Modivcare Reports Second Quarter 2024 Financial Results; Adjusts 2024 Guidance

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Insights

Modivcare's Q2 2024 results present a mixed picture. While revenue remained stable at $698.3 million, the company reported a significant net loss of $128.9 million, primarily due to a $105.3 million goodwill impairment charge in the RPM segment. The adjusted EBITDA of $45.4 million (6.5% of revenue) shows a decline from $52.4 million (7.5% of revenue) in Q2 2023.

The lowered 2024 Adjusted EBITDA guidance to $185-$195 million from $190-$210 million is concerning, indicating challenges in the personal care services transformation. The negative free cash flow of $62 million and increased working capital needs due to lengthened settlement cycles in NEMT contracts are also red flags for investors.

However, the successful refinancing of 2025 senior unsecured notes with a new Term Loan B is a positive development, addressing near-term debt concerns. The company's focus on de-leveraging and operational optimization could potentially improve its financial position in the long term.

Modivcare's Q2 results reflect the ongoing challenges in the healthcare services sector. The stable revenue but declining profitability highlights the pressure on margins in this industry. The NEMT segment's strong performance, driven by new business wins and platform automation, is a bright spot amidst the overall challenging picture.

The impact of Medicaid redetermination on working capital is a sector-wide issue that Modivcare is navigating. The company's expectation for working capital normalization in H2 2024 will be important to monitor. The $97.8 million in new NEMT contracts (TCV) is encouraging, but the delayed implementation until Q3 2024 means the financial benefits will be deferred.

The personal care services transformation, while causing short-term pain, could position Modivcare for future growth in this expanding market. However, investors should closely watch the execution of this strategy and its impact on financial performance in the coming quarters.

Modivcare's Q2 results and revised guidance offer insights into broader market trends. The stable revenue despite challenges indicates resilience in demand for healthcare support services. However, the profitability squeeze suggests increasing cost pressures across the industry.

The company's focus on platform automation in NEMT aligns with the growing trend of technology integration in healthcare services. This could be a key differentiator in a competitive market. The personal care and remote patient monitoring segments, despite current challenges, represent growth opportunities as the healthcare industry continues to shift towards home-based care models.

Modivcare's refinancing move reflects the broader trend of companies taking advantage of the current interest rate environment to optimize their capital structures. The market will likely view this positively, but the focus on de-leveraging suggests a cautious approach to growth in the near term.

08/07/2024 - 04:05 PM

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 focused on improving health outcomes, today reported financial results for the three and six months ended June 30, 2024.

Second Quarter 2024 Summary:

Service revenue of $698.3 million, remaining consistent with the second quarter of 2023
Net loss of $128.9 million or negative $9.07 per diluted common share
Adjusted EBITDA⁽¹⁾ of $45.4 million, adjusted net loss⁽¹⁾ of $0.4 million and adjusted EPS⁽¹⁾ of negative $0.03 per diluted common share
Cash used in operating activities during the quarter of $55.3 million and free cash flow⁽²⁾ of negative $62.0 million
Contract receivables, net of contract payables, of $79.0 million as of June 30, 2024
Won $97.8 million of NEMT total contract value (TCV) during second quarter 2024 ($32.6 million annual contract value (ACV)), with implementation beginning in the third quarter of 2024


⁽¹⁾ Non-GAAP financial measure reconciliations and other related information about non-GAAP financial measures provided below.
⁽²⁾Free cash flow, a non-GAAP financial measure, is calculated by us as cash flow from operations less our capital expenditures during the period of $6.7 million that is included in our purchase of property and equipment line in our Unaudited Condensed Consolidated Statements of Cash Flows provided below.

“Second quarter adjusted EBITDA of $45 million was driven by strong performance within our NEMT segment due to new business wins, upward repricing, and platform automation,” stated L. Heath Sampson, President and CEO. “We lowered our 2024 Adjusted EBITDA guidance range, primarily due to our personal care services transformation, which provides a solid foundation for growth, but it has also increased our cost structure and moderated growth in the first half of 2024. As previously disclosed, while our NEMT shared risk contract structure protects our margins and cash flow, it has also lengthened settlement cycles, leading to increased working capital needs as Medicaid redetermination and healthcare utilization normalize. As such, net cash flow from operating activities was a use of $55 million in the second quarter, with expectations for working capital to normalize in the second half of 2024. I am proud of how our team has transformed this company, especially in NEMT, where we have developed the most scaled and innovative platform. Our personal care and remote patient monitoring segments have also made significant progress, further positioning us to leverage our extensive footprints with recurring revenue and growing markets.”

