Q1 2025 Concentra Group Holdings Parent Inc Earnings Call
Good morning and thank you for joining us today, for Concentra Group Holdings Parent Inc.
Speaking today are the company's chief executive officer, Keith Newton, and the company's president and chief financial officer, Matt DeCanio.
Speaker Change: Management will provide an overview and then open the call for questions.
Speaker Change: Before we get started, we would like to remind you that this conference call may contain forward-looking statements.
Speaker Change: regarding future events or the future financial performance of the company.
Speaker Change: Including, without limitation, statements regarding operating results, growth opportunities and other statements that refer to concentric plans, expectations, strategies, intentions, and beliefs.
Speaker Change: 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.
Speaker Change: At this time, I will turn the conference over to Mr. Keith Newton. Sir, the floor is yours. Thanks operator. Good morning everyone. Welcome to Concentra's first quarter 2025 earnings call.
Keith Newton: We had a very successful first quarter to start the year. Today we'll talk about three key trends we saw in our business.
Keith Newton: First, solid visit growth, including a positive reversal in our employer service visits.
Secondly, Strong Rate Growth [inaudible]
And finally, significant corporate development activity.
Keith Newton: We have always referred to these as our key growth drivers and this quarter all were nicely trending together.
One thing to note.
Keith Newton: Given that the Nova Medical Center's acquisition closed on March 1st, 2025, and thus, we are only reflecting one month.
Keith Newton: of its results in the first quarter. We will talk about some of our results this quarter with and without Nova, so investors and analysts can understand both.
Keith Newton: First, from a visit perspective, patient visits in Q1 2025 were up across all service lines year over year with total visits per day increasing 3.2% to 50.9,000.
Keith Newton: Excluding the impact from the acquisition of NOVA in early March, total visits per day increased 0.6% to 49.6000.
Keith Newton: We continue to see year-over-year growth in workers' compensation volume with total visits per day increasing 2.4% over the first quarter of 2024, excluding NOVA daily workers' compensation visits increase 0.2%
Keith Newton: Importantly, on the employer's services side, we're pleased to report that we saw year-over-year daily visit growth for the quarter.
Keith Newton: Employer Services Volume increased 3.9% per day relative to the first quarter of 2024.
Keith Newton: Even when excluding NOVA, employer services volume increased 0.9% per day.
Keith Newton: This marks a pretty significant turnaround in our employer services visits following many consecutive quarters of year-over-year mid-single digit declines coming out of the post-COVID normalization.
Keith Newton: From a race standpoint, we had another strong quarter with a 5.6% increase in revenue per visit in Q1 2025 compared to the same quarter prior year.
Keith Newton: The growth was driven by increases in both workers' compensation and employer services revenue per visit.
Keith Newton: Lastly, I will let Matt talk more about our corporate development efforts, but it has been a highly successful few months with the closing of our NOVA acquisition on March 1st.
Keith Newton: The addition of five new Centers in Florida from our Physician Health Center Acquisition on March 8th, the opening of three Dinovo sites in Q1 in the signing of the Pivot On-site Acquisition that we announced on April 21st.
Keith Newton: In total, these efforts will add 75 new occupational health centers and approximately 200 on-site health clinics.
Keith Newton: This is our most active stretch of M&A in quite some time.
Keith Newton: With the three growth drivers all moving in the same direction and despite one less revenue day in the quarter versus prior year, we achieved strong financial results for Q1.
Keith Newton: Revenue was 500.8 million for the three months ended March 31st, 2025, compared to 467.6 million for the three months ended March 31st, 2024.
Keith Newton: Representing 7.1% growth year-over-year. This represents a revenue growth rate at 8.9% year-over-year on a revenue per day basis.
Keith Newton: Adjusted EBITDA was 102.7 million in the first quarter of 2025, versus 96.1 million in the first quarter of 2024, or a 6.8% increased.
Keith Newton: Adjusted EBITDA margin decreased slightly from 20.6% in Q1 2024 to 20.5% in Q1 2025.
Keith Newton: Matt will provide more detail shortly, but once you normalize Q1 2024 for a favorable out-of-period expense reversal, we would have experienced positive year-over-year growth in adjusted EBITDA margin.
Keith Newton: Net income was 40.6 million and adjusted earnings per share with 32 cents for the first quarter 2025. Net income was lower than same quarter prior year, primarily due to an increase in interest expense resulting from the IPO recapitalization.
Keith Newton: With some transaction expenses related to the NOVA acquisition and related financing events that were accounted for as adjustments to earnings per share.
Keith Newton: Overall, the NOVA acquisition contributed to our strong performance in the month of March, but our core business also performed very well. Just to reiterate, positive workers' compensation visit growth?
Keith Newton: Positive employer services visit growth, strong rate growth for all visit types and successful M&A, a nice recipe for success with our business.
Keith Newton: Later in the call, we will discuss our revised financial outlook for 2025, which we are raising from our initial outlook provided in January of 2025. We'll also comment on the expected impact of potential tariffs on our business while we think we are well-positioned as a company in the event of macroeconomic turbulence.
