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 months ended March 31, 2023.
First Quarter 2023 Highlights:
Service revenue of $662.3 million, a 15.3% increase as compared to $574.5 million in Q1 2022
Net loss of $4.0 million or $0.28 per diluted common share
Adjusted EBITDA(1) of $50.2 million, adjusted net income(1) of $20.2 million and adjusted EPS(1) of $1.42 per diluted common share
Net cash used in operating activities during the quarter of $2.7 million
Cash and cash equivalents of $12.8 million as of March 31, 2023, with $1.0 billion principal amount of debt outstanding related to the Senior Unsecured Notes due 2025 and 2029
$15.0 million drawn on the $325.0 million revolving credit facility as of March 31, 2023
____________________
(1) Non-GAAP financial measure reconciliations and other related information about non-GAAP financial measures provided below
“We reported solid first quarter results with 15 percent revenue growth driven by strong growth across each of our segments,” said L. Heath Sampson, President and Chief Executive Officer. “We remain confident in our 2023 outlook, which we maintained, due to several factors, including recent new contract wins, a strong pipeline for new business, and the continued success of our Home business. As the U.S. healthcare system increasingly shifts to home-based care, we are well positioned to capitalize on these opportunities with our supportive care services. Our offerings provide high quality care and services to our members in a cost-effective manner, aligning with the evolving needs of the healthcare landscape. Our focus for 2023 remains steadfast to build for scale and grow our business. We are confident that the initiatives implemented over the past few quarters will drive efficiencies and operating leverage throughout the year. I am incredibly proud of our team’s ability to perform and execute at a high level, and I am grateful for their hard work and dedication.”
2023 Guidance
We maintained our 2023 revenue and our Adjusted EBITDA guidance range as follows ($ in millions):
Low
High
Revenue
$
2,575
$
2,600
Adjusted EBITDA
$
225
$
235
Guidance excludes the effects of any future merger or acquisition activity and is based on the current operating environment.
First Quarter 2023 Results
For the first quarter of 2023, the Company reported revenue of $662.3 million, an increase of 15.3% from $574.5 million in the first quarter of 2022. The increase in revenue is primarily attributable to a 4.7% increase in membership and an 11.8% increase in revenue per member in our NEMT segment coupled with a 4.4% increase in hours worked and a 4.4% increase in rate per hour in our personal care segment.
Operating income was $8.1 million, or 1.2% of revenue, in the first quarter of 2023, compared to operating income of $14.9 million, or 2.6% of revenue, in the first quarter of 2022. Net loss in the first quarter of 2023 was $4.0 million, or $0.28 per diluted common share, compared to net income of $0.3 million, or $0.02 per diluted common share, in the first quarter of 2022.
Adjusted EBITDA was $50.2 million, or 7.6% of revenue, in the first quarter of 2023, compared to $50.3 million, or 8.8% of revenue, in the first quarter of 2022.
Adjusted net income in the first quarter of 2023 was $20.2 million, or $1.42 per diluted common share, compared to $22.2 million, or $1.57 per diluted common share, in the first quarter of 2022.
First Quarter Earnings Conference Call
Modivcare will hold a conference call to discuss its financial results on Thursday, May 4, 2023 at 8:00 a.m. ET. To access the call, please dial:
US toll-free: 1 (888) 437-3179
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 are intended to address the social determinants of health (SDoH), enable greater access to care, reduce costs, and improve outcomes. We are a leading provider of non-emergency medical transportation (NEMT), personal care and remote patient monitoring. To learn more about Modivcare, please visit www.modivcare.com.
Non-GAAP Financial Measures and Adjustments
In addition to the financial measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), this press release includes EBITDA, Adjusted EBITDA and Adjusted G&A expense for the Company and its segments, Adjusted EBITDA margin for the Company’s segments (other than its Corporate segment), and Adjusted Net Income and Adjusted EPS for the Company, all of which are performance measures that are not recognized under GAAP. EBITDA is defined as net income (loss) before: (1) interest expense, net, (2) provision (benefit) for income taxes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before (as applicable): (1) restructuring and related costs, including severance and organizational consolidation costs and professional services fees, (2) certain transaction and integration costs, (3) settlement related costs, (4) cash settled equity, (5) stock-based compensation, (6) COVID-19 related costs, net of grant income, and (7) equity in net (income) loss of investee, net of tax. Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by service revenue, net. Adjusted Net Income is calculated as net income (loss) before: (1) restructuring and related costs, including severance and organizational consolidation costs and professional services fees (2) certain transaction and integration costs, (3) settlement related costs, (4) cash settled equity, (5) stock-based compensation, (6) equity in net (income) loss of investee, net of tax (7) intangible 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, (4) cash settled equity, and (5) stock-based compensation. We do not provide guidance for net income (loss) in this presentation on a basis consistent with GAAP or a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict items contained in the GAAP financial measures without unreasonable efforts. Our non-GAAP performance measures exclude expenses and amounts that are not driven by our core operating results and may be one time in nature. Excluding these expenses makes comparisons with prior periods as well as to other companies in our industry more meaningful. We believe such measures allow investors to gain a better understanding of the factors and trends affecting the ongoing operations of our business. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. As a result, our net income or loss in equity investee is excluded from these measures, as we do not have the ability to manage the venture, allocate resources within the venture, or directly control its operations or performance.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.
