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Good morning, and thank you for joining us today for Select Medical Holdings Corporation earnings conference call to discuss the fourth quarter and full year 2025 results and the company's business outlook. Presenting today are the company's Chief Executive Officer, Thomas Mullen, and the company's Executive Vice President and Chief Financial Officer, Michael Malatesta. Also on the conference line is the company's Senior Vice President, Controller and Chief Accounting Officer, Christopher Wiegel. Samantha will give you an overview of the quarter and then open the call for your 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 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 call over to Mr. Thomas Mullen.

Thank you, Operator, and good morning, everyone. Welcome to Select Medical's fourth quarter 2025 earnings call. I would like to begin our call by taking a moment to address the take-private proposal that was recently submitted by our Executive Chairman. On November 24, we received a nonbinding indication of interest to acquire all outstanding shares of Select Medical. A special committee of the Board of Directors is in the process of carefully reviewing and evaluating the proposal. This process is ongoing, and the special committee will determine the appropriate steps based on what it believes is in the best interest of the company and all of our stockholders. With that update, let me now transition to our development activity, where we continue to focus on the expansion of our inpatient rehabilitation business. In the fourth quarter, we added 150 beds through a combination of hospital openings and acquisitions. These include a new 32-bed hospital with the Cleveland Clinic, a 32-bed acute rehab unit in Orlando, Florida, a 10-bed expansion at our rehab hospital with Riverside Health in Virginia, and, finally, the acquisition of a 76-bed rehabilitation hospital in partnership with Vibra Healthcare in Southern Kentucky. For the full year 2025, we added 212 rehab beds: 202 beds from three new hospitals, three acute rehab units, and one neuro-transitional unit, with the remaining 10 beds coming from an expansion at an existing facility. We also added 10 beds during the fourth quarter in Savannah, Georgia, in our critical illness recovery hospital division, through the acquisition of a hospital in that market. Across 2026 and 2027, we expect to add 399 beds, which includes the 166 beds we have added so far this year. In January, we opened our fifth rehabilitation hospital with Baylor Scott & White Health in Temple, Texas, operating 45 beds, and a 63-bed hospital with CoxHealth in Ozark, Missouri. Earlier this month, a 58-bed hospital with Banner Health in Tucson, Arizona, the fourth within the joint venture. Some upcoming projects include a 60-bed hospital with AtlantiCare in Southern New Jersey, which we expect to open in 2026, as well as two acute rehab units in Florida and two neuro units scheduled to open throughout the second quarter of 2026. In the first quarter of 2027, we expect to open a 76-bed rehab hospital in Jersey City and plan to expand one of our Banner rehabilitation hospitals by 20 beds. Beyond these projects, additional opportunities are progressing through various stages of development and positioning us for long-term growth. Before we move into our financial performance, I would like to provide a brief update on capital allocation. Our Board of Directors approved a cash dividend of $0.0625 per share payable on 03/12/2026 to stockholders of record as of 03/02/2026. Now shifting to our consolidated financial performance, all three divisions exceeded prior-year revenue in the fourth quarter, with total revenue growing more than 6% year over year. Adjusted EBITDA declined 10% to $104.7 million from $116.0 million in the prior year. A contributing factor to the decline in adjusted EBITDA was an increase in health insurance expense year over year driven by elevated health-related costs, including higher-cost claimants, increased utilization of medical and pharmacy benefits, and cost escalation. Earnings per common share from continuing operations was $0.16 versus a diluted loss per common share of $0.19 per share in the prior year. Adjusted earnings per common share from continuing operations was $0.16 compared to $0.18 last year. As a reminder, adjusted EPS in the prior-year period excluded costs associated with the separation of Concentra, including accelerated stock-based compensation expense and a loss on early retirement of debt. For the full year, revenue grew more than 5%. Adjusted EBITDA was $493.2 million with a 9% margin, compared to $510.4 million and a 9.8% margin in 2024. Earnings per common share from continuing operations was $1.16, up from $0.51 last year. Adjusted earnings per share from continuing operations was $1.00 compared to $0.94 in the prior year. Now turning to our segment performance. Beginning with the inpatient rehab hospital division, revenue increased over 15% year over year to $339.2 million and adjusted EBITDA rose 11% to $69.2 million. Revenue per patient day increased over 6%, and our average daily census grew nearly 10%. Occupancy improved to 82% from 81% with same-store occupancy rising to 86% from 85%. Our adjusted EBITDA margin was 20.4% compared to 21.2% in the prior year. In our critical illness recovery hospital division, revenue increased nearly 5% to $629.7 million while adjusted EBITDA grew 5% to $66.4 million from $63.1 million in the prior year. Our adjusted EBITDA margin was consistent with the prior year at 10.5%. Our occupancy rate also remained steady at 67%, our admissions rising by 3%. Finally, in our outpatient rehab division, revenue increased to $324.6 million from $319.6 million in the prior year. This was driven by nearly 5% growth in patient visits. Net revenue per visit declined to $98 from $102 compared to the same quarter last year, and is reflective of a reduction in Medicare reimbursement, an unfavorable shift in payer mix, and an increase in variable discounts. Adjusted EBITDA was $11.2 million compared to $26.6 million last year, with margin declining to 3.4%. This decrease is primarily due to lower net revenue per visit and, as noted earlier, higher health insurance expense. That concludes my remarks. I will now turn the call over to Michael Malatesta for additional financial details before we open up the call for questions.

