Modivcare Reports Third Quarter 2022 Financial Results and Updates 2022 Guidance

Rhea-AI Summary

Modivcare reported Q3 2022 revenue of $647.8 million, a 31.4% increase from Q3 2021. Despite the revenue growth, the company faced a net loss of $28.5 million or $2.03 per diluted share, primarily due to goodwill impairment related to its equity investment in Matrix. Adjusted EBITDA was $51.8 million, reflecting an 8.0% margin. The company updated its 2022 revenue guidance to a range of $2.450 billion to $2.475 billion and adjusted EBITDA guidance of $210 million to $220 million.

Positive

• Revenue increased to $647.8 million, up 31.4% year-over-year.
• Adjusted EBITDA rose to $51.8 million, or 8.0% of revenue.
• Membership growth of 23% in non-emergency medical transportation.
• 43% revenue growth in the personal care business.

Negative

• Net loss of $28.5 million attributed to goodwill impairment.
• Operating income decreased to $12.4 million, or 1.9% of revenue.
• Adjusted Net Income declined to $22.7 million from $23.1 million in Q3 2021.

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 patient outcomes, today reported financial results for the three and nine months ended September 30, 2022.

Third Quarter 2022 Highlights:

• Revenue of $647.8 million, a 31.4% increase as compared to $493.1 million in Q3 2021
• Net loss of $28.5 million or $2.03 per diluted common share was primarily attributable to a goodwill impairment for Matrix
• Adjusted EBITDA of $51.8 million, Adjusted Net Income of $22.7 million and Adjusted EPS of $1.61
• Net cash used in operating activities during the quarter of $5.7 million
• Cash and cash equivalents of $72.7 million as of September 30, 2022, with $1,000.0 million principal amount of debt outstanding related to the Senior Unsecured Notes due 2025 and 2029
• Undrawn $325.0 million revolving credit facility as of September 30, 2022

“We delivered another solid quarter highlighted by over 30 percent revenue growth as compared to the same quarter last year, driven by 23 percent membership growth from our non-emergency medical transportation business and 43 percent revenue growth from our personal care business,” said Heath Sampson, President and Chief Executive Officer. “Modivcare is a uniquely positioned supportive care platform company focused on addressing the social determinants of health for our country’s most vulnerable population. Our team is focused on executing our plan to provide high-quality care and the best experience to our members while we also progress on cross-selling, bundling, and value-based care initiatives. I am very excited about the opportunity to continue to improve outcomes for our members and reduce costs through our services while creating meaningful long-term shareholder value. I want to thank our team members at Modivcare for their hard work and dedication executing our purpose and vision this quarter.”

Third Quarter 2022 Results

For the third quarter of 2022, the Company reported revenue of $647.8 million, an increase of 31.4% from $493.1 million in the third quarter of 2021.

Operating income was $12.4 million, or 1.9% of revenue, in the third quarter of 2022, compared to operating income of $13.0 million, or 2.6% of revenue, in the third quarter of 2021. Net loss in the third quarter of 2022 was $28.5 million, or $2.03 per diluted common share, compared to net loss of $7.6 million, or $0.54 per diluted common share, in the third quarter of 2021. Our net loss in the third quarter of 2022 is attributable primarily to a loss from our equity investment in Matrix of $26.4 million, net of tax, due to a goodwill impairment taken by one of their segments.

Adjusted EBITDA was $51.8 million, or 8.0% of revenue, in the third quarter of 2022, compared to $44.3 million, or 9.0% of revenue, in the third quarter of 2021.

Adjusted Net Income in the third quarter of 2022 was $22.7 million, or $1.61 per diluted common share, compared to $23.1 million, or $1.63 per diluted common share, in the third quarter of 2021.

The year-over-year increase in revenue was primarily due to incremental revenue of $34.5 million and $12.5 million associated with the acquisitions of Care Finders and VRI, respectively. NEMT revenue also increased year-over-year due to higher trip volume, which drove higher revenue per member in the third quarter of 2022.

Adjusted EBITDA increased in the third quarter of 2022 due to incremental contribution from Care Finders and VRI. This was partially offset by higher corporate general and administrative cost as the Company continued to make investments in its employees and technology.

