UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34221 ModivCare Inc. (Exact name of registrant as specified in its charter) Delaware 86-0845127 (State or other jurisdiction of incor ...

Financial Data and Key Metrics Changes - The fourth quarter revenue increased 7.5% year-over-year to $703 million, while full year 2023 revenue increased 10% to $2.75 billion [52][53] - Full year 2023 adjusted EBITDA was $204 million, with an adjusted EBITDA margin of 7.4%, a decline of 140 basis points year-over-year [53] - The fourth quarter net loss was $5 million, while adjusted net income was $18 million or $1.29 per diluted share [23] Business Line Data and Key Metrics Changes - NEMT fourth quarter revenue increased 9% year-over-year to $499 million, with adjusted EBITDA for the fourth quarter approximately $40 million or 8% of revenue [24][25] - Personal care revenue for the fourth quarter increased 3% year-over-year to $181 million, with adjusted EBITDA of $16 million or 8.7% of revenue [27][28] - RPM segment revenue increased 7% year-over-year to $20 million, with fourth quarter adjusted EBITDA of $7.2 million or a 35% margin [58] Market Data and Key Metrics Changes - Medicaid redetermination reduced Medicaid membership by approximately 450,000 members, bringing total membership to 24.7 million [55] - The company expects redetermination to adversely impact revenue by approximately $60 million and adjusted EBITDA by approximately $30 million in 2024 [26] Company Strategy and Development Direction - The company is focused on positioning each business line for long-term profitable growth while fortifying its platform for 2025 and beyond [9] - The strategy in remote patient monitoring includes expanding product capabilities and enhancing member engagement through innovative services [10] - The company aims to leverage automation and digital tools to improve caregiver efficiency and engagement in personal care [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the normalization of healthcare utilization and the impact of cost-saving initiatives [35] - The company anticipates free cash flow to improve significantly in the second half of 2024, projecting a range of $40 million to $60 million for the year [60] - Management acknowledged challenges in the first half of 2024 due to contract losses and Medicaid redetermination but expects a stronger performance in the latter half [63] Other Important Information - The company has successfully renegotiated its revolving credit facility covenants, enhancing financial flexibility [7] - The net contract receivable and payable balance at the end of the fourth quarter was $27 million, in line with expectations [30] - The company expects to refinance its 2025 unsecured notes in the coming months [18] Q&A Session Summary Question: What caused the shortfall in NEMT outlook for Q1? - Management indicated that the shortfall was primarily due to contract losses and the impact of redetermination and utilization normalization [42][67] Question: How is the company addressing cost issues? - Management confirmed that cost-saving initiatives are tracking as expected, with pressures on margins primarily due to redetermination and utilization [42][93] Question: What is the outlook for labor availability and costs? - Management noted that labor availability has normalized over the last three quarters, allowing for continued hiring and retention [79] Question: How does the company feel about retaining business with a large customer after contract losses? - Management expressed confidence in maintaining a strong relationship with the customer and continuing to grow business despite recent losses [101]

Modivcare Reports Fourth Quarter and Full Year 2023 Financial Results; Issues 2024 Guidance Denver, CO – February 22, 2024 – Modivcare Inc. (the "Company" or "Modivcare") (Nasdaq: MODV), a technology- enabled healthcare services company that provides a suite of integrated supportive care solutions focused on improving patient outcomes, today reported financial results for the three months and full year ended December 31, 2023. Fourth Quarter 2023 Summary: Full Year 2023 Summary: Non-GAAP financial measure r ...