Thank you, Tom, and hello, everyone. At the end of the quarter, we had $1.8 billion of debt outstanding and $26.5 million of cash on the balance sheet. Our debt at quarter end includes $1.04 billion in term loans, $100 million in revolving loans, $550 million in 6.25% senior notes due 2032, and $155 million of other miscellaneous debt. We ended the quarter with net leverage of 3.67x under our senior secured credit agreement, and $469.1 million of availability on our revolving loans. Our term loan carries an interest rate of SOFR plus 200 basis points, and matures on 12/03/2031. Interest expense for the quarter was $28.9 million compared to $28.6 million in the same quarter last year. For the quarter, cash flow from operating activities was $64.3 million. Our days sales outstanding, or DSO, from continuing operations was 57 days at 12/31/2025, compared to 58 days at 12/31/2024 and 56 days at 09/30/2025. Investing activities used $66.9 million, which includes $59.1 million used for purchases of property and equipment and $9.1 million in acquisition and investment activity. Financing activities used $31.0 million, including $50.0 million in net repayments on our revolving line of credit, $38.1 million in net distributions to noncontrolling interests, $7.8 million in dividends, and $2.6 million in term loan repayments. We also received $51.3 million of net proceeds from other debt issuances during the quarter. We are issuing our business outlook for 2026 and expect revenue to be in the range of $5.6 billion to $5.8 billion. Adjusted EBITDA is expected to be in the range of $520 million to $540 million, and fully diluted earnings per common share is expected to fall in the range of $1.22 to $1.32. Lastly, capital expenditures are expected to be in the range of $200 million to $220 million. This concludes our prepared remarks. At this time, we would like to turn the call back to the Operator to open the line for questions.

Thank you. Press 1-1. If your question has been answered and you would like to move yourself in the queue, please press 1-1 again. Our first question comes from Ben Hendrix with RBC Capital Markets. Your line is open.

Great. Thank you very much. I was wondering if we could parse through some of the income statement items, particularly the higher health costs that you saw, just the total amount of that, and then just the impact on the outpatient rehab business in particular. I am looking at the 3.4% margin and the weakness you saw. I just want to parse that out between the variable discount, the Medicare rate, mix pressure, and the health cost. Thanks. Hi, Ben. It is Mike.

In regards to health insurance expense, for the outpatient division, the impact was approximately $5 million for the quarter. The impact for variable discount was approximately $6 million. So both added together is around $11 million, and the remainder of the delta is related to, as we noted, shift in payer mix and softness in some markets.

Thank you. And as we think about the guidance going forward, can you talk about the puts and takes and how you are thinking about forecasting? Do we have this mix pressure continuing in the outlook? And then what are your base assumptions for some of the other segments? Thanks.

