ADDISON, Texas–(BUSINESS WIRE)–Concentra Group Holdings Parent, Inc. (“Concentra,” “we,” “us,” or “our”) (NYSE: CON) today announced results for its second quarter ended June 30, 2024.
“Our colleagues’ ongoing commitment to providing exceptional service and care continues to be the powerful force driving Concentra forward. With steadfast dedication to our mission to improve the health of America’s workforce, one patient at a time, we have reached another important milestone with the completion of our IPO,” said Keith Newton, Chief Executive Officer of Concentra.
Matt DiCanio, President & Chief Financial Officer, added “We are so proud of our colleagues and teams who have provided great care and dedication over the past 45 years. Our IPO marks a significant landmark in our company’s history, but it does not change our goal of meeting and exceeding customer and patient needs and delivering consistent financial results. We are confident in our ability to continue to drive optimal performance now and into the future.”
Second Quarter 2024 Highlights
For the second quarter ended June 30, 2024 and 2023
Revenue of $477.9 million, an increase of 2.3% from $467.1 million in Q2 2023
Net Income of $53.1 million, a decrease of 1.8% from $54.0 million in Q2 2023
Adjusted EBITDA of $101.6 million, an increase of 1.2% from $100.4 million in Q2 2023
Earnings per Share of $0.50, a decrease of 2.0% from $0.51 in Q2 2023
Patient Visits of 3,214,255, or 50,223 Visits per Day in the quarter, a decrease of 1.6% from Q2 2023
Revenue per Visit of $139.81, an increase of 3.9% from $134.50 in Q2 2023
Total occupational health centers of 547, compared to 540 at end of Q2 2023
Total onsite health clinics of 154, compared to 141 at end of Q2 2023
Company Overview
Concentra is the largest provider of occupational health services in the United States by number of locations, with the mission of improving the health of America’s workforce, one patient at a time. Our 11,000 colleagues and affiliated physicians and clinicians support the delivery of an extensive suite of services, including occupational and consumer health services and other direct-to-employer care, to more than 50,000 patients each day on average across 45 states at our 547 occupational health centers, 154 onsite health clinics at employer worksites, and Concentra Telemed as of June 30, 2024.
Second Quarter 2024 Financial Overview
For the second quarter ended June 30, 2024, revenue increased 2.3% to $477.9 million, compared to $467.1 million for the same quarter, prior year. Income from operations increased 2.2% to $83.9 million for the second quarter ended June 30, 2024, compared to $82.1 million for the same quarter, prior year. Net income decreased 1.8% to $53.1 million for the second quarter ended June 30, 2024, compared to $54.0 million for the same quarter, prior year. Adjusted EBITDA increased 1.2% to $101.6 million for the second quarter ended June 30, 2024, compared to $100.4 million for the same quarter, prior year. The Adjusted EBITDA margin was 21.3% for the second quarter ended June 30, 2024, compared to 21.5% for the same quarter, prior year. Earnings per common share decreased 2.0% to $0.50 for the second quarter ended June 30, 2024, compared to $0.51 for the same quarter, prior year. Adjusted earnings per share was $0.49 for the second quarter ended June 30, 2024, compared to $0.51 for the same quarter, prior year. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are presented in table X of this release. A reconciliation of earnings per common share to adjusted earnings per share is presented in table XI of this release.
Year to Date June 30, 2024 Financial Overview
For the six months ended June 30, 2024, revenue increased 2.4% to $945.5 million, compared to $923.4 million for the same period, prior year. Income from operations increased 1.3% to $159.4 million for the six months ended June 30, 2024, compared to $157.4 million for the same period, prior year. Net income increased 1.8% to $103.3 million for the six months ended June 30, 2024, compared to $101.5 million for the same period, prior year. Adjusted EBITDA increased 1.9% to $197.7 million for the six months ended June 30, 2024, compared to $194.1 million for the same period, prior year. The Adjusted EBITDA margin was 20.9% for the six months ended June 30, 2024, compared to 21.0% for the same period, prior year. Earnings per share increased 2.1% to $0.97 for the six months ended June 30, 2024, compared to $0.95 for the same period, prior year. Adjusted earnings per common share was $0.98 for the six months ended June 30, 2024, compared to $0.95 for the same period, prior year. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are presented in table X of this release. A reconciliation of earnings per share to adjusted earnings per common share is presented in table XI of this release.
