SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Delaware						86-0845127
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~4700 South Syracuse Street, 4~~6900 Layton Avenue, l2th Floor, Denver, Colorado 80237

(Address of principal executive offices) (Zip Code)


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.001 par value per share	MODV	The NASDAQ Global Select Market

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~“smaller~~

“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

March 31, 2021 December 31, 2020

Assets
Current assets:
Cash and cash equivalents $ 299,559 $ 183,281
Accounts receivable, net of allowance of $2,376 and $2,403, respectively 211,340 197,943
Other receivables 12,219 12,674
Prepaid expenses and other current assets 13,927 31,885
Restricted cash 48 75
Current assets of discontinued operations 141 758
Total current assets 537,234 426,616
Operating lease right-of-use assets 29,398 30,928
Property and equipment, net 30,195 27,544
Goodwill 444,927 444,927
Intangible assets, net 336,150 345,652
Equity investment 141,220 137,466
Other assets 12,651 12,780
Total assets $ 1,531,775 $ 1,425,913
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 33,779 $ 8,464
Accrued contract payables 245,386 101,705
Accrued expenses and other current liabilities 119,326 117,010
Accrued transportation costs 70,870 79,674
Current portion of operating lease liabilities 7,922 8,277
Self-funded insurance programs 4,453 4,727
Deferred revenue 2,820 2,923
Current liabilities of discontinued operations 1,527 1,971
Total current liabilities 486,083 324,751
Long-term debt, net of deferred financing costs of $13,295 and $14,020, respectively 486,705 485,980
Deferred tax liabilities 91,579 92,195
Operating lease liabilities, less current portion 22,214 23,437
Long-term contract payables 0 72,183
Other long-term liabilities 26,441 15,756
Total liabilities 1,113,022 1,014,302
Commitments and contingencies (Note 14) 0 0
Stockholders’ equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 19,623,017 and 19,570,598, respectively, issued and outstanding (including treasury shares) 20 20
Additional paid-in capital 424,791 421,318
Retained earnings 237,254 218,414
Treasury shares, at cost, 5,385,771 and 5,287,283 shares, respectively (243,312) (228,141)
Total stockholders’ equity 418,753 411,611
Total liabilities and stockholders’ equity $ 1,531,775 $ 1,425,913


	September 30, 2021		December 31, 2020

Assets
Current assets:
Cash and cash equivalents	$	126,506	$	183,281
Accounts receivable, net of allowance of $690 and $2,403, respectively	289,230		197,943
Other receivables	12,934		12,674
Prepaid expenses and other current assets	41,655		31,885
Restricted cash	186		75
Current assets of discontinued operations	141		758
Total current assets	470,652		426,616
Operating lease right-of-use assets	44,077		30,928
Property and equipment, net	52,538		27,544
Goodwill	929,986		444,927
Intangible assets, net	491,997		345,652
Equity investment	134,353		137,466
Other assets	11,550		12,780


Total assets	$	2,135,153	$	1,425,913
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	33,458	$	8,464
Accrued contract payables	320,045		101,705
Accrued expenses and other current liabilities	109,571		117,010
Accrued transportation costs	92,028		79,674
Current portion of operating lease liabilities	9,287		8,277
Self-funded insurance programs	7,563		4,727
Deferred revenue	2,488		2,923
Current liabilities of discontinued operations	1,527		1,971
Total current liabilities	575,967		324,751
Long-term debt, net of deferred financing costs of $25,330 and $14,020, respectively	974,669		485,980
Deferred tax liabilities	112,461		92,195
Operating lease liabilities, less current portion	35,389		23,437
Long-term contract payables	5,793		72,183
Other long-term liabilities	26,887		15,756

Total liabilities	1,731,166		1,014,302
Commitments and contingencies (Note 14)	0		0


Stockholders’ equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 19,581,219 and 19,570,598, respectively, issued and outstanding (including treasury shares)	20		20
Additional paid-in capital	428,643		421,318
Retained earnings	243,356		218,414

Treasury shares, at cost, 5,561,826 and 5,287,283 shares, respectively	(268,032)		(228,141)
Total stockholders’ equity	403,987		411,611
Total liabilities and stockholders’ equity	$	2,135,153	$	1,425,913

See accompanying notes to the unaudited condensed consolidated financial statements

Three months ended March 31,
2021 2020
Service revenue, net $ 453,610 $ 367,291
Grant income (Note 2) 2,648 0
Operating expenses:
Service expense 360,333 332,661
General and administrative expense 54,871 20,795
Depreciation and amortization 12,239 3,790
Total operating expenses 427,443 357,246
Operating income 28,815 10,045
Other expenses (income):
Interest expense, net 8,423 241
Equity in net loss (income) of investee (4,503) 2,550
Income from continuing operations before income taxes 24,895 7,254
Provision (benefit) for income taxes 6,016 (9,046)
Income from continuing operations, net of tax 18,879 16,300
Loss from discontinued operations, net of tax (39) (202)
Net income $ 18,840 $ 16,098
Net income available to common stockholders (Note 12) $ 18,840 $ 12,998
Basic earnings (loss) per common share:
Continuing operations $ 1.33 $ 1.02
Discontinued operations 0 (0.02)
Basic earnings per common share $ 1.33 $ 1.00
Diluted earnings (loss) per common share:
Continuing operations $ 1.31 $ 1.02
Discontinued operations 0 (0.02)
Diluted earnings per common share $ 1.31 $ 1.00
Weighted-average number of common shares outstanding:
Basic 14,158,666 12,987,740
Diluted 14,362,226 13,012,991


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Service revenue, net	$	493,059	$	320,619	$	1,421,117	$	970,166
Grant income (Note 2)	—		—		3,500		—

Operating expenses:
Service expense	399,272		235,543		1,139,170		764,310
General and administrative expense	68,054		34,441		179,271		86,435
Depreciation and amortization	12,608		7,301		36,667		17,199

Total operating expenses	479,934		277,285		1,355,108		867,944

Operating income	13,125		43,334		69,509		102,222

Other expenses (income):
Interest expense, net	17,702		379		34,412		2,118

Equity in net loss (income) of investee	6,748		(10,325)		1,978		(12,200)
Income (loss) from continuing operations before income taxes	(11,325)		53,280		33,119		112,304
Provision (benefit) for income taxes	(3,863)		14,360		7,944		19,785
Income (loss) from continuing operations, net of tax	(7,462)		38,920		25,175		92,519
Loss from discontinued operations, net of tax	(108)		(115)		(232)		(618)
Net income (loss)	$	(7,570)	$	38,805	$	24,943	$	91,901

Net income (loss) available to common stockholders (Note 12)	$	(7,570)	$	35,346	$	24,943	$	34,563

Basic earnings (loss) per common share:
Continuing operations	$	(0.53)	$	2.53	$	1.79	$	2.63
Discontinued operations	(0.01)		(0.01)		(0.02)		(0.05)
Basic earnings (loss) per common share	$	(0.54)	$	2.52	$	1.77	$	2.58

Diluted earnings (loss) per common share:
Continuing operations	$	(0.53)	$	2.51	$	1.76	$	2.62
Discontinued operations	(0.01)		(0.01)		(0.02)		(0.05)
Diluted earnings (loss) per common share	$	(0.54)	$	2.50	$	1.74	$	2.57

Weighted-average number of common shares outstanding:
Basic	13,993,438		14,026,039		14,102,371		13,367,605
Diluted	13,993,438		14,133,904		14,278,331		13,415,344


	Nine months ended September 30,
	2021		2020
Operating activities
Net income	$	24,943	$	91,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	8,839		6,980
Amortization	27,827		10,219
Provision for doubtful accounts	(1,712)		(3,139)
Stock-based compensation	4,225		2,949
Deferred income taxes	(3,295)		12,612
Amortization of deferred financing costs and debt discount	2,175		292
Equity in net loss (income) of investee	1,978		(12,200)
Reduction of right-of-use assets	8,681		6,769
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable and other receivables	(69,597)		20,017
Prepaid expenses and other assets	(5,330)		(28,216)
Income tax refunds on sale of business	—		17,789
Self-funded insurance programs	2,837		1,259
Accrued contract payables	151,950		88,347
Accounts payable and accrued expenses	7,138		33,061
Accrued transportation costs	12,354		(5,506)
Deferred revenue	(502)		453
Other long-term liabilities	2,183		43,639
Net cash provided by operating activities	174,694		287,226
Investing activities
Purchase of property and equipment	(13,852)		(4,786)
Acquisition, net of cash acquired	(667,228)		(77,665)