Updated 2022 Guidance

We are updating our 2022 guidance as follows ($ in millions):

		Updated						Previous
		Low			High			Low			High
Revenue		$	2,450		$	2,475		$	2,375		$	2,400
Adjusted EBITDA		$	210		$	220		$	210		$	220

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

Organizational Consolidation and Change in Segments

We operate four reportable business segments: NEMT, Personal Care, RPM, and Corporate and Other. Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate segment that includes the costs associated with the Company's corporate operations. The operating results of our Corporate segment include our activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of our Matrix investment. The Company reclassified certain costs associated with this reorganization for the three and nine months ended September 30, 2021 to conform to this presentation.

Third Quarter Earnings Conference Call

Modivcare will hold a conference call to discuss its financial results on Thursday, November 3, 2022 at 8:00 a.m. ET. To access the call, please dial:

US toll-free: 1 (888) 428-7458
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. (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 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 EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted G&A expense for the Company and its segments, and Adjusted Net Income and Adjusted EPS for the Company, 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 charges, including severance and organizational consolidation costs and professional services fees, (2) certain transaction and related costs, (3) cash settled equity, (4) stock-based compensation, (5) COVID-19 related costs, net of grant income, 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 is calculated as net income (loss) before: (1) restructuring and related charges, including severance and organizational consolidation costs and professional services fees (2) certain transaction and related costs, (3) cash settled equity, (4) stock-based compensation, (5) equity in net (income) loss of investee, net of tax (6) intangible amortization expense, (7) COVID-19 related costs, net of grant income, (8) transaction related financing expense, and (9) 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 charges, (2) transaction costs, (3) cash settled equity, and (4) stock-based compensation. We do not provide updated 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 events to be materially different from those expressed or implied herein, including but not limited to: government or private insurance program funding reductions or limitations; alternative payment models or the transition of Medicaid and Medicare beneficiaries to Managed Care Organizations, or MCOs; our inability to control reimbursement rates received for our services; cost containment initiatives undertaken by private third-party payors; the effects of a public health emergency; inadequacies in, or security breaches of, our information technology systems, including the systems intended to protect our clients’ privacy and confidential information; any changes in the funding, financial viability or our relationships with our payors; pandemic infectious diseases, including the COVID-19 pandemic; disruptions to our contact center operations caused by health epidemics or pandemics like COVID-19; delays in collection, or non-collection, of our accounts receivable, particularly during any business integration; an impairment of our long-lived assets; any failure to maintain or to develop further reliable, efficient and secure information technology systems; an inability to attract and retain qualified employees; any acquisition or acquisition integration efforts; 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; a 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; 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 that we acquired with our personal care segment; acquired unknown liabilities in connection with the acquisition of our personal care segment; 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 shortages in qualified employees and management; labor disputes or disruptions, in particular in New York; becoming subject to malpractice or other similar claims; and our reliance on others for the financial condition of our equity investment in Matrix.

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. 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 September 30,								Nine months ended September 30,
		2022				2021				2022				2021
Service revenue, net		$	647,782			$	493,059			$	1,850,472			$	1,421,117
Grant income			789				—				4,587				3,500
Operating expenses:
Service expense			534,563				399,272				1,498,108				1,139,170
General and administrative expense			75,889				68,205				232,108				179,595
Depreciation and amortization			25,672				12,608				74,376				36,667
Total operating expenses			636,124				480,085				1,804,592				1,355,432
Operating income			12,447				12,974				50,467				69,185
Other expenses:
Interest expense, net			15,557				17,702				46,429				34,412
Income (loss) before income taxes and equity method investment			(3,110	)			(4,728	)			4,038				34,773
Provision (benefit) for income taxes			(1,053	)			(2,001	)			877				8,409
Equity in net loss of investee, net of tax			26,448				4,845				28,020				1,424
Net income (loss)		$	(28,505	)		$	(7,572	)		$	(24,859	)		$	24,940
Earnings (loss) per common share:
Basic		$	(2.03	)		$	(0.54	)		$	(1.77	)		$	1.77
Diluted		$	(2.03	)		$	(0.54	)		$	(1.77	)		$	1.75
Weighted-average number of common shares outstanding:
Basic			14,051,794				13,993,438				14,041,224				14,102,371
Diluted			14,051,794				13,993,438				14,041,224				14,278,331

