UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20212022

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

For the transition period from             to             
 
Commission File Number 001-34221
 

ModivCare Inc.
(Exact name of registrant as specified in its charter)

Delaware86-0845127
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
6900 E Layton Avenue, l2th12th Floor, Denver, Colorado           80237
(Address of principal executive offices) (Zip Code)  
303-728-7030(303) 728-7030
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.001 par value per shareMODVThe NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒  Yes   ☐   No
 
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,”
1


“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐  Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of November 1, 2021, tOctober 28, 2022, there werehere were outstanding 13,999,767 14,138,324 shares outstanding (excluding treasury shares of 5,415,040)5,427,999) of the registrant’s Common Stock, $0.001 par value per share.


2


TABLE OF CONTENTS
 Page
  
 
   
Item 1.
4
   
 
Unaudited Condensed Consolidated Balance Sheets – September 30, 20212022 and December 31, 20202021
4
   
 
Unaudited Condensed Consolidated Statements of Operations – Three and Ninenine months ended September 30, 20212022 and 20202021
5
  
Unaudited Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 20212022 and 20202021
6
Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Three quarters ended September 30, 20212022 and 20202021
8
 
109
   
Item 2.
3127
   
Item 3.
42
   
Item 4.
42
  
 
   
Item 1.
4344
   
Item 1A.
4344
   
Item 6.
4445


3


PART I—FINANCIAL INFORMATION
Item 1.  Financial Statements.

ModivCare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

September 30, 2021December 31, 2020September 30, 2022December 31, 2021
   
AssetsAssets  Assets  
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$126,506 $183,281 Cash and cash equivalents$72,703 $133,139 
Accounts receivable, net of allowance of $690 and $2,403, respectively289,230 197,943 
Accounts receivable, net of allowance of $2,670 and $2,296, respectivelyAccounts receivable, net of allowance of $2,670 and $2,296, respectively266,177 233,121 
Other receivablesOther receivables12,934 12,674 Other receivables6,117 4,740 
Prepaid expenses and other current assetsPrepaid expenses and other current assets41,655 31,885 Prepaid expenses and other current assets36,681 38,551 
Restricted cashRestricted cash186 75 Restricted cash28 283 
Current assets of discontinued operations141 758 
Total current assetsTotal current assets470,652 426,616 Total current assets381,706 409,834 
Operating lease right-of-use assets44,077 30,928 
Property and equipment, netProperty and equipment, net52,538 27,544 Property and equipment, net67,413 53,549 
GoodwillGoodwill929,986 444,927 Goodwill968,420 924,787 
Intangible assets, net491,997 345,652 
Payor network, netPayor network, net408,147 425,516 
Other intangible assets, netOther intangible assets, net51,643 64,697 
Equity investmentEquity investment134,353 137,466 Equity investment43,477 83,069 
Operating lease right-of-use assetsOperating lease right-of-use assets38,368 43,750 
Other assetsOther assets11,550 12,780 Other assets30,671 22,223 
Total assetsTotal assets$2,135,153 $1,425,913 Total assets$1,989,845 $2,027,425 
Liabilities and stockholders' equityLiabilities and stockholders' equityLiabilities and stockholders' equity
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$33,458 $8,464 Accounts payable$44,242 $8,690 
Accrued contract payablesAccrued contract payables320,045 101,705 Accrued contract payables243,800 281,586 
Accrued transportation costsAccrued transportation costs90,114 103,294 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities109,571 117,010 Accrued expenses and other current liabilities145,217 123,791 
Accrued transportation costs92,028 79,674 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities9,287 8,277 Current portion of operating lease liabilities10,134 9,873 
Self-funded insurance programs7,563 4,727 
Deferred revenue2,488 2,923 
Current liabilities of discontinued operations1,527 1,971 
Total current liabilitiesTotal current liabilities575,967 324,751 Total current liabilities533,507 527,234 
Long-term debt, net of deferred financing costs of $25,330 and $14,020, respectively974,669 485,980 
Long-term debt, net of deferred financing costs of $21,699 and $24,775, respectivelyLong-term debt, net of deferred financing costs of $21,699 and $24,775, respectively978,301 975,225 
Deferred tax liabilitiesDeferred tax liabilities112,461 92,195 Deferred tax liabilities62,666 94,611 
Operating lease liabilities, less current portionOperating lease liabilities, less current portion35,389 23,437 Operating lease liabilities, less current portion30,595 34,524 
Long-term contract payables5,793 72,183 
Other long-term liabilitiesOther long-term liabilities26,887 15,756 Other long-term liabilities30,628 22,564 
Total liabilitiesTotal liabilities1,731,166 1,014,302 Total liabilities1,635,697 1,654,158 
Commitments and contingencies (Note 14)00
Commitments and contingencies (Note 13)Commitments and contingencies (Note 13)
Stockholders’ equityStockholders’ equityStockholders’ 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 
Common stock: Authorized 40,000,000 shares; $0.001 par value; 19,632,749 and 19,589,422, respectively, issued and outstanding (including treasury shares)Common stock: Authorized 40,000,000 shares; $0.001 par value; 19,632,749 and 19,589,422, respectively, issued and outstanding (including treasury shares)20 20 
Additional paid-in capitalAdditional paid-in capital428,643 421,318 Additional paid-in capital436,839 430,449 
Retained earningsRetained earnings243,356 218,414 Retained earnings186,970 211,829 
Treasury shares, at cost, 5,561,826 and 5,287,283 shares, respectively(268,032)(228,141)
Treasury shares, at cost, 5,574,905 and 5,568,983 shares, respectivelyTreasury shares, at cost, 5,574,905 and 5,568,983 shares, respectively(269,681)(269,031)
Total stockholders’ equityTotal stockholders’ equity403,987 411,611 Total stockholders’ equity354,148 373,267 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$2,135,153 $1,425,913 Total liabilities and stockholders’ equity$1,989,845 $2,027,425 

 See accompanying notes to the unaudited condensed consolidated financial statements
4


ModivCare Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)

Three months ended September 30,Nine months ended September 30, Three months ended September 30,Nine months ended September 30,
2021202020212020 2022202120222021
Service revenue, netService revenue, net$493,059 $320,619 $1,421,117 $970,166 Service revenue, net$647,782 $493,059 $1,850,472 $1,421,117 
Grant income (Note 2)Grant income (Note 2)— — 3,500 — Grant income (Note 2)789 — 4,587 3,500 
Operating expenses:Operating expenses:    Operating expenses:  
Service expenseService expense399,272 235,543 1,139,170 764,310 Service expense534,563 399,272 1,498,108 1,139,170 
General and administrative expenseGeneral and administrative expense68,054 34,441 179,271 86,435 General and administrative expense75,889 68,205 232,108 179,595 
Depreciation and amortizationDepreciation and amortization12,608 7,301 36,667 17,199 Depreciation and amortization25,672 12,608 74,376 36,667 
Total operating expensesTotal operating expenses479,934 277,285 1,355,108 867,944 Total operating expenses636,124 480,085 1,804,592 1,355,432 
Operating incomeOperating income13,125 43,334 69,509 102,222 Operating income12,447 12,974 50,467 69,185 
Other expenses (income):    
Other expenses:Other expenses:  
Interest expense, netInterest expense, net17,702 379 34,412 2,118 Interest expense, net15,557 17,702 46,429 34,412 
Equity in net loss (income) of investee6,748 (10,325)1,978 (12,200)
Income (loss) from continuing operations before income taxes(11,325)53,280 33,119 112,304 
Income (loss) before income taxes and equity method investmentIncome (loss) before income taxes and equity method investment(3,110)(4,728)4,038 34,773 
Provision (benefit) for income taxesProvision (benefit) for income taxes(3,863)14,360 7,944 19,785 Provision (benefit) for income taxes(1,053)(2,001)877 8,409 
Income (loss) from continuing operations, net of tax(7,462)38,920 25,175 92,519 
Loss from discontinued operations, net of tax(108)(115)(232)(618)
Equity in net loss of investee, net of taxEquity in net loss of investee, net of tax26,448 4,845 28,020 1,424 
Net income (loss)Net income (loss)$(7,570)$38,805 $24,943 $91,901 Net income (loss)$(28,505)$(7,572)$(24,859)$24,940 
Net income (loss) available to common stockholders (Note 12)$(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 $2.57 
Earnings (loss) per common share:Earnings (loss) per common share:  
BasicBasic$(2.03)$(0.54)$(1.77)$1.77 
DilutedDiluted$(2.03)$(0.54)$(1.77)$1.75 
Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:    Weighted-average number of common shares outstanding: 
BasicBasic13,993,438 14,026,039 14,102,371 13,367,605 Basic14,051,794 13,993,438 14,041,224 14,102,371 
DilutedDiluted13,993,438 14,133,904 14,278,331 13,415,344 Diluted14,051,794 13,993,438 14,041,224 14,278,331 

See accompanying notes to the unaudited condensed consolidated financial statements
5


ModivCare Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 Nine months ended September 30,
 20212020
Operating activities  
Net income$24,943 $91,901 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation8,839 6,980 
Amortization27,827 10,219 
Provision for doubtful accounts(1,712)(3,139)
Stock-based compensation4,225 2,949 
Deferred income taxes(3,295)12,612 
Amortization of deferred financing costs and debt discount2,175 292 
Equity in net loss (income) of investee1,978 (12,200)
Reduction of right-of-use assets8,681 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 programs2,837 1,259 
Accrued contract payables151,950 88,347 
Accounts payable and accrued expenses7,138 33,061 
Accrued transportation costs12,354 (5,506)
Deferred revenue(502)453 
Other long-term liabilities2,183 43,639 
Net cash provided by operating activities174,694 287,226 
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 debt625,000 162,000 
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 exercise3,099 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 activities449,722 (79,632)
Net change in cash, cash equivalents and restricted cash(56,664)125,143 
Cash, cash equivalents and restricted cash at beginning of period183,356 61,673 
Cash, cash equivalents and restricted cash at end of period$126,692 $186,816 

 Nine months ended September 30,
 20222021
Operating activities  
Net income (loss)$(24,859)$24,940 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation14,398 8,839 
Amortization59,978 27,828 
Provision for doubtful accounts(2,670)(1,712)
Stock-based compensation5,152 4,225 
Deferred income taxes(31,232)(3,295)
Amortization of deferred financing costs and debt discount3,878 2,175 
Equity in net loss of investees38,883 1,978 
Reduction of right-of-use assets8,680 8,681 
Changes in operating assets and liabilities:
Accounts receivable and other receivables(28,507)(69,597)
Prepaid expenses and other(4,194)(5,330)
Accrued contract payables(37,786)151,950 
Accounts payable and accrued expenses55,887 9,475 
Accrued transportation costs(13,180)12,354 
Other long-term liabilities1,098 2,183 
Net cash provided by operating activities45,526 174,694 
Investing activities  
Purchase of property and equipment(25,518)(13,852)
Acquisition, net of cash acquired(78,872)(667,228)
Net cash used in investing activities(104,390)(681,080)
Financing activities  
Proceeds from debt100,000 625,000 
Repayment of debt(100,000)(125,000)
Repurchase of common stock, for treasury— (39,040)
Debt issuance costs(2,415)(13,486)
Proceeds from common stock issued pursuant to stock option exercise1,237 3,099 
Restricted stock surrendered for employee tax payment(649)(851)
Net cash provided by (used in) financing activities(1,827)449,722 
Net change in cash, cash equivalents and restricted cash(60,691)(56,664)
Cash, cash equivalents and restricted cash at beginning of period133,422 183,356 
Cash, cash equivalents and restricted cash at end of period$72,731 $126,692 

See accompanying notes to the unaudited condensed consolidated financial statements
6


ModivCare Inc.
Unaudited Supplemental Cash Flow Information
(in thousands)
 Nine months ended September 30,
Supplemental cash flow information20212020
Cash paid for interest$24,006 $1,775 
Cash paid for income taxes, net of refunds$12,846 $11,805 
Assets acquired under operating leases$21,829 $5,488 

 Nine months ended September 30,
Supplemental cash flow information20222021
Cash paid for interest$31,460 $24,006 
Cash paid for income taxes$4,159 $12,846 
Assets acquired under operating leases$3,298 $21,829 
Acquisitions:  
Purchase price$79,199 $682,113 
Less:  
Cash acquired327 14,885 
Acquisitions, net of cash acquired$78,872 $667,228 

See accompanying notes to the unaudited condensed consolidated financial statements
7


