Financial Data and Key Metrics - Q3 2024 revenue increased 2% YoY to $702 million, driven by 5% growth in Personal Care Services (PCS) and 1% growth in Non-Emergency Medical Transportation (NEMT) [32] - Adjusted EBITDA for Q3 2024 was $43 million, or 6.2% of revenue, driven by solid performance in RPM and PCS segments, as well as operational improvements and cost savings in NEMT [33] - Net loss for Q3 2024 was approximately $27 million, while adjusted net income was $6 million, or $0.45 per diluted share [32] - Free cash flow for Q3 2024 was $1.5 million, consisting of $9.3 million in operating cash flow and $7.7 million in capital expenditures [41] Business Line Data and Key Metrics NEMT Segment - NEMT revenue increased 1% YoY to $492 million, with average monthly membership up 1% sequentially to 30 million [34] - NEMT adjusted EBITDA was $31 million, with a margin of 6.2%, down 99 basis points sequentially due to higher utilization, trip mix, and higher G&A expenses [36] - NEMT gross margin decreased 150 basis points sequentially to 11.3%, primarily due to growth in trips and trip mix, partially offset by cost-saving initiatives [35] - NEMT unit costs decreased, with purchased services expense per trip down 1% QoQ to $3.75 and payroll and other expenses per trip down 9% sequentially to $5.60 [35] Personal Care Services (PCS) Segment - PCS revenue increased 5% YoY to $189 million, driven by 3% growth in hours and 2% growth in revenue per hour [37] - PCS adjusted EBITDA was $16 million, or 8.3% of revenue, showing modest improvement from Q2 due to lower G&A expenses and slightly lower service expense per hour [38] - Reimbursement rate increases in New York, New Jersey, and West Virginia contributed to PCS growth [37] Remote Patient Monitoring (RPM) Segment - RPM revenue decreased 2% YoY but increased 2% sequentially to $19 million, with adjusted EBITDA margin at 37% [39] - RPM margins are expected to remain in the mid-30% range despite headwinds from Medicare Advantage (MA) supplemental benefit changes [40] Market Data and Key Metrics - Medicaid redeterminations impacted NEMT membership by approximately 220,000 members and adjusted EBITDA by less than $1 million in Q3 2024 [36] - Medicare Advantage (MA) accounts for 15% of NEMT revenue and 25% of RPM revenue, with anticipated contraction in MA business in 2025 [17] - The company expects a shift in MA mix to "winners" from "losers" due to market changes, with a focus on developing MA products in response to these shifts [17] Company Strategy and Industry Competition - The company is transitioning shared-risk NEMT contracts to fee-for-service arrangements, which will improve cash flow and reduce receivables build [11][12] - The company is focusing on cost-saving initiatives, including automation and technology optimization, which have driven $3 million in net cost savings in Q3 2024 [19] - The company is working to deleverage its balance sheet, with discussions ongoing with the bank group for long-term covenant relief [31][44] - The company is evaluating the potential sale of assets, including Matrix, to optimize value and reduce debt [60][61] Management Commentary on Operating Environment and Future Outlook - Management expects 2025 adjusted EBITDA to increase by approximately 10%, driven by membership growth, new contract wins, and cost-saving initiatives [15] - The company anticipates continued headwinds in the MA market but expects growth in Medicaid and other segments to offset these challenges [90] - Management highlighted the importance of the company's multimodal network strategy in reducing NEMT unit costs and improving operational efficiency [21] Other Important Information - The company collected $105 million in gross contract receivables in Q3 2024, including $42 million from retrospective prepayment resets and $39 million from early settlements [43] - The company ended Q3 2024 with $48 million in cash and $1.2 billion in debt, with a net leverage ratio of 5.6x [45] - The company maintained its 2024 revenue guidance of $2.7 billion to $2.9 billion and adjusted EBITDA guidance of $170 million to $180 million [46] Q&A Session Summary Question: Fee-for-service shift in NEMT contracts - The shift to fee-for-service is driven by the need for faster cash flow and cost of capital considerations, with state Medicaid contracts likely to remain full-risk [53] - The company expects margin compression in shared-risk contracts but believes the cost savings and operational efficiencies will offset this [54][55] Question: Cash flow and receivables outlook - The company expects to normalize working capital and free cash flow by mid-2025 as shared-risk contracts roll off and fee-for-service contracts take effect [57][58] - The company collected $105 million in gross contract receivables in Q3 2024 and expects to settle or repay $47 million in contract payables by mid-2025 [43][57] Question: Potential asset sales and deleveraging - The company is evaluating the sale of assets, including Matrix, as part of its strategy to deleverage the balance sheet [60][61] - The timing of asset sales will depend on market conditions and the company's ability to achieve the right valuation [62] Question: NEMT cost structure and margin outlook - The company has made significant progress in reducing NEMT unit costs through automation and multimodal strategies, with further cost savings expected in 2025 [82][83] - The company expects NEMT margins to improve as it transitions to fee-for-service contracts and continues to optimize its cost structure [84] Question: RPM headwinds and PCS margin outlook - RPM growth is expected to be impacted by MA headwinds, but Medicaid LTSS growth is expected to offset these challenges [90] - PCS margins are expected to improve, with a target exit rate of around 10% by the end of 2024 [87] Question: CDPAP revenue and EBITDA impact - The potential loss of CDPAP revenue would have an EBITDA impact of $3 million to $5 million, but the company expects to continue participating in the New York market [93][94] Question: Fee-for-service revenue mix in NEMT - The company expects approximately 60% of NEMT revenue to transition to fee-for-service by the end of 2025, with the remaining 40% in full-risk state contracts [97] Question: Cash flow conversion and deleveraging - The company expects a 30% cash flow conversion rate post-mid-2025, with potential for improvement to 50% as the company deleverages [110][111] Question: Pennsylvania rate study and Matrix monetization - The company is optimistic about a potential rate increase in Pennsylvania but cannot predict the timing [112] - The timing for Matrix monetization has been pushed out due to MA headwinds [113]

ModivCare (MODV) came out with quarterly earnings of $0.45 per share, missing the Zacks Consensus Estimate of $0.59 per share. This compares to earnings of $1.44 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -23.73%. A quarter ago, it was expected that this provider of government-sponsored social services would post earnings of $0.81 per share when it actually produced a loss of $0.03, delivering a surprise of -103.70%.Over ...

Core Insights - ModivCare reported a quarterly loss of $0.03 per share, significantly missing the Zacks Consensus Estimate of $0.81, and a stark decline from earnings of $1.47 per share a year ago, resulting in an earnings surprise of -103.70% [1] - The company posted revenues of $698.3 million for the quarter ended June 2024, which was 0.81% below the Zacks Consensus Estimate and a decrease from $701.74 million in the same quarter last year [2] - ModivCare shares have declined approximately 54.6% year-to-date, contrasting with the S&P 500's gain of 9.9% [3] Earnings Outlook - The future performance of ModivCare's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is $1.30 on revenues of $722.54 million, and for the current fiscal year, it is $3.95 on revenues of $2.84 billion [7] Industry Context - The Medical Services industry, to which ModivCare belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact ModivCare's stock performance [5][6]

