Modivcare Reports First Quarter 2023 Financial Results

Modivcare Inc., (the “Company” or “Modivcare”) (Nasdaq: MODV), a technology-enabled healthcare services company that provides a platform of integrated supportive care solutions focused on improving patient outcomes, today reported financial results for the three months ended March 31, 2023.

First Quarter 2023 Highlights:

• Service revenue of $662.3 million, a 15.3% increase as compared to $574.5 million in Q1 2022
• Net loss of $4.0 million or $0.28 per diluted common share
• Adjusted EBITDA⁽¹⁾ of $50.2 million, adjusted net income⁽¹⁾ of $20.2 million and adjusted EPS⁽¹⁾ of $1.42 per diluted common share
• Net cash used in operating activities during the quarter of $2.7 million
• Cash and cash equivalents of $12.8 million as of March 31, 2023, with $1.0 billion principal amount of debt outstanding related to the Senior Unsecured Notes due 2025 and 2029
• $15.0 million drawn on the $325.0 million revolving credit facility as of March 31, 2023

“We reported solid first quarter results with 15 percent revenue growth driven by strong growth across each of our segments,” said L. Heath Sampson, President and Chief Executive Officer. “We remain confident in our 2023 outlook, which we maintained, due to several factors, including recent new contract wins, a strong pipeline for new business, and the continued success of our Home business. As the U.S. healthcare system increasingly shifts to home-based care, we are well positioned to capitalize on these opportunities with our supportive care services. Our offerings provide high quality care and services to our members in a cost-effective manner, aligning with the evolving needs of the healthcare landscape. Our focus for 2023 remains steadfast to build for scale and grow our business. We are confident that the initiatives implemented over the past few quarters will drive efficiencies and operating leverage throughout the year. I am incredibly proud of our team’s ability to perform and execute at a high level, and I am grateful for their hard work and dedication.”

2023 Guidance

We maintained our 2023 revenue and our Adjusted EBITDA guidance range as follows ($ in millions):

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

First Quarter 2023 Results

For the first quarter of 2023, the Company reported revenue of $662.3 million, an increase of 15.3% from $574.5 million in the first quarter of 2022. The increase in revenue is primarily attributable to a 4.7% increase in membership and an 11.8% increase in revenue per member in our NEMT segment coupled with a 4.4% increase in hours worked and a 4.4% increase in rate per hour in our personal care segment.

Operating income was $8.1 million, or 1.2% of revenue, in the first quarter of 2023, compared to operating income of $14.9 million, or 2.6% of revenue, in the first quarter of 2022. Net loss in the first quarter of 2023 was $4.0 million, or $0.28 per diluted common share, compared to net income of $0.3 million, or $0.02 per diluted common share, in the first quarter of 2022.

Adjusted EBITDA was $50.2 million, or 7.6% of revenue, in the first quarter of 2023, compared to $50.3 million, or 8.8% of revenue, in the first quarter of 2022.

Adjusted net income in the first quarter of 2023 was $20.2 million, or $1.42 per diluted common share, compared to $22.2 million, or $1.57 per diluted common share, in the first quarter of 2022.

First Quarter Earnings Conference Call

Modivcare will hold a conference call to discuss its financial results on Thursday, May 4, 2023 at 8:00 a.m. ET. To access the call, please dial:

US toll-free: 1 (888) 437-3179

International: 1 (862) 298-0702

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 are intended to 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 and Adjusted G&A expense for the Company and its segments, Adjusted EBITDA margin for the Company's segments (other than its Corporate segment), and Adjusted Net Income and Adjusted EPS for the Company, all of 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, and (9) 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 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 goodwill and long-lived assets; any failure to maintain or to develop reliable, efficient and secure information technology systems; an inability to attract and retain qualified employees; any acquisition or acquisition integration efforts; estimated income taxes being different from income taxes that we ultimately pay; 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; certificates of need, or CON, laws or other regulatory and licensure obligations that may adversely affect our personal care integration efforts and expansion into new markets; 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; 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 labor shortages in qualified employees and management; labor disputes or disruptions, in particular in New York; becoming subject to malpractice or other similar claims; our operating in the competitive remote patient monitoring industry, and failing to develop and enhance related technology applications; any failure to innovate and provide services that are useful to customers and to achieve and maintain market acceptance; and our lack of sole decision-making authority with respect to our minority investment in Matrix and any failure by Matrix to achieve positive financial results of operations.

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.