ModivCare Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity 
(in thousands, except share and per share data)
Nine months ended September 30, 2021
Common StockAdditional
Paid-In		RetainedTreasury Stock
 SharesAmountCapitalEarningsSharesAmountTotal
Balance at December 31, 202019,570,598 $20 $421,318 $218,414 5,287,283 $(228,141)$411,611 
Net income— — — 18,840 — — 18,840 
Stock-based compensation— — 1,149 — — — 1,149 
Exercise of employee stock options36,338 — 2,286 — — — 2,286 
Restricted stock issued15,821 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 4,253 (721)(721)
Shares issued for bonus settlement and director stipends260 — 38 — — — 38 
Stock repurchase plan— — — — 94,235 (14,450)(14,450)
Balance at March 31, 202119,623,017 20 424,791 237,254 5,385,771 (243,312)418,753 
Net income— — — 13,672 — — 13,672 
Stock-based compensation— — 1,416 — — — 1,416 
Exercise of employee stock options866 — 49 — — — 49 
Restricted stock forfeited(55,162)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 713 (99)(99)
Shares issued for bonus settlement and director stipends324 — 56 — — — 56 
Stock repurchase plan— — — — 175,173 (24,590)(24,590)
Balance at June 30, 202119,569,045 20 426,312 250,926 5,561,657 (268,001)409,257 
Net loss— — — (7,570)— — (7,570)
Stock-based compensation— — 1,505 — — — 1,505 
Exercise of employee stock options12,296 — 765 — — — 765 
Restricted stock issued(455)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 169 (31)(31)
  Shares issued for bonus settlement and director stipends333 — 61 — — — 61 
Stock repurchase plan— — — — — — — 
Balance at September 30, 202119,581,219 $20 $428,643 $243,356 5,561,826 $(268,032)$403,987 

Nine months ended September 30, 2022
Common StockAdditionalRetainedTreasury Stock
 SharesAmountPaid-In CapitalEarningsSharesAmountTotal
Balance at December 31, 202119,589,422 $20 $430,449 $211,829 5,568,983 $(269,031)$373,267 
Net income— — — 318 — — 318 
Stock-based compensation— — 1,963 — — — 1,963 
Exercise of employee stock options20,683 — 1,138 — — — 1,138 
Restricted stock issued16,306 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 5,179 (572)(572)
Shares issued for bonus settlement and director stipends732 — 86 — — — 86 
Balance at March 31, 202219,627,143 $20 $433,636 $212,147 5,574,162 $(269,603)$376,200 
Net income— — — 3,328 — — 3,328 
Stock-based compensation— — 2,363 — — — 2,363 
Exercise of employee stock options16 — — — — — — 
Restricted stock forfeited(551)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 322 (36)(36)
Shares issued for bonus settlement and director stipends1,000 — 85 — — — 85 
Balance at June 30, 202219,627,608 $20 $436,084 $215,475 5,574,484 $(269,639)$381,940 
Net loss— — — (28,505)— — (28,505)
Stock-based compensation— — 570 — — — 570 
Exercise of employee stock options3,381 — 100 — — — 100 
Restricted stock issued914 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 421 (42)(42)
Shares issued for bonus settlement and director stipends846 — 85 — — — 85 
Balance at September 30, 202219,632,749 $20 $436,839 $186,970 5,574,905 $(269,681)$354,148 

8

Nine months ended September 30, 2020
Common StockAdditional
Paid-In		RetainedTreasury Stock
 SharesAmountCapitalEarningsSharesAmountTotal
Balance at December 31, 201918,073,763 $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 options39,111 — 2,054 — — — 2,054 
Restricted stock issued79,029 — — — 626 (37)(37)
Shares issued for bonus settlement and director stipends701 — 38 — — — 38 
Stock repurchase plan— — — — 142,821 (7,299)(7,299)
Conversion of convertible preferred stock to common stock40 — 2 — — — 2 
Convertible preferred stock dividends (1)
— — — (1,095)— — (1,095)
Balance at March 31, 202018,192,644 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 options129,722 — 9,275 — — — 9,275 
Restricted stock forfeited(8,496)— — — — — — 
Shares issued for bonus settlement and director stipends487 — 38 — — — 38 
 Stock repurchase plan— — — — 52,856 (2,887)(2,887)
Conversion of convertible preferred stock to common stock14,166 — 546 — — — 546 
Redemption of convertible preferred stock— — — (42,954)— — (42,954)
Conversion of convertible preferred stock to common stock pursuant to Conversion Agreement925,567 1 37,255 (5,997)— — 31,259 
Convertible preferred stock dividends (1)
— — — (866)— — (866)
Balance at June 30, 202019,254,090 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 options145,124 1 10,250 — — — 10,251 
Restricted stock issued330 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 581 (55)(55)
Shares issued for bonus settlement and director stipends414 — 38 — — — 38 
Redemption of convertible preferred stock— — — (3,186)— — (3,186)
Conversion of convertible preferred stock to common stock68,633 — 2,644 — — — 2,644 
Dividends paid pursuant to the Conversion Agreement (2)
— — — (27)— — (27)
Balance at September 30, 202019,468,591 $20 $416,504 $221,509 5,285,666 $(227,966)$410,067 

(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.
Nine months ended September 30, 2021
Common StockAdditionalRetainedTreasury Stock
 SharesAmountPaid-In CapitalEarningsSharesAmountTotal
Balance at December 31, 202019,570,598 $20 $421,318 $218,414 5,287,283 $(228,141)$411,611 
Net income— — — 18,840 — — 18,840 
Stock-based compensation— — 1,149 — — — 1,149 
Exercise of employee stock options36,338 — 2,286 — — — 2,286 
Restricted stock issued15,821 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 4,253 (721)(721)
Shares issued for bonus settlement and director stipends260 — 38 — — — 38 
Stock repurchase plan— — — — 94,235 (14,450)(14,450)
Balance at March 31, 202119,623,017 $20 $424,791 $237,254 5,385,771 $(243,312)$418,753 
Net income— — — 13,672 — — 13,672 
Stock-based compensation— — 1,416 — — — 1,416 
Exercise of employee stock options866 — 49 — — — 49 
Restricted stock forfeited(55,162)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 713 (99)(99)
Shares issued for bonus settlement and director stipends324 — 56 — — — 56 
Stock repurchase plan— — — — 175,173 (24,590)(24,590)
Balance at June 30, 202119,569,045 $20 $426,312 $250,926 5,561,657 $(268,001)$409,257 
Net loss— — — (7,572)— — (7,572)
Stock-based compensation— — 1,505 — — — 1,505 
Exercise of employee stock options12,296 — 765 — — — 765 
Restricted stock forfeited(455)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 169 (31)(31)
Shares issued for bonus settlement and director stipends333 — 61 — — — 61 
Balance at September 30, 202119,581,219 $20 $428,643 $243,354 5,561,826 $(268,032)$403,985 

See accompanying notes to the unaudited condensed consolidated financial statements
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ModivCare Inc.
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 20212022

1.    Organization and Basis of Presentation

Description of Business

ModivCare Inc. ("ModivCare" or the "Company") is a technology-enabled healthcare services company 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 accessconnect members to care, help health plans manage risks, reduce costs, and improve outcomes. ModivCare is a provider of non-emergency medical transportation, or NEMT, personal care, and remote patient monitoring, or RPM, solutions. solutions, which serve similar, highly vulnerable patient populations.

The technology-enabled operating model includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transporttransportation management. Additionally, its personal care services include placements of non-medical personal care assistants, home health aides and 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.setting. 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 partnerworking with communities throughout the country, providingto provide 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, its in-home personal care business that 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 VRI, ModivCare has united four complementary healthcare businesses that serve similar, highly vulnerable patient populations.

On May 6, 2020, ModivCare acquired all of the outstanding equity of National MedTrans, LLC, or NMT, a New York limited liability company and provider of non-emergency medical 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.

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.

See Note 3, Acquisitions, for further information regarding the above acquisitions.

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") provides risk adjustment solutions that improve health outcomes for individuals and financial performance for health plans. Matrix’s clinical solutions business ("Clinical 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.




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Basis of Presentation

The Company follows accounting standards established by the Financial Accounting Standards Board (“FASB”). The FASB establishes accounting principles generally accepted in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. References to GAAP issued by the FASB in these notes are to the FASB Accounting Standards Codification (“ASC”), which serves as the single source of authoritative accounting and applicable reporting standards to be applied for non-governmental entities. All amounts are presented in U.S. dollars unless otherwise noted.

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 annual auditedcomplete 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 September 30, 20212022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021.2022. 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 unaudited condensed consolidated financial statements.

The unaudited condensed consolidated balance sheet at December 31, 20202021 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 annual auditedcomplete 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, 2020.2021.

The Company accounts for its investment in Matrix using the equity method, as the Company does not control the decision-making process or business management practices of Matrix. While the Company has accessReclassifications: Certain prior year amounts have been reclassified to certain information and performs certain proceduresconform to review the reasonableness of information, the Company relies on the management of Matrix to provide accurate financial information prepared in accordance with GAAP. The Company receives audit reports relating to such financial information from Matrix’s independent auditors on an annual basis. The Company is not aware of any errors in or possible misstatements of the financial information provided by Matrix that would have a material effect on the Company’s consolidated financial statements. See Note 7, Equity Investment, for further information.current year presentation.

Impact of the COVID-19 Pandemic
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Since March 2020, the COVID-19 pandemic has impactedand the measures enacted by state and government officials to prevent, prepare for, and respond to COVID-19 or slow its spread have had an ongoing adverse impact on the Company’s business, as well as its patients, communities, and employees. The Company’s priorities duringWith ongoing uncertainties around the duration and magnitude of the pandemic, the ultimate impact to the business remains uncertain. Accordingly, the COVID-19 pandemic could continue to have an adverse impact on the Company's financial statements with potential for (i) labor shortages or other disruptions that impact our ability to provide services, and (ii) decreased member comfort leaving the house to obtain transportation for non-emergency medical purposes; among other things. Despite ongoing uncertainties, the Company’s priorities throughout the COVID-19 pandemic remain intact with emphasis on protecting the health and safety of its employees, maximizing the availability of its services and products to support the SDoH, and supporting 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,CARES Act and Economic Securitythe American Rescue Plan Act (the "CARES Act"of 2021 ("ARPA"), 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"). The Government further initiated ARPA which established the Coronavirus State and Local Fiscal Recovery Fund ("SLFRF") to send relief payments to state and local governments impacted by the pandemic to assist with responding to the public health emergency (“PHE”) including the economic hardships that continue to impact communities and to respond to workers performing essential work during the COVID-19 PHE, including providers. These funds are not subject to repayment, provided we are able to attest and comply with any terms and conditions of such funding, as applicable.


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2.    Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

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.

Grant IncomeChanges in Accounting Estimate

DuringIn accordance with its policy, the Company reviews the estimated useful lives of its fixed assets and intangible assets on an ongoing basis. As a result of this review, the Company adjusted the estimated useful life of the Simplura trademarks and trade names intangible asset from 10 years to 3 years and adjusted the estimated useful life of the payor network from 15 years to 10 years effective as of January 1, 2022. This change was driven by strategic shifts in the Company's personal care segment operations, partially contributed to by the acquisition of Care Finders Total Care, LLC ("Care Finders"). Based on the intangible asset values as of December 31, 2021, the effect of the change in estimate during the three and nine months ended September 30, 2022 was an increase in amortization expense of $3.6 million, a decrease in net income of $2.4 million, and a decrease in earnings per share of $0.17 per diluted common share outstanding, and an increase in amortization expense of $10.7 million, a decrease in net income of $8.4 million, and a decrease in earnings per share of $0.60 per diluted common share outstanding, respectively.

Government Grants

The Company has received government grants under the CARES Act PRF and the ARPA SLFRF to provide economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. Under these acts, the Company received distributions of approximately $1.4 million during the three months ended September 30, 2022. No distributions were received during the three months ended September 30, 2021. The Company received distributions of approximately $10.4 million and $3.5 million during the nine months ended September 30, 2021, the Company received distributions from the CARES Act PRF of approximately $3.5 million targeted to offset lost revenue2022 and expenditures incurred in connection with the COVID-19 pandemic. During the three months ended September 30, 2021, Company did not receive distributionsrespectively. Distributions received under these acts are targeted to assist with incremental health care related expenses or lost revenue attributable to the COVID-19 pandemic as well as provide stimulus to support long-term growth and recovery.

The payments from the CARES Act PRF. The PRF paymentsthese acts are subject to certain restrictions and are subject topossible recoupment if not used for designated purposes. As a condition to receiving PRF distributions, providers must agree to certain terms and conditions, including among other things, that the funds are being used for healthcare related expenses and lost revenues and unreimbursedattributable to COVID-19, related expenses as defined by the U.S. Department of Health and Human Services ("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 granthas submitted the required
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documents to meet reporting requirements through reporting period three, which ended September 30, 2022. The Company received an audit inquiry letter from HHS related to one of the business units that received PRF payments, to which the Company has responded and submitted all requested information and believes that the payments received are substantiated and within the terms and conditions defined by the HHS and continues to include these amounts as grant income. At this time, the Company is unaware of any other pending or upcoming audits or inquiries related to PRF received.

