ModivCare (US:MODV)2024-02-23 21:23Financial 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]