Sampson continued, “Lastly, we successfully refinanced our 2025 senior unsecured notes with a new Term Loan B, removing a near-term overhang and tightening our capital structure. Our top priority is to de-lever our balance sheet while executing our transformation strategy, optimizing our business operations, and exploring other opportunities. We have built a company that provides multiple avenues to enhance shareholder value."

2024 Guidance

We maintained our revenue guidance range and lowered our adjusted EBITDA guidance range as follows ($ in millions):

	Fiscal Year 2024
	Updated	Previous
Revenue	Unchanged	$2,700 - $2,900
Adjusted EBITDA	$185 - $195	$190 - $210

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

Second Quarter 2024 Results

For the second quarter of 2024, the Company reported $698.3 million in revenue, which was consistent with the $699.1 million in revenue reported in the second quarter of 2023. NEMT segment revenue decreased by $6.3 million or 1.3%, PCS segment revenue grew by $6.3 million or 3.5%, and RPM segment revenue decreased by $0.2 million or 1.0%, as compared to the second quarter of 2023.

Our operating loss was $98.9 million, or 14.2% of revenue, in the second quarter of 2024, compared to an operating loss of $175.8 million, or 25.1% of revenue, in the second quarter of 2023. Net loss in the second quarter of 2024 was $128.9 million, or negative $9.07 per diluted common share, compared to net loss of $190.9 million, or negative $13.47 per diluted common share in the second quarter of 2023. Both the operating loss and the net loss for the second quarters of 2023 and 2024 are primarily attributable to the non-cash goodwill impairment charges of $183.1 million and $105.3 million, respectively.

Adjusted EBITDA was $45.4 million, or 6.5% of revenue, in the second quarter of 2024, compared to $52.4 million, or 7.5% of revenue, in the second quarter of 2023. The change in adjusted EBITDA was primarily a result of a decrease in adjusted EBITDA at the PCS, RPM, and Corporate and Other segments that was greater than the increase in adjusted EBITDA at the NEMT segment. Accordingly, adjusted net loss in the second quarter of 2024 was $0.4 million, or negative $0.03 per diluted common share, compared to adjusted net income of $20.8 million, or $1.47 per diluted common share, in the second quarter of 2023.

Cash used in operations during the quarter was $55.3 million as compared to $108.2 million of cash used in operations during the second quarter of 2023. Changes in operating assets and liabilities during the quarter include an increase in contract receivables of $11.6 million, net, and a decrease in contract payables of $41.5 million, net. Net cash used in investing activities during the quarter was $6.7 million, primarily due to capitalized investments in technology and purchases of monitoring devices. Net cash provided by financing activities during the quarter was $62.2 million, which resulted in a quarter ended balance on our revolving credit facility of $183.0 million.

During the second quarter, a goodwill impairment of $105.3 million was recognized at our RPM segment, 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 performance of our RPM segment primarily related to lower than expected membership and revenue.

Second Quarter 2024 Earnings Conference Call

Modivcare will hold a conference call to discuss its financial results on Thursday, August 8, 2024 at 8:30 a.m. ET. To access the call, please dial:

