ModivCare (US:MODV)2025-12-29 15:25Financial Restructuring - The company entered into a Restructuring Support Agreement (RSA) with creditors to implement a financial restructuring, reducing total funded debt by approximately $1.1 billion[166]. - A Superpriority Secured Debtor In Possession Credit Agreement was established, providing up to $100 million in debtor-in-possession financing to fund the Chapter 11 Cases[167]. - The restructuring plan includes converting approximately $871 million in principal claims into $200 million of exit debt and 98% of the reorganized company's pro forma equity[168]. - The restructuring plan includes a potential equity rights offering of up to $200 million for certain holders of unsecured claims[168]. - The enterprise value range accepted by the Bankruptcy Court for the Chapter 11 restructuring is between $750.0 million and $925.0 million[182]. - Reorganization items, net for Q3 2025 amounted to $53.5 million due to the Chapter 11 restructuring[194]. - The company filed for reorganization under Chapter 11 on August 20, 2025, raising substantial doubt about its ability to meet obligations over the next twelve months[246]. - The company has classified the outstanding principal balance of the Incremental Term Loan and Term Loan Facility as liabilities subject to compromise due to Chapter 11 proceedings[270]. - Management has substantial doubt about the company's ability to continue as a going concern without successful restructuring[282]. Operational Performance - Consolidated service revenue, net for Q3 2025 decreased by $22.3 million, or 3.2%, compared to Q3 2024, with declines in all segments: NEMT down $0.6 million, PCS down $19.8 million, and Monitoring down $2.4 million[200]. - Total operating expenses for Q3 2025 were $691.8 million, slightly decreasing from $696.8 million in Q3 2024, with service expense accounting for 85.9% of revenue[200]. - Operating loss for Q3 2025 was $12.1 million, compared to an operating income of $5.3 million in Q3 2024, reflecting a significant decline in profitability[200]. - General and administrative expenses increased by $13.4 million, or 19.0%, in Q3 2025 compared to Q3 2024, rising to 12.4% of service revenue, net[202][203]. - Interest expense, net for Q3 2025 decreased by $14.0 million, or 49.2%, compared to Q3 2024, primarily due to the Chapter 11 filing which affected pre-petition debt[204]. - Consolidated service revenue, net for YTD 2025 decreased by $94.9 million, or 4.6%, compared to YTD 2024, driven by declines in the NEMT, PCS, and Monitoring segments[209]. - Total operating expenses for YTD 2025 increased to $2,274.9 million, or 114.3% of service revenue, compared to $2,181.8 million, or 104.7% of service revenue for YTD 2024[209]. - The company reported a net loss of $427.2 million for YTD 2025, compared to a net loss of $177.8 million for YTD 2024[209]. Segment Performance - The NEMT segment reported service revenue of $1,414.0 million for YTD 2025, a decrease from $1,462.2 million for YTD 2024[219]. - Average monthly members in the NEMT segment decreased to 23,628 in YTD 2025 from 30,023 in YTD 2024[219]. - Service revenue, net for the PCS segment decreased by $19.8 million, or 10.5%, in Q3 2025 compared to Q3 2024, primarily due to a 13.3% decrease in hours worked by personal care providers[228]. - Total service expense for the PCS segment decreased by $17.5 million, or 11.5%, in Q3 2025 compared to Q3 2024, mainly due to a decrease in payroll and related costs[229]. - Average monthly membership decreased by 21.3% in Q3 2025 and 20.0% YTD 2025, while revenue per member per month increased by 26.9% and 20.9% respectively, partially offsetting revenue declines[221]. Goodwill and Impairment - Goodwill impairment was recognized for the PCS and Monitoring reporting units during Q2 2025, attributed to a decline in market price and lower operating results[192]. - Impairment of goodwill for YTD 2025 was $263.4 million, significantly higher than $105.3 million for YTD 2024, due to charges recorded at both PCS and Monitoring units[213]. - An impairment of goodwill charge of $211.8 million was recorded during YTD 2025 for the PCS reporting unit, while no impairment charge was recorded in YTD 2024[233]. - Impairment of goodwill for YTD 2025 was $51.6 million, compared to $105.3 million for YTD 2024, indicating a significant reduction in impairment charges[241]. Cash Flow and Liquidity - Cash used in operating activities was $154.8 million for YTD 2025, an increase of $118.3 million compared to $36.5 million for YTD 2024, primarily due to lower service revenue and higher interest expense[249]. - The balance of cash and cash equivalents was $78.2 million as of September 30, 2025, down from $112.6 million at December 31, 2024[247]. - The company has a total cash requirement of $357.7 million over the next 12 months, which includes the DIP Facility and other current liabilities[277]. - The company expects to continue generating negative cash flows from operations in the near term, impacted by increased costs and membership declines[278]. - A one-percentage point increase in interest rates on the DIP Facility would have an approximate $0.6 million negative impact on pre-tax earnings[285]. Debt and Financing - The company entered into a DIP Credit Agreement for a senior secured superpriority term loan facility of up to $100.0 million, with an initial draw of $62.5 million[271]. - The DIP Facility has an interest rate of either SOFR plus 7.00% or Alternate Base Rate plus 6.00% per annum[272]. - The company issued $500.0 million in 5.000% senior unsecured notes due October 1, 2029 (2029 Notes) on August 24, 2021[252]. - The Fifth Amendment to the Credit Agreement allowed for the exchange of up to $251.0 million in principal of the 2029 Notes for Second Lien Notes[254]. - The Second Lien Notes will accrue interest at 5.000% per annum if paid in cash, or 10.000% if paid-in-kind, maturing on October 1, 2029[256].