Keith Newton: Now I'll turn it over to Matt to provide some more detail on our financial results and additional commentary on our corporate development efforts.
Matt DiCanio: Thanks Keith and good morning everyone. I'll start by adding some additional commentary on the financials and then we'll talk more about the exciting growth efforts.
Matt DiCanio: In our Occupational Health Center operating segment, the following numbers are inclusive of the Nova Acquisition.
Matt DiCanio: With one less revenue day as compared to the prior year, this constitutes an 8.9% year-over-year increase on a revenue per day basis.
Matt DiCanio: Total visits per day increase 3.2% over the same quarter of a year, and revenue per visit increased 5.6% from $139 in Q1, 2024 to $147 in Q1, 2025.
Matt DiCanio: WorkComp visits per day increased 2.4% from prior year, and WorkComp revenue per visit increased 7.1% versus prior year.
Matt DiCanio: Excluding the Florida work comp rate increase, our work comp revenue per visit would have increased by approximately 5%.
Matt DiCanio: Within employer services, revenue of $160.1 million in Q1 2025 increased 6.2% from prior year. This constitutes a 7.9% increase on a revenue per day basis.
Matt DiCanio: Employer Services visits per day increased 3.9% from prior year. A welcome reversal of negative year wear trends in recent quarters.
Matt DiCanio: Employer Services Revenue per visit increased 3.9% versus prior year.
Matt DiCanio: Given the partial quarter contribution of Novita's financial results, I'm also going to provide a few metrics excluding the impact of the NOVA acquisition.
Matt DiCanio: Excluding the impact of NOVA, total revenue within the Occupational Health Center Operating
which excludes the on-site health clinics and other businesses.
Matt DiCanio: was 461.7 million, a 4.7% increase over the prior year. This constitutes a 6.3% year-over-year increase on a revenue per day basis.
Matt DiCanio: Total visits per day increased 0.6% over the same quarter per year, and revenue per visit increased 5.8% from $139 in Q1, 2024 to $147 in Q1, 2025.
Matt DiCanio: Worked comp visits per day were 0.2% higher than per year, and work comp revenue per visit was 7% higher than per year.
Matt DiCanio: Employer Services visits per day were 0.9% higher than prior year. Employer Services revenue per visit was 4% higher than prior year.
Matt DiCanio: Moving on from our Occupational Health Centers, our on-site health clinic segment reported revenue of $16.6 million in Q1 2025.
Matt DiCanio: A 4.4% increase from the same quarter per year and our other business segment generated revenue of $11.3 million, a 5.7% increase against the same quarter per year.
Matt DiCanio: Now two expenses are costs 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.
Matt DiCanio: Cost of Services was $357.1 million, or 71.3% of revenue in Q1 2025, down from 72.1% of revenue for the same quarter part year.
Cross both clinical and operation.
Matt DiCanio: General and administrative expense includes corporate overheads such as finance, legal, HR, or marketing, corporate offices and other administrative areas.
Matt DiCanio: Our GNA expense were 46.7 million or 9.3% of revenue in Q1 2025 compared to 7.9% of revenue in the same quarter prior year.
Matt DiCanio: Excluding items that are added back for the purposes of calculating adjusted EBITDA, including equity compensation expense and certain transaction expenses.
Matt DiCanio: GNA Expense was 41.2 million for the quarter, or 8.2% of revenue compared to 7.4% of revenue in the same quarter prior year.
Matt DiCanio: Prior year, GNA expense was reduced by a favorable out-of-period legal expense reversal that was recorded during Q1 2024. This had a positive EBITDA impact.
Matt DiCanio: The year-over-year increase in GNA as a percentage of revenue is primarily driven by that reversal and the addition of new support FTs as previously planned as we separate from select medical and build out the team required to operate as a standalone public company.
Matt DiCanio: The overall result was adjusted EBITDA margin in Q1 2025 of 20.5%, a slight decrease from 20.6%
Matt DiCanio: Removing the impact of the favorable one-time legal expense reversal would have resulted in Q-1 2024 adjusted EBITDA margin of 19.8 percent.
Demonstrating Strong Year-over-Year Marching Growth on a Run-Rate Basin.
Matt DiCanio: In Q1 2025, we generated $11.7 million in operating cashflow.
Matt DiCanio: I would note that Q1 is consistently one of our slowest cash quarters due to lower collections following seasonally lower fourth quarter volume, as well as other quarter specific material cash outflows such as company-wide bonus payments.
Matt DiCanio: related to prior year incentive plans and semi-annual interest payments on our unsecured bonds.
Matt DiCanio: Relative to Q1 2024, the drop in cash flow from operations was largely attributable to an increase in interest payments following the IPO driven recapitalization by summer.
Matt DiCanio: Investing activities use 294.7 million of cash in the first quarter, predominantly driven by our previously announced acquisition activity.
