What Management Said
Read the full Q4 2025 transcript ↗I'm pleased to be with you today on my first earnings call since returning as CEO. After a period of record expansion, the priority now is to shift our focus toward operational excellence and execution. The environment is not without challenges, but there is a large opportunity to unlock the EBITDA and free cash flow potential within our existing facilities. Relative to the startup losses included in our 2025 results, the incremental EBITDA opportunity represented by the new facilities opened from 2023 through 2026 exceeds $200 million.
Turning to our fourth quarter results, we reported revenue of $821.5 million, representing a 6.1% increase over the fourth quarter of last year. Fourth quarter results included a $52.7 million adjustment to the company's reserve for professional and general liability, in line with the updated guidance that was provided on December 2, 2025. Adjusted EBITDA was $608.9 million, near the upper end of our guidance range of $601 million-$611 million. In the fourth quarter, same-facility revenue grew 4.4% year-over-year, driven by a 1.3% increase in revenue per patient day, and a 3.1% increase in patient days, an improvement over recent quarters.
On a same-facility basis, Adjusted EBITDA was $152 million in the fourth quarter. We invested $93 million in CapEx in Q4, and a total of $572 million for the full year of 2025, nearly $50 million favorable to our prior guidance. For the full year 2025, we added 1,089 beds, exceeding the high end of our guidance range. During the fourth quarter, we also opened a new de novo in our CTC line of business, bringing the total to 15 new CTCs added to the full year of 2025.
- Fourth quarter 2025 revenue of $821.5 million grew 6.1% over the prior-year quarter, and full-year 2025 revenue of $3.31 billion (up 5%) finished slightly above the upper end of guidance, reflecting improved volume.
- Full-year Adjusted EBITDA of $608.9 million landed near the upper end of the $601 million-$611 million guidance range.
- Fourth quarter same-facility patient days grew 3.1% and same-facility revenue grew 4.4%, an improvement over recent quarters with broad-based strength in both acute and specialty.
- The company added 1,089 beds in 2025, exceeding the high end of guidance, including 778 beds from six new facilities and 15 new CTCs, and full-year CapEx of $572 million was nearly $50 million favorable to prior guidance.
- Costs related to managing the government investigation fell to $12 million in Q4, down 69% sequentially.
- The incremental EBITDA opportunity from facilities opened from 2023 through 2026 exceeds $200 million, expected to be realized within five years.
- Fourth quarter Adjusted EBITDA of $99.8 million included a $52.7 million adjustment to the reserve for professional and general liability.
- DSO was up about 6 days year-over-year, driven by slower payments tied to two states whose programs needed finalizing, plus denials.
- New York's decision to no longer allow Medicaid patients to receive care in out-of-state facilities is expected to create a $25 million-$30 million annual EBITDA impact and an approximate 350 basis point headwind to 2026 same-facility growth, leading to closure of two leased Pennsylvania specialty facilities.
- Q4 startup losses of $12.8 million rose from $11.2 million in Q4 2024, and some newer facilities have not ramped as quickly as expected.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year revenue | FY2026 | $3.37B-$3.45B (initiated) |
| Full-year Adjusted EBITDA | FY2026 | $575M-$610M (initiated) |
| Full-year Adjusted EPS | FY2026 | $1.30-$1.55 (initiated) |
| Full-year startup losses | FY2026 | $47M-$53M (expected to decline) |
| Full-year CapEx | FY2026 | $255M-$280M (declining) |
| Q1 revenue | Q1 2026 | $820M-$830M (initiated) |
| Q1 Adjusted EBITDA | Q1 2026 | $130M-$137M (initiated) |
| Full-year same-facility volume growth | FY2026 | 0%-1% (initiated) |
| Full-year PLGL expense | FY2026 | $100M-$110M (initiated) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Q4 revenue | +6.1% to $821.5M | improved volume with same-facility revenue up 4.4% |
| Full-year 2025 revenue | +5% to $3.31B | improved volume, finishing slightly above the upper end of guidance |
| Q4 same-facility revenue | +4.4% | 1.3% increase in revenue per patient day and 3.1% increase in patient days |
| Q4 Adjusted EBITDA | to $99.8M | included a $52.7M professional and general liability reserve adjustment |
| Beds added in 2025 | 1,089 beds | exceeded the high end of guidance, including 778 beds from six new facilities; offset by 382 beds from five closed facilities |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Leadership transition | prior CEO Chris Hunter regime | Debbie Osteen returned as CEO focused on stability, execution, accountability and right-sizing corporate and field structure | Transition to new leadership |
| Professional and general liability (PLGL) | significant headwind in 2025; Q4 included $52.7M reserve adjustment | 2026 PLGL expense expected $100M-$110M, in line with prior guidance; claims consistent with December expectations | Stabilizing but elevated |
| New facility ramp | record expansion, some facilities not ramping as quickly as expected | evaluating each facility individually, building standardized opening approach; $200M+ incremental EBITDA opportunity within 5 years | Shifting to operational excellence |
| Capital discipline | $572M CapEx in 2025 | CapEx declining to $255M-$280M in 2026 with expected positive free cash flow | Declining spend |
| New York Medicaid / Pennsylvania | previewed in January | $25M-$30M annual EBITDA impact, two leased Pennsylvania facilities closed, backfilling occupancy | Headwind being managed |
Q&A Summary
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