UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period Ended March 31, 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file numbers: 001-42188
(Exact name of Registrant as specified in its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | |||||||
(Address of Principal Executive Offices and Zip code)
(972 ) 364-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| (NYSE) | ||||||||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as such Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
| Emerging Growth Company | |||||||||||
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2025, Concentra Group Holdings Parent, Inc. had outstanding 128,171,952 shares of common stock.
Unless the context indicates otherwise, any reference in this report to “Concentra” refers to Concentra Group Holdings Parent, Inc. and its subsidiaries. References to the “Company,” “we,” “us,” and “our” refer collectively to Concentra and its subsidiaries.
TABLE OF CONTENTS
Page | ||||||||
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCENTRA GROUP HOLDINGS PARENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value and share data)
| March 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash | $ | $ | |||||||||
| Accounts receivable | |||||||||||
| Prepaid income taxes | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other identifiable intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current operating lease liabilities | $ | $ | |||||||||
| Current portion of long-term debt and notes payable | |||||||||||
| Accounts payable | |||||||||||
Dividends payable | |||||||||||
| Accrued and other liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Non-current operating lease liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Non-current deferred tax liability | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 12) | |||||||||||
| Redeemable non-controlling interests | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
| Capital in excess of par | |||||||||||
| Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Non-controlling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CONCENTRA GROUP HOLDINGS PARENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
| For the Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenue | $ | $ | |||||||||
| Costs and expenses: | |||||||||||
| Cost of services, exclusive of depreciation and amortization | |||||||||||
General and administrative, exclusive of depreciation and amortization(1) | |||||||||||
| Depreciation and amortization | |||||||||||
| Total costs and expenses | |||||||||||
| Other operating income | |||||||||||
| Income from operations | |||||||||||
| Other income and expense: | |||||||||||
| Loss on early retirement of debt | ( | ||||||||||
| Interest expense | ( | ( | |||||||||
| Interest expense on related party debt | ( | ||||||||||
| Income before income taxes | |||||||||||
| Income tax expense | |||||||||||
| Net income | |||||||||||
| Less: net income attributable to non-controlling interests | |||||||||||
| Net income attributable to the Company | $ | $ | |||||||||
Earnings per common share (Note 10): | |||||||||||
| Basic and diluted | $ | $ | |||||||||
____________________________________________
(1) Includes transaction services agreement fees of $3.7 million for the three months ended March 31, 2025, and shared service fees from a related party of $3.8 million for the three months ended March 31, 2024. See Note 11—“ Relationship with Select”, for additional information .
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CONCENTRA GROUP HOLDINGS PARENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
| For the Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Net income | $ | $ | |||||||||
Other comprehensive loss, net of tax: | |||||||||||
Loss on derivatives | ( | ||||||||||
Reclassification adjustment for gains included in net income | |||||||||||
Net change, net of tax benefit of $ | ( | ||||||||||
Comprehensive income | |||||||||||
Less: comprehensive income attributable to non-controlling interests | |||||||||||
Comprehensive income attributable to the Company | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CONCENTRA GROUP HOLDINGS PARENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(in thousands, except per share amounts)
| For the Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock Issued | Common Stock Par Value | Capital in excess of par | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Net income attributable to the Company | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interests | |||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared for common shareholders ($ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Members’ Units | Members’ Contributed Capital | Common Stock Issued | Common Stock Par Value | Capital in excess of par | Retained Earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | — | $ | — | $ | — | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to the Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution to Parent | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to and purchases of non-controlling interests | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Redemption value adjustment on non-controlling interests | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of LLC to Corporation and impact of reverse stock split | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | — | $ | — | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
CONCENTRA GROUP HOLDINGS PARENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| For the Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
Loss on extinguishment of debt | |||||||||||
(Gain) loss on sale of assets | ( | ||||||||||
| Stock compensation expense | |||||||||||
| Amortization of debt discount and issuance costs | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities, net of effects of business combinations: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Other current assets | ( | ( | |||||||||
| Other assets | |||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities | |||||||||||
| Business combinations, net of cash acquired | ( | ( | |||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from sale of assets | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities | |||||||||||
| Borrowings on revolving facilities | |||||||||||
| Borrowings from related party revolving promissory note | |||||||||||
| Payments on related party revolving promissory note | ( | ||||||||||
| Proceeds from term loans, net of issuance costs | |||||||||||
| Payments on term loans | ( | ||||||||||
| Borrowings of other debt | |||||||||||
| Principal payments on other debt | ( | ( | |||||||||
| Distributions to and purchases of non-controlling interests | ( | ( | |||||||||
Distributions to Select | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net (decrease) increase in cash | ( | ||||||||||
| Cash at beginning of period | |||||||||||
| Cash at end of period | $ | $ | |||||||||
| Supplemental information | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash (refund received) paid for taxes | $ | ( | $ | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Concentra Group Holdings Parent, Inc., a Delaware corporation, conducts substantially all of its business through Concentra Health Services, Inc. (“CHSI”) and its subsidiaries. As the context may require, the “Company,” “we,” “our” or similar words in this report refer collectively to Concentra and its subsidiaries.
2. Accounting Policies
Basis of Presentation and Consolidation
The Company operated as part of Select Medical Corporation (“Select”) until Select made a special stock distribution of 104,093,503 shares of the Company’s common stock to Select’s stockholders (the “Distribution”) on November 25, 2024. The Company’s consolidated financial statements prior to the Distribution have been prepared from Select’s historical accounting records and derived from the condensed consolidated financial statements of Select to present the Company as if it had been operating on a standalone basis. The unaudited condensed consolidated financial statements of the Company as of March 31, 2025, and for the three months ended March 31, 2025 and 2024, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting and the accounting principles generally accepted in the United States of America (“U.S. GAAP”). Accordingly, certain information and disclosures required by GAAP, which are normally included in the notes to the consolidated financial statements, have been condensed or omitted pursuant to those rules and regulations, although the Company believes the disclosure is adequate to make the information presented not misleading. In the opinion of management, such information contains all adjustments, which are normal and recurring in nature, necessary for a fair statement of the financial position, results of operations and cash flow for such periods.
The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full fiscal year ended December 31, 2025. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes as contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (File No. 001-42188).
The condensed consolidated financial statements include the assets, liabilities, revenue, and expenses based on our legal entity structure as well as direct and indirect costs that are attributable to our operations. Indirect costs are the costs of support functions that are partially provided on a centralized basis by Select and its affiliates, which include finance, human resources, benefits administration, procurement support, information technology, legal, corporate governance and other professional services. Indirect costs were allocated to the Company, prior to the IPO, for the purposes of preparing the consolidated financial statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method, primarily based on headcount or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by the Company during the periods presented, depending on the nature of the services received. Subsequent to the IPO, the support services provided by Select have been billed to the Company pursuant to a transitional services agreement, as further described in Note 11—“Relationship with Select”.
The income tax amounts in these condensed consolidated financial statements prior to the Distribution have been calculated based on a separate return methodology and are presented as if our income gave rise to separate federal and state consolidated income tax return filing obligations in the respective jurisdictions in which we operate. Adjustments to income tax expense resulting from the application of the separate return methodology, as compared to tax obligations determined by the Company’s inclusion in Select’s consolidated income tax provision, were assumed to be immediately settled with Select through contributed capital/capital in excess of par as reflected on the condensed consolidated balance sheets, and reflected as a (distribution)/contribution to Select on the condensed consolidated statements of changes in stockholders’/members’ equity and the condensed consolidated statements of cash flows within financing activities.
8
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The condensed consolidated financial statements include the accounts of the Company and the subsidiaries and variable interest entities in which the Company has a controlling financial interest. All intercompany balances and transactions within the Company are eliminated in consolidation. Transactions between the Company and Select have been included in these condensed consolidated financial statements. The transactions with Select are settled in cash, other than the assumed income tax settlement noted above, and are reflected within the condensed consolidated statement of cash flows as an operating or financing activity determined by the nature of the transaction.
Derivatives and Hedging
The Company is exposed to certain risks relating to its ongoing financial arrangements. The primary risk managed using derivative instruments is to reduce variability in interest cash flows on its variable-rate debt. Interest rate swaps and collars are entered into to manage interest rate risk associated with the Company’s variable-rate debt. As a matter of policy, we do not use highly leveraged derivative instruments, nor do we use financial instruments for speculative purposes.
ASC 815 requires entities to recognize all derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship.
Our designated derivative contracts include interest rate swap and collar agreements, which effectively modify the Company’s exposure to interest rate risk by converting the Company’s floating-rate debt to a fixed-rate basis (for interest rate swap arrangements) and capping and flooring the interest rates (for collar arrangements) for the next three years
Our derivatives are designated as cash flow hedges and qualify for hedge accounting treatment. Gains or losses on cash flow hedges are deferred as a component of accumulated other comprehensive income or losses and reclassified into earnings at the time the hedged item affects earnings, presented in the same income statement line item as the underlying hedged item (i.e., in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate debt).
