Concentra Group Holdings Parent, Inc.

Good morning, and thank you for joining us today for Concentra Group Holdings Parent, Inc. Earnings Conference Call to discuss the fourth quarter and full year 2024 results, as well as some important company updates. Speaking today are the company's Chief Executive Officer, Keith Newton, and the company's President and Chief Financial Officer, Matt DiCagno. Management will give you an overview and then 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 Concentra's plans, expectations, strategies, intentions, and beliefs. These forward-looking statements are based on the information available to management of Concentra today and the company assumes no obligation to update these statements as circumstances change. At this time, I would like to turn the conference call over to Mr. Keith Newton.

Thanks, operator. Good morning, everyone. Welcome to Consensure's fourth quarter 2024 earnings call. If you recall from our conference call in January, we touched on three key developments. The preliminary release of our Q4 and full year 2024 financial results, the signing of the NOVA Medical Center's acquisition, and our financial outlook for 2025. Today, we'll provide updates and more color on each of those topics and set the stage for the year ahead. Before we do that, I'd like to express my sincere gratitude to all of Consentra's colleagues, patients, employer customers, ecosystem partners, and investors. 2024 was a transformative year. with our successful IPO, a spinoff from Select Medical, solid growth and financial performance, and continued execution on our strategic initiatives. As the largest provider of occupational health services in the United States by number of locations, we are relentless in our mission to improve the health of America's workforce one patient at a time. That is the key driving force behind our success and continued pursuit of excellence. Switching to our fourth quarter 2024 performance, Consentra ended the quarter with 552 occupational health centers and 157 on-site health clinics at employer work sites for a total of 709 locations, which is 15 more than Q4 2023. In the quarter, revenue was $465 million compared to $440.7 million in the prior year, representing a 5.5% growth year-over-year. Adjusted EBITDA was $77.5 million in the quarter versus $68.3 million in the same quarter prior year for a 13.6% increase. Adjusted EBITDA margin increased from 15.5% in Q4 2023 to 16.7% in Q4 2024, a result of revenue growth and improved cost of services. All of this is consistent with our pre-release announcement back in January. Net income was $22.8 million, and earnings per common share were 17 cents for the fourth quarter of 2024. Net income was slightly better than the range we provided in our preliminary flash in January due to the timing of the finalization of our tax expense entries. Net income was lower than the same quarter prior year, primarily due to the IPO recapitalization. From a patient visit standpoint, year-over-year trends in Q4 2024 were very similar to recent quarters. Total visits per day were 46.8 thousand, a 2.1% decline compared to the same quarter prior year. This was driven by a 4.8% decline in our employer services visits, which was expected and consistent with the variance we had been seeing in earlier quarters. The decline in employer service visits were partially offset by a 1.1% increase in our workers' compensation volume. As we discussed before, the foundation for our employer services and workers' compensation visit volumes in the United States is driven by the U.S. labor market and its underlying trends. Total employment continues to gradually grow, which supports our workers' compensation visits. Employer service visits are more correlated to job creation and churn within the workforce, as hiring events are the key driver of these type visits. Hiring rates and the quit rates in the United States are starting to show signs of stabilization and bottoming out. While we continue to manage these employer service trends to still drive revenue, profit growth, and stable margins, we are optimistic and expect that a more stable growing economy and labor market will help boost our employer services volumes from current levels. So far, we are seeing some better trends in these type of visits early in 2025. From a rate standpoint, we had a strong quarter with 5.8% increase in revenue per visit in Q4 2024 compared to the same quarter prior year. The growth was driven by increases in both workers' compensation and employer services revenue per visit, as well as a slight shift in mix between these categories. Beyond the financial metrics, we continue to execute on the strategic initiatives and growth objectives we established for ourselves. For example, The spinoff from Simple Act Medical was completed. We made further progress on our separation. We continue to advance our various clinical, operational, and technology initiatives and our development pipeline, all while achieving strong satisfaction scores from our patients and customers and improving our colleague retention. This concludes my overall company remarks. I'll now turn the call over to Matt to provide more color on our operating segments, key operating metrics, cost and expenses, cash flow, and balance sheet. We'll then wrap the call with further insight into the NOVA transaction and the previously provided guidance for 2025.