US toll-free: 1 (888) 645-4404
International: 1 (862) 298-0702

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

About Modivcare

Modivcare Inc. ("Modivcare" or the "Company") is a technology-enabled healthcare services company that provides a suite of integrated supportive care solutions for public and private payors and their members. Our value-based solutions address the social determinants of health (SDoH) by connecting members to essential care services. By doing so, Modivcare helps health plans manage risks, reduce costs, and improve health outcomes. Modivcare is a provider of non-emergency medical transportation (NEMT), personal care services (PCS), and remote patient monitoring solutions (RPM). The company also holds a minority equity investment in CCHN Holdings (d/b/a Matrix Medical Network), an independent, at scale provider of comprehensive in-home health assessments in the U.S. 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 of America ("GAAP"), the information contained herein may include presentations for the Company and its segments (as noted and applicable) of: (1) EBITDA, Adjusted EBITDA, Adjusted G&A expense, Adjusted EBITDA margin, Adjusted Net Income (Loss), and Adjusted EPS, all of which are non-GAAP financial measures considered by management to be performance measures; and (2) free cash flow, which is a non-GAAP financial measure considered by management to be a liquidity measure. 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) stock-based compensation; (5) impairment of goodwill; and (6) 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 (Loss) is calculated as net income (loss) before (as applicable): (1) restructuring and related costs; (2) transaction and integration costs; (3) settlement related costs; (4) stock-based compensation; (5) impairment of goodwill; (6) equity in net (income) loss of investee, net of tax; (7) intangible asset amortization expense; and (8) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income (Loss) divided by the diluted weighted-average number of common shares outstanding as calculated for Adjusted Net Income (Loss). 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; and (4) stock-based compensation. Free cash flow is calculated as cash flow from operations less our applicable capital expenditures included in our purchase of property and equipment line in our Consolidated Statements of Cash Flows.

Reconciliations of the non-GAAP financial measures used herein to their most directly comparable GAAP financial measures that are not included in the discussion above 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 measure (Adjusted EBITDA) to its most directly comparable GAAP financial measure (net income (loss)) on a forward-looking basis because we are unable to predict items contained in the GAAP financial measure 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 free cash flow presentation (as applicable) reflects an additional way of viewing our liquidity that, when viewed together with our GAAP results, provides management, investors, and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. Our use of the term free cash flow is not intended to imply, and no inference should be made, however, that any reported amounts are free to be used without restriction for discretionary expenditures, as our use of these funds may be restricted by the terms of our outstanding indebtedness, including our credit facility, and otherwise earmarked for other non-discretionary expenditures.

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 their 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; inadequacies in, or security breaches of, our information technology systems, including those intended to protect our clients’ confidential information; the effects of any public health emergency; changes in the funding, financial viability or our relationships with our payors; delays in collection, or non-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; weakening of general economic conditions, including the impact of inflationary pressures, rising interest rates, labor shortages, higher labor costs and supply chain challenges; estimated income taxes being different from income taxes that we ultimately pay; pandemics and other infectious diseases; 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; labor disputes or disruptions, in particular in New York; becoming subject to malpractice, professional negligence, medical liability 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; any legal challenges to the relationships or arrangements between our virtual clinical care management services and the unaffiliated physician-owned professional corporation through which such services are provided; any failure to comply with applicable data interoperability and information blocking rules; the lapse of temporary telehealth flexibilities currently permitted under the Consolidated Appropriations Act of 2023; 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; increasing scrutiny and changing expectations with respect to environmental, social and governance matters; changes to, or violations of, licensing regulations, including regulations governing surveys and audits; 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, financial covenants and cross-default provisions that limit our flexibility in operating our business; our substantial indebtedness and lease obligations and ability to generate or distribute sufficient cash to service our indebtedness; the expiration of our existing credit agreement or any loss of available financing alternatives; our ability to incur substantial additional indebtedness or to issue additional equity; the results of the remediation of our identified material weaknesses in internal control over financial reporting; future sales of our common stock by existing stockholders; any stock price volatility; our dependence on our subsidiaries to fund our operations and expenses; securities analysts failing to publish research or publishing misleading or unfavorable research about us; and the effects of applicable anti-takeover provisions.

The Company has provided additional information about the foregoing and other risks facing our business in our annual report on Form 10-K and subsequent periodic and current reports 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,
		2024			2023			2024			2023

Service revenue, net	$	698,299		$	699,107		$	1,382,750		$	1,361,413
Grant income		—			2,634			—			4,098

Operating expenses:
Service expense		588,100			589,255			1,171,666			1,139,521
General and administrative expense		76,065			79,240			153,242			158,953
Depreciation and amortization		27,752			25,909			54,855			51,602
Impairment of goodwill		105,302			183,100			105,302			183,100
Total operating expenses		797,219			877,504			1,485,065			1,533,176

Operating loss		(98,920	)		(175,763	)		(102,315	)		(167,665	)

Interest expense, net		19,950			16,967			38,636			32,925
Loss before income taxes and equity method investment		(118,870	)		(192,730	)		(140,951	)		(200,590	)
Income tax (provision) benefit		(9,558	)		830			(9,015	)		2,703
Equity in net income (loss) of investee, net of tax		(456	)		956			(1,218	)		2,981
Net loss	$	(128,884	)	$	(190,944	)	$	(151,184	)	$	(194,906	)

