Modivcare Reports Third Quarter 2023 Financial Results; Maintains Guidance

Rhea-AI Summary

Modivcare Inc. reported financial results for Q3 2023, with service revenue of $686.9 million, a 6.0% increase compared to the same period last year. The company had a net loss of $4.3 million or $0.30 per diluted common share. Adjusted EBITDA was $51.3 million, adjusted net income was $20.5 million, and adjusted EPS was $1.44 per diluted common share. Cash provided by operating activities was $53.5 million, and free cash flow was $44.7 million. Contract receivables increased by $9.5 million to $129.3 million, and contract payables increased by $24.5 million to $133.6 million. The company repaid $43.5 million on its revolving credit facility, reducing the balance drawn to $83.0 million. Modivcare also won $138.0 million of NEMT managed Medicaid total contract value during the quarter and was awarded a state Medicaid expansion in the northeast.

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 nine months ended September 30, 2023.

Third Quarter 2023 Highlights:

• Service revenue of $686.9 million, a 6.0% increase as compared to $647.8 million in the third quarter of 2022
• Net loss of $4.3 million or $0.30 per diluted common share
• Adjusted EBITDA⁽¹⁾ of $51.3 million, adjusted net income⁽¹⁾ of $20.5 million and adjusted EPS⁽¹⁾ of $1.44 per diluted common share
• Cash provided by operating activities during the quarter of $53.5 million and free cash flow⁽²⁾ of $44.7 million
• Contract receivables increased by $9.5 million to $129.3 million and contract payables increased by $24.5 million to $133.6 million, resulting in net contract payables of $4.3 million as of September 30, 2023
• Repaid $43.5 million on the $325.0 million revolving credit facility, reducing the balance drawn to $83.0 million as of September 30, 2023
• $138.0 million of NEMT managed Medicaid total contract value (TCV) won during third quarter 2023; awarded a state Medicaid expansion in the northeast that will be implemented in mid-2024 once finalized; national MCO contract won earlier in 2023 implemented during the quarter

(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 $8.9 million that is included in our purchase of property and equipment line in our Statements of Cash Flows provided below.

"We're pleased to announce strong Q3 2023 results, highlighted by adjusted EBITDA of $51 million, $54 million of cash flow from operations, and $45 million of free cash flow," said L. Heath Sampson, President and CEO. "We have addressed internal inefficiencies in our operations and are now leveraging new technologies to deliver high quality care at a lower cost. The net result can be seen in our strong profitability and cash flow this quarter, which enabled us to reduce our outstanding revolver balance by one-third and improved our leverage ratio. Since taking on the role of CEO a year ago, our transformation has been comprehensive. We've initiated foundational shifts in our operating model, transitioning to a more unified, customer-centric strategy. While making these pivotal investments, we've maintained focus on our balance sheet. By generating cash, we aim to demonstrate to the market that our platform is not only resilient in the face of short-term challenges but also well-positioned for sustainable growth and margin expansion."

Mr. Sampson continued, "In our NEMT business, we've achieved meaningful operational improvements, including a notable sequential uptick in our margins. While navigating near-term complexities like Medicaid redetermination, we've excelled in customer service level agreements, leading to significant new contract wins. Our personal care services segment has made rapid strides in 2023, setting the stage for improved growth and margins in 2024. Our remote patient monitoring segment continues to grow with high margins and acts as a digital gateway for members to access care. When integrated with our NEMT and personal care services, we can unlock unique customer value and diversify our revenue streams. In summary, our transformation is not merely aspirational; it's a tangible reality that is driving measurable outcomes and positioning us for long-term success. I want to extend my deepest gratitude to our dedicated team, many of whom are managing multiple change-oriented roles in addition to their core responsibilities."

2023 Guidance

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

	2023 Guidance
	Low				High
Revenue	$	2,750			$	2,800
Adjusted EBITDA	$	200			$	210

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

Third Quarter 2023 Results

For the third quarter of 2023, the Company reported $686.9 million in revenue, a 6.0% increase from $647.8 million in the third quarter of 2022. The revenue growth was driven by a 9.7% increase in total paid trips in our NEMT segment coupled with a 2.3% increase in hours worked and a 3.9% increase in rate per hour in our personal care services segment, partially offset by a 3.6% decrease in revenue per paid trip in our NEMT segment.

