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 2025 results. Speaking today are the company's Chief Executive Officer, Keith Newton, and the company's President and Chief Financial Officer, Matt DiCanio. 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 concentrous plans, expectations, strategies, intentions, and beliefs. You are hereby cautioned that these forward-looking statements may be affected by the important factors, among others, set forth in concentrous earnings release and in reports that are filed or furnished to the SEC. Consequently, actual operations and results may differ materially from those discussed in the forward-looking statements. 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'd like to turn the conference over to Mr. Keith Newton.

Thanks, Operator. Good morning, everyone. Welcome to Consumptra's fourth quarter 2025 earnings call. Hopefully everyone had a chance to review our pre-release that we furnished to the SEC on January 28th, which included certain operational and financial results for the fourth quarter and 2025 fiscal year, including visits, rate, revenue, adjusted EBITDA, net income, and EPS, amongst others. We have no material changes to report to any of our previously released financial or operational metrics. Q4 earnings pre-release was published at the same time as our fiscal year 2026 guidance in our investor book. The detailed investor book provides a comprehensive primer on our business and industry. We recognize that Concentra is a unique company and therefore may necessitate additional foundational information for some investors to gain a better understanding of our fundamentals. We touched on everything from the patient journey in our centers to customer value proposition to our company performance through various economic cycles to the workers' comp ecosystem and rate-setting mechanisms to financial highlights including cash conversion and return on invested capital and much more. We've gotten positive feedback on it thus far and expect that it will continue to resonate with the market. I'd also like to add that we recently completed additional validation studies on workers' compensation claims that we treated that support and validate our considerable value proposition to our employer customers and ecosystem partners. The additional studies produced strong results consistent with our previous published studies. Adding the results to the previously published data, we now have reviewed and analyzed more than 550,000 claims from 2020 to 2025. in partnership with employers and payers, and we have found that the average total workers' compensation claims cost for those treated by Concentra is 25% lower than non-Concentra providers, and that the average claim duration is 65 fewer days when treated by Concentra. We believe our specialized clinical approach and fully integrated medical model drive these strong outcomes for injured workers and their employers, With our unmatched nationwide access, technological capabilities, data interconnectivity, and excellent patient satisfaction metrics, which are at all-time highs, we continue to prove to employers why we are the best solution for creating the most value for all their occupational health needs. Moving on to our financial results, we had a strong finish to an overall solid year for the company, exceeding the high end of the range of our previously issued full-year 2025 guidance for both revenue and adjusted EBITDA, as well as coming in better than our guidance on leverage. Solid growth in both visits and rate within the occupational health center's operating segment, prudent cost management across G&A and cost of services, and and continued double-digit organic growth in the onsite business operating segment all contributed to the outperformance during the fourth quarter. Total company revenue was $539.1 million in Q4 2025 compared to $465 million in Q4 of the prior year, representing 15.9% growth year-over-year. Excluding contributions from the NOVA and Pivot acquisitions, Revenue was $493.8 million in Q4 2025, resulting in a 6.2% increase over the prior year. For the full year 2025, revenue was $2.2 billion compared to $1.9 billion in 2024, representing 13.9% growth year-over-year despite one less revenue day. Excluding contributions from NOVA and PIVOT, 2025 revenue was $2 billion, resulting in a 6.4% increase of the prior year or a 6.8% increase on a per day basis. Total patient visits increased 9% to more than 51,000 visits per day in the fourth quarter, which is always our lowest volume quarter of the year due to the seasonal holidays and colder weather. Our workers' compensation visits per day increased 9.1%, and the employer service visit volume increased 9.4% relative to prior year. Excluding the impact from the acquisition of NOVA, total visits per day increased 2.6% in the fourth quarter. Workers' compensation visits increased 3.4%, and employer service visits increased 2.3%, both continuing the strong momentum from the third quarter of 2025. I would note that we are largely unimpacted by the government shutdown during the quarter, given limited exposure to the federal government from an employer-customer standpoint. Full-year 2025 visits per day increased 7.7% year-over-year to over 53,000. Workers' compensation visits increased 7.7%, and