Balance Sheet
As of June 30, 2024, Concentra’s balance sheet reflected cash of $50.7 million, total debt of $427.7 million and total assets of $2.363 billion.
Cash Flow
Cash flows provided by operating activities in the second quarter ended June 30, 2024 totaled $70.4 million compared to $81.8 million for the same quarter, prior year. During the second quarter ended June 30, 2024, capital expenditures totaled $15.3 million, excluding acquisitions.
Initial Public Offering and Debt Transactions
On July 26, 2024, Concentra completed an initial public offering (“IPO”) of 22,500,000 shares of its common stock, par value $0.01 per share, at an initial public offering price of $23.50 per share for gross proceeds of $528.8 million. In addition, Concentra has granted the underwriters a 30-day option to purchase up to an additional 3,375,000 shares of its common stock. Concentra shares began trading on the New York Stock Exchange under the symbol “CON” on July 25, 2024. In connection with the offering, Concentra Health Services, Inc. (“CHSI”), a wholly-owned subsidiary of Concentra, entered into certain financing arrangements which include Credit Facilities and $650.0 million aggregate principal amount of 6.875% Senior Notes due 2032 (the “Notes”). The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Concentra and certain of its wholly-owned subsidiaries. The Credit Facilities consist of an $850.0 million Term Loan and a $400.0 million Revolving Credit Facility. The Term Loan matures on July 26, 2031 and has an interest rate of Term SOFR plus 2.25%, subject to a leverage-based pricing grid. The Revolving Credit Facility matures on July 26, 2029 and has an interest rate of Term SOFR plus 2.50%, subject to a leverage-based pricing grid.
The net proceeds of the IPO were used to pay down the long-term debt and promissory note with a related party and the debt financing transactions, except for $34.7 million, were used to issue a dividend to Select Medical Corporation.
This recapitalization results in $1.5 billion in total debt and $100 million in cash on our balance sheet, or total net debt of $1.4 billion. With the $400 million revolver, we have $500 million in total liquidity.
Conference Call
Concentra will host a conference call regarding its second quarter results and its business outlook on Friday, August 2, 2024, at 10:30 am ET. The conference call will be a live webcast and can be accessed at Concentra Group Holdings Parent, Inc.’s website at www.concentra.com and a replay of the webcast will be available shortly after the call through the same link.
For listeners wishing to dial-in via telephone, or participate in the question and answer session, you may pre-register for the call at Concentra Earnings Call Registration to obtain your dial-in number and unique passcode.
* * * * *
Certain statements contained herein that are not descriptions of historical facts are “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements due to factors including the following:
The frequency of work-related injuries and illnesses;
The adverse changes to our relationships with employer customers, third-party payors, workers’ compensation provider networks or employer services networks;
Changes to regulations, new interpretations of existing regulations, or violations of regulations;
State fee schedule changes undertaken by state workers’ compensation boards or commissions and other third-party payors;
Our ability to realize reimbursement increases at rates sufficient to keep pace with the inflation of our costs;
Labor shortages, increased employee turnover or costs, and union activity could significantly increase our operating costs;
Our ability to compete effectively with other occupational health centers, onsite health clinics at employer worksites, and healthcare providers;
A security breach of our, or our third-party vendors’, information technology systems which may cause a violation of HIPAA and subject us to potential legal and reputational harm;
Negative publicity which can result in increased governmental and regulatory scrutiny and possibly adverse regulatory changes;
Litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our business and financial statements and the effects of claims asserted against us could subject us to substantial uninsured liabilities;
Acquisitions may use significant resources, may be unsuccessful, and could expose us to unforeseen liabilities;
Our exposure to additional risk due to our reliance on third parties in many aspects of our business;
Compliance with applicable laws regarding the corporate practice of medicine and therapy and fee-splitting;
Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information;
Compliance with applicable data interoperability and information blocking rule;
Facility licensure requirements in some states are costly and time-consuming, limiting or delaying our operations;
Our ability to adequately protect and enforce our intellectual property and other proprietary rights;
Adverse economic conditions in the U.S. or globally;
Any negative impact on the global economy and capital markets resulting from other geopolitical tensions;
Our ability to maintain satisfactory credit ratings;
The inability to execute on the separation from Select Medical;
The risk of disruption or unanticipated costs in connection with the separation;
Our ability to succeed as a standalone publicly traded entity;
Restrictions on our business, potential tax and indemnification liabilities and substantial charges in connection with the separation, the distribution and related transactions;
The negative impact of public threats such as a global pandemic or widespread outbreak of an infectious disease similar to the COVID-19 pandemic;
The loss of key members of our management team and our ability to attract and retain talented, highly skilled employees and a diverse workforce, and on the succession of our senior management; and,
Changes in tax laws or exposures to additional tax liabilities.
Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance.
I. Condensed Consolidated Statements of Operations
For the Second Quarter Ended June 30, 2024 and 2023
(In thousands, except per share amounts, unaudited)
2024
2023
% Change
Revenue
$
477,915
$
467,079
2.3
%
Costs and expenses:
Cost of services, exclusive of depreciation and amortization
339,273
329,836
2.9
General and administrative, exclusive of depreciation and amortization (1)
36,828
37,003
(0.5
)
Depreciation and amortization
17,870
18,283
(2.3
)
Total costs and expenses
393,971
385,122
2.3
Other operating income
—
151
N/M
Income from operations
83,944
82,108
2.2
Other income and expense:
Equity in losses of unconsolidated subsidiaries
(3,676
)
—
N/M
Interest expense on related party debt
(9,318
)
(11,500
)
(19.0
)
Interest income
205
17
N/M
Income before income taxes
71,155
70,625
0.8
Income tax expense
18,096
16,593
9.1
Net income
53,059
54,032
(1.8
)
Less: Net income attributable to non-controlling interests
1,322
1,290
2.5
Net income attributable to Concentra
$
51,737
$
52,742
(1.9
)%
Basic and diluted earnings per common share:(2)
$
0.50
$
0.51
_______________________________________________________________________________
(1)
Includes the shared service fee from related party of $3.8 million and $3.7 million for the second quarter ended June 30, 2024 and 2023, respectively.
(2)
Refer to table III for calculation of earnings per common share.
N/M
Not meaningful
II. Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 2024 and 2023
(In thousands, except per share amounts, unaudited)
2024
2023
% Change
Revenue
$
945,513
$
923,377
2.4
%
Costs and expenses:
Cost of services, exclusive of depreciation and amortization
676,263
657,914
2.8
General and administrative, exclusive of depreciation and amortization (1)
73,737
71,653
2.9
Depreciation and amortization
36,355
36,593
(0.7
)
Total costs and expenses
786,355
766,160
2.6
Other operating income
284
151
N/M
Income from operations
159,442
157,368
1.3
Other income and expense:
Equity in losses of unconsolidated subsidiaries
(3,676
)
(526
)
N/M
Interest expense on related party debt
(19,289
)
(22,576
)
(14.6
)
Interest income (expense)
94
(44
)
N/M
Income before income taxes
136,571
134,222
1.8
Income tax expense
33,233
32,759
1.4
Net income
103,338
101,463
1.8
Less: Net income attributable to non-controlling interests
2,645
2,457
7.7
Net income attributable to Concentra
$
100,693
$
99,006
1.7
%
Basic and diluted earnings per common share:(2)
$
0.97
$
0.95
_______________________________________________________________________________
(1)
Includes the shared service fee from related party of $7.7 million and $7.3 million for the six months ended June 30, 2024 and 2023, respectively.
(2)
Refer to table III for calculation of earnings per common share.
N/M
Not meaningful
III. Earnings per Share
For the Three and Six Months Ended June 30, 2024 and 2023
(In thousands, except per share amounts, unaudited)
At December 31, 2023, there were 435,000 Class A units, 8,498 Class B units, and 3,583 Class C units (in thousands) outstanding which converted to common shares on a one-for-one basis effective March 4, 2024. On June 24, 2024, the Company effectuated a reverse stock split at a ratio of one share of common stock for every 4.295 shares of common stock and resulted in 104,094 shares (in thousands) outstanding. There were no participating shares or securities outstanding during the three and six months ended June 30, 2024.
