Modivcare Announces Credit Agreement Amendment and Cash Collections Update

Rhea-AI Summary

ModivCare Inc. (Nasdaq: MODV) has announced an amendment to its Credit Agreement with JPMorgan Chase Bank, N.A. and other key lenders. The amendment includes:

• An increase in the Total Net Leverage Ratio Covenant to 6.50x from 5.25x for Q3 2024
• A reduction in the Minimum Interest Coverage Ratio Covenant to 2.00x from 2.75x for Q3 2024

The company agreed to a 25 basis point increase in its interest rate margin until it delivers financial statements for FY 2024. ModivCare is also in discussions for a long-term relief amendment. Additionally, the company has successfully collected approximately $60 million in previously delayed contract receivables.

Positive

• Successfully collected $60 million in delayed contract receivables
• Amended Credit Agreement to maintain compliance with covenants
• Ongoing discussions for long-term relief amendment with bank group

Negative

• Increase in interest rate margin by 25 basis points
• Reduction in Minimum Interest Coverage Ratio Covenant for Q3 2024
• Need for covenant amendments suggests potential financial challenges

Insights

Financial Analyst

This amendment to Modivcare's credit agreement is a significant financial development with both positive and negative implications. The increased leverage ratio covenant and reduced interest coverage ratio provide near-term flexibility, helping ensure compliance through Q3 2024. This buys time for the company to address its financial challenges.

However, the need for these amendments signals underlying financial stress. The 25 basis point increase in interest rate margin will raise borrowing costs, potentially impacting profitability. The mention of ongoing discussions for long-term covenant relief suggests continued challenges ahead.

On a positive note, the collection of $60 million in delayed receivables is a important cash flow boost. This improves Modivcare's liquidity position and demonstrates its ability to recover outstanding payments.

Investors should closely monitor Modivcare's financial performance and any further amendments, as these could indicate the company's trajectory towards either stabilization or deeper financial troubles.

Market Research Analyst

This news reveals important insights into Modivcare's financial health and market position. The need for covenant amendments suggests the company is facing operational challenges that are impacting its financial metrics. This could be due to industry-wide pressures or company-specific issues.

The successful collection of $60 million in delayed receivables is a positive sign, indicating that Modivcare maintains strong relationships with its clients and can effectively manage its accounts receivable. However, the fact that these payments were delayed in the first place raises questions about the company's cash flow management and the financial stability of its customers.

For the healthcare services sector, this news may signal broader challenges in maintaining profitability and managing debt covenants. Investors should assess whether Modivcare's situation is unique or reflective of industry-wide trends that could affect other players in the market.

DENVER--(BUSINESS WIRE)-- ModivCare Inc. (“Modivcare” or the “Company”) (Nasdaq: MODV), a technology-enabled healthcare services company that provides a platform of integrated supportive care solutions focused on improving health outcomes, today announced that it has amended its Credit Agreement, dated February 3, 2022 (as amended to date, the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, along with other key lenders.

Key Amendment Highlights:

• Total Net Leverage Ratio Covenant: Increased for the quarter ended September 30, 2024, to 6.50x from 5.25x.
• Minimum Interest Coverage Ratio Covenant: Reduced for the quarter ended September 30, 2024, to 2.00x from 2.75x.

This amendment ensures in advance that the Company will maintain its compliance with all of its covenants under the Credit Agreement for the Company’s last completed fiscal quarter. In consideration, the Company has agreed to increase its interest rate margin by 25 basis points until it delivers the required financial statements and compliance certificate for the fiscal year ending December 31, 2024.

In addition to today's amendment, the Company will continue discussions with its bank group on a collaborative long-term relief amendment, anticipated to be finalized in the near term, intended to support ongoing compliance with its financial covenants.

The Company is pleased to announce that it has successfully collected all of the approximately $60 million in contract receivables that were previously reported as delayed (per Form 8-K filed on September 16, 2024). These amounts are in addition to normal course cash collections.

Cautionary Note Regarding Forward-Looking Statements

Statements contained in this release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature and are identified generally by the use of the terms “intended”, “expected”, “estimates”, “will”, and “anticipates”, and similar words or expressions indicating possible future expectations, events or actions. The Company’s expectation about reaching a mutually agreeable long-term amendment to the Credit Agreement is a forward-looking statement. Forward-looking statements are based on current expectations, assumptions, estimates and projections about the Company’s business and its industry, and are not guarantees of future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or predict, which may cause actual events to be materially different from those expressed or implied herein. The Company has provided additional information about the risks facing its business and the Company in its most recent annual report on Form 10-K, and in its subsequent periodic and current reports on Forms 10-Q and 8-K, filed by it with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made and are expressly qualified in their entirety by the cautionary statements set forth herein and in the periodic and current reports filed with the Securities and Exchange Commission identified above, which you should read in their entirety before making an investment decision with respect to the Company’s securities. The Company undertakes no obligation to update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Modivcare

Modivcare (Nasdaq: MODV) is a technology-enabled healthcare services company that provides a platform of integrated supportive care solutions for public and private payors and their members. Our value-based solutions address the social determinants of health (SDoH), enable greater access to care, reduce costs, and improve outcomes. We are a leading provider of non-emergency medical transportation (NEMT), personal care services (PCS) and remote patient monitoring (RPM). The Company also holds a minority equity investment in CCHN Group Holdings, Inc. (dba Matrix Medical Network), a leading and independent national provider of in-home comprehensive health assessments. To learn more about Modivcare, please visit www.modivcare.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241001735164/en/

Media

Media.Inquiry@modivcare.com

Investors

Kevin Ellich

Vice President, Head of Investor Relations

Kevin.ellich@modivcare.com

Source: Modivcare Inc.

FAQ

What changes were made to ModivCare's Credit Agreement?

ModivCare amended its Credit Agreement, increasing the Total Net Leverage Ratio Covenant to 6.50x from 5.25x and reducing the Minimum Interest Coverage Ratio Covenant to 2.00x from 2.75x for the quarter ended September 30, 2024.

How much did ModivCare (MODV) collect in delayed contract receivables?

ModivCare successfully collected approximately $60 million in contract receivables that were previously reported as delayed.

What is the impact on ModivCare's interest rate following the Credit Agreement amendment?

ModivCare agreed to increase its interest rate margin by 25 basis points until it delivers the required financial statements and compliance certificate for the fiscal year ending December 31, 2024.

Is ModivCare (MODV) planning any further amendments to its Credit Agreement?

Yes, ModivCare is in ongoing discussions with its bank group for a collaborative long-term relief amendment, anticipated to be finalized in the near term, to support ongoing compliance with its financial covenants.