To qualify for hedge accounting, a specified level of hedge effectiveness between the hedging instrument and the hedged item must be achieved at inception and maintained throughout the hedged period. We formally document our risk management objectives, our strategies for undertaking the hedge transactions, the nature of and relationships between the hedging instruments and hedged items, and the method for assessing hedge effectiveness. Additionally, for qualified hedges of forecasted transactions, we specifically identify the significant characteristics and expected terms of the forecasted transactions.
If it becomes probable that a forecasted transaction will not occur, previously deferred gains and losses related to those forecasted transactions would be recognized in earnings in the current period.
Recent Accounting Guidance Not Yet Adopted
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency and decision usefulness of income tax disclosures. The ASU includes enhanced requirements on the rate reconciliation, including specific categories that must be disclosed, and provides a threshold over which reconciling items must be disclosed. The amendments in the update also require annual disclosure of income taxes paid, disaggregated by federal, state, and foreign taxes, as well as any individual jurisdictions in which income taxes paid is greater than 5% of total income taxes paid.
The ASU is effective for the Company’s annual financial statements for the year ended December 31, 2025. The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing the impact that ASU 2023-09 will have on the disclosures in our consolidated financial statements.
Expense Disaggregation
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which is intended to improve the disclosures of expenses by providing more
9
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
detailed information about the types of expenses in commonly presented expense captions. The ASU requires entities to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption; as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The amendment also requires disclosure of the total amount of selling expense and, in annual reporting periods, an entity’s definition of selling expenses.
The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027; however early adoption is permitted. The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing the impact that ASU 2024-03 will have on the disclosures in our consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates.
3. Redeemable Non-Controlling Interests
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Balance as of January 1 | $ | $ | |||||||||
| Net income attributable to redeemable non-controlling interests | |||||||||||
Distributions to redeemable non-controlling interests | ( | ( | |||||||||
| Redemption value adjustment on redeemable non-controlling interests | |||||||||||
| Balance as of March 31 | $ | $ | |||||||||
4. Variable Interest Entities
Certain states prohibit the “corporate practice of medicine,” which restricts the Company from owning medical practices that directly employ physicians and from exercising control over medical decisions by physicians. In these states, the Company enters into long-term management agreements with affiliated professional medical groups (referred to as “Managed PCs”) that are owned by licensed physicians which, in turn, employ or contract with physicians who provide professional medical services in its occupational health centers. The Company also enters into a stock transfer restriction agreement with the respective equity holders, which provide for the Company to direct the transfer of ownership of the Managed PCs to other licensed physicians at any time. The long-term management agreements provide for various administrative and management services to be provided by the Company to the Managed PCs, including, but not limited to, billing and collections, accounting, non-physician personnel, supplies, security and maintenance, and insurance. The Company has the right to receive income as an ongoing management fee, and effectively absorbs all of the residual interests of the Managed PCs. Based on the provisions of the management and stock transfer agreements, the Managed PCs are variable interest entities for which the Company is the primary beneficiary and consolidates the Managed PCs under the variable interest entity model. There are no restrictions on the use of the assets of the Managed PCs or on the settlement of its liabilities. Additionally, the Company fully indemnifies the licensed physician owners from all claims, demands, costs, damages, losses, liabilities, and other amounts arising from the ownership and operation of the medical practices, excluding gross negligence.
As of March 31, 2025, and December 31, 2024, the total assets of the Company’s variable interest entities were $235.3 million and $213.9 million, respectively, and are principally comprised of accounts receivable. As of March 31, 2025, and December 31, 2024, the total liabilities of the Company’s variable interest entities were $51.8 million and $57.5 million, respectively, and are principally comprised of accounts payable and accrued expenses. These variable interest entities have obligations payable for services received under their management agreements with the Company of $180.9 million and $157.0 million as of March 31, 2025, and December 31, 2024, respectively. These intercompany balances are eliminated in consolidation.
10
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Leases
The Company’s total lease cost is as follows:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Operating lease cost | $ | $ | |||||||||
| Finance lease cost: | |||||||||||
| Amortization of right-of-use assets | |||||||||||
| Interest on lease liabilities | ( | ||||||||||
| Variable lease cost | |||||||||||
| Total lease cost | $ | $ | |||||||||
6. Long-Term Debt
As of March 31, 2025, the Company’s long-term debt is as follows:
| Principal Outstanding | Unamortized Premium (Discount) | Unamortized Issuance Costs | Carrying Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
| Credit facilities: | |||||||||||||||||||||||
Revolving Credit Facility | |||||||||||||||||||||||
Term Loan | ( | ( | |||||||||||||||||||||
Other debt(1) | |||||||||||||||||||||||
| Total debt | $ | $ | ( | $ | ( | $ | |||||||||||||||||
(1) Other debt is primarily comprised of insurance financing arrangements, promissory notes executed in connection with business combinations, and finance leases.
As of March 31, 2025, principal maturities of the Company’s long-term debt and notes payable are as follows:
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Credit facilities: | |||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facility | |||||||||||||||||||||||||||||||||||||||||
Term Loan | |||||||||||||||||||||||||||||||||||||||||
| Other debt, including finance leases | |||||||||||||||||||||||||||||||||||||||||
| Total debt | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
11
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As of December 31, 2024, the Company’s long-term debt and notes payable are as follows:
| Principal Outstanding | Unamortized Premium (Discount) | Unamortized Issuance Costs | Carrying Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
| Credit facilities: | |||||||||||||||||||||||
Term Loan | ( | ( | |||||||||||||||||||||
Other debt(1) | |||||||||||||||||||||||
| Total debt | $ | $ | ( | $ | ( | $ | |||||||||||||||||
(1) Other debt is primarily comprised of insurance financing arrangements, promissory notes executed in connection with business combinations, and finance leases.
Credit Facilities
On July 26, 2024, Concentra Health Services, Inc. (“CHSI”), a wholly-owned subsidiary of Concentra, entered into a senior secured credit agreement (the “Credit Agreement”) that provides for an $850.0 million term loan (the “Term Loan”), and a $400.0 million revolving credit facility, including a $75.0 million sublimit for the issuance of standby letters of credit (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”). In March 2025, the Company completed an amendment to the Credit Agreement to increase our Revolving Credit Facility by $50.0 million from $400.0 million to $450.0 million. The interest rate for the Revolving Credit Facility has been reduced from Term SOFR plus 2.50 % to Term SOFR plus 2.00 %, subject to a leverage-based pricing grid. In addition, the amendment to the Credit Agreement also added new debt through an incremental term loan of $102.1 million, which provides an updated Term Loan of $950.0 million. The Term Loan interest rate has been reduced from Term SOFR plus 2.25 % down to Term SOFR plus 2.00 %, subject to a leverage-based pricing grid including 25 -basis point step down at a net leverage ratio of ≤3.25 x.
At March 31, 2025, the Company had $386.4 million of availability under its Revolving Credit Facility after giving effect to $50.0 million of borrowings under the Revolving Credit Facility and $13.6 million of outstanding letters of credit.
The Credit Facilities require CHSI to maintain a leverage ratio (as defined in the Credit Agreement), which is tested quarterly and currently must not be greater than 6.50 to 1.00. As of March 31, 2025, the Company was in compliance with all debt covenants.
7. Accrued and Other Liabilities
The following table sets forth the components of accrued and other liabilities on the condensed consolidated balance sheets:
| March 31, 2025 | December 31, 2024 | ||||||||||
(in thousands) | |||||||||||
| Accrued payroll | $ | $ | |||||||||
| Accrued vacation | |||||||||||
| Accrued interest | |||||||||||
| Accrued other | |||||||||||
| Income taxes payable | |||||||||||
| Accrued and other liabilities | $ | $ | |||||||||
12
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. Fair Value of Financial Instruments
Financial instruments which are measured at fair value, or for which a fair value is disclosed, are classified in the fair value hierarchy, as outlined below, on the basis of the observability of the inputs used in the fair value measurement:
•Level 1 – inputs are based upon quoted prices for identical instruments in active markets.
•Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data.
•Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the instrument.
The Company’s derivative instruments are based on quotes from the market makers that derive fair values from market data, and therefore, are classified as Level 2.
The Company does not measure its indebtedness at fair value in its condensed consolidated balance sheets. The fair value of the Credit Facilities is based on quoted market prices for this debt in the syndicated loan market. The fair value of the Concentra senior notes is based on quoted market prices. The carrying value of the Company’s other debt, as disclosed in Note 6—“Long-Term Debt”, approximates fair value.
We did not have any Level 3 financial assets or liabilities in any period presented.
