Concentra Group Holdings Parent, Inc. Q4 FY2024 earnings call

Key Developments

• 2024 was a transformative year with successful IPO, spin-off from Select Medical, solid growth and financial performance, and execution on strategic initiatives.

Fourth Quarter Performance

• Ended the quarter with 709 locations, 15 more than Q4 2023. Revenue was $465 million, a 5.5% growth year-over-year. Adjusted EBITDA was $77.5 million, a 13.6% increase. Adjusted EBITDA margin increased from 15.5% in Q4 2023 to 16.7% in Q4 2024. Net income was $22.8 million, earnings per common share were $0.17. Patient visits: total visits per day were 46,800, a 2.1% decline year-over-year, with Employer Services visits down 4.8% and workers' compensation volume up 1.1%. Revenue per visit was up 5.8%.

Strategic Initiatives

• Spin-off from Select Medical continued with progress on leadership hires, team building, and separating support functions. De novo strategy with 3 new occupational health centers in Q4, and plans for more in 2025. Acquisition pipeline robust, with completion of Nova Medical Centers acquisition on March 1. Nova has 67 centers, $130 million annual revenue, and $28.3 million pro forma adjusted EBITDA.

In the Occupational Health Center operating segment, revenue in Q4 2024 was $437 million, a 5.4% increase year-over-year. Workers' compensation revenue was $289.1 million, a 7% increase from the prior year, representing 66% of the center operating segment revenue in Q4 2024 compared to 65% in Q4 2023. Employer Services revenue was $137.2 million, a 1.3% increase from the prior year. Onsite revenue was $17.1 million, a 7% increase from the same quarter prior year. Other business revenue was $10.9 million, an 8% increase against the same quarter prior year.

2025 Outlook

• Expect total revenue of approximately $2.1 billion, a 10.5% increase over 2024. Adjusted EBITDA expected to be $410 million to $425 million, a 11% increase at midpoint. Core business revenue includes fee schedule changes and improvement in employer services trends. Nova acquisition expected to contribute over $15 million in 2025. Capital expenditures outlook $80 million to $90 million, including one-time spend for Nova. Net leverage ratio expected to end 2025 at approximately 3.5x.

Q: Regarding the Nova integration, how do you approach larger transactions like Nova and what are you baking into your 2025 expectations regarding integration costs?

A: William Newton said they've done several large transactions before and learn to do them well. Nova's footprint overlaps with theirs, so integration should go well. Matthew DiCanio added they've been planning for integration for over 6 months and will follow their playbook.

Q: On your deleveraging pathway, following the Nova close, can you walk us through your pathway?

A: Matthew DiCanio said it's similar to the IPO story. Back at IPO, they were 3.9x levered, delevered to 3.46x at end of 2024, now at 3.9x post-Nova, expecting to get to 3.5x by end of 2025 and target 3x net leverage or below within 18-24 months, combining cash flow generation and EBITDA growth.

Q: On the Employer Services business improvement, can you give context on the expected improvement?

A: Matthew DiCanio said they're seeing improving trends in Employer Services, with last 3 quarters in minus 4%-5% range, and seeing better trends in January and February, implying trends will continue and lead to flat or slightly positive growth later in 2025.