Modivcare Reports Second Quarter 2023 Financial Results and Adjusts 2023 Guidance

Rhea-AI Summary

Modivcare Inc. (MODV) Reports 11.3% Increase in Service Revenue to $699.1 Million for Q2 2023

Positive

• Service revenue increased by 11.3% year-over-year
• Adjusted EBITDA of $52.4 million
• Amended credit agreement for improved access to liquidity

Negative

• None.

DENVER--(BUSINESS WIRE)-- Modivcare Inc., (the “Company” or “Modivcare”) (Nasdaq: MODV), a technology-enabled healthcare services company that provides a platform of integrated supportive care solutions addressing the social determinants of health and improving health outcomes, today reported financial results for the three and six months ended June 30, 2023.

Second Quarter 2023 Highlights:

• Service revenue of $699.1 million, an 11.3% increase as compared to $628.2 million in the second quarter of 2022
• Net loss of $190.9 million or $13.47 per diluted common share, primarily attributable to goodwill impairment of $183.1 million
• Adjusted EBITDA⁽¹⁾ of $52.4 million, adjusted net income⁽¹⁾ of $20.8 million and adjusted EPS⁽¹⁾ of $1.47 per diluted common share
• Cash used in operating activities during the quarter of $108.2 million along with capex spend of $8.9 million
• Contract payables decreased by $78.5 million to $109.1 million and contract receivables increased by $17.4 million to $119.8 million, resulting in net contract receivables of $10.7 million as of June 30, 2023
• $126.5 million drawn on the $325.0 million revolving credit facility as of June 30, 2023
• Amended credit agreement’s maximum Total Net Leverage Ratio to provide improved access to liquidity

(1) Non-GAAP financial measure reconciliations and other related information about non-GAAP financial measures provided below

"Modivcare continues to transform into a more efficient tech-enabled platform with a differentiated offering in the health care services market. Revenue growth of 11% during the second quarter of 2023 was driven by strong growth across our Home and Mobility businesses,” stated L. Heath Sampson, President, and CEO. “Our Home division is benefiting from our centralization and standardization initiatives, which helped drive double-digit revenue and Adjusted EBITDA growth. We made significant progress on our move towards One Modivcare during the second quarter by accelerating the creation of a longitudinal member profile that will allow us to improve member experience, lower costs, and generate proactive outcome-based insights. Membership in our Mobility division increased 2% sequentially driven by expansions of existing contracts, with 5% Medicare Advantage growth and 1% Medicaid member growth, despite the initial impact of Medicaid redeterminations. However, in the near-term, increased utilization and related higher call volumes in NEMT, along with new contract win implementation delays, and contract attrition from prior years, prompted us to revise our 2023 full-year Adjusted EBITDA guidance to an updated range of $200 million to $210 million. Our cash flow was also negatively impacted during the second quarter of 2023 due to a $96 million decline in our contract payables, net of receivables. We expect positive cash flow in the second half of the year, as collections on our contract receivables align with or exceed declines on our contract payables. Despite the near-term challenges, we believe our business is well positioned to generate strong long-term performance as we continue to drive us towards our unique One Modivcare vision."

2023 Guidance

We updated our revenue and adjusted EBITDA guidance ranges as follows ($ in millions):

		Updated						Previous
		Low			High			Low			High
Revenue		$	2,750		$	2,800		$	2,575		$	2,600
Adjusted EBITDA		$	200		$	210		$	225		$	235

Guidance excludes the effects of any future merger or acquisition activity and is based on the current operating environment.

Second Quarter 2023 Results

For the second quarter of 2023, the Company reported revenue of $699.1 million, an increase of 11.3% from $628.2 million in the second quarter of 2022. The increase in revenue is primarily attributable to a 1.5% increase in membership and an 9.0% increase in revenue per member per month in our NEMT segment coupled with a 3.4% increase in hours worked and a 7.2% increase in rate per hour in our Personal Care segment.

Our operating loss was $175.8 million, or 25.1% of revenue, in the second quarter of 2023, compared to operating income of $23.1 million, or 3.7% of revenue, in the second quarter of 2022. Net loss in the second quarter of 2023 was $190.9 million, or $13.47 per diluted common share, compared to net income of $3.3 million, or $0.24 per diluted common share, in the second quarter of 2022. Both the operating loss and the net loss for the second quarter of 2023 are primarily attributable to the non-cash goodwill impairment of $183.1 million.

Adjusted EBITDA was $52.4 million, or 7.5% of revenue, in the second quarter of 2023, compared to $60.2 million, or 9.6% of revenue, in the second quarter of 2022. Our Adjusted EBITDA decreased primarily as a result of a $17.5 million decrease in the NEMT segment. This decrease was driven by increased service expense per trip and higher than expected trip volume, as well as contract losses that impacted NEMT's operating margin. Accordingly, adjusted net income in the second quarter of 2023 was $20.8 million, or $1.47 per diluted common share, compared to $28.1 million, or $1.99 per diluted common share, in the second quarter of 2022.

