and the operations and with Keith, you know, still as executive chairman, but just curious if, you know, from the capital deployment perspective or priorities on operations as a strategy, if anything that you think you'd see yourself, you know, maybe focusing in on even more or conversely a little bit less.

Yeah, no, Scott, I think the story is going to stay exactly how it is today. We've got a great strategy in place. It's working, as Keith mentioned in some of his remarks, focusing on providing great clinical outcomes and care at the center level, great patient experience, great customer experience. We're going to continue to focus on technologies to make it easier to do business with us, and we've got a great growth strategy from an inorganic standpoint. So, no, there's no plans to change anything. We really like where we're at, and we just need to continue to execute what we're doing.

I was going to add to that. You know, we've got a, as we mentioned several times, that we've got a very tenured executive team. The executive team itself has well over 20 years average experience here at Concentra. And then you take the next 50 to 75 people below that from a senior management team, and it's probably close to 20 years also. So we've got a great foundation built here, a great culture. It's a very collaborative decision-making process. It's not just Matt and I making the decisions and pushing them down. It's bought in by all those individuals that I just spoke of. A lot of smart people weighing in on the decisions and the strategies and executing on them. And so we've got a tremendous recipe here that we've been working on for a long time and will continue to execute on that recipe.

Okay, great. For my follow-up, I'm going to ask a two-parter, I guess not entirely related, but I still will do it anyway. First part, just around the free cash flow, which was very strong there, sort of close to doubling year over year and did reflect those EBITDA margins getting to sort of higher levels and then the lower capex. Can you maybe just talk about the sustainability of, you know, the free cash flow or what type of sort of level you think is more sustainable and sort of implied in the back half and, you know, sort of, you know, how we should be thinking about that. And then the other part was just on the industrial injuries. Just interested if just around the whole theme of, you know, sort of the new construction and activity around sort of the AI infrastructure for hyperscaling and the opportunities that are there. Are you seeing any evidence yet of the – I know you talked about, you know, sort of seeing, you know, some emerging indicators there, but just curious around like the industrial industry injuries themselves. Are you seeing any sort of impact from that, or is it still too early to really see that in terms of your mix?

Sure. I'll hit the free cash flow first. So, approximately $120 million in the quarter, obviously an incredibly strong quarter. You look at our guide, we bumped it up slightly. There is some timing, as we mentioned, as it relates to the cash flow. So, we had some current liabilities that impacted timing from a favorable perspective. And also, So our CapEx was slightly lower in the front half of the year. So we have some planned CapEx, especially related to the de novos and some of our other IT investments in the back half of the year. So sometimes from a quarter-to-quarter perspective, there is some timing there. But overall, we expect a very strong free cash flow year, well north of $200-plus million. On the second question, on the data centers and the injuries, we are seeing some early positive signs. We're seeing really close to a lot of the major construction companies across the country. We're seeing some nice growth in Texas, Oklahoma, things like that. I think the NOVA acquisition really helped us expand into markets that we weren't in, that those markets have some of the data center build happening. So we'll continue to monitor it closely, but we definitely are seeing early signs of it.

Yeah, I was going to add, and some of the other early signs that we do see, typically employer services is a leading indicator that ultimately yields work comp. And definitely in the construction and manufacturing area, we've seen our employer services tweaking up at a better rate than potentially some of the other industries out there. So, you know, it's anecdotal whether that's a result of the data centers. But we think that because of that, the construction activity and some of the things that may be coming down the pipeline, that that could be happening.

Okay. Thank you.

Your next question for today is from Benjamin Rossi with J.P. Morgan.

Hey, good morning. I appreciate you taking my questions. Regarding expense trends during 2Q, cost of services improved nicely quarter over quarter on a per-visit basis despite buy-ins picking up. What specific operating levers are driving center-level efficiency? And then how are you thinking about primary expense trends for the remainder of the year and what assumptions are embedded in your guidance raise?

I can talk about some of the operating levers within the bricks and mortar. Personnel labor is by far our largest cost, and in the past we've been asked quite often how we manage that relative to what some of the other health care entities have been seeing. And our business is a little different than the others. We didn't have the RNs. We didn't feel a lot of the pressures that others felt. And so we've been able to manage the per FTE cost. In addition to that, as far as the number of FTEs within the centers, we continue to get more efficient with patient visits per FTE within the practices. And a lot of that has to do with the technologies that we put into place to try to eliminate the inefficient work that any of them are doing. and we continue to see that tweak up and leverage that cost as a result. So our individuals, our people, our colleagues within the centers are able to see more patients on a per-person basis than what they've done in the past purely because of some of those technologies and the elimination of a lot of non-clinical activities that take place within the practices. So that's how we're really leveraging that cost within the bricks and mortar. I don't know if you want to add anything.

Yeah, I'll just add a little bit to what Keith said, Ben, to your question. You know, on a rolling TTM basis, our cost of services as a percentage of revenue has come down pretty much every single quarter since the IPO, and it really speaks to what the teams are doing out there across the country, as Keith mentioned. Also, obviously, we had strong revenue growth this quarter, which helps that metric. And we also noted, when you look at the year-over-year comparison, we noted that last year in 2025, this quarter, we were preparing and beginning our NOVA integration efforts, and we also had some costs at the cost of services line that has since been synergized. And those are not center-level costs, but costs to support the centers. Um, so hopefully some of those comments help. Yeah, no, great.