Modivcare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
		September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents		$	72,703		$	133,139
Accounts receivable, net			266,177			233,121
Other current assets (1)			42,826			43,574
Total current assets			381,706			409,834
Property and equipment, net			67,413			53,549
Goodwill and intangible assets, net			1,428,210			1,415,000
Equity investment			43,477			83,069
Operating lease right-of-use assets			38,368			43,750
Other long-term assets			30,671			22,223
Total assets		$	1,989,845		$	2,027,425
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$	44,242		$	8,690
Accrued contract payables			243,800			281,586
Accrued expenses and other current liabilities			145,217			123,791
Accrued transportation costs			90,114			103,294
Current portion of operating lease liabilities			10,134			9,873
Total current liabilities			533,507			527,234
Long-term debt, net of deferred financing costs			978,301			975,225
Operating lease liabilities, less current portion			30,595			34,524
Other long-term liabilities (2)			93,294			117,175
Total liabilities			1,635,697			1,654,158
Stockholders' equity
Stockholders' equity			354,148			373,267
Total liabilities and stockholders' equity		$	1,989,845		$	2,027,425

(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)
		Nine months ended September 30,
		2022				2021
Operating activities
Net income (loss)		$	(24,859	)		$	24,940
Depreciation and amortization			74,376				36,667
Stock-based compensation			5,152				4,225
Equity in net loss of investee			38,883				1,978
Deferred income taxes			(31,232	)			(3,295	)
Reduction of right-of-use asset			8,680				8,681
Other non-cash items (1)			1,208				463
Changes in working capital (2)			(26,682	)			101,035
Net cash provided by operating activities			45,526				174,694
Investing activities
Purchase of property and equipment			(25,518	)			(13,852	)
Acquisition, net of cash acquired			(78,872	)			(667,228	)
Net cash used in investing activities			(104,390	)			(681,080	)
Financing activities
Proceeds from debt			100,000				625,000
Repayment of debt			(100,000	)			(125,000	)
Debt issuance costs			(2,415	)			(13,486	)
Repurchase of common stock, for treasury			—				(39,040	)
Proceeds from common stock issued pursuant to stock option exercise			1,237				3,099
Restricted stock surrendered for employee tax payment			(649	)			(851	)
Net cash provided by (used in) financing activities			(1,827	)			449,722
Net change in cash, cash equivalents and restricted cash			(60,691	)			(56,664	)
Cash, cash equivalents and restricted cash at beginning of period			133,422				183,356
Cash, cash equivalents and restricted cash at end of period		$	72,731			$	126,692

(1)		Includes provision for doubtful accounts and amortization of deferred financing costs and debt discount.
(2)		Includes accounts receivable and other 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 September 30, 2022
		NEMT				Personal Care			RPM			Corporate (3)				Total
Service revenue, net		$	459,796			$	169,226		$	18,760		$	—			$	647,782
Grant income			—				789			—			—				789
Operating expenses:
Service expense			394,981				132,746			6,836			—				534,563
General and administrative expense			31,815				22,057			5,816			16,201				75,889
Depreciation and amortization			7,079				12,919			5,467			207				25,672
Total operating expenses			433,875				167,722			18,119			16,408				636,124
Operating income (loss)			25,921				2,293			641			(16,408	)			12,447
Other expenses:
Interest expense, net			—				—			—			15,557				15,557
Income (loss) before income taxes and equity method investment			25,921				2,293			641			(31,965	)			(3,110	)
Provision (benefit) for income taxes			6,978				661			179			(8,871	)			(1,053	)
Equity in net loss (income) of investee, net of tax			(208	)			—			—			26,656				26,448
Net income (loss)			19,151				1,632			462			(49,750	)			(28,505	)
Interest expense, net			—				—			—			15,557				15,557
Provision (benefit) for income taxes			6,978				661			179			(8,871	)			(1,053	)
Depreciation and amortization			7,079				12,919			5,467			207				25,672
EBITDA			33,208				15,212			6,108			(42,857	)			11,671
Restructuring and related charges (1)			902				582			39			565				2,088
Transaction costs (2)			5,506				2,231			471			2,691				10,899
Cash settled equity			—				—			—			82				82
Stock-based compensation			—				—			—			1				1
COVID-19 related costs, net of grant income			(51	)			659			—			—				608
Equity in net loss (income) of investee, net of tax			(208	)			—			—			26,656				26,448
Adjusted EBITDA		$	39,357			$	18,684		$	6,618		$	(12,862	)		$	51,797

