Robert A. Ortenzio, the company's Executive Chairman, Co-Founder, and Director, submitted a non-binding indication of interest to acquire all of the company's outstanding shares for cash consideration of $16.00 to $16.20 per share.

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.0625 per share and benefit from the ongoing common stock repurchase program. The non-binding take-private proposal from the Executive Chairman could lead to a significant liquidity event at a premium.
• Employees may be impacted by potential labor shortages in qualified nurses, therapists, and physicians, which could lead to increased workload or reliance on contract labor.
• Customers and patients continue to be served by the company's network of 104 critical illness recovery hospitals, 38 rehabilitation hospitals, and 1,917 outpatient rehabilitation clinics across 39 states and the District of Columbia.
• Creditors' interests are influenced by the company's financial performance and outlook, which impact its ability to service debt obligations.

Next Steps

• A conference call will be hosted on Friday, February 20, 2026, at 9:00 am ET to discuss the results for the fourth quarter and full year ended December 31, 2025, and the 2026 business outlook.
• The independent special committee of the Board of Directors is continuing to review and evaluate the non-binding take-private proposal from Executive Chairman Robert A. Ortenzio and other potential strategic alternatives to maximize stockholder value.
• The common stock repurchase program will remain in effect until December 31, 2027, unless further extended or earlier terminated by the Board of Directors.

Key Dates

Recommendation

The company delivered strong net income and EPS growth, declared a dividend, and provided a positive 2026 outlook, which are all favorable. However, the decline in Adjusted EBITDA and the underperformance of the outpatient rehabilitation segment present areas of concern. The non-binding take-private proposal from the Executive Chairman introduces significant uncertainty and potential upside, but the Special Committee's evaluation is ongoing. Given the mixed operational results and the pending strategic review, a 'hold' recommendation is appropriate as investors await further clarity on the take-private offer and its potential impact on valuation.

Keywords

Healthcare, Rehabilitation, Hospitals, Financial Results, Earnings, Dividend, Stock Repurchase, Take-Private Offer, SEC Filing, SEM, Critical Illness Recovery, Outpatient Rehabilitation