Thanks, Keith, and good morning, everyone. I'll begin with some additional commentary on our operating segments and our major expense categories. as well as other key performance indicators. In our Occupational Health Center operating segment, revenue of $437 million in Q4 2024 was 5.4% higher than the same quarter prior year. Keith outlined our visit decline year-over-year driven by the continued and expected lower employer services volume, which are lower revenue and lower margin visits. and the 5.8% increase in revenue per visit from $137 in Q4 2023 to $145 in Q4 2024. Within the center operating segment, workers' compensation revenue of $289.1 million was 7% higher than prior year. Q4 2024 work comp visits per day increased 1.1 percent from prior year q4 2024 work comp revenue per visit increased 4.4 percent versus prior year workers compensation revenue represented 66 percent of our total center operating segment revenue from q4 2024 versus 65 percent in q4 2023. Employer services revenue in the center operating segment of $137.2 million increased 1.3% from prior year. Employer services visits per day decreased 4.8% from prior year, in line with expectations and continued trends from recent quarters. The Q4 2024 employer services revenue per visit increased 4.8% versus prior year. On-site revenue of $17.1 million in Q4 increased 7% from the same quarter prior year. We had a solid business development quarter in this operating segment, winning 10 new onsites that will open in the coming months, and we continue to build out an exciting growth pipeline. Other business revenue of $10.9 million increased 8% against the same quarter prior year. Our cost of services expense, excluding depreciation and amortization, a major component of which is personnel costs, includes all direct and indirect support costs related to providing services to our customers. Cost of services was $344.9 million, or 74.2% of revenue, in Q4 2024. down from 75.1% of revenue for the same quarter prior year. General and administrative expense includes corporate overhead such as finance, legal, human resources, marketing, corporate offices, and other administrative areas. Our general and administrative expenses were $45.5 million, or 9.8% of revenue, in Q4 2024. compared to 9.6% of revenue in the same quarter prior year. For the fourth quarter, we had strong cash flow generation, with operating activities providing $93.7 million in cash flow, and our day's sales outstanding, or DSO, was 43 days at December 31, 2024, which was two days better than prior year. Our cash flow metrics continue to improve over historical levels. Investing activities used $16.7 million of cash in the fourth quarter, almost entirely from purchases of property and equipment, as our teams continued to successfully manage to healthy levels of capital expenditure for maintenance and growth each quarter. Financing activities used $30.6 million of cash for the fourth quarter, and we ended the quarter with a cash balance of $183.3 million. Our net leverage ratio at the end of 2024 was 3.46 times, down from approximately 3.9 times at the time of our IPO last July. This is a good proof point of our ability to generate strong cash flow and delever. With the strong financial performance, we are pleased to announce that on February 28, 2025, Concentra's Board of Directors declared a quarterly cash dividend of 6.25 cents per share. The dividend will be payable on or about April 1, 2025 to stockholders of record as of the close of business on March 18, 2025. We continue to recognize the importance of our dividend as a means to return value to shareholders, but our two highest priorities for capital allocation in the near future remain our growth efforts and delevering. Switching to our corporate development efforts, we continued our successful de novo strategy with three new occupational health centers in the fourth quarter. We opened our fourth center in the greater Orlando area, an especially exciting development with the increase in the Florida work comp fee schedule that went into effect on January 1, 2025. We opened a center in DeSoto, Texas, a highly industrial section of the Dallas-Fort Worth area bringing our total count to 19 centers in greater DFW. And we opened our first center in Knoxville, Tennessee, an exciting growth area for Concentra. Our de novo efforts will continue in 2025, as we have already opened an additional center in the Dallas-Fort Worth area in January, and we have five additional leases signed for centers expected to open this year. Our acquisition pipeline remains robust as well, as we continue to execute on our core M&A strategy of highly accretive occupational health practices and onsite additions across the U.S. We will talk more about the NOVA acquisition here shortly. And now I'll comment on our separation process from Select Medical, highlighted by the completion of Select's spinoff of Concentra in November. We have continued to make solid progress in these efforts as we execute on key leadership hires, building out specific teams in certain functional areas, and separating certain support functions and vendor contracts from Select. There is much work remaining, but the takeaway is that we remain on track with the process of operating completely independently from Select Medical by the time our TSA with Select ends in late 2026. With that, I'll turn it back to Keith to provide an update on the NOVA transaction.