Matt DiCanio: Also included in this number was 15.7 million of CAFACs that covered our normal course capital program opening Genovo's and upgrading and maintaining existing facilities.
Matt DiCanio: Financing activities resulted in net cash inflows of $151.9 million for the first quarter.
Matt DiCanio: As a reminder, in conjunction with funding the NOVA acquisition in early March, we drew 50 million on a revolving credit facility, and we upsize our term loan fee from approximately 848 million to 950 million.
Matt DiCanio: Additionally, we reprised our term loan B at sofa plus 200, down from sofa plus 225, with a 25 basis point step down at net leverage of less than 3.25 times.
Matt DiCanio: At the same time, we upsized our revolver capacity from 400 million to 450 million and we reprised at Sofer plus 200 down from Sofer plus 250 with a 25 basis point step down at net leverage of less than 3.5 times.
Matt DiCanio: We ended the quarter with a total debt balance of $1.6 billion and a cash balance of $52 million.
Matt DiCanio: At the end of March, our net leverage ratio per our credit agreement was 3.9 times, up from 3.5 times at year end 2024, and approximately the same as our leverage ratio at the time of our IPO last July .
Matt DiCanio: The increase in leverage during the quarter was driven by our NOVA acquisition and is in line with what we previously communicated at the time of the acquisition signing.
Matt DiCanio: In early March, we executed interest rate hedges on $600 million of notional value related to our floating rate term Long B.
Matt DiCanio: This, along with our fixed rate bonds, now gives us protection from rising interest rates on over 75% of our currently outstanding debt while retaining solid exposure to potential rate decreases.
Matt DiCanio: Switching gears, we're pleased to announce the continuation of our dividend in this quarter with Concentra's Board of Directors declaring a cash dividend.
Matt DiCanio: of six and a quarter cents per share on May 6th, 2025. The dividend will be payable on or about May 29th, 2025 to stockholders of record as of the close of business on May 20th, 2025.
Speaker Change: Now, before I turn it back to Keith, I want to add some more color on our Corporate Development Update.
Matt DiCanio: First, we are very excited about the last few months and what our collective teams have accomplished.
Matt DiCanio: We close in a core and strategic acquisition of NOVA. Our team is working hard on the integration efforts and we're really pleased with the progress of the day.
Matt DiCanio: We are ahead of schedule on Synergy Capture and we are trending above forecast with respect to patient visit volume in those centers.
Matt DiCanio: Our new Concentra colleagues that came over from the Nova acquisition have hit the ground running and have done an excellent job at hearing to best in class, clinical and operational standards and maintaining customer relationships through the transition.
Matt DiCanio: We will be converting all know-the-centers over to Concentra's systems, processes and signage over the coming months, which we anticipate will further enhance top line and cost efficiency.
Matt DiCanio: Our physician health center acquisition in Florida and our three de novo's open in the quarter are a continuation of our core center growth strategy in all eight centers are off to a great start.
Matt DiCanio: Lastly, with respect to pivot onsite innovations, this is an acquisition we're really excited about and demonstrates our commitment to investing in and scaling our onsite health clinics [inaudible]
Matt DiCanio: This effectively doubles the revenue of that segment and brings an additional 700 plus colleagues into the Concentra family.
Matt DiCanio: We see a lot of opportunity for both organic and inorganic growth within the on-site health space.
Matt DiCanio: with an estimated serviceable, addressable market of more than 17 billion across both occupational health and advanced primary care service offering.
Matt DiCanio: We announced the signing of this transaction on April 21, 2025 and posted a brief investor deck on our website.
Matt DiCanio: The purchase price is $55 million, and the expected acquired revenue will be approximately $60 million.
Matt DiCanio: The deal is immediately accretive from a value standpoint and we expect to capture cost synergies over the first 12 months post-acquisition, resulting in a pro-forma purchase multiple
Matt DiCanio: We expect to close in Q2 2025 subject to certain closing conditions.
Matt DiCanio: Given the recent pace of deal activity, I would like to take a moment to underscore our long-term commitment to
Matt DiCanio: As of quarter end, our leverage ratio is approximately 3.9 times and we do not expect that to change.
Matt DiCanio: materially because of the pivot acquisition following the close of that deal later this quarter. We anticipate limited M&A activity over the remainder of this year with our focus now on integration effort.
We intend to deploy free cash flow towards debt repayment.
Matt DiCanio: and other organic growth initiatives, and we'll continue to target a year-end.
20-25 leverage ratio.
Matt DiCanio: of approximately 3.5 times and a 3.0 leverage ratio within the next 18-24 month.
Speaker Change: Thanks, Matt. As you can see, we made great progress in the first quarter. I'd like to take a few minutes to address the current macroeconomic landscape and outlook for Concentra from a qualitative perspective, and the Matt will review our updated 2025 financial outlook.
Speaker Change: Like everyone else, we're actively monitoring global fiscal, monetary, regulatory, and trade policy, and are evaluating potential impacts to our business.