Our operating income was $12.0 million, or 1.8% of revenue, in the third quarter of 2023, compared to operating income of $12.4 million, or 1.9% of revenue, in the third quarter of 2022. Net loss in the third quarter of 2023 was $4.3 million, or $0.30 per diluted common share, compared to net loss of $28.5 million, or $2.03 per diluted common share, in the third quarter of 2022. While our operating income remained relatively flat period over period, the net loss in 2022 is higher due to our allocated percentage of a one-time impairment taken at our Matrix investment.

Adjusted EBITDA was $51.3 million, or 7.5% of revenue, in the third quarter of 2023, compared to $51.8 million, or 8.0% of revenue, in the third quarter of 2022. Our Adjusted EBITDA was largely consistent, primarily related to a $4.1 million decrease in adjusted EBITDA at our NEMT segment, offset by a $4.1 million increase in adjusted EBITDA at our corporate segment. The NEMT segment's decrease was driven by increased payroll and other expense per trip and higher than expected trip volume. Accordingly, adjusted net income in the third quarter of 2023 was $20.5 million, or $1.44 per diluted common share, compared to $22.7 million, or $1.61 per diluted common share, in the third quarter of 2022.

Cash generated from operations during the quarter was $53.5 million as compared to $5.7 million of cash used in operations during the third quarter of 2022. The primary source of cash during the quarter was a $24.5 million build in contract payables, coupled with a $21.3 million decrease in accounts receivable. We used $43.5 million of this cash to pay down our revolving credit facility and ended the quarter with $83.0 million drawn.

Third Quarter Earnings Conference Call

Modivcare will hold a conference call to discuss its financial results on Friday, November 3, 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. ("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 overall health outcomes. Modivcare is a provider of non-emergency medical transportation (NEMT), personal care services (PCS), and remote patient monitoring (RPM) solutions. 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, and also free cash flow for the Company, which is a liquidity measure that is 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) stock-based compensation, (5) impairment of goodwill, as applicable, (6) equity in net (income) loss of investee, net of tax, and (7) COVID-19 related costs, net of grant income. 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) stock-based compensation, (5) impairment of goodwill, as applicable, (6) equity in net (income) loss of investee, net of tax (7) intangible asset amortization expense, (8) COVID-19 related costs, net of grant income, 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 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 Statements of Cash Flows. Reconciliations of the non-GAAP financial measures 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 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 liquidity measure is included because it 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 the 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 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 September 30,								Nine months ended September 30,
			2023				2022				2023				2022
Service revenue, net		$	686,925			$	647,782			$	2,048,338			$	1,850,472
Grant income			551				789				4,649				4,587
Operating expenses:
Service expense			579,214				534,563				1,718,735				1,498,108
General and administrative expense			70,142				75,889				229,095				232,108
Depreciation and amortization			26,077				25,672				77,679				74,376
Impairment of goodwill			—				—				183,100				—
Total operating expenses			675,433				636,124				2,208,609				1,804,592
Operating income (loss)			12,043				12,447				(155,622	)			50,467
Interest expense, net			17,844				15,557				50,769				46,429
Income (loss) before income taxes and equity method investment			(5,801	)			(3,110	)			(206,391	)			4,038
Income tax (provision) benefit			1,659				1,053				4,362				(877	)
Equity in net income (loss) of investee, net of tax			(160	)			(26,448	)			2,821				(28,020	)
Net loss		$	(4,302	)		$	(28,505	)		$	(199,208	)		$	(24,859	)
Loss per common share:
Basic		$	(0.30	)		$	(2.03	)		$	(14.06	)		$	(1.77	)
Diluted		$	(0.30	)		$	(2.03	)		$	(14.06	)		$	(1.77	)
Weighted-average number of common shares outstanding:
Basic			14,182,839				14,051,794				14,169,537				14,041,224
Diluted			14,182,839				14,051,794				14,169,537				14,041,224