Forward-Looking Statements
Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature and are frequently identified by the use of terms such as “may,” “will,” “should,” “expect,” “believe,” “estimate,” “intend,” and similar words indicating possible future expectations, events or actions. The updated guidance discussed herein constitutes forward-looking statements. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, which may cause actual 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 goodwill and long-lived assets; any failure to maintain or to develop reliable, efficient and secure information technology systems; an inability to attract and retain qualified employees; any 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; 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; certificates of need, or CON, 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 that we acquired with 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 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; and our lack of sole decision-making authority with respect to our minority investment in Matrix and any failure by Matrix to achieve positive financial results of operations.
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 March 31,
2023
2022
Service revenue, net
$
662,306
$
574,475
Grant income
1,464
468
Operating expenses:
Service expense
550,266
459,315
General and administrative expense
79,713
76,808
Depreciation and amortization
25,693
23,946
Total operating expenses
655,672
560,069
Operating income
8,098
14,874
Interest expense, net
15,958
15,400
Loss before income taxes and equity method investment
(7,860
)
(526
)
Benefit for income taxes
(1,873
)
(361
)
Equity in net income of investee, net of tax
(2,025
)
(483
)
Net income (loss)
$
(3,962
)
$
318
Earnings (loss) per common share:
Basic
$
(0.28
)
$
0.02
Diluted
$
(0.28
)
$
0.02
Weighted-average number of common shares outstanding:
Basic
14,163,511
14,023,585
Diluted
14,163,511
14,123,825
Modivcare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
March 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
12,848
$
14,451
Accounts receivable, net
296,745
294,341
Other current assets(1)
38,638
37,362
Total current assets
348,231
346,154
Property and equipment, net
76,252
69,138
Goodwill and intangible assets, net
1,388,576
1,408,063
Equity investment
43,698
41,303
Operating lease right-of-use assets
40,311
39,405
Other long-term assets
44,461
40,209
Total assets
$
1,941,529
$
1,944,272
Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings
$
15,000
$
—
Accounts payable
54,987
54,959
Accrued contract payables
187,620
194,287
Accrued expenses and other current liabilities
132,978
135,860
Accrued transportation costs
93,726
96,851
Current portion of operating lease liabilities
9,852
9,640
Total current liabilities
494,163
491,597
Long-term debt, net of deferred financing costs
980,433
979,361
Operating lease liabilities, less current portion
32,867
32,088
Other long-term liabilities(2)
82,968
86,670
Total liabilities
1,590,431
1,589,716
Stockholders’ equity
Stockholders’ equity
351,098
354,556
Total liabilities and stockholders’ equity
$
1,941,529
$
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 March 31,
2023
2022
Operating activities
Net income (loss)
$
(3,962
)
$
318
Depreciation and amortization
25,693
23,946
Stock-based compensation
1,124
2,049
Equity in net income of investee
(2,810
)
(671
)
Deferred income taxes
(3,624
)
(6,587
)
Reduction of right-of-use asset
3,547
2,884
Other non-cash items(1)
(2,975
)
(1,996
)
Changes in working capital(2)
(19,648
)
51,542
Net cash provided by (used in) operating activities
(2,655
)
71,485
Investing activities
Purchase of property and equipment
(13,320
)
(8,584
)
Net cash used in investing activities
(13,320
)
(8,584
)
Financing activities
Proceeds from short-term borrowings
15,000
—
Debt issuance costs
—
(2,415
)
Proceeds from common stock issued pursuant to stock option exercise
—
1,138
Restricted stock surrendered for employee tax payment
(620
)
(572
)
Net cash provided by (used in) financing activities
14,380
(1,849
)
Net change in cash, cash equivalents and restricted cash
(1,595
)
61,052