The following table sets forth the computation of earnings per share (EPS):
Three Months Ended June 30, 2024
Six Months Ended June 30, 2024
Net Income Attributable
to
Concentra
Shares(1)
Basic and Diluted EPS
Net Income Attributable
to
Concentra
Shares(1)
Basic and Diluted
EPS
(in thousands, except for per share amounts)
Common shares
$
51,737
104,094
$
0.50
$
100,693
104,094
$
0.97
At June 30, 2023, Concentra’s capital structure included Class A, B and C units outstanding and unvested restricted interests and outstanding options. To calculate EPS for the three and six months ended June 30, 2023, Concentra applied the two-class method because its unvested restricted interests and outstanding options are participating securities.
The following table sets forth the net income attributable to the Company, its units outstanding, and its participating units outstanding:
Three Months Ended
June 30, 2023
Six Months Ended
June 30, 2023
(in thousands)
Net income
$
54,032
$
101,463
Less: net income attributable to non-controlling interests
1,290
2,457
Net income attributable to Concentra
52,742
99,006
Less: Distributed and undistributed income attributable to participating shares
148
287
Distributed and undistributed income attributable to outstanding shares
$
52,594
$
98,719
The following table sets forth the computation of EPS, under the two-class method:
Three Months Ended June 30, 2023
Six Months Ended June 30, 2023
Net Income Allocation
Shares (1)(2)
Basic and Diluted EPS
Net Income Allocation
Shares (1)(2)
Basic and Diluted EPS
(in thousands, except for per share amounts)
Outstanding Class A, Class B,
and Class C shares
$
52,594
103,962
$
0.51
$
98,719
103,952
$
0.95
Participating shares
148
292
$
0.51
287
302
$
0.95
Total Company
$
52,742
$
99,006
_______________________________________________________________________________
(1)
The recapitalization of the members units into common shares has been treated as such for earnings per share purposes and has been reflected retrospectively for all periods, along with the one for 4.295 reverse stock split.
(2)
Represents the weighted average units outstanding during the period.
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
June 30, 2024
December 31, 2023
Assets
Current Assets:
Cash
$
50,669
$
31,374
Accounts receivable
228,964
216,194
Other current assets
40,673
46,850
Total Current Assets
320,306
294,418
Operating lease right-of-use assets
399,464
397,852
Property and equipment, net
186,879
178,370
Goodwill
1,233,406
1,229,745
Identifiable intangible assets, net
212,868
224,769
Other assets
10,415
8,406
Total Assets
$
2,363,338
$
2,333,560
Liabilities and Equity
Current Liabilities:
Payables and accruals
$
182,594
$
196,879
Due to related party
4,360
3,354
Current operating lease liabilities
73,517
72,946
Current portion of long-term debt and notes payable
4,682
1,455
Total Current Liabilities
265,153
274,634
Non-current operating lease liabilities
359,736
357,310
Long-term debt, net of current portion
3,048
3,291
Long-term debt with related party
420,000
470,000
Non-current deferred tax liability
21,994
23,364
Other non-current liabilities
23,015
27,522
Total Liabilities
1,092,946
1,156,121
Redeemable non-controlling interests
18,410
16,477
Total equity
1,251,982
1,160,962
Total Liabilities and Equity
$
2,363,338
$
2,333,560
V. Condensed Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2024 and 2023
(In thousands, unaudited)
2024
2023
Operating activities
Net income
$
53,059
$
54,032
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
17,870
18,283
Provision for expected credit losses
47
166
Equity in losses of unconsolidated subsidiaries
3,676
—
Gain on sale or disposal of assets
(1
)
(10
)
Stock compensation expense
166
—
Deferred income taxes
903
(70
)
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable
676
(7,650
)
Other current assets