As a condition to receiving SLFRF, providers must agree to use the funds to respond to the PHE or its negative economic impacts, to respond to workers performing essential work by providing premium pay to eligible workers and to offset reduction in revenue due to the COVID-19 PHE as stipulated by the states in which the funds were received. All recipients of SLFRF payments are required to comply with the reporting requirements that the state in which the funds originated has requested in order for the states to meet the requirements as described in the terms and conditions as determined by the Department of the Treasury. The Company has complied with all known reporting requirements to date.

The Company recognizes distributions from government grants as grant income in line with the loss of revenues or expenses for which the grants are intended to compensate 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 $20.8$12.3 million related to the deferral of employer payroll taxes as of September 30, 2022 and December 31, 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, $10.4 millionAct which is recorded in accrued expenses and $10.4 millionon the unaudited condensed consolidated balance sheets. This balance is recordedexpected to be paid in other long-term liabilities.the fourth quarter of 2022.

Recent Accounting Pronouncements

The Company adopted the following accounting pronouncements during the nine months ended 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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The ASU removes certain exceptions to the general principles in ASC 740, Income Taxes, and also clarifies and amends existing guidance to reduce complexity in accounting for income taxes. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. 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:2022:

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("("ASU 2020-04") which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The relief granted in ASC 848, Reference Rate Reform ("ASC 848"), is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. The provisions of ASC 848 must be applied for all transactions other than derivatives, which may be applied at a hedging relationship level. Entities may apply the provisions as of the beginning of the reporting period when the election is made (i.e. as early as the first quarter 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluatingThere was no material impact to the
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impact ASU 2020-04 will have on its consolidated financial statements or disclosures; however, does not expectfrom the adoption to have a material impact.of this ASU.

In August 2020,October 2021, the FASB issued ASU 2021-08, ASU 2020-06, Debt—DebtBusiness Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40)Customers ("ASU 2020-06"2021-08") which addresses. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the complexity associatedacquirer on the acquisition date in accordance with applying GAAP for certain financial instrumentsASC 606, Revenue from Contracts with characteristics ofCustomers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities and equity. The update limitsare recognized by the accounting models for convertible instruments resulting in fewer embedded conversion features being separately recognized fromacquirer at fair value on the host contract. Specifically,acquisition date. ASU 2020-06 removes from GAAP the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present an embedded conversion feature in such debt within equity. ASU 2020-062021-08 is effective for public business entities for fiscal years beginning on or after December 15, 2021,November 1, 2023, including interim periods therein. The Company is currently evaluatingstandard will not impact acquired contract assets or liabilities from business combinations occurring prior to the effective date of adoption, and the impact ASU 2020-06in future periods will havedepend on its consolidatedthe contract assets and contract liabilities acquired in future business combinations. The Company has elected to early adopt this accounting standard and notes that there was no material impact to the financial statements or disclosures; however, does not expectfrom the adoption to have a material impact.of this ASU.

3.  Acquisitions

Business Combinations

Simplura Health Group

On November 18, 2020, the Company completed its acquisition of Simplura Heath Group, or Simplura. Simplura was a nonpublic entity that specializes in personal care services offering placements of personal care assistants, home health aides, and skilled nurses for senior citizens, disabled adults and other high-needs patients. Simplura operates from its headquarters in Valley Stream, New York, with approximately 57 branches across 7 states, including in several of the nation’s largest personal care markets. The acquisition of Simplura added a new business segment in personal care—a sector of healthcare that complements the NEMT segment.

The stock transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of ModivCare Inc. acquired 100 percent of the voting stock of Simplura for $548.6 million (a preliminary purchase price of $569.8 million less $21.2 million of cash that was acquired).

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 November 18, 2020 (in thousands):

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

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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.

(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 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):

TypeUseful LifeValue
Payor networkAmortizable15 years$221,000 
Trademarks and trade namesAmortizable10 years43,000 
LicensesNot AmortizableIndefinite770 
$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. This assessment is preliminary and will be finalized in the fourth quarter of 2021.

(5) The fair value of the operating lease liability and corresponding right-of-use asset (current and long-term) were recorded at $11.7 million based on market rates available to the Company during our preliminary purchase price allocation. This assessment has 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 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) Accounts payable as well as certain other current and non-current assets and liabilities are stated at fair value as of the acquisition date.
(8) Deferred acquisition payments are associated with historical acquisitions by Simplura.
(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.

CareFindersFinders Total Care, LLC

On September 14, 2021, the Company completed its acquisition ofacquired Care Finders. Care Finders which 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.platform.
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The equity transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of ModivCare Inc.the Company acquired 100% percent100.0% of the equity securities of Care Finders for $332.3$333.4 million (a preliminary purchase price of $344.3$344.8 million less $12.0$11.4 million of cash that was acquired).

The Company has not yet obtained and assessed all relevant historical financialfollowing table summarizes 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, offrom 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):


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Cash$11,96311,424 
Accounts receivable (1)
12,25314,708 
Prepaid expenses and other (2)
6532,625 
Property and equipment (3)
3,2062,527 
Inventories (4)
145231 
IntangiblesOperating right of use asset (5)
75,9001,939 
GoodwillIntangibles (6)
248,518100,750 
Goodwill (7)
232,103 
Other assets (7)(8)
226 
Accounts payable and accrued liabilities (8) (9)
(5,347)(2,720)
Accrued expense (8)expenses and other accrued liabilities (9)
(871)(14,344)
Other liabilities (8)Operating lease liability (5)
(80)(1,939)
Deferred tax liabilities (9)(10)
(2,327)
(2,275)Other liabilities (9)
(378)
Total of assets acquired andless liabilities assumed$344,291344,825 

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 third quarter of 2022.

(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, the carrying value represents the fair value.
(3)     The acquired property and equipment consists primarily of capitalized software, construction in progress,computer equipment, and computer equipment. This estimate is preliminary asautomobiles.
(4)     Given the Company's evaluationshort-term nature of the balance of inventories, the carrying value represents the fair value.
(5)     The fair value of propertythe operating lease liability and equipment is ongoing.corresponding right-of-use asset (current and long-term) was recorded at $1.9 million based on market rates available to the Company during the purchase price allocation.
(4) Inventories are stated at fair value as of the acquisition date.
(5)(6)     The allocation of consideration exchanged tofor intangible assets acquired is as follows (in thousands):

TypeUseful LifeValue
Payor networkAmortizable97 years$68,30097,200 
Trade nameAmortizable83 years7,6001,950 
Non-compete agreementAmortizable5 years1,600 
$75,900100,750 

The intangible valuation amounts disclosed inCompany valued the table above represent a preliminary estimate, as ofpayor network utilizing the acquisition date of September 14, 2021. Final purchase accounting is expected to be finalized bymulti-period excess earnings method, trade names utilizing the third quarter of 2022.relief-from-royalty method and the non-compete agreement utilizing the with/without method.

(6)(7)     The acquisition preliminarilyinitially resulted in $248.5$232.2 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 inhome care solutions. In the third quarter of 2022.2022, goodwill decreased by $0.1 million as a result of changes to accounts payable and deferred tax liabilities, as discussed in detail below. 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)(8)     Included in Otherother assets are security deposits with a value of $0.2 million.
(8) Accounts(9)     Due to the short-term nature of the accounts, the carrying value is assumed to represent the fair value for accounts payable as well as certain other current and non-current assets and liabilities are stated at fair value as of the acquisition date. In the third quarter of 2022, it was determined that an additional $0.2 million of accounts payable existed as of the acquisition date, and therefore, the initial balance of $2.5 million was increased to $2.7 million.
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(9)
(10)     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 discussionbasis. In the third quarter of 2022, deferred tax liabilities of $2.6 million decreased by $0.3 million due to tax impacts 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.


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VRI Intermediate Holdings, LLC

On September 22, 2021, the Company completed its acquisition ofacquired VRI, a provider of remote patient monitoring solutions managingthat manages 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,SDoH, introduces new technology-enabled in-home solutions that deepen the Company's engagement with payors and patients, and adds a strategic pillarnew suite of services 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.

The stock transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of ModivCare Inc.the Company acquired 100% percent100.0% of the equity securities of VRI for $314.8$314.6 million (a preliminary purchase price of $317.7$317.5 million less $2.9 million of cash that was acquired).

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, ofsummarizes the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of September 22, 2021 (in thousands):

Cash$2,922 
Accounts receivable (1)
6,8496,800 
Inventory (2)
1,684 
Prepaid expenses and other (3)
284805 
Property and equipment (4)
16,77514,908 
Intangible assets (5)
85,80075,590 
Goodwill (6)
228,884236,317 
Other assets (7)217 
Accounts payable and accrued liabilities (8) (7)
(1,890)(1,884)
Accrued expense (8) (7)
(2,481)(2,487)
Deferred revenue (8) (7)
(66)(67)
Deferred tax liabilities (8)
(21,285)(17,070)
Total of assets acquired andless liabilities assumed$317,693317,518 

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 third quarter of 2022.

(1)    Management has valued accounts receivable based on the estimated future collectability of the receivables portfolio. This estimate is preliminary as
(2)     Given the Company's evaluationshort-term nature of the collectabilitybalance of receivables is ongoing.
(2) Inventory is stated atinventories, the carrying value represents the fair value as of the acquisition date.value.
(3)     Given the short-term nature of the balance of prepaid expenses, the carrying value represents the fair value.
(4)     The acquired property and equipment consists primarily of monitoringpersonal emergency response system devices, with the remainder consisting of computer equipment, buildings and vitalsother equipment. This estimate is preliminary asThe Company valued the Company's evaluationpersonal emergency response system devices, computer equipment and other equipment utilizing the cost approach at $12.7 million. The carrying value of the fair valueremainder of the property, plant and equipment, consisting primarily of buildings and land, is ongoing.assumed to represent the fair value.
(5)    The allocation of consideration exchanged tofor intangible assets acquired is as follows (in thousands):

TypeUseful LifeValue
Payor networkAmortizable97 years$70,70072,150 
Trade nameAmortizable83 years13,300890 
Internally developed softwareDeveloped technologyAmortizable73 years1,8002,550 
$85,80075,590 

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The intangible valuation amounts disclosed inCompany valued the table above represent a preliminary estimate, as ofpayor network utilizing the acquisition date of September 22, 2021. Final purchase accounting is expected to be finalized bymulti-period excess earnings method, trade names utilizing the third quarter of 2022.relief-from-royalty method and developed technology utilizing the cost approach.

(6)     The acquisition preliminarilyinitially resulted in $228.9$236.7 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 inIn the third quarter of 2022.2022, goodwill decreased by $0.4 million due to a decrease in deferred tax liabilities, as discussed in more detail below. The amount ofrelated goodwill is not deductible for tax purposes has yetpurposes.
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(7)     Due to be determined. Goodwill allocation to reporting units is not completed asthe short-term nature of the date ofaccounts, the financial statements, September 30, 2021.
(7) Included in other assets are other receivables and employees advances with acarrying value of approximately $0.2 million.
(8) Accountsis assumed to represent the fair value for accounts payable as well as certain other current and non-current liabilities are stated at fair value as of the acquisition date.
(8)     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 discussionbasis. In the third quarter of 2022, deferred tax liabilities of $17.5 million decreased by $0.4 million due to tax impacts of the Company’s combined income tax position subsequentacquisition.

Guardian Medical Monitoring

On May 11, 2022, the Company acquired Guardian Medical Monitoring ("GMM"), a provider of remote patient monitoring solutions that manages a comprehensive suite of services including personal emergency response systems and medication management. The acquisition of GMM supports the Company's strategy to expand its RPM segment and enhances the acquisition.Company's suite of supportive care solutions that address SDoH.

The stock transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of the Company acquired 100.0% of the equity securities of GMM for $71.3 million (a purchase price of $71.6 million less $0.3 million of cash that was acquired).

SinceThe following is a preliminary estimate of the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of May 11, 2022 (in thousands):

Cash$327 
Accounts receivable (1)
2,548 
Prepaid expenses and other (2)
770 
Property and equipment (3)
2,744 
Intangible assets (4)
21,950 
Goodwill (5)
44,113 
Accounts payable (6)
(281)
Accrued expenses and other current liabilities (6)
(577)
Total of assets acquired less liabilities assumed$71,594 

The acquisition method of accounting requires us to record the assets acquired and liabilities assumed at their fair values as of the date of acquisition, which requires management to use currently available information to make estimates and assumptions. The Company believes that the available information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however, if new information becomes available related to facts that existed at the acquisition VRI salesdate, preliminary estimates may be adjusted. Upon finalization of $1.6 millionthe preliminary items noted below, there may be related adjustments to certain of such items and netto goodwill and income taxes.

