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 second quarter 2026 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 Concentra's 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 Concentra's 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 will turn a conference call over to Mr. Keith Newton.

Good morning, and thank you for joining us today. Before we comment on our second quarter results, I would like to share my perspective on the announcement that was made yesterday afternoon in our press release. After more than a decade as Consensory's Chief Executive Officer and our relationship with a company that has spanned over 30 years, I have decided effective November 1st of this year to transition from the CEO role into a new role at Concentra as its executive chairman of the board. At that time, Matt DiCanio, our president and chief financial officer, will become Concentra's president and chief executive officer. Bob Ortenzio, our current chairman, will continue to serve on our board as a director. Many thanks to Bob for his leadership and guidance over the last 11 years especially over the last couple of years as a public company. Leading this organization and its more than 13,000 colleagues has been the privilege of my career. I could not be prouder of what we have accomplished together at Concentra. Today we stand as the clear leader in occupational health, powered by a best-in-class team that remains focused every day on our mission of improving the health of America's workforce. The company has experienced tremendous growth, particularly over the last decade, driven by the dedication and execution of our teams. Together, we have reached significant milestones throughout our journey, including the successful completion of our IPO in 2024. This transition is the result of a multi-year succession plan that we have worked on with our board of directors, and there is no better time to turn the role over to Matt. The business is performing exceptionally well, Our strategy is delivering, and Matt has been central to both. Over more than a decade working side by side, he has shaped nearly every dimension of Concentra, leading our de novo and acquisition growth engine and integration efforts, developing and executing strategies that support our operating model, running the IPO process, and leading our public company efforts since the IPO. He knows this business. He knows our customers. and he knows our people as well as anyone. Importantly, Matt will assume this role supported by one of the most experienced leadership teams in our industry. The members of our executive and senior leadership team across the country have an average tenure with Concentra of approximately 20 years, reflecting a deep understanding of our business, a strong commitment to our culture and a proven ability to execute through changing market environments. As executive chairman, I plan to remain actively engaged with the board, Matt, and his executive leadership team, and I have complete confidence that Concentra will continue to prosper in its next chapter in his hands. So with that, I will turn it over to Matt to talk about the quarter, where you will see we continue to have great momentum with the business.

Matt? Thank you, Keith. Before turning to the quarter, I would like to say what an honor it is to be selected by the Board of Directors as Concentra's next president and chief executive officer. Keith, on behalf of all of our colleagues, thank you for your leadership. Over the 11 years we've worked together, you've taught me what it means to lead this company, making sure the right people are in place, enabling teams to do what they do best, and supporting the culture we have built. And I'm grateful that I'll continue to benefit from your partnership and counsel as executive chairmen. To our shareholders, my message is simple. This transition reflects continuity. The strategy we've articulated since our IPO, delivering on our strong customer value proposition, expanding access through de novo development and discipline acquisitions, and driving operating leverage across the platform is working, and it will not change on November 1st. Just as importantly, I have the privilege of working alongside an exceptional, tenured, Executive and Senior Leadership Team. Their experience, institutional knowledge, and commitment to our mission provides tremendous stability and positions us well for our next phase of growth. So with that, let's turn to our second quarter results. Total company revenue was $606 million in Q2 2026 compared to $550.8 million in Q2 of the prior year, representing 10% growth year over year. Excluding contributions from the pivot acquisition in both the current and prior year where applicable, revenue was $589.1 million this quarter, resulting in an 8% increase over the prior year, representing one of our strongest core revenue growth quarters in some time. Total occupational health center patient visits increased 2.6% to an average of more than 56,000 visits per day in the second quarter. Our work comp visits per day increased 3.7% and our employer services visit volume increased 1.8% relative to prior year. As we expected, work comp visit growth rates were lower relative to the first quarter, but visits remained strong and above long-term growth averages. We believe that this reflects both a resilient blue-collar labor market where we generally operate as well as market share gains. Importantly, The growth in visit volume has been nicely distributed across industries and geographies. While it's still a little early to definitively point towards reshoring as a key driver of the recent uptick in visit growth, we are seeing indications of improved activity in the manufacturing and construction sectors, and in particular, some encouraging activities in markets proximate to data center development. With respect to market share, as mentioned last quarter, we are continuing to deploy new tactics and technologies to help us target and efficiently communicate with prospective customers, which we think is having a positive impact. Those efforts, combined with customer satisfaction and retention metrics remaining at or near all-time highs, are likely contributing to our market share gains. There are solid secular tailwinds supporting a growing market in the near and long term, and we are actively investing and utilizing all available levers to increase our share. We'd also like to highlight the acceleration employer services growth this quarter, which we view as an indicator of relatively resilient hiring trends across the economy. On the occupational health center rate front, revenue per visit grew 4.6% during the second quarter relative to prior year. This growth was driven by a 4.9% increase in work comp and a 3.2% increase in employer services revenue per visit. We had expected rate bumps in the state of California and Tennessee on March 1st and April 