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ModivCare Inc.Q224 Results
Deutsche Bank·2024-08-13 09:56

Investment Rating - The report rates ModivCare Inc.'s bonds as Buy, indicating an expectation for these bonds to outperform other issues in the sector over the next three to six months [1][27]. Core Insights - ModivCare Inc. (MODV) reported Q224 EBITDA of 45million,slightlyaboveBloombergconsensusof45 million, slightly above Bloomberg consensus of 42 million and a significant improvement from 32millioninQ124,leadingtoalasttwelvemonths(LTM)EBITDAof32 million in Q124, leading to a last twelve months (LTM) EBITDA of 179 million [4][18]. - The company won new NEMT contracts in Q224, generating 33millioninannualrevenue,whichisexpectedtopositivelyimpactthesecondhalfof2024[1][10].−ModivCare′sleveragetargetissetat3x,withcurrentnetleveragereportedat5.2x,indicatingafocusonimprovingcoreoperationsandconsideringstrategicoptions[6][18].−Thecompanyhasloweredits2024EBITDAguidancetoarangeof33 million in annual revenue, which is expected to positively impact the second half of 2024 [1][10]. - ModivCare's leverage target is set at 3x, with current net leverage reported at 5.2x, indicating a focus on improving core operations and considering strategic options [6][18]. - The company has lowered its 2024 EBITDA guidance to a range of 185-195 million, primarily due to weaker-than-expected results from its PCS segment [7][18]. - ModivCare's liquidity position is reported at 99million,withcashof99 million, with cash of 11 million and revolver availability of 89million[16].FinancialPerformance−TheLTMnetleverageasofJune30,2024,isreportedat5.2x,whichincludes89 million [16]. Financial Performance - The LTM net leverage as of June 30, 2024, is reported at 5.2x, which includes 45 million of cost savings, while a calculation without these add-backs shows a net leverage of 6.5x [5][18]. - The company expects to generate positive free cash flow (FCF) in 2024, with a conversion rate of approximately 30% of EBITDA [7][18]. - ModivCare's revenue for FY2024 is projected at 2,818million,withEBITDAexpectedtobe2,818 million, with EBITDA expected to be 180 million [19]. Contractual Developments - In Q224, ModivCare secured new contracts that contribute to a total of approximately 211millioninannualrevenuefromcontractswonin2023and2024[10].−ThecompanyanticipatesmonetizingitsMatrixassetinlate2024orearly2025,whichcouldsignificantlyimproveitsleverageprofile[13][18].MarketPosition−ModivCare′sPCSEBITDAimprovedto211 million in annual revenue from contracts won in 2023 and 2024 [10]. - The company anticipates monetizing its Matrix asset in late 2024 or early 2025, which could significantly improve its leverage profile [13][18]. Market Position - ModivCare's PCS EBITDA improved to 15 million in Q224, up from 11millioninQ124,butremainsbelowtheannualrunratepotentialof11 million in Q124, but remains below the annual run rate potential of 75 million [11]. - The company expects to exit 2024 with PCS margins approaching 10%, with NEMT margins projected to increase by roughly 100 basis points [12].