Loss per common share:
Basic	$	(9.07	)	$	(13.47	)	$	(10.64	)	$	(13.76	)
Diluted	$	(9.07	)	$	(13.47	)	$	(10.64	)	$	(13.76	)

Weighted-average number of common shares outstanding:
Basic		14,216,954			14,170,617			14,209,477			14,162,776
Diluted		14,216,954			14,170,617			14,209,477			14,162,776

Modivcare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)

	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	10,546	$	2,217
Accounts receivable, net		229,648		222,537
Contract receivables		159,345		143,960
Other current assets⁽¹⁾		57,160		36,209
Total current assets		456,699		404,923
Property and equipment, net		84,949		85,629
Long-term contract receivables		6,512		—
Goodwill		680,252		785,554
Intangible assets, net		321,313		360,935
Equity investment		39,340		41,531
Operating lease right-of-use assets		38,656		39,776
Other long-term assets		48,421		48,927
Total assets	$	1,676,142	$	1,767,275

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	62,006	$	55,241
Accrued contract payables		86,894		117,488
Accrued expenses and other current liabilities		120,469		127,901
Accrued transportation costs		107,773		97,245
Current portion of operating lease liabilities		8,474		8,727
Short-term borrowings		183,000		113,800
Total current liabilities		568,616		520,402
Long-term debt, net of deferred financing costs		986,057		983,757
Operating lease liabilities, less current portion		33,105		33,784
Other long-term liabilities⁽²⁾		78,849		73,137
Total liabilities		1,666,627		1,611,080

Stockholders' equity
Stockholders' equity		9,515		156,195
Total liabilities and stockholders' equity	$	1,676,142	$	1,767,275

(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)

	Three months ended June 30,						Six months ended June 30,
		2024			2023			2024			2023
Operating activities
Net loss	$	(128,884	)	$	(190,944	)	$	(151,184	)	$	(194,906	)
Depreciation and amortization		27,752			25,909			54,855			51,602
Stock-based compensation		2,252			1,162			4,262			2,286
Equity in net (income) loss of investee		634			(1,327	)		1,690			(4,137	)
Deferred income taxes		9,365			(6,640	)		5,587			(10,264	)
Impairment of goodwill		105,302			183,100			105,302			183,100
Reduction of right-of-use asset		1,972			3,404			4,919			6,951
Other non-cash items⁽¹⁾		1,451			1,298			2,858			2,576
Changes in operating assets and liabilities:
Contract receivables		(24,666	)		(21,738	)		(15,386	)		(48,631	)
Contract payables		(41,504	)		(78,526	)		(30,594	)		(85,193	)
Long-term contract receivables		13,086			4,324			(6,512	)		427
Other changes in operating assets and liabilities⁽²⁾		(22,046	)		(28,241	)		(21,523	)		(14,685	)
Net cash used in operating activities		(55,286	)		(108,219	)		(45,726	)		(110,874	)

Investing activities
Purchase of property and equipment		(6,697	)		(8,945	)		(14,553	)		(22,265	)
Net cash used in investing activities		(6,697	)		(8,945	)		(14,553	)		(22,265	)

Financing activities
Net proceeds from short-term borrowings		62,000			111,500			69,200			126,500
Payments of debt issuance costs		(107	)		(376	)		(863	)		(376	)
Restricted stock surrendered for employee tax payment		(92	)		(220	)		(156	)		(840	)
Other financing activities		398			346			398			346
Net cash provided by financing activities		62,199			111,250			68,579			125,630

Net change in cash, cash equivalents and restricted cash		216			(5,914	)		8,300			(7,509	)
Cash, cash equivalents and restricted cash at beginning of period		10,866			13,380			2,782			14,975
Cash, cash equivalents and restricted cash at end of period	$	11,082		$	7,466		$	11,082		$	7,466

(1)		Includes amortization of deferred financing costs and debt discount.
(2)		Includes accounts receivable and other receivables, prepaid expenses and other current assets, accounts payable and accrued expenses, accrued transportation costs, other changes in operating assets and liabilities.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)

