ModivCare Inc.Q224 Results

Investment Rating - The report rates ModivCare Inc.'s bonds as Buy, indicating an expectation for these bonds to outperform other issues in the sector over the next three to six months [1][27]. Core Insights - ModivCare Inc. (MODV) reported Q224 EBITDA of $45 million, slightly above Bloomberg consensus of $42 million and a significant improvement from $32 million in Q124, leading to a last twelve months (LTM) EBITDA of $179 million [4][18]. - The company won new NEMT contracts in Q224, generating $33 million in annual revenue, which is expected to positively impact the second half of 2024 [1][10]. - ModivCare's leverage target is set at 3x, with current net leverage reported at 5.2x, indicating a focus on improving core operations and considering strategic options [6][18]. - The company has lowered its 2024 EBITDA guidance to a range of $185-195 million, primarily due to weaker-than-expected results from its PCS segment [7][18]. - ModivCare's liquidity position is reported at $99 million, with cash of $11 million and revolver availability of $89 million [16]. Financial Performance - The LTM net leverage as of June 30, 2024, is reported at 5.2x, which includes $45 million of cost savings, while a calculation without these add-backs shows a net leverage of 6.5x [5][18]. - The company expects to generate positive free cash flow (FCF) in 2024, with a conversion rate of approximately 30% of EBITDA [7][18]. - ModivCare's revenue for FY2024 is projected at $2,818 million, with EBITDA expected to be $180 million [19]. Contractual Developments - In Q224, ModivCare secured new contracts that contribute to a total of approximately $211 million in annual revenue from contracts won in 2023 and 2024 [10]. - The company anticipates monetizing its Matrix asset in late 2024 or early 2025, which could significantly improve its leverage profile [13][18]. Market Position - ModivCare's PCS EBITDA improved to $15 million in Q224, up from $11 million in Q124, but remains below the annual run rate potential of $75 million [11]. - The company expects to exit 2024 with PCS margins approaching 10%, with NEMT margins projected to increase by roughly 100 basis points [12].