Speaker Change: There is obviously a fair amount of broader economic uncertainty right now, but I will note that we have not observed an impact to the visit volumes in our centers as of the date of this earnings call, which I think is an encouraging macro data point, especially given the breadth and diversity of our domestic customer base and our footprint.
Speaker Change: Like everyone else, I wish we had a crystal ball with respect to the impact of the implementation and outcomes of these policies, but in the absence of that we feel that we are positioned well here at Concentra to address any economic slowdown should it occur and had proven that in the past.
Speaker Change: What we can share anecdotally, at least, is how the administration's current policies could directly impact us over time.
Speaker Change: If to the extent economic policy does result in an expansion of manufacturing through the reshoring of American industrial jobs over the long term as the Trump administration hopes, that would serve as a tailwind for Concentra because we serve America's workforce.
Speaker Change: To that end, there has been a flurry of recent announcement from domestic and international companies indicating plans to invest in incremental manufacturing capacity in the US, which would likely drive an increase in total employment and thus both visit growth at our centers as well as potential new employer on-site opportunities.
Speaker Change: If new policy leads to higher inflation, our rates would likely increase due to many of those states' workers' compensation fee schedules having built-in inflationary adjustments.
Speaker Change: Employer services rates have also generally grown in line with inflation in recent years, so higher inflation would likely result in higher revenue per visit, which was what we have experienced in the past.
from a supply chain standpoint.
Speaker Change: We expect minimal bottom line impact in tariff since medical supplies and pharmacies is a line item expense category constitute less than 3% of total revenue for us, which based on our research is one of the lowest percentages among comparable healthcare services companies.
Speaker Change: That said, we are certainly taking proactive steps to mitigate any potential exposure to trade and do's cost-creep within our business.
Speaker Change: Lastly, in the event, economic activity does slow over the near term, which to be clear we are not currently predicting nor seem to be experiencing in our visits.
Speaker Change: We are well positioned to weather the storm. Although we are a new standalone public company, we have a long history of nimble managing our cost structure and down cycles in the economy.
Speaker Change: During the global financial crisis in 2008 and 2009 and during COVID and 2020, we experienced a substantial drop in visits, but we limited the negative adjusted impact.
Speaker Change: We have a highly experienced and capable operational team actively monitoring day-to-day volume and managing our cost trends throughout the country. And we are well positioned to react quickly in the event overall economic growth were to slow.
Speaker Change: Longer term, these policies could serve as tailwinds for our business if they result in material growth in US jobs.
Speaker Change: With that, Matt can share our thoughts on our updated financial guidance.
Speaker Change: Great, thanks. I think he summarized the uncertainty nicely in the way these policies could impact Concentra.
Speaker Change: While we are obviously tracking the broader macro economic landscape, we aren't seeing an impact to our business currently.
Speaker Change: In fact, April volume across work comp and employer services was up the over year and into early May, even after excluding the impact of NOVA.
Speaker Change: Given the strong financial start to the year, an additional development activity that previously wasn't factored into our guidance.
Speaker Change: including the acquisitions of Physician Health Center and Pivot Ency. We felt it was appropriate at this time to raise our view of some of the previously provided 2025 financial metrics.
Speaker Change: For 2025, Concentra now expects to deliver revenue in the range of 2.1 to 2.15 billion, and adjusted EBITDA in the range of 415 million to 430 million.
Speaker Change: We are tracking well to the Capitol expenditures and net leverage ratio outlook guidance that we previously communicated so there's no change there.
Speaker Change: We intend to closely monitor potential macro impacts to our business over the next few months, as well as progress on integration of our recent acquisitions, and we may have additional updates with the respective full-year 2025 guidance during our Q2 earnings call.
Speaker Change: Thanks, Matt. Obviously, a lot of good news here for the quarter.
Speaker Change: As a management team, we're excited about the progress we've made as a standalone company post IPO and are proud of the outstanding effort and execution from all of our colleagues across clinical operational support and development functions.
Speaker Change: Our people and culture have served as a cornerstone of our company for over 45 years and we are focused on maintaining our values and adhering to our mission of improving the health of America's workforce, one patient at a time, as we continue our growth.
Speaker Change: We think we have a strong value proposition to offer health care investors given.
Speaker Change: Our industry leading market position as a provider of choice for over 215,000 employer customers due to our long history of clinical excellence, patient care, and our overall value proposition to help employers lower health care costs.
Speaker Change: Also our strong geographic industry, customer and service offering diversification representative of 45 states.
Speaker Change: The attractive reimbursement model that mitigates stroke-of-the-pin risk due to less than 1% of our revenue having government payer exposure.
Speaker Change: Our flexible operating structure that allows us to quickly scale staffing and cost up and down from real-time volume trends.
Speaker Change: And our motivated and highly experienced management team that has a long track record producing mid to high single digit top line growth, consistent 20% adjusted EBDA margins, significant free cash flow and low to mid teams return on invested capital.