Financial Performance - Service revenue for Q2 2024 was $698.3 million, consistent with Q2 2023 revenue of $699.1 million[2][4] - Net loss for Q2 2024 was $128.9 million, or negative $9.07 per diluted common share, compared to a net loss of $190.9 million, or negative $13.47 per diluted common share in Q2 2023[5] - Adjusted EBITDA for Q2 2024 was $45.4 million, or 6.5% of revenue, down from $52.4 million, or 7.5% of revenue in Q2 2023[6] - The company reported an operating loss of $98.9 million for Q2 2024, an improvement from an operating loss of $175.8 million in Q2 2023[17] - Modivcare Inc. reported a net loss of $128.884 million for the three months ended June 30, 2024, compared to a net loss of $190.944 million for the same period in 2023, representing a 32.6% improvement[20] - Adjusted EBITDA for the three months ended June 30, 2024, was $35.302 million, up from $15.262 million in the same period of 2023, indicating a significant increase of 131.5%[21] - Net loss for the three months ended June 30, 2024, was $128,884,000, compared to a net loss of $190,944,000 for the same period in 2023, showing an improvement of approximately 32.6%[27] Cash Flow and Operating Activities - Cash used in operating activities during Q2 2024 was $55.3 million, an improvement from $108.2 million in Q2 2023[7] - The company experienced a decrease in net cash used in operating activities, which was $55.286 million for the three months ended June 30, 2024, compared to $108.219 million in the same period of 2023, a reduction of 48.9%[20] - Cash and cash equivalents increased significantly to $10.5 million as of June 30, 2024, up from $2.2 million at the end of 2023[19] - Cash, cash equivalents, and restricted cash at the end of the period increased to $11.082 million from $7.466 million at the end of the same period in 2023, reflecting a 48.0% increase[20] Revenue Segments - The NEMT segment revenue decreased by $6.3 million, or 1.3%, while the PCS segment revenue grew by $6.3 million, or 3.5%[4] - Total service revenue for the three months ended June 30, 2024, was $698.299 million, with NEMT contributing $490.677 million and PCS contributing $186.610 million[21] - Service revenue for the NEMT segment was $490,677, a decrease of 1.3% compared to $496,975 in the same period last year[29] - Modivcare Inc. reported net service revenue of $186,610,000 for Q2 2024, a 3.5% increase from $180,325,000 in Q2 2023[30] Expenses and Cost Management - Total operating expenses decreased to $797.2 million in Q2 2024 from $877.5 million in Q2 2023, representing a reduction of approximately 9.1%[17] - The company’s total operating expenses for the three months ended June 30, 2024, were $797.219 million, compared to $877.504 million for the same period in 2023, a decrease of 9.1%[21] - General and administrative (G&A) expenses rose by 16.2% to $23,897,000 in Q2 2024 compared to $20,565,000 in Q2 2023[30] - The company reported a total G&A expense of $153,242,000 for the six months ended June 30, 2024, down from $158,953,000 for the same period in 2023, reflecting a decrease of 3.6%[33] - The company experienced a significant reduction in restructuring and related costs, which decreased by 21.1% to $7,981,000 for the three months ended June 30, 2024, from $10,110,000 in the same period last year[33] Goodwill and Impairment - A goodwill impairment of $105.3 million was recognized in the RPM segment during Q2 2024[8] - Modivcare Inc. reported an impairment of goodwill of $105.302 million for the three months ended June 30, 2024, consistent with the same amount reported in the previous year[20] - The company incurred impairment of goodwill amounting to $105,302,000 for the six months ended June 30, 2024, down from $183,100,000 for the same period in 2023[27] Debt and Financing - The company successfully refinanced its 2025 senior unsecured notes with a new Term Loan B, improving its capital structure[2] - Long-term debt remained relatively stable at $986.1 million compared to $983.8 million at the end of 2023[19] Membership and Utilization - Average monthly members decreased to 29,703 thousand, down 13.4% from 34,312 thousand in the same period last year[29] - Average monthly members increased by 2.5% to 246,000 in Q2 2024 compared to 240,000 in Q2 2023[31] - Monthly utilization remained stable at 10.1%, consistent with the previous quarter[29] Other Financial Metrics - Adjusted net income (loss) for the six months ended June 30, 2024, was $(1,277,000), compared to $40,977,000 for the same period in 2023, indicating a significant decline[27] - Interest expense for the six months ended June 30, 2024, was $38,636,000, compared to $32,925,000 for the same period in 2023, representing an increase of approximately 17.3%[24] - Total paid trips increased to 9,031 thousand, up 3.4% from 8,735 thousand year-over-year[29]