	Three months ended June 30, 2024
	NEMT			PCS			RPM			Corporate and Other			Total

Service revenue, net	$	490,677		$	186,610		$	19,025		$	1,987		$	698,299

Operating expenses:
Service expense		427,956			149,866			8,175			2,103			588,100
General and administrative expense		33,123			23,897			6,008			13,037			76,065
Depreciation and amortization		7,598			12,793			7,087			274			27,752
Impairment of goodwill		—			—			105,302			—			105,302
Total operating expenses		468,677			186,556			126,572			15,414			797,219

Operating income (loss)		22,000			54			(107,547	)		(13,427	)		(98,920	)

Interest expense, net		—			—			—			19,950			19,950
Income (loss) before income taxes and equity method investment		22,000			54			(107,547	)		(33,377	)		(118,870	)
Income tax benefit (provision)		(5,748	)		67			666			(4,543	)		(9,558	)
Equity in net income (loss) of investee, net of tax		146			—			—			(602	)		(456	)
Net income (loss)		16,398			121			(106,881	)		(38,522	)		(128,884	)

Interest expense, net		—			—			—			19,950			19,950
Income tax provision (benefit)		5,748			(67	)		(666	)		4,543			9,558
Depreciation and amortization		7,598			12,793			7,087			274			27,752
EBITDA		29,744			12,847			(100,460	)		(13,755	)		(71,624	)

Restructuring and related costs⁽¹⁾		5,704			1,179			1,189			(91	)		7,981
Transaction and integration costs		—			431			100			29			560
Settlement related costs		—			805			—			—			805
Stock-based compensation		—			—			—			1,969			1,969
Impairment of goodwill		—			—			105,302			—			105,302
Equity in net (income) loss of investee, net of tax		(146	)		—			—			602			456

Adjusted EBITDA	$	35,302		$	15,262		$	6,131		$	(11,246	)	$	45,449

(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, 2023
	NEMT			PCS			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 benefit (provision)		(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⁽²⁾		—			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.

(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, 2024
	NEMT			PCS			RPM			Corporate and Other			Total

Service revenue, net	$	969,983		$	370,178		$	39,127		$	3,462		$	1,382,750

Operating expenses:
Service expense		851,613			299,304			16,538			4,211			1,171,666
General and administrative expense		64,943			48,329			11,448			28,522			153,242
Depreciation and amortization		14,957			25,588			13,761			549			54,855
Impairment of goodwill		—			—			105,302			—			105,302
Total operating expenses		931,513			373,221			147,049			33,282			1,485,065

Operating income (loss)		38,470			(3,043	)		(107,922	)		(29,820	)		(102,315	)

Interest expense, net		—			—			—			38,636			38,636
Income (loss) before income taxes and equity method investment		38,470			(3,043	)		(107,922	)		(68,456	)		(140,951	)
Income tax (provision) benefit		(10,022	)		890			733			(616	)		(9,015	)
Equity in net income (loss) of investee, net of tax		118			—			—			(1,336	)		(1,218	)
Net income (loss)		28,566			(2,153	)		(107,189	)		(70,408	)		(151,184	)

Interest expense, net		—			—			—			38,636			38,636
Income tax provision (benefit)		10,022			(890	)		(733	)		616			9,015
Depreciation and amortization		14,957			25,588			13,761			549			54,855
EBITDA		53,545			22,545			(94,161	)		(30,607	)		(48,678	)

Restructuring and related costs⁽¹⁾		8,943			1,306			1,199			1,638			13,086
Transaction and integration costs		52			1,877			100			74			2,103
Settlement related costs		—			805			—			—			805
Stock-based compensation		—			—			—			3,750			3,750
Impairment of goodwill		—			—			105,302			—			105,302
Equity in net (income) loss of investee, net of tax		(118	)		—			—			1,336			1,218

Adjusted EBITDA	$	62,422		$	26,533		$	12,440		$	(23,809	)	$	77,586

(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, 2023
	NEMT			PCS			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⁽²⁾		—			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.