Net cash used in investing activities	(681,080)		(82,451)
Financing activities
Proceeds from debt	625,000		162,000
Repayment of debt	(125,000)		(162,000)
Repurchase of common stock, for treasury	(39,040)		(10,186)
Payment of debt issuance costs	(13,486)		—
Proceeds from common stock issued pursuant to stock option exercise	3,099		21,581
Restricted stock surrendered for employee tax payment	(851)		(92)
Preferred stock redemption payment	—		(88,743)
Preferred stock dividends	—		(1,988)
Other financing activities	—		(204)
Net cash provided by (used in) financing activities	449,722		(79,632)
Net change in cash, cash equivalents and restricted cash	(56,664)		125,143
Cash, cash equivalents and restricted cash at beginning of period	183,356		61,673
Cash, cash equivalents and restricted cash at end of period	$	126,692	$	186,816


	Nine months ended September 30, 2020

	Common Stock			Additional Paid-In		Retained		Treasury Stock
	Shares	Amount		Capital		Earnings		Shares	Amount		Total

Balance at December 31, 2019	18,073,763	$	18	$	351,529	$	183,733	5,088,782	$	(217,688)	$	317,592
Net income	—	—		—		16,098		—	—		16,098
Stock-based compensation	—	—		1,005		—		—	—		1,005
Exercise of employee stock options	39,111	—		2,054		—		—	—		2,054
Restricted stock issued	79,029	—		—		—		626	(37)		(37)
Shares issued for bonus settlement and director stipends	701	—		38		—		—	—		38
Stock repurchase plan	—	—		—		—		142,821	(7,299)		(7,299)
Conversion of convertible preferred stock to common stock	40	—		2		—		—	—		2
Convertible preferred stock dividends (1)	—	—		—		(1,095)		—	—		(1,095)
Balance at March 31, 2020	18,192,644	18		354,628		198,736		5,232,229	(225,024)		328,358
Net income	—	—		—		36,998		—	—		36,998
Stock-based compensation	—	—		691		—		—	—		691
Exercise of employee stock options	129,722	—		9,275		—		—	—		9,275
Restricted stock forfeited	(8,496)	—		—		—		—	—		—
Shares issued for bonus settlement and director stipends	487	—		38		—		—	—		38
Stock repurchase plan	—	—		—		—		52,856	(2,887)		(2,887)
Conversion of convertible preferred stock to common stock	14,166	—		546		—		—	—		546
Redemption of convertible preferred stock	—	—		—		(42,954)		—	—		(42,954)
Conversion of convertible preferred stock to common stock pursuant to Conversion Agreement	925,567	1		37,255		(5,997)		—	—		31,259
Convertible preferred stock dividends (1)	—	—		—		(866)		—	—		(866)
Balance at June 30, 2020	19,254,090	19		402,433		185,917		5,285,085	(227,911)		360,458
Net income	—	—		—		38,805		—	—		38,805
Stock-based compensation	—	—		1,139		—		—	—		1,139
Exercise of employee stock options	145,124	1		10,250		—		—	—		10,251
Restricted stock issued	330	—		—		—		—	—		—
Restricted stock surrendered for employee tax payment	—	—		—		—		581	(55)		(55)
Shares issued for bonus settlement and director stipends	414	—		38		—		—	—		38


Redemption of convertible preferred stock	—	—		—		(3,186)		—	—		(3,186)
Conversion of convertible preferred stock to common stock	68,633	—		2,644		—		—	—		2,644
Dividends paid pursuant to the Conversion Agreement (2)	—	—		—		(27)		—	—		(27)
Balance at September 30, 2020	19,468,591	$	20	$	416,504	$	221,509	5,285,666	$	(227,966)	$	410,067

Convertible preferred stock dividends (1)

(1)Cash dividends on redeemable convertible preferred stock of $1.37 per share were distributed to convertible preferred stockholders for the three months ended March 31, 2020 and June 30, 2020.

(2) On September 3, 2020, accrued cash dividends of $1.37 per share were paid to Coliseum Capital Partners, L.P. and certain funds and accounts managed by Coliseum Capital Management, LLC pursuant to the Preferred Stock Conversion Agreement as discussed in Note 11, Stock-Based Compensation and Similar Arrangements.

1. Organization and Basis of Presentation

Description of Business

ModivCare Inc. ("ModivCare" or the "Company") is a technology-enabled healthcare services company ~~which~~that provides a suite of integrated supportive care solutions for public and private payors and their patients. Its value-based solutions address the social determinants of health, or SDoH, enable greater access to care, reduce costs, and improve outcomes. ModivCare is a ~~leading~~ provider of non-emergency medical transportation, or NEMT, personal ~~and home~~ care, and ~~nutritional meal delivery. Our~~remote patient monitoring, or RPM, solutions. The technology-enabled operating model includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transport management. ~~The Company also partners with communities throughout the country, providing food-insecure individuals delivery of nutritional meals.~~ Additionally, its personal ~~and home~~ care services include placements of non-medical personal care assistants, home health aides and ~~skilled~~ nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting, including senior citizens and disabled adults. ModivCare’s remote patient monitoring services include personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. ModivCare is further expanding its offerings to include nutritional meal delivery and partner with communities throughout the country, providing food-insecure individuals delivery of nutritional meals.

ModivCare’s solutions help health plans manage risks, close care gaps, reduce costs, and connect members to care. Through the combination of its historical NEMT business, ~~with~~ its in-home personal care business that ~~was previously operated by~~consists of Simplura Health Group and Care Finders Total Care LLC, and its recent addition of the remote patient monitoring business through its acquisition of VRI Intermediate Holdings, LLC, or ~~Simplura, as described further below,~~VRI, ModivCare has united ~~two~~four complementary healthcare ~~companies~~businesses that serve similar, highly vulnerable patient populations. ~~Collectively, ModivCare is uniquely positioned to remove the barriers of health inequities and address the SDoH.~~

On May 6, 2020, ModivCare ~~entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Specialty Benefits, LLC., a Delaware corporation (the “Seller”),~~acquired all of the outstanding equity of National MedTrans, LLC, or NMT, a New York limited liability company ~~(“NMT”)~~ and ~~for limited purposes therein, United Healthcare Services, Inc., a Minnesota corporation. NMT services contractual relationships to provide~~provider of non-emergency medical ~~transportation. Pursuant to the terms of the Purchase Agreement, ModivCare acquired all of the outstanding capital stock of NMT.~~transportation services under contractual relationships.

On November 18, 2020, ModivCare acquired all of the outstanding equity of OEP AM, Inc., a Delaware corporation doing business as Simplura Health Group, or Simplura, which formed the foundation of our personal care business and Personal Care ~~Segment operations.~~ segment.

On May 6, 2021, ModivCare acquired the WellRyde software from nuVizz, Inc., a Georgia corporation ("nuVizz"), a technology provider of Advanced Transportation Management Systems software enabling routing, automated trip assignments and real-time network monitoring.

On September 14, 2021, ModivCare acquired Care Finders Total Care LLC, or Care Finders, a personal care provider in the Northeast, with a scaled presence in New Jersey, Pennsylvania, and Connecticut, as an addition to the Personal Care segment.

On September 22, 2021, ModivCare acquired VRI, a provider of remote patient monitoring and data-driven patient engagement solutions.

ModivCare also holds a 43.6% minority interest in CCHN Group Holdings, Inc. and its subsidiaries, which operates under the Matrix Medical Network brand and which we refer to as “Matrix”. Matrix maintains a national network of community-based clinicians who deliver in-home and on-site services, and a fleet of mobile health clinics that provide community-based care with advanced diagnostic capabilities and enhanced care options. Matrix’s clinical care business ("Clinical ~~Care~~Care") provides risk adjustment solutions that improve health outcomes for individuals and financial performance for health plans. Matrix’s clinical solutions business ("Clinical ~~Solutions~~Solutions") provides employee health and wellness services focused on improving employee health with worksite certification solutions that reinforce business resilience and safe return-to-work outcomes. Its Clinical Solutions offerings also provide clinical trial services which support the delivery of safe and effective decentralized clinical trial operations to patients and eligible volunteers. Matrix also provides lab services, including services related to COVID-19 such as screening, testing, and vaccinations.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for ~~complete~~annual audited financial statements. In the opinion of management, all adjustments considered necessary for the fair presentation of the results of the interim periods have been included.