(1)		Restructuring and related charges include severance, organizational consolidation costs and professional fees.
(2)		Transaction costs include integration efforts at recently acquired subsidiaries related to Sarbanes-Oxley Act of 2002 ("SOX") compliance and acquisition costs.
(3)		Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate segment that includes the costs associated with the Company's corporate operations. Through this reorganization, it was also determined that the Matrix Investment is no longer a reportable segment, and is now reported within the Corporate segment. Prior period segment amounts have been reclassified to conform to the current presentation.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Three months ended September 30, 2021
		NEMT			Personal Care			RPM			Corporate (3)				Total
Service revenue, net		$	372,992		$	118,503		$	1,564		$	—			$	493,059
Grant income			—			—			—			—				—
Operating expenses:
Service expense			304,398			94,107			767			—				399,272
General and administrative expense			29,875			15,802			216			22,312				68,205
Depreciation and amortization			7,496			4,912			200			—				12,608
Total operating expenses			341,769			114,821			1,183			22,312				480,085
Operating income (loss)			31,223			3,682			381			(22,312	)			12,974
Interest expense, net			—			—			—			17,702				17,702
Income (loss) before income taxes and equity method investment			31,223			3,682			381			(40,014	)			(4,728	)
Provision (benefit) for income taxes			6,956			838			106			(9,901	)			(2,001	)
Equity in net loss of investee, net of tax			—			—			—			4,845				4,845
Net income (loss)			24,267			2,844			275			(34,958	)			(7,572	)
Interest expense, net			—			—			—			17,702				17,702
Provision (benefit) for income taxes			6,956			838			106			(9,901	)			(2,001	)
Depreciation and amortization			7,496			4,912			200			—				12,608
EBITDA			38,719			8,594			581			(27,157	)			20,737
Restructuring and related charges (1)			2,521			—			—			717				3,238
Transaction costs (2)			376			1,177			—			9,739				11,292
Cash settled equity			—			—			—			2,600				2,600
Stock-based compensation			—			—			—			1,218				1,218
COVID-19 related costs, net of grant income			165			229			—			—				394
Equity in net loss of investee, net of tax			—			—			—			4,845				4,845
Adjusted EBITDA		$	41,781		$	10,000		$	581		$	(8,038	)		$	44,324

(1)		Restructuring and related charges include severance, organizational consolidation costs and professional fees.
(2)		Transaction costs include Circulation MIP costs and certain transaction-related expenses.
(3)		Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate segment that includes the costs associated with the Company's corporate operations. Through this reorganization, it was also determined that the Matrix Investment is no longer a reportable segment, and is now reported within the Corporate segment. Prior period segment amounts have been reclassified to conform to the current presentation.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Nine months ended September 30, 2022
		NEMT				Personal Care				RPM				Corporate (3)				Total
Service revenue, net		$	1,309,449			$	491,661			$	49,362			$	—			$	1,850,472
Grant income			—				4,587				—				—				4,587
Operating expenses:
Service expense			1,100,801				379,423				17,884				—				1,498,108
General and administrative expense			102,736				68,536				17,520				43,316				232,108
Depreciation and amortization			21,576				37,976				14,201				623				74,376
Total operating expenses			1,225,113				485,935				49,605				43,939				1,804,592
Operating income (loss)			84,336				10,313				(243	)			(43,939	)			50,467
Interest expense, net			—				—				—				46,429				46,429
Income (loss) before income taxes and equity method investment			84,336				10,313				(243	)			(90,368	)			4,038
Provision (benefit) for income taxes			23,116				2,902				(68	)			(25,073	)			877
Equity in net loss (income) of investee, net of tax			(143	)			—				—				28,163				28,020
Net income (loss)			61,363				7,411				(175	)			(93,458	)			(24,859	)
Interest expense, net			—				—				—				46,429				46,429
Provision (benefit) for income taxes			23,116				2,902				(68	)			(25,073	)			877
Depreciation and amortization			21,576				37,976				14,201				623				74,376
EBITDA			106,055				48,289				13,958				(71,479	)			96,823
Restructuring and related charges (1)			11,359				763				63				950				13,135
Transaction costs (2)			5,506				6,334				2,753				7,719				22,312
Cash settled equity			—				—				—				89				89
Stock-based compensation			—				190				86				3,861				4,137
COVID-19 related costs, net of grant income			105				(2,370	)			—				—				(2,265	)
Equity in net loss (income) of investee, net of tax			(143	)			—				—				28,163				28,020
Adjusted EBITDA		$	122,882			$	53,206			$	16,860			$	(30,697	)		$	162,251