1st, respectively, helping drive the increase in the work comp rate. Additionally, We had some mixed dynamics at play with higher reimbursement initial injury visits comprising a larger percentage of total work comp visits this quarter. We expect rate growth over the remainder of the year to fall closer to 3%. Adjusted EBITDA was $140.9 million this quarter versus $115 million in the same quarter of the prior year, an increase of 22.5%. Adjusted EBITDA margin increased nearly 240 basis points from 20.9% in Q2 2025 to 23.3% this quarter, reflecting strong rate and volume growth coupled with good execution and operational efficiencies across the business. Additionally, Q2 2025 included just under $4 million of estimated NOVA acquisition-related costs, tied to one-time integration activities or expenses that have since been eliminated through synergies, creating an incremental tailwind for year-over-year earnings growth. Both our Pivot and NOVA acquisitions continue to perform very well and are ahead of underwriting. Adjusted net income attributable to the company was $66.7 million, and adjusted earnings per share was $0.52 for the second quarter of 2026. representing approximately 40% growth over prior year adjusted net income of $47.7 million and adjusted earnings per share of $0.37. Next, to provide a little more detail in our occupational health operating segment, total revenue of $553.5 million this quarter was 7.2% higher than the same quarter of prior year Work Comp specific revenue of $361.2 million this quarter was 8.7% higher than prior year and Employer Services specific revenue of $183.2 million increased 5.1% in Q2 2026 versus prior year. Our onsite health clinics operating segment had yet another strong quarter with reported revenue of $38.8 million A 72.1% increase from the same quarter of the prior year. Excluding the impact from the pivot acquisition in June of last year, the onsite health clinic's operating segment revenue grew 27.9% year-over-year during this quarter. As mentioned last quarter, we continue to be encouraged by both the realized growth in this business as well as the pipeline of new opportunities that the team is building. While mid- to high-20s organic growth percentage may not be sustainable long-term, we see a lot of opportunity here and do expect this segment to continue to grow at a faster clip than the core business. Finally, other businesses, including telemed, our pharmacy operations, and other Ock Health-related service businesses generated revenue of $13.7 million in the quarter, a 13.3% increase compared to the same quarter of prior year. Moving on to expenses. Positive services was $413.9 million or 68.3% of revenue in Q2 2026, an improvement from 70.7% of revenue for the same quarter of the prior year. We continue to do well with our staffing efficiencies, which has precipitated nice flow through from our visit and rate growth. Additionally, as previously noted, Q2 2025 included one-time expenses related to NOVA integration activities and other costs within cost of services that have since been eliminated through synergy realization. Our total general and administrative expenses were 56.7 million or 9.4% of revenue in the quarter compared to 9.6% of revenue in the same quarter of the prior year, excluding items that are added back for the purposes of calculating adjusted EBITDA, including equity, comp, GNA expense one-time select separation costs and M&A transaction costs. GNA expense was $51.1 million for the quarter or 8.4% of revenue compared to 8.5% of revenue in the same quarter of the prior year. As with cost of services, we had NOVA expenses in Q2 2025 that have been synergized, offsetting expected year-over-year increases in personnel and systems-related overhead related to our separation from Select Medical. Now to touch on cash flows. In the quarter we generated $135.2 million in operating cash flow. This compares to $88.4 million in the second quarter of last year with the year-over-year increase largely resulting from higher earnings and year-over-year variances in timing associated with payments of current liabilities. Investing activities used $14.2 million of cash in the second quarter and was driven by additional investments in de novo centers, relocations, renovations, and maintenance, as well as IT investments. On the de novo front, we opened one center near Phoenix in Q2 and subsequent to quarter end, we opened two additional centers in Boise and Kansas City. The Boise Center is our first location in Idaho, which represents our 42nd state with an occupational health center, a great milestone for our company. We are still targeting a total of 8 to 10 de novo centers this year and have a nice development pipeline that we expect to potentially support double digit new sites in 2027 and beyond. We are also continuing to work our bolt-on M&A pipeline and anticipate additional announcements on that front over the remainder of the year. Free cash flow or cash flow from operations less cash flow from investing activity excluding business combinations totaled $121 million, an increase from prior year second quarter free cash flow of $63.2 million. This was driven by A combination of higher cash flow from operations and lower capital spend in Q2 2026 relative to Q2 2025. Finally, financing activities during the quarter resulted in net cash outflows of $24.7 million as we repurchased approximately 424,000 shares totaling $11 million and paid $8 million in dividends. At the end of the second quarter, we had approximately $54 million remaining under the original $100 million repurchase program authorized by our board of directors. We ended the quarter with a total debt balance of $1.57 billion and a cash balance of $158 million. Our net leverage ratio per our credit agreement at the end of June was just under three times, down from 3.4 times at the end of the first quarter. We made significant headway this quarter on both the numerator with strong free cash flow generation as well as on the denominator given our growth in adjusted EBITDA. We have reached this leverage milestone well ahead of schedule and absent opportunistic M&A and share repurchases will continue to work towards our long-term leverage target of near two and a half times. One additional note here, we expect the interest rate spread on our term loan B to step down 25 basis points to 175 basis points now that we are below 3.25 times leverage, meaning that we should see a nice reduction in interest expense going forward. Finally, we are pleased to announce the continuation of our dividend this quarter with Concentra's Board of Directors declaring a cash dividend of $0.0625 per share on August 5, 2026. The dividend will be payable on or about August 28, 2026 to stockholders of record as of the close of business on August 20, 2026. Now, I'll turn it back to Keith to close us out with some comments on separation activity as well as our updated guidance.