Cash used in operations during the quarter was $108.2 million as compared to $17.9 million during the second quarter of 2022. The primary use of cash during the quarter was a net $78.5 million reduction in contract payables, coupled with a $17.4 million increase in contract receivables, for a total use of cash of $95.9 million. As of the quarter end, we are in a net contract receivables position of $10.7 million.

During the second quarter, a goodwill impairment of $183.1 million was recognized, as the Company performed its annual goodwill impairment assessment and determined that based on its qualitative assessment for each reporting unit, factors existed which required the Company to perform a quantitative assessment to test its goodwill for impairment. These factors included a decline in the market price of the Company's common stock and general economic and market volatility.

Second Quarter Earnings Conference Call

Modivcare will hold a conference call to discuss its financial results on Friday, August 4, 2023 at 8:30 a.m. ET. To access the call, please dial:

US toll-free: 1 (877) 407-8037
International: 1 (201) 689-8037

You may also access the conference call via webcast at investors.modivcare.com, where the call will also be archived.

About Modivcare

Modivcare Inc. (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 patients. Our value-based solutions are intended to 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 and remote patient monitoring. To learn more about Modivcare, please visit www.modivcare.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), this press release includes (as applicable) EBITDA, Adjusted EBITDA and Adjusted G&A expense for the Company and its segments, Adjusted EBITDA margin for the Company's segments (other than its Corporate segment), and Adjusted Net Income and Adjusted EPS for the Company, all of which are performance measures that are not recognized under GAAP. EBITDA is defined as net income (loss) before: (1) interest expense, net, (2) provision (benefit) for income taxes, and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before (as applicable): (1) restructuring and related costs, (2) transaction and integration costs, (3) settlement related costs, (4) cash settled equity, (5) stock-based compensation, (6) impairment of goodwill, (7) COVID-19 related costs, net of grant income, and (8) equity in net (income) loss of investee, net of tax. Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by service revenue, net. Adjusted Net Income is calculated as net income (loss) before: (1) restructuring and related costs, (2) transaction and integration costs, (3) settlement related costs, (4) cash settled equity, (5) stock-based compensation, (6) impairment of goodwill, (7) equity in net (income) loss of investee, net of tax (8) intangible asset amortization expense, (9) COVID-19 related costs, net of grant income, and (10) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income divided by the diluted weighted-average number of common shares outstanding as calculated for Adjusted Net Income. Adjusted G&A expense is calculated as G&A expense before (as applicable): (1) restructuring and related costs, (2) transaction and integration costs, (3) settlement related costs, (4) cash settled equity, and (5) stock-based compensation. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures are included below. We do not provide guidance for net income (loss) in this presentation on a basis consistent with GAAP or a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict items contained in the GAAP financial measures without unreasonable efforts. Our non-GAAP performance measures exclude expenses and amounts that are not driven by our core operating results and may be one time in nature. Excluding these expenses makes comparisons with prior periods as well as to other companies in our industry more meaningful. We believe such measures allow investors to gain a better understanding of the factors and trends affecting the ongoing operations of our business. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. As a result, our net income or loss in equity investee is excluded from these measures, as we do not have the ability to manage the venture, allocate resources within the venture, or directly control its operations or performance.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