(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 (Loss) and Adjusted Net Income (Loss) per Common Share
(in thousands, except share and per share data)

	Three months ended June 30,						Six months ended June 30,
		2024			2023			2024			2023

Net loss	$	(128,884	)	$	(190,944	)	$	(151,184	)	$	(194,906	)

Restructuring and related costs⁽¹⁾		7,981			10,110			13,086			24,555
Transaction and integration costs⁽²⁾		560			854			2,103			1,727
Settlement related costs		805			7,209			805			7,484
Stock-based compensation		1,969			947			3,750			1,795
Impairment of goodwill		105,302			183,100			105,302			183,100
Equity in net (income) loss of investee, net of tax		456			(956	)		1,218			(2,981	)
Intangible asset amortization expense		19,765			19,808			39,544			39,709
Tax effected impact of adjustments		(8,328	)		(9,352	)		(15,901	)		(19,506	)

Adjusted net income (loss)	$	(374	)	$	20,776		$	(1,277	)	$	40,977

Adjusted earnings (loss) per share	$	(0.03	)	$	1.47		$	(0.09	)	$	2.89

Diluted weighted-average number of common shares outstanding		14,216,954			14,173,854			14,209,477			14,178,375

(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, 2024			June 30, 2023			% Change		June 30, 2024			June 30, 2023			% Change		March 31, 2024			QoQ % Change

NEMT Segment

Service revenue, net	$	490,677		$	496,975		(1.3	)%	$	969,983		$	966,438		0.4	%	$	479,306		2.4	%
Purchased services expense		372,579			377,192		(1.2	)%		735,479			721,612		1.9	%		362,900		2.7	%
Payroll and other expense		55,377			64,705		(14.4	)%		116,134			127,971		(9.2	)%		60,757		(8.9	)%
Service expense	$	427,956		$	441,897		(3.2	)%	$	851,613		$	849,583		0.2	%	$	423,657		1.0	%

Gross profit	$	62,721		$	55,078		13.9	%	$	118,370		$	116,855		1.3	%	$	55,649		12.7	%
Gross margin		12.8	%		11.1	%				12.2	%		12.1	%				11.6	%

G&A expense	$	33,123		$	28,337		16.9	%	$	64,943		$	62,212		4.4	%	$	31,820		4.1	%
G&A expense adjustments:
Restructuring and related costs		5,704			2,055		177.6	%		8,943			9,154		(2.3	)%		3,239		76.1	%
Transaction and integration costs		—			—		N/M			52			—		N/M			52		(100.0	)%
Settlement related costs		—			—		N/M			—			275		(100.0	)%		—		N/M
Adjusted G&A expense	$	27,419		$	26,282		4.3	%	$	55,948		$	52,783		6.0	%	$	28,529		(3.9	)%
Adjusted G&A expense % of revenue		5.6	%		5.3	%				5.8	%		5.5	%				6.0	%

Net income	$	16,398		$	14,789		10.9	%	$	28,566		$	30,960		(7.7	)%	$	12,168		34.8	%
Net income margin		3.3	%		3.0	%				2.9	%		3.2	%				2.5	%

Adjusted EBITDA	$	35,302		$	28,796		22.6	%	$	62,422		$	64,072		(2.6	)%	$	27,120		30.2	%
Adjusted EBITDA margin		7.2	%		5.8	%				6.4	%		6.6	%				5.7	%

Total paid trips (thousands)		9,031			8,735		3.4	%		17,839			16,937		5.3	%		8,808		2.5	%
Average monthly members (thousands)		29,703			34,312		(13.4	)%		29,387			34,008		(13.6	)%		29,071		2.2	%

Revenue per member per month	$	5.51		$	4.83		14.1	%	$	5.50		$	4.74		16.0	%	$	5.50		0.2	%
Revenue per trip	$	54.33		$	56.89		(4.5	)%	$	54.37		$	57.06		(4.7	)%	$	54.42		(0.2	)%
Monthly utilization		10.1	%		8.5	%				10.1	%		8.3	%				10.1	%

Purchased services per trip	$	41.26		$	43.18		(4.4	)%	$	41.23		$	42.61		(3.2	)%	$	41.20		0.1	%
Payroll and other per trip	$	6.13		$	7.41		(17.3	)%	$	6.51		$	7.56		(13.9	)%	$	6.90		(11.2	)%
Total service expense per trip	$	47.39		$	50.59		(6.3	)%	$	47.74		$	50.17		(4.8	)%	$	48.10		(1.5	)%

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, 2024			June 30, 2023			% Change		June 30, 2024			June 30, 2023			% Change		March 31, 2024			QoQ % Change