Speaker Change: We are excited to continue to share our story with the market and provide updates on our performance and growth initiatives over the coming quarters. That concludes our prepared remarks, and we thank everybody for the time today. We'd like to turn it back over to the operator to open the call for questions.
Speaker Change: Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question key and you may press start to if you would like to remove your question from the key.
One moment please. We'll be pulled for questions.
Speaker Change: Thank you. Our first question is coming from Benjamin Rossi with JP Morgan, Your Line Is Life.
Great. Thanks for the question here. So.
Speaker Change: An employer's service is volumes with the strong performance during 1Q coming in ahead of expectations, seems as though we've potentially hidden in flex and point.
Speaker Change: on Visit Volume erosion in that segment. Can you just discuss your turnaround here organically and what are some of the factors that aided this turnaround? And then looking ahead, how are you factoring volume trends here for the remainder of the year?
Speaker Change: Yeah, I'll I'll start with that natural free to chime in. You know, I think as we've talked about in the past
Speaker Change: The the turn that took place and then the downturn that we subsequently saw that created year over year.
Speaker Change: Negative Comps. I think we'd bottomed out and we talked about it last year that we felt that we were slowly starting to see some improvement there.
Speaker Change: and I think as we came into this year there seemed to be a little more optimism we felt from the noise from the employer base and I think just continued sales and marketing efforts that we deployed.
Speaker Change: Through several channels within our sales and marketing group as far as continuing to gain market share in those markets has really helped us start. [inaudible]
Speaker Change: Turn that needle and drive it back in the direction it's going. You know, we seem several of these if you go back years and years where there's
Speaker Change: Little bit peaks and valleys associated with what's going on from an economic standpoint and so I think we're starting to see some of the rewards of you know the hard work we put in over the last year along with just some of the dynamics of coming out of the COVID in the
Speaker Change: The great, you know, the hiring and the turn associated with that, you know, we continue to see that and we're cautiously optimistic. There's a lot of turbulence out there and projections of what could or could not happen from an economic standpoint, but so far we've been pleased with what we're seeing.
Speaker Change: Great, appreciate the color there, and this is a follow-up. So, taking a step back.
Speaker Change: Down to the series of acquisitions makes you one of the most scaled platforms in occupational health across both your workers comp and employer services segments. Just with these transactions, could you take a step back and describe this where you see concentric going from here with these added capabilities and ultimately how this scaled platform helps you deliver upon your long-term growth goals.
Speaker Change: Yeah, I'll take that one also. You know, we, the bricks and mortar, we're going to continue to pick an axe down that pathway. There's still opportunities out there.
Speaker Change: The size we have also has created greater partnerships with the managed care ecosystem world or the work comp industry. We've got a lot of relationships that are helping drive additional volume from that standpoint.
Speaker Change: You know what, I'm really excited about, that we've talked about in the past many times is
Speaker Change: Three legs on the stool here at Concentra, the largest by far, the bricks and mortar, the second being our employer on sites, and the third being our other business lines primarily our fellow medicine.
Speaker Change: We're really excited with the opportunity that we have from an on-site perspective. As we mentioned on the call, we're doubling that segment.
from a revenue standpoint where the acquisition of Pivot
Speaker Change: It still puts us on the smaller end of onsite companies. We're definitely in the top 10.
Speaker Change: But, you know, we think there's gonna be tremendous growth there. We have other opportunities.
Speaker Change: to look at in the future that are going to allow us to grow that business. We're in the process of scaling it. We think Pivot helps a lot. It's a very similar.
Business to what we have from an occupational medicine standpoint.
We are...
Speaker Change: We have deployed our advanced primary care product and are starting to get a few wins relative to RFPs in that area and that's a big marketplace for us that we're going to prospect very hard as we push forward and now that we have a very good solid foundation built around that business with a pivot acquisition in our own business that we feel very good about the growth from that perspective that that segment is going to help drive for us in the future. Thank you.
Speaker Change: Yeah, Ben, the only thing I could add there too,
Speaker Change: You know, I always talk about providing great access to our employer customers, and we do that through our locations so employers can send their employees to us at our health clinics.
Speaker Change: But we can also go to them through our on-site business and we do that episodically. We do that from a mobile standpoint and then full time as well.
Speaker Change: And then the third one is our virtual telemedicine service offering. So what we're trying to do is just continue to build out all three of those areas and provide a very comprehensive solution set for our employer or customer.
Great. Thanks for the commentary.
Speaker Change: Thank you. Our next question is coming from Jamie Perse with Goldman Sachs. Your line is life.
Jamie Purse: Hey, thanks. Good morning. Just starting on workers' comp, I think visits were up 2.4% per day. Sounds like that was 0.2% organic and 220 basis points from NOVA. How would you contextualize the organic performance there slower than trends? And I think slower than the roughly 2% long term framing you've provided for that business. So what did you see in the quarter? Do you expect improvement from here and how should we get confidence in that?
Speaker Change: You know, kind of roughly 2% long-term outlook for that business.
Sure, I can take that. Hey, Jamie.