employer services visits increased 8.1%. Excluding the impact from the acquisition of NOVA, total 2025 visits per day increased 2.2%, with increases in workers' compensation visits of 2.8% and employer services visits of 1.8%. We sustained relatively strong performance over the course of 2025, despite a lot of debate around the state of the broader labor market. Following the recent BLS jobs revisions to 2025, We now know that across the economy, the U.S. labor market grew at a relatively anemic clip of 0.1% in 2025. However, the blue-collar economy, largely encompassing production and non-supervisory workers, which represent about 80% of the private labor market and is more indicative of the labor force we serve in our occupational health centers, added more than 450,000 net jobs over the course of the year, according to the BLS, and grew at a rate of 0.4% in 2025. We remain positive on the long-term outlook for the US labor market. According to the most recent employment projections by the BLS published in August 2025, the US is expected to add 5.2 million jobs from 2024 through 2034, with a large subset of these jobs in physically demanding occupations with higher incidence rates. Additionally, we anticipate that there will be upside to those employment projections if the proposed capital commitments made in conjunction with a broader reshoring initiative continue to be converted into large construction projects and more manufacturing jobs are added to the economy. Overall growth in employment combined with a stable injury incidence rate across industry sectors and an aging workforce with increased comorbidities that result in increased severity of injuries should continue to provide strong tailwinds to our business over the long run. With respect to our rates, revenue per visit grew 3.1% during the fourth quarter relative to the prior year. This growth was driven by a 4.1% increase in workers' compensation and a 1.2% increase in employer services revenue per visit. Compared to early quarters in 2025, year-over-year growth in employer services rate in Q4 2025 was down primarily to a shift in mix between the lower dollar drug screens and higher dollar physicals. For full year 2025, revenue per visit was 4.3% higher than 2024, with workers' compensation revenue per visit increasing 5.3%, and employer services revenue per visit increasing 2.7%. Adjusted EBITDA was $95.3 million in the quarter versus $77.5 million in the same quarter prior year for a 22.9% increase. Adjusted EBITDA margin increased 100 basis points from 16.7% in Q4 2024 to 17.7% in Q4 2025. For the full year 2025, adjusted EBITDA was $431.9 million compared to $376.9 million in 2024, representing 14.6% growth year-over-year despite one less revenue day. We're really happy with the results that we've seen over the last 18 months. Since our IPO in July of 2024, we've grown adjusted EBITDA by approximately $67 million, constituting an 18% increase. While the Nova and Pivot acquisitions certainly contributed, the majority of this growth has been organically driven, which again is a testament to the continued execution of our entire team. For full year 2025, adjusted EBITDA margin increased to 20% from 19.8% in 2024. As with previous quarters, we are comparing against prior year margins that were burdened with less public company and separation costs, indicating even greater margin performance if you were to compare on an apples to apples basis. Respect to the separation with Select, we are tracking very well and have hired more than 80% of the total expected FTEs, including all senior level positions. We expect to finalize hiring and complete the majority of the remaining separation activities by the summer, well ahead of the November 2026 expiration of the transition services agreement with Select Medical. Adjusted net income attributable to the company was $36.1 million and adjusted earnings per share were $0.28 for the fourth quarter of 2025, representing significant growth over prior year adjusted net income attributable to the company and adjusted earnings per share of $22.2 million and $0.17 respectively. Adjusted net income attributable to the company was $176 million and adjusted earnings per share was $1.37 for full year 2025. For full year 2024, adjusted net income attributable to the company was $168.5 million, and adjusted earnings per share was $1.48. During the fourth quarter, we opened two additional de novo sites in Southern California and Miami, resulting in seven total de novos in 2025. We have a strong pipeline heading into 2026, having already opened another new location outside of Atlanta in January, executed leases on another five locations across Arizona, Florida, Missouri, and Idaho, which will be a new state for us, and identified several other attractive sites that could push us into high single-digit de novo openings in 2026. On the M&A front, we plan to continue with the smaller bolt-on acquisition opportunities. We have often said that these deals are highly accreted for us due to the top line and cost synergies we were able to achieve. The acquisition of the three net incremental centers in California in January aligns with this approach. Now we'll turn it over to Matt to provide additional details on our financial results for the quarter and our growth outlook for 2026.