Modivcare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
		September 30, 2023				December 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	8,070			$	14,451
Accounts receivable, net			202,701				223,210
Contract receivables			129,275				71,131
Other current assets(1)			47,895				37,362
Total current assets			387,941				346,154
Property and equipment, net			81,419				69,138
Goodwill			785,554				968,654
Intangible assets, net			380,591				439,409
Equity investment			45,207				41,303
Operating lease right-of-use assets			39,744				39,405
Other long-term assets			42,630				40,209
Total assets		$	1,763,086			$	1,944,272
Liabilities and stockholders' equity
Current liabilities:
Accounts payable			41,834				54,959
Accrued contract payables			133,576				194,287
Accrued expenses and other current liabilities			146,564				135,860
Accrued transportation costs			102,974				96,851
Current portion of operating lease liabilities			8,902				9,640
Short-term borrowings			83,000				—
Total current liabilities			516,850				491,597
Long-term debt, net of deferred financing costs			982,630				979,361
Operating lease liabilities, less current portion			33,397				32,088
Other long-term liabilities(2)			71,348				86,670
Total liabilities			1,604,225				1,589,716
Stockholders' equity
Stockholders' equity			158,861				354,556
Total liabilities and stockholders' equity		$	1,763,086			$	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)
	Three months ended September 30,								Nine months ended September 30,
		2023				2022				2023				2022
Operating activities
Net loss	$	(4,302	)		$	(28,505	)		$	(199,208	)		$	(24,859	)
Depreciation and amortization		26,077				25,672				77,679				74,376
Stock-based compensation		1,743				656				4,029				5,152
Equity in net (income) loss of investee		222				36,525				(3,915	)			38,883
Deferred income taxes		(4,971	)			(16,739	)			(15,235	)			(31,232	)
Impairment of goodwill		—				—				183,100				—
Reduction of right-of-use asset		2,924				2,923				9,875				8,680
Other non-cash items(1)		1,594				1,925				1,486				(4,570	)
Changes in operating assets and liabilities:
Contract receivables		(9,512	)			(13,562	)			(58,143	)			(35,580	)
Contract payables		24,483				(37,938	)			(60,710	)			(37,786	)
Other working capital items(2)		15,289				23,363				3,715				52,462
Net cash provided by (used in) operating activities		53,547				(5,680	)			(57,327	)			45,526
Investing activities
Purchase of property and equipment		(8,878	)			(9,619	)			(31,143	)			(25,518	)
Acquisitions, net of cash acquired		—				(11	)			—				(78,872	)
Net cash used in investing activities		(8,878	)			(9,630	)			(31,143	)			(104,390	)
Financing activities
Proceeds from short-term borrowings		(43,500	)			—				83,000				—
Debt issuance costs		—				—				(376	)			(2,415	)
Proceeds from common stock issued pursuant to stock option exercise		—				99				31				1,237
Restricted stock surrendered for employee tax payment		(21	)			(42	)			(861	)			(649	)
Other financing activities		—				—				315				—
Net cash provided by (used in) financing activities		(43,521	)			57				82,109				(1,827	)
Net change in cash, cash equivalents and restricted cash		1,148				(15,253	)			(6,361	)			(60,691	)
Cash, cash equivalents and restricted cash at beginning of period		7,466				87,984				14,975				133,422
Cash, cash equivalents and restricted cash at end of period	$	8,614			$	72,731			$	8,614			$	72,731

(1)		Includes amortization of deferred financing costs and debt discount and other assets.
(2)		Includes accounts receivable and other receivables, prepaid expenses and other current assets, 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, 2023
	NEMT				PCS				RPM				Corporate and Other				Total
Service revenue, net	$	485,951			$	179,979			$	19,779			$	1,216			$	686,925
Grant income		—				551				—				—				551
Operating expenses:
Service expense		428,021				143,078				6,934				1,181				579,214
General and administrative expense		25,433				20,252				5,685				18,772				70,142
Depreciation and amortization		6,814				12,850				6,174				239				26,077
Total operating expenses		460,268				176,180				18,793				20,192				675,433
Operating income (loss)		25,683				4,350				986				(18,976	)			12,043
Interest expense, net		—				—				—				17,844				17,844
Income (loss) before income taxes and equity method investment		25,683				4,350				986				(36,820	)			(5,801	)
Income tax (provision) benefit		(6,994	)			(1,208	)			(279	)			10,140				1,659
Equity in net income (loss) of investee, net of tax		142				—				—				(302	)			(160	)
Net income (loss)		18,831				3,142				707				(26,982	)			(4,302	)
Interest expense, net		—				—				—				17,844				17,844
Income tax provision (benefit)		6,994				1,208				279				(10,140	)			(1,659	)
Depreciation and amortization		6,814				12,850				6,174				239				26,077
EBITDA		32,639				17,200				7,160				(19,039	)			37,960
Restructuring and related costs(1)		2,711				—				—				6,205				8,916
Transaction and integration costs		101				431				22				605				1,159
Settlement related costs		(25	)			—				—				1,474				1,449
Stock-based compensation		—				—				—				1,690				1,690
Equity in net (income) loss of investee, net of tax		(142	)			—				—				302				160
Adjusted EBITDA	$	35,284			$	17,631			$	7,182			$	(8,763	)		$	51,334