(1)		Restructuring and related charges include severance, organizational consolidation costs and professional fees.
(2)		Transaction costs include SOX integration efforts at recently acquired subsidiaries and acquisition costs.
(3)		Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate segment that includes the costs associated with the Company's corporate operations. Through this reorganization, it was also determined that the Matrix Investment is no longer a reportable segment, and is now reported within the Corporate segment. Prior period segment amounts have been reclassified to conform to the current presentation.

Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
		Nine months ended September 30, 2021
		NEMT			Personal Care				RPM			Corporate (3)				Total
Service revenue, net		$	1,081,168		$	338,385			$	1,564		$	—			$	1,421,117
Grant income			—			3,500				—			—				3,500
Operating expenses:
Service expense			869,470			268,933				767			—				1,139,170
General and administrative expense			85,961			45,606				216			47,812				179,595
Depreciation and amortization			21,744			14,723				200			—				36,667
Total operating expenses			977,175			329,262				1,183			47,812				1,355,432
Operating income (loss)			103,993			12,623				381			(47,812	)			69,185
Interest expense, net			—			—				—			34,412				34,412
Income (loss) before income taxes and equity method investment			103,993			12,623				381			(82,224	)			34,773
Provision (benefit) for income taxes			26,379			3,194				106			(21,270	)			8,409
Equity in net loss of investee, net of tax			—			—				—			1,424				1,424
Net income (loss)			77,614			9,429				275			(62,378	)			24,940
Interest expense, net			—			—				—			34,412				34,412
Provision (benefit) for income taxes			26,379			3,194				106			(21,270	)			8,409
Depreciation and amortization			21,744			14,723				200			—				36,667
EBITDA			125,737			27,346				581			(49,236	)			104,428
Restructuring and related charges (1)			10,059			—				—			1,480				11,539
Transaction costs (2)			586			3,467				—			14,383				18,436
Cash settled equity			—			—				—			9,145				9,145
Stock-based compensation			—			76				—			3,707				3,783
COVID-19 related costs, net of grant income			618			(1,871	)			—			—				(1,253	)
Equity in net loss of investee, net of tax			—			—				—			1,424				1,424
Adjusted EBITDA		$	137,000		$	29,018			$	581		$	(19,097	)		$	147,502

(1)		Restructuring and related charges include severance, organizational consolidation costs and professional fees.
(2)		Transaction costs include Circulation management incentive plan ("MIP") costs and certain transaction-related expenses.
(3)		Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate segment that includes the costs associated with the Company's corporate operations. Through this reorganization, it was also determined that the Matrix Investment is no longer a reportable segment, and is now reported within the Corporate segment. Prior period segment amounts have been reclassified to conform to the current presentation.