Thanks, Keith, and good morning, everyone. I'll start by going through some more details on our Q4 results in our three operating segments. In our Occupational Health Center operating segment, total revenue of $490.6 million in Q4 2025 was 12.2% higher than the same quarter prior year. Total visits per day increased 9% over the same quarter prior year. Revenue per visit increased 3.1% from $145 in Q4 2024 to $150 in Q4 2025. Workers' compensation revenue of $328.5 million in Q4 2025 was 13.6% higher than prior year. Work comp visits per day increased 9.1% from prior year during the quarter, and work comp revenue per visit increased 4.1% versus prior year during the quarter. Within employer services, revenue of $151.9 million increased 10.7% in Q4 2025 from prior year. Employer services visits per day increased 9.4% from prior year during the quarter, and employer services revenue per visit increased 1.2% versus prior year during the quarter. As with past quarters, here are the same stats for Q4, excluding the impact of NOVA, to help isolate core business from our Q1 2025 acquisition. Total revenue within the occupational health center operating segment was $461.9 million in Q4 2025, a 5.7% increase over the prior year. Total visits per day increased 2.6% over the same quarter prior year, and revenue per visit increased 3.1% from $145 in Q4 2024 to $150 in Q4 2025. Workers' compensation revenue of $309 million in Q4 2025 was 7.2% higher than prior year. Work comp visits per day were 3.4% higher than prior year during the quarter, and work comp revenue per visit was 3.7% higher than prior year during the quarter. Within employer services, revenue of 142.2 million in Q4 2025 increased 3.7% from prior year. Employer services visits per day were 2.3% higher than prior year during the quarter. And employer services revenue per visit was 1.3% higher than prior year during the quarter. Moving on from our occupational health centers, our onsite health clinics operating segment reported revenue of 36.2 million in Q4 2025, a 112% increase from the same quarter prior year. This was largely driven by the acquisition of Pivot onsite innovations in Q2 2025. Excluding the impact from Pivot, onsite operating segment revenue grew 14.6% year-over-year during the quarter, the third consecutive quarter with double-digit organic growth. For the full year 2025, our onsite health clinics operating segment reported revenue of 110.2 million, a 72% increase over full year 2024. Excluding the impact from pivot, the onsite operating segment revenue grew 11.6% over full year 2024. We have a robust prospective onsite customer pipeline and expect to continue to see strong organic sales growth in this operating segment in 2026. In particular, our advanced primary care product offering has gained a lot of traction within the broader market, and we expect that to serve as a key growth driver for the business. And finally, other businesses generated revenue of $12.3 million in Q4 2025, a 12.6% increase against the same quarter prior year. For the full year 2025, other businesses grew 8.7% over a full year 2024. Now moving on to expenses. Cost of services was $398.4 million, or 73.9% of revenue in Q4 2025, an improvement from 74.2% of revenue for the same quarter prior year. For the year, cost of services was 71.7% of revenue, a decrease from 72.2% in 2024. The improvement year-over-year is really a testament to our operators and staffing efficiencies they were able to garner within the centers. The year-over-year improvement is also despite headwinds from one-time integration costs we incurred as a result of the NOVA transaction, which totaled more than $2 million over the year. Our total general and administrative expenses were $50.8 million, or 9.4% of revenue, in Q4 2025, compared to 9.8% of revenue in the same quarter prior year, excluding items that are added back for the purposes of calculating adjusted EBITDA, including equity compensation expense, one-time select separation costs, and M&A transaction costs, G&A expense was $45.8 million for the quarter, or 8.5% of revenue, compared to 9.4% of revenue in the same quarter prior year. The year-over-year outperformance in Q4 2025, despite incurring additional separation costs, was partially driven by the reduction in certain non-recurring expenses that we incurred in Q4 2024. For the full year of 2025, G&A expense as a percent of revenue was 9.4% compared to 8.2% for the full year 2024. Excluding items that are added back for the purposes of calculating adjusted