Forward-Looking Statements

Certain statements contained in this press 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 frequently identified by the use of terms such as “may,” “will,” “should,” “expect,” “believe,” “estimate,” “intend,” and similar words indicating possible future expectations, events or actions. The updated guidance discussed herein constitutes forward-looking statements. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, which may cause actual results to be materially different from those expressed or implied herein, including but not limited to: government or private insurance program funding reductions or limitations; implementation of alternative payment models or the transition of Medicaid and Medicare beneficiaries to Managed Care Organizations; our inability to control reimbursement rates received for our services; cost containment initiatives undertaken by private third-party payors and an inability to maintain or reduce our cost of services below rates set forth by our payors; the effects of a public health emergency; inadequacies in our information technology systems; changes in the funding, financial viability or our relationships with our payors; pandemics and other infectious diseases; disruptions to our contact center operations caused by health epidemics or pandemics; delays in collection of our accounts receivable; any impairment of our goodwill and long-lived assets; any failure to maintain or to develop reliable, efficient and secure information technology systems; any inability to attract and retain qualified employees; any disruptions from acquisition or acquisition integration efforts; estimated income taxes being different from income taxes that we ultimately pay; our contracts not surviving until the end of their stated terms, or not being renewed or extended; our failure to compete effectively in the marketplace; our not being awarded contracts through the government’s requests for proposals process, or our awarded contracts not being profitable; any failure to satisfy our contractual obligations or to maintain existing pledged performance and payment bonds; any failure to estimate accurately the cost of performing our contracts; any misclassification of the drivers we engage as independent contractors rather than as employees; significant interruptions in our communication and data services; not successfully executing on our strategies in the face of our competition; any inability to maintain relationships with existing patient referral sources; certificates of need laws or other regulatory and licensure obligations that may adversely affect our personal care integration efforts and expansion into new markets; any failure to obtain the consent of the New York Department of Health to manage the day to day operations of our licensed in-home personal care services agency business; changes in the case-mix of our personal care patients, or changes in payor mix or payment methodologies; our loss of existing favorable managed care contracts; our experiencing labor shortages in qualified employees and management; labor disputes or disruptions, in particular in New York; becoming subject to malpractice or other similar claims; our operating in the competitive remote patient monitoring industry, and failing to develop and enhance related technology applications; any failure to innovate and provide services that are useful to customers and to achieve and maintain market acceptance; our lack of sole decision-making authority with respect to our minority investment in Matrix and any failure by Matrix to achieve positive financial position and results of operations; the cost of our compliance with laws; changes to the regulatory landscape applicable to our businesses; changes in budgetary priorities of the government entities or private insurance programs that fund our services; regulations relating to privacy and security of patient and service user information; actions for false claims or recoupment of funds; civil penalties or loss of business for failing to comply with bribery, corruption and other regulations governing business with public organizations; changes to, or violations of, licensing regulations; our contracts being subject to audit and modification by the payors with whom we contract; a loss of Medicaid coverage by a significant number of Medicaid beneficiaries following the expiration of the COVID-19 public health emergency under the Families First Coronavirus Response Act (2020); our existing debt agreements containing restrictions that limit our flexibility in operating our business; our substantial indebtedness and lease obligations; any loss of available financing alternatives; our ability to incur substantial additional indebtedness; and the results of the remediation of our identified material weaknesses in internal control over financial reporting.

The Company has provided additional information about the risks facing our business in our annual report on Form 10-K and subsequent periodic and current reports most recently filed with the Securities and Exchange Commission that could impact future performance. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made and are expressly qualified in their entirety by the cautionary statements set forth herein and in our filings with the Securities and Exchange Commission, which you should read in their entirety before making an investment decision with respect to our securities. We undertake no obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law.

Modivcare Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
		Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Service revenue, net		$	699,107			$	628,215			$	1,361,413			$	1,202,690
Grant income			2,634				3,330				4,098				3,798
Operating expenses:
Service expense			589,255				504,230				1,139,521				963,545
General and administrative expense			79,240				79,411				158,953				156,219
Depreciation and amortization			25,909				24,758				51,602				48,704
Impairment of goodwill			183,100				—				183,100				—
Total operating expenses			877,504				608,399				1,533,176				1,168,468
Operating income (loss)			(175,763	)			23,146				(167,665	)			38,020
Interest expense, net			16,967				15,472				32,925				30,872
Income (loss) before income taxes and equity method investment			(192,730	)			7,674				(200,590	)			7,148
Income tax (provision) benefit			830				(2,291	)			2,703				(1,930	)
Equity in net income (loss) of investee, net of tax			956				(2,055	)			2,981				(1,572	)
Net income (loss)		$	(190,944	)		$	3,328			$	(194,906	)		$	3,646
Earnings (loss) per common share:
Basic		$	(13.47	)		$	0.24			$	(13.76	)		$	0.26
Diluted		$	(13.47	)		$	0.24			$	(13.76	)		$	0.26
Weighted-average number of common shares outstanding:
Basic			14,170,617				14,047,459				14,162,776				14,035,588
Diluted			14,170,617				14,115,471				14,162,776				14,122,730

Modivcare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
		June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	6,898		$	14,451
Accounts receivable, net			224,013			223,210
Contract receivables			119,763			71,131
Other current assets(1)			42,275			37,362
Total current assets			392,949			346,154
Property and equipment, net			78,922			69,138
Goodwill			785,554			968,654
Intangible assets, net			400,287			439,409
Equity investment			45,114			41,303
Operating lease right-of-use assets			39,301			39,405
Other long-term assets			42,893			40,209
Total assets		$	1,785,020		$	1,944,272
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings		$	126,500		$	—
Accounts payable			56,047			54,959
Accrued contract payables			109,094			194,287
Accrued expenses and other current liabilities			138,178			135,860
Accrued transportation costs			94,118			96,851
Current portion of operating lease liabilities			9,298			9,640
Total current liabilities			533,235			491,597
Long-term debt, net of deferred financing costs			981,526			979,361
Operating lease liabilities, less current portion			32,396			32,088
Other long-term liabilities(2)			76,422			86,670
Total liabilities			1,623,579			1,589,716
Stockholders' equity
Stockholders' equity			161,441			354,556
Total liabilities and stockholders' equity		$	1,785,020		$	1,944,272

(1)		Includes other receivables, prepaid expenses and other current assets and short-term restricted cash.
(2)		Includes other long-term liabilities and deferred tax liabilities.