Well, I think we are very, very confident and pleased with the performance of our inpatient rehab division. It is Tom commented earlier, we have a very robust pipeline, so we are set up well for 2026.

Outpatient we did, you know, we are cautiously optimistic on outpatient for improvement.

We believe that the $11 million that we just alluded to were truly one-timers. And then for critical illness, you know, the fourth quarter, we basically are right in plan or maybe even a little better than we expected. And for critical illness, again, I would say cautiously optimistic for next year. But, again, there is always, just with all the puts and takes in that division, it is a little more subject to variability.

Thank you. Our next question comes from Justin D. Bowers with Deutsche Bank. Hi. Good morning. Appreciate the update on the special committee and was curious if you are able to expand upon that, maybe around some of the other potential strategic alternatives? And then any timing goalposts, to the extent that you can?

Hey, Justin. It is Mike. We are really not able to comment on the process that is taking place right now, other than what we commented on at the beginning of the call.

Understood. And then there has been some weather in the first quarter across the country. I am presuming the guidance incorporates that, but is there any callouts there in any of the segments? And then any differences in days this year, 1Q versus 1Q of last year, we should consider?

Justin, there really was not a large impact, or any impact at all of material, on our inpatient divisions for critical illness and inpatient rehab. There was an impact, though, for outpatient. And, again, some of that you are able to recover through the course of the quarter. But there was an impact in some areas and states related to the weather that we experienced in the beginning of 2026.

Okay. Thank you, Mike.

Thank you.

Our next question comes from Ann Kathleen Hynes with Mizuho. Your line is open.

Thanks. Just a little bit more detail on the outpatient issues. Why would the health insurance only impact the outpatient division? I am assuming you are self-funded for your entire company. Is it just the population? I am just kind of confused why it would impact just that division. And can we just have a little bit more detail on what you mean by the $6 million variable discounts? You are just taking higher managed care discounts than you, in guidance?

Hi, Ann. In regards to health insurance, that impacted the entire company. But it stuck out a little bit more in outpatient just because of the size of outpatient. Softness we had in some certain areas. So, overall, it was approximately a $15 million impact in the fourth quarter for all Select Medical that we did not anticipate coming into the fourth quarter. In regards to variable discount, that is related to some of our older receivables that we made the decision to write off after we thought all collection efforts were exhausted, and we are talking all the receivables. I would say they are falling over the two-year period of receivables. So I do not know if that answers your question, if you have a follow-up. Yeah.

And then you mentioned some softness in markets. Is that due to competitive issues? Are they big markets? Any more detail you can provide on that, that would be great just because the miss on outpatient was much bigger than, you know, obviously, people thought.

Yeah. I mean, there are some certain markets that we are evaluating and put a focus on in 2026. We are investigating why the why was a little softer than we anticipated. Tom, I do not know if you want to add any color to that.

I think that we are looking at rate in some of these markets, and then some of the markets where we are having some challenges right now revolve around staffing. And we are focusing on the recruitment of therapists in those markets. And that is some of the softness that we are experiencing currently that we expect to overcome in the coming months.

Great. And just directionally, your EBITDA guidance, can you provide detail from a segment level? Can outpatient, I am sure that weakness in the second half has to anniversary in early 2026, can you expect that segment to rebound to growth? And then any additional detail you can give on expectations for growth for critical illness and inpatient rehab, that would be helpful.

Yeah. So, Ann, we historically have not provided guidance at the segment level, but some color that I could add is for critical illness, I would say cautiously optimistic, but it is somewhat in line with where we performed our projection for 2025. Kind of kept it relatively flat. For inpatient rehab, that is where we, again, as we experienced over the last few years, are seeing the majority of our growth. And for outpatient, we do expect it to improve and grow year over year, but both what we saw in Q3 and Q4, the last half of the year, we did taper those expectations within our guidance.

Okay. Thank you.

Thank you. Our next question comes from Joanna Gajuk with Bank of America.

