ModivCare Inc. (NASDAQ:MODV) is a leading technology-enabled healthcare services company that provides a comprehensive suite of integrated supportive care solutions for public and private payors and their members. The company's innovative approach addresses the social determinants of health (SDoH) by connecting members to essential care services, helping health plans manage risks, reduce costs, and improve health outcomes.

Business Overview

ModivCare operates four reportable business segments: Non-Emergency Medical Transportation (NEMT), Personal Care Services (PCS), Remote Patient Monitoring (RPM), and Corporate and Other. The NEMT segment is the largest manager of non-emergency medical transportation programs for state governments and managed care organizations in the U.S. The PCS segment provides in-home personal care services to Medicaid, Medicare, and private pay patient populations. The RPM segment offers remote patient monitoring solutions, including personal emergency response systems, vitals monitoring, and data-driven patient engagement solutions.

Financials

In fiscal year 2023, ModivCare reported annual revenue of $2,751,170,000 and a net loss of $204,460,000. The company's annual operating cash flow was -$82,971,000, and its annual free cash flow was -$125,259,000. These financial results reflect the company's ongoing transformation efforts and the impact of the COVID-19 pandemic on its operations.

During the first quarter of 2024, ModivCare's revenue increased 3.3% year-over-year to $684,451,000, driven by growth across all three of its operating segments. The NEMT segment reported a 2.1% increase in revenue to $479,306,000, the PCS segment saw a 5.4% increase in revenue to $183,568,000, and the RPM segment experienced a 7.4% increase in revenue to $20,102,000. The company's net loss in the first quarter of 2024 was $22,300,000.

The company's performance in the first quarter was in line with its guidance, with adjusted EBITDA of $32,000,000, or 4.7% of revenue. ModivCare's management team expects to see sequential improvement in the company's financial results throughout the year, driven by new contract implementations, greater benefits from cost-saving initiatives, the diminishing impact of Medicaid redetermination, and improvements in the Home segment.

Recent Developments

One of the key drivers of ModivCare's financial performance is the ongoing Medicaid redetermination process, which has had a significant impact on the company's NEMT segment. During the first quarter of 2024, Medicaid redetermination resulted in a $10,000,000 reduction in revenue and a $5,000,000 impact on adjusted EBITDA. However, the company now expects the full-year impact of Medicaid redetermination to be slightly better than its original guidance, with a $60,000,000 reduction in revenue and a $26,000,000 to $30,000,000 impact on adjusted EBITDA.

In the NEMT segment, ModivCare's cost-saving initiatives are progressing as scheduled, with the company expecting to achieve at least $34,000,000 in in-year cost savings and approximately $60,000,000 in annualized savings beyond 2024. These savings are driven by the company's NEMT transformation, including digital integration and technology advancements.

The PCS segment faced some challenges in the first quarter, with higher-than-expected wage increases and higher centralized costs. However, ModivCare is focused on implementing a sophisticated member referral and caregiver matching system, as well as platform implementation and shared service centralization, which are expected to drive operating efficiencies and help the segment return to its long-term revenue growth rate of 7% to 9% and an adjusted EBITDA margin of 10% to 12%.

In the RPM segment, ModivCare continues to see solid growth and performance, with revenue increasing 7.4% year-over-year in the first quarter. The company is seeing good progress with payers as it shifts to an "access to care" model driven by its hybrid digital and human touch engagement approach. ModivCare expects meaningful revenue contribution from its RPM solutions in 2025 and beyond.

Outlook

One of ModivCare's key strategic initiatives is the potential monetization of its minority equity stake in Matrix Medical Network, a national network of community-based clinicians who deliver in-home and on-site services. The company expects to have the opportunity to monetize this investment in the latter half of 2024 or the first half of 2025, which could provide additional avenues for deleveraging its balance sheet.

Liquidity

ModivCare's liquidity position is supported by its cash and cash equivalents of $10,341,000 and accounts receivable, contract receivables, and other receivables of $362,900,000 as of March 31, 2024. The company also has access to its revolving credit facility, which had $121,000,000 in outstanding borrowings as of the end of the first quarter. ModivCare's management team believes the company's current liquidity, combined with expected future cash generated from operations, will be sufficient to fund its operations and growth strategies for the next twelve months.

Risks and Challenges

However, the company's long-term capital requirements include the need to refinance its $500,000,000 in senior unsecured notes due in November 2025. ModivCare is currently pursuing financing solutions that provide flexibility for prepayment to support its priority of deleveraging while managing its overall cost of capital. The company expects to complete the refinancing process before the end of the second quarter of 2024.

Conclusion

In conclusion, ModivCare is a leading provider of integrated supportive care solutions that address the social determinants of health and help health plans manage risks, reduce costs, and improve health outcomes. The company's ongoing transformation efforts, including cost-saving initiatives, platform enhancements, and strategic investments, position it well to navigate the evolving healthcare landscape and deliver long-term value for its shareholders.