The Company has made estimates relating to the reporting of assets and liabilities, revenues and expenses, and certain disclosures in the preparation of these unaudited condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates. Operating results for the three and nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. Management has evaluated events and transactions that occurred after the balance sheet date and through the date these unaudited condensed consolidated financial statements were filed with the SEC and considered the effect of such events in the preparation of these condensed consolidated financial statements.

The condensed consolidated balance sheet at December 31, 2020 included in this Form 10-Q has been derived from audited financial statements at that date, but does not include all the information and footnotes required by GAAP for ~~complete~~annual audited financial statements. The unaudited condensed consolidated financial statements contained herein should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Impact of the COVID-19 Pandemic

~~During~~Since March 2020, the COVID-19 pandemic has impacted the Company’s business, as well as its patients, communities, and employees. The Company’s priorities during the COVID-19 pandemic remain protecting the health and safety of its employees, maximizing the availability of its services and products to support the SDoH, and the operational and financial stability of its business.

Federal, state, and local authorities have taken several actions designed to assist healthcare providers in providing care to COVID-19 and other patients and to mitigate the adverse economic impact of the COVID-19 pandemic. Legislative actions taken by the federal government include the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020. Through the CARES Act, the federal government has authorized payments to be distributed to healthcare providers through the Public Health and Social Services Emergency Fund ("Provider Relief Fund" or "PRF").

2. Significant Accounting Policies and Recent Accounting Pronouncements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingencies, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

InDuring the ~~first quarter of~~nine months ended September 30, 2021, the Company received distributions offrom the CARES Act PRF of approximately ~~$2.6~~$3.5 million targeted to offset lost revenue and expenditures incurred in connection with the COVID-19 pandemic. During the three months ended September 30, 2021, Company did not receive distributions from the CARES Act PRF. The PRF payments are subject to certain restrictions and are subject to recoupment if not used for designated purposes. As a condition to receiving distributions, providers must agree to certain terms and conditions, including, among other things, that the funds are being used for lost revenues and unreimbursed COVID-19 related expenses as defined by the U.S. Department of Health and Human Services ~~(HHS)~~("HHS"). All recipients of PRF payments are required to comply with the reporting requirements described in the terms and conditions and as determined by HHS. The Company recognizes grant payments as grant income when there is reasonable assurance that it has complied with the conditions associated with the grant. Grant income recognized by the Company is presented in grant income in the accompanying condensed consolidated statements of operations. HHS guidance related to PRF grant funds is still evolving and subject to change. The Company is continuing to monitor the reporting requirements as they evolve.

CARES Act Payroll Deferral

The CARES Act also provides for certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes. The Company has deferred payment of approximately ~~$20.7~~$20.8 million related to the deferral of employer payroll taxes as of ~~March 31,~~September 30, 2021 under the CARES Act. Of this amount, approximately 50% is due in December of 2021 and 50% is due in December of ~~2022,~~2022; therefore, ~~$10.3~~$10.4 million is recorded in accrued expenses, and $10.4 million is recorded in other long-term liabilities.

Recent Accounting Pronouncements

The Company adopted the following accounting pronouncements during the ~~three~~nine months ended ~~March 31,~~September 30, 2021:

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 ("ASU 2020-01"), to clarify the interaction among the accounting standards for equity securities, equity method investments and certain derivatives. ASU 2020-01 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. There was no material impact to the financial statements from the adoption of this ASU.

Recent accounting pronouncements that the Company has yet to adopt are as follows:

~~3. Acquisitions~~Business Combinations

Simplura Health Group

The following is a preliminary estimate, ~~as a result of~~based on certain preliminary items noted in the table below, of the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of November ~~17,~~18, 2020 (in thousands):


Cash	$	21,182
Accounts receivable (1)	69,882
Prepaid expenses and other (2)	~~9,089~~9,688
Property and equipment (3)	1,640
Intangible assets (4)	264,770
Operating right of use asset (5)	~~11,725~~10,285
Goodwill (6)	~~309,711~~317,085
Other assets (7)	~~4,561~~628
Accounts payable and accrued liabilities ~~(8)~~(7)	~~(46,043)~~(46,073)
Accrued expense ~~(8)~~(7)	(2,564)
Deferred revenue ~~(8)~~(7)	(2,871)
Deferred acquisition payments ~~(9)~~(8)	(4,046)
Deferred acquisition note payable ~~(8)~~(7)	(1,050)
Operating lease liabilities (5)	~~(11,725)~~(10,285)
Deferred tax liabilities ~~(10)~~(9)	~~(57,883)~~(58,452)
Total of assets acquired and liabilities assumed	$	~~566,378~~569,819

The acquisition method of accounting incorporates fair value measurements that can be highly subjective, and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances. Upon finalization of the preliminary items noted below there may be related adjustments to certain of such items and to goodwill and income taxes. All items are expected to be finalized by the second quarter of 2021.

(1) Management has valued accounts ~~receivables~~receivable based on the estimated future collectability of the receivables portfolio. This estimate is preliminary as the Company's evaluation of the collectability of receivables is ongoing.

(2) Given the short-term nature of the balance of prepaid expenses carrying value represents the fair value.

(3) The acquired property and equipment consists primarily of leasehold improvements, furniture and fixtures, and vehicles. The fair value of the property and equipment was determined based upon the best and highest use of the property with final values determined using cost and comparable sales methods.

(4) The allocation of consideration exchanged to intangible assets acquired is as follows (in thousands):


	Type	Useful Life	Value
Payor network	Amortizable	15 years	$	221,000
Trademarks and trade names	Amortizable	10 years	43,000
Licenses	Not Amortizable	Indefinite	770
			$	264,770

The Company valued trademarks and trade names utilizing the relief of royalty method and payor network utilizing the multi-period excess earnings method, a form of the income approach. ~~These estimates are~~This assessment is preliminary asand will be finalized in the ~~Company continues to evaluate inputs and assumptions used in arriving at the fair value~~fourth quarter of ~~the intangible assets.~~2021.

(5) The fair value of the operating lease liability and corresponding right-of-use asset (current and long-term) ~~was~~were recorded at $11.7 million based on ~~current~~ market rates available to the ~~Company.~~Company during our preliminary purchase price allocation. This assessment ishas since been updated through the implementation of ASC 842 at the Personal Care segment as of September 30, 2021, and the related balances have been updated to $10.3 million. This assessment remains preliminary as of the date of our filing and will be finalized with final purchase ~~accounting.~~accounting in the fourth quarter of 2021.

(6) The acquisition preliminarily resulted in $309.7 million of goodwill as a result of expected synergies due to value-based care and solutions being provided to similar patient populations that partner with many of the same payor groups. In the second quarter of 2021 a closing cash adjustment of $3.5 million was paid to OEP AM and in the third quarter of 2021 other assets acquired were adjusted down by $3.9 million which, along with other immaterial adjustments, increased the goodwill related to this transaction to $317.1 million. This assessment is preliminary and purchase accounting will be finalized in the fourth quarter of 2021. None of the acquired goodwill is deductible for tax purposes.

(7) Included in Other assets are indemnification guarantees with a value of $3.9 million, obtained in conjunction with the acquisition of Simplura to cover certain acquired liabilities totaling approximately $3.9 million.

~~(8)~~ Accounts payable as well as certain other current and non-current assets and liabilities are stated at fair value as of the acquisition date.

~~(9)~~(8) Deferred acquisition payments are associated with historical acquisitions by Simplura. ~~Of this balance, $0.1 million has been released through the first quarter of 2021.~~

~~(10)~~(9) Net deferred tax liabilities ~~represented~~represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. See Note 13, Income Taxes, for additional discussion of the Company’s combined income tax position subsequent to the acquisition.

CareFinders Total Care

On September 14, 2021, the Company completed its acquisition of Care Finders. Care Finders is a personal care provider in the Northeast, with operations in New Jersey, Pennsylvania, and Connecticut. The acquisition of Care Finders broadens access to in-home personal care solutions for patients and supports the Company's strategy to expand on its personal care platform, which already includes Simplura.

The Company has not yet obtained and assessed all relevant historical financial information needed to perform the valuation and has not completed the final valuations of certain assets and liabilities. As such, the following is a preliminary estimate, based on certain preliminary items noted in the table below, of the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of September 14, 2021 (in thousands):


Cash	$	11,963
Accounts receivable (1)	12,253
Prepaid expenses and other (2)	653
Property and equipment (3)	3,206
Inventories (4)	145
Intangibles (5)	75,900
Goodwill (6)	248,518
Other assets (7)	226
Accounts payable and accrued liabilities (8)	(5,347)
Accrued expense (8)	(871)
Other liabilities (8)	(80)
Deferred tax liabilities (9)	(2,275)
Total of assets acquired and liabilities assumed	$	344,291

(1) Management has valued accounts receivable based on the estimated future collectability of the receivables portfolio. This estimate is preliminary as the Company's evaluation of the collectability of receivables is ongoing.