(1)    Management has valued accounts receivable based on the estimated future collectability of the receivables portfolio. In the third quarter of 2022, it was determined that $0.4 million are included inof the initial accounts receivable balance was uncollectible, and therefore, the initial balance of $2.9 million was decreased to $2.5 million. This estimate is preliminary as the Company's consolidated resultsevaluation of operations.the collectability of receivables is ongoing.
(2)     Given the short-term nature of the balance of prepaid expenses and other assets, the carrying value represents the fair value.
(3)     The acquired property and equipment consists primarily of personal emergency response system devices, with the remainder consisting of computer equipment and furniture and fixtures. The Company valued the personal emergency response system devices utilizing the cost approach. The carrying value of the remainder of the property, plant and equipment, consisting primarily of computer equipment and furniture and fixtures, is assumed to represent the fair value. Management's assessment of the fair value for PP&E is ongoing.
(4)    The preliminary allocation of consideration exchanged for intangible assets acquired is as follows (in thousands):

TypeUseful LifeValue
Payor networkAmortizable7 years$21,600 
Trade nameAmortizable2 years350 
$21,950 

The Company valued the payor network utilizing the multi-period excess earnings method and trade names utilizing the relief-from-royalty method.
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(5)     The acquisition preliminarily resulted in $43.7 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. In the third quarter of 2022, accounts receivable was adjusted down by $0.4 million which caused a corresponding increase to goodwill for a total goodwill balance of $44.1 million. The amount of goodwill deductible for tax purposes has yet to be determined.
(6)     Due to the short-term nature of the accounts, the carrying value is assumed to represent the fair value for accounts payable and accrued expenses and other current liabilities as of the acquisition date.

Pro Forma Financial Information (unaudited)

Assuming SimpluraCare Finders, VRI, and GMM had been acquired as of January 1, 2019, and Care Finders and VRI had been acquired as of January 1, 2020,2021, and the results of each of them had been included in operations beginning on January 1, 2020,2021, the following table provides estimated unaudited pro forma results of operations for the three and nine months ended September 30, 20212022 and 2020September 30, 2021 (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 acquisitions, transaction costs and other non-recurring costs directly attributable to the transactions and the impact of the additional debt to finance the applicable acquisitions.

Three months ended September 30,Nine months ended September 30,Three months ended September 30,Nine months ended September 30,
20212020202120202022202120222021
Pro forma:
RevenueRevenue$547,965 $489,104 $1,603,015 $1,475,668 Revenue$647,782 $552,342 $1,850,472 $1,616,115 
Income (loss) from continuing operations, netIncome (loss) from continuing operations, net(13,678)30,043 11,568 (4,417)Income (loss) from continuing operations, net(9,714)(13,442)(7,242)12,439 
Diluted earnings (loss) per shareDiluted earnings (loss) per share$(0.98)$2.13 $0.81 $(0.33)Diluted earnings (loss) per share$(0.69)$(0.96)$(0.52)$0.87 

Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the date indicated or of future operating results. The supplemental proformapro forma earnings were adjusted to exclude the impact of historical interest expense of Simplura, Care Finders and VRI of $6.2 million, $1.1 million and $1.1$1.0 million, respectively, for the three months ended September 30, 2020,2021 and $20.1 million, $3.6$3.7 million and $3.8$3.2 million, respectively, for the nine months ended September 30, 2020.2021.

Acquisition-related costs of approximately $5.9$0.4 million and $4.5$2.0 million for Care Findersthe three and VRI, respectively,nine months ended September 30, 2022 for GMM 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.acquisition.

Asset Acquisitions

National MedTransAcquisition

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

The transaction was accounted for as an asset acquisition in accordance with ASC 805, Business Combinations. The Company incurred transaction costs for the acquisition of $0.8 million during the year ended December 31, 2020. These costs were capitalized as a component of the purchase price.

The consideration paid for the acquisition is as follows (in thousands):
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Value
Consideration paid$80,000 
Transaction costs774 
Restricted cash received(3,109)
Net consideration$77,665 

Restricted cash acquired was related to a security reserve for a contract. No liabilities were assumed.

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

TypeUseful LifeValue
Payor relationshipsAmortizable6 years$75,514 
Trade names and trademarksAmortizable3 years2,151 
$77,665 

WellRyde

On May 6, 2021,30, 2022, the Company entered into an asset purchase agreement with nuVizza private entity to purchase the software, WellRyde.certain customer contracts. Pursuant to the purchase agreement, the WellRyde software wascontracts were acquired for total preliminary consideration of $12.0$7.6 million in cash, subject to certain adjustments.

The transaction was accounted for as an asset acquisition in accordance with ASC 805, Business Combinations. The Company incurred transaction costs for the acquisition of $0.5 million during the period ended September 30, 2021. These costs were capitalized as a component of the purchase price.

The consideration paid for the acquisition is as follows (in thousands):
Value
Consideration paid$12,000 
Transaction costs463 
Net consideration$12,463 

Thepreliminary fair value allocation of the net consideration is as follows (in thousands, except useful lives):
Typefully allocated to a payor network intangible asset recorded at the personal care segment and will be amortized over a period of 6 years.Useful LifeValue
Transportation management softwareAmortizable10 years$12,328 
Assembled workforceAmortizable10 years135 
$12,463 


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4.    Segments

Prior to theThe Company’s acquisition of Simplura in November 2020, the Company,reportable segments are identified based on a number of factors related to how its chief operating decision maker then determined("CODM") determines the allocation of resources and assessedassesses 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 byoperations. The Company's CODM manages the Company under the equity method of accounting. Following its acquisition of Simplura in November 2020, which operates as a personal care service provider, the Company began reporting a 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.four reportable segments.

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
18

management of each at the time of acquisition retained to continue to operate their respective businesses.

The Company has determined each of the separate reportable segments based on the difference in services provided by each of the segments as provided in further detail below:

•NEMT - whichThe Company's NEMT segment is its legacy segment and operates primarily under the brands ModivCare Solutions and Circulation,Circulation. The NEMT segment is the largest manager of non-emergency medical transportation programs for state governments and managed care organizations, or MCOs, in the U.S and includesU.S. This segment also holds the Company’s activities for executive, accounting, finance, internal audit, tax, legal and certain strategic and development functions;results of the Company's captive insurance program.

•Personal Care - whichThe Company's Personal Care segment began operations in November 2020 with the acquisition of Simplura and expanded in September 2021 with the acquisition of Care Finders. The Personal Care segment operates under the brands Simplura and Care Finders and provides personal care to State and Managed Medicaid, Medicare, and Private Pay patient populations including seniors and disabled adults, in need of care monitoring and assistance performing activities of daily living;

•RPM - whichThe Company's RPM segment began operations in September 2021 with the acquisition of VRI and expanded in May 2022 with the acquisition of GMM. The RPM segment operates under the VRI brand and is a provider of remote patient monitoring solutions, including personal emergency response systems, vitals monitoring and data drivendata-driven patient engagement solutions; and

•Matrix InvestmentCorporate and Other - Effective January 1, 2022, the Company completed its segment reorganization which consistsresulted in the addition of a minorityCorporate and Other segment that includes the costs associated with the Company's corporate operations. The operating results of the Corporate and Other segment include activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of the Matrix investment. Prior to the segment reorganization, we reported the investment in Matrix including its Clinical Careas a separate operating segment, however based on the relative size of the Matrix investment and Clinical Solutions businesses. Matrix’s Clinical Care provides risk adjustment solutions that improve health outcomesall related activity to the overall financial statements, the CODM no longer views it as a separate operating segment but reviews results in conjunction with the other corporate results of the business. The Company reclassified certain costs associated with this reorganization for individualsthe three and financialnine months ended September 30, 2021, to conform to this presentation.

The Company evaluates performance for health plans. Matrix’s Clinical Solutions provides employee health and wellness services, decentralized clinical trial services,allocates resources based on the operating income of the reportable segments, which includes an allocation of corporate expenses directly attributable to the specific segment and lab servicesincludes revenues and all other costs directly attributable to its customers.the specific segment.

The following tables settable sets forth certain financial information from continuing operations attributable to the Company’s business segments for the three and nine months ended September 30, 2022 and 2021 (in thousands):
 Three months ended September 30, 2021
 NEMTPersonal CareRPMMatrix InvestmentTotal
 Service revenue, net$372,992 $118,503 $1,564 $— $493,059 
Grant income (1)
— — — — — 
Service expense304,398 94,107 767 — 399,272 
General and administrative expense (2)
52,118 15,720 216 — 68,054 
Depreciation and amortization7,496 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 

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19
 Three months ended September 30, 2022
 NEMTPersonal CareRPMCorporate and OtherTotal
 Service revenue, net$459,796 $169,226 $18,760 $— $647,782 
Grant income (1)
— 789 — — 789 
Service expense394,981 132,746 6,836 — 534,563 
General and administrative expense31,815 22,057 5,816 16,201 75,889 
Depreciation and amortization7,079 12,919 5,467 207 25,672 
Operating income (loss)$25,921 $2,293 $641 $(16,408)$12,447 
Equity in net loss (income) of investee, net of tax$(208)$— $— $26,656 $26,448 
Equity investment$208 $— $— $43,269 $43,477 
Goodwill (2)
$135,186 $552,775 $280,429 $30 $968,420 
Total assets$517,930 $962,425 $402,929 $106,561 $1,989,845 

Nine months ended September 30, 2021 Nine months ended September 30, 2022
NEMTPersonal CareRPMMatrix InvestmentTotal NEMTPersonal CareRPMCorporate and OtherTotal
Service revenue, net Service revenue, net$1,081,168 $338,385 $1,564 $— $1,421,117  Service revenue, net$1,309,449 $491,661 $49,362 $— $1,850,472 
Grant income (1)
Grant income (1)
— 3,500 — — 3,500 
Grant income (1)
— 4,587 — — 4,587 
Service expenseService expense869,470 268,933 767 — 1,139,170 Service expense1,100,801 379,423 17,884 — 1,498,108 
General and administrative expense (2)
General and administrative expense (2)
133,706 45,349 216 — 179,271 
General and administrative expense (2)
102,736 68,536 17,520 43,316 232,108 
Depreciation and amortizationDepreciation and amortization21,744 14,723 200 — 36,667 Depreciation and amortization21,576 37,976 14,201 623 74,376 
Operating income$56,248 $12,880 $381 $— $69,509 
Operating income (loss)Operating income (loss)$84,336 $10,313 $(243)$(43,939)$50,467 
Equity in net income (loss) of investee$— $— $— $(1,978)$(1,978)
Equity in net loss (income) of investee, net of taxEquity in net loss (income) of investee, net of tax$(143)$— $— $28,163 $28,020 
Equity investmentEquity investment$— $— $— $134,353 $134,353 Equity investment$208 $— $— $43,269 $43,477 
Goodwill(2)Goodwill(2)$135,216 $565,886 $228,884 $— $929,986 Goodwill(2)$135,186 $552,775 $280,429 $30 $968,420 
Total assets (continuing operations)$619,637 $1,037,886 $343,277 $134,353 $2,135,153 
Total assetsTotal assets$517,930 $962,425 $402,929 $106,561 $1,989,845 

(1)    Grant income for the Personal Care segment includes $3.5 million of providerfunding received on a periodic basis from the PRF in relation to relief funds received under the CARES Act. These funds are intendedAct and funding received from the SLFRF under ARPA in relation to support healthcare providers by reimbursing them for expenses incurred, or revenue lost, as a resulteconomic recovery to combat health and economic impacts of the COVID-19 pandemic. See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements.

