Modivcare Reports Fourth Quarter and Full Year 2022 Financial Results; Issues 2023 Guidance

Modivcare Inc. (the “Company” or “Modivcare”) (Nasdaq: MODV), a technology-enabled healthcare services company that provides a suite of integrated supportive care solutions focused on improving patient outcomes, today reported financial results for the three months and full year ended December 31, 2022.

Fourth Quarter 2022 Highlights:

• Service revenue of $653.9 million, a 14% increase as compared to $575.8 million in the fourth quarter of 2021
• Net loss of $6.9 million, or $0.49 per diluted common share
• Adjusted EBITDA of $59.7 million, adjusted net income of $29.8 million and adjusted EPS of $2.11 per diluted common share
• Net cash used in operating activities during the quarter of $56.0 million
• Cash and cash equivalents of $14.5 million as of December 31, 2022, with $1,000.0 million principal amount of debt outstanding related to the Senior Unsecured Notes due 2025 and 2029

Full Year 2022 Highlights:

• Service revenue of $2,504.4 million, a 25% increase as compared to $1,996.9 million in 2021
• Net loss of $31.8 million, or $2.26 per diluted common share
• Adjusted EBITDA of $221.9 million, adjusted net income of $103.4 million and adjusted EPS of $7.32 per diluted common share
• Net cash used in operating activities in 2022 of $10.4 million
• On February 3, 2022, Modivcare Inc. entered into a new senior secured revolving credit facility with total borrowing capacity of $325.0 million and a maturity date in February 2027. This new facility was undrawn at closing and replaces the Company’s prior $225.0 million revolving credit facility.

“We reported strong financial results for 2022 with revenue and Adjusted EBITDA exceeding the high end of our guidance ranges. Solid fourth quarter 2022 results were highlighted by 14 percent revenue growth, driven by mid-teens membership growth and 12 percent growth from our personal care business,” said Heath Sampson, President and Chief Executive Officer. “Our 2023 guidance affirms our confidence in continued growth this year and our long-term outlook. As we continue our journey to become One Modivcare, which is aligning across all of our supportive care services to better serve the needs of our members and customers, we are focused on building for scale, driving efficiencies, and growing our business in 2023. I am grateful and proud of our team’s dedication and hard work. Our supportive care services are uniquely positioned to provide the highest quality, best-in-class member experience for approximately 35 million members in the most cost-effective manner for our customers and the healthcare system.”

2023 Guidance

Our 2023 guidance is as follows ($ in millions):

Guidance excludes the effects of any future merger or acquisition activity and is based on the current operating environment.

Fourth Quarter 2022 Results

For the fourth quarter of 2022, the Company reported revenue of $653.9 million, an increase of 14% from $575.8 million in the fourth quarter of 2021.

Operating income was $6.6 million, or 1% of revenue, in the fourth quarter of 2022, compared to $20.2 million, or 4% of revenue, in the fourth quarter of 2021. Net loss was $6.9 million, or $0.49 per common share in the fourth quarter of 2022, compared to $31.5 million, or $2.25 per common share, in the fourth quarter of 2021.

Adjusted EBITDA was $59.7 million, or 9% of revenue, in the fourth quarter of 2022, compared to $57.5 million, or 10% of revenue, in the fourth quarter of 2021.

Adjusted net income in the fourth quarter of 2022 was $29.8 million or $2.11 per diluted common share, compared to $29.8 million, or $2.11 per diluted common share, in the fourth quarter of 2021.

Full Year 2022 Results

For the full year 2022, the Company reported revenue of $2,504.4 million, an increase of 25% from $1,996.9 million in 2021.

Operating income was $57.1 million, or 2% of revenue, for 2022, compared to $89.4 million, or 4% of revenue, for 2021. Net loss in 2022 was $31.8 million, or $2.26 per common share, compared to a net loss of $6.6 million, or $0.47 per common share, in 2021.

Adjusted EBITDA for 2022 was $221.9 million or 9% of revenue, compared to $205.0 million, or 10% of revenue, in 2021.

Adjusted net income for 2022 was $103.4 million or $7.32 per diluted common share, compared to $112.4 million, or $7.90 per diluted common share, for 2021.

Organizational Consolidation and Change in Segments

We operate four reportable business segments: NEMT, Personal Care, RPM, and Corporate and Other. Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate segment that includes the costs associated with the Company's corporate operations. The operating results of our Corporate segment include our activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of our Matrix investment. The Company reclassified certain costs associated with this reorganization for the three and twelve months ended December 31, 2021 to conform to this presentation.

Fourth Quarter Earnings Conference Call

Modivcare will hold a conference call to discuss its financial results on Thursday, February 23, 2023 at 8:00 a.m. ET. To access the call, please dial:

US toll-free: 1 (887) 407-8037

International: 1 (201) 689-8037

You may also access the conference call via webcast at investors.modivcare.com, where the call will also be archived.

