ModivCare (MODV) - 2024 Q1 - Quarterly Results

Financial Performance and Outlook 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 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 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] - Management is confident in its path to exit Q4 2024 with an expected run-rate adjusted EBITDA of $220 million to $230 million[4] - The company's top priority is refinancing its 2025 senior unsecured notes, and the process is reported to be well underway[4] - Modivcare won an additional $36 million in Annual Contract Value (ACV) during Q1 2024[4] 2024 Full-Year Guidance 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] Detailed Financial Results 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 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] 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 Analysis reveals revenue growth across all segments, though profitability declined in NEMT and PCS due to increased service costs NEMT Segment 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 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 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 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] - Consolidated Adjusted G&A expense increased 8.7% YoY to $68.7 million, representing 10.0% of consolidated revenue[48] Consolidated Financial Statements 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 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 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 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 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 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) 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 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 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] - 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] - 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] Forward-Looking Statements 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] - 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][18] - 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]