(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 September 30, 2022
	NEMT				PCS				RPM				Corporate and Other				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
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	)
Income tax (provision) benefit		(6,978	)			(661	)			(179	)			8,871				1,053
Equity in net income (loss) 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
Income tax provision (benefit)		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 costs(1)		902				582				39				565				2,088
Transaction and integration costs(2)		6				2,231				471				2,191				4,899
Settlement related costs		5,500				—				—				500				6,000
Stock-based compensation(3)		—				—				—				83				83
COVID-19 related costs, net of grant income		(51	)			659				—				—				608
Equity in net (income) loss 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 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.
(3)		Stock-based compensation includes cash settled equity balances.

Modivcare Inc. Unaudited Reconciliation of Non-GAAP Financial Measures Segment Information and Adjusted EBITDA (in thousands)
	Nine months ended September 30, 2023
	NEMT				PCS				RPM				Corporate and Other				Total
Service revenue, net	$	1,452,389			$	534,435			$	57,702			$	3,812			$	2,048,338
Grant income		—				4,649				—				—				4,649
Operating expenses:
Service expense		1,277,604				417,636				20,129				3,366				1,718,735
General and administrative expense		87,645				63,480				16,781				61,189				229,095
Depreciation and amortization		20,319				38,590				18,087				683				77,679
Impairment of goodwill		—				137,331				45,769				—				183,100
Total operating expenses		1,385,568				657,037				100,766				65,238				2,208,609
Operating income (loss)		66,821				(117,953	)			(43,064	)			(61,426	)			(155,622	)
Interest expense, net		—				—				—				50,769				50,769
Income (loss) before income taxes and equity method investment		66,821				(117,953	)			(43,064	)			(112,195	)			(206,391	)
Income tax (provision) benefit		(18,014	)			(5,452	)			(765	)			28,593				4,362
Equity in net income (loss) of investee, net of tax		984				—				—				1,837				2,821
Net income (loss)		49,791				(123,405	)			(43,829	)			(81,765	)			(199,208	)
Interest expense, net		—				—				—				50,769				50,769
Income tax provision (benefit)		18,014				5,452				765				(28,593	)			(4,362	)
Depreciation and amortization		20,319				38,590				18,087				683				77,679
EBITDA		88,124				(79,363	)			(24,977	)			(58,906	)			(75,122	)
Restructuring and related costs(1)		11,865				—				—				21,606				33,471
Transaction and integration costs		101				881				70				1,834				2,886
Settlement related costs		250				—				—				8,683				8,933
Stock-based compensation		—				—				—				3,485				3,485
Impairment of goodwill		—				137,331				45,769				—				183,100
Equity in net (income) loss of investee, net of tax		(984	)			—				—				(1,837	)			(2,821	)
Adjusted EBITDA	$	99,356			$	58,849			$	20,862			$	(25,135	)		$	153,932

(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)
	Nine months ended September 30, 2022
	NEMT				PCS				RPM				Corporate and Other				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
Income tax (provision) benefit		(23,116	)			(2,902	)			68				25,073				(877	)
Equity in net income (loss) 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
Income tax provision (benefit)		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 costs(1)		11,359				763				63				950				13,135
Transaction and integration costs(2)		6				6,334				2,753				7,219				16,312
Settlement related costs		5,500				—				—				500				6,000
Stock-based compensation(3)		—				190				86				3,950				4,226
COVID-19 related costs, net of grant income		105				(2,370	)			—				—				(2,265	)
Equity in net (income) loss 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 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.
(3)		Stock-based compensation includes cash settled equity balances.