PCS Segment

Service revenue, net	$	186,610		$	180,325		3.5	%	$	370,178		$	354,456		4.4	%	$	183,568		1.7	%
Service expense		149,866			138,468		8.2	%		299,304			274,558		9.0	%		149,438		0.3	%
Gross profit	$	36,744		$	41,857		(12.2	)%	$	70,874		$	79,898		(11.3	)%	$	34,130		7.7	%
Gross margin		19.7	%		23.2	%				19.1	%		22.5	%				18.6	%

G&A expense	$	23,897		$	20,565		16.2	%	$	48,329		$	43,228		11.8	%	$	24,432		(2.2	)%
G&A expense adjustments
Restructuring and related costs		1,179			—		N/M			1,306			—		N/M			127		828.3	%
Transaction and integration costs		431			173		149.1	%		1,877			450		317.1	%		1,446		(70.2	)%
Settlement related costs		805			—		N/M			805			—		N/M			—		N/M
Adjusted G&A expense	$	21,482		$	20,392		5.3	%	$	44,341		$	42,778		3.7	%	$	22,859		(6.0	)%
Adjusted G&A expense % of revenue		11.5	%		11.3	%				12.0	%		12.1	%				12.5	%

Net income (loss)	$	121		$	(129,372	)	(100.1	)%	$	(2,153	)	$	(126,547	)	(98.3	)%	$	(2,274	)	(105.3	)%
Net income (loss) margin		0.1	%		(71.7	)%				(0.6	)%		(35.7	)%				(1.2	)%

Adjusted EBITDA	$	15,262		$	24,099		(36.7	)%	$	26,533		$	41,218		(35.6	)%	$	11,271		35.4	%
Adjusted EBITDA margin		8.2	%		13.4	%				7.2	%		11.6	%				6.1	%

Total hours (thousands)		7,048			6,933		1.7	%		14,013			13,757		1.9	%		6,965		1.2	%
Revenue per hour	$	26.48		$	26.01		1.8	%	$	26.42		$	25.77		2.5	%	$	26.36		0.5	%
Service expense per hour	$	21.26		$	19.97		6.5	%	$	21.36		$	19.96		7.0	%	$	21.46		(0.9	)%

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, 2024			June 30, 2023			% Change		June 30, 2024			June 30, 2023			% Change		March 31, 2024			QoQ % Change

RPM Segment

Service revenue, net	$	19,025		$	19,211		(1.0	)%	$	39,127		$	37,923		3.2	%	$	20,102		(5.4	)%
Service expense		8,175			6,705		21.9	%		16,538			13,195		25.3	%		8,363		(2.2	)%
Gross profit	$	10,850		$	12,506		(13.2	)%	$	22,589		$	24,728		(8.7	)%	$	11,739		(7.6	)%
Gross margin		57.0	%		65.1	%				57.7	%		65.2	%				58.4	%

G&A expense	$	6,008		$	5,327		12.8	%	$	11,448		$	11,096		3.2	%	$	5,440		10.4	%
G&A expense adjustments
Restructuring and related costs		1,189			—		N/M			1,199			—		N/M			10		N/M
Transaction and integration costs		100			16		525.0	%		100			48		108.3	%		—		N/M
Adjusted G&A expense	$	4,719		$	5,311		(11.1	)%	$	10,149		$	11,048		(8.1	)%	$	5,430		(13.1	)%
Adjusted G&A expense % of revenue		24.8	%		27.6	%				25.9	%		29.1	%				27.0	%

Net loss	$	(106,881	)	$	(44,965	)	137.7	%	$	(107,189	)	$	(44,536	)	140.7	%	$	(308	)	N/M
Net loss margin		(561.8	)%		(234.1	)%				(274.0	)%		(117.4	)%				(1.5	)%

Adjusted EBITDA	$	6,131		$	7,195		(14.8	)%	$	12,440		$	13,680		(9.1	)%	$	6,309		(2.8	)%
Adjusted EBITDA margin		32.2	%		37.5	%				31.8	%		36.1	%				31.4	%