About Modivcare

Modivcare Inc. (Nasdaq: MODV) is a technology-enabled healthcare services company that provides a platform of integrated supportive care solutions for public and private payors and their patients. Our value-based solutions address the social determinants of health (SDoH), enable greater access to care, reduce costs, and improve outcomes. We are a leading provider of non-emergency medical transportation (NEMT), personal care and remote patient monitoring. To learn more about Modivcare, please visit www.modivcare.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial measures prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), this press release includes EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted G&A expense for the Company and its segments, and Adjusted Net Income and Adjusted EPS for the Company, which are performance measures that are not recognized under GAAP. EBITDA is defined as net income (loss) before: (1) interest expense, net, (2) provision (benefit) for income taxes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before (as applicable): (1) restructuring and related costs, including severance and organizational consolidation costs and professional services fees, (2) certain transaction and integration costs, (3) settlement related costs, (4) cash settled equity, (5) stock-based compensation, (6) COVID-19 related costs, net of grant income, and (7) equity in net (income) loss of investee, net of tax. Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by service revenue, net. Adjusted Net Income is calculated as net income (loss) before: (1) restructuring and related costs, including severance and organizational consolidation costs and professional services fees (2) certain transaction and integration costs, (3) settlement related costs, (4) cash settled equity, (5) stock-based compensation, (6) equity in net (income) loss of investee, net of tax (7) intangible amortization expense, (8) COVID-19 related costs, net of grant income, (9) transaction related financing expense, and (10) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income divided by the diluted weighted-average number of common shares outstanding as calculated for Adjusted Net Income. Adjusted G&A expense is calculated as G&A expense before (as applicable): (1) restructuring and related costs, (2) transaction and integration costs, (3) settlement related costs, (4) cash settled equity, and (5) stock-based compensation. We do not provide updated guidance for net income (loss) in this presentation on a basis consistent with GAAP or a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict items contained in the GAAP financial measures without unreasonable efforts. Our non-GAAP performance measures exclude expenses and amounts that are not driven by our core operating results and may be one time in nature. Excluding these expenses makes comparisons with prior periods as well as to other companies in our industry more meaningful. We believe such measures allow investors to gain a better understanding of the factors and trends affecting the ongoing operations of our business. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. As a result, our net income or loss in equity investee is excluded from these measures, as we do not have the ability to manage the venture, allocate resources within the venture, or directly control its operations or performance.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature and are frequently identified by the use of terms such as “may,” “will,” “should,” “expect,” “believe,” “estimate,” “intend,” and similar words indicating possible future expectations, events or actions. The updated guidance discussed herein constitutes forward-looking statements. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, which may cause actual events to be materially different from those expressed or implied herein, including but not limited to: government or private insurance program funding reductions or limitations; alternative payment models or the transition of Medicaid and Medicare beneficiaries to Managed Care Organizations, or MCOs; our inability to control reimbursement rates received for our services; cost containment initiatives undertaken by private third-party payors; the effects of a public health emergency; inadequacies in, or security breaches of, our information technology systems, including the systems intended to protect our clients’ privacy and confidential information; any changes in the funding, financial viability or our relationships with our payors; pandemic infectious diseases, including the COVID-19 pandemic; disruptions to our contact center operations caused by health epidemics or pandemics like COVID-19; delays in collection, or non-collection, of our accounts receivable, particularly during any business integration; an impairment of our long-lived assets; any failure to maintain or to develop further reliable, efficient and secure information technology systems; an inability to attract and retain qualified employees; any acquisition or acquisition integration efforts; our contracts not surviving until the end of their stated terms, or not being renewed or extended; our failure to compete effectively in the marketplace; our not being awarded contracts through the government’s requests for proposals process, or our awarded contracts not being profitable; any failure to satisfy our contractual obligations or to maintain existing pledged performance and payment bonds; a failure to estimate accurately the cost of performing our contracts; any misclassification of the drivers we engage as independent contractors rather than as employees; significant interruptions in our communication and data services; not successfully executing on our strategies in the face of our competition; any inability to maintain relationships with existing patient referral sources; any failure to obtain the consent of the New York Department of Health to manage the day to day operations of our licensed in-home personal care services agency business that we acquired with our personal care segment; acquired unknown liabilities in connection with the acquisition of our personal care segment; changes in the case-mix of our personal care patients, or changes in payor mix or payment methodologies; our loss of existing favorable managed care contracts; our experiencing shortages in qualified employees and management; labor disputes or disruptions, in particular in New York; becoming subject to malpractice or other similar claims; and our reliance on others for the financial condition of our equity investment in Matrix.

The Company has provided additional information about the risks facing our business in our annual report on Form 10-K and subsequent periodic and current reports most recently filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made and are expressly qualified in their entirety by the cautionary statements set forth herein and in our filings with the Securities and Exchange Commission, which you should read in their entirety before making an investment decision with respect to our securities. We undertake no obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law.