ModivCare (US:MODV)2024-05-03 17:09Financial Data and Key Metrics Changes - In Q1 2024, revenue increased by 3% year-over-year to $685 million, with adjusted EBITDA of $32 million, representing 4.7% of revenue, in line with guidance [4][35] - The net loss for Q1 was $22 million, while the adjusted net loss was $1.2 million or $0.09 per diluted share [35] - The company expects to exit 2024 with a run-rate adjusted EBITDA between $220 million and $230 million and a free cash flow conversion of 40% to 50% excluding expected debt refinancing impacts [4][41] Business Line Data and Key Metrics Changes - NEMT revenue increased by 2% year-over-year to $479 million, with adjusted EBITDA at $27 million or 5.7% of revenue [20][35][145] - Personal Care Services (PCS) adjusted EBITDA was $11 million or 6% of revenue, lower than expected due to wage growth outpacing rate increases [22] - Remote Patient Monitoring (RPM) revenue grew by 7% year-over-year to $20 million, with adjusted EBITDA at $6.3 million or a 31% margin [23][146] Market Data and Key Metrics Changes - The average monthly membership for NEMT decreased by 12% sequentially to 29.1 million due to contract losses and Medicaid redetermination [145] - The company secured $36 million in NEMT Annualized Contract Value from Mississippi State contracts and continued momentum with contract renewals in Maine [10][20] - Medicaid redetermination is expected to adversely impact revenue by $60 million and adjusted EBITDA by $26 million to $30 million in 2024 [37] Company Strategy and Development Direction - The company is focused on operational improvements, technology advancements, and sales to enhance competitive positioning and achieve financial targets [26][28] - Cost savings initiatives are expected to yield at least $34 million in-year savings and approximately $60 million in annualized savings beyond 2024 [7][43] - The management team is optimistic about monetizing assets, including a minority equity stake in Matrix Medical, with expectations for a potential sale in late 2024 or early 2025 [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and competitive positioning, anticipating a normalization of healthcare utilization and improved cash flow in the latter half of 2024 [33][41] - The company expects to see margins improve throughout the year due to new contract onboarding and execution of cost initiatives [20][44] - Management noted that Medicaid redetermination is tracking slightly better than expected, providing a clearer earnings trajectory [42][44] Other Important Information - The company maintained its 2024 revenue guidance in the range of $2.7 billion to $2.9 billion and adjusted EBITDA in the range of $190 million to $210 million [56] - The reimbursement rate increase was driven by favorable minimum wage increases in New York, but a more subdued reimbursement environment is expected for the remainder of the year [38] Q&A Session Summary Question: What is the impact of Medicaid redetermination on the business? - Management acknowledged that Medicaid redetermination is a significant factor affecting membership and revenue, with expectations of a 20% to 30% reenrollment of eligible members in the coming quarters [13][20] Question: Can you discuss the pipeline and visibility regarding contract wins and losses? - Management expressed confidence in their ability to win new contracts while minimizing losses, noting that their current capabilities have improved significantly [52][67] Question: What are the expectations for margin improvements throughout the year? - Management indicated that margins are expected to improve in the latter half of the year, driven by new contract implementations and cost savings initiatives [44][128]