(2) Given the short-term nature of the balance of prepaid expenses carrying value represents the fair value.

(3) The acquired property and equipment consists primarily of capitalized software, construction in progress, and computer equipment. This estimate is preliminary as the Company's evaluation of the fair value of property and equipment is ongoing.

(4) Inventories are stated at fair value as of the acquisition date.

(5) The allocation of consideration exchanged to intangible assets acquired is as follows (in thousands):


	Type	Useful Life	Value
Payor network	Amortizable	9 years	$	68,300
Trade name	Amortizable	8 years	7,600
			$	75,900

The intangible valuation amounts disclosed in the table above represent a preliminary estimate, as of the acquisition date of September 14, 2021. Final purchase accounting is expected to be finalized by the third quarter of 2022.

(6) The acquisition preliminarily resulted in $248.5 million of goodwill as a result of expected synergies due to future customers driven by expansion into different markets, an increase in market share, and a growing demographic that will need VRI's monitoring products. Purchase accounting will be finalized in the third quarter of 2022. All of the acquired goodwill is deductible for tax purposes. Goodwill allocation to reporting units is not completed as of the date of the financial statements, September 30, 2021.

(7) Included in Other assets are security deposits with a value of $0.2 million.

(8) Accounts payable as well as certain other current and non-current assets and liabilities are stated at fair value as of the acquisition date.

(9) Net deferred tax liabilities represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. See Note 13, Income Taxes, for additional discussion of the Company’s combined income tax position subsequent to the acquisition.

Since the date of the acquisition, Care Finders sales of $8.9 million and net income of $0.5 million are included in the Company's consolidated results of operations.

VRI Intermediate Holdings, LLC

On September 22, 2021, the Company completed its acquisition of VRI, a provider of remote patient monitoring solutions, managing a comprehensive suite of services including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. The acquisition of VRI accelerates the Company's strategy to build a holistic suite of supportive care solutions that address social determinants of health, introduces new technology-enabled in-home solutions that deepen the Company's engagement with payors and patients, and adds a strategic pillar and operating team to advance the Company's broader technology and data strategy. As a result of the acquisition, ModivCare adds remote patient monitoring, or RPM, as a business segment.


Cash	$	2,922
Accounts receivable (1)	6,849
Inventory (2)	1,684
Prepaid expenses and other (3)	284
Property and equipment (4)	16,775
Intangible assets (5)	85,800
Goodwill (6)	228,884
Other assets (7)	217
Accounts payable and accrued liabilities (8)	(1,890)
Accrued expense (8)	(2,481)
Deferred revenue (8)	(66)
Deferred tax liabilities (8)	(21,285)
Total of assets acquired and liabilities assumed	$	317,693

(2) Inventory is stated at fair value as of the acquisition date.

(3) Given the short-term nature of the balance of prepaid expenses carrying value represents the fair value.

(4) The acquired property and equipment consists primarily of monitoring equipment, buildings, and vitals equipment. This estimate is preliminary as the Company's evaluation of the fair value of property and equipment is ongoing.

(5) The allocation of consideration exchanged to intangible assets acquired is as follows (in thousands):


	Type	Useful Life	Value
Payor network	Amortizable	9 years	$	70,700
Trade name	Amortizable	8 years	13,300
Internally developed software	Amortizable	7 years	1,800
			$	85,800

The intangible valuation amounts disclosed in the table above represent a preliminary estimate, as of the acquisition date of September 22, 2021. Final purchase accounting is expected to be finalized by the third quarter of 2022.

(6) The acquisition preliminarily resulted in $228.9 million of goodwill as a result of expected synergies due to future customers driven by expansion into different markets and an increase in market share. Purchase accounting will be finalized in the third quarter of 2022. The amount of goodwill deductible for tax purposes has yet to be determined. Goodwill allocation to reporting units is not completed as of the date of the financial statements, September 30, 2021.

(7) Included in other assets are other receivables and employees advances with a value of approximately $0.2 million.

(8) Accounts payable as well as certain other current and non-current liabilities are stated at fair value as of the acquisition date. Net deferred tax liabilities represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. See Note 13, Income Taxes, for additional discussion of the Company’s combined income tax position subsequent to the acquisition.

Since the date of the acquisition, VRI sales of $1.6 million and net income of $0.4 million are included in the Company's consolidated results of operations.

Pro Forma Financial Information

Assuming Simplura had been acquired as of January 1, 2019, and Care Finders and VRI had been acquired as of January 1, 2020, and the results of ~~Simplura~~each of them had been included in operations beginning on January 1, ~~2019,~~2020, the following ~~tables provide~~table provides estimated unaudited pro forma results of operations for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands, except earnings per share). The estimated pro forma net income adjusts for the effect of fair value adjustments related to each of the ~~acquisition,~~acquisitions, transaction costs and other non-recurring costs directly attributable to the ~~transaction~~transactions and the impact of the additional debt to finance the ~~acquisition.~~applicable acquisitions.

Three months ended March 31,
2021 2020
Actual Proforma
Revenue $ 453,610 $ 486,701
Income from continuing operations, net 18,879 19,048
Diluted earnings per share $ 1.31 $ 1.46


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Pro forma:
Revenue	$	547,965	$	489,104	$	1,603,015	$	1,475,668
Income (loss) from continuing operations, net	(13,678)		30,043		11,568		(4,417)
Diluted earnings (loss) per share	$	(0.98)	$	2.13	$	0.81	$	(0.33)

Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the ~~acquisition~~acquisitions been completed on the date indicated or ~~the~~of future operating results. The supplemental proforma earnings were adjusted to exclude the impact of ~~Simplura's~~ historical interest expense of ~~$7.0~~Simplura, Care Finders and VRI of $6.2 million, $1.1 million and $1.1 million, respectively, for the three months ended ~~March 31,~~September 30, 2020, and $20.1 million, $3.6 million and $3.8 million, respectively, for the nine months ended September 30, 2020.

~~NMT~~Acquisition-related costs of approximately $5.9 million and $4.5 million for Care Finders and VRI, respectively, were expensed as incurred, recorded in selling, general and administrative expenses during the period ended September 30, 2021, and are reflected in the pro forma table above at the assumed acquisition date. Acquisition-related costs consisted of professional fees for advisory, consulting and underwriting services as well as other incremental costs directly related to the acquisitions.

On May 6, 2020, ModivCare Solutions, LLC, entered into ~~an equity~~a purchase agreement with ~~the Seller and~~ NMT, ~~acquiring all of the outstanding capital stock.~~pursuant to which NMT was acquired for total consideration of $80.0 million, less certain adjustments, in an all cash transaction.

The consideration paid for the acquisition is as follows (in thousands):


	Value
Consideration paid	$	80,000
Transaction costs	774
Restricted cash received	(3,109)
Net consideration	$	77,665

Restricted cash acquired was related to a security reserve for a ~~contract and is presented in other current assets in our condensed consolidated balance sheet as of March 31, 2021.~~contract. No liabilities were assumed.

The fair value allocation of the net consideration is as follows (in thousands, except useful lives):


	Type	Useful Life	Value
Payor relationships	Amortizable	6 years	$	75,514
Trade names and trademarks	Amortizable	3 years	2,151
			$	77,665

On May 6, 2021, the Company entered into an asset purchase agreement with nuVizz to purchase the software, WellRyde. Pursuant to the purchase agreement, the WellRyde software was acquired for total consideration of $12.0 million in cash, subject to certain adjustments.

