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01/10 16:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with significant revenue growth across segments, improved cost efficiency, and optimistic future guidance. Despite decreased free cash flow, the company is bullish about 2026, with no major headwinds anticipated. The Q&A indicates positive sentiment from analysts, highlighting growth in market share and strategic IT investments. While there was some avoidance in addressing the decoupling of BLS data, the overall sentiment remains positive, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
Total company revenue $572.8 million in Q3 2025 compared to $489.6 million in Q3 2024, representing 17% growth year-over-year. Excluding contributions from Nova, revenue was $541.5 million, resulting in a 10.6% increase over the prior year. The growth was driven by volume and rate growth across workers' compensation and employer services.
Total patient visits Increased 9.2% in Q3 2025 to more than 55,500 visits per day. Workers' compensation visits per day increased 9.8%, and employer services visit volumes increased 8.9% relative to prior year. Excluding Nova, total visits per day increased 3.0%. Workers' compensation visits increased 4.4%, and employer services visits increased 1.9%. The growth was partly due to Hurricane Beryl's impact in July 2024 and growth in follow-up injury and physical therapy visits.
Revenue per visit Increased 4.2% in Q3 2025 versus Q3 2024. Workers' compensation revenue per visit increased 4.7%, and employer services revenue per visit increased 2.7%. This growth was driven by visit mix and pricing improvements.
Adjusted EBITDA $118.9 million in Q3 2025 versus $101.6 million in Q3 2024, a 17.1% increase. Adjusted EBITDA margin increased slightly from 20.7% to 20.8%. The increase was achieved despite public company and separation costs, as well as onetime Nova integration costs.
Adjusted net income $49.9 million in Q3 2025 compared to $44.3 million in Q3 2024. Adjusted earnings per share was $0.39 compared to $0.37 in the prior year. The increase reflects strong operational performance.
Occupational health operating segment revenue $526 million in Q3 2025, a 13.6% increase from Q3 2024. Workers' compensation revenue was $343.5 million, a 15% increase, and employer services revenue was $173.2 million, an 11.9% increase. Growth was driven by higher visit volumes and revenue per visit.
Onsite health clinics revenue $34.9 million in Q3 2025, a 123.8% increase from Q3 2024. Excluding Pivot, revenue grew 17.5% year-over-year. The growth was driven by the acquisition of Pivot Onsite Innovations and organic growth.
Other businesses revenue $11.9 million in Q3 2025, an 8.1% increase from Q3 2024. Growth was attributed to operational improvements.
Cost of services $405.5 million or 70.8% of revenue in Q3 2025, down from 71.7% in Q3 2024. The decrease as a percentage of revenue was due to staffing efficiencies.
Free cash flow $40.2 million in Q3 2025, down from $50.8 million in Q3 2024. The decrease was driven by a $25 million increase in cash interest payments and $3 million in onetime Nova integration CapEx, partially offset by a $12 million decrease in cash taxes paid.
Integration and rebranding of Nova occupational health centers: Finalized integration and rebranding of Nova occupational health centers, contributing to revenue growth.
De novo centers: Opened 5 de novo centers in 2025, with 2 more planned by year-end.
Onsite health clinics: Strong performance driven by organic growth and integration of Pivot Onsite Innovations.
Market share growth: Gained market share in workers' compensation and employer services despite uncertain macroeconomic conditions.
Expansion in California and Florida: Planned de novo centers in California and Florida for Q4 2025.
Revenue growth: Achieved 17% year-over-year revenue growth in Q3 2025, with $572.8 million in total revenue.
Operational efficiencies: Improved staffing efficiencies and reduced cost of services to 70.8% of revenue.
Adjusted EBITDA: Increased adjusted EBITDA by 17.1% year-over-year to $118.9 million.
Technological investments: Planned investments in digital interconnectivity, payment automation, patient scheduling, and AI to enhance customer and operational efficiencies.
M&A strategy: Focus on acquiring smaller practices with 1-5 occupational health centers, with several active targets.
Macroeconomic Uncertainty: The company acknowledges an uncertain macroeconomic backdrop, including interest rates, tariffs, and a potential economic slowdown, which could impact workers' compensation and employer services volumes.
Correlation with Employment Data: The company notes a lack of correlation between workers' compensation visit data and BLS employment data in recent times, which could complicate forecasting and planning.
Separation from Select Medical: The ongoing separation from Select Medical involves additional costs and operational complexities, with full transition expected by summer 2026. This could strain resources and impact margins.
Integration Costs: The integration of Nova and Pivot acquisitions has incurred significant one-time costs, which have burdened adjusted EBITDA and free cash flow.
Debt and Leverage: The company has a high total debt balance of $1.61 billion and is focused on deleveraging to meet targets of 3.5x leverage by the end of 2025 and below 3.0x by 2026. High leverage could limit financial flexibility.
Technological Investments: Planned investments in new technological capabilities, while necessary for competitive differentiation, could increase costs and require significant resources for implementation.
State Fee Schedules: Uncertainty around state fee schedules, which are finalized late in the year, could impact revenue projections and financial planning for 2026.
Revenue Guidance: The company raised the low end of its 2025 revenue guidance range from $2.13 billion to $2.145 billion, with the top end remaining unchanged.
Adjusted EBITDA Guidance: The low end of the 2025 adjusted EBITDA guidance range was raised from $420 million to $425 million, with the top end remaining unchanged.
Capital Expenditures: The company reaffirmed its 2025 CapEx range of $80 million to $90 million, trending towards the lower end of the range. This includes $10 million to $15 million in one-time Nova integration-related spend.
Leverage Targets: The company reiterated its leverage targets of less than or equal to 3.5x by the end of 2025 and less than 3x by the end of 2026.
Technological Investments: The company plans to invest in new technological capabilities over the coming year, including digital bilateral interconnectivity with customers, systems modernization, payment automation, patient scheduling capabilities, and AI initiatives.
De Novo Centers: The company plans to open 2 more de novo centers in California and Florida in Q4 2025 and has 6 sites in advanced stages of development for 2026 across Florida, Georgia, Missouri, Idaho, and Arizona.
M&A Strategy: The company is shifting focus back to its core acquisition strategy targeting practices with 1 to 5 occupational health centers, with several active targets expected to close in the next 3 to 6 months.
2026 Guidance: Formal guidance for 2026 will be provided early next year after further visibility into visit trends and state fee schedules.
Dividend Declaration: The Board of Directors declared a cash dividend of $0.0625 per share on November 5, 2025. The dividend will be payable on or about December 9, 2025, to stockholders of record as of the close of business on December 2, 2025.
Share Repurchase Program: The Board of Directors authorized a share repurchase program of up to $100 million of the company's outstanding common stock. The authorization will expire on December 31, 2027, unless extended or terminated earlier by the Board of Directors.
The earnings call reveals strong financial performance with significant revenue growth across segments, improved cost efficiency, and optimistic future guidance. Despite decreased free cash flow, the company is bullish about 2026, with no major headwinds anticipated. The Q&A indicates positive sentiment from analysts, highlighting growth in market share and strategic IT investments. While there was some avoidance in addressing the decoupling of BLS data, the overall sentiment remains positive, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals mixed signals. While there are positives such as improved EBIT, reduced net indebtedness, and a slight dividend increase, revenue decline and weak automotive margins are concerning. The Q&A section reveals management's vague responses on tariffs and future cash flows, adding uncertainty. The lack of clear guidance and detailed answers tempers overall optimism, resulting in a neutral outlook for stock price movement.
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