The fair values and the levels within the fair value hierarchy of financial instruments recorded on the condensed consolidated balance sheets were (in thousands):
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Financial Instrument | Level | Balance Sheet Classification | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | (in thousands) | |||||||||||||||||||||||||||||||||||||
Swap contracts | Level 2 | Other current assets | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Swap contracts | Level 2 | Non-current liability | ( | ( | ||||||||||||||||||||||||||||||||||
Total swap contracts | ( | ( | ||||||||||||||||||||||||||||||||||||
| Collar contracts | Level 2 | Current liability | ( | ( | ||||||||||||||||||||||||||||||||||
| Collar contracts | Level 2 | Non-current liability | ( | ( | ||||||||||||||||||||||||||||||||||
Total collar contracts | ( | ( | ||||||||||||||||||||||||||||||||||||
Total fair value | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
| Level 2 | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Credit facilities: | ||||||||||||||||||||||||||||||||||||||
Revolving Credit Facility | Level 2 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Term Loan | Level 2 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
13
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Revenue
The following table disaggregates the Company’s revenue for the three months ended March 31, 2025 and 2024:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Occupational health centers: | |||||||||||
| Workers’ compensation | $ | $ | |||||||||
| Employer services | |||||||||||
| Consumer health | |||||||||||
| Other occupational health center revenue | |||||||||||
| Total occupational health center revenue | |||||||||||
| Onsite health clinics | |||||||||||
| Other | |||||||||||
| Total revenue | $ | $ | |||||||||
10. Earnings per Share
As of March 31, 2025, the Company’s capital structure consists of common stock and unvested restricted stock. To calculate earnings per share (“EPS”) for the three months ended March 31, 2025, the Company applied the two-class method because its unvested restricted shares were participating securities.
As of March 31, 2024, the Company’s capital structure consists of common stock and there were no participating shares or securities outstanding.
The following table sets forth the net income attributable to the Company, its shares, and its participating shares:
Basic and Diluted EPS | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in thousands) | ||||||||||||||
| Net income | $ | $ | ||||||||||||
Less: net income attributable to non-controlling interests | ||||||||||||||
| Net income attributable to the Company | ||||||||||||||
Less: distributed and undistributed income attributable to participating securities | ||||||||||||||
Distributed and undistributed income attributable to common shares | $ | $ | ||||||||||||
The following table set forth the computation of EPS. For the three months ended March 31, 2025, the Company applied the two-class method.
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Net Income Attributable to the Company | Shares(1) | Basic and Diluted EPS | Net Income Attributable to the Company | Shares(1) | Basic and Diluted EPS | |||||||||||||||||||||||||||||||||
| (in thousands, except for per share amounts) | ||||||||||||||||||||||||||||||||||||||
| Common shares | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Participating securities | $ | — | — | $ | — | |||||||||||||||||||||||||||||||||
Total Company | $ | $ | ||||||||||||||||||||||||||||||||||||
(1) Represents the weighted average shares outstanding during the period.
14
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
11. Relationship with Select
On November 25, 2024, Concentra became a fully independent company upon the completion of the Distribution and Select ceased to be a related party on that date. The Company continues to have material agreements with Select, including a separation agreement, a transition services agreement, a tax matters agreement and an employee matters agreement.
Shared Services Agreement and Transition Services Agreement
The Company pays Select a fee for the shared support functions provided on a centralized basis by Select and its affiliates. Prior to the IPO, the shared services fee was governed by a shared services agreement between the Company and Select which was reassessed and adjusted annually. The transition services agreement, which became effective concurrent with the IPO, now provides the framework for the services provided by Select and the applicable fee for such services. For the three months ended March 31, 2025, the transaction services agreement fees were $3.7 million, and for the three months ended March 31, 2024, the shared service fees from a related party were $3.8 million.
12. Commitments and Contingencies
Litigation
The Company is a party to various legal actions, proceedings, and claims, and regulatory and other governmental audits and investigations in the ordinary course of its business, including, but not limited to, legal actions and claims alleging professional malpractice, general liability for property damage, personal and bodily injury, violations of federal and state employment laws, often in the form of wage and hour class action lawsuits, and liability for data breaches. Many of these actions involve large claims and significant defense costs and sometimes, as in the case of wage and hour class actions, are not covered by insurance. The Company cannot predict the ultimate outcome of pending litigation, proceedings, and regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines, and other penalties.
To address claims arising out of the Company’s operations, the Company maintains professional malpractice liability insurance and general liability insurance coverages through a number of different programs that are dependent upon such factors as the state where the Company is operating. The Company currently maintains insurance coverages under a combination of policies with a total annual per claim aggregate limit of $29.0 million for professional malpractice liability insurance and general liability insurance. The Company’s insurance for the professional liability coverage is written on a “claims-made” basis, and its commercial general liability coverage is maintained on an “occurrence” basis. These coverages apply after a self-insured retention limit is exceeded. In addition, the Company purchases additional primary care limits in certain patient compensation fund states, including Indiana, Kansas, Louisiana, Nebraska, Pennsylvania and Wisconsin. The Company also maintains additional types of liability insurance covering claims that, due to their nature or amount, are not covered by or not fully covered by the applicable professional malpractice and general liability insurance policies, including workers compensation, property and casualty, directors and officers, cyber liability, and employment practices liability insurance coverages. Our insurance policies generally are silent with respect to punitive damages so coverage is available to the extent insurable under the law of any applicable jurisdiction, and are subject to various deductibles and policy limits. The Company reviews its insurance program annually and may make adjustments to the amount of insurance coverage and self-insured retentions in future years. Significant legal actions, as well as the cost and possible lack of available insurance, could subject the Company to substantial uninsured liabilities.
California Department of Insurance Investigation. On February 5, 2024, the Company received a subpoena from the California Department of Insurance relating to an investigation under the California Insurance Frauds Prevention Act, Cal. Ins. Code § 1871.7 et seq., which allows a whistleblower to file a false claims lawsuit based on the submission of false or fraudulent claims to insurance companies. The subpoena seeks documentation relating mainly to the Company’s billing and coding for physical therapy claims submitted to commercial insurers and workers’ compensation carriers located or doing business in California. The Company has produced data and other documents requested by the California Department of Insurance and intends to fully cooperate with this investigation. At this time, the Company is unable to predict the timing and outcome of this matter.
Perry Johnson & Associates, Inc. Data Breach. On November 10, 2023, Perry Johnson & Associates, Inc., a third-party vendor of health information technology solutions that provides medical transcription services (“PJ&A”), notified CHSI that certain information related to particular Concentra patients was potentially affected by a cybersecurity event. In February 2024,
15
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Concentra sent notices to almost four million patients who may have been impacted by the data breach. During the first quarter of 2024, Concentra became aware of six putative class action lawsuits filed against PJ&A and Concentra related to the data breach. Five of the putative class action lawsuits have been transferred to the U.S. District Court for the Eastern District of New York and consolidated with the one class action lawsuit pending there. Plaintiffs filed a Consolidated Class Action Complaint on August 19, 2024 against PJ&A, Concentra, Select Medical Holdings Corporation and other unrelated defendants under the caption In re Perry Johnson & Associates Medical Transcription Data Security Breach Litigation (“Consolidated Complaint”). The Consolidated Complaint alleges that the plaintiffs have suffered injuries and damages under theories of negligence, breach of contract, and failure to comply with statutory duties, including duties under HIPAA, FTC guidelines and industry standards, and various state consumer protection and deceptive trade practice laws. In March 2025, pursuant to a Case Management Order (“Court Order”), five of the named plaintiffs in the Consolidated Complaint filed an amended Direct-Filed Class Action Complaint in the U.S. District Court for the Eastern District of New York. Pursuant to this Court Order, the Direct-Filed Class Action Complaint will be remanded to the United States District Court for the Northern District of Texas after the conclusion of pretrial proceedings. The Company is working with its cybersecurity risk insurance policy carrier and does not believe that the data breach or the lawsuits will have a material impact on its operations or financial performance. However, at this time, the Company is unable to predict the timing and outcome of these matters.
Physical Therapy Billing. In 2021, Select Medical Corporation (“Select”), the former parent of the Company, received a letter from a Trial Attorney at the U.S. Department of Justice, Civil Division, Commercial Litigation Branch, Fraud Section (“DOJ”) stating that the DOJ, in conjunction with the U.S. Department of Health and Human Services (“HHS”), is investigating Select in connection with potential violations of the False Claims Act, 31 U.S.C. § 3729, et seq. The letter specified that the investigation relates to Select’s billing for physical therapy services, and indicated that the DOJ would be requesting certain records from Select. Although the DOJ’s initial requests involved Select’s outpatient therapy clinics, in 2022 and 2023, the DOJ sought and the Company produced additional data and documents relating to the physical therapy services furnished by the Company. In May 2024, by order of the U.S. District Court for the Middle District of Florida, a qui tam lawsuit that is related to the DOJ’s investigation was unsealed after the U.S. filed a notice declining to intervene in the case. The lawsuit, filed in May 2021 and amended in October 2021, was brought by Kathleen Kane, a physical therapist formerly employed in Select’s outpatient division, against Select Medical Corporation, Select Physical Therapy Holdings, Inc. and Select Employment Services, Inc., but does not name the Company as a defendant. The amended complaint alleges that the defendants billed Federally funded health programs for one-on-one therapy services when group therapy was performed or overbilled for one-on-one therapy services, billed for unreimbursable unskilled physical therapy services, and submitted claims containing signatures of therapists who did not provide the billed services. The Company is fully cooperating on this investigation, but at this time, is unable to predict the timing and outcome of this matter.