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 September 30,								Nine months ended September 30,
			2022				2021				2022				2021
Net income (loss)		$	(28,505	)		$	(7,572	)		$	(24,859	)		$	24,940
Restructuring and related charges(1)			2,088				3,238				13,135				11,539
Transaction costs(2)			10,899				11,292				22,312				18,436
Cash settled equity			82				2,600				89				9,145
Stock-based compensation			1				1,218				4,137				3,783
Equity in net loss of investee, net of tax			26,448				4,845				28,020				1,424
Intangible amortization expense			20,727				9,177				59,978				27,827
Transaction related financing expense			—				6,630				—				6,630
COVID-19 related costs, net of grant income			608				394				(2,265	)			(1,253	)
Tax effected impact of adjustments			(9,649	)			(8,763	)			(26,964	)			(20,034	)
Adjusted Net Income		$	22,699			$	23,059			$	73,583			$	82,437
Adjusted EPS		$	1.61			$	1.63			$	5.21			$	5.77
Diluted weighted-average number of common shares outstanding			14,110,928				14,161,806				14,119,598				14,278,331

(1)		Restructuring and related charges include severance, organizational consolidation costs and professional fees.
(2)		Transaction costs include certain transaction-related expenses and SOX integration efforts.

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands, except for statistical data)
	Three months ended											Nine months ended											Three months ended
	September 30, 2022				September 30, 2021				% Change			September 30, 2022				September 30, 2021				% Change			June 30, 2022				QoQ % Change
NEMT Segment
Service revenue, net	$	459,796			$	372,992			23.3	%		$	1,309,449			$	1,081,168			21.1	%		$	448,733			2.5	%
Purchased services expense		340,138				256,750			32.5	%			935,298				725,059			29.0	%			317,213			7.2	%
Payroll and other expense		54,843				47,648			15.1	%			165,503				144,411			14.6	%			56,511			(3.0	)%
Service expense	$	394,981			$	304,398			29.8	%		$	1,100,801			$	869,470			26.6	%		$	373,724			5.7	%
Gross profit	$	64,815			$	68,594			(5.5	)%		$	208,648			$	211,698			(1.4	)%		$	75,009			(13.6	)%
Gross margin		14.1	%			18.4	%						15.9	%			19.6	%						16.7	%
G&A expense	$	31,815			$	29,875			6.5	%		$	102,736			$	85,961			19.5	%		$	33,588			(5.3	)%
G&A expense adjustments:
Restructuring and related charges		902				2,521			(64.2	)%			11,359				10,059			12.9	%			4,852			(81.4	)%
Transaction costs		5,506				376			1364.4	%			5,506				586			—	%			—			—	%
Adjusted G&A expense	$	25,407			$	26,978			(5.8	)%		$	85,871			$	75,316			14.0	%		$	28,736			(11.6	)%
Adjusted G&A expense % of revenue		5.5	%			7.2	%						6.6	%			7.0	%						6.4	%
Net income	$	19,151			$	24,267			(21.1	)%		$	61,363			$	77,614			(20.9	)%		$	24,466			(21.7	)%
Net income margin		4.2	%			6.5	%						4.7	%			7.2	%						5.5	%
Adjusted EBITDA	$	39,357			$	41,781			(5.8	)%		$	122,882			$	137,000			(10.3	)%		$	46,307			(15.0	)%
Adjusted EBITDA margin		8.6	%			11.2	%						9.4	%			12.7	%						10.3	%
Total paid trips (in thousands)		8,045				6,928			16.1	%			22,987				20,204			13.8	%			7,831			2.7	%
Average monthly members (in thousands)		36,026				29,387			22.6	%			33,998				29,863			13.8	%			33,792			6.6	%
Revenue per member per month	$	4.25			$	4.23			0.5	%		$	4.28			$	4.02			6.5	%		$	4.43			(4.1	)%
Revenue per trip	$	57.15			$	53.84			6.1	%		$	56.96			$	53.51			6.4	%		$	57.30			(0.3	)%
Monthly utilization		7.4	%			7.9	%						7.5	%			7.5	%						7.7	%
Purchased services per trip	$	42.28			$	37.06			14.1	%		$	40.69			$	35.89			13.4	%		$	40.51			4.4	%
Payroll and other per trip	$	6.82			$	6.88			(0.9	)%		$	7.20			$	7.15			0.7	%		$	7.22			(5.5	)%
Total service expense per trip	$	49.10			$	43.94			11.7	%		$	47.89			$	43.04			11.3	%		$	47.73			2.9	%

