Concentra Group Holdings Parent, Inc. Announces Results For Its Second Quarter Ended June 30, 2024

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.

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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.

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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):

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:

The following table sets forth the computation of EPS, under the two-class method:

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IX. Disaggregated Revenue

For the Three and Six Months Ended June 30, 2024 and 2023

(In thousands, unaudited)

The following table disaggregates the Company's revenue for the three and six months ended June 30, 2024 and 2023:

X. Net Income to Adjusted EBITDA Reconciliation

For the Three and Six Months Ended June 30, 2024 and 2023

(In thousands, unaudited)

The presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our segments. Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America ("GAAP"). Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, income from operations, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying definitions, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

The following table reconciles net income to Adjusted EBITDA for Concentra. Adjusted EBITDA is defined as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, separation transaction costs, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.

XI. Reconciliation of Earnings per Common Share to Adjusted Earnings per Common Share

For the Three and Six Months Ended June 30, 2024 and 2023

(In thousands, except per share amounts, unaudited)

Adjusted net income attributable to common shares and adjusted earnings per common share are not measures of financial performance under GAAP. Items excluded from adjusted net income attributable to common shares and adjusted earnings per common share are significant components in understanding and assessing financial performance. Concentra believes that the presentation of adjusted net income attributable to common shares and adjusted earnings per common share are important to investors because they are reflective of the financial performance of Concentra's ongoing operations and provide better comparability of its results of operations between periods. Adjusted net income attributable to common shares and adjusted earnings per common share should not be considered in isolation or as alternatives to, or substitutes for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because adjusted net income attributable to common shares and adjusted earnings per common share are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, adjusted net income attributable to common shares and adjusted earnings per common share as presented may not be comparable to other similarly titled measures of other companies.

The following tables reconcile net income attributable to common shares and earnings per common share on a fully diluted basis to adjusted net income attributable to common shares and adjusted earnings per common share on a fully diluted basis.

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