13. Segment Information
Our business is organized into three operating segments based primarily on the type or location of occupational health services provided: (i) occupational health centers, (ii) onsite health clinics, and (iii) other businesses. All three operating segments are aggregated into a single reportable segment in our consolidated financial statements based on similar services provided, service delivery process involved, target customers, and similar economic characteristics. Across our operating segments, we offer a diverse and comprehensive array of services, which includes workers’ compensation, employer services and consumer health. Our patients are generally employed by our main customers - employers across the United States.
Occupational health services are focused on the diagnosis and treatment of work-related injuries and illnesses (workers’ compensation services) and employer services such as examinations, physicals, tests and screenings, vaccinations, and a range of consulting services designed to protect employees from workplace hazards.
The chief operating decision maker (“CODM”) is our Chief Executive Officer. The CODM uses Segment Adjusted EBITDA in the annual budgeting and forecasting process, in the review of budget-to-actual and prior year variances to make decisions about the allocation of operating and capital resources, and to establish management’s compensation.
16
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table is representative of the significant categories, including significant expenses, regularly provided to the CODM when managing the Company’s single reporting segment.
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Revenue | $ | $ | |||||||||
Expenses:(1) | |||||||||||
Personnel expenses | |||||||||||
Facility expenses | |||||||||||
Other expenses | |||||||||||
| Total segment expenses | |||||||||||
| Segment Adjusted EBITDA | $ | $ | |||||||||
| Total assets | $ | $ | |||||||||
| Purchases of property and equipment | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | |||||||||
____________________________________________
Segment Adjusted EBITDA is calculated as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, separation transaction costs, acquisition costs, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
The following table reconciles Segment Adjusted EBITDA to income before income taxes for the periods indicated.
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
Segment Adjusted EBITDA | $ | $ | |||||||||
| Interest expense | ( | ( | |||||||||
Interest expense on related party debt | ( | ||||||||||
Loss on early retirement of debt | ( | ||||||||||
Stock compensation expense | ( | ( | |||||||||
Depreciation and amortization | ( | ( | |||||||||
Separation transaction costs(1) | ( | ( | |||||||||
Nova acquisition costs | ( | ||||||||||
Income before income taxes | $ | $ | |||||||||
(1) Separation transaction costs represent non-recurring incremental consulting, legal, audit-related fees, and system implementation costs incurred in connection with the Company’s separation into a new, publicly traded company and are included within general and administrative expenses on the consolidated statements of operations.
17
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
14. Acquisitions
Nova Acquisition
Effective March 1, 2025, the Company acquired Nova Medical Centers (“Nova”). CHSI entered into an equity purchase agreement to acquire all of the outstanding membership interests for a purchase price of approximately $265 million, subject to adjustment in accordance with the terms and conditions set forth in the purchase agreement. We financed the transaction using a combination of $102.1 million of new debt financing under the Credit Agreement, $50.0 million of available borrowing capacity under our existing Revolving Credit Facility, and the remaining with cash on hand.
Nova operates 67 occupational health centers in five states, providing workers’ compensation injury care services, physical therapy, drug and alcohol screening, and pre-employment physicals as part of their full suite of occupational health services. The acquisition enabled the Company to expand to more than 775 occupational health centers and onsite health clinics at employer worksites in 42 states.
The Nova acquisition met the definition of a business pursuant to Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and the acquisition was accounted for as a business combination under the acquisition method of accounting. The Company allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair values are based on inputs that are unobservable in the market and therefore represent Level 3 inputs.
The Company is in the process of completing its assessment of the acquisition-date fair values of the assets acquired and liabilities assumed and determining the estimated useful lives of long-lived assets and finite-lived intangible assets; therefore, the values set forth are subject to adjustment during the measurement period. The amount of these potential adjustments could be significant. The Company expects to complete its purchase price allocation activities by December 31, 2025.
Pursuant to ASC Topic 810, Consolidation, certain Nova affiliated entities were determined to be a variable interest entity, and the Company was determined to be their primary beneficiary. As a result, the Company obtained a controlling financial interest and Nova has been consolidated into the Company's financial results.
The following table reconciles the preliminary allocation of estimated fair value to identifiable net assets and goodwill to the consideration given for the acquired business (in thousands):
Identifiable tangible assets | $ | |||||||
Identifiable intangible assets | ||||||||
Goodwill | ||||||||
Total assets | ||||||||
Total liabilities | ||||||||
Consideration given | $ | |||||||
The preliminary estimate for goodwill of $205.6 million has been recognized for the business combination, representing the excess of the consideration given over the fair value of identifiable net assets acquired. The value of goodwill is derived from Nova’s future earnings potential and its assembled workforce. The amount of goodwill is expected to be deductible for tax purposes.
For the period March 1, 2025 through March 31, 2025, Nova had total revenue and net income of $11.2 million and $1.2 million, respectively, which was included in the condensed consolidated financial statements.
Pro Forma Results
The following unaudited consolidated pro forma financial results combine the historical results of Nova and the Company to present the results as if the Nova acquisition had occurred on January 1, 2024. The pro forma information is presented for illustration purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition occurred on that date, nor is it indicative of future results.
18
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
(unaudited) (in thousands) | |||||||||||
| Total revenue | $ | $ | |||||||||
Net income attributable to the Company | $ | $ | |||||||||
The pro forma financial information is based on the preliminary allocation of the purchase price of the Nova acquisition and is therefore subject to adjustment upon finalizing the purchase price allocation, as described above, during the measurement period. The net income tax impact was calculated at the effective tax rate, as Nova had been a subsidiary of the Company as of January 1, 2024.
Pro forma results were adjusted to exclude acquisition-related expenses incurred by the Company that are directly attributable to the transaction. These excluded costs primarily consist of legal, advisory, and transaction-related compensation expenses that are nonrecurring in nature and not reflective of the ongoing operations of the combined business.
15. Derivative Instruments
The Company uses derivative instruments to manage its exposure to variable-rate debt indexed to 1-month Term SOFR, issued under its Tranche B-1 Term Loans drawn from the Company’s Credit Agreement.
Derivative
Certain information related to our derivatives contracts is presented below (in thousands):
| Effective Date | Notional Amount | Fixed Rate | Cap | Floor | Index | Actual Termination Date | |||||||||||||||||||||||||||||||||||
| Swap contracts | 3/3/2025 | $ | % | USD-SOFR rate | 2/29/2028 | ||||||||||||||||||||||||||||||||||||
| Collar contracts | 3/3/2025 | $ | — | % | % | USD-SOFR rate | 2/29/2028 | ||||||||||||||||||||||||||||||||||
Cash Flow Hedge Coverage
The Company has entered into interest rate swap and collar agreements designated as cash flow hedges. These agreements are used to manage interest rate risk associated with a portion of the Company’s floating-rate debt for periods not exceeding the next three years .
Deferred Hedging Gains and Losses on Cash Flow Hedges
Based on our valuation at March 31, 2025 and assuming market rates remain constant through contract maturities, we expect transfers to earnings of the existing gains or losses reported in accumulated other comprehensive income on interest rate cash flow hedges during the next 12 months to correspond to the current and non-current assets and liabilities portion of the derivative as disclosed in Note 8—“Fair Value of Financial Instruments”.
19
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Derivative Impact on the Statements of Comprehensive Income
The following table presents the pre-tax amounts of derivative gains or losses deferred into accumulated other comprehensive income and the income statement line item that will be affected when reclassified to earnings (in thousands):
| Accumulated Other Comprehensive Income Component (OCI) | Gains/(Losses) Recognized in OCI Related to Derivatives Designated as Hedging Instruments | Location of Gains/(Losses) When Reclassified to Net Income/(Loss) | ||||||||||||
Three Months Ended March 31, 2025 | ||||||||||||||
| Cash flow hedges: | ||||||||||||||
| Swap contracts | $ | ( | Interest expense | |||||||||||
| Collar contracts | ( | Interest expense | ||||||||||||
Total (losses)/gains recognized in statements of comprehensive income | $ | ( | ||||||||||||
Derivative Impact on the Statements of Income
The following tables present the pre-tax amounts of derivative gains or (losses) recorded to earnings and the affected income statement line items (in thousands):
Three Months Ended March 31, 2025 | ||||||||
| Interest expense | ||||||||
| Total amounts presented in the condensed consolidated statements of income in which the following effects were recorded | ||||||||
| Gains/(losses) related to derivatives designated as hedging instruments: | ||||||||
Cash flow hedges(1): | ||||||||
Swap contracts | $ | |||||||
Collar contracts(2) | ||||||||
| Total gains/(losses) recognized in statements of income | $ | |||||||
____________________________________________
(1) Represents the pre-tax amounts of derivative gains/(losses) reclassified from accumulated other comprehensive income to earnings.