The consideration paid for the acquisition is as follows (in thousands):


	Value
Consideration paid	$	12,000
Transaction costs	463
Net consideration	$	12,463

The fair value allocation of the net consideration is as follows (in thousands, except useful lives):


	Type	Useful Life	Value
Transportation management software	Amortizable	10 years	$	12,328
Assembled workforce	Amortizable	10 years	135
			$	12,463

OnPrior to the Company’s acquisition of Simplura in November ~~18,~~ 2020, the Company, ~~acquired~~based on how its chief operating decision maker then determined the allocation of resources and assessed the performance of the Company’s operations, determined that it had 2 reportable operating segments: NEMT, which represents the Company’s non-emergency medical transportation business; and Matrix Investment, which represents the Company’s Clinical Care and Clinical Solutions businesses, that is reported by the Company under the equity method of accounting. Following its acquisition of Simplura in November 2020, which operates as a ~~home~~ personal care service ~~provider. As~~provider, the Company began reporting a ~~result, at March 31,~~third operating segment: Personal Care. The acquisition of Care Finders in September 2021, another personal care service provider, added to the operations of the Personal Care segment. Finally, the acquisition of VRI in September of 2021, a provider of remote patient monitoring solutions, adds a fourth operating segment, RPM, with respect to which the Company’s chief operating decision maker reviews financial performance and allocates ~~resources~~resources.

The Company’s reportable segments are strategic units that offer different services under different financial and operating models to the Company’s customers. The segments are managed separately because each requires different technology and marketing strategies. Furthermore, the different segments were each generally acquired as a unit, with the

•NEMT - which operates primarily under the brands ModivCare Solutions ~~LLC,~~ and Circulation, is the largest manager of ~~NEMT~~non-emergency medical transportation programs for state governments and managed care organizations, ~~("MCOs")~~or MCOs, in the U.S and includes the Company’s activities for executive, accounting, finance, internal audit, tax, legal and certain strategic and development ~~functions and the Company’s insurance captive.~~functions;

•Personal Care - which ~~consists of~~operates under the brands Simplura and Care Finders, provides personal care to Medicaid patient populations, including seniors and disabled adults, in need of care monitoring and assistance performing activities of daily ~~living.~~living;

•RPM - which operates under the VRI brand, is a provider of remote patient monitoring solutions, including personal emergency response systems, vitals monitoring and data driven patient engagement solutions; and

•Matrix Investment - which consists of a minority investment in Matrix, including its Clinical Care and Clinical Solutions businesses. Matrix’s Clinical Care provides ~~a broad array of assessment and care management services~~risk adjustment solutions that improve health outcomes for individuals and financial performance for health plans. Matrix’s ~~national network of community-based clinicians delivers in-home~~Clinical Solutions provides employee health and wellness services, ~~while~~decentralized clinical trial services, and lab services to its ~~fleet of mobile health clinics provides community-based care with advance diagnostic capabilities.~~customers.

The following tables set forth certain financial information from continuing operations attributable to the Company’s business segments (in thousands):


	Three months ended September 30, 2021
	NEMT		Personal Care		RPM		Matrix Investment		Total
Service revenue, net	$	372,992	$	118,503	$	1,564	$	—	$	493,059
Grant income (1)	—		—		—		—		—

Service expense	304,398		94,107		767		—		399,272
General and administrative expense (2)	52,118		15,720		216		—		68,054
Depreciation and amortization	7,496		4,912		200		—		12,608
Operating income	$	8,980	$	3,764	$	381	$	—	$	13,125

Equity in net income (loss) of investee	$	—	$	—	$	—	$	(6,748)	$	(6,748)
Equity investment	$	—	$	—	$	—	$	134,353	$	134,353
Goodwill	$	135,216	$	565,886	$	228,884	$	—	$	929,986
Total assets (continuing operations)	$	619,637	$	1,037,886	$	343,277	$	134,353	$	2,135,153


		Three months ended March 31, 2021									Nine months ended September 30, 2021
		NEMT		Personal Care		Matrix Investment		Total			NEMT		Personal Care		RPM		Matrix Investment		Total
Service revenue, net	Service revenue, net	$	343,416	$	110,194	$	0	$	453,610	Service revenue, net	$	1,081,168	$	338,385	$	1,564	$	—	$	1,421,117
Grant income (1)	Grant income (1)	0		2,648		0		2,648		Grant income (1)	—		3,500		—		—		3,500

Service expense	Service expense	272,416		87,917		0		360,333		Service expense	869,470		268,933		767		—		1,139,170
General and administrative expense(2)	General and administrative expense(2)	39,967		14,904		0		54,871		General and administrative expense(2)	133,706		45,349		216		—		179,271
Depreciation and amortization	Depreciation and amortization	7,312		4,927		0		12,239		Depreciation and amortization	21,744		14,723		200		—		36,667
Operating income	Operating income	$	23,721	$	2,446	$	0	$	28,815	Operating income	$	56,248	$	12,880	$	381	$	—	$	69,509

Equity in net income of investee		$	0	$	0	$	(4,503)	$	(4,503)
Equity in net income (loss) of investee										Equity in net income (loss) of investee	$	—	$	—	$	—	$	(1,978)	$	(1,978)
Equity investment	Equity investment	$	0	$	0	$	141,220	$	141,220	Equity investment	$	—	$	—	$	—	$	134,353	$	134,353
Goodwill	Goodwill	$	135,216	$	309,711	$	0	$	444,927	Goodwill	$	135,216	$	565,886	$	228,884	$	—	$	929,986
Total assets (continuing operations)	Total assets (continuing operations)	$	691,570	$	698,985	$	141,220	$	1,531,775	Total assets (continuing operations)	$	619,637	$	1,037,886	$	343,277	$	134,353	$	2,135,153

(1) Grant income for the Personal Care segment includes ~~$2.6~~$3.5 million of provider relief funds received under the CARES Act. These funds are intended to support healthcare providers by reimbursing them for expenses incurred, or revenue lost, as a result of the COVID-19 pandemic. See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements.

Three months ended March 31, 2020
NEMT Matrix Investment Total
Service revenue, net $ 367,291 $ 0 $ 367,291
Service expense 332,661 0 332,661
General and administrative expense 20,795 0 20,795
Depreciation and amortization 3,790 0 3,790
Operating income $ 10,045 $ 0 $ 10,045
Equity in net loss of investee $ 0 $ 2,550 $ 2,550
Equity investment $ 0 $ 128,098 $ 128,098
Goodwill $ 135,216 $ 0 $ 135,216
Total assets (continuing operations) $ 668,984 $ 128,098 $ 797,082
(2) General and administrative expense for the NEMT segment includes $1.4 million and $3.4 million of costs related to the development of the nutritional meal delivery business offering for the three and nine months ended September 30, 2021, respectively. As this line of business has not yet commenced, and there is no discrete financial information available related to it, it is not considered a separate reportable segment at this time.


	Three months ended September 30, 2020
	NEMT		Matrix Investment		Total
Service revenue, net	$	320,619	$	—	$	320,619

Service expense	235,543		—		235,543
General and administrative expense	34,441		—		34,441
Depreciation and amortization	7,301		—		7,301
Operating income	$	43,334	$	—	$	43,334

Equity in net income of investee	$	—	$	10,325	$	10,325


	Nine months ended September 30, 2020
	NEMT		Matrix Investment		Total
Service revenue, net	$	970,166	$	—	$	970,166


Service expense	764,310		—		764,310
General and administrative expense	86,435		—		86,435
Depreciation and amortization	17,199		—		17,199
Operating income	$	102,222	$	—	$	102,222

Equity in net income of investee	$	—	$	12,200	$	12,200


	December 31, 2020
	NEMT		Personal Care		Matrix Investment		Total
Equity investment	$	—	$	—	$	137,466	$	137,466
Goodwill	$	135,216	$	309,711	$	—	$	444,927
Total assets (continuing operations)	$	594,952	$	693,495	$	137,466	$	1,425,913

5. Revenue Recognition

Under ASC 606, the Company recognizes revenue as it transfers promised services to its customers and generates all of its revenue from contracts with customers. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these services. The Company satisfies substantially all of its performance obligations and recognizes revenue over time instead of at points in time.

~~Capitation structure~~Revenue Contract Structure

NEMT Capitated Contracts

Under capitated contracts, payors pay a fixed amount per eligible member. We assume the responsibility of meeting the covered healthcare related transportation requirements based on per-member per-month fees for the number of eligible members in the customer’s program. Revenue is recognized based on the population served during the period. ~~Under certain~~Certain capitated contracts ~~known as~~have provisions for reconciliations, risk corridors or profit rebates. For contracts with reconciliation ~~contracts, partial~~provisions, capitation payment is received as a prepayment during the month service is provided. These prepayments are periodically reconciled based on actual trip volume and ~~costs and~~ may result in refunds to the customer, or additional payments due from the customer. ~~Other capitated contracts known as~~Contracts with risk corridor or profit rebate ~~contacts,~~provisions allow for profit within a certain corridor and once we reach ~~certain~~ profit level thresholds or maximums, we discontinue recognizing revenue and instead record a liability within the ~~Accrued Contract Payable~~accrued contract payable account. This liability is

may be reduced through future increases in trip volume ~~and~~or periodic settlements with the customer. While a profit rebate provision could only result in a liability from this profit threshold, a risk corridor provision could potentially result in receivables if the Company does not reach certain profit minimums, which would be recorded in the reconciliation contract receivables account.