Cash, cash equivalents and restricted cash at beginning of period
14,975
133,422
Cash, cash equivalents and restricted cash at end of period
$
13,380
$
194,474
(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 March 31, 2023
NEMT
Personal Care
RPM
Corporate
Total
Service revenue, net
$
469,463
$
174,131
$
18,712
$
—
$
662,306
Grant income
—
1,464
—
—
1,464
Operating expenses:
Service expense
407,686
136,090
6,490
—
550,266
General and administrative expense
33,875
22,663
5,769
17,406
79,713
Depreciation and amortization
6,766
12,868
5,854
205
25,693
Total operating expenses
448,327
171,621
18,113
17,611
655,672
Operating income (loss)
21,136
3,974
599
(17,611
)
8,098
Interest expense, net
—
—
—
15,958
15,958
Income (loss) before income taxes and equity method investment
21,136
3,974
599
(33,569
)
(7,860
)
Provision (benefit) for income taxes
5,618
1,149
170
(8,810
)
(1,873
)
Equity in net income of investee, net of tax
(653
)
—
—
(1,372
)
(2,025
)
Net income (loss)
16,171
2,825
429
(23,387
)
(3,962
)
Interest expense, net
—
—
—
15,958
15,958
Provision (benefit) for income taxes
5,618
1,149
170
(8,810
)
(1,873
)
Depreciation and amortization
6,766
12,868
5,854
205
25,693
EBITDA
28,555
16,842
6,453
(16,034
)
35,816
Restructuring and related costs(1)
7,099
—
—
7,346
14,445
Transaction and integration costs(2)
—
277
32
564
873
Settlement related costs
275
—
—
—
275
Stock-based compensation
—
—
—
848
848
Equity in net income of investee, net of tax
(653
)
—
—
(1,372
)
(2,025
)
Adjusted EBITDA
$
35,276
$
17,119
$
6,485
$
(8,648
)
$
50,232
(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 (“SOX”) implementation and business integration efforts.
Modivcare Inc.
Unaudited Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
Three months ended March 31, 2022
NEMT
Personal Care
RPM
Corporate
Total
Service revenue, net
$
400,920
$
159,698
$
13,857
$
—
$
574,475
Grant income
—
468
—
—
468
Operating expenses:
Service expense
332,096
122,232
4,987
—
459,315
General and administrative expense
37,333
23,133
4,962
11,380
76,808
Depreciation and amortization
7,105
12,505
4,128
208
23,946
Total operating expenses
376,534
157,870
14,077
11,588
560,069
Operating income (loss)
24,386
2,296
(220
)
(11,588
)
14,874
Interest expense, net
—
—
—
15,400
15,400
Income (loss) before income taxes and equity method investment
24,386
2,296
(220
)
(26,988
)
(526
)
Provision (benefit) for income taxes
6,575
640
(58
)
(7,518
)
(361
)
Equity in net (income) loss of investee, net of tax
65
—
—
(548
)
(483
)
Net income (loss)
17,746
1,656
(162
)
(18,922
)
318
Interest expense, net
—
—
—
15,400
15,400
Provision (benefit) for income taxes
6,575
640
(58
)
(7,518
)
(361
)
Depreciation and amortization
7,105
12,505
4,128
208
23,946
EBITDA
31,426
14,801
3,908
(10,832
)
39,303
Restructuring and related costs(1)
5,604
181
24
31
5,840
Transaction and integration costs(2)
—
1,273
647
1,791
3,711
Cash settled equity
—
—
—
(13
)
(13
)
Stock-based compensation
—
17
29
1,420
1,466
COVID-19 related costs, net of grant income
122
349
—
—
471
Equity in net (income) loss of investee, net of tax
65
—
—
(548
)
(483
)
Adjusted EBITDA
$
37,217
$
16,621
$
4,608
$
(8,151
)
$
50,295
(1) Restructuring and related costs include professional services costs and severance and recruiting costs.
(2) Transaction and integration costs include SOX integration efforts at recently acquired subsidiaries and acquisition costs.
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 March 31,
2023
2022
Net income (loss)
$
(3,962
)
$
318
Restructuring and related costs(1)
14,445
5,840
Transaction and integration costs(2)
873
3,711
Settlement related costs
275
—
Cash settled equity
—
(13
)
Stock-based compensation
848
1,466
Equity in net income of investee, net of tax
(2,025
)
(483
)
Intangible amortization expense
19,901
19,490
COVID-19 related costs, net of grant income
—
471
Tax effected impact of adjustments
(10,154
)
(8,629
)
Adjusted net income
$
20,201
$
22,171
Adjusted EPS
$
1.42
$
1.57
Diluted weighted-average number of common shares outstanding
14,193,257
14,123,825
(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.
Contacts
Investor Relations Contact
Kevin Ellich,
Head of Investor Relations
(303) 728-7012
[email protected]