Financial Data and Key Metrics Changes - The company generated strong free cash flow of approximately $45 million in the third quarter [3][137] - Adjusted EBITDA for the third quarter was $51 million, with a net loss of approximately $4 million, while adjusted net income was $20 million or $1.44 per diluted share [45][137] - The bank-defined net leverage ratio declined sequentially to 4.6x as of September 30, 2023, compared to 4.7x in the second quarter [21][137] - Revenue for the third quarter increased 6% year-over-year to $687 million, driven by growth in various segments [137] Business Line Data and Key Metrics Changes - NEMT adjusted EBITDA margins improved by 150 basis points sequentially to 7.3%, driven by a $4 million reduction in adjusted G&A and improved gross profit per trip [46][137] - Personal Care Services revenue increased 6% year-over-year to $180 million, with a 2% growth in hours and a 4% increase in revenue per hour [47] - Remote Patient Monitoring revenue growth was solid, primarily driven by industry-leading referral sales penetrating new Medicaid markets [135] Market Data and Key Metrics Changes - Total membership decreased 6.6% year-over-year to 33.7 million members, with a sequential decrease of 2% in average monthly members due to Medicaid redetermination [18] - The company expects a 10% to 15% range impact on membership from redetermination [60] Company Strategy and Development Direction - The company is focused on four strategic pillars: people, operational excellence, growth, and innovation [11] - Initiatives include multimodal trip assignment, omnichannel member engagement, and customer integration, targeting $30 million to $50 million in cost savings over the next 12 months [132] - The company aims to maintain adjusted EBITDA margins of 10% to 12% while continuing to invest in growth [126] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about realizing benefits from new wins, including a new mobility MCO business with a total contract value of $138 million starting in 2024 [7] - The impact of Medicaid redetermination is expected to be $5 million to $10 million for the second half of 2023 and $20 million to $40 million in 2024 [19] - Management believes that a recession could be beneficial as more people may need services, potentially increasing Medicaid roles [109] Other Important Information - The company has a 43.6% minority stake in Matrix Medical, which is expected to generate adjusted EBITDA between $50 million to $100 million [16] - The company is committed to a disciplined capital allocation strategy, focusing on paying down debt and improving flexibility in its capital structure [141] Q&A Session Summary Question: Can you explain the sequential increase in utilization while service trip expense decreased? - Management indicated that the improvements in automation and operational efficiency are driving strong margin improvements, and they expect margins to continue to improve [24][25] Question: What are the expected cash flow and DSO metrics going forward? - Management noted that DSO is around 26.8 days, which is the lowest in their model, and they expect to maintain strong cash generation [54][55] Question: Can you provide insights on the savings from multimodal and omnichannel strategies? - Management stated that omnichannel engagement accounts for over 50% of cost savings, while multimodal contributes about 20% to 25% [61] Question: What is the company's strategy for the next few years? - The strategy focuses on scaling operations, improving service delivery, and enhancing margins through centralization and automation [64][66] Question: How does the company view the impact of a potential recession? - Management believes that a recession could lead to increased demand for services, benefiting the company as more individuals may require assistance [109]

PART I—FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's net loss widened significantly year-to-date to $199.2 million due to a major goodwill impairment, decreasing assets and creating negative operating cash flow [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.76 billion due to a $183.1 million goodwill impairment, causing a sharp decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $8,070 | $14,451 | ($6,381) | | Goodwill | $785,554 | $968,654 | ($183,100) | | Total assets | $1,763,086 | $1,944,272 | ($181,186) | | **Liabilities & Equity** | | | | | Short-term borrowings | $83,000 | $0 | +$83,000 | | Total liabilities | $1,604,225 | $1,589,716 | +$14,509 | | Retained earnings (accumulated deficit) | ($19,185) | $180,023 | ($199,208) | | Total stockholders' equity | $158,861 | $354,556 | ($195,695) | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Year-to-date revenue grew 10.7%, but a $183.1 million goodwill impairment drove a substantial net loss of $199.2 million Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Service revenue, net | $686,925 | $647,782 | $2,048,338 | $1,850,472 | | Service expense | $579,214 | $534,563 | $1,718,735 | $1,498,108 | | Impairment of goodwill | $0 | $0 | $183,100 | $0 | | Operating income (loss) | $12,043 | $12,447 | ($155,622) | $50,467 | | Net loss | ($4,302) | ($28,505) | ($199,208) | ($24,859) | | Diluted loss per share | ($0.30) | ($2.03) | ($14.06) | ($1.77) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities used $57.3 million in cash year-to-date, a sharp reversal from the prior year, necessitating short-term borrowings Cash Flow Summary (in