(2) As of the reporting date, the 1-month Term SOFR remains within the specified cap strike and floor strike bands. Consequently, there are no payments required to be exchanged under this agreement.
16. Accumulated Other Comprehensive Income
The components of, and changes in, accumulated other comprehensive income, net of tax, were as follows (in thousands):
Net Cash Flow Hedge Adjustments | |||||
| Balance as of December 31, 2024 | $ | ||||
Net deferred (losses)/gains on cash flow hedges | ( | ||||
Net deferred gains/(losses) on cash flow hedges reclassified to net income | |||||
| Balance as of March 31, 2025 | $ | ( | |||
20
CONCENTRA GROUP HOLDINGS PARENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The gross amount and related tax benefit/(expense) recorded in, and associated with, each component of other comprehensive income were as follows (in thousands):
Three Months Ended March 31, 2025 | |||||||||||||||||
| Before Tax Amount | Tax | Net of Tax Amount | |||||||||||||||
Net deferred (losses)/gains on cash flow hedges | $ | ( | $ | $ | ( | ||||||||||||
Net deferred gains/(losses) on cash flow hedges reclassified to net income | $ | $ | ( | $ | |||||||||||||
The amounts reclassified from accumulated other comprehensive income were as follows (in thousands):
| Accumulated Other Comprehensive Income (OCI) Component | Reclassified from Accumulated OCI to Earnings for the Three Months Ended March 31, 2025 | Affected Line Item in the Statements of Income | ||||||||||||
Gains/(losses) on cash flow hedges: | ||||||||||||||
| Swap contract | $ | Interest expense | ||||||||||||
Collar contract(1) | Interest expense | |||||||||||||
Gains/(losses) on hedges before income taxes | $ | |||||||||||||
| Income tax expense | ( | |||||||||||||
| Gains on hedges | $ | |||||||||||||
____________________________________________
(1) As of the reporting date, the 1-month Term SOFR remains within the specified cap strike and floor strike bands. Consequently, no amounts have been reclassified from OCI to earnings.
17. Subsequent Events
Equity Purchase Agreement
On April 18, 2025, CHSI entered into an equity purchase agreement with Pivot Occupational Health, LLC to acquire all of the outstanding equity interests of Onsite Innovations, LLC (“Pivot Onsite Innovations”). The transaction values Pivot Onsite Innovations at $55 million, subject to adjustment in accordance with the terms and conditions set forth in the purchase agreement. The transaction is expected to close in the second quarter of 2025 and is subject to customary closing conditions set forth in the purchase agreement.
CHSI currently expects to finance the transaction using a combination of cash on hand and available borrowing capacity under its existing Revolving Credit Facility.
Pivot Onsite Innovations operates approximately 200 onsite health clinics at employer locations in over 40 states, providing occupational health, wellness, prevention, and performance services. When combined with Concentra’s current onsite health clinic footprint, the acquisition will enable the Company to expand to more than 350 onsite health clinics at employer worksites.
Dividend
On May 6, 2025, the Board of Directors declared a cash dividend of $0.0625 per share. The dividend will be payable May 29, 2025, to stockholders of record as of the close of business on May 20, 2025.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with our unaudited condensed consolidated financial statements and accompanying notes.
Forward-Looking Statements
This report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates” and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; impact of planned acquisitions and dispositions; our strategy for growth; product development activities; regulatory approvals; market position; market size and opportunity; expenditures; and the effects of the Separation on our business.
Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to risks, uncertainties and changes that are difficult to predict and many of which are outside of our control. You should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, our actual results and financial condition could vary materially from expectations and projections expressed or implied in our forward-looking statements. You are therefore cautioned not to rely on these forward-looking statements. Risks and uncertainties include:
•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;
•Significant legal actions could subject us to substantial uninsured liabilities;
•Litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our business and financial statements;
•Insurance coverage may not be sufficient to cover losses we may incur;
•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;
22
•Adverse economic conditions in the U.S. or globally;
•Any negative impact on the global economy and capital markets resulting from other geopolitical tensions;
•The impact of impairment of our goodwill and other intangible assets;
•Our ability to maintain satisfactory credit ratings;
•The effects of the Separation on our business;
•Our ability to achieve the expected benefits of and successfully execute the Separation and related transactions;
•Restrictions on our business, potential tax and indemnification liabilities and substantial charges in connection with the Separation 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;
•Our ability to attract and retain talented, highly skilled employees and a diverse workforce, and on the succession of our senior management;
•Climate change, or legal, regulatory or market measures to address climate change;
•Increasing scrutiny and rapidly evolving expectations from stakeholders regarding ESG matters;
•Changes in tax laws or exposures to additional tax liabilities; and
•Changes to United States tariff and import/export regulations and the impact on global economic conditions may have a negative effect on our business, financial condition and results of operations.
You should also carefully read the risk factors described in our Annual Report on Form 10-K in Part I, Item 1A. “Risk Factors” for a description of certain risks that could, among other things, cause our actual results to differ materially from those expressed or implied in our forward-looking statements. You should understand that it is not possible to predict or identify all such factors and you should not consider the risks described above to be a complete statement of all potential risks and uncertainties. We do not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments, except as required by law.
Overview
We were founded in 1979 and have grown to be the largest provider of occupational health services in the United States by number of locations. Our national presence enables us to provide access to high-quality care that supports our mission to improve the health of America’s workforce. As of March 31, 2025, we operated 627 stand-alone occupational health centers in 41 states and 160 onsite health clinics at employer worksites in 36 states. We also have expanded our reach via our telemedicine program serving 43 states and the District of Columbia. In total, we deliver services across 45 states and the District of Columbia. Our patients are generally employed by our main customers — employers across the United States.
Our business is organized into three operating segments based primarily on the type or location of occupational health services provided:
•Occupational health centers: Our occupational health centers operating segment encompasses the occupational health services we deliver at our 627 occupational health center facilities across the United States. In this operating segment, we serve all types of employers, from Fortune 500 to small businesses. The occupational health services provided in this operating segment include workers’ compensation and employer services and we also provide consumer health services.
•Onsite health clinics: Our onsite health clinics operating segment delivers occupational health services and/or employer-sponsored primary care services at an employer’s workplace, including mobile health services and episodic specialty testing services — we deliver our services at 160 permanent on-site locations and multiple other employer locations through our episodic services. In this segment, we serve medium to large-sized employers.
•Other businesses: Our other businesses operating segment is comprised of several complementary services to our core occupational health services offering and includes Concentra Telemed, Concentra Pharmacy, and Concentra Medical Compliance Administration. In this operating segment, we serve all types of employers.
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All three operating segments are aggregated into a single reportable segment in our condensed consolidated financial statements based on similar services provided, service delivery process involved, target customers, and similar economic characteristics.
The following table represents the percentage of revenue by our operating segments for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Occupational health centers | 95 | % | 95 | % | |||||||
Onsite health clinics | 3 | % | 3 | % | |||||||
Other businesses | 2 | % | 2 | % | |||||||
Across our operating segments, we offer a diverse and comprehensive array of occupational health services, including workers’ compensation and employer services, and consumer health services:
•Workers’ compensation services: include the support of workers’ compensation injury, physical rehabilitation, and specialist care.
•Employer services: consist of drug and alcohol screenings, physical examinations and evaluations, clinical testing, and preventive care, as well as direct-to-employer services that include the services described above and advanced primary care at our onsite health clinics.
•Consumer health services: consist of the support of patient-directed urgent care treatment of injuries and illnesses.
The following table sets forth the percentage of our overall visits per day (“VPD”) volume in our occupational health center operating segment by service offering, for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Workers’ compensation services | 45 | % | 45 | % | |||||||
| Employer services | 53 | % | 53 | % | |||||||
| Consumer health services | 2 | % | 2 | % | |||||||
The following table sets forth the percentage of visit-related revenue in our occupational health center operating segment by service offering, for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Workers’ compensation services | 64 | % | 64 | % | |||||||
| Employer services | 34 | % | 34 | % | |||||||
| Consumer health services | 2 | % | 2 | % | |||||||
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Significant Events
Nova Acquisition
Effective March 1, 2025, the Company acquired Nova Medical Centers (“Nova”). CHSI entered into an equity purchase agreement to acquire all of the outstanding membership interests for a purchase price of approximately $265 million, subject to adjustment in accordance with the terms and conditions set forth in the purchase agreement. We financed the transaction using a combination of $102.1 million of new debt financing under the Credit Agreement, $50.0 million of available borrowing capacity under our existing Revolving Credit Facility, and the remaining with cash on hand.
Nova operates 67 occupational health centers in five states, providing workers’ compensation injury care services, physical therapy, drug and alcohol screening, and pre-employment physicals as part of their full suite of occupational health services. The acquisition enabled the Company to expand to more than 775 occupational health centers and onsite health clinics at employer worksites in 42 states.