Financial Data and Key Metrics Changes - In Q1 2024, revenue increased by 3% year-over-year to $685 million, with adjusted EBITDA of $32 million, representing 4.7% of revenue, in line with guidance [4][35] - The net loss for Q1 was $22 million, while the adjusted net loss was $1.2 million or $0.09 per diluted share [35] - The company expects to exit 2024 with a run-rate adjusted EBITDA between $220 million and $230 million and a free cash flow conversion of 40% to 50% excluding expected debt refinancing impacts [4][41] Business Line Data and Key Metrics Changes - NEMT revenue increased by 2% year-over-year to $479 million, with adjusted EBITDA at $27 million or 5.7% of revenue [20][35][145] - Personal Care Services (PCS) adjusted EBITDA was $11 million or 6% of revenue, lower than expected due to wage growth outpacing rate increases [22] - Remote Patient Monitoring (RPM) revenue grew by 7% year-over-year to $20 million, with adjusted EBITDA at $6.3 million or a 31% margin [23][146] Market Data and Key Metrics Changes - The average monthly membership for NEMT decreased by 12% sequentially to 29.1 million due to contract losses and Medicaid redetermination [145] - The company secured $36 million in NEMT Annualized Contract Value from Mississippi State contracts and continued momentum with contract renewals in Maine [10][20] - Medicaid redetermination is expected to adversely impact revenue by $60 million and adjusted EBITDA by $26 million to $30 million in 2024 [37] Company Strategy and Development Direction - The company is focused on operational improvements, technology advancements, and sales to enhance competitive positioning and achieve financial targets [26][28] - Cost savings initiatives are expected to yield at least $34 million in-year savings and approximately $60 million in annualized savings beyond 2024 [7][43] - The management team is optimistic about monetizing assets, including a minority equity stake in Matrix Medical, with expectations for a potential sale in late 2024 or early 2025 [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and competitive positioning, anticipating a normalization of healthcare utilization and improved cash flow in the latter half of 2024 [33][41] - The company expects to see margins improve throughout the year due to new contract onboarding and execution of cost initiatives [20][44] - Management noted that Medicaid redetermination is tracking slightly better than expected, providing a clearer earnings trajectory [42][44] Other Important Information - The company maintained its 2024 revenue guidance in the range of $2.7 billion to $2.9 billion and adjusted EBITDA in the range of $190 million to $210 million [56] - The reimbursement rate increase was driven by favorable minimum wage increases in New York, but a more subdued reimbursement environment is expected for the remainder of the year [38] Q&A Session Summary Question: What is the impact of Medicaid redetermination on the business? - Management acknowledged that Medicaid redetermination is a significant factor affecting membership and revenue, with expectations of a 20% to 30% reenrollment of eligible members in the coming quarters [13][20] Question: Can you discuss the pipeline and visibility regarding contract wins and losses? - Management expressed confidence in their ability to win new contracts while minimizing losses, noting that their current capabilities have improved significantly [52][67] Question: What are the expectations for margin improvements throughout the year? - Management indicated that margins are expected to improve in the latter half of the year, driven by new contract implementations and cost savings initiatives [44][128]

May 2024 Investor Presentation © 2024 Modivcare® Inc. Certain statements contained in herein 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 ...