(2)    General and administrative expense forIn May 2022, the NEMT segment includes $1.4Company completed the acquisition of GMM which is included within the RPM segment. The Company recorded goodwill of $43.7 million and $3.4 million of costs related to the developmentacquisition during the second quarter of 2022. During the nutritional meal delivery business offering forthird quarter of 2022, the threeCompany recorded an increase in GMM goodwill of $0.4 million and nine months ended September 30, 2021, respectively. As this linea decrease in VRI goodwill of business has not yet commenced, and there is no discrete financial information available$0.4 million related to it, it is not consideredmeasurement period adjustments as discussed in Note 3, Acquisitions, for a separate reportabletotal GMM goodwill balance of $44.1 million and a total VRI goodwill balance of $236.3 million. Additionally, during the third quarter of 2022, the Company recorded a net decrease in goodwill of $0.1 million in the Personal Care segment related to measurement period adjustments at this time.the Care Finders subsidiary as discussed in Note 3,

Acquisitions
 Three months ended September 30, 2020
 NEMTMatrix InvestmentTotal
 Service revenue, net$320,619 $— $320,619 
Service expense235,543 — 235,543 
General and administrative expense34,441 — 34,441 
Depreciation and amortization7,301 — 7,301 
Operating income$43,334 $— $43,334 
Equity in net income of investee$— $10,325 $10,325 

 Nine months ended September 30, 2020
 NEMTMatrix InvestmentTotal
 Service revenue, net$970,166 $— $970,166 
Service expense764,310 — 764,310 
General and administrative expense86,435 — 86,435 
Depreciation and amortization17,199 — 17,199 
Operating income$102,222 $— $102,222 
Equity in net income of investee$— $12,200 $12,200 

.
2017


December 31, 2020 Three months ended September 30, 2021
NEMTPersonal CareMatrix InvestmentTotal NEMTPersonal CareRPMCorporate and OtherTotal
Service revenue, netService revenue, net$372,992 $118,503 $1,564 $— $493,059 
Grant income (1)
Grant income (1)
— — — — — 
Service expenseService expense304,398 94,107 767 — 399,272 
General and administrative expenseGeneral and administrative expense29,875 15,802 216 22,312 68,205 
Depreciation and amortizationDepreciation and amortization7,496 4,912 200 — 12,608 
Operating income (loss)Operating income (loss)$31,223 $3,682 $381 $(22,312)$12,974 
Equity in net loss of investee, net of taxEquity in net loss of investee, net of tax$— $— $— $4,845 $4,845 
Equity investmentEquity investment$— $— $137,466 $137,466 Equity investment$— $— $— $134,353 $134,353 
GoodwillGoodwill$135,216 $309,711 $— $444,927 Goodwill$135,186 $565,886 $228,884 $30 $929,986 
Total assets (continuing operations)$594,952 $693,495 $137,466 $1,425,913 
Total assetsTotal assets$552,912 $1,037,886 $343,277 $201,078 $2,135,153 

 Nine months ended September 30, 2021
 NEMTPersonal CareRPMCorporate and OtherTotal
Service revenue, net$1,081,168 $338,385 $1,564 $— $1,421,117 
Grant income (1)
— 3,500 — — 3,500 
Service expense869,470 268,933 767 — 1,139,170 
General and administrative expense85,961 45,606 216 47,812 179,595 
Depreciation and amortization21,744 14,723 200 — 36,667 
Operating income (loss)$103,993 $12,623 $381 $(47,812)$69,185 
Equity in net loss of investee, net of tax$— $— $— $1,424 $1,424 
Equity investment$— $— $— $134,353 $134,353 
Goodwill$135,186 $565,886 $228,884 $30 $929,986 
Total assets$552,912 $1,037,886 $343,277 $201,078 $2,135,153 

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.

Revenue Contract Structure

NEMT Capitated Contracts (per-member-per-month)

Under capitated contracts, payors pay a fixed amount per eligible member.member per month. Capitation rates are generally based on expected costs and volume of services. 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’spayor’s program. Revenue is recognized based on the population served during the period. Certain capitated contracts have provisions for reconciliations, risk corridors or profit rebates. For contracts with reconciliation provisions, capitation payment is received as a prepayment during the month service is provided. These prepayments are periodically reconciled based on actual cost and/or trip volume and may result in refunds to the customer,payor, or additional payments due from the customer.payor. Contracts with risk corridor or profit rebate provisions allow for profit within a certain corridor and once we reach profit level thresholds or maximums, we discontinue recognizing revenue and instead record a liability within the accrued contract payable account. This liability may be
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reduced through future increases in trip volume or periodic settlements with the customer.payor. 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 payors based on the health status (acuity) of each individual enrollee, 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 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.

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.rendered based on actual personal care hours provided. 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 Serviceper-member-per-month Contracts

RPM serviceper-member-per-month ("PMPM") revenue consists of revenue from monitoring services provided to the customer. Under RPM contracts, payors pay per-enrolled-member-per month,per-enrolled-member-per-month based on enrolled membership. Consideration is generally fixed for each type of
21

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
The following table summarizes disaggregated revenue from contracts with customers by contract type for the three and nine months ended September 30, 2022 and September 30, 2021 (in thousands):

Three months ended September 30, 2021Three months ended September 30, 2020Nine months ended September 30, 2021Nine months ended September 30, 2020
NEMT Capitated Contracts$287,768 $277,908 $854,269 $832,490 
NEMT FFS Contracts85,224 42,711 226,899 137,676 
Total NEMT Segment Revenue372,992 320,619 1,081,168 970,166 
Personal Care FFS Contracts118,503 — 338,385 — 
RPM Service Contracts1,564 — 1,564 — 
Total service revenue, net$493,059 $320,619 $1,421,117 $970,166 
Three months ended September 30,Nine months ended September 30,
2022202120222021
NEMT capitated contracts$399,859 $311,913 $1,145,694 $916,976 
NEMT FFS contracts59,937 61,079 163,755 164,192 
Total NEMT revenue459,796 372,992 1,309,449 1,081,168 
Personal Care FFS contracts169,226 118,503 491,661 338,385 
RPM PMPM contracts18,760 1,564 49,362 1,564 
Total service revenue, net$647,782 $493,059 $1,850,472 $1,421,117 

Payor Information
Service revenue, net, is derived from state and managed 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, 9.7%10.4% and 10.4%10.8% were derived from one U.S. state Medicaid programpayor for the three months ended September 30, 2022 and 2021, respectively, and 11.0% and 9.7% were derived from one payor for the nine months ended September 30, 2022 and 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% was12.1% and 12.0% were derived from one U.S. state Medicaid programpayor for the three months ended September 30, 2022 and 2021, respectively, and 12.0% and 13.0% were derived from one payor for the nine months ended September 30, 2021.2022 and 2021, respectively. Of the RPM segment's revenue, 18.4% was derived from one payor for the three months ended September 30, 2022, and 20.4% was derived from one payor for the nine months ended September 30, 2022. As the RPM segment was established on September 22, 2021, the concentration of revenue is also derived from state Medicaid contractsnot meaningful for the three and managed Medicaid and Medicare contracts (MCOs).nine months ended September 30, 2021.

The following table summarizes disaggregated revenue from contracts with customers by payor type (in thousands):
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Three months ended September 30,Nine months ended September 30,
2022202120222021
State and Managed Medicaid contracts$547,423 $441,802 $1,565,738 $1,274,660 
Managed Medicare contracts92,228 44,074 254,835 125,571 
Private pay and other contracts8,131 7,183 29,899 20,886 
Total service revenue, net$647,782 $493,059 $1,850,472 $1,421,117 

Three months ended September 30, 2021Three months ended September 30, 2020Nine months ended September 30, 2021Nine months ended September 30, 2020
State Medicaid contracts$204,403 $154,318 $615,154 $486,971 
Managed Medicaid contracts237,399 141,365 659,506 407,723 
Managed Medicare contracts44,074 24,936 125,571 75,472 
Private pay and other contracts7,183 — 20,886 — 
Total service revenue, net$493,059 $320,619 $1,421,117 $970,166 
Revenue Adjustments

During the three months ended September 30, 20212022 and 2020,2021, the Company recognized a $0.1an increase of $1.7 million and a $3.6reduction of $0.1 million reduction ofin service revenue, respectively, from contractual adjustments relating to performance obligations satisfied in previous periods to which the customerpayor agreed. During the nine months ended September 30, 20212022 and 2020,2021, the Company recognized aan increase of $6.5 million and $0.2 million increase to and a $3.5 million reduction ofin service revenue, respectively, from contractual adjustments relating to performance obligations satisfied in previous periods to which the customerpayor agreed.

Related Balance Sheet Accounts

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

September 30, 2022December 31, 2021
Accounts receivable$208,787 $210,937 
Reconciliation contracts receivable (1)
60,060 24,480 
Allowance for doubtful accounts(2,670)(2,296)
Accounts receivable, net$266,177 $233,121 
September 30, 2021December 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 contracts receivable primarily represent underpayments and receivables on certain contracts with reconciliation and risk corridor provisions. See the contract payables and receivables rollforwardactivity below.
22

The following table provides information about other revenue related accounts included on the accompanying unaudited condensed consolidated balance sheets (in thousands):
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Accrued contract payables (1)
Accrued contract payables (1)
$320,045 $101,705 
Accrued contract payables (1)
$243,800 $281,586 
Long-term contract payables (2)
$5,793 $72,183 
Deferred revenue, currentDeferred revenue, current$2,488 $2,923 Deferred revenue, current$2,213 $2,714 
(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.contracts.

The following table provides athe summary rollforwardactivity of total contract payables and receivables as reported within the unaudited condensed consolidated balance sheets (in thousands):

December 31, 2020Additional Amounts RecordedAmounts Paid or SettledSeptember 30, 2021December 31, 2021Additional Amounts RecordedAmounts Paid or SettledSeptember 30, 2022
Reconciliation contract payablesReconciliation contract payables$33,330 $34,912 $(20,549)$47,693 Reconciliation contract payables$22,035 $15,675 $(13,011)$24,699 
Profit rebate/corridor contract payablesProfit rebate/corridor contract payables123,239 137,003 (47)260,195 Profit rebate/corridor contract payables246,424 59,129 (99,123)206,430 
Overpayments and other cash itemsOverpayments and other cash items17,319 13,366 (12,735)17,950 Overpayments and other cash items13,127 7,529 (7,985)12,671 
Total contract payablesTotal contract payables$173,888 $185,281 $(33,331)$325,838 Total contract payables$281,586 $82,333 $(120,119)$243,800 
Reconciliation contract receivablesReconciliation contract receivables$35,580 $9,984 $(25,140)$20,424 Reconciliation contract receivables$24,403 $37,838 $(15,848)$46,393 
Corridor contract receivablesCorridor contract receivables144 (39)— 105 Corridor contract receivables77 13,590 — 13,667 
Total contract receivables$35,724 $9,945 $(25,140)$20,529 
Total reconciliation contract receivablesTotal reconciliation contract receivables$24,480 $51,428 $(15,848)$60,060 

6.    Cash, Cash Equivalents and Restricted Cash
20


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):
September 30,
20212020
Cash and cash equivalents$126,506 $183,277 
Restricted cash, current186 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.

7.6.    Equity Investment

As of September 30, 20212022 and December 31, 2020,2021, 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 thisits 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 (income) loss (income) of investee” in the accompanying unaudited condensed consolidated statements of operations. During the three and nine months ended September 30, 2022, Matrix recorded asset impairment charges of $82.2 million and during the year ended December 31, 2021, Matrix recorded asset impairment charges of $111.4 million. No asset impairment charges were recorded for the three and nine months ended September 30, 2021.

23The Company's gross share of its Matrix's operations for the three months ended September 30, 2022 and September 30, 2021 was a loss of $36.1 million and a loss of $6.7 million, respectively, which is presented net of tax on the unaudited condensed consolidated statements of operations for a loss of $26.7 million and a loss of $4.8 million, respectively. For the nine months ended September 30, 2022 and September 30, 2021, the Company's gross share of its investment in Matrix was a loss of $39.0 million and a loss of $2.0 million, respectively, which is presented net of tax on the unaudited condensed consolidated statements of operations for a loss of $28.2 million and a loss of $1.4 million, respectively.

The carrying amount of the assets included in the Company’s unaudited condensed consolidated balance sheets and the maximum loss exposure related to the Company’s interest in Matrix as of September 30, 20212022 and December 31, 20202021 totaled $134.4$43.5 million and $137.5$83.1 million,, respectively.