Debt Financing
On March 3, 2025, the Company completed an amendment to the Credit Agreement to increase our revolving credit facility by $50.0 million from $400.0 million to $450.0 million. The interest rate for the revolving credit facility has been reduced from Term SOFR plus 2.50% to Term SOFR plus 2.00%, subject to a leverage-based pricing grid. In addition, the amendment to the Credit Agreement also added new debt through an incremental term loan of $102.1 million, which provides an updated Term Loan of $950.0 million. The Term Loan interest rate has been reduced from Term SOFR plus 2.25% down to Term SOFR plus 2.00%, subject to a leverage-based pricing grid including 25-basis point step down at a net leverage ratio of ≤3.25x.
Equity Purchase Agreement
On April 18, 2025, CHSI entered into an equity purchase agreement with Pivot Occupational Health, LLC to acquire all of the outstanding equity interests of Onsite Innovations, LLC (“Pivot Onsite Innovations”). The transaction values Pivot Onsite Innovations at $55 million, subject to adjustment in accordance with the terms and conditions set forth in the purchase agreement. The transaction is expected to close in the second quarter of 2025 and is subject to customary closing conditions set forth in the purchase agreement.
CHSI currently expects to finance the transaction using a combination of cash on hand and available borrowing capacity under its existing Revolving Credit Facility.
Pivot Onsite Innovations operates approximately 200 onsite health clinics at employer locations in over 40 states, providing occupational health, wellness, prevention, and performance services. When combined with Concentra’s current onsite health clinic footprint, the acquisition will enable the Company to expand to more than 350 onsite health clinics at employer worksites.
Regulatory Changes
Our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025, contains a detailed discussion of the regulations that affect our business in Part I, Item I. Business—Government Regulations.
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Operating Metrics
Management utilizes specific key operating metrics to monitor trends and performance in our business and therefore may be important to investors because management may assess our performance based in part on such metrics. Other healthcare providers may present similar measures; however, these measures are susceptible to varying definitions and our key metrics may not be comparable to other similarly titled measures of other companies.
Patient Visits and Visits Per Day Volume
We monitor the number of patient visits per day (“VPD”) volume for each of our major service lines in our occupational health center operating segment — workers’ compensation services, employer services, and consumer health. Management believes that the number of patient visits is the single most important indicator of the volume of services being provided in our centers. VPD volume, which is calculated as total patient visits in a given period divided by total business days for such period, allows for comparability between time periods with different number of business days. Patient visits and VPD volume include only the patients seen in our occupational health centers operating segment and does not include our onsite health clinics or other businesses operating segments.
Revenue Per Visit
Management also measures reimbursement rates utilizing patient revenue per visit which is calculated as total patient revenue divided by total patient visits. Revenue per visit as reported includes only the revenue and patient visits in our occupational health centers operating segment and does not include our onsite health clinics or other businesses operating segments.
The following table sets forth operating statistics for our occupational health centers operating segment for the periods presented:
| Three Months Ended March 31, | ||||||||||||||||||||
| 2025 | 2024 | % Change | ||||||||||||||||||
| Number of patient visits | ||||||||||||||||||||
Workers’ compensation | 1,444,880 | 1,433,084 | 0.8% | |||||||||||||||||
Employer services | 1,696,412 | 1,659,291 | 2.2% | |||||||||||||||||
Consumer health | 63,076 | 63,280 | (0.3)% | |||||||||||||||||
| Total | 3,204,368 | 3,155,655 | 1.5% | |||||||||||||||||
| VPD Volume | ||||||||||||||||||||
Workers’ compensation | 22,935 | 22,392 | 2.4% | |||||||||||||||||
Employer services | 26,927 | 25,926 | 3.9% | |||||||||||||||||
Consumer health | 1,001 | 989 | 1.2% | |||||||||||||||||
| Total | 50,863 | 49,307 | 3.2% | |||||||||||||||||
| Revenue per visit | ||||||||||||||||||||
Workers’ compensation | $ | 209.09 | $ | 195.29 | 7.1% | |||||||||||||||
Employer services | 94.40 | 90.84 | 3.9% | |||||||||||||||||
Consumer health | 136.52 | 131.57 | 3.8% | |||||||||||||||||
| Total | $ | 146.94 | $ | 139.09 | 5.6% | |||||||||||||||
Business days | 63 | 64 | ||||||||||||||||||
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Facility Counts
The following table sets forth facility counts for our occupational health centers and onsite health clinics operating segments for the periods presented:
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Number of occupational health centers—start of period | 552 | 544 | ||||||||||||
| Number of occupational health centers acquired | 72 | 2 | ||||||||||||
| Number of occupational health centers de novos | 3 | 1 | ||||||||||||
| Number of occupational health centers closed/sold | — | — | ||||||||||||
| Number of occupational health centers—end of period | 627 | 547 | ||||||||||||
| Number of onsite health clinics operated—end of period | 160 | 151 | ||||||||||||
Results of Operations
The following table outlines selected operating data as a percentage of revenue for the periods indicated:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
(in thousands) | Amount | Percent(1) | Amount | Percent | ||||||||||||||||||||||
| Revenue | $ | 500,752 | 100.0 | % | $ | 467,598 | 100.0 | % | ||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Cost of services, exclusive of depreciation and amortization | 357,101 | 71.3 | 336,990 | 72.1 | ||||||||||||||||||||||
| General and administrative, exclusive of depreciation and amortization | 46,713 | 9.3 | 36,909 | 7.9 | ||||||||||||||||||||||
| Depreciation and amortization | 16,619 | 3.3 | 18,485 | 4.0 | ||||||||||||||||||||||
| Total costs and expenses | 420,433 | 84.0 | 392,384 | 84.0 | ||||||||||||||||||||||
Other operating income | — | — | 284 | 0.1 | ||||||||||||||||||||||
| Income from operations | 80,319 | 16.0 | 75,498 | 16.1 | ||||||||||||||||||||||
| Other income and expense: | ||||||||||||||||||||||||||
Loss on early retirement of debt | (875) | (0.2) | — | — | ||||||||||||||||||||||
| Interest expense | (25,548) | (5.1) | (111) | — | ||||||||||||||||||||||
| Interest expense on related party debt | — | — | (9,971) | (2.1) | ||||||||||||||||||||||
| Income before income taxes | 53,896 | 10.8 | 65,416 | 14.0 | ||||||||||||||||||||||
| Income tax expense | 13,254 | 2.6 | 15,137 | 3.2 | ||||||||||||||||||||||
| Net income | 40,642 | 8.1 | 50,279 | 10.8 | ||||||||||||||||||||||
Less: net income attributable to non-controlling interests | 1,731 | 0.3 | 1,323 | 0.3 | ||||||||||||||||||||||
| Net income attributable to the Company | $ | 38,911 | 7.8 | % | $ | 48,956 | 10.5 | % | ||||||||||||||||||
(1) Totals in this column may not foot due to rounding.
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024
Revenue
Revenue increased 7.1% to $500.8 million for the three months ended March 31, 2025, compared to $467.6 million for the three months ended March 31, 2024, driven primarily by the increase in revenue per visit, as described below, and the 72 occupational health centers that were acquired through acquisitions in March 2025.
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Our total patient visits increased 1.5% to 3,204,368 for the three months ended March 31, 2025, compared to 3,155,655 visits for the three months ended March 31, 2024. Total VPD volume increased 3.2% to 50,863 for the three months ended March 31, 2025, compared to 49,307 for the three months ended March 31, 2024, primarily due to an increase in employer services visits. Workers’ compensation VPD volume increased 2.4% to 22,935 from 22,392, employer services VPD volume increased 3.9% to 26,927 from 25,926, and consumer health VPD volume increased 1.2% to 1,001 from 989, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.
Revenue per visit increased 5.6% to $146.94 for the three months ended March 31, 2025, compared to $139.09 for the three months ended March 31, 2024. We experienced a higher revenue per visit principally due to increases in the reimbursement rates payable pursuant to certain state fee schedules for workers’ compensation visits, as well as increases in our employer services rates, for the three months ended March 31, 2025. Revenue per visit for workers’ compensation visits increased 7.1% to $209.09 from $195.29, revenue per visit for employer services visits increased 3.9% to $94.40 from $90.84 and revenue per visit for consumer health visits increased by 3.8% to $136.52 from $131.57, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.
Cost of Services
Our cost of services expense includes all direct and indirect support costs related to providing services to our customers. Cost of services was $357.1 million, or 71.3% of revenue, for the three months ended March 31, 2025, compared to $337.0 million, or 72.1% of revenue, for the three months ended March 31, 2024. The percentage of revenue was lower overall predominantly due to the 7.1% increase in revenue during the period, including the rate gains, as well as operational efficiencies resulting from the replacement of contract clinicians with employed clinicians and general improvements in staffing efficiencies across clinical and operations.
