ModivCare (US:MODV)2023-08-04 17:49Financial Data and Key Metrics Changes - In Q2 2023, revenue increased by 11% year-over-year to $699 million, driven by 11% growth in mobility and the Home division [19] - Adjusted EBITDA for NEMT was approximately $29 million, down 38% year-over-year due to increased service expenses and a prior year benefit of $7 million from repricing [20] - Contract receivables collections increased to approximately $16 million in Q2 from $6 million in Q1, indicating improved cash flow [22] - The company lowered its adjusted EBITDA guidance due to higher NEMT utilization and associated costs [24] Business Line Data and Key Metrics Changes - NEMT revenue for Q2 was $497 million, with a 1.5% year-over-year increase in average monthly members to 34.3 million and a 9% increase in revenue per member per month [30] - The Home division's personal care revenue increased by 11% year-over-year to $180 million, driven by a 3.4% growth in hours and a 7% increase in revenue per hour [31] - RPM segment revenue increased by 15% year-over-year to $19 million, supported by strong referral sales [21] Market Data and Key Metrics Changes - The company anticipates Medicaid redetermination could create an adjusted EBITDA headwind of approximately $5 million to $10 million for the second half of 2023 [11] - The company expects regular growth in Medicaid and MA programs to counterbalance the impacts of redetermination [11] Company Strategy and Development Direction - The company's strategy focuses on digital transformation and operational excellence, with a strong emphasis on automation and improving member engagement through omnichannel options [14][15] - The company is pursuing approximately $700 million in new opportunities in its MCO pipeline, aiming to provide holistic solutions beyond transportation [16] - The company is committed to growing supportive care services focused on social determinants of health [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating substantial cash flow in the second half of 2023, driven by normalized working capital and strong core cash flow [9][37] - The company is optimistic about its long-term growth strategy despite the challenges posed by Medicaid redetermination [35] - Management highlighted the importance of automation and cost-saving initiatives to improve margins and cash flow generation [91][119] Other Important Information - The company ended Q2 with approximately $7 million in cash and had $126.5 million drawn on its $325 million revolver [33] - The company continues to target a net leverage of three times, expecting to achieve this through debt reduction and EBITDA growth [34] Q&A Session Summary Question: What is the impact of Medicaid redetermination on the company? - Management expects a 10% to 15% reduction in the number of Medicaid lives covered, with an estimated EBITDA impact of $5 million to $10 million for 2023 [11][82] Question: How are margins looking in the full-risk versus shared-risk categories? - Full-risk contracts generally have higher margins but come with more variability, while shared-risk contracts offer more predictability with slightly lower margins [63][67] Question: What are the expected wage increases for caregivers? - Management indicated that wage increases are expected to be competitive in the marketplace, particularly in states with higher minimum wage requirements [72][94] Question: How does the company plan to manage cash flow and debt? - The company plans to pay down its revolver by $30 million to $50 million in the second half of the year, with expectations of generating cash flow in line with its guidance [128][130] Question: What is the company's strategy for automation and cost savings? - The company is implementing automation to reduce call center interactions and improve efficiency, expecting significant cost savings to materialize in 2024 [160][161]