Capitation rates are generally based on expected costs and volume of services. Because Medicare pays capitation using a “risk adjustment model,” which compensates ~~providers~~payors based on the health status (acuity) of each individual enrollee, ~~providers~~payors with higher acuity enrollees receive more, and those with lower acuity enrollees receive less of the capitation that can be allocated to service providers. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled.

NEMT Fee-for-service ~~structure~~Contracts

Fee-for-service ("FFS") revenue represents revenue earned under non-capitated contracts in which we bill and collect a specified amount for each service that we provide. FFS revenue is recognized in the period in which the services are rendered and is reduced by the estimated impact of contractual ~~allowances and policy discounts in the case of third-party payors.~~allowances.

~~Customer Information~~Personal Care Fee-for-service Contracts

Personal Care FFS service revenue is reported at the estimated net realizable amount from clients, patients and third-party payors for services rendered. Payment for services received from third-party payors includes, but is not limited to, insurance companies, hospitals, governmental agencies and other home health care providers who subcontract work to the Company. Certain contracts are subject to retroactive audit and possible adjustment by those payors based on the nature of the contract or costs incurred. The Company makes estimates of retroactive adjustments and considers these in the recognition of revenue in the period in which the related services are rendered. The difference between estimated settlement and actual settlement is reported in net service revenues as adjustments become known or as years are no longer subject to such audits, reviews, or investigations.

RPM Service Contracts

RPM service revenue consists of revenue from monitoring services provided to the customer. Under RPM contracts, payors pay per-enrolled-member-per month, based on enrolled membership. Consideration is generally fixed for each type of

monitoring service and the contracts do not typically contain variable components of consideration. As such, the RPM segment recognizes revenue based on the monthly fee paid by customers.

Disaggregation of Revenue by Contract Type


	Three months ended September 30, 2021		Three months ended September 30, 2020		Nine months ended September 30, 2021		Nine months ended September 30, 2020
NEMT Capitated Contracts	$	287,768	$	277,908	$	854,269	$	832,490
NEMT FFS Contracts	85,224		42,711		226,899		137,676
Total NEMT Segment Revenue	372,992		320,619		1,081,168		970,166

Personal Care FFS Contracts	118,503		—		338,385		—
RPM Service Contracts	1,564		—		1,564		—
Total service revenue, net	$	493,059	$	320,619	$	1,421,117	$	970,166

Service revenue, net, is derived from state Medicaid contracts, managed Medicaid and Medicare contracts (also known as MCOs), as well as a small amount from private pay and other contracts. Of the NEMT segment’s revenue, ~~8.8%~~9.7% and ~~11.9%~~10.4% were derived from one U.S. state Medicaid program for the nine months ended September 30, 2021, and 2020, respectively. Personal Care segment revenue is derived from services rendered to Medicaid program beneficiaries and reimbursed by the Medicaid, Medicaid waiver and Medicaid managed care programs. Of the Personal Care segment's revenue, 28.1% was derived from one U.S. state Medicaid program for the ~~three~~nine months ended ~~March 31, 2021 and 2020, respectively. Of the Personal Care segment's~~September 30, 2021. RPM segment revenue ~~28.5% was~~is also derived from ~~one U.S.~~ state Medicaid program for the three months ended March 31, 2021. In addition, substantially all of the Company’s revenues are generated from domestic governmental agencies or entities that contract with governmental agencies.

~~Disaggregation of Revenue~~contracts and managed Medicaid and Medicare contracts (MCOs).

The following table summarizes disaggregated revenue from contracts with customers by ~~contract~~payor type (in thousands):

Three months ended March 31,
2021 2020
State Medicaid agency and Medicare contracts $ 203,320 $ 180,731
Managed care organization contracts 250,290 186,560
Total Service revenue, net $ 453,610 $ 367,291
Capitated contracts $ 296,235 $ 300,724
Non-capitated contracts 157,375 66,567
Total Service revenue, net $ 453,610 $ 367,291

The table above includes $110.2 million of revenue for the three months ended March 31, 2021 related to the Personal Care Segment through the acquisition of Simplura. Simplura's revenue is non-capitated and approximately 40% is generated from state Medicaid and Medicare agency contracts, while the other 60% is generated from MCO and other private pay contracts.

During the three months ended ~~March 31,~~September 30, 2021 and 2020, the Company recognized a ~~$3.3~~$0.1 million and a $3.6 million reduction of service revenue respectively, from contractual adjustments relating to performance obligations satisfied in previous periods to which the customer agreed. During the nine months ended September 30, 2021 and 2020, the Company recognized a $0.2 million increase to and a ~~$0.6~~$3.5 million ~~increase in~~reduction of service revenue, respectively, from contractual adjustments relating to performance obligations satisfied in previous periods to which the customer agreed.

Related Balance Sheet Accounts

The following table provides information about accounts receivable, net (in thousands):

Reconciliation contracts receivable (1)


	September 30, 2021		December 31, 2020
Accounts receivable	$	269,391	$	164,622
Reconciliation contracts receivable (1)	20,529		35,724
Allowance for doubtful accounts	(690)		(2,403)
Accounts receivable, net	$	289,230	$	197,943

(1) Reconciliation ~~contract receivables,~~contracts receivable, primarily represent underpayments and receivables on certain contracts with reconciliation and risk corridor ~~profit rebate~~provisions. See the contract payables and ~~reconciliation contracts.~~receivables rollforward below.

The following table provides information about other revenue related accounts included on the accompanying condensed consolidated balance sheets (in thousands):

March 31, 2021 December 31, 2020
Accrued contract payables (1)
$ 245,386 $ 101,705
Long-term contract payables (2)
$ 0 $ 72,183
Deferred revenue, current $ 2,820 $ 2,923
Deferred revenue, long-term, included in “other long-term liabilities” $ 509 $ 566


	September 30, 2021		December 31, 2020
Accrued contract payables (1)	$	320,045	$	101,705
Long-term contract payables (2)	$	5,793	$	72,183
Deferred revenue, current	$	2,488	$	2,923

(1) Accrued contract payables primarily represent overpayments and liability reserves on certain risk corridor, profit rebate and reconciliation contracts due to lower activity as a result of COVID-19.

(2) Long-term contract payables primarily represent liability reserves on certain risk corridor, profit rebate and reconciliation contracts due to lower activity as a result of COVID-19 that may be repaid in greater than 12 months.


	December 31, 2020		Additional Amounts Recorded		Amounts Paid or Settled		September 30, 2021
Reconciliation contract payables	$	33,330	$	34,912	$	(20,549)	$	47,693
Profit rebate/corridor contract payables	123,239		137,003		(47)		260,195
Overpayments and other cash items	17,319		13,366		(12,735)		17,950
Total contract payables	$	173,888	$	185,281	$	(33,331)	$	325,838

Reconciliation contract receivables	$	35,580	$	9,984	$	(25,140)	$	20,424
Corridor contract receivables	144		(39)		—		105
Total contract receivables	$	35,724	$	9,945	$	(25,140)	$	20,529

6. Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows (in thousands):

March 31,
2021 2020
Cash and cash equivalents $ 299,559 $ 254,371
Restricted cash, current 48 73
Cash, cash equivalents and restricted cash $ 299,607 $ 254,444


	September 30,
	2021		2020
Cash and cash equivalents	$	126,506	$	183,277
Restricted cash, current	186		3,182
Current assets of discontinued operations	—		357

Cash, cash equivalents and restricted cash	$	126,692	$	186,816

Restricted cash primarily relates to amounts held in trusts for reinsurance claims losses under the Company’s insurance operation for historical workers’ compensation, general and professional liability and auto liability reinsurance programs, as well as amounts restricted for withdrawal under our self-insured medical and benefits plans.

7. Equity Investment

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company owned a 43.6% non-controlling interest in Matrix. Pursuant to a Shareholder’s Agreement, affiliates of Frazier Healthcare Partners hold rights necessary to control the fundamental operations of Matrix. The Company accounts for this investment in Matrix under the equity method of accounting and the Company’s share of Matrix’s income or losses are recorded as “Equity in net loss (income) of investee” in the accompanying consolidated statements of operations.