Hi. Good morning. So a couple of follow-ups. Maybe first on the outpatient rehab segment commentary. I appreciate quantifying the costs and discounts, or this receivable write-off, and then payer mix. So last quarter you talked about it. I want to check whether the same issues or different issues popped up because it is, you know, I guess the pricing sounds like it was impacted by the discount, but I was trying to assess the payment situation or the headwind because you still called it out.

Hi. Hi. So, Joanna, I guess on the variable discount, I did not understand your first part of the question. Can you repeat that?

I was asking about the payer mix issues because on the third quarter call, when you called it out, you said you think this is temporary in nature. And with the fourth quarter now, you are saying that there is obviously the bigger issue around the cost and discounts, but the payer mix is also mentioned there. So I want to check whether you have the same payer mix issues you had in the third quarter or there is something new?

So we have seen within the division in the fourth quarter, we did have an uptick in our managed Medicare population. So that caused some headwinds. And that is something that we have been dealing with throughout this fiscal year. Workers’ comp was slightly down when I compare it year over year. And so, with a company our size too, it is not sometimes just within the classifications. It also sometimes can be the mix within the mix, within certain payers within a market within managed care commercial. And with our volume, those dollars can add up easily. So, again, what we saw was just a slight deterioration in our payer mix, which impacted our net rev per visit. I would say it is probably about a dollar of the impact. The variable discount was approximately $2 of the impact on the year-over-year net rev per visit. And, Joanna, it is Tom. I would add that going into 2026, with the regulatory changes that we have on the horizon from January forward, we are seeing a 2% increase on Medicare for the first time in many years. So we are going to see somewhat of a rate increase as a result of the regulatory change on Medicare and Medicare Advantage for 2026.

I was going to ask you a second question. I know you do not give specific guidance by segment for the year, because my question was around the Medicare rate increase. ’26. How much it is going to help? And should we assume the margins will improve? It was 7% for the full year, but the second half of the year was much worse. I am trying to figure out how to think about directionally the progression in margin in that segment.

Yes. You should expect the margins to improve year over year in the outpatient division.

Okay. And if I may, on the consolidated numbers, when we look at the fourth quarter, the EBITDA of $105 million is about, call it, almost $30 million below what was implied by your original guidance at the midpoint. You quantified a couple of these things to $15 million for the cost, and there is the discount in the outpatient, but there is still something missing. That has to be the payer mix. Anything else to call out? It sounds like the critical illness was in line and maybe the IRFs were better. So I wonder what else was a part of the shortfall.

Joanna, I think we are probably a little off of what you said the midpoint of our guidance was heading into the fourth quarter. I think our midpoint heading in was probably $520 million, so we are right around $25 million. I mean, it is all significant miss, but $15 million of it is health insurance right off the bat. We did have some timing issues with inpatient rehab. We were expecting inpatient to even do that much better year over year. But, again, these are just timing issues of when certain of our development activities have taken place. So, in the long run, we are still very bullish on the inpatient rehab division. And then, again, on top of the health insurance, and maybe a few million dollars in inpatient rehab, where we thought we would exceed a little bit more, it was just the softness we had in the outpatient division in the fourth quarter.

Alright. Thank you. That was my other follow-up on the IRF segment. The margins there declined year over year and quarter over quarter. It sounds like there are some timing issues. Maybe you can help us quantify some of the startup losses in the segment, and how should we think about that for 2026? Thank you.

So the margin, the same-store margin, was still in excess of 23%, Joanna. So we still feel very comfortable. The deterioration in the margin down to a little north of 20% is related to startup loss. So, again, these are just timing issues. Nothing with the long-term viability of that segment.

Alright. Thank you so much.

Thank you.

And our next question comes from Albert Rice with UBS. Your line is open.

Thanks. Hi, everyone. Just a couple of questions. One thing that has created a little bit of volatility in the LTACH business over the last few years has been the high-cost outlier threshold movement. I know it is still early in the year, but are you seeing anything there that gives you pause that maybe it is going to be more or less impactful, the year-to-year change, than you thought?