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,
		2023				2022				2023				2022
Net income (loss)	$	(4,302	)		$	(28,505	)		$	(199,208	)		$	(24,859	)
Restructuring and related costs(1)		8,916				2,088				33,471				13,135
Transaction and integration costs(2)		1,159				4,899				2,886				16,312
Settlement related costs		1,449				6,000				8,933				6,000
Stock-based compensation(3)		1,690				83				3,485				4,226
Impairment of goodwill		—				—				183,100				—
Equity in net (income) loss of investee, net of tax		160				26,448				(2,821	)			28,020
Intangible asset amortization expense		19,748				20,727				59,457				59,978
COVID-19 related costs, net of grant income(4)		—				608				—				(2,265	)
Tax effected impact of adjustments		(8,327	)			(9,649	)			(27,833	)			(26,964	)
Adjusted net income	$	20,493			$	22,699			$	61,470			$	73,583
Adjusted EPS	$	1.44			$	1.61			$	4.33			$	5.21
Diluted weighted-average number of common shares outstanding		14,218,141				14,110,928				14,209,787				14,119,598

(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 SOX implementation and business integration efforts.
(3)		Stock-based compensation includes cash settled equity balances.
(4)		COVID-19 related costs were added back as one-time items through 2022. As the Public Health Emergency ended in 2023 and the effects of COVID-19 have become normal course of business, COVID-19 related items are no longer added back in 2023.

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, 2023				September 30, 2022				% Change			September 30, 2023				September 30, 2022				% Change			June 30, 2023				QoQ % Change
NEMT Segment
Service revenue, net	$	485,951			$	459,796			5.7	%		$	1,452,389			$	1,309,449			10.9	%		$	496,975			(2.2	)%
Purchased services expense		363,594				340,138			6.9	%			1,085,206				935,298			16.0	%			377,192			(3.6	)%
Payroll and other expense		64,427				54,843			17.5	%			192,398				165,503			16.3	%			64,705			(0.4	)%
Service expense	$	428,021			$	394,981			8.4	%		$	1,277,604			$	1,100,801			16.1	%		$	441,897			(3.1	)%
Gross profit	$	57,930			$	64,815			(10.6	)%		$	174,785			$	208,648			(16.2	)%		$	55,078			5.2	%
Gross margin		11.9	%			14.1	%						12.0	%			15.9	%						11.1	%
G&A expense	$	25,433			$	31,815			(20.1	)%		$	87,645			$	102,736			(14.7	)%		$	28,337			(10.2	)%
G&A expense adjustments:
Restructuring and related costs		2,711				902			200.6	%			11,865				11,359			4.5	%			2,055			31.9	%
Transaction and integration costs		101				6			N/M				101				6			N/M				—			N/M
Settlement related costs		(25	)			5,500			N/M				250				5,500			N/M				—			N/M
Adjusted G&A expense	$	22,646			$	25,407			(10.9	)%		$	75,429			$	85,871			(12.2	)%		$	26,282			(13.8	)%
Adjusted G&A expense % of revenue		4.7	%			5.5	%						5.2	%			6.6	%						5.3	%
Net income	$	18,831			$	19,151			(1.7	)%		$	49,791			$	61,363			(18.9	)%		$	14,789			27.3	%
Net income margin		3.9	%			4.2	%						3.4	%			4.7	%						3.0	%
Adjusted EBITDA	$	35,284			$	39,357			(10.3	)%		$	99,356			$	122,882			(19.1	)%		$	28,796			22.5	%
Adjusted EBITDA margin		7.3	%			8.6	%						6.8	%			9.4	%						5.8	%
Total paid trips (thousands)		8,824				8,045			9.7	%			25,761				22,987			12.1	%			8,735			1.0	%
Average monthly members (thousands)		33,660				36,026			(6.6	)%			33,892				33,998			(0.3	)%			34,312			(1.9	)%
Revenue per member per month	$	4.81			$	4.25			13.2	%		$	4.76			$	4.28			11.2	%		$	4.83			(0.4	)%
Revenue per trip	$	55.07			$	57.15			(3.6	)%		$	56.38			$	56.96			(1.0	)%		$	56.89			(3.2	)%
Monthly utilization		8.7	%			7.4	%						8.4	%			7.5	%						8.5	%
Purchased services per trip	$	41.21			$	42.28			(2.5	)%		$	42.13			$	40.69			3.5	%		$	43.18			(4.6	)%
Payroll and other per trip	$	7.30			$	6.82			7.0	%		$	7.47			$	7.20			3.7	%		$	7.41			(1.5	)%
Total service expense per trip	$	48.51			$	49.10			(1.2	)%		$	49.60			$	47.89			3.6	%		$	50.59			(4.1	)%