Summary financial information for Matrix on a standalone basis is as follows (in thousands):
 September 30, 2021December 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 

Three months ended September 30, 2021Three months ended September 30, 2020
Revenue$78,458 $140,728 
Operating income (loss)$(16,833)$35,489 
Net income (loss)$(15,627)$21,382 
 September 30, 2022December 31, 2021
Current assets$110,892 $124,081 
Long-term assets$381,096 $482,063 
Current liabilities$44,557 $57,048 
Long-term liabilities$330,794 $340,448 

Nine months ended September 30, 2021Nine months ended September 30, 2020
Revenue$316,830 $292,699 
Operating income$3,324 $49,074 
Net income (loss)$(7,143)$23,917 

Three months ended September 30,Nine months ended September 30,
2022202120222021
Revenue$76,461 $78,458 $235,582 $316,830 
Operating income (loss)$(79,992)$(16,833)$(81,604)$3,324 
Net loss$(85,081)$(15,627)$(93,211)$(7,143)

8.7.    Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consistedwere comprised of the following (in thousands): 
September 30, 2021December 31, 2020
Prepaid income taxes$13,499 $14,633 
Prepaid insurance12,519 7,577 
Deferred financing costs on credit facility2,452 — 
Inventory1,733 — 
Prepaid rent260 1,196 
Other prepaid expenses11,192 8,479 
Total prepaid expenses and other current assets$41,655 $31,885 

September 30, 2022December 31, 2021
Prepaid insurance$8,331 $9,487 
Deferred ERP implementation costs6,390 3,003 
Deferred financing costs on credit facility3,249 1,480 
Prepaid income taxes2,709 13,848 
Inventory1,864 1,458 
Other prepaid expenses14,138 9,275 
Total prepaid expenses and other current assets$36,681 $38,551 


2421


9.    8.    Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consistedwere comprised of the following (in thousands):
September 30, 2021December 31, 2020
Accrued compensation and related liabilities (1)
$57,461 $57,201 
Accrued interest13,735 4,927 
Deferred operating expenses10,375 8,018 
Union pension obligations9,073 6,632 
Accrued legal fees4,862 3,228 
Deferred acquisition payments3,978 3,978 
Accrued cash settled stock-based compensation163 19,376 
Other9,924 13,650 
Total accrued expenses and other current liabilities$109,571 $117,010 

September 30, 2022December 31, 2021
Accrued compensation and related liabilities (1)
$52,107 $54,564 
Accrued interest24,239 12,826 
Accrued operating expenses16,378 14,457 
Insurance reserves15,972 10,152 
Accrued legal fees11,016 5,081 
Accrued government grants (2)
5,439 1,514 
Union pension obligation4,952 6,629 
Deferred revenue2,213 2,714 
Deferred acquisition payments50 3,578 
Other12,851 12,276 
Total accrued expenses and other current liabilities$145,217 $123,791 

(1)     Accrued compensation and related liabilities 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 hasSee Note 2, Significant Accounting Policies and Recent Accounting Pronouncements.

(2)     Accrued government grants include payments received a cumulative cash benefit of approximately $20.8 million relatedfrom government entities in relation to the deferralPRF and SLFRF to offset lost revenue or increased expenditures for which the related expenditure has not yet been incurred and thus the related payments are deferred as of employer payroll taxes as of September 30, 2021 under the CARES Act. Of this amount, approximately 50% is due in2022 and December of 2021 and 50% is due in December of 2022, therefore, $10.4 million is recorded in accrued expenses, and $10.4 million is recorded in other long-term liabilities.31, 2021.

10.9.    Debt

Senior Unsecured Notes

On November 4, 2020, the Company issued $500.0 million in aggregate principal amount of 5.875% seniorSenior unsecured notes due on November 15, 2025 (the “Senior Notes due 2025”). Additionally on August 24,as of September 30, 2022 and December 31, 2021 consisted of the Company issued $500 million in aggregate principal amount of 5.000% senior unsecured notes due on October 1, 2029 (the “Senior Notes due 2029”). The Senior Notes due 2025 and the Senior Notes due 2029 were issued pursuant to two indentures, dated November 4, 2020 and August 24, 2021 respectively, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Senior Notes due 2025 relate to the Company’s acquisition of Simplura and the Senior Notes due 2029 relate to the Company’s acquisition of VRI.following (in thousands):

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 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 indentures for both the Senior Notes due 2025 and the Senior Notes due 2029 provide that the notes may become subject to redemption under certain circumstances.

In connection with the Senior Notes due 2025, the Company may redeem the 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 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 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 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.

25

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:

YearPercentage
2022102.938%
2023101.469%
2024 and thereafter100.000%
Senior Unsecured NoteDate of IssuanceSeptember 30, 2022December 31, 2021
$500.0 million 5.875% due November 15, 202511/4/2020$490,399 $488,368 
$500.0 million 5.000% due October 1, 20298/24/2021$487,902 $486,857 

The Company may also redeem the Senior Notes due 2029, in whole or in part, at any time prior to October 1, 2024, at a price equal to 100% of the principal amount of the 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 Senior Notes due 2029 prior to October 1, 2024, at a redemption price of 105.000% 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.

On or after October 1, 2024, the Company may redeem all or a part of the Senior Notes due 2029 upon not less than ten 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 Notes redeemed, to, but excluding, the applicable redemption date, if redeemed during the 12-month period beginning on October 1 of the years indicated below:


YearPercentage
2024102.500%
2025101.250%
2026 and thereafter100.000%

The Company will paypays interest on the Senior Unsecured Notes due 2025 at 5.875% per annum until maturity. Interest is payable semi-annually in arrears on May 15 and November 15 of each year, with the first interest payment date being May 15, 2021.arrears. Principal payments are not required until the maturity date on November 15, 2025 when 100% of the outstanding principal will be required to be repaid. As a part of the bond issuance process, we incurred a $9.0 million bridge commitment fee that provided a potential funding backstop in the event that the Notes did not meet the desired subscription level to be used to acquire Simplura. That commitment expired unused upon closing of the Notes and the fee was expensed in Q4 2020.

Pursuant to the Senior Notes due 2029, the Company will pay interest on the notes at 5.000% per annum until maturity. Interest is payable semi-annually in arrears on April 1 and October 1 of each year, with the first interest payment date being April 1, 2022. Principal payments are not required until the maturity date on October 1, 2029 when 100% of the outstanding principal will be required to be repaid. As a part of the bond issuance process, we incurred a $6.6 million bridge commitment fee that provided a potential funding backstop in the event that the Notes did not meet the desired subscription level to be used to acquire VRI. That commitment expired unused upon closing of the Notes and the fee was expensed in Q3 2021.

date. Debt issuance costs of $14.5 million in relation to the issuance of the Senior Notes due 2025 were incurred and these costs were deferred and are amortized to interest cost over the term of the Notes. Debt issuance costs of $13.5 million were incurred in relation to the issuance of the Senior Notes due 2029 and these costs were deferred and are amortized to interest cost over the term of the Notes. As of September 30, 2021, $25.32022, $21.7 million of unamortized deferred issuance costs was netted against the long-term debt balance on the unaudited condensed consolidated balance sheet.sheets. The Company was in compliance with all covenants as of September 30, 2022.

Credit Facility

TheOn February 3, 2022, the Company isentered into a party to the amended and restatednew credit and guaranty agreement dated as of August 2, 2013 (as amended, the “Credit(the “New Credit Agreement”), with JPMorgan Chase Bank, of America, N.A., as administrative agent, swing line lender and letteran issuing bank, Wells Fargo Bank, National Association, as an issuing bank, Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents, Deutsche Bank AG New York Branch, Bank of credit issuer,America, N.A., Regions Bank, Bank of Montreal and Capital One, National Association, as co-documentation agents, and JPMorgan Chase Bank, N.A., Truist Securities, Inc. and Wells Fargo Securities, LLC, as joint bookrunners and joint lead arrangers, and the other lenders party thereto. On May 6, 2020,The New Credit Agreement provides 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 thewith a senior secured revolving credit facility (the “Credit“New Credit Facility”) from $200.0 million to $225.0 million, and increased the sub-facilityin an aggregate principal amount of $325.0 million. The New Credit Facility includes sublimits for swingline loans, letters of credit fromand alternative currency loans in amounts of up to $25.0 million, $60.0 million and $75.0 million, respectively. The Company did not draw any amount of the New Credit Facility at closing of the New Credit Agreement. As of September 30, 2022, the Company had $38.0 million of outstanding
22


letters of credit under the New Credit Facility. The proceeds of the New Credit Facility may be used (i) to $40.0 million.finance working capital needs of the Company and its subsidiaries and (ii) for general corporate purposes of the Company and its subsidiaries (including to finance capital expenditures, permitted acquisitions and investments). The New Credit Facility replaces the Credit Facility under the Credit Agreement, which was terminated concurrently with the Company's entry into the New Credit Agreement.

Under the New Credit Facility, the Company has an option to request an increase in the amount of the New Credit Facility or obtain incremental term loans from time to time (on substantially the same terms as apply to the existing facilities) by an aggregate amount of up to $175.0 million, plus an unlimited amount so long as the pro forma secured net leverage ratio does not exceed 3.50:1.00, with either additional commitments from lenders under the New Credit Agreement at such time or new commitments from financial institutions approved by the Company and the administrative agent (which approval is not to be unreasonably withheld), so long as, at the time of any such increase, no default or event of default exists, the representations and warranties of the Company set forth in the New Credit Agreement are true and correct in all material respects and the Company is in pro forma compliance with the financial covenants in the New Credit Agreement. The Company may not be able to access additional funds under this increase option as no lender is obligated to participate in any such increase under the New Credit Facility.

The New Credit Facility matures on February 3, 2027. The Company may prepay the New Credit Facility in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in connection with prepayments of Term Benchmark loans or RFR loans, each as defined in the New Credit Agreement. The unutilized portion of the commitments under the New Credit Facility may be irrevocably reduced or terminated by the Company at any time without penalty.

Interest on the outstanding principal amount of the loans accrues at a per annum rate equal to the Alternate Base Rate, the Adjusted Term SOFR Rate, the Adjusted Daily Simple SOFR Rate, the Adjusted EURIBOR Rate or the Adjusted Daily Simple SONIA Rate, as applicable and each as defined in the New Credit Agreement, in each case, plus an applicable margin. The applicable margin ranges from 1.75% to 3.50% in the case of Term Benchmark loans or RFR loans, and 0.75% to 2.50% in the case of the Alternate Base Rate loans, in each case, based on the Company’s total net leverage ratio as defined in the New Credit Agreement. Interest on the loans is payable quarterly in arrears.arrears in the case of Alternate Base Rate loans, on the last day of the relevant interest period in the case of Term Benchmark loans, and monthly in arrears in the case of RFR loans. 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 Facilityrevolving 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.

26

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.

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 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 as defined in the agreement plus an applicable 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 loans, in each case, based on the Company’s consolidated leverage ratio as defined in the Credit Agreement that governs our Credit Facility. The commitment fee and letter of credit fee range from 0.35%0.30% to 0.50% and 2.25%1.75% to 3.50%, respectively, in each case, based on the Company’s consolidatedtotal net leverage ratio as defined in the credit agreement that governs our Credit Facility.ratio.

AsThe New Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The negative covenants include restrictions on the Company’s ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets and merge and consolidate. The Company is subject to financial covenants, including total net leverage and interest coverage covenants.

The Company’s obligations under the New Credit Facility are guaranteed by all of the Company’s present and future material domestic subsidiaries, excluding certain material domestic subsidiaries that are excluded from being guarantors pursuant to the terms of the New Credit Agreement. The Company’s obligations under, and each guarantor’s obligations under its guaranty of, the New Credit Facility are secured by a first priority lien on substantially all of the Company’s or such guarantor’s respective assets. If an event of default occurs, the required lenders may cause the administrative agent to declare all unpaid principal and any accrued and unpaid interest and all fees and expenses under the New Credit Facility to be immediately due and payable. All amounts outstanding under the New Credit Facility will automatically become due and payable upon the commencement of any bankruptcy, insolvency or similar proceedings. The New Credit Agreement also contains a cross default to any of the Company’s indebtedness having a principal amount in excess of $40.0 million. The Company was in compliance with all covenants under the Credit Agreement as of September 30, 2021, the Company had no borrowings outstanding on the Credit Facility; however, there were letters of credit outstanding in the amount of $21.1 million. The Company’s available borrowing capacity under the Credit Facility was $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 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 increases. The Company may not be able to access additional funds under these increase options as no lender is obligated to participate in any such increases under the Credit Facility.2022.

11.10.    Stock-Based Compensation and Similar Arrangements

The Company provides stock-based compensation to employees, and non-employee directors, consultants and advisors under the Company'sCompany’s 2006 Long-Term Incentive Plan as amended and restated effective July 27, 2016 (the “Equity Incentive(“2006 Plan”). The Equity Incentive2006 Plan allows the flexibility to grant or award stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units including restricted stock units and performance awards to eligible persons.

23


Stock options. The following table reflects the amountCompany recognized a reversal of previously recognized stock-based compensation expense for share settled awards, recorded in each financial statement line itemnon-qualified stock options (“NQs”) of $0.3 million during the three months ended September 30, 2022 due to forfeitures that occurred during the period and the Company recognized stock-based compensation expense for NQs of $0.5 million for the three months ended September 30, 2021 in general and 2020 andadministrative expense. For the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense for NQs of $1.0 million and 2020 (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Service expense$— $55 $— $174 
General and administrative expense1,566 1,122 4,225 2,775 
Total stock-based compensation$1,566 $1,177 $4,225 $2,949 

$1.5 million, respectively, in general and administrative expense. At September 30, 2021,2022, the Company had 270,962209,075 stock options outstanding with a weighted-average exercise price of $88.03.$97.30.