Modivcare Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
		Six months ended June 30,
		2023				2022
Operating activities
Net income (loss)		$	(194,906	)		$	3,646
Depreciation and amortization			51,602				48,704
Stock-based compensation			2,286				4,496
Equity in net (income) loss of investee			(4,137	)			2,358
Deferred income taxes			(10,264	)			(14,493	)
Impairment of goodwill			183,100				—
Reduction of right-of-use asset			6,951				5,757
Other non-cash items(1)			(108	)			(6,495	)
Changes in working capital(2)			(145,398	)			7,233
Net cash provided by (used in) operating activities			(110,874	)			51,206
Investing activities
Purchase of property and equipment			(22,265	)			(15,899	)
Acquisitions, net of cash acquired			—				(78,861	)
Net cash used in investing activities			(22,265	)			(94,760	)
Financing activities
Proceeds from short-term borrowings			126,500				—
Debt issuance costs			(376	)			(2,415	)
Proceeds from common stock issued pursuant to stock option exercise			31				1,138
Restricted stock surrendered for employee tax payment			(840	)			(607	)
Other financing activities			315				—
Net cash provided by (used in) financing activities			125,630				(1,884	)
Net change in cash, cash equivalents and restricted cash			(7,509	)			(45,438	)
Cash, cash equivalents and restricted cash at beginning of period			14,975				133,422
Cash, cash equivalents and restricted cash at end of period		$	7,466			$	87,984

(1)		Includes amortization of deferred financing costs and debt discount and other assets.
(2)		Includes accounts receivable and other receivables, contract receivables, prepaid expenses and other current assets, accrued contract payables, accounts payable and accrued expenses, accrued transportation costs and other long-term liabilities.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Three months ended June 30, 2023
		NEMT				Personal Care				RPM				Corporate and Other				Total
Service revenue, net		$	496,975			$	180,325			$	19,211			$	2,596			$	699,107
Grant income			—				2,634				—				—				2,634
Operating expenses:
Service expense			441,897				138,468				6,705				2,185				589,255
General and administrative expense			28,337				20,565				5,327				25,011				79,240
Depreciation and amortization			6,739				12,872				6,059				239				25,909
Impairment of goodwill			—				137,331				45,769				—				183,100
Total operating expenses			476,973				309,236				63,860				27,435				877,504
Operating income (loss)			20,002				(126,277	)			(44,649	)			(24,839	)			(175,763	)
Interest expense, net			—				—				—				16,967				16,967
Income (loss) before income taxes and equity method investment			20,002				(126,277	)			(44,649	)			(41,806	)			(192,730	)
Income tax (provision) benefit			(5,402	)			(3,095	)			(316	)			9,643				830
Equity in net income of investee, net of tax			189				—				—				767				956
Net income (loss)			14,789				(129,372	)			(44,965	)			(31,396	)			(190,944	)
Interest expense, net			—				—				—				16,967				16,967
Income tax provision (benefit)			5,402				3,095				316				(9,643	)			(830	)
Depreciation and amortization			6,739				12,872				6,059				239				25,909
EBITDA			26,930				(113,405	)			(38,590	)			(23,833	)			(148,898	)
Restructuring and related costs(1)			2,055				—				—				8,055				10,110
Transaction and integration costs			—				173				16				665				854
Settlement related costs			—				—				—				7,209				7,209
Stock-based compensation			—				—				—				947				947
Impairment of goodwill			—				137,331				45,769				—				183,100
Equity in net income of investee, net of tax			(189	)			—				—				(767	)			(956	)
Adjusted EBITDA		$	28,796			$	24,099			$	7,195			$	(7,724	)		$	52,366

(1)