thousands) | Activity | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($57,327) | $45,526 | | Net cash used in investing activities | ($31,143) | ($104,390) | | Net cash provided by (used in) financing activities | $82,109 | ($1,827) | | **Net change in cash, cash equivalents and restricted cash** | **($6,361)** | **($60,691)** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Key disclosures include a $183.1 million goodwill impairment, details of the company's debt structure, and a $9.6 million legal settlement - The company operates in three main segments: **Non-Emergency Medical Transportation (NEMT)**, **Personal Care Services (PCS)**, and **Remote Patient Monitoring (RPM)**[24](index=24&type=chunk)[49](index=49&type=chunk) - In Q2 2023, the company recorded a **$183.1 million non-cash goodwill impairment charge**, with $137.3 million allocated to the PCS segment and $45.8 million to the RPM segment, triggered by a decline in stock price and market volatility[39](index=39&type=chunk)[72](index=72&type=chunk)[75](index=75&type=chunk) - As of September 30, 2023, the company had **$1.0 billion in senior unsecured notes** and **$83.0 million in outstanding short-term borrowings** under its credit facility[79](index=79&type=chunk)[82](index=82&type=chunk) - In May 2023, the company settled with its former CEO, Daniel Greenleaf, for **$9.6 million** regarding claims of a breach of his employment agreement[100](index=100&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue growth was offset by a significant goodwill impairment and rising service expenses, tightening liquidity and increasing reliance on debt [Business Outlook and Trends](index=28&type=section&id=Business%20Outlook%20and%20Trends) The company faces near-term headwinds from labor shortages and Medicaid redetermination despite positive long-term demographic trends - Long-term growth is expected from an **aging population**, rising chronic illnesses, and a shift towards value-based and in-home care[111](index=111&type=chunk) - Near-term challenges include **labor shortages** for healthcare professionals, uncertain macroeconomic conditions, and negative impacts from **Medicaid redetermination efforts**[110](index=110&type=chunk)[111](index=111&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Consolidated revenue grew across all segments, but profitability was erased by a $183.1 million goodwill impairment and higher service costs NEMT Segment Key Metrics | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total paid trips (thousands) | 8,824 | 8,045 | 25,761 | 22,987 | | Average monthly members (thousands) | 33,660 | 36,026 | 33,892 | 33,998 | | Service revenue, net ($M) | $485.9 | $459.8 | $1,452.4 | $1,309.4 | | Operating income ($M) | $25.7 | $25.9 | $66.8 | $84.3 | PCS Segment Key Metrics | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total hours (thousands) | 6,995 | 6,836 | 20,752 | 20,076 | | Service revenue per hour | $25.73 | $24.76 | $25.75 | $24.49 | | Service expense per hour | $20.45 | $19.42 | $20.13 | $18.90 | | Operating income (loss) ($M) | $4.3 | $2.3 | ($118.0) | $10.3 | RPM Segment Key Metrics | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Average monthly members (thousands) | 247 | 230 | 241 | 201 | | Service revenue, net ($M) | $19.8 | $18.8 | $57.7 | $49.4 | | Operating income (loss) ($M) | $1.0 | $0.6 | ($43.1) | ($0.2) | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20capital%20resources) A significant decrease in operating cash flow to a $57.3 million deficit necessitated drawing $83.0 million from the credit facility - Cash used in operating activities was **$57.3 million for YTD 2023**, a decrease of $102.9 million compared to cash provided by operating activities of $45.5 million for YTD 2022[180](index=180&type=chunk)[183](index=183&type=chunk) - The company had **$83.0 million of short-term borrowings** outstanding on its Credit Facility as of September 30, 2023, with approximately **$164.0 million of remaining availability**[185](index=185&type=chunk)[188](index=188&type=chunk) Future Cash Requirements Summary (in thousands) | Obligation | Total | Less than 1 Year | Greater than 1 Year | | :--- | :--- | :--- | :--- | | Senior Unsecured Notes & Interest | $1,213,996 | $56,847 | $1,157,149 | | Short-term borrowings | $83,000 | $83,000 | $0 | | Operating leases | $42,299 | $8,902 | $33,397 | | Other current cash obligations | $515,888 | $515,888 | $0 | | **Total** | **$1,936,859** | **$691,662** | **$1,245,197** | [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure from its $83.0 million in variable-rate borrowings - The company is exposed to **interest rate risk** from its Credit Facility, which has variable interest rates; at September 30, 2023, **$83.0 million was outstanding**[194](index=194&type=chunk) - A sensitivity analysis indicates that a **one-percentage point increase in interest rates** would negatively impact pre-tax earnings by approximately **$0.8 million annually**[194](index=194&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective as of September 30, 2023, due to previously identified material weaknesses under remediation - The principal executive and financial officers concluded that **disclosure controls and procedures were not effective** as of September 30, 2023, due to previously identified material weaknesses[195](index=195&type=chunk) - Ongoing remediation efforts are focused on key areas including **general IT controls (GITC)**, payroll controls, revenue process