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands, except for statistical data)
	Three months ended											Nine months ended											Three months ended
	September 30, 2022				September 30, 2021				% Change			September 30, 2022				September 30, 2021				% Change			June 30, 2022				QoQ % Change
Personal Care Segment
Service revenue, net	$	169,226			$	118,503			42.8	%		$	491,661			$	338,385			45.3	%		$	162,737			4.0	%
Service expense		132,746				94,107			41.1	%			379,423				268,933			41.1	%			124,445			6.7	%
Gross profit	$	36,480			$	24,396			49.5	%		$	112,238			$	69,452			61.6	%		$	38,292			(4.7	)%
Gross Margin		21.6	%			20.6	%						22.8	%			20.5	%						23.5	%
G&A expense	$	22,057			$	15,802			39.6	%		$	68,536			$	45,606			50.3	%		$	23,346			(5.5	)%
G&A expense adjustments
Restructuring and related charges		582				—			—	%			763				—			—	%			—			—	%
Transaction costs		2,231				1,177			89.5	%			6,334				3,467			82.7	%			2,830			(21.2	)%
Stock-based compensation		—				—			—	%			190				76			150.0	%			173			(100.0	)%
Adjusted G&A expense	$	19,244			$	14,625			31.6	%		$	61,249			$	42,063			45.6	%		$	20,343			(5.4	)%
Adjusted G&A expense % of revenue		11.4	%			12.3	%						12.5	%			12.4	%						12.5	%
Net income	$	1,632			$	2,844			(42.6	)%		$	7,411			$	9,429			(21.4	)%		$	4,123			(60.4	)%
Net income margin		1.0	%			2.4	%						1.5	%			2.8	%						2.5	%
Adjusted EBITDA	$	18,684			$	10,000			86.8	%		$	53,206			$	29,018			83.4	%		$	17,901			4.4	%
Adjusted EBITDA margin		11.0	%			8.4	%						10.8	%			8.6	%						11.0	%
Total hours (in thousands)		6,836				5,075			34.7	%			20,076				14,331			40.1	%			6,705			2.0	%
Revenue per hour	$	24.76			$	23.35			6.0	%		$	24.49			$	23.61			3.7	%		$	24.27			2.0	%
Service expense per hour	$	19.42			$	18.54			4.7	%		$	18.90			$	18.77			0.7	%		$	18.56			4.6	%

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands, except for statistical data)
	Three months ended										Nine months ended										Three months ended
	September 30, 2022				September 30, 2021				% Change		September 30, 2022				September 30, 2021				% Change		June 30, 2022				QoQ % Change
RPM Segment
Service revenue, net	$	18,760			$	1,564			N/M		$	49,362			$	1,564			N/M		$	16,745			12.0	%
Service expense		6,836				767			N/M			17,884				767			N/M			6,061			12.8	%
Gross profit	$	11,924			$	797			N/M		$	31,478			$	797			N/M		$	10,684			11.6	%
Gross Margin		63.6	%			51.0	%					63.8	%			51.0	%					63.8	%
G&A expense	$	5,816			$	216			N/M		$	17,520			$	216			N/M		$	6,742			(13.7	)%
G&A expense adjustments
Restructuring and related charges		39				—			N/M			63				—			N/M			—			—	%
Transaction costs		471				—			N/M			2,753				—			N/M			1,635			(71.2	)%
Stock-based compensation		—				—			N/M			86				—			N/M			57			(100.0	)%
Adjusted G&A expense	$	5,306			$	216			N/M		$	14,618			$	216			N/M		$	5,050			5.1	%
Adjusted G&A expense % of revenue		28.3	%			13.8	%					29.6	%			13.8	%					30.2	%
Net income (loss)	$	462			$	275			N/M		$	(175	)		$	275			N/M		$	(475	)		(197.3	)%
Net income (loss) margin		2.5	%			17.6	%					(0.4	)%			17.6	%					(2.8	)%
Adjusted EBITDA	$	6,618			$	581			N/M		$	16,860			$	581			N/M		$	5,634			17.5	%
Adjusted EBITDA margin		35.3	%			37.1	%					34.2	%			37.1	%					33.6	%
Average monthly members (in thousands)		230			N/M				N/M			201			N/M				N/M			203			13.3	%
Revenue per member per month	$	27.19			N/M				N/M		$	27.29			N/M				N/M		$	27.50			(1.1	)%
Service expense per member per month	$	9.91			N/M				N/M		$	9.89			N/M				N/M		$	9.95			(0.4	)%