Restructuring and related costs include professional fees for strategic initiatives, organizational consolidation costs, severance and other professional fees.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Three months ended June 30, 2022
		NEMT				Personal Care				RPM				Corporate and Other				Total
Service revenue, net		$	448,733			$	162,737			$	16,745			$	—			$	628,215
Grant income			—				3,330				—				—				3,330
Operating expenses:
Service expense			373,724				124,445				6,061				—				504,230
General and administrative expense			33,588				23,346				6,742				15,735				79,411
Depreciation and amortization			7,392				12,552				4,606				208				24,758
Total operating expenses			414,704				160,343				17,409				15,943				608,399
Operating income (loss)			34,029				5,724				(664	)			(15,943	)			23,146
Interest expense, net			—				—				—				15,472				15,472
Income (loss) before income taxes and equity method investment			34,029				5,724				(664	)			(31,415	)			7,674
Income tax (provision) benefit			(9,563	)			(1,601	)			189				8,684				(2,291	)
Equity in net loss of investee, net of tax			—				—				—				(2,055	)			(2,055	)
Net income (loss)			24,466				4,123				(475	)			(24,786	)			3,328
Interest expense, net			—				—				—				15,472				15,472
Income tax provision (benefit)			9,563				1,601				(189	)			(8,684	)			2,291
Depreciation and amortization			7,392				12,552				4,606				208				24,758
EBITDA			41,421				18,276				3,942				(17,790	)			45,849
Restructuring and related costs(1)			4,852				—				—				354				5,206
Transaction and integration costs(2)			—				2,830				1,635				3,237				7,702
Cash settled equity			—				—				—				20				20
Stock-based compensation			—				173				57				2,440				2,670
COVID-19 related costs, net of grant income			34				(3,378	)			—				—				(3,344	)
Equity in net loss of investee, net of tax			—				—				—				2,055				2,055
Adjusted EBITDA		$	46,307			$	17,901			$	5,634			$	(9,684	)		$	60,158

(1)		Restructuring and related costs include professional fees for strategic initiatives, organizational consolidation costs, severance and other professional fees.
(2)		Transaction and integration costs consist of fees incurred related to Sarbanes-Oxley Act of 2002 implementation and business integration efforts.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Six months ended June 30, 2023
		NEMT				Personal Care				RPM				Corporate and Other				Total
Service revenue, net		$	966,438			$	354,456			$	37,923			$	2,596			$	1,361,413
Grant income			—				4,098				—				—				4,098
Operating expenses:
Service expense			849,583				274,558				13,195				2,185				1,139,521
General and administrative expense			62,212				43,228				11,096				42,417				158,953
Depreciation and amortization			13,505				25,740				11,913				444				51,602
Impairment of goodwill			—				137,331				45,769				—				183,100
Total operating expenses			925,300				480,857				81,973				45,046				1,533,176
Operating income (loss)			41,138				(122,303	)			(44,050	)			(42,450	)			(167,665	)
Interest expense, net			—				—				—				32,925				32,925
Income (loss) before income taxes and equity method investment			41,138				(122,303	)			(44,050	)			(75,375	)			(200,590	)
Income tax (provision) benefit			(11,020	)			(4,244	)			(486	)			18,453				2,703
Equity in net income of investee, net of tax			842				—				—				2,139				2,981
Net income (loss)			30,960				(126,547	)			(44,536	)			(54,783	)			(194,906	)
Interest expense, net			—				—				—				32,925				32,925
Income tax provision (benefit)			11,020				4,244				486				(18,453	)			(2,703	)
Depreciation and amortization			13,505				25,740				11,913				444				51,602
EBITDA			55,485				(96,563	)			(32,137	)			(39,867	)			(113,082	)
Restructuring and related costs(1)			9,154				—				—				15,401				24,555
Transaction and integration costs			—				450				48				1,229				1,727
Settlement related costs			275				—				—				7,209				7,484
Stock-based compensation			—				—				—				1,795				1,795
Impairment of goodwill			—				137,331				45,769				—				183,100
Equity in net income of investee, net of tax			(842	)			—				—				(2,139	)			(2,981	)
Adjusted EBITDA		$	64,072			$	41,218			$	13,680			$	(16,372	)		$	102,598

(1)

Restructuring and related costs include professional fees for strategic initiatives, organizational consolidation costs, severance and other professional fees.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Six months ended June 30, 2022
		NEMT				Personal Care				RPM				Corporate and Other				Total
Service revenue, net		$	849,653			$	322,435			$	30,602			$	—			$	1,202,690
Grant income			—				3,798				—				—				3,798
Operating expenses:
Service expense			705,820				246,677				11,048				—				963,545
General and administrative expense			70,921				46,479				11,704				27,115				156,219
Depreciation and amortization			14,497				25,057				8,734				416				48,704
Total operating expenses			791,238				318,213				31,486				27,531				1,168,468
Operating income (loss)			58,415				8,020				(884	)			(27,531	)			38,020
Interest expense, net			—				—				—				30,872				30,872
Income (loss) before income taxes and equity method investment			58,415				8,020				(884	)			(58,403	)			7,148
Income tax (provision) benefit			(16,138	)			(2,241	)			247				16,202				(1,930	)
Equity in net loss of investee, net of tax			(65	)			—				—				(1,507	)			(1,572	)
Net income (loss)			42,212				5,779				(637	)			(43,708	)			3,646
Interest expense, net			—				—				—				30,872				30,872
Income tax provision (benefit)			16,138				2,241				(247	)			(16,202	)			1,930
Depreciation and amortization			14,497				25,057				8,734				416				48,704
EBITDA			72,847				33,077				7,850				(28,622	)			85,152
Restructuring and related charges (1)			10,456				181				24				385				11,046
Transaction costs (2)			—				4,103				2,282				5,028				11,413
Cash settled equity			—				—				—				7				7
Stock-based compensation			—				190				86				3,860				4,136
COVID-19 related costs, net of grant income			156				(3,029	)			—				—				(2,873	)
Equity in net loss of investee, net of tax			65				—				—				1,507				1,572
Adjusted EBITDA		$	83,524			$	34,522			$	10,242			$	(17,835	)		$	110,453