Jamie Purse: So yes, work comp from a core standpoint was a little lighter than prior quarter, but still positive overall. We continue to see total employment growth.
Jamie Purse: You know, there's obviously some changes within that category, practice patterns, and things like that. So, overall we expect to see positive work comp, visit growth from a core perspective on a go for basis.
Thank you.
Jamie Purse: Sure. Yeah, there's a lot of moving pieces in the in the margin profile. Obviously we had strong rate performance. We had positive visit growth. We had the acquisitions.
Jamie Purse: We also have some incremental hires as we're separating from select and we had the one time out of period favorable item prior year. So all all those are kind of contributing to to where we presented, but
Jamie Purse: You know, fourth, fifty year here in a row with twenty plus percent margins.
Jamie Purse: We expect that sustainable and with the continued M&A activity we think there's up side from there as well.
Jamie Purse: Yeah, and I would add that nobody was only one month of the results, so it had very little impact this quarter, but
Jamie Purse: We feel pretty good with the synergies that we're executing on right now but it's going to contribute as we go forward but the rate has really been a nice driver this year.
Thank you.
Speaker Change: Our next question is coming from Ben Hendrix with RBC Capital Markets. Your line is live.
Speaker Change: Rate updates, lagging, inflation more than others. Just want to get an idea of the uniformity across the footprint. Thanks.
Speaker Change: Yeah, typically there are some sort of inflationary factor they use, and it could be CPI, it could be MEI.
Speaker Change: of the year and they'll look back kind of what's happened in the last three to six months. So it's been fairly reflective at the time that they go in as to what recently has happened relative to inflation.
Speaker Change: and so that's what we've seen historically, so it's worked pretty well from that standpoint.
Speaker Change: Great. Thank you for that. And then just from my other question for Matt, I just wanted to go back to the cost of service performance and the lower cost of service is a percent of revenue. And you noticed some labor efficiency. She captured in there. Just wanted to kind of gill in more color around that kind of what the, you know, if there's more room to run in that regard and kind of how you see labor fleshing out for the long term, you know, as a percent of revenue. And if there's any change to [inaudible]
to that forecast. Thanks.
Speaker Change: Sure, I'll add a couple comments there. Obviously, the revenue increase and the rate gains helped cost the services as a percentage of revenue go down.
Speaker Change: But we also noted that we had some staffing efficiency gains at the center level across all disciplines and across the countries. Our teams are doing a great job. The visit volumes are more stable than they have been in prior years. We have some technology initiatives.
that have helped with efficiencies and
Speaker Change: You know, we're really happy with some of the key metrics we look at, whether it's patient satisfaction or...
Speaker Change: Turn around times and things like that. So, you know, we'll continue to invest in technologies and other ways to make our colleagues at the centers more more efficient in the future.
Thank you.
Thank you.
Operator: Our next question is coming from Joanna Gajuk with Bank of America. Your line is live.
Thank you.
Joanna Gadjuk: All right, good morning. Thank you so much for taking the question. So it's a couple of follow up just to clarify on your
Joanna Gadjuk: Guidance Update, where you see where the revenue and your EBITDA guidance was raised by $5 million and you said to reflect the Q1 and also the deal activities to just make sure do you include the pivot acquisition of your knockouts. Thank you very much.
in the subterric guidance.
Joanna Gadjuk: Yes, so I'll add a little commentary just to make sure that's very clear. Our previous guidance included NOVA and all of our to NOVA's for this year. Subsequent to that, we closed on the small Ph.C. deal in Florida.
Joanna Gadjuk: And then we announced the PIVIT acquisition. So both PHC and PIVIT are included in our revised guidance. PIVIT is not closed yet but we expect it to close here shortly.
Speaker Change: Okay, so expect a close show. That's why you're including it. Okay. And another follow-up, thank you for that. And another follow-up. So your workers comp revenue per visit, even if you exclude a Florida race would still be, you know, pretty good out there, five percent. So is that a good number to kind of assume, you know, longer term? Yeah.
Speaker Change: You know, over a long period of time, the stat that we've always referenced is 3% is the long-term average on work rate increases, you know, you can look over a 5, 10, 15, 20 year period.
Speaker Change: and it's pretty much in line with that. Obviously, you know, inflation has been higher in recent years and I think that's what's reflected in our numbers this year and
Keith Newton: You know, to Keith's comments earlier, if there is any sustained inflation, you know, we expect it to be slightly higher than 3% in the near term.
Speaker Change: Any 5 May, I'm going to follow up on the workers comp. So your comment for us that I guess excluding Nova, the ones for days is celebrated, you know, and we're only up to 0.2% versus 1% in Q4. So I wasn't sure whether you're trying to call out anything there or you just kind of, you know, sort of in the range of things so that you would have expected. Thank you.
Speaker Change: No, we're not trying to call out anything there other than we just spelled it was really important to exclude the Nova visits so people can look at our core company performance.
Speaker Change: This quarter, especially with the one month of Nova visits, but…
Speaker Change: Work comp was in in line with expectations, maybe slightly softer than what we thought, but...