Um, I'm just thinking about employer services during the second quarter, uh, volume stepped up there pretty nicely for that segment on a sequential basis between your lower dollar drug screens versus some of the higher dollar physicals. What was the service line mix and 2Q for employer services? And then what does guidance anticipated for shifts in mix during the back half of the year? Thanks.

Yeah, so we saw 1.8 percent overall employer services growth. We don't really get into the breakdown of drug streams, fiscals, but as far as the back half of the year, we're anticipating a low single-digit visit growth for the implied in our guidance for employer services. So, but as Keith mentioned, And, you know, we're seeing positive signs there. It is a nice indicator of future economic activity. And so we like what we're seeing there.

Your next question for today is from Jared Hasse with William Blair.

Hey, good morning. Thanks for taking the questions. And I'll echo the congrats to Matt and Keith, you both, on the new roles here. Maybe I wanted to ask about the on-site business. You had another really strong growth quarter on an organic basis. Can you just take a step back and give us an update on sort of the pipeline, you know, deal flow, how you feel like the offering is positioned here with the broader services that you have now with the advanced primary care capability? And I'm also curious, I mean, clearly it seems like you must be taking market share here, but just, you know, are you seeing a little bit of demand acceleration here? I'm just thinking about all of the pressures that employers are facing from a cost trend perspective. Is that playing out at all, or do you feel like this is truly just share gains for your business?

No, we definitely feel there's increasing demand for these services. Our sales pipeline is as robust as it's ever been. The pivot combination with our core onsites really helped us leverage a lot of things in relationships. We've been able to expand with existing customers on both sides that were common customers. So you do that without having to go out for an RFP. So we continue to grow what our core business has been. The transaction with Pivot has helped us out a lot as far as the visibility and getting bigger and leveraging that platform. And then you combine that with added traction and momentum that we're starting to gain with our advanced primary care services. With the implementation of EPIC, it's really put us on the map. And the relationships that we're developing with the broker community out there were historically we did not have those relationships because we didn't need them on the occupational health care side. Those are starting to foster and we're winning, starting to win those RFPs.

Yeah, I just want to also give our team a big kudos, obviously 20-plus percent organic growth, but also the execution on the pivot transaction was flawless. The two leadership teams came together and are working together so well, brought a lot of talent over from the pivot acquisition, and our core leadership team is strong. The sales and marketing efforts are going really well. Just execution across the board in that segment is going incredibly well.

That's great to hear. And then maybe just for the follow-up. So I just wanted to clarify, when we think about your de novo expectations, and I think your full-year target sort of implies a bit of an uptick in the back half of the year, to what extent is there any sort of incremental volume lift associated with those de novos and 2026 guidance. And, you know, when I think about how quickly they can ramp, is there any potential upside from the 2026 cohort? And then I guess sticking with the DeNovo thread, I'd love to hear a little bit about just your pipeline and opportunities that you have earmarked both for 2027 and then maybe starting to think about, you know, even 2028 at this point.

Yeah. So the way I think about DeNovo is we're targeting eight to 10 this year. We're targeting double digit next year we have a funnel of 30 to 40 different sites that we're looking at and just prioritizing across the country as far as the contribution you know we've been doing them for a long time there they start out at zero obviously they do ramp quickly really excited about some recent improvements we've made from a sales and marketing standpoint even though historically we've done such a great job ramping quickly. Their contribution from a visit standpoint is minimal. So, you know, less than 1% overall. So, this strategy is working. And again, we, as Keith mentioned early in the call, we have a lot of white space out there to add, you know, a decent bit of these over the next 5, 10, 15 plus years.

Yeah, I was going to add the first 6 to 12 months from a de novo perspective, it's really not much contribution at all. You're going to start out with some cash flow of losses that break even and start to go positive. But the net net of everything, we really don't see much until they get into the 12 to 24 months and start to really ramp up. So the hope would be what we're doing in 26 really benefits us more in 27 and 28. they're really no benefit either way or drag, per se, in 2026.

Okay. That's very helpful. Thank you.

As a reminder, if you would like to ask a question, please press star one. Your next question for today is from Ben Hendricks with RBC Capital Markets.

Great. Thank you very much. Just hoping you can give us a quick update on the state regulatory and rate horizon. Now that we have California and Tennessee updates, just what kind of is next in terms of the outlook? Is there anything catalytic on the horizon you're waiting for or anything that we should be aware of, you know, from the right perspective going forward?

No, I think as it relates to 2026, we're, you know, nothing is really on the horizon for the remainder of the year. It's just kind of digesting what has happened at this time. And it's still really a little too early to know what's going to transpire completely in 2027. We'll know more as we get into latter part of Q3, early part of Q4. But the indications and the things that we do see for next year what what we can see it seems it'll be a nice nice year for us as far as we know at this point in time and there's nothing of concern at all at this point in time and we should see hopefully something similar to what we've seen in the past years great thanks just apologize if I missed this but now with leverage down at your target level I just wanted to see if you guys are setting a new kind of intermediate term target are we taking it down another half a turn uh would that be optimal or do you think we'll maintain that three just wanted to

get your thoughts on kind of where that target goes now yeah no our our goal is to get it down uh optimal uh from our standpoint is call it in the range of two and a half times um and we're going to continue to prioritize m a de novos um we did the share repurchases in the quarter, we have the dividend in place that the board approved again this quarter. So we're going to stick with the strategy and the leverage we expect will continue to come down.

Thanks, guys. And congrats.

Thank you.

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