(1)		Restructuring and related costs include professional fees for strategic initiatives, organizational consolidation costs, severance and other professional fees.
(2)		Transaction and integration costs consist of fees incurred related to Sarbanes-Oxley Act of 2002 implementation and business integration efforts.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Net Income per Common Share
(in thousands, except share and per share data)
		Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Net income (loss)		$	(190,944	)		$	3,328			$	(194,906	)		$	3,646
Restructuring and related costs(1)			10,110				5,206				24,555				11,046
Transaction and integration costs(2)			854				7,702				1,727				11,413
Settlement related costs			7,209				—				7,484				—
Cash settled equity			—				20				—				7
Stock-based compensation			947				2,670				1,795				4,136
Impairment of goodwill			183,100				—				183,100				—
Equity in net (income) loss of investee, net of tax			(956	)			2,055				(2,981	)			1,572
Intangible asset amortization expense			19,808				19,752				39,709				39,251
COVID-19 related costs, net of grant income			—				(3,344	)			—				(2,873	)
Tax effected impact of adjustments			(9,352	)			(9,299	)			(19,506	)			(18,224	)
Adjusted net income		$	20,776			$	28,090			$	40,977			$	49,974
Adjusted EPS		$	1.47			$	1.99			$	2.89			$	3.54
Diluted weighted-average number of common shares outstanding			14,173,854				14,115,471				14,178,375				14,122,730

(1)		Restructuring and related costs include professional fees for strategic initiatives, organizational consolidation costs, severance and other professional fees.
(2)		Transaction and integration costs consist of fees incurred related to SOX implementation and business integration efforts.

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands, except for statistical data)
		Three months ended											Six months ended											Three months ended
		June 30, 2023				June 30, 2022				% Change			June 30, 2023				June 30, 2022				% Change			March 31, 2023				QoQ % Change
NEMT Segment
Service revenue, net		$	496,975			$	448,733			10.8	%		$	966,438			$	849,653			13.7	%		$	469,463			5.9	%
Purchased services expense			377,192				317,213			18.9	%			721,612				595,160			21.2	%			344,420			9.5	%
Payroll and other expense			64,705				56,511			14.5	%			127,971				110,660			15.6	%			63,266			2.3	%
Service expense		$	441,897			$	373,724			18.2	%		$	849,583			$	705,820			20.4	%		$	407,686			8.4	%
Gross profit		$	55,078			$	75,009			(26.6	)%		$	116,855			$	143,833			(18.8	)%		$	61,777			(10.8	)%
Gross margin			11.1	%			16.7	%						12.1	%			16.9	%						13.2	%
G&A expense		$	28,337			$	33,588			(15.6	)%		$	62,212			$	70,921			(12.3	)%		$	33,875			(16.3	)%
G&A expense adjustments:
Restructuring and related costs			2,055				4,852			(57.6	)%			9,154				10,456			(12.5	)%			7,099			(71.1	)%
Settlement related costs			—				—			N/M				275				—			N/M				275			N/M
Adjusted G&A expense		$	26,282			$	28,736			(8.5	)%		$	52,783			$	60,465			(12.7	)%		$	26,501			(0.8	)%
Adjusted G&A expense % of revenue			5.3	%			6.4	%						5.5	%			7.1	%						5.6	%
Net income		$	14,789			$	24,466			(39.6	)%		$	30,960			$	42,212			(26.7	)%		$	16,171			(8.5	)%
Net income margin			3.0	%			5.5	%						3.2	%			5.0	%						3.4	%
Adjusted EBITDA		$	28,796			$	46,307			(37.8	)%		$	64,072			$	83,524			(23.3	)%		$	35,276			(18.4	)%
Adjusted EBITDA margin			5.8	%			10.3	%						6.6	%			9.8	%						7.5	%
Total paid trips (thousands)			8,735				7,831			11.5	%			16,937				14,942			13.4	%			8,202			6.5	%
Average monthly members (thousands)			34,312				33,792			1.5	%			34,008				32,984			3.1	%			33,704			1.8	%
Revenue per member per month		$	4.83			$	4.43			9.0	%		$	4.74			$	4.29			10.5	%		$	4.64			4.1	%
Revenue per trip		$	56.89			$	57.30			(0.7	)%		$	57.06			$	56.86			0.4	%		$	57.24			(0.6	)%
Monthly utilization			8.5	%			7.7	%						8.3	%			7.6	%						8.1	%
Purchased services per trip		$	43.18			$	40.51			6.6	%		$	42.61			$	39.83			7.0	%		$	41.99			2.8	%
Payroll and other per trip		$	7.41			$	7.22			2.6	%		$	7.56			$	7.41			2.0	%		$	7.71			(3.9	)%
Total service expense per trip		$	50.59			$	47.73			6.0	%		$	50.17			$	47.24			6.2	%		$	49.70			1.8	%