PART I—FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company reported a wider net loss of $22.3 million in Q1 2024 and faces a need to refinance its 2025 Senior Notes Q1 2024 vs. Q1 2023 Statement of Operations Highlights | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | **Service revenue, net** | $684,451 thousand | $662,306 thousand | | **Operating income (loss)** | $(3,395) thousand | $8,098 thousand | | **Net loss** | $(22,300) thousand | $(3,962) thousand | | **Diluted loss per share** | $(1.57) | $(0.28) | Balance Sheet Highlights | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total current assets** | $404,001 thousand | $404,923 thousand | | **Total assets** | $1,764,048 thousand | $1,767,275 thousand | | **Total current liabilities** | $539,314 thousand | $520,402 thousand | | **Total liabilities** | $1,628,207 thousand | $1,611,080 thousand | | **Total stockholders' equity** | $135,841 thousand | $156,195 thousand | Q1 2024 vs. Q1 2023 Cash Flow Highlights | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $9,560 thousand | $(2,655) thousand | | **Net cash used in investing activities** | $(7,856) thousand | $(13,320) thousand | | **Net cash provided by financing activities** | $6,380 thousand | $14,380 thousand | - The company expects to be required to raise additional capital to repay or refinance its **Senior Notes due November 15, 2025**, as it does not currently have sufficient available cash flows to repay them in full when due[33](index=33&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 3.3% in Q1 2024, but higher service expenses led to an operating loss of $3.4 million - Business outlook is influenced by long-term trends such as an aging population and a shift to value-based care, but faces near-term challenges from **Medicaid redetermination and macroeconomic pressures**[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk) - The company expects that cash from operations and its Credit Facility will be sufficient to fund operations for the next twelve months but anticipates needing to **raise additional capital to refinance the Senior Notes due in November 2025**[177](index=177&type=chunk)[178](index=178&type=chunk) Consolidated Results of Operations (Q1 2024 vs. Q1 2023) | Line Item | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | **Service revenue, net** | $684,451 | $662,306 | | **Service expense** | $583,566 | $550,266 | | **Operating income (loss)** | $(3,395) | $8,098 | | **Net loss** | $(22,300) | $(3,962) | [Results of Operations - Segments](index=29&type=section&id=Results%20of%20Operations%20-%20Segments) Segment performance shows revenue growth across NEMT, PCS, and RPM, but profitability declined in PCS and RPM NEMT Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Service revenue, net** | $479,306 thousand | $469,463 thousand | | **Operating income** | $16,470 thousand | $21,136 thousand | | **Total paid trips** | 8,808 thousand | 8,202 thousand | | **Average monthly members** | 29,071 thousand | 33,704 thousand | PCS Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Service revenue, net** | $183,568 thousand | $174,131 thousand | | **Operating income (loss)** | $(3,097) thousand | $3,974 thousand | | **Total hours** | 6,965 thousand | 6,824 thousand | | **Service expense per hour** | $21.46 | $19.94 | RPM Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Service revenue, net** | $20,102 thousand | $18,712 thousand | | **Operating income (loss)** | $(375) thousand | $599 thousand | | **Average monthly members** | 249 thousand | 235 thousand | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20capital%20resources) The company has sufficient liquidity for the next 12 months but faces significant future cash requirements for its notes - **Cash provided by operating activities increased by $12.2 million** year-over-year, driven by favorable changes in operating assets and liabilities[167](index=167&type=chunk)[168](index=168&type=chunk) - On February 22, 2024, the company amended its Credit Agreement to increase the maximum permitted Total Net Leverage Ratio and add a **minimum liquidity covenant of $100.0 million**[173](index=173&type=chunk)[174](index=174&type=chunk) Future Cash Requirements as of March 31, 2024 | Obligation | Total (in thousands) | Due in Less than 1 Year (in thousands) | Due in More than 1 Year (in thousands) | | :--- | :--- | :--- | :--- | | **Senior Unsecured Notes** | $1,000,000 | $— | $1,000,000 | | **Interest** | $197,633 | $66,036 | $131,597 | | **Short-term borrowings** | $121,000 | $121,000 | $— | | **Total** | **$1,922,155** | **$719,776** | **$1,202,379** | [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuation on its $121.0 million in variable-rate debt - The company is exposed to interest rate risk from its Credit Facility, which has variable interest rates, with **$121.0 million outstanding** at March 31, 2024[183](index=183&type=chunk) - A sensitivity analysis indicates that a **one-percentage point increase in interest rates** would negatively impact pre-tax earnings by approximately **$1.2 million annually**[183](index=183&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of March 31, 2024, due to previously identified material weaknesses - Management concluded that **disclosure controls and procedures were not effective** as of March 31, 2024, due to material weaknesses identified in the 2023 Annual Report on Form 10-K[185](index=185&type=chunk) - Ongoing remediation efforts are focused on addressing general information technology control deficiencies and **process-level controls for revenue and payroll within the PCS segment**[188](index=188&type=chunk) - Despite the control weaknesses, management believes the financial statements in this report are **fairly presented in all material respects** due to additional analysis and procedures performed[186](index=186&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings not expected to have a material adverse effect - The company is subject to legal proceedings in the ordinary course of business but **does not expect them to have a material adverse effect**[192](index=192&type=chunk) - Note 12 details a class action lawsuit against the PCS subsidiary All Metro Health Care concerning pay for live-in caregivers, which the **company is defending vigorously**[97](index=97&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the 2023 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, 2023[193](index=193&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not conduct any unregistered sales of equity securities during the reporting period - None[195](index=195&type=chunk) [Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None[196](index=196&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[197](index=197&type=chunk) [Other Information](index=41&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted or terminated Rule 10b5-1 trading plans during the first quarter of 2024 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangement during the three months ended March 31, 2024[198](index=198&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section indexes all exhibits filed with the Form 10-Q, including agreements and certifications - The report includes an index of exhibits filed, such as amendments to the credit agreement and certifications required by the Sarbanes-Oxley Act[200](index=200&type=chunk)

[Financial Performance and Outlook](index=1&type=section&id=Financial%20Performance%20and%20Outlook) The company reported modest Q1 revenue growth alongside a net loss, but maintains its full-year guidance and focuses on strategic transformation and refinancing [First Quarter 2024 Financial Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Highlights) The company's first quarter saw revenue growth to $684.5 million but resulted in a net loss of $22.3 million Q1 2024 Key Metrics | Metric | Q1 2024 Value | | :--- | :--- | | Service Revenue | $684.5 million (+3.3% YoY) | | Net Loss | $22.3 million | | Diluted EPS | ($1.57) | | Adjusted EBITDA | $32.1 million | | Adjusted EPS | ($0.09) | | Cash from Operations | $9.6 million | | Free Cash Flow | $1.7 million | | New NEMT TCV Won | $171.2 million | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management confirmed Q1 results met guidance and expressed confidence in achieving future EBITDA targets and completing debt refinancing - The company is progressing with its strategic transformation, with digital and technology initiatives expected to yield at least **$34 million in in-year cost savings**[4](index=4&type=chunk) - Management is confident in its path to exit Q4 2024 with an expected run-rate adjusted EBITDA of **$220 million to $230 million**[4](index=4&type=chunk) - The company's top priority is refinancing its **2025 senior unsecured notes**, and the process is reported to be well underway[4](index=4&type=chunk) - Modivcare won an additional **$36 million in Annual Contract Value (ACV)** during Q1 2024[4](index=4&type=chunk) [2024 Full-Year Guidance](index=2&type=section&id=2024%20Full-Year%20Guidance) Modivcare reaffirmed its full-year 2024 guidance, projecting revenue of $2.7-$2.9 billion and Adjusted EBITDA of $190-$210 million Fiscal Year 2024 Outlook | Metric | Fiscal Year 2024 Guidance ($ in millions) | | :--- | :--- | | Revenue | $2,700 - $2,900 | | Adjusted EBITDA | $190 - $210 | - The provided guidance excludes the effects of any future merger or acquisition activity[7](index=7&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) This section breaks down the company's financial performance, showing consolidated revenue growth offset by rising expenses and declining profitability across key segments [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) Consolidated revenue grew 3.3% in Q1 2024, but higher service expenses led to an operating loss and a decline in Adjusted EBITDA Revenue Growth by Segment (YoY) | Segment | Revenue Growth (YoY) | | :--- | :--- | | NEMT | +2.1% | | PCS | +5.4% | | RPM | +7.4% | - The company reported an **operating loss of $3.4 million**, compared to an operating income of $8.1 million in Q1 2023, driven by a 4.9% increase in total operating expenses[9](index=9&type=chunk) Key Profitability Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Adjusted EBITDA | $32.1M | $50.2M | | Adjusted Net Loss/(Income) | ($1.2M) | $20.2M | | Adjusted EPS | ($0.09) | $1.42 | [Segment Performance Analysis](index=11&type=section&id=Segment%20Performance%20Analysis) Analysis reveals revenue growth across all segments, though profitability declined in NEMT and PCS due to increased service costs [NEMT Segment](index=11&type=section&id=NEMT%20Segment) The NEMT segment's revenue grew due to higher trip volume, but its Adjusted EBITDA margin contracted significantly Q1 NEMT Segment Performance | NEMT Segment Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Service revenue, net | $479.3M | $469.5M | +2.1% | | Adjusted EBITDA | $27.1M | $35.3M | -23.1% | | Adjusted EBITDA margin | 5.7% | 7.5% | -1.8 ppt | | Total paid trips (thousands) | 8,808 | 8,202 | +7.4% | | Avg. monthly members (thousands) | 29,071 | 33,704 | -13.7% | [PCS Segment](index=12&type=section&id=PCS%20Segment) The PCS segment's revenue increased, but profitability fell as service expense growth outpaced revenue per hour growth Q1 PCS Segment Performance | PCS Segment Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Service revenue, net | $183.6M | $174.1M | +5.4% | | Adjusted EBITDA | $11.3M | $17.1M | -34.2% | | Adjusted EBITDA margin | 6.1% | 9.8% | -3.7 ppt | | Total hours (thousands) | 6,965 | 6,824 | +2.1% | [RPM Segment](index=13&type=section&id=RPM%20Segment) The RPM segment delivered revenue growth driven by more members while maintaining relatively stable Adjusted EBITDA Q1 RPM Segment Performance | RPM Segment Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Service revenue, net | $20.1M | $18.7M | +7.4% | | Adjusted EBITDA | $6.3M | $6.5M | -2.7% | | Adjusted EBITDA margin | 31.4% | 34.7% | -3.3 ppt | | Avg. monthly members (thousands) | 249 | 235 | +6.0% | [Corporate and Other](index=14&type=section&id=Corporate%20and%20Other) Corporate and Other expenses saw a significant year-over-year increase in Adjusted G&A, impacting overall profitability - Corporate Adjusted G&A expense **increased 38.0% YoY to $11.9 million** from $8.6 million[48](index=48&type=chunk) - Consolidated Adjusted G&A expense **increased 8.7% YoY to $68.7 million**, representing 10.0% of consolidated revenue[48](index=48&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited condensed statements of operations, balance sheets, and cash flows for the first quarter of 2024 [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The Q1 2024 income statement details a net loss of $22.3 million on $684.5 million in revenue, driven by increased operating expenses Statement of Operations Highlights (in thousands) | Line Item (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Service revenue, net | $684,451 | $662,306 | | Total operating expenses | $687,846 | $655,672 | | Operating income (loss) | ($3,395) | $8,098 | | Net loss | ($22,300) | ($3,962) | | Loss per common share, diluted | ($1.57) | ($0.28) | [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2024, shows stable total assets at $1.76 billion but a decrease in stockholders' equity Balance Sheet Highlights (in thousands) | Balance Sheet Item (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,341 | $2,217 | | Total assets | $1,764,048 | $1,767,275 | | Total liabilities | $1,628,207 | $1,611,080 | | Long-term debt, net | $984,896 | $983,757 | | Stockholders' equity | $135,841 | $156,195 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated positive operating cash flow of $9.6 million in Q1 2024, a notable improvement from the prior-year period Cash Flow Summary (in thousands) | Cash Flow Activity (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $9,560 | ($2,655) | | Net cash used in investing activities | ($7,856) | ($13,320) | | Net cash provided by financing activities | $6,380 | $14,380 | | Net change in cash | $8,084 | ($1,595) | [Non-GAAP Financial Measures and Reconciliations](index=8&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides reconciliations of GAAP measures like net loss to non-GAAP measures such as Adjusted EBITDA and Adjusted Net Income [Reconciliation of Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) A reconciliation from a GAAP net loss of $22.3 million to a non-GAAP Adjusted EBITDA of $32.1 million is detailed for Q1 2024 Net Loss to Adjusted EBITDA Reconciliation (in thousands) | Reconciliation Item (in thousands) | Q1 2024 | | :--- | :--- | | Net loss | ($22,300) | | Depreciation and amortization | $27,103 | | Interest expense, net | $18,686 | | Income tax benefit | ($543) | | Restructuring and related costs | $5,105 | | Transaction and integration costs | $1,543 | | Stock-based compensation | $1,781 | | Equity in net loss of investee | $762 | | **Adjusted EBITDA** | **$32,137** | Adjusted EBITDA by Segment (in thousands) | Adjusted EBITDA by Segment (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | NEMT | $27,120 | $35,276 | | PCS | $11,271 | $17,119 | | RPM | $6,309 | $6,485 | | Corporate and Other | ($12,563) | ($8,648) | | **Total** | **$32,137** | **$50,232** | [Reconciliation of Adjusted Net Income (Loss)](index=10&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Income%20(Loss)) The Q1 2024 GAAP net loss is reconciled to a non-GAAP Adjusted Net Loss of $1.2 million, a sharp decline from the prior year's adjusted income Net Loss to Adjusted Net Income (Loss) Reconciliation (in thousands) | Reconciliation Item (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | ($22,300) | ($3,962) | | Adjustments (Restructuring, Amortization, etc.) | $28,970 | $36,367 | | Tax effected impact of adjustments | ($7,881) | ($10,154) | | **Adjusted net income (loss)** | **($1,211)** | **$20,201** | | **Adjusted earnings (loss) per share** | **($0.09)** | **$1.42** | [Important Disclosures](index=3&type=section&id=Important%20Disclosures) This section defines the non-GAAP financial measures used in the report and provides a safe harbor for forward-looking statements [Non-GAAP Financial Measures Definitions](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Definitions) Key non-GAAP metrics like Adjusted EBITDA and free cash flow are defined to clarify their use in assessing core operating performance - The report uses several non-GAAP financial measures, such as EBITDA, Adjusted EBITDA, and Adjusted Net Income, which are defined in this section[14](index=14&type=chunk) - Management believes these non-GAAP measures provide a better understanding of ongoing business operations and facilitate more meaningful comparisons with prior periods and industry peers[15](index=15&type=chunk) - The company urges investors to review the reconciliations of non-GAAP measures to their most directly comparable GAAP measures and not to rely on any single financial metric[16](index=16&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The report includes a safe harbor statement cautioning that forward-looking information is subject to significant risks and uncertainties - The press release contains forward-looking statements, including the company's financial guidance, which are subject to various risks and uncertainties[17](index=17&type=chunk) - Key risks include, but are not limited to, government funding reductions, reimbursement rate pressures, IT security breaches, economic conditions like inflation and rising interest rates, and the ability to service its substantial debt[17](index=17&type=chunk)[18](index=18&type=chunk) - The company directs readers to its SEC filings, such as the Form 10-K, for a more comprehensive discussion of the risks facing the business[19](index=19&type=chunk)

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]