N/M - Not Meaningful. The RPM Segment was established with the acquisition of VRI on September 22, 2021 and as such, these figures are not meaningful for comparative purposes.

Modivcare Inc.
Unaudited Key Statistical and Financial Data
(in thousands)
	Three months ended											Nine months ended											Three months ended
	September 30, 2022				September 30, 2021				% Change			September 30, 2022				September 30, 2021				% Change			June 30, 2022				QoQ % Change
Corporate and Other Segment
G&A expense	$	16,201			$	22,312			(27.4	)%		$	43,316			$	47,812			(9.4	)%		$	15,735			3.0	%
G&A expense adjustments
Restructuring and related charges		565				717			(21.2	)%			950				1,480			(35.8	)%			354			59.6	%
Transaction costs		2,691				9,739			(72.4	)%			7,719				14,383			(46.3	)%			3,237			(16.9	)%
Cash settled equity		82				2,600			(96.8	)%			89				9,145			(99.0	)%			20			310.0	%
Stock-based compensation		1				1,218			(99.9	)%			3,861				3,707			4.2	%			2,440			(100.0	)%
Adjusted G&A expense	$	12,862			$	8,038			60.0	%		$	30,697			$	19,097			60.7	%		$	9,684			32.8	%
Adjusted G&A expense % of consolidated revenue		2.0	%			1.6	%						1.7	%			1.3	%						1.5	%

	Three months ended											Nine months ended											Three months ended
	September 30, 2022				September 30, 2021				% Change			September 30, 2022				September 30, 2021				% Change			June 30, 2022				QoQ % Change
Consolidated Modivcare
G&A expense	$	75,889			$	68,205			11.3	%		$	232,108			$	179,595			29.2	%		$	79,411			(4.4	)%
G&A expense adjustments
Restructuring and related charges		2,088				3,238			(35.5	)%			13,135				11,539			13.8	%			5,206			(59.9	)%
Transaction costs		10,899				11,292			(3.5	)%			22,312				18,436			21.0	%			7,702			41.5	%
Cash settled equity		82				2,600			(96.8	)%			89				9,145			(99.0	)%			20			310.0	%
Stock-based compensation		1				1,218			(99.9	)%			4,137				3,783			9.4	%			2,670			(100.0	)%
Adjusted G&A expense	$	62,819			$	49,857			26.0	%		$	192,435			$	136,692			40.8	%		$	63,813			(1.6	)%
Adjusted G&A expense % of revenue		9.7	%			10.1	%						10.4	%			9.6	%						10.2	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221103005255/en/

Investor Relations Contact

Kevin Ellich,

Head of Investor Relations

(303) 728-7012

Kevin.Ellich@modivcare.com

Source: Modivcare Inc.

FAQ

What were Modivcare's Q3 2022 earnings results?

Modivcare reported Q3 2022 revenue of $647.8 million, a net loss of $28.5 million, and adjusted EBITDA of $51.8 million.

What is Modivcare's updated guidance for 2022?

Modivcare updated its 2022 revenue guidance to between $2.450 billion and $2.475 billion, with adjusted EBITDA guidance of $210 million to $220 million.

What factors contributed to Modivcare's revenue growth?

Revenue growth was driven by a 23% increase in membership in the non-emergency medical transportation segment and a 43% increase in the personal care segment.

What caused Modivcare's net loss in Q3 2022?

The net loss of $28.5 million was primarily due to a goodwill impairment related to Modivcare's investment in Matrix.

When is Modivcare's Q3 2022 earnings conference call?

Modivcare will hold its Q3 2022 earnings conference call on November 3, 2022, at 8:00 a.m. ET.