Summary financial information for Matrix on a standalone basis is as follows (in thousands):


	September 30, 2021		December 31, 2020
Current assets	$	127,994	$	143,110
Long-term assets	$	596,562	$	619,642
Current liabilities	$	60,835	$	81,920
Long-term liabilities	$	339,699	$	351,036

March 31, 2021 December 31, 2020
Current assets $ 153,525 $ 143,110
Long-term assets $ 613,249 $ 619,642
Current liabilities $ 78,771 $ 81,920
Long-term liabilities $ 349,608 $ 351,036


	Three months ended September 30, 2021		Three months ended September 30, 2020
Revenue	$	78,458	$	140,728
Operating income (loss)	$	(16,833)	$	35,489
Net income (loss)	$	(15,627)	$	21,382

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets ~~were comprised~~consisted of the following (in thousands):

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accrued compensation and related liabilities (1)

(1) Accrued compensation and related liabilities ~~includes~~include deferred payroll taxes, which are deferred as a result of the CARES Act. The CARES Act provides for certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes. The Company has received a cumulative cash benefit of approximately ~~$20.7~~$20.8 million related to the deferral of employer payroll taxes as of ~~March 31,~~September 30, 2021 under the CARES Act. Of this amount, approximately 50% is due in December of 2021 and 50% is due in December of ~~2022. Therefore, $10.3~~2022, therefore, $10.4 million is recorded in accrued expenses, and $10.4 million is recorded in other long-term liabilities.

Senior Unsecured Notes

The Senior Notes due 2025 and the Senior Notes due 2029 (collectively, the "Notes") are senior unsecured obligations and rank senior in right of payment to all of the Company's future subordinated indebtedness, rank equally in right of payment with all of the Company's existing and future senior indebtedness, are effectively subordinated to any of the Company's existing and future secured indebtedness, including indebtedness under the Credit Facility (as defined below), to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all of the existing and future liabilities (including trade payables) of each of the Company’s non-guarantor subsidiaries.

The ~~Indenture contains~~indentures for the Notes contain covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries to, among other things: incur additional indebtedness or issue disqualified capital stock; make certain investments; create or incur certain liens; enter into certain transactions with affiliates; merge, consolidate, amalgamate or transfer substantially all of its assets; agree to dividend or other payment restrictions affecting its restricted subsidiaries; and transfer or sell assets, including capital stock of its restricted subsidiaries. These covenants, however, are subject to a number of important exceptions and qualifications, and certain covenants may be suspended in the event the Notes are assigned an investment grade rating from two of three ratings agencies.

The ~~Indenture provides~~indentures for both the Senior Notes due 2025 and the Senior Notes due 2029 provide that the ~~Notes~~notes may become subject to redemption under certain ~~circumstances, including if certain escrowed property has not been released from the escrow account in~~circumstances.

In connection with the ~~consummation of~~Senior Notes due 2025, the ~~acquisition of the Simplura Group. The~~ Company may ~~also~~ redeem the ~~Notes,~~notes, in whole or in part, at any time prior to November 15, 2022, at a price equal to 100% of the principal amount of the ~~Notes~~notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption plus a “make-whole” premium set forth in the Indenture. In addition, the Company may redeem up to 40% of the ~~Notes~~notes prior to November 15, 2022, at a redemption price of 105.875% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, with the proceeds of certain equity offerings, subject to certain conditions as specified in the Indenture Agreement. At any time prior to November 15, 2022, during each calendar year, the Company may redeem up to 10% of the aggregate principal amount of the ~~Notes~~notes at a purchase price equal to 103% of the aggregate principal amount of the Senior Notes due 2025 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

On or after November 15, 2022, the Company may redeem all or a part of the Senior Notes due 2025 upon not less than ten days’ nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the Senior Notes due 2025 redeemed, to, but excluding, the applicable redemption date, if redeemed during the 12-month period beginning on November 15 of the years indicated below:


Year			Percentage
2022			102.938%
2023			101.469%
2024 and thereafter			100.000%

The Company is a party to the amended and restated credit and guaranty agreement, dated as of August 2, 2013 (as amended, the “Credit Agreement”), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and the other lenders party thereto. On May 6, 2020, the Company entered into the Seventh Amendment to the Amended and Restated Credit and Guaranty Agreement (the “Seventh Amendment”) which, among other things, extended the maturity date to August 1, 2021, expanded the amount available under the revolving credit facility (the “Credit Facility”) from $200.0 million to $225.0 million, and increased the sub-facility for letters of ~~credits~~credit from $25.0 million to $40.0 million. Interest on the loans is payable quarterly in arrears. In addition, the Company is obligated to pay a quarterly commitment fee based on a percentage of the unused portion of each lender’s commitment under the Credit Facility and quarterly letter of credit fees based on a percentage of the maximum amount available to be drawn under each outstanding letter of credit.

On October 16, 2020, the Company entered into the Eighth Amendment to the Amended and Restated Credit and Guaranty Agreement (the “Eighth Amendment”), which among other things, amended the Credit Facility to permit the incurrence of additional debt to finance the acquisition of Simplura (the "Simplura Acquisition"), permit borrowing under the Credit Facility to partially fund the Simplura Acquisition with limited conditions to such borrowing, increase the top interest rate margin that may apply to loans thereunder, and revise our permitted ratio of EBITDA to indebtedness. In addition, the Eighth Amendment extended the maturity date to August 2, 2023. ~~See Note 3,~~ ~~Acquisitions, for further information on the acquisition.~~

On September 13, 2021, the Company entered into the Ninth Amendment to the Amended and Restated Credit and Guaranty Agreement (the “Ninth Amendment”), which among other things, amended the Credit Facility to permit the incurrence of additional debt to finance the acquisition of VRI and revise certain financial covenants therein to permit the consummation of the VRI acquisition.

Effective as of the ~~Eighth~~Ninth Amendment, interest on the outstanding principal amount of loans under the Credit Facility accrues, at the Company’s election, at a per annum rate equal to the greater of either LIBOR or 1.00%, plus an applicable margin, or the ~~base rate~~Base Rate as defined in the agreement plus an applicable ~~margin.~~margin respectively. The applicable margin ranges from 2.25% to 3.50% in the case of LIBOR loans and 1.25% to 2.50% in the case of the ~~base rate~~Base Rate loans, in each case, based on the Company’s consolidated leverage ratio as defined in the ~~credit agreement~~Credit Agreement that governs our Credit Facility. The commitment fee and letter of credit fee range from 0.35% to 0.50% and 2.25% to 3.50%, respectively, in each case based on the Company’s consolidated leverage ratio as defined in the credit agreement that governs our Credit Facility.

As of ~~March 31,~~September 30, 2021, the Company had 0no borrowings outstanding on the Credit Facility; however, there were letters of credit outstanding in the amount of ~~$17.2~~$21.1 million. The Company’s available ~~credit~~borrowing capacity under the Credit Facility was ~~$207.8~~$203.9 million. Under the Credit Agreement, the Company has an option to request an increase in the amount of the revolving credit facility from time to time (on substantially the same terms as apply to the existing facilities) in an aggregate amount of up to $75.0 million, with either additional commitments from lenders under the Credit ~~Agreement~~Agreements at such time or new commitments from financial institutions acceptable to the administrative agent in its reasonable discretion, so long as no default or event of default exists at the time of any such ~~increase.~~increases. The Company may not be able to access additional funds under ~~this~~these increase ~~option~~options as no lender is obligated to participate in any such ~~increase~~increases under the Credit Facility.