Restricted stock and restricted stock units. The Company also had 19,975 unvestedrecognized stock-based compensation expense for restricted stock awards ("RSAs") and 60,243 unvested restricted stock units ("RSUs") of $0.7 million and $1.0 million for the three months ended September 30, 2022 and 2021, respectively, and $3.5 million and $2.5 million for the nine months ended September 30, 2022 and 2021, respectively, in general and administrative expense. The Company had 13,137 unvested RSAs and 85,369 unvested RSUs outstanding at September 30, 20212022 with a weighted-average grant date fair value of $91.08$94.44 and $114.19,$113.19, respectively.


Performance-based share awards. These awards include RSUs and were initially issued in the first quarter of 2022. The purpose of these awards is to align management’s compensation with the Company's financial performance and other operational objectives and to retain key employees. Awards granted under this category are based on the achievement of various targeted metrics as defined by the Plan. Stock-based compensation expense related to these performance-based share awards ("PRSUs") is recognized over the 3-year vesting period under the straight-line attribution method. Related to the PRSUs, the Company recorded a reversal of $0.2 million of previously recognized stock-based compensation expense for the three months ended September 30, 2022 due to forfeitures that occurred during the period and recorded $0.6 million of stock-based compensation expense for the nine months ended September 30, 2022, with the remaining portion expected to be recognized over the remainder of the 3-year requisite service period. The Company had 18,663 unvested PRSUs outstanding at September 30, 2022 with a weighted-average grant date fair value of $153.17.
27

In the second quarter of 2022, an Employee Stock Purchase Program ("ESPP") was approved by the Board of Directors and the Company's shareholders, which will allow employees to purchase Company stock at a discounted rate. The first offering period will begin in the fourth quarter of 2022.
12.
11.    Earnings (Loss) Per Share

The following table details the computation of basic and diluted earnings (loss) per share (in thousands, except share and per share data):

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Numerator:    
Net income (loss)$(7,570)$38,805 $24,943 $91,901 
Dividends on convertible preferred stock outstanding— — — (1,171)
Dividends paid pursuant to the Conversion Agreement— (27)— (817)
Consideration paid in excess of preferred cost basis pursuant to the Conversion Agreement— (3,186)— (52,137)
Income allocated to participating securities— (246)— (3,213)
 Net income (loss) available to common stockholders$(7,570)$35,346 $24,943 $34,563 
Continuing operations$(7,462)$35,461 $25,175 $35,181 
Discontinued operations(108)(115)(232)(618)
Net income (loss) available to common stockholders$(7,570)$35,346 $24,943 $34,563 
Denominator:    
Denominator for basic earnings per share -- weighted-average shares13,993,438 14,026,039 14,102,371 13,367,605 
Effect of dilutive securities:    
Common stock options— 61,312 130,221 15,730 
Restricted stock— 46,553 45,739 32,009 
Denominator for diluted earnings per share -- adjusted weighted-average shares assumed conversion13,993,438 14,133,904 14,278,331 13,415,344 
Basic earnings (loss) per share:    
Continuing operations$(0.53)$2.53 $1.79 $2.63 
Discontinued operations(0.01)(0.01)(0.02)(0.05)
 Basic earnings (loss) per share$(0.54)$2.52 $1.77 $2.58 
Diluted earnings (loss) per share:    
Continuing operations$(0.53)$2.51 $1.76 $2.62 
Discontinued operations(0.01)(0.01)(0.02)(0.05)
  Diluted earnings (loss) per share$(0.54)$2.50 $1.74 $2.57 

Income allocated to participating securities is calculated by allocating a portion of net income attributable to ModivCare, less dividends on convertible stock, to the convertible preferred stockholders on a pro-rata, as converted basis; however, the convertible preferred stockholders are not allocated losses.
 Three months ended September 30,Nine months ended September 30,
 2022202120222021
Numerator:    
Net income (loss)$(28,505)$(7,572)$(24,859)$24,940 
Denominator:    
Denominator for basic earnings per share -- weighted-average shares14,051,794 13,993,438 14,041,224 14,102,371 
Effect of dilutive securities:    
Common stock options— — — 130,221 
Restricted stock— — — 45,739 
Denominator for diluted earnings per share -- adjusted weighted-average shares assumed conversion14,051,794 13,993,438 14,041,224 14,278,331 
Earnings (loss) per share:    
 Basic earnings (loss) per share$(2.03)$(0.54)$(1.77)$1.77 
  Diluted earnings (loss) per share$(2.03)$(0.54)$(1.77)$1.75 

The following weighted-average shares were not included in the computation of diluted earnings per share as the effect of their inclusion would have been anti-dilutive:

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24


 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Stock options to purchase common stock49,158 3,481 53,550 170,076 
Convertible preferred stock— 38,851 — 487,576 
 Three months ended September 30,Nine months ended September 30,
 2022202120222021
Stock options to purchase common stock115,686 49,158 123,534 53,550 

Issuer Purchases of Equity Securities

On March 8, 2021, the Board of Directors authorized a stock repurchase program under which the Company maycould repurchase up to $75.0 million in aggregate value of the Company’s Common Stock through December 31, 2021, unless terminated earlier. Through September 30, 2021, 269,407 shares were repurchased under the program for $39.0 million. The program ended December 31, 2021. No repurchase program was authorized as of September 30, 2022.

13.12.    Income Taxes

The Company’s effective tax rate for continuing operationsthe three months ended September 30, 2022 and 2021 was a tax benefit of 33.9% and 42.3%, respectively. The effective tax rate for the nine months ended September 30, 2022 and 2021 was a tax provision of 21.7% and 24.2%, respectively. For the three and nine months ended September 30, 2022 and 2021, was 34.1% and 24.0% respectively. Thethe effective tax rate for continuing operations for the three and nine months ended September 30, 2020 was 27.0% and 17.6%, respectively. For the nine months ended September 30, 2021, the effective tax rate wasrates were higher thanthan the U.S. federal statutory rate of 21.0% primarily due to state income taxes and certain non-deductiblenondeductible expenses. For the nine months ended September 30, 2020, the effective tax rate was lower than the U.S. federal statutory rate of 21.0%primarily due to the favorable impact of the CARES Act on the Company’s 2018 U.S. net operating losses ("NOLs").

During 2019, the Company received refunds from the Internal Revenue Service (“IRS”) totaling $30.8 million resulting from the loss on the sale of our workforce development segment ("WD Services segment") in 2018. As a result of the size of the refunds received, in October 2019, the IRS commenced a Joint Committee Review of the refunds. The review was completed in the third quarter of 2021 with no material adjustments being made.

The 2017 Tax Reform Act reduced the U.S. corporate income tax rate from 35% to 21% and provided that U.S. NOLs incurred after 2017 could only be carried forward to offset future taxable income. Pursuant to the CARES Act, which was enacted on March 27, 2020, the Company carried its 2018 NOL back five years. As a result, during the nine months ended September 30, 2020, the Company recorded a $27.3 million receivable for the 2018 U.S. NOL carryback, and a $11.0 million tax benefit from the favorable carryback tax rate of 35% compared to a carryforward tax rate of 21%. The Company also recorded an additional income tax payable of $3.5 million for 2019 as a result of the 2018 NOL being carried back instead of carried forward.

As of September 30, 2021, the Company has received all of the $27.3 million receivable for the 2018 U.S. NOL carryback. This $27.3 million was also subject to the IRS Joint Committee Review, which was completed in the third quarter of 2021 with no material adjustments being made.

14.13.    Commitments and Contingencies

Legal proceedings

In the ordinary course of business, the Company may from time to time be or become involved in various lawsuits. Unless otherwise expressly stated, our management does not expect any ongoing lawsuits involving the Company to have a material impact on the business, liquidity, financial condition, or results of operations of the Company.

On August 6, 2020, LogistiCare Solutions, LLC, the Company’s subsidiary now known as ModivCare Solutions, LLC (“ModivCare Solutions”), was served with a putative class action law suitlawsuit filed against it by Mohamed Farah, the owner of transportation provider Dalmar Transportation, in the Western District of Missouri, seeking to represent all non-employee transportation providers contracted with ModivCare Solutions. The lawsuit alleges claims under the Fair Labor Standards Act of 1938, as amended (the “FLSA”), and the Missouri Minimum Wage Act, and asserts that all transportation providers to ModivCare Solutions in the putative class should be considered ModivCare Solutions’ employees rather than independent contractors. On June 6, 2021, the Court conditionally certified as the putative class all current and former In Network Transportation Providers who, individually or through their companies, were issued 1099 payments from ModivCare Solutions for providing non-emergency medical transportation services for ModivCare Solutions for the previous three years. Notice of the proposed collective class was issued on October 5, 2021, and potential members of the class havehad until January 3, 2022 to opt-in. Plaintiff moved for class certification on August 15, 2022, and ModivCare Solutions filed an opposition to class certification on September 6, 2022. ModivCare Solutions believes it will be able to decertifysuccessfully oppose class certification of this class action after discovery and in any event intends to defend itself vigorously with respect to this matter, believes that it is and has been in compliance in all material respects with the laws and regulations regarding the characterization of the transportation providers as independent contractors, and does not
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believe that the ultimate outcome of this matter will have a material adverse effect on the Company’s business, liquidity, financial condition or results of operations.

On January 21, 2019, the United States District Court for the Southern District of Ohio unsealed a qui tam complaint, filed in December 2015, against Mobile Care Group, Inc., Mobile Care Group of Ohio, LLC, Mobile Care EMS & Transport, Inc. (collectively, the “Mobile Care Entities”) and ModivCare Solutions by Brandee White, Laura Cunningham, and Jeffery Wisier (the “Relators”) alleging that the Mobile Care Entities and indirectly ModivCare Solutions violated the federal False Claims Act by presenting claims for payment to government healthcare programs knowing that the prerequisites for such claims to be paid had not been met. The Relators seeksought to recover damages, fees and costs under the federal False Claims Act, including treble damages, civil penalties and attorneys’ fees. In addition, the Relators seek reinstatement to their jobs with the Mobile Care Entities. None of the Relators were employed by ModivCare Solutions. The federal government has declined to intervene against ModivCare Solutions. ModivCare Solutions filed a motion to dismiss the Complaint on April 22, 2019, but such motion was denied on October 26, 2021. ModivCare Solutions intends to filefiled an interlocutory appeal of this ruling with the Sixth Circuit Court of Appeals which was subsequently denied. The Relators and believes,Modivcare tentatively agreed to settle the Relators' substantive claims in any event, thatSeptember 2022 and continue discussions concerning the caseRelators' counsel’s attorney fees. The settlement will not have a material adverse effect on the Company’s business, liquidity, financial condition or results of operations.

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In 2017, one of our Personal Care segment subsidiaries, All Metro Home Care Services of New York, Inc. d/b/a All Metro Health Care (“All Metro”), received a class action lawsuit in state court claiming that, among other things, it failed to properly pay live-in caregivers who stay in patients’ homes for 24 hours per day (“live-ins”). The Company currently pays live-ins for 13 hours per day as supported through a written opinion letter from the New York State Department of Labor (“NYSDOL”). A similar case involving this issue has been heard by the New York Court of Appeals (New York’s highest court), which on March 26, 2019, issued a ruling reversing earlier lower courts’ decisions that an employer must pay live-ins for 24 hours. The Court of Appeals agreed with the NYSDOL’s interpretation to pay live-ins 13 hours instead of 24 hours if certain conditions were being met. If the class action lawsuit on this matter is allowed to proceed, and is successful, All Metro may be liable for back wages and litigated damages going back to November 2011. All Metro filed its motion to oppose class certification of this matter and the matter was heard on June 23, 2022. A ruling should be issued by end-of-year.All Metro intends to defend itself vigorously with respect to this matter, believes that it is and has been in compliance in all material respects with the laws and regulations covering pay for live-in caregivers, and does not believe in any event that the ultimate outcome of this matter will have a material adverse effect on the Company’s business, liquidity, financial condition or results of operations. In a companion case, a federal class action lawsuit was filed in May 2021 alleging similar claims. All Metro retained the same attorneys to represent it in both the state and federal cases. All Metro orally agreed to settle this federal matter for a de minimis amount on October 15, 2021.

15.    Transactions with Related Parties

Cash-Settled Awards

On an annual basis, the Company grants stock equivalent unit awards (“SEUs”) to Coliseum Capital Management, LLC (“Coliseum”) as compensation for the board of directors’ service of Christopher Shackelton in lieu of the restricted share awards that are given to our other non-employee directors. These SEUs typically have a one-year vesting schedule and are paid out in cash upon vesting based upon the closing price of the Company’s common stock on the date of vesting. On February 10, 2021, the Company granted Coliseum 725 SEUs under this program.

In addition, on September 11, 2014, the Company granted 200,000 stock option equivalent units (“SOEUs”) to Coliseum at an exercise price of $43.81 per share that were fully vested. The SOEUs were accounted for as liability awards, with the recorded expense adjustment attributable to the Company’s change in stock price from the previous reporting period. On August 12, 2021, Coliseum exercised all of the SOEUs at a stock price of $182.73 per share for a total cash settlement of $27.8 million. At September 30, 2021, there were no SOEU's outstanding.