General and Administrative
General and administrative expense includes corporate overhead such as finance, legal, human resources, marketing, corporate offices, and other administrative areas as well as executive compensation. Our general and administrative expenses were $46.7 million, or 9.3% of revenue, for the three months ended March 31, 2025, compared to $36.9 million, or 7.9% of revenue, for the three months ended March 31, 2024. The increase in general and administrative as a percentage of revenue is principally due to the favorable out of period legal expense reversal during the three months ended March 31, 2024, stock compensation expense, Nova acquisition costs, and the addition of new full-time employees to support the separation from Select Medical and operate as a standalone public company.
Depreciation and Amortization
Depreciation and amortization expense was $16.6 million for the three months ended March 31, 2025, or 3.3% of revenue compared to $18.5 million for the three months ended March 31, 2024, or 4.0% of revenue. The decrease was due to an intangible asset fully amortizing in June 2024.
Interest Expense
For the three months ended March 31, 2025, we had interest expense of $25.5 million, compared to $0.1 million for the three months ended March 31, 2024. The increase in interest expense was due to the issuance of an $850.0 million term loan and $650.0 million senior notes in July 2024, and due to the $102.1 million of incremental term loan and $50.0 million in borrowings on the revolving credit facility in March 2025, as described in Note 6—“Long-Term Debt”.
Interest Expense on Related Party Debt
For the three months ended March 31, 2025, we had no interest expense on related party debt with Select, compared to $10.0 million for the three months ended March 31, 2024. The decrease in interest expense is due to the payoff of the revolving promissory note with Select during the three months ended December 31, 2024.
Income Taxes
We recorded income tax expense of $13.3 million for the three months ended March 31, 2025, which represented an effective tax rate of 24.6%. We recorded income tax expense of $15.1 million for the three months ended March 31, 2024, which represented an effective tax rate of 23.1%. Our income tax expense is computed based on annual estimates which we allocate throughout the year based on our income. This intra-period tax allocation may cause our effective tax rate to reflect variances when compared to the prior year as estimates of our annual income and the components of our income tax expense change throughout the year.
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Non-GAAP Measures
Adjusted EBITDA and Adjusted EBITDA Margin
We believe that the presentation of Adjusted EBITDA and Adjusted EBITDA margin, as defined herein, are important to investors because Adjusted EBITDA and Adjusted EBITDA margin are commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA and Adjusted EBITDA margin are used by management to evaluate financial performance of, and determine resource allocation for, each of our operating segments. However, Adjusted EBITDA and Adjusted EBITDA margin are not measures of financial performance under U.S. GAAP. Items excluded from Adjusted EBITDA and Adjusted EBITDA margin are significant components in understanding and assessing financial performance. Adjusted EBITDA and Adjusted EBITDA margin should not be considered in isolation, or as an alternative to, or substitute for, net income, net income margin, income from operations, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the condensed consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA and Adjusted EBITDA margin are not measurements determined in accordance with U.S. GAAP and are thus susceptible to varying definitions, Adjusted EBITDA and Adjusted EBITDA margin as presented may not be comparable to other similarly titled measures of other companies.
We define Adjusted EBITDA as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, separation transaction costs, acquisition costs, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.
The following table reconciles net income to Adjusted EBITDA and net income margin to Adjusted EBITDA margin and should be referenced when we discuss Adjusted EBITDA and Adjusted EBITDA margin.
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
($ in thousands) | Amount | % of Revenue | Amount | % of Revenue | ||||||||||||||||||||||
Reconciliation of Adjusted EBITDA: | ||||||||||||||||||||||||||
| Net income | $ | 40,642 | 8.1 | % | $ | 50,279 | 10.8 | % | ||||||||||||||||||
Add (Subtract): | ||||||||||||||||||||||||||
| Income tax expense | 13,254 | 2.6 | 15,137 | 3.2 | ||||||||||||||||||||||
| Interest expense | 25,548 | 5.1 | 111 | — | ||||||||||||||||||||||
| Interest expense on related party debt | — | — | 9,971 | 2.1 | ||||||||||||||||||||||
| Loss on early retirement of debt | 875 | 0.2 | — | — | ||||||||||||||||||||||
| Stock compensation expense | 2,269 | 0.5 | 166 | — | ||||||||||||||||||||||
| Depreciation and amortization | 16,619 | 3.3 | 18,485 | 4.0 | ||||||||||||||||||||||
Separation transaction costs(1) | 315 | 0.1 | 1,993 | 0.5 | ||||||||||||||||||||||
Nova acquisition costs | 3,137 | 0.6 | — | — | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 102,659 | 20.5 | % | $ | 96,142 | 20.6 | % | ||||||||||||||||||
(1) Separation transaction costs represent non-recurring incremental consulting, legal, audit-related fees, and system implementation costs incurred in connection with the Company’s separation into a new, publicly traded company and are included within general and administrative expenses on the condensed consolidated statements of operations.
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Adjusted Net Income Attributable to Common Shares and Adjusted Earnings per Common Share
Adjusted Net Income Attributable to Common Shares and Adjusted Earnings per Common Share are used by management to provide useful insight into the underlying performance of our business in each of our operating segments. Adjusted Net Income Attributable to Common Shares and Adjusted Earnings per Common Share are not measures of financial performance under U.S. GAAP and are not intended to be substitutes for U.S. GAAP measures such as net income or earnings per common share. These metrics may differ from similarly titled metrics supported by other companies. 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 period. Investors should consider these measures in addition to, and not as a replacement for, U.S. GAAP results reported in our financial statements.
We define Adjusted Net Income Attributable to Common Shares as net income attributable to common shares, excluding gain (loss) on early retirement of debt, separation transaction costs, acquisition costs, gain (loss) on sale of businesses, and other non-recurring costs not directly tied to operating performance. We define Adjusted Earnings per Common Share as the Adjusted Net Income Attributable to Common Shares divided by the diluted weighted average common shares outstanding.
The following table reconciles 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.
| Three Months Ended March 31, | |||||||||||||||||||||||
($ in thousands, except per share amounts) | 2025 | Per Share(1) | 2024 | Per Share(1) | |||||||||||||||||||
Reconciliation of Adjusted Net Income Attributable to Common Shares: | |||||||||||||||||||||||
Net income attributable to common shares(1) | $ | 38,456 | $ | 0.30 | $ | 48,956 | $ | 0.47 | |||||||||||||||
Adjustments:(2) | |||||||||||||||||||||||
| Loss on early retirement of debt | 865 | 0.01 | — | — | |||||||||||||||||||
Separation transaction costs(3) | 311 | — | 1,993 | 0.02 | |||||||||||||||||||
| Nova acquisition costs | 3,100 | 0.02 | — | — | |||||||||||||||||||
| Total additions, net | $ | 4,276 | $ | 0.03 | $ | 1,993 | $ | 0.02 | |||||||||||||||
Less: tax effect of adjustments(4) | (1,052) | (0.01) | (460) | — | |||||||||||||||||||
Adjusted Net Income Attributable to Common Shares | $ | 41,680 | $ | 0.32 | $ | 50,489 | $ | 0.49 | |||||||||||||||
Weighted average common shares outstanding - diluted | 126,647 | 104,094 | |||||||||||||||||||||
(1) Net income attributable to common shares and earnings per common share are calculated based on the diluted weighted average common shares outstanding in Note 10—“Earnings Per Share”.
(2) Reflect the common shares allocation of the adjustments.
(3) Separation transaction costs represent non-recurring incremental consulting, legal, audit-related fees, and system implementation costs incurred in connection with the Company’s separation into a new, publicly traded company and are included within general and administrative expenses on the condensed consolidated statements of operations.
(4) Tax impact is calculated using the annual effective tax rate, excluding discrete costs and benefits.
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Liquidity and Capital Resources
Cash Flows for the Three Months Ended March 31, 2025 and Three Months Ended March 31, 2024
In the following table and analysis, we discuss cash flows from operating activities, investing activities, and financing activities for the periods indicated:
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in thousands) | ||||||||||||||
| Net cash provided by operating activities | $ | 11,699 | $ | 44,622 | ||||||||||
| Net cash used in investing activities | (294,749) | (22,352) | ||||||||||||
Net cash provided by (used in) financing activities | 151,904 | (4,092) | ||||||||||||
Net (decrease) increase in cash | (131,146) | 18,178 | ||||||||||||
| Cash at beginning of period | 183,255 | 31,374 | ||||||||||||
| Cash at end of period | $ | 52,109 | $ | 49,552 | ||||||||||
Operating activities provided $11.7 million and $44.6 million of cash flows during the three months ended March 31, 2025 and 2024, respectively. The decrease in cash flows from operating activities for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily due to an increase in interest payments following the recapitalization of debt in July 2024.
Investing activities used $294.7 million and $22.4 million of cash flows for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the principal uses of cash were $15.7 million for purchases of property and equipment under our capital program to open de novos and upgrade and maintain existing facilities, and $279.0 million for acquisitions of businesses, which primarily includes the purchase of Nova. For the three months ended March 31, 2024, the principal uses of cash were $17.2 million for purchases of property and equipment and $5.1 million for acquisitions of businesses.