controls, and risk assessment[197](index=197&type=chunk)[199](index=199&type=chunk) - Management expects that testing the operating effectiveness of the remediation plan will **extend into 2024** for the PCS segment[202](index=202&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing legal matters are not expected to have a material adverse effect on the company's financial condition or operations - The company is subject to legal proceedings in the ordinary course of business but **does not expect them to have a material adverse effect**[205](index=205&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported from the risk factors disclosed in the 2022 Annual Report on Form 10-K - **No material changes** have occurred to the risk factors disclosed in the company's 2022 Annual Report on Form 10-K[206](index=206&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the reporting period - None[208](index=208&type=chunk) [Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the reporting period - None[209](index=209&type=chunk) [Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted or terminated Rule 10b5-1 trading plans during the third quarter - No officers or directors adopted or terminated a **Rule 10b5-1 trading plan** during the third quarter of 2023[211](index=211&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section indexes all exhibits filed with the Form 10-Q, including certifications and corporate documents

Financial Data and Key Metrics Changes - In Q2 2023, revenue increased by 11% year-over-year to $699 million, driven by 11% growth in mobility and the Home division [19] - Adjusted EBITDA for NEMT was approximately $29 million, down 38% year-over-year due to increased service expenses and a prior year benefit of $7 million from repricing [20] - Contract receivables collections increased to approximately $16 million in Q2 from $6 million in Q1, indicating improved cash flow [22] - The company lowered its adjusted EBITDA guidance due to higher NEMT utilization and associated costs [24] Business Line Data and Key Metrics Changes - NEMT revenue for Q2 was $497 million, with a 1.5% year-over-year increase in average monthly members to 34.3 million and a 9% increase in revenue per member per month [30] - The Home division's personal care revenue increased by 11% year-over-year to $180 million, driven by a 3.4% growth in hours and a 7% increase in revenue per hour [31] - RPM segment revenue increased by 15% year-over-year to $19 million, supported by strong referral sales [21] Market Data and Key Metrics Changes - The company anticipates Medicaid redetermination could create an adjusted EBITDA headwind of approximately $5 million to $10 million for the second half of 2023 [11] - The company expects regular growth in Medicaid and MA programs to counterbalance the impacts of redetermination [11] Company Strategy and Development Direction - The company's strategy focuses on digital transformation and operational excellence, with a strong emphasis on automation and improving member engagement through omnichannel options [14][15] - The company is pursuing approximately $700 million in new opportunities in its MCO pipeline, aiming to provide holistic solutions beyond transportation [16] - The company is committed to growing supportive care services focused on social determinants of health [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating substantial cash flow in the second half of 2023, driven by normalized working capital and strong core cash flow [9][37] - The company is optimistic about its long-term growth strategy despite the challenges posed by Medicaid redetermination [35] - Management highlighted the importance of automation and cost-saving initiatives to improve margins and cash flow generation [91][119] Other Important Information - The company ended Q2 with approximately $7 million in cash and had $126.5 million drawn on its $325 million revolver [33] - The company continues to target a net leverage of three times, expecting to achieve this through debt reduction and EBITDA growth [34] Q&A Session Summary Question: What is the impact of Medicaid redetermination on the company? - Management expects a 10% to 15% reduction in the number of Medicaid lives covered, with an estimated EBITDA impact of $5 million to $10 million for 2023 [11][82] Question: How are margins looking in the full-risk versus shared-risk categories? - Full-risk contracts generally have higher margins but come with more variability, while shared-risk contracts offer more predictability with slightly lower margins [63][67] Question: What are the expected wage increases for caregivers? - Management indicated that wage increases are expected to be competitive in the marketplace, particularly in states with higher minimum wage requirements [72][94] Question: How does the company plan to manage cash flow and debt? - The company plans to pay down its revolver by $30 million to $50 million in the second half of the year, with expectations of generating cash flow in line with its guidance [128][130] Question: What is the company's strategy for automation and cost savings? - The company is implementing automation to reduce call center interactions and improve efficiency, expecting significant cost savings to materialize in 2024 [160][161]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34221 ModivCare Inc. (Exact name of registrant as specified in its charter) Delaware 86-0845127 (State or other jurisdiction of i ...