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, except for statistical data)
	Three months ended											Nine months ended											Three months ended
	September 30, 2023				September 30, 2022				% Change			September 30, 2023				September 30, 2022				% Change			June 30, 2023				QoQ % Change
PCS Segment
Service revenue, net	$	179,979			$	169,226			6.4	%		$	534,435			$	491,661			8.7	%		$	180,325			(0.2	)%
Service expense		143,078				132,746			7.8	%			417,636				379,423			10.1	%			138,468			3.3	%
Gross profit	$	36,901			$	36,480			1.2	%		$	116,799			$	112,238			4.1	%		$	41,857			(11.8	)%
Gross Margin		20.5	%			21.6	%						21.9	%			22.8	%						23.2	%
G&A expense	$	20,252			$	22,057			(8.2	)%		$	63,480			$	68,536			(7.4	)%		$	20,565			(1.5	)%
G&A expense adjustments
Restructuring and related costs		—				582			(100.0	)%			—				763			(100.0	)%			—			N/M
Transaction and integration costs		431				2,231			(80.7	)%			881				6,334			(86.1	)%			173			149.1	%
Stock-based compensation		—				—			N/M				—				190			(100.0	)%			—			N/M
Adjusted G&A expense	$	19,821			$	19,244			3.0	%		$	62,599			$	61,249			2.2	%		$	20,392			(2.8	)%
Adjusted G&A expense % of revenue		11.0	%			11.4	%						11.7	%			12.5	%						11.3	%
Net income	$	3,142			$	1,632			92.5	%		$	(123,405	)		$	7,411			(1765.2	)%		$	(129,372	)		(102.4	)%
Net income margin		1.7	%			1.0	%						(23.1	)%			1.5	%						(71.7	)%
Adjusted EBITDA	$	17,631			$	18,684			(5.6	)%		$	58,849			$	53,206			10.6	%		$	24,099			(26.8	)%
Adjusted EBITDA margin		9.8	%			11.0	%						11.0	%			10.8	%						13.4	%
Total hours (in thousands)		6,995				6,836			2.3	%			20,752				20,076			3.4	%			6,933			0.9	%
Revenue per hour	$	25.73			$	24.76			3.9	%		$	25.75			$	24.49			5.1	%		$	26.01			(1.1	)%
Service expense per hour	$	20.45			$	19.42			5.3	%		$	20.13			$	18.90			6.5	%		$	19.97			2.4	%

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											Nine months ended											Three months ended
	September 30, 2023				September 30, 2022				% Change			September 30, 2023				September 30, 2022				% Change			June 30, 2023				QoQ % Change
RPM Segment
Service revenue, net	$	19,779			$	18,760			5.4	%		$	57,702			$	49,362			16.9	%		$	19,211			3.0	%
Service expense		6,934				6,836			1.4	%			20,129				17,884			12.6	%			6,705			3.4	%
Gross profit	$	12,845			$	11,924			7.7	%		$	37,573			$	31,478			19.4	%		$	12,506			2.7	%
Gross Margin		64.9	%			63.6	%						65.1	%			63.8	%						65.1	%
G&A expense	$	5,685			$	5,816			(2.3	)%		$	16,781			$	17,520			(4.2	)%		$	5,327			6.7	%
G&A expense adjustments
Restructuring and related costs		—				39			(100.0	)%			—				63			(100.0	)%			—			N/M
Transaction and integration costs		22				471			(95.3	)%			70				2,753			(97.5	)%			16			37.5	%
Stock-based compensation		—				—			N/M				—				86			(100.0	)%			—			N/M
Adjusted G&A expense	$	5,663			$	5,306			6.7	%		$	16,711			$	14,618			14.3	%		$	5,311			6.6	%
Adjusted G&A expense % of revenue		28.6	%			28.3	%						29.0	%			29.6	%						27.6	%
Net income (loss)	$	707			$	462			53.0	%		$	(43,829	)		$	(175	)		N/M			$	(44,965	)		(101.6	)%
Net income (loss) margin		3.6	%			2.5	%						(76.0	)%			(0.4	)%						(234.1	)%
Adjusted EBITDA	$	7,182			$	6,618			8.5	%		$	20,862			$	16,860			23.7	%		$	7,195			(0.2	)%
Adjusted EBITDA margin		36.3	%			35.3	%						36.2	%			34.2	%						37.5	%
Average monthly members (in thousands)		247				230			7.4	%			241				201			19.9	%			240			2.9	%
Revenue per member per month	$	26.69			$	27.19			(1.8	)%		$	26.60			$	27.29			(2.5	)%		$	26.68			—	%
Service expense per member per month	$	9.36			$	9.91			(5.5	)%		$	9.28			$	9.89			(6.2	)%		$	9.31			0.5	%