Speaker Change: You know, it always bounces around a little bit and it's still positive. And I think the big news for us really as we spoke about was the turning point with employer services visits. We're very happy about that.
Yes, for sure. Thank you so much.
Speaker Change: Thank you. Our next question is coming from Stephen Baxter with Wells Fargo. Your line is line.
Stephen Baxter: Hi, thanks. I just wanted to follow up a little bit on some of the moving parts on guidance.
Stephen Baxter: Perhaps you could start by reminding us, I guess, when exactly you're expecting the pivot deal to close and what the annual revenue contribution is there. I kind of thought that getting a couple quarters of that deal would maybe explain.
Stephen Baxter: The entirety of your guidance raised, maybe even more than that potentially, just trying to sort out the organic pieces versus how you're thinking about pivot and how much revenue is in the guidance for pivot. And I guess also these, you know, the smaller five-center deal that you close as well. Thanks.
Sure, thanks for the question, Steve. So, Pivot.
Speaker Change: We are expecting a close towards the end of Q2. So there will be approximately half a year impact on our financials. Obviously, there's going to and with the PhD deal and pivot.
Stephen Baxter: There'll be some transition time and rampant things like that.
Stephen Baxter: PhD closed in mid-March and pivot at the end of Q2.
Stephen Baxter: and I believe pivot was a potentially a $60 million annual revenue business and maybe the disclosure that you gave, do we have that right or is there a different number for some reason then we should be thinking about for two quarters of that for the balance of the year.
Stephen Baxter: No, that's correct. $60 million revenue on an annualized basis. And just add a couple of comments.
Stephen Baxter: I think as you're getting to, you know, how we thought about guidance. Obviously, there's a lot of moving pieces. We've got the M&A coming on board. We've got some uncertainty that Keith and I both talked about. And, you know, we felt like at the end of Q1 with the strong.
Q1 Performance, and then a couple additional deals.
Stephen Baxter: We thought it was appropriate to increase the guidance by 50 million on the on the top end of the revenue range and then 5 million on both ends of the EBITDA range and really, you know, just being very thoughtful about where we are in the year.
Higher or Larger Increase
Stephen Baxter: Yeah, I was going to add, you know, in my comments I mentioned, you know, we wish we all had a crystal ball.
Stephen Baxter: We feel really good about how we ended the first quarter and how we're going in to the second quarter.
Stephen Baxter: But again, there's a lot uncertainty and turbulence out there, so...
Stephen Baxter: As an organization and what we say at this point in time, we want to remain cautious, especially in the early stages of being a public company as far as what we think will end and will update as we go forward each quarter as to what we're seeing in the business.
Stephen Baxter: Okay, next time. So, a better Q1, but just maintaining a prudent stance on the rest of the business organically and folding the deals. I think we can...
We can appreciate that then. And then...
Speaker Change: I just wanted to follow up on some of the macro discussion. I think we do understand the workers' compensation side of the business and how there's often tie-ins to inflation benchmarking. Can you talk a little bit about how employer services rates?
Stephen Baxter: Appheld up when you've had previous, you know, economic cycles with more pressure or maybe more uncertainty, maybe more akin to the environment that we're in now. Thank you.
Speaker Change: Yeah, we've historically our employer services rates have reflected the very trend of very similar
Speaker Change: You know, kind of the inflationary environment out there. What we historically do around October November each year is look back on the year, look at what's happening from that standpoint.
Speaker Change: and then identify what we feel is the right number to communicate, to be effective on January 1st, and typically, as long as we kind of use a guideline, and then...
Speaker Change: Inflation and what's happening from that perspective on how we handle our employer services pricing. It's been well received with minimal pushback at all. And so that's historically year after year how we've approached things.
Thank you.
Speaker Change: Yeah, and to add to that, I think it's reflective of what's happening in this year at our 3.9% what we're seeing so far this year is right in line with what we targeted and what we communicated to an employer perspective in the fourth quarter.
Justin Bowers: Thank you. Our next question is coming from Justin Bowers with Deutsche Bank. Your line is lies.
Justin Bowers: Hi, good morning, everyone. Just sticking with the rate topic. Can you remind us, um, sort of the, the seasonality of when you get the updates, um, or on those kick-in for, for the fee schedules on the workers' comp sites? So, for example, is it?
Justin Bowers: 75% on Jan 1, 25% on October 1, just trying to get a sense of phasing here.
I would say [inaudible]
Justin Bowers: 80% to 90% we're going to see within the first quarter.
Justin Bowers: A good majority are affected January 1st. Some states lag a little bit as far as I've been in their schedules.
Justin Bowers: but it typically happens in the first quarter. You'll get the other...
Justin Bowers: You know, 20% or so. In the middle of the year July , there's some updates and then again in October there's a couple of states, I believe there's Zona typically is an October update but the majority of what we're going to see each year happens within the first quarter.