8,539
2,711
Other assets
(4,939
)
622
Accounts payable and accrued liabilities
(9,563
)
13,762
Net cash provided by operating activities
70,433
81,846
Investing activities
Business combinations, net of cash acquired
—
(1,446
)
Acquired customer relationships
—
(1,626
)
Purchases of property and equipment
(15,263
)
(14,220
)
Proceeds from sale of assets
1
16
Net cash used in investing activities
(15,262
)
(17,276
)
Financing activities
Payments on related party revolving promissory note
(50,000
)
(50,000
)
Principal payments on other debt
(2,103
)
(1,686
)
Distributions to and purchases of non-controlling interests
(1,100
)
(1,253
)
Distributions to Parent
(851
)
(3,352
)
Net cash used in financing activities
(54,054
)
(56,291
)
Net increase in cash and cash equivalents
1,117
8,279
Cash and cash equivalents at beginning of period
49,552
24,959
Cash and cash equivalents at end of period
$
50,669
$
33,238
Supplemental information
Cash paid for interest
$
9,554
$
11,477
Cash paid for taxes
33,975
32,650
VI. Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2024 and 2023
(In thousands, unaudited)
2024
2023
Operating activities
Net income
$
103,338
$
101,463
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
36,355
36,593
Provision for expected credit losses
59
185
Equity in losses of unconsolidated subsidiaries
3,676
526
(Gain) loss on sale or disposal of assets
42
(14
)
Stock compensation expense
332
178
Deferred income taxes
(1,618
)
(3,265
)
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable
(12,829
)
(27,011
)
Other current assets
1,224
(9,944
)
Other assets
(4,217
)
1,796
Accounts payable and accrued liabilities
(11,307
)
(966
)
Net cash provided by operating activities
115,055
99,541
Investing activities
Business combinations, net of cash acquired
(5,144
)
(1,446
)
Acquired customer relationships
—
(4,382
)
Purchases of property and equipment
(32,494
)
(25,864
)
Proceeds from sale of assets
23
20
Net cash used in investing activities
(37,615
)
(31,672
)
Financing activities
Borrowings from related party revolving promissory note
10,000
—
Payments on related party revolving promissory note
(60,000
)
(70,000
)
Borrowings of other debt
6,618
5,471
Principal payments on other debt
(4,379
)
(4,074
)
Distributions to and purchases of non-controlling interests
(2,643
)
(3,130
)
Distributions to Parent
(7,741
)
(555
)
Net cash used in financing activities
(58,145
)
(72,288
)
Net increase (decrease) in cash and cash equivalents
19,295
(4,419
)
Cash and cash equivalents at beginning of period
31,374
37,657
Cash and cash equivalents at end of period
$
50,669
$
33,238
Supplemental information
Cash paid for interest
$
19,512
$
22,784
Cash paid for taxes
34,009
32,445
VII. Key Statistics
For the Second Quarter Ended June 30, 2024 and 2023
(unaudited)
2024
2023
% Change
Facility Count
Number of occupational health centers—start of period
547
539
Number of occupational health centers acquired
—
1
Number of occupational health centers de novos
1
—
Number of occupational health centers closed/sold
(1
)
—
Number of occupational health centers—end of period
547
540
Number of onsite health clinics operated—end of period
154
141
Number of patient visits (1)(2)
Workers’ Compensation
1,455,254
1,429,035
1.8
%
Employer Services
1,702,399
1,781,012
(4.4
)%
Consumer Health
56,602
57,847
(2.2
)%
Total
3,214,255
3,267,894
(1.6
)%
Visits per day volume
Workers’ Compensation
22,739
22,329
1.8
%
Employer Services
26,600
27,828
(4.4
)%
Consumer Health
884
904
(2.2
)%
Total
50,223
51,061
(1.6
)%
Revenue per visit (1)(3)
Workers’ Compensation
$
198.18
$
194.92
1.7
%
Employer Services
90.05
86.00
4.7
%
Consumer Health
135.49
134.88
0.5
%
Total
$
139.81
$
134.50
3.9
%
Business Days (4)
64
64
Contacts
Investor inquiries:
Bill Chapman
Vice President, Strategy & Investor Relations
972-725-6488
[email protected]