GMM Reported Revenue (Pre-Acquisition) 6,487 Consolidated Pro Forma Revenue $2,510,880 Twelve Months Ended Dec 31, | --- | --- | |-------|----------| | 2022 | | | | $221,902 | | | | | | $224,351 | (dollars in thousands) Consolidated Adj. EBITDA Consolidated Pro Forma Adj. EBITDA | --- | --- | |---------------------------------------------------------|---------------| | | | | Pro Forma Remote Patient Monitoring Segment Revenue | Twelve Months | | | Ended Dec 31, | | (dollars in thousands) | 2022 | | Modivcar ...

ModivCare Inc. (NASDAQ:MODV) Q1 2023 Earnings Conference Call May 4, 2023 8:00 AM ET Company Participants Kevin Ellich - Head, Investor Relations Heath Sampson - President, Chief Executive Officer and Chief Financial Officer Ken Shepard - Head of Finance Conference Call Participants Brian Tanquilut - Jefferies Bob Labick - CJS Securities Scott Fidel - Stephens Pito Chickering - Deutsche Bank Miles Highsmith - Deutsche Bank Mike Petusky - Barrington Research Operator Good morning and welcome to ModivCare's F ...

PART I—FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2023 financial statements show total assets of $1.94 billion, a net loss of $4.0 million, and a significant decrease in operating cash flow [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position as of March 31, 2023, showing total assets and liabilities Condensed Consolidated Balance Sheet (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $12,848 | $14,451 | | Total current assets | $348,231 | $346,154 | | Goodwill | $968,654 | $968,654 | | Total assets | $1,941,529 | $1,944,272 | | **Liabilities & Equity** | | | | Total current liabilities | $494,163 | $491,597 | | Long-term debt, net | $980,433 | $979,361 | | Total liabilities | $1,590,431 | $1,589,716 | | Total stockholders' equity | $351,098 | $354,556 | | **Total liabilities and stockholders' equity** | **$1,941,529** | **$1,944,272** | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenue, expenses, and net income (loss) for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Operations (in thousands) | Account | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Service revenue, net | $662,306 | $574,475 | | Total operating expenses | $655,672 | $560,069 | | Operating income | $8,098 | $14,874 | | Net income (loss) | $(3,962) | $318 | | Basic EPS | $(0.28) | $0.02 | | Diluted EPS | $(0.28) | $0.02 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Outlines the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(2,655) | $71,485 | | Net cash used in investing activities | $(13,320) | $(8,584) | | 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** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed information on the company's business segments, accounting policies, debt structure, and ongoing legal proceedings - ModivCare provides a suite of supportive care solutions including Non-Emergency Medical Transportation (NEMT), Personal Care, and Remote Patient Monitoring (RPM). It also holds a **43.6% minority interest** in Matrix Medical Network[23](index=23&type=chunk)[24](index=24&type=chunk) Segment Operating Income (Loss) for Q1 2023 vs Q1 2022 (in thousands) | Segment | Q1 2023 Operating Income (Loss) | Q1 2022 Operating Income (Loss) | | :--- | :--- | :--- | | NEMT | $21,136 | $24,386 | | Personal Care | $3,974 | $2,296 | | RPM | $599 | $(220) | | Corporate and Other | $(17,611) | $(11,588) | | **Total** | **$8,098** | **$14,874** | Disaggregated Revenue by Contract Type (in thousands) | Contract Type | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | NEMT capitated contracts | $404,689 | $335,718 | | NEMT FFS contracts | $64,774 | $65,202 | | Personal Care FFS contracts | $174,131 | $159,698 | | RPM PMPM contracts | $18,712 | $13,857 | | **Total service revenue, net** | **$662,306** | **$574,475** | - The company has two series of senior unsecured notes totaling **$1 billion principal amount**: **$500 million at 5.875% due 2025** and **$500 million at 5.000% due 2029**. As of March 31, 2023, the carrying amount was **$980.4 million**[64](index=64&type=chunk) - The company is involved in several legal proceedings, including a class action lawsuit regarding caregiver pay and a dispute with its former CEO. Management does not currently expect these to have a **material adverse effect** on the company[81](index=81&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes the company's Q1 2023 financial performance, highlighting revenue growth, operating income decline, and changes in liquidity [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Details the consolidated and segment-specific revenue and expense trends, explaining the drivers behind changes in operating income Consolidated Results of Operations (in thousands) | Account | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Service revenue, net | $662,306 | $574,475 | 15.3% | | Service expense | $550,266 | $459,315 | 19.8% | | Operating income | $8,098 | $14,874 | (45.5)% | | Net income (loss) | $(3,962) | $318 | N/A | - The NEMT segment's service revenue increased by **$68.5 million (17.1%)** due to a **15.3% increase in trip volume** and a **4.7% increase in average monthly