Average monthly members (thousands)		246			240		2.5	%		248			237		4.6	%		249		(1.2	)%
Revenue per member per month	$	25.78		$	26.68		(3.4	)%	$	26.30		$	26.67		(1.4	)%	$	26.91		(4.2	)%
Service expense per member per month	$	11.08		$	9.31		19.0	%	$	11.11		$	9.28		19.7	%	$	11.20		(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, 2024			June 30, 2023			% Change		June 30, 2024			June 30, 2023			% Change		March 31, 2024			QoQ % Change

Corporate and Other Segment

G&A expense	$	13,037		$	25,011		(47.9	)%	$	28,522		$	42,417		(32.8	)%	$	15,485		(15.8	)%
G&A expense adjustments
Restructuring and related costs		(91	)		8,055		(101.1	)%		1,638			15,401		(89.4	)%		1,729		(105.3	)%
Transaction and integration costs		29			665		(95.6	)%		74			1,229		(94.0	)%		45		(35.6	)%
Settlement related costs		—			7,209		(100.0	)%		—			7,209		(100.0	)%		—		—	%
Stock-based compensation		1,969			947		107.9	%		3,750			1,795		108.9	%		1,781		10.6	%
Adjusted G&A expense	$	11,130		$	8,135		36.8	%	$	23,060		$	16,783		37.4	%	$	11,930		(6.7	)%
Adjusted G&A expense % of consolidated revenue		1.6	%		1.2	%				1.7	%		1.2	%				1.7	%

	Three months ended								Six months ended								Three months ended
	June 30, 2024			June 30, 2023			% Change		June 30, 2024			June 30, 2023			% Change		March 31, 2024			QoQ % Change

Consolidated Modivcare Inc.

G&A expense	$	76,065		$	79,240		(4.0	)%	$	153,242		$	158,953		(3.6	)%	$	77,177		(1.4	)%
G&A expense adjustments
Restructuring and related costs		7,981			10,110		(21.1	)%		13,086			24,555		(46.7	)%		5,105		56.3	%
Transaction and integration costs		560			854		(34.4	)%		2,103			1,727		21.8	%		1,543		(63.7	)%
Settlement related costs		805			7,209		(88.8	)%		805			7,484		(89.2	)%		—		N/M
Stock-based compensation		1,969			947		107.9	%		3,750			1,795		108.9	%		1,781		10.6	%
Adjusted G&A expense	$	64,750		$	60,120		7.7	%	$	133,498		$	123,392		8.2	%	$	68,748		(5.8	)%
Adjusted G&A expense % of consolidated revenue		9.3	%		8.6	%				9.7	%		9.1	%				10.0	%

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/20240807160260/en/

Investor Relations Contact

Kevin Ellich,

Head of Investor Relations

Kevin.Ellich@modivcare.com

Source: Modivcare Inc.

FAQ

What were Modivcare's Q2 2024 revenue and net loss?

Modivcare reported revenue of $698.3M and a net loss of $128.9M or -$9.07 per diluted share.

What was Modivcare's adjusted EBITDA for Q2 2024?

Modivcare's adjusted EBITDA for Q2 2024 was $45.4M.

How much cash did Modivcare use in operations during Q2 2024?

Modivcare used $55.3M in operations during Q2 2024.

What is Modivcare's updated 2024 adjusted EBITDA guidance?

Modivcare's updated 2024 adjusted EBITDA guidance is $185-$195M.

What were the key contract wins for Modivcare in Q2 2024?

Modivcare secured $97.8M in NEMT contracts during Q2 2024.

Modivcare Reports Second Quarter 2024 Financial Results; Adjusts 2024 Guidance

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FAQ

What were Modivcare's Q2 2024 revenue and net loss?

What was Modivcare's adjusted EBITDA for Q2 2024?

How much cash did Modivcare use in operations during Q2 2024?

What is Modivcare's updated 2024 adjusted EBITDA guidance?

What were the key contract wins for Modivcare in Q2 2024?

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Modivcare Reports Second Quarter 2024 Financial Results; Adjusts 2024 Guidance

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Financial Analyst negative

Healthcare Industry Analyst neutral

Market Research Analyst neutral

FAQ

What were Modivcare's Q2 2024 revenue and net loss?

What was Modivcare's adjusted EBITDA for Q2 2024?

How much cash did Modivcare use in operations during Q2 2024?

What is Modivcare's updated 2024 adjusted EBITDA guidance?

What were the key contract wins for Modivcare in Q2 2024?

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