11. Stock-Based Compensation and Similar Arrangements


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Unaudited Condensed Consolidated Balance Sheets – ~~March 31,~~September 30, 2021 and December 31, 2020	4

	Unaudited Condensed Consolidated Statements of Operations – Three and Nine months ended ~~March 31,~~September 30, 2021 and 2020	5

	Unaudited Condensed Consolidated Statements of Cash Flows – ~~Three~~Nine months ended ~~March 31,~~September 30, 2021 and 2020	6

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Three ~~months~~quarters ended ~~March 31,~~September 30, 2021 and 2020	8

	Notes to the Unaudited Condensed Consolidated Financial Statements ~~– March 31, 2021~~	910

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2331

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3142

Item 4.	Controls and Procedures	3142

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3243

Item 1A.	Risk Factors	3243

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	32







Item 6.	Exhibits	3344


		Three months ended March 31,					Nine months ended September 30,
Supplemental cash flow information	Supplemental cash flow information	2021		2020		Supplemental cash flow information	2021		2020
Cash paid for interest	Cash paid for interest	$	251	$	197	Cash paid for interest	$	24,006	$	1,775
Cash paid (received) for income taxes, net of refunds		$	(9,033)	$	1,437
Cash paid for income taxes, net of refunds						Cash paid for income taxes, net of refunds	$	12,846	$	11,805
Assets acquired under operating leases	Assets acquired under operating leases	$	1,214	$	0	Assets acquired under operating leases	$	21,829	$	5,488


	Three months ended September 30, 2021		Three months ended September 30, 2020		Nine months ended September 30, 2021		Nine months ended September 30, 2020
State Medicaid contracts	$	204,403	$	154,318	$	615,154	$	486,971
Managed Medicaid contracts	237,399		141,365		659,506		407,723
Managed Medicare contracts	44,074		24,936		125,571		75,472
Private pay and other contracts	7,183		—		20,886		—
Total service revenue, net	$	493,059	$	320,619	$	1,421,117	$	970,166


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Prepaid income taxes	Prepaid income taxes	$	0	$	14,633	Prepaid income taxes	$	13,499	$	14,633
Prepaid insurance	Prepaid insurance	5,010		7,577		Prepaid insurance	12,519		7,577

Deferred financing costs on credit facility						Deferred financing costs on credit facility	2,452		—
Inventory						Inventory	1,733		—
Prepaid rent	Prepaid rent	1,107		1,196		Prepaid rent	260		1,196

Other prepaid expenses	Other prepaid expenses	7,810		8,479		Other prepaid expenses	11,192		8,479
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	13,927	$	31,885	Total prepaid expenses and other current assets	$	41,655	$	31,885


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three months ended March 31,
	2021		2020
Service revenue, net	$	453,610	$	367,291
Grant income (Note 2)	2,648		0

Operating expenses:
Service expense	360,333		332,661
General and administrative expense	54,871		20,795
Depreciation and amortization	12,239		3,790

Total operating expenses	427,443		357,246

Operating income	28,815		10,045

Other expenses (income):
Interest expense, net	8,423		241

Equity in net loss (income) of investee	(4,503)		2,550
Income from continuing operations before income taxes	24,895		7,254
Provision (benefit) for income taxes	6,016		(9,046)
Income from continuing operations, net of tax	18,879		16,300
Loss from discontinued operations, net of tax	(39)		(202)
Net income	$	18,840	$	16,098

Net income available to common stockholders (Note 12)	$	18,840	$	12,998

Basic earnings (loss) per common share:
Continuing operations	$	1.33	$	1.02
Discontinued operations	0		(0.02)
Basic earnings per common share	$	1.33	$	1.00

Diluted earnings (loss) per common share:
Continuing operations	$	1.31	$	1.02
Discontinued operations	0		(0.02)
Diluted earnings per common share	$	1.31	$	1.00

Weighted-average number of common shares outstanding:
Basic	14,158,666		12,987,740
Diluted	14,362,226		13,012,991


	Three months ended March 31, 2020

	Common Stock			Additional Paid-In		Retained		Treasury Stock
	Shares	Amount		Capital		Earnings		Shares	Amount		Total

Balance at December 31, 2019	18,073,763	$	18	$	351,529	$	183,733	5,088,782	$	(217,688)	$	317,592
Net income	—	—		—		16,098		—	—		16,098
Stock-based compensation	—	—		1,005		—		—	—		1,005
Exercise of employee stock options	39,111	—		2,054		—		—	—		2,054
Restricted stock issued	79,029	—		—		—		626	(37)		(37)
Shares issued for bonus settlement and director stipends	701	—		38		—		—	—		38
Stock repurchase plan	—	—		—		—		142,821	(7,299)		(7,299)
Conversion of convertible preferred stock to common stock	40	—		2		—		—	—		2
Convertible preferred stock dividends (1)	—	—		—		(1,095)		—	—		(1,095)
Balance at March 31, 2020	18,192,644	$	18	$	354,628	$	198,736	5,232,229	$	(225,024)	$	328,358


	March 31,
	2021		2020
Cash and cash equivalents	$	299,559	$	254,371
Restricted cash, current	48		73


Cash, cash equivalents and restricted cash	$	299,607	$	254,444


Year			Percentage
2024			102.500%
2025			101.250%
2026 and thereafter			100.000%


	For the Three months ended September 30,						For the Nine months ended September 30,
	2021			2020			2021			2020
	Amount		% of Segment Revenue	Amount		% of Segment Revenue	Amount		% of Segment Revenue	Amount		% of Segment Revenue
Service revenue, net	$	372,992	100%	$	320,619	100%	$	1,081,168	100%	$	970,166	100%
Service expense	304,398		82%	235,543		73%	869,470		80%	764,310		79%
General and administrative expense	52,118		14%	34,441		11%	133,706		12%	86,435		9%
Depreciation and amortization	7,496		2%	7,301		2%	21,744		2%	17,199		2%
Operating income	$	8,980	2%	$	43,334	14%	$	56,248	5%	$	102,222	11%


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) of Common Stock Purchased as Part of Publicly Announced Plans or Program	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (000’s)
January 1, 2021 to January 31, 2021	—	—		—	$	75,000

February 1, 2021 to February 28, 2021	—	—		—	$	75,000

March 1, 2021 to March 31, 2021	94,235	$	153.35	94,235	$	60,549

Total	94,235			94,235	$	60,549


Exhibit Number						Description
2.1+						Agreement and Plan of Merger, dated as of July 25, 2021, by and among Care Finders Total Care LLC, ModivCare Inc., Socrates Health Holdings, LLC, Saints Merger Sub, LLC, and Shareholder Representative Services LLC. (Incorporated by reference to exhibit 2.1 to the registrant’s current report on Form 8-K filed with the SEC on July 26, 2021.)

2.2+						Securities Purchase Agreement, dated as of August 2, 2021, by and among VRI Ultimate Holdings, LLC, VRI Intermediate Holdings, LLC ModivCare Inc. and Victory Health Holdings, LLC. (Incorporated by reference to exhibit 2.1 to the registrant’s current report on Form 8-K filed with the SEC on August 3, 2021.)

4.1						Senior Notes Indenture dated as of ~~November 4, 2020,~~August 24, 2021, between ~~ModivCare~~ModivCare Escrow Issuer, Inc.~~, f/k/a~~ ~~The Providence Service Corporation~~ and The Bank of New York Mellon Trust Company, N.A., as ~~trustee~~trustee. (Incorporated by reference to an exhibit 10.1 to the ~~registrant's~~registrant’s current report on Form 8-K filed with the SEC on ~~November 12, 2020).~~August 24, 2021.)

10.1*10.1						~~Transition and Separation Agreement~~Commitment Letter, dated as of ~~March 11, 2020,~~August 2, 2021, by and among ModivCare Inc., Deutsche Bank Securities Inc and ~~Kevin Dotts~~Jefferies Finance LLC. (Incorporated by reference to exhibit 10.1 to the registrant’s current report on Form 8-K filed with the SEC on August 3, 2021.)

10.2						Consent Agreement, dated as of August 6, 2021, among ModivCare Inc., the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent. (Incorporated by reference to exhibit 10.1 to the registrant’s current report on Form 8-K filed with the SEC on August 9, 2021.)

10.3






						Ninth Amendment to Credit Agreement dated as of September 13, 2021, among ModivCare Inc., the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent. (Incorporated by reference to exhibit 10.1 to the registrant’s current report on Form 8-K filed with the SEC on September 14, 2021.)

31.1*						Certification pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer.

31.2*						Certification pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer.

32.1**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.

32.2**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.

101.INS*						Inline XBR Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Schema Document

101.CAL*						Inline XBRL Calculation Linkbase Document

101.LAB*						Inline XBRL Label Linkbase Document

101.PRE*						Inline XBRL Presentation Linkbase Document

101.DEF*						Inline XBRL Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith.
**			Furnished herewith.
+			Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The descriptions of the omitted schedules and exhibits are contained within the filed agreement. ModivCare hereby agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request.


	ModivCare Inc.

Date: ~~May 7,~~November 4, 2021	By:	/s/ Daniel E. Greenleaf
		Daniel E. Greenleaf Chief Executive Officer
		(Duly Authorized Officer)

Date: ~~May 7,~~November 4, 2021	By:	/s/ L. Heath Sampson
		L. Heath Sampson Chief Financial Officer
		(Principal Financial Officer)