Year over year, AJ, this is Tom. We are seeing the high-cost outlier threshold only increase by—it is pretty flat to prior year. It is $1,888 in total. So we are not going to expect any major shifts like we saw this past year. We are doing a nice job of moving patients into our inpatient rehab hospitals timely, our shared markets, and that is starting to help us drive down some of that high-cost outlier percentages so that we have less high-cost outliers as a proportionate share of all of our LTACH patients. So I do not think that we are going to see any major headwinds as it relates to high-cost outlier this year. And we will be looking for the proposed rule early summer to see what to expect for 10/01/2026 forward.

Right. Okay. There have certainly been some questions mainly around the IRFs, but broadly, I will ask you on this CMS TEAM demo. What are your thoughts on that and how that might impact your business, if at all?

We have a small proportion of our rehab hospitals where we are in partner with partner systems that will be impacted by the TEAM implementation. The only area that we are really seeing that may have somewhat of a minor impact on us is spinal fusion surgeries—some of the spinal cord patients that we treat. We have been talking to our partners about this new initiative and the bundling, and think that it is going to be a minor adjustment in those markets at best.

Okay. And then my last question on the share repurchase. There was not much done in the fourth quarter. When we think about 2026, any comments on capital deployment? Any changes in priority? Any thoughts on share repurchases for 2026? I know you have got the pending review, so maybe that puts everything on hold. But I just wondered what your thoughts were about share repurchases.

AJ, your last comment when you said we are under the review or evaluating the process, you are correct. That puts everything on hold. It is really applicable.

Alright. And then on capital, does it make any changes on CapEx? Any thoughts around that?

No. Right now, it is business as usual as we are running our business. Again, I think we have been very open that our focus is growing inpatient rehab—our primary focus is growing our inpatient rehab division. So I think you will see more on the inpatient rehab hospital space, some new rehab units, as well as our neuro-transitional center, continuing to grow over the course of this year.

It does not jump off the page to me, but we are asking this for almost all the provider companies. Any applications for AI that you find particularly useful that you are focused on?

Yeah. We are evaluating employing AI. One thing that we are evaluating is some of our back-end processes in our billing office where we think there is opportunity. I will let Tom speak a little more because we are evaluating across all lines of business.

We are looking at it to help with our outpatient collections, and we have engaged a group who is piloting that initiative with us, as well as we are looking at the possibility of some clinical initiatives around virtual sitters and potentially telemetry monitoring in the future in the AI space.

Interesting. Okay. Thanks a lot.

Thank you. Our next question comes from William Sutherland with Benchmark Stonex.

Thank you. Actually, AJ took care of most of my questions. I am thinking the only labor question we did not really address was in critical illness, which I know you focused on a lot in the past couple of years. Is that settling in and kind of a good mix? And I am seeing all the union activity in the health systems on the acute care side. Any issues there for you guys going forward?

In regards to labor, Bill, we are very pleasantly surprised where the agency rate has settled into post the difficulties we experienced with agency costs in 2022—really the fourth quarter 2021 through 2023. That has come into line, and we are really focused on settling more on the allocation of 70% full-time, 15% PRN, and 15% agency, and it has hovered right around that percentage of 15%. So I think it is just continued improvement. We have kind of reached where I think we are at, with a little improvement year over year on our margin for SW&B. Tom, if you have anything to add to that.

No. Our labor margin is running just above 56%, and that is in line with where we were projecting to be and want to be. And then as far as labor union activity, there are always some systems that are dealing with labor union activity. We have not, in the past year, had any significant threats we have had to deal with, and there is nothing on the horizon right now for us in any of our locations.

That is good to hear. And, Tom, did you address—or Mike—the startup expense for IRF? Will it be in line this year and not impact margins?

Yes. It is going to be relatively consistent year over year. There is a little timing, but for total spend, I would expect around $15 million, a little south of $15 million of losses for 2026.

Okay. Which is in line with this year.

Yeah. Yeah. Yeah. Great. Thanks.

Thank you. I am showing no further questions at this time. I would like to turn the call back over to Tom Mullen for closing remarks.

Thank you, Operator. We have no further comments. We will look forward to updating the group next quarter. Thank you for your participation. This does conclude the program. You may now disconnect.