N/M - Not Meaningful. Certain figures in the tables above do not provide meaningful percentage comparison, thus, the percentage has been removed.

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands, except for statistical data)
		Three months ended											Six months ended											Three months ended
		June 30, 2023				June 30, 2022				% Change			June 30, 2023				June 30, 2022				% Change			March 31, 2023				QoQ % Change
Personal Care Segment
Service revenue, net		$	180,325			$	162,737			10.8	%		$	354,456			$	322,435			9.9	%		$	174,131			3.6	%
Service expense			138,468				124,445			11.3	%			274,558				246,677			11.3	%			136,090			1.7	%
Gross profit		$	41,857			$	38,292			9.3	%		$	79,898			$	75,758			5.5	%		$	38,041			10.0	%
Gross Margin			23.2	%			23.5	%						22.5	%			23.5	%						21.8	%
G&A expense		$	20,565			$	23,346			(11.9	)%		$	43,228			$	46,479			(7.0	)%		$	22,663			(9.3	)%
G&A expense adjustments
Restructuring and related costs			—				—			N/M				—				181			N/M				—			N/M
Transaction and integration costs			173				2,830			(93.9	)%			450				4,103			(89.0	)%			277			(37.5	)%
Stock-based compensation			—				173			N/M				—				190			N/M				—			N/M
Adjusted G&A expense		$	20,392			$	20,343			0.2	%		$	42,778			$	42,005			1.8	%		$	22,386			(8.9	)%
Adjusted G&A expense % of revenue			11.3	%			12.5	%						12.1	%			13.0	%						12.9	%
Net income		$	(129,372	)		$	4,123			N/M			$	(126,547	)		$	5,779			N/M			$	2,825			N/M
Net income margin			(71.7	)%			2.5	%						(35.7	)%			1.8	%						1.6	%
Adjusted EBITDA		$	24,099			$	17,901			34.6	%		$	41,218			$	34,522			19.4	%		$	17,119			40.8	%
Adjusted EBITDA margin			13.4	%			11.0	%						11.6	%			10.7	%						9.8	%
Total hours (in thousands)			6,933				6,705			3.4	%			13,757				13,240			3.9	%			6,824			1.6	%
Revenue per hour		$	26.01			$	24.27			7.2	%		$	25.77			$	24.35			5.8	%		$	25.52			1.9	%
Service expense per hour		$	19.97			$	18.56			7.6	%		$	19.96			$	18.63			7.1	%		$	19.94			0.2	%

N/M - Not Meaningful. Certain figures in the tables above do not provide meaningful percentage comparison, thus, the percentage has been removed.