During the three and nine months ended September 30, 2021, the Company recorded expense of $2.6 million and $9.1 million respectively, for all cash-settled awards, and during the three and nine months ended September 30, 2020, the Company recorded expense of $2.9 million and $6.9 million respectively, for all cash-settled awards. The expense and benefit for cash-settled awards is included as “General and administrative expense” in the accompanying condensed consolidated statements of operations. The liability for unexercised cash-settled share-based payment awards of $0.2 million and $19.4 million at September 30, 2021 and December 31, 2020, respectively, is reflected in “Accrued expenses and other current liabilities” in the condensed consolidated balance sheets. At September 30, 2021, the Company had 1,344 SEUs outstanding.


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16.14.    Subsequent Events

ManagementThe Company has evaluated events and transactions subsequent events through November 5, 2021,to the Company's unaudited condensed consolidated balance sheet date and prior to the date whichof issuance. Based on this evaluation, the financial statements were availableCompany is not aware of any events or transactions that occurred subsequent to be issued. All subsequent events requiringthe unaudited condensed consolidated balance sheet date and prior to the date of issuance that would require recognition as of September 30, 2021 have been incorporated intoor disclosure in these financial statements and there are no subsequent events that require disclosure, other than the updated status on the legal matters, as discussed in Note 14 statements.
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Commitments and Contingencies.

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

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes for the three and nine months ended September 30, 2022 and 2021 and 2020,included herein, as well as our audited consolidated financial statements and accompanying notes and management’s discussion and analysis of financial condition and results of operations included in our Form 10-K for the year ended December 31, 2020.2021. For purposes of “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” references to Q3 2021"Q3 2022" and Q3 2020"Q3 2021" mean the three months ended September 30, 20212022 and the three months ended September 30, 2020, respectively, and references to YTD 2021, and YTD 2020 mean the nine months ended September 30, 2021 and the nine months ended September 30, 2020, respectively.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 3b-6 promulgated thereunder, including statements related to the Company’s strategies or expectations about revenues, liabilities, results of operations, cash flows, ability to fund operations, profitability, ability to meet financial covenants, contracts or market opportunities. 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. In addition, statements that are not historical statements of fact should also be considered 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, that may cause actual events to be materially different from those expressed or implied herein. Among such risks, uncertainties and other factors are those summarized under the caption “Summary Risk Factors” in Part I, and described in further detail under the caption “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, for the fiscal year ended December 31, 2020.2021. Hyperlinks to such sections of our Annual Report are contained in the text included within the quotation marks.

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 other filings with the SEC, 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.

Overview of Our Business

ModivCare Inc. ("ModivCare" or the "Company") is a technology-enabled healthcare services company 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 accessconnect members to care, help health plans manage risks, reduce costs, and improve outcomes. ModivCare is a provider of non-emergency medical transportation, or NEMT, personal care, and remote patient monitoring, or RPM, solutions. solutions, which serve similar, highly vulnerable patient populations.

The technology-enabled operating model includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transporttransportation management. Additionally, its personal care services include placements of non-medical personal care assistants, home health aides and 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 meal delivery and working with communities to provide food-insecure individuals delivery of 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, its in-home personal care business that consists of Simplura HealthModivCare also holds a 43.6% minority interest in CCHN Group and Care Finders Total Care LLC,Holdings, Inc. and its recent additionsubsidiaries, which operates under the Matrix Medical Network brand and which we refer to as “Matrix”. Matrix maintains a national network of the remote patient monitoring business through its acquisitioncommunity-based clinicians who deliver in-home and on-site services, and a fleet of VRI Intermediate Holdings, LLC, or VRI, ModivCare has united four complementary healthcare businessesmobile health clinics that provide community-based care with advanced diagnostic capabilities and enhanced care options.


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serve similar, highly vulnerable patient populations. For additional information about our business and operating segments, please see Note 1 and Note 4 to the accompanying unaudited financial statements.
Business Outlook and Trends
 
Our performance is affected by a number of trends that drive the demand for our services. In particular, the markets in which we operate are exposed to various trends, such as healthcare industry and demographic dynamics. Over the long term, we believe there are numerous factors that could affect growth within the industries in which we operate, including:

•an aging population, which is expected to increase demand for healthcare services and transportation and, accordingly, in-home personal care services;
•increasing prevalence of chronic illnesses that require active and ongoing monitoring of health data which can be accomplished at a lower cost and result in better health outcomes through remote patient monitoring services;
•a movement towards value-based care versus fee-for-service and cost plus or FFS, care and budget pressure on governments, both of which may increase the use of private corporations to provide necessary and innovative services;
•increasing demand for in-home care provision, driven by cost pressures on traditional reimbursement models and technological advances enabling remote engagement, including telehealthremote monitoring and similar internet-based health related services;
•technological advancements, which may be utilized by us to improve services and lower costs, but may also be utilized by others, which may increase industry competitiveness; and
•State Medicaid programs, Medicaid Managed Care Organizations (MCOs)(“MCOs”) and Medicare Advantage plans increasingly are covering NEMT services for a variety of reasons, including increased access to care, improved patient compliance with treatment plans, social trends, and to promote SDoH, and this trend may be accelerated or reinforced by the signing into law of The Consolidated Appropriations Act of 2021 ("H.R.133"), a component of which mandates that state Medicaid programs ensure that Medicaid beneficiaries have necessary transportation to and from health care providers.

Update on the Impact of the COVID-19 Pandemic

Since March of 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 and patients, 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").

Grant Income. For the nine months ended September 30, 2021, the Company received distributions of the CARES Act PRF of approximately $3.5 million targeted to offset lost revenue and expenditures incurred in connection with the COVID-19 pandemic, which is currently recorded as grant income. 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 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 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.

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 $20.8 million related to the deferral of employer payroll taxes as of 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, $10.4 million is recorded in accrued expenses, and $10.4 million is recorded in other long-term liabilities.

As a result of the COVID-19 pandemic, our NEMT Segment has experienced a decreased number of trips beginning in March 2020. As many of our contracts are capitated, our revenues did not experience a decrease to the level of our transportation costs, resulting in a positive impact to our gross margin. However, certain of our contracts contain risk corridor or profit rebate provisions, which result in a possible refund to our payors if our gross margin exceeds certain pre-determined
32

limits. For these contracts, we have recognized a contract payable in relation to revenues that have been received, however are unearned due to the possibility of payback. It is possible we could experience higher transportation costs in the future as we are currently seeing trip volumes increase to levels higher than those pre-pandemic in certain regions of the country. See further discussion of this at Note 5, Revenue Recognition.

Since March 2020 and primarily as a result of the COVIDCOVID-19 pandemic, we have observed a material reduction in trip volume in our NEMT segment as a result of state imposed public health orders and other pandemic impacts that have driven structural changes in the industry, predominantly related to an increase in the utilization of telehealth and virtual care. This reduction in trip volume has had a negative financial impact on our transportation providers and may impact the availability of transportation providers in the future given the heightened sanitation requirements imposed on drivers and depressed volume.

Our Personal Care Segment businesssegment has experienced and is expected to continue to experience a material reduction in the volume of service hours and visits. Volume has been reduced as patientsmembers put services on hold due to infection concerns, and/or because they had the alternative of receiving care from family members and othersother caregivers working remotely or furloughed from their jobs.remotely. Cases have also been lost and new case referrals slowedAdditionally, the strain on healthcare professionals as referral sources faced disruption froma result of the various restrictions and “stay at home” orders. Our personal carepandemic has led to a shortage of caregivers which will continue to impact the volume of service volumes are not expected to recover to pre-pandemic levels until the vaccines are more universally applied in the markets where we provide our services. While thesehours that can be provided. These depressed volumes will continue to result in lower than expected revenue, at least in the near term, in the Personal Care segment.

Our RPM segment has not experienced a direct material impact to operations or financial activity as a result of the COVID-19 pandemic. While this segment of the business has proven resilient given the increase in demand for remote healthcare services in a highly contagious infection environment, potential risks could arise that could have a material impact on the financial results of the segment. Specifically, given the strain on the healthcare professionals that serve the healthcare community, we could experience shortages in qualified medical professionals that support our remote care monitoring business.

Furthermore, the impact of the COVID-19 pandemic is continuously evolving, and the continuation of the pandemic, any additional resurgence, or COVID-19 variants could continue to change trends in the market.

Our business environment is a highly competitive and volatile market and based on current results, may also be challenged with wage pressures relatednot realize their long-term forecast. The Company continues to minimum wage increasesmonitor the performance of the business versus the long-term forecast, among other relevant considerations, to determine if any impairments exist. Our management has continued to refine their business strategy throughout the year in order to address the highly competitive and a narrowing caregiver labor poolvolatile business environment but there are no guarantees that such efforts will result in the Company meeting their long-term forecast. Accordingly, the Company believes there is currently being supplemented by unemployment benefits and further being impacted by a federal vaccine mandate.an elevated risk of impairment.

Critical Accounting Estimates and Policies

There have been no significant changes to our critical accounting policies in our unaudited condensed consolidated financial statements from our Form 10-K for the year ended December 31, 2020.2021. For further discussion of our critical accounting policies, see management’s discussion and analysis of financial condition and results of operations contained in our Form 10-K for the year ended December 31, 2020.2021.

CompositionChange in Accounting Estimate
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During the first quarter, the Company completed an assessment of the useful lives of our intangible assets and adjusted the estimated useful life of the Simplura trademarks and trade names intangible asset from 10 years to 3 years and adjusted the estimated useful life of the payor network from 15 years to 10 years effective as of January 1, 2022. This change was driven by strategic shifts in the Company's personal care segment operations, partially contributed to by the acquisition of Care Finders. Based on the intangible asset values as of December 31, 2021, the effect of the change in estimate during the three and nine months ended September 30, 2022 was an increase in amortization expense of $3.6 million, a decrease in net income of $2.4 million, and a decrease in earnings per share of $0.17 per diluted common share outstanding, and an increase in amortization expense of $10.7 million, a decrease in net income of $8.4 million, and a decrease in earnings per share of $0.60 per diluted common share outstanding, respectively.

Results of Operations

The following results of operations include the accounts of ModivCare Inc. and our subsidiaries for the three and nine months ended September 30, 2021.2022.

Revenues

Service revenue, netnet. . Service revenue net represents the revenue recognized from transportation management services throughfor our NEMT segment from personal careincludes contracts predominately with state Medicaid agencies and MCOs for the coordination of their members’ non-emergency transportation needs. Most contracts are capitated, which means we are paid on a per-member, per-month basis for each eligible member. For most contracts, we arrange for transportation of members through our network of independent transportation providers, whereby we negotiate rates and remit payment to the transportation providers. However, for certain contracts, we assume no risk for the transportation network, credentialing and/or payments to these providers. For these contracts, we only provide administrative management services throughto support the customers’ efforts to serve their clients.

Certain other contracts are structured as fee-for-service ("FFS") 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.

Service revenue for our Personal Care segment includes hours incurred by our in-home caregivers that are billed to our customers. Our customers consist of third-party payors including, but not limited to, MCOs, hospitals, Medicaid agencies and from remoteprograms and other home health care providers who subcontract the services of our caregivers.

Service revenue for our RPM segment includes the sale of monitoring equipment to our third-party distributors as well as hours incurred by our Clinical Team for providing monitoring services throughthat are billed to our RPM segment.customers. Our customers consist of national and regional health plans, government-funded benefit programs, healthcare provider organizations, and individuals.

Grant Income

Grant Income. Through the third quarter of 2021, theThe Company has received distributions ofunder the CARES Act PRFProvider Relief Fund ("PRF") and the ARPA Coronavirus State and Local Fiscal Relief Fund ("SLFRF") targeted to offset lost revenueproviding economic relief and expenditures incurred in connection withstimulus to combat health and economic impacts of the COVID-19 pandemic.

Operating Expenses

Service expenseexpense. . Service expenseExpense for our NEMT segment consists primarily ofincludes purchased transportation, costs paidoperational payroll and other operational related costs. Purchased transportation includes the amounts we pay to third partythird-party service providers salaries of employees withinand is typically dependent upon service volume. Operational payroll predominately includes our contact centerscenter operations, customer advocacy and operation centerstransportation network team. Other operating expenses primarily include operational overhead costs, and occupancy costs.operating facilities and related charges. Service expense for our Personal Care segment consists primarily of salariesincludes payroll and other operational related costs for the employees providing the personal care services.our caregivers to provide in-home care. Service expense for our RPM segment primarily consists of salaries of employees in our contact centers, connectivity