EBITDA, including stock comp expense and one-time transaction costs, G&A expense as a percentage of revenue was 8.4% in 2025 compared to 8% in 2024. The year-over-year increase was largely due to incremental costs resulting from our separation from Select and emergence as a standalone public company in July of 2024. Adjusted EBITDA margin increased from 16.7% in Q4 2024 to 17.7% in Q4 2025, and adjusted EBITDA margin increased from 19.8% for the full year 2024 to 20% in full year 2025. We are pleased to have achieved margin improvement year over year despite the incremental separation in public company costs. Again, I would highlight the strong efficiency gains within cost of services as well as the smooth execution of our separation hiring plan within G&A as key drivers of the improvement we saw in 2025. Now to touch on cash flows. In Q4, our seasonally strongest cash flow quarter within any given year, we generated $118.7 million in operating cash flow. This compares to $93.7 million in the fourth quarter of 2024, with the year-over-year increase resulting from materially higher earnings in 2025. For the year, we generated $279.4 million in cash flow from operations, which represented a slight improvement over 2024 cash flow from operations of $274.7 million, despite significantly more cash interest expense incurred in 2025 due to the IPO recap in July 2024. Investing activities used $20.1 million of cash in the fourth quarter and was driven by investments in center de novos, relocations, renovations, and maintenance, as well as IT investments. The year-over-year increase from $16.7 million of spend in Q4 2024 was largely due to an additional $4 million of one-time capex related to the NOVA integration. We expect to incur minimal incremental capital costs in the NOVA integration going forward since most of the work was finalized as of the end of the third quarter. For the year, we used $414.9 million in cash from investing activities as we executed business combinations totaling $333.3 million and invested $82.3 million in CapEx over the course of the year. This was a significant increase over cash used in investing activities in 2024 of $71.3 million when we didn't have larger acquisitions like NOVA and Pivot. Free cash flow or cash flow from operations less cash flow from investing activity excluding business combinations and acquired customer relationships, totaled $98.6 million, an increase from prior year fourth quarter free cash flow of $77 million. For the full year, we generated free cash flow of $197.8 million. Free cash flow conversion, which we define as free cash flow divided by net income, remained healthy for the year at 114%. about the same conversion rate we have seen on average over the course of the past five years. Finally, financing activities during the quarter resulted in net cash outflows of $68.6 million as we repaid the entirety of the $35 million outstanding balance under our credit facility, repurchased 1.1 million shares totaling $22.4 million, and paid $8 million in dividends in conjunction with our standard dividend programs. Over the course of 2025, we made principal payments on our senior debt totaling $92.1 million, including $7.1 million of mandatory amortization payments and $85 million in payments on our revolving credit facility. We also executed share repurchases totaling $22.4 million and made dividend payments of $32.1 million. The remainder of the free cash flow was largely used in conjunction with M&A activities. We will continue to be opportunistic, executing on our share repurchase program in 2026, while simultaneously working towards our year-end 2026 leverage target of approximately three times. At the end of the fourth quarter, we had approximately $80 million authorized by the Board of Directors remaining under the repurchase program. We ended the quarter with a total debt balance of $1.57 billion and a cash balance of $79.9 million. Our net leverage ratio per our credit agreement at the end of December was 3.4 times. We expect to continue making meaningful progress towards our three times target following Q1. I would just note that Q1 is our seasonally slowest free cash flow quarter due to coming off our seasonally lowest visits quarter in Q4. Interest payments associated with our bonds in Q1 and typically elevated working capital requirements in Q1. Next, I'd like to touch more broadly on the forward outlook. With respect to our growth efforts, we are largely through the integration process for both Inova and Pivot acquisitions and have