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands, except for statistical data)
		Three months ended											Six months ended											Three months ended
		June 30, 2023				June 30, 2022				% Change			June 30, 2023				June 30, 2022				% Change			March 31, 2023				QoQ % Change
RPM Segment
Service revenue, net		$	19,211			$	16,745			14.7	%		$	37,923			$	30,602			23.9	%		$	18,712			2.7	%
Service expense			6,705				6,061			10.6	%			13,195				11,048			19.4	%			6,490			3.3	%
Gross profit		$	12,506			$	10,684			17.1	%		$	24,728			$	19,554			26.5	%		$	12,222			2.3	%
Gross Margin			65.1	%			63.8	%						65.2	%			63.9	%						65.3	%
G&A expense		$	5,327			$	6,742			(21.0	)%		$	11,096			$	11,704			(5.2	)%		$	5,769			(7.7	)%
G&A expense adjustments
Restructuring and related costs			—				—			N/M				—				24			N/M				—			N/M
Transaction and integration costs			16				1,635			(99.0	)%			48				2,282			(97.9	)%			32			(50.0	)%
Stock-based compensation			—				57			N/M				—				86			N/M				—			N/M
Adjusted G&A expense		$	5,311			$	5,050			5.2	%		$	11,048			$	9,312			18.6	%		$	5,737			(7.4	)%
Adjusted G&A expense % of revenue			27.6	%			30.2	%						29.1	%			30.4	%						30.7	%
Net income (loss)		$	(44,965	)		$	(475	)		N/M			$	(44,536	)		$	(637	)		N/M			$	429			N/M
Net income (loss) margin			(234.1	)%			(2.8	)%						(117.4	)%			(2.1	)%						2.3	%
Adjusted EBITDA		$	7,195			$	5,634			27.7	%		$	13,680			$	10,242			33.6	%		$	6,485			10.9	%
Adjusted EBITDA margin			37.5	%			33.6	%						36.1	%			33.5	%						34.7	%
Average monthly members (in thousands)			240				203			18.2	%			237				186			27.4	%			235			2.1	%
Revenue per member per month		$	26.68			$	27.50			(3.0	)%		$	26.67			$	27.42			(2.7	)%		$	26.54			0.5	%
Service expense per member per month		$	9.31			$	9.95			(6.4	)%		$	9.28			$	9.90			(6.3	)%		$	9.21			1.1	%

N/M - Not Meaningful. Certain figures in the tables above do not provide meaningful percentage comparison, thus, the percentage has been removed.

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands)
		Three months ended											Six months ended											Three months ended
		June 30, 2023				June 30, 2022				% Change			June 30, 2023				June 30, 2022				% Change			March 31, 2023				QoQ % Change
Corporate and Other Segment
G&A expense		$	25,011			$	15,735			59.0	%		$	42,417			$	27,115			56.4	%		$	17,406			43.7	%
G&A expense adjustments
Restructuring and related costs			8,055				354			N/M				15,401				385			N/M				7,346			9.7	%
Transaction and integration costs			665				3,237			(79.5	)%			1,229				5,028			(75.6	)%			564			17.9	%
Settlement related costs			7,209				—			N/M				7,209				—			N/M				—			N/M
Cash settled equity			—				20			N/M				—				7			N/M				—			N/M
Stock-based compensation			947				2,440			(61.2	)%			1,795				3,860			(53.5	)%			848			11.7	%
Adjusted G&A expense		$	8,135			$	9,684			(16.0	)%		$	16,783			$	17,835			(5.9	)%		$	8,648			(5.9	)%
Adjusted G&A expense % of consolidated revenue			1.2	%			1.5	%						1.2	%			1.5	%						1.3	%

		Three months ended											Six months ended											Three months ended
		June 30, 2023				June 30, 2022				% Change			June 30, 2023				June 30, 2022				% Change			March 31, 2023				QoQ % Change
Consolidated Modivcare Inc.
G&A expense		$	79,240			$	79,411			(0.2	)%		$	158,953			$	156,219			1.8	%		$	79,713			(0.6	)%
G&A expense adjustments
Restructuring and related costs			10,110				5,206			94.2	%			24,555				11,046			N/M				14,445			(30.0	)%
Transaction and integration costs			854				7,702			(88.9	)%			1,727				11,413			(84.9	)%			873			(2.2	)%
Settlement related costs			7,209				—			N/M				7,484				—			N/M				275			N/M
Cash settled equity			—				20			N/M				—				7			N/M				—			N/M
Stock-based compensation			947				2,670			(64.5	)%			1,795				4,136			(56.6	)%			848			11.7	%
Adjusted G&A expense		$	60,120			$	63,813			(5.8	)%		$	123,392			$	129,617			(4.8	)%		$	63,272			(5.0	)%
Adjusted G&A expense % of revenue			8.6	%			10.2	%						9.1	%			10.8	%						9.6	%

N/M - Not Meaningful. Certain figures in the tables above do not provide meaningful percentage comparison, thus, the percentage has been removed.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230803323189/en/

Investor Relations Contact

Kevin Ellich,

Head of Investor Relations

Kevin.Ellich@modivcare.com

Source: Modivcare Inc.

FAQ

What is Modivcare Inc.'s ticker symbol?

Modivcare Inc.'s ticker symbol is MODV.

What were the financial results for Modivcare Inc. for the three and six months ended June 30, 2023?

Modivcare reported service revenue of $699.1 million, an 11.3% increase compared to the second quarter of 2022, with a net loss of $190.9 million.

What was the adjusted EBITDA for Modivcare Inc. in Q2 2023?

Modivcare Inc. reported adjusted EBITDA of $52.4 million.

What was the impact of the amended credit agreement on Modivcare Inc.?

The amended credit agreement's maximum Total Net Leverage Ratio provides improved access to liquidity for Modivcare Inc.