ModivCare (MODV)2025-05-08 21:39Revenue and Segments - ModivCare reported service revenue for the NEMT segment generated from non-emergency medical transportation services, with payment structures including capitated and fee-for-service models [122]. - The company operates four reportable segments: NEMT, PCS, Monitoring, and Corporate and Other, each contributing to overall revenue and expenses [135]. - Service revenue for the PCS segment is primarily generated on a fee-for-service basis, billing third-party payors including MCOs and Medicaid agencies [126]. - The Monitoring segment generates revenue from the sale of monitoring equipment and services, primarily on a per-member, per-month basis [127]. - The NEMT segment reported service revenue, net of $449.0 million in Q1 2025, down from $479.3 million in Q1 2024, with total paid trips decreasing by 4.0% [146]. - The PCS segment's service revenue, net for Q1 2025 was $181.8 million, a slight decrease from $183.6 million in Q1 2024, with operating income improving to $2.3 million [154]. - Monitoring segment service revenue, net decreased by $2.0 million, or 9.8%, for Q1 2025, primarily due to a 2.8% decrease in revenue per member per month and a 7.2% decrease in average monthly members [163]. Financial Performance - Consolidated service revenue, net for Q1 2025 decreased by $33.8 million, or 4.9%, compared to Q1 2024, with declines across all segments [137]. - Service expense for Q1 2025 decreased by $30.6 million, or 5.2%, compared to Q1 2024, primarily due to a decrease in the NEMT segment [138]. - Total operating expenses for Q1 2025 were $655.1 million, a decrease from $687.8 million in Q1 2024, leading to an operating loss of $4.4 million [137]. - General and administrative expense increased by $1.4 million, or 1.8%, in Q1 2025, with a notable increase in the Corporate and Other segment [139]. - Interest expense, net for Q1 2025 increased by $20.2 million, or 107.8%, compared to Q1 2024, due to new debt facilities and higher interest rates [141]. - The effective tax rate for Q1 2025 was 8.2%, compared to 2.5% for Q1 2024, influenced by various tax credits and changes in reserves [144]. - Total service expense for the PCS segment decreased by $1.9 million, or 1.3%, in Q1 2025, mainly driven by a $1.5 million, or 1.0%, decrease in payroll and related costs [159]. - General and administrative expense decreased by $1.8 million, or 7.6%, for Q1 2025 compared to Q1 2024, attributed to lower salaries and personnel expenses [160]. - Depreciation and amortization expense decreased by $3.6 million, or 13.2%, in Q1 2025, primarily due to certain intangible assets being fully amortized [140]. - Depreciation and amortization expense for Q1 2025 decreased by $3.4 million, or 26.3%, due to certain intangible assets being fully depreciated during 2024 [161]. Economic and Operational Challenges - Adverse economic conditions, including high inflation and labor shortages, have negatively impacted profit margins in the NEMT and PCS segments, with rising costs outpacing reimbursement rates [120]. - ModivCare's business environment is competitive, with regulatory complexities and a constrained labor market for healthcare professionals affecting operational performance [121]. - The company faces risks related to extended collection periods for receivables, impacting cash flow and financial stability [122]. - The company experienced financial challenges, including increased transportation and caregiver costs, leading to negative impacts on cash flow generation and liquidity [201]. - The company is likely to require additional liquidity to support ongoing operations over the next year due to prolonged cash conversion cycles [201]. - Management has concluded that substantial doubt exists about the company's ability to continue as a going concern [204]. Cash Flow and Liquidity - Cash used in operating activities was $82.1 million for YTD 2025, a decrease of $91.7 million compared to cash provided by operating activities of $9.6 million for YTD 2024 [177]. - Net cash provided by financing activities was $93.0 million for YTD 2025, an increase of $86.6 million compared to $6.4 million for YTD 2024, primarily due to the issuance of the Incremental Term Loan Facility [179]. - The balance of cash and cash equivalents, excluding restricted cash, was $116.0 million at March 31, 2025, compared to $112.6 million at December 31, 2024 [175]. - Cash requirements over the next 12 months totaled $880.5 million, including $88.8 million in guarantees and letters of credit not expected to be settled in cash [200]. - The company has cash requirements of $880.5 million due within one year and $1,376.6 million due beyond one year as of March 31, 2025 [207]. - Total future cash obligations amount to $2,257.1 million, with $880.5 million due in less than one year and $1,376.6 million due in more than one year [208]. - The company has a combined $344.6 million of short-term debt outstanding and $495.2 million of long-term debt as of March 31, 2025 [211]. - Management has implemented cost optimization measures and secured additional financing to improve liquidity [205]. - The company is evaluating potential strategic asset divestitures and operational efficiencies to enhance liquidity [205]. - Management continuously monitors liquidity and adjusts the balance between sources and uses of funds as necessary [209]. Debt and Financing - The principal balance of the 2029 Notes was reduced to $228.8 million from $500.0 million as of March 31, 2025, while the principal balance of the Second Lien Notes was $301.2 million [188]. - The company entered into an Incremental Term Loan Facility of $75.0 million with a maturity date of January 10, 2026, priced at a SOFR-based benchmark plus 7.50% [197]. - The Revolving Credit Facility has an aggregate principal amount of $325.0 million, with sublimits for swingline loans, letters of credit, and alternative currency loans [190]. - The Term Loan Facility established on July 1, 2024, has an aggregate principal amount of $525.0 million and requires quarterly principal payments [194]. - The company was granted a covenant holiday for the fourth quarter of 2024 through the second fiscal quarter of 2025, allowing for temporary relief from certain financial covenants [193]. - Interest rates on the Revolving Credit Facility and Term Loan Facility are variable, with the Incremental Term Loan accruing at a rate equal to the SOFR-based benchmark plus 7.50% [211]. - A one-percentage point increase in interest rates would have an approximate $8.7 million negative impact on pre-tax earnings [211]. - There are statutory, regulatory, and debt covenant limitations affecting the company's ability to access capital markets for funding [209]. Strategic Focus - The company anticipates increased demand for healthcare services driven by an aging population and the prevalence of chronic illnesses requiring ongoing monitoring [122]. - ModivCare's strategic focus includes leveraging technological advancements to improve service delivery and reduce operational costs [122]. - The governance structure has been strengthened with the establishment of the Strategic Alternatives Committee to support asset divestitures and cost savings initiatives [205].