ModivCare (US:MODV)2025-12-29 15:23Restructuring and Bankruptcy - The company entered into a Restructuring Support Agreement (RSA) with creditors to restructure approximately $1.1 billion in total funded debt[155]. - A Superpriority Secured Debtor In Possession Credit Agreement was established, providing a term loan credit facility of up to $100 million[156]. - 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[157]. - The company is facing delisting from Nasdaq due to the commencement of Chapter 11 cases and failure to file required reports[160][161]. - The company is subject to risks associated with the Chapter 11 cases, which may affect its ability to continue as a going concern[165]. - The enterprise value range accepted by the Bankruptcy Court for the Chapter 11 restructuring is between $750.0 million and $925.0 million[170]. - The company filed for Chapter 11 reorganization on August 20, 2025, due to substantial doubt about its ability to meet obligations over the next twelve months[237]. - The company filed for Chapter 11 bankruptcy on August 20, 2025, to restructure its debt and improve liquidity[275]. - Management has substantial doubt about the company's ability to continue as a going concern without successful restructuring[271]. Financial Performance - Consolidated service revenue, net for Q2 2025 decreased by $38.7 million, or 5.5%, compared to Q2 2024, with declines in all segments: NEMT down $17.3 million, PCS down $19.7 million, and Monitoring down $1.5 million[188]. - Total operating expenses for Q2 2025 were $928.0 million, representing 140.7% of service revenue, net, compared to $797.2 million or 114.2% in Q2 2024[188]. - Impairment of goodwill for Q2 2025 was $263.4 million, significantly higher than $105.3 million in Q2 2024, driven by impairment charges in both PCS and Monitoring reporting units[192]. - Interest expense, net for Q2 2025 increased by $17.2 million, or 86.0%, totaling $37.1 million compared to $20.0 million in Q2 2024, due to new debt facilities and higher interest rates[193]. - Consolidated service revenue, net for YTD 2025 decreased by $72.5 million, or 5.2%, compared to YTD 2024, driven by declines in the NEMT segment ($47.6 million), PCS segment ($21.5 million), and Monitoring segment ($3.5 million)[197]. - Total operating expenses for YTD 2025 increased to $1,583.1 million, representing 120.8% of service revenue, net, compared to $1,485.1 million or 107.4% in YTD 2024[197]. - Impairment of goodwill for YTD 2025 was $263.4 million, significantly higher than $105.3 million in YTD 2024, due to charges recorded at both PCS and Monitoring reporting units[201]. - Interest expense, net for YTD 2025 increased by $37.3 million, or 96.6%, totaling $75.9 million compared to $38.6 million in YTD 2024, attributed to new debt facilities and higher interest rates[202]. Membership and Revenue Trends - Average monthly members decreased by 19.7% in Q2 2025 and 19.3% in YTD 2025 compared to the same periods in 2024, impacting revenue generation[207]. - Revenue per member per month increased by 20.1% in Q2 2025 and 18.0% in YTD 2025, partially offsetting the decline in total revenue due to decreased membership[207]. - Total paid trips increased by 0.1% in Q2 2025 but decreased by 1.9% in YTD 2025 compared to the same periods in 2024[207]. Cost Management - Service expense for Q2 2025 decreased by $17.5 million, or 3.0%, totaling $570.6 million, with notable decreases in the PCS segment by $16.3 million[189]. - General and administrative expense for Q2 2025 decreased by $5.5 million, or 7.2%, totaling $70.6 million, with a slight increase in the Corporate and Other segment[190]. - Depreciation and amortization expense decreased by $4.3 million, or 15.6%, in Q2 2025, primarily due to certain intangible assets being fully amortized[191]. - Service expense for YTD 2025 decreased by $48.0 million, or 4.1%, compared to YTD 2024, with notable reductions in the NEMT and PCS segments[198]. - General and administrative expenses for YTD 2025 decreased by $4.1 million, or 2.7%, but increased as a percentage of service revenue, net to 11.4% from 11.1% in YTD 2024[199]. Debt and Financing - The principal balance of the 2029 Notes was reduced to $228.8 million as of June 30, 2025, down from $500.0 million as of December 31, 2024[249]. - The principal balance of the Second Lien Notes as of June 30, 2025, was $316.2 million, which includes $15.1 million of PIK interest[249]. - The Revolving Credit Facility has an aggregate principal amount of $325.0 million, with sublimits for swingline loans, letters of credit, and alternative currency loans[251]. - The Term Loan Facility was established with an aggregate principal amount of $525.0 million, maturing on July 1, 2031, or July 2, 2029, if any of the 2029 Notes remain outstanding[255][256]. - The Incremental Term Loan was established with an aggregate principal amount of $75.0 million, priced at a SOFR-based benchmark plus 7.50%, maturing on January 10, 2026[258]. - The DIP Facility has an aggregate principal amount of up to $100.0 million, with an initial draw of up to $62.5 million and a subsequent draw of up to $37.5 million[260]. - The DIP Loans will accrue an interest rate of either SOFR plus 7.00% per annum or Alternate Base Rate plus 6.00% per annum[261]. - The Term Loan Facility requires annual prepayments of a percentage of Excess Cash Flow, starting with 75.0% if the Total Net Leverage Ratio exceeds 4.40:1.00[256]. - The company incurred approximately $26.9 million of deferred financing costs related to the Term Loan Facility[255]. Cash Flow and Liquidity - Cash used in operating activities was $104.3 million for YTD 2025, an increase of $58.6 million compared to $45.7 million for YTD 2024, primarily due to higher interest expense and changes in operating assets and liabilities[241]. - Net cash provided by financing activities was $91.7 million for YTD 2025, an increase of $23.1 million compared to $68.6 million for YTD 2024, driven by the issuance of the Incremental Term Loan[243]. - Net cash used in investing activities was $10.7 million for YTD 2025, a decrease of $3.8 million compared to YTD 2024, related to less cash used for property and equipment purchases[242]. - As of June 30, 2025, the company had liquid assets of $76.4 million and accounts receivable totaling $392.6 million[265]. - Cash requirements over the next 12 months totaled $935.9 million, including $130.7 million in guarantees and letters of credit not expected to be settled in cash[265]. - The company has a short-term balance of outstanding contract receivables of $115.6 million as of June 30, 2025[266]. - Total cash requirements as of June 30, 2025, amounted to $2.29 billion, with $935.9 million due in one year or less[273]. Operational Challenges - The company is experiencing rising labor costs and trip costs in its non-emergency medical transportation (NEMT) segment, impacting profit margins[169]. - The company is monitoring legislative impacts of the OBBBA, which could affect membership and the fair value of intangible assets[170]. - A one-percentage point increase in interest rates would negatively impact pre-tax earnings by approximately $8.7 million[277]. - The company has a history of operating losses and anticipates continued negative cash flows from operations in the near term[266]. - The company is authorized to operate as a debtor-in-possession but cannot engage in transactions outside the ordinary course without Bankruptcy Court approval[269].