Joanna Gadjuk: Okay. Thank you, Keith. And then sticking with workers comp, just a two-parter. One, was there any weather impact to call out in the first quarter? I know. And we're seeing that in other parts of services. And then.
Joanna Gadjuk: at some of those Fortune 500 accounts, and I were thinking about that over the next, you know, call it two to three years.
Speaker Change: Yeah, I'll comment on both the funders to the second part, but as far as whether we get impacted by weather, just like everybody else.
It's a walk-in.
Urgent Care Practices
Speaker Change: If there's ice and snow, it can significantly impact us as far as when initially it also potentially helps us with slips and falls along with that weather. But we have it every year and it's hard to...
Speaker Change: Really ascertain that there's really a more negative impact this year than last year so that's why we didn't really comment from that perspective relative to whether this year impacting us.
Speaker Change: You know, as far as employers, we've built some of the larger ones, we've uh...
We get further and further integrated with them.
Speaker Change: within workers comp ecosystems and their other partners, their TPAs, their managed care entities that may support some of the programs that they have in place.
Speaker Change: to where there is a true direction of care that occurs relative to trying to get patients to us versus somebody else because of the ease of business or that we provide for them and their payers. A big part of what our value prop.
Speaker Change: is about this velocity of information regarding patients, return to work, communication, and if they can use a provider that is technology advanced that can provide them information.
in a faster manner than others that can help. [inaudible]
Speaker Change: Return their workers to full functionality quicker than others. It's going to save tremendous cost as we've shown in the past. You know, validation studies have shown 25 to 30% the cost of savings with us versus a non-concentral facility.
Speaker Change: and so we feel good, especially with the size that we have, the footprint.
Speaker Change: The ability for employer to come to us and have good penetration into their employee base across the country as far as using us and it just streamlines things to them so it's a great value prop that we have.
Thank you, appreciate that.
Thank you.
Ed Kressler: Our next question is coming from Ed Cruster with PPG Angelo Gordon. Your line is live.
Ed Kressler: You know, just looking at the queue, is it right to think that kind of low 70s percent of your cogs is labor and just curious how much of that is variable?
Speaker Change: Yeah, I can take that. Thanks for the question. You know, most of our cost structure is labor and there's obviously a...
Corps, Staffing Group for each individual center.
Speaker Change: But the teams in the field that manage the centers and work in the centers every day are really good at staffing up and down to volume. We have large PRN pools across all functional areas.
Speaker Change: The teams are used to the seasonality within the work week, within the month and month by month throughout the year.
Speaker Change: So we saw that as we navigate prior cycles, the teams can do a really nice job of managing the personnel to the appropriate visit volumes.
Speaker Change: Gotcha. Great. And then laughing for me, just from the on-site side, obviously you're doubling down there. Can you talk a little bit about experience in a macro downturn there? Do you have you seen, for example, in great financial crisis, did you see employers dial back on providing any services? Or is that something that kind of, once it's in, they stick with? Thank you.
Justin Bowers, Stephen Baxter, Thomas Devasia, Concentra Group Holdings
I'll take that when you, we weren't.
That big end-of-the-on-site arena back there.
Speaker Change: But we didn't, you know, there's always some that may decide that that's a cost that may not be needed there or an investment, maybe as a better way to say that. But for the most part,
Speaker Change: You know, I don't hear that and I don't see that much from the competition out there relative to
Speaker Change: and what they may have said relative to their experience. I mean they really look at it as an investment that they've made for their employee base that's there at their work site.
Speaker Change: As long as a return on investment can be shown from that perspective, then…
Speaker Change: Those employers will keep that in typically in a downturn even if they downsize most of those sites there are.
Speaker Change: Several hundred employees there at that site. So, you know, a small reduction in force at the work site is not going to necessarily dictate an elimination of that work site. So, you know, we feel pretty optimistic that
Dr. Baxter. Dr. Baxter, Dr. Baxter, Dr. Baxter,
Speaker Change: They'll weather the storm well if something were to happen from that perspective.
Speaker Change: Yeah, the only thing I would add there too is, you know, we're thinking long-term about the business and everything going on with the current administration and reshoring of America jobs. We think that's going to be a really nice tailwind as companies continue to announce.
Speaker Change: their investment back here in the US with, you know, large labor forces and
Speaker Change: You know, there's going to be an increased need for onsite's long term in our view.
Speaker Change: Gotcha, and then I lied, last thing is just thinking about that on the on-site side. Should we think, I think you've characterized it as, it's generally kind of cost plus in the past, the, should we be thinking about that as...
Speaker Change: Volume Dependent as well, so to the extent that an employer has an option of vacation and they reduce staff, would that affect us or do we think of it as kind of cost plus for the box? And not a volume dependent, thank you.
I would think of it as cost plus.
Great, thanks for the help.
Yep.
Speaker Change: Thank you. As we have no further questions on the lines at this time, I'd like to hand it back to Mr. Newton for any closing remarks.
We appreciate everybody's participation today and thank you very much.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time and we thank you for your participation.