captured the majority of synergies that we expect to capture at this point. In fact, we have come in comfortably ahead of underwriting in terms of total synergies achieved across the two deals. As Keith mentioned, we are going to continue to stay active on the Inova and Bolton M&A front. We're targeting seven to nine Inovas in 2026. which would be a record for us, and potentially double-digit new sites in 2027. As a reminder, these are very accretive for us with payback typically occurring in under three years. With respect to M&A, we are not anticipating any larger deals over the near term, but are continuing to work our pipeline of small one-to-five center deals. We recently finalized the Reliant acquisition from MBI in January. and our goal is to continue developing the pipeline and executing on smaller M&A. Switching gears to developments out of the state of New York related to their workers' compensation fee schedule. If you recall, we have no centers in the state due to their exceedingly low fee schedule, but believe we could add dozens of locations or more across the state if the fee schedule is revised sufficiently higher. The state board published revised rates in mid-January that increased evaluation and management codes which generally cover primary injury care, excluding physical therapy, by approximately 50%. This was a good first step. However, both the proposed E&M and PT workers' comp codes are still below where we feel they should be in order to commit the capital to enter the state in a meaningful way. The public comment period, which we will be actively participating in, goes through mid-March and we expect new rates to be implemented starting around January 1, 2027. Our onsite health clinic operating segment, we will continue to evaluate inorganic growth opportunities of both occupational health-focused onsite groups like PIVOT, as well as advanced primary care focus groups. Valuations in that space have remained elevated, with platforms largely trading based on revenue multiples over recent years. We will continue to patiently monitor the market and look for ways to be opportunistic here in the future at attractive valuation. Moving on to our full year 2026 guidance, which we released at the end of January. We have set our revenue target at a range of 2.25 to 2.35 billion. Our adjusted EBITDA target at a range of 450 million to 470 million. Our CapEx target at a range of 70 to 80 million. our free cash flow target at a range of $200 million to $225 million, and our leverage target remains approximately three times by the end of 2026. In our January 2026 investor presentation, we laid out our key assumptions, including approximately 3% rate growth within the occupational health center's operating segment, We have a relatively high degree of confidence around rate guidance since the majority of states, including our largest states like Texas, California, Florida, and Pennsylvania, have now finalized their 2026 fee schedules. We also stated we are assuming low single-digit visit growth, excluding NOVA. Included in our guidance is the January 3 Center acquisition and six de novo sites with executed leases as of the guidance date. On the cost side, we are anticipating stickiness with efficiency gains captured in our centers over the course of 2025 and cost of services as a percentage of revenue to remain relatively consistent with 2025. With respect to overhead, we will incur incremental separation costs in 2026 relative to 2025 as we hire the remaining colleagues in the first half of 2026 and annualize the impact of colleagues hired in the second half of 2025. All in, we expect adjusted EBITDA margin in 2026 to remain relatively constant with 2025 at around 20%, with potential for additional margin expansion thereafter once the separation is fully complete. We expect an overall decrease in CapEx in 2026 relative to 2025 as approximately $15 million in one-time NOVA integration CapEx rolls off. As a reminder, the majority of our typical annual CapEx spend is related to positive ROI projects, including DeNovo's IT investment, relocations, and strategic renovations. A small portion constitutes true maintenance capital. Finally, we are pleased to announce a continuation of our dividend this quarter, with Concentra's Board of Directors declaring a cash dividend of $0.0625 per share on February 25, 2026. The dividend will be payable on or about March 19, 2026, to stockholders of record as of the close of business on March 12, 2026. Now back to Keith for a few closing comments.