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)
	Three months ended											Nine months ended											Three months ended
	September 30, 2023				September 30, 2022				% Change			September 30, 2023				September 30, 2022				% Change			June 30, 2023				QoQ % Change
Corporate and Other Segment
G&A expense	$	18,772			$	16,201			15.9	%		$	61,189			$	43,316			41.3	%		$	25,011			(24.9	)%
G&A expense adjustments
Restructuring and related costs		6,205				565			N/M				21,606				950			N/M				8,055			(23.0	)%
Transaction and integration costs		605				2,191			(72.4	)%			1,834				7,219			(74.6	)%			665			(9.0	)%
Settlement related costs		1,474				500			194.8	%			8,683				500			N/M				7,209			(79.6	)%
Stock-based compensation		1,690				83			N/M				3,485				3,950			(11.8	)%			947			78.5	%
Adjusted G&A expense	$	8,798			$	12,862			(31.6	)%		$	25,581			$	30,697			(16.7	)%		$	8,135			8.1	%
Adjusted G&A expense % of consolidated revenue		1.3	%			2.0	%						1.2	%			1.7	%						1.2	%

	Three months ended											Nine months ended											Three months ended
	September 30, 2023				September 30, 2022				% Change			September 30, 2023				September 30, 2022				% Change			June 30, 2023				QoQ % Change
Consolidated Modivcare Inc.
G&A expense	$	70,142			$	75,889			(7.6	)%		$	229,095			$	232,108			(1.3	)%		$	79,240			(11.5	)%
G&A expense adjustments
Restructuring and related costs		8,916				2,088			327.0	%			33,471				13,135			154.8	%			10,110			(11.8	)%
Transaction and integration costs		1,159				4,899			(76.3	)%			2,886				16,312			(82.3	)%			854			35.7	%
Settlement related costs		1,449				6,000			(75.9	)%			8,933				6,000			48.9	%			7,209			(79.9	)%
Stock-based compensation		1,690				83			N/M				3,485				4,226			(17.5	)%			947			78.5	%
Adjusted G&A expense	$	56,928			$	62,819			(9.4	)%		$	180,320			$	192,435			(6.3	)%		$	60,120			(5.3	)%
Adjusted G&A expense % of revenue		8.3	%			9.7	%						8.8	%			10.4	%						8.6	%

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/20231102026666/en/

Investor Relations Contact

Kevin Ellich,

Head of Investor Relations

Kevin.Ellich@modivcare.com

Source: Modivcare Inc.

FAQ

What are the financial results for Modivcare Inc. in Q3 2023?

Modivcare reported service revenue of $686.9 million, a 6.0% increase compared to the same period last year. The company had a net loss of $4.3 million or $0.30 per diluted common share.

What were the adjusted EBITDA and adjusted net income for Modivcare in Q3 2023?

Modivcare's adjusted EBITDA was $51.3 million, and adjusted net income was $20.5 million.

How much cash was provided by operating activities during Q3 2023?

Modivcare provided $53.5 million in cash from operating activities during the quarter.

How much contract receivables and contract payables did Modivcare have as of September 30, 2023?

Modivcare had contract receivables of $129.3 million and contract payables of $133.6 million, resulting in net contract payables of $4.3 million.

How much did Modivcare repay on its revolving credit facility?

Modivcare repaid $43.5 million on its $325.0 million revolving credit facility, reducing the balance drawn to $83.0 million.

What contracts did Modivcare win during Q3 2023?

Modivcare won $138.0 million of NEMT managed Medicaid total contract value during the quarter and was awarded a state Medicaid expansion in the northeast.