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
Contacts
Investor Relations Contact
Kevin Ellich,
Head of Investor Relations
(303) 728-7012
[email protected]