Financing activities provided $151.9 million and used $4.1 million of cash flows for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the principal sources of cash were due to the updated term loan, net of issuance costs of $948.8 million and from borrowings on our Revolving Credit Facility of $50.0 million. This was partially offset by payment of the original term loan of $847.9 million. For the three months ended March 31, 2024, the principal uses of cash were distributions to Select of $6.9 million and principal payments on other debt of $2.3 million, offset by $6.6 million in borrowings of other debt.
Capital Resources
We had net working capital of $31.2 million at March 31, 2025, compared to net working capital of $130.0 million at December 31, 2024. The decrease in the net working capital surplus was principally due to a decrease in our cash, which resulted from the Nova acquisition in March 2025. On March 1, 2025, we acquired Nova and financed the transaction using a combination of $102.1 million of new debt financing under the Credit Agreement, $50.0 million of available borrowing capacity under our existing Revolving Credit Facility, and the remaining with cash on hand.
On April 18, 2025, CHSI entered into an equity purchase agreement with Pivot Occupational Health, LLC to acquire all of the outstanding equity interests of Onsite Innovations, LLC (“Pivot Onsite Innovations”). The transaction values Pivot Onsite Innovations at $55 million, subject to adjustment in accordance with the terms and conditions set forth in the purchase agreement. The transaction is expected to close in the second quarter of 2025 and is subject to customary closing conditions set forth in the purchase agreement. CHSI currently expects to finance the transaction using a combination of cash on hand and available borrowing capacity under its existing Revolving Credit Facility.
A significant component of our net working capital is our accounts receivable. Collection of these accounts receivable is our primary source of cash and is critical to our liquidity and capital resources. Because our accounts receivable is primarily paid for by highly-solvent, creditworthy payors, such as workers’ compensation programs, employer programs, third party administrators, commercial insurance companies, and federal and state governmental authorities, our credit losses have historically been infrequent and insignificant in nature, and we believe the possibility of credit default is remote.
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Credit Facilities
On July 26, 2024, Concentra Health Services, Inc. (“CHSI”), a wholly-owned subsidiary of Concentra, entered into a senior secured credit agreement (the “Credit Agreement”) that provided for an $850.0 million term loan (the “Term Loan”), and a $400.0 million revolving credit facility, including a $75.0 million sublimit for the issuance of standby letters of credit (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”). In March 2025, the Company completed an amendment to the Credit Agreement to increase our Revolving Credit Facility by $50.0 million from $400.0 million to $450.0 million. The interest rate for the Revolving Credit Facility has been reduced from Term SOFR plus 2.50% to Term SOFR plus 2.00%, subject to a leverage-based pricing grid. In addition, the amendment to the Credit Agreement also added new debt through an incremental term loan of $102.1 million, which provides an updated Term Loan of $950.0 million. The Term Loan interest rate has been reduced from Term SOFR plus 2.25% down to Term SOFR plus 2.00%, subject to a leverage-based pricing grid including 25-basis point step down at a net leverage ratio of ≤3.25x.
At March 31, 2025, the Company had $386.4 million of availability under its Revolving Credit Facility after giving effect to $50.0 million of borrowings under the Revolving Credit Facility and $13.6 million of outstanding letters of credit.
The Credit Facilities require CHSI to maintain a leverage ratio (as defined in the Credit Agreement), which is tested quarterly and currently must not be greater than 6.50 to 1.00. As of March 31, 2025, the Company was in compliance with all debt covenants.
Hedging
On March 3, 2025 we entered into derivative swap and collar contracts to mitigate our exposure to variable Term SOFR interest rates, which expire on February 29, 2028. The derivative swap contract limits the Term SOFR rate to a fixed rate of 3.829% on $300 million of principal outstanding under our term loan. We also entered into a derivative collar contract, which limits the Term SOFR rate to a cap of 4.500% and floor of 3.001% on $300 million of principal outstanding under our term loan. These derivative contracts limit our Term SOFR variable interest exposure on our $950 million term loan and $50 million of borrowings under the Revolving Credit Facility.
Liquidity
We believe our internally generated cash flows and borrowing capacity under our Revolving Credit Facility will allow us to finance our operations in both the short and long term. As of March 31, 2025, we had cash of $52.1 million and $386.4 million of availability under the Revolving Credit Facility, after giving effect to $50 million of borrowings under the Revolving Credit Facility and $13.6 million of outstanding letters of credit.
As of April 18, 2025 we have a new material cash commitment under our equity purchase agreement with Pivot Occupational Health, LLC to acquire all of the outstanding equity interests of Pivot Onsite Innovations for $55 million, subject to adjustment in accordance with the terms and conditions set forth in the Purchase Agreement. The transaction is expected to close during the second quarter of 2025.
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Use of Capital Resources
We intend to grow through strategic acquisitions of existing occupational health centers as well as building new de novo centers.
Dividend
On May 6, 2025, the Company’s Board of Directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about May 29, 2025, to stockholders of record as of the close of business on May 20, 2025.
There is no assurance that future dividends will be declared. The declaration and payment of dividends in the future are at the discretion of our Board of Directors after taking into account various factors, including, but not limited to, our financial condition, operating results, available cash and current and anticipated cash needs, the terms of our indebtedness, and other factors our Board of Directors may deem to be relevant. Additionally, certain contractual agreements we are party to, including our credit facilities will limit our ability to pay dividends to our stockholders.
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Recent Accounting Pronouncements
Refer to Note 2— “Accounting Policies” of the notes to our condensed consolidated financial statements included herein for information regarding recent accounting pronouncements.
Effects of Inflation
The healthcare industry is labor intensive and our largest expenses are labor related costs. Wage and other expenses increase during periods of inflation and when labor shortages occur in the marketplace. There has been minimal inflationary impact on our businesses thus far.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk in connection with our variable rate long-term indebtedness. Our principal interest rate exposure relates to the loans outstanding under our credit facilities, which bear interest rates that are indexed against Term SOFR.
At March 31, 2025, we had outstanding borrowings under our credit facilities consisting of a $950.0 million term loan (excluding unamortized original issue discounts and debt issuance costs of $13.1 million) and $50.0 million of borrowings under our Revolving Credit Facility, which bear interest at variable rates.
In order to mitigate our exposure to rising interest rates, we entered into a derivative swap contract effective on March 3, 2025, which limits the Term SOFR rate to a fixed rate of 3.829% on $300 million of principal outstanding under our term loan. The agreement applies to interest payments through February 29, 2028.
In addition, we entered into a derivative collar contract effective on March 3, 2025, which limits the Term SOFR rate to a cap of 4.500% and floor of 3.001% on $300 million of principal outstanding under our term loan. The agreement applies to interest payments through February 29, 2028.
As of March 31, 2025, the Term SOFR rate was 4.32% and we had $650 million of term loan borrowings and $50.0 million of Revolving Credit Facility, which would be subject to variable interest rates.
At March 31, 2025, each 0.25% increase in market interest rates will impact the annual interest expense on our variable rate debt by $1.5 million per year. Each subsequent 0.25% increase in market interest rates will impact the annual interest expense on our variable rate debt by $1.0 million per year.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered in this report. Based on this evaluation, as of March 31, 2025, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures, including the accumulation and communication of disclosure to our principal executive officer and principal financial officer as appropriate to allow timely decisions regarding disclosure, are effective to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized, and reported within the time periods specified in the relevant SEC rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(d) of the Securities Exchange Act of 1934 that occurred during the first quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the “Litigation” section contained within Note 12—“Commitments and Contingencies” of the notes to our condensed consolidated financial statements included herein.
ITEM 1A. RISK FACTORS
Except as set forth below, there have been no material changes in the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.
Changes to United States tariff and import/export regulations and macroeconomic conditions may have a negative effect on our business, financial condition and results of operations.
The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs (including retaliatory tariffs in response to tariffs imposed by the United States). These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors and uncertain and volatile macroeconomic conditions, including low productivity growth, declining business investment, inflationary pressures, fluctuating interests rates, concerns regarding the level of U.S. debt, shifts in monetary and fiscal policy, strained international trade relations, and heightened geopolitical pressures could depress economic activity and have a material adverse effect on our business, financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended March 31, 2025, none of our directors or executive officers adopted terminated
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ITEM 6. EXHIBITS
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| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
* Filed herewith
† Indicates a management contract or compensatory plan or arrangement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CONCENTRA GROUP HOLDINGS PARENT, INC. | ||||||||
Dated: May 7, 2025 | By: | /s/ Matthew T. DiCanio | ||||||
| Matthew T. DiCanio | ||||||||
| President and Principal Financial Officer | ||||||||
| (Duly Authorized Officer) | ||||||||
Dated: May 7, 2025 | By: | /s/ Su Zan Nelson | ||||||
| Su Zan Nelson | ||||||||
| Executive Vice President, Chief Accounting Officer | ||||||||
| (Principal Accounting Officer) | ||||||||
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