membership**. However, service expense grew faster at **22.8%**, causing operating income to fall to **$21.1 million** from **$24.4 million**[122](index=122&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - The Personal Care segment's revenue grew by **$14.4 million (9.0%)** due to higher hours worked and higher rates. Operating income increased to **$4.0 million** from **$2.3 million**, despite an **11.3% rise** in service expense driven by higher caregiver wages[128](index=128&type=chunk)[130](index=130&type=chunk)[132](index=132&type=chunk) - The RPM segment's revenue increased by **$4.9 million (35.0%)**, primarily from the GMM acquisition in May 2022. The segment reported an operating income of **$0.6 million**, an improvement from an operating loss of **$0.2 million** in the prior year[136](index=136&type=chunk)[138](index=138&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20capital%20resources) Assesses the company's cash position, operating cash flow changes, available credit, and future cash requirements - Cash used in operating activities was **$2.7 million** for YTD 2023, a decrease of **$74.1 million** from the **$71.5 million** provided in YTD 2022. The decline was primarily due to a **$71.2 million decrease** in cash from working capital changes[150](index=150&type=chunk) - As of March 31, 2023, the company had **$12.8 million** in cash and cash equivalents. It also had **$15.0 million** in short-term borrowings and **$32.8 million** in letters of credit outstanding under its **$325.0 million Credit Facility**[148](index=148&type=chunk)[66](index=66&type=chunk) Summary of Future Cash Requirements (in thousands) | Obligation | Total | Less than 1 Year | Greater than 1 Year | | :--- | :--- | :--- | :--- | | Senior Unsecured Notes | $1,000,000 | $— | $1,000,000 | | Interest on Notes | $238,712 | $54,375 | $184,337 | | Contracts payable | $187,620 | $187,620 | $— | | Operating leases | $51,058 | $11,686 | $39,372 | | Short-term borrowings | $15,000 | $15,000 | $— | | **Total (selected)** | **$1,492,390** | **$268,681** | **$1,223,709** | [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is to interest rate fluctuations related to its variable-rate Credit Facility, with a hypothetical one-percentage-point increase impacting pre-tax earnings by approximately $0.1 million - The company is exposed to interest rate risk from its variable-rate Credit Facility. At March 31, 2023, **$15.0 million** was outstanding[162](index=162&type=chunk) - A sensitivity analysis shows that a **one-percentage point increase** in interest rates would have an approximate **$0.1 million negative impact** on pre-tax earnings, assuming the outstanding borrowing amount for the full fiscal year[162](index=162&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to identified material weaknesses, for which the company is actively implementing a remediation plan - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2023, due to **material weaknesses** identified in the Annual Report on Form 10-K for the year ended December 31, 2022[163](index=163&type=chunk) - The company is undergoing remediation efforts, including hiring a third party to lead the process and adding internal resources. Key focus areas are general IT controls (GITC), payroll controls, revenue process controls, and risk assessment[166](index=166&type=chunk) - Specific remediation actions include implementing a new personnel management system in 2023, enhancing the risk assessment process for IT systems and acquisitions, and improving GITCs for change management and logical access[168](index=168&type=chunk)[169](index=169&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, which management does not expect to have a material adverse effect, as detailed in Note 12 - The company is subject to legal proceedings in the ordinary course of business. Management does not anticipate a **material adverse effect** from these matters, but acknowledges the inherent uncertainties of litigation. More details are available in Note 12[172](index=172&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Confirms no material changes to the risk factors previously disclosed in the company's latest annual report - There have been **no material changes** from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[173](index=173&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter, the company acquired 6,000 shares from employees for tax withholding purposes, not as part of a publicly announced repurchase program Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2023 | — | — | | Feb 2023 | 4,896 | $107.66 | | Mar 2023 | 1,104 | $84.93 | | **Total** | **6,000** | **N/A** | - The purchased shares were from vested restricted stock tendered by participants in the Company's 2006 Plan to cover income tax withholding. These were **not part of a publicly announced repurchase program**[175](index=175&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Discloses a separation agreement with Mr. Grover Wray, effective May 1, 2023 - On May 1, 2023, the Company entered into a separation agreement and general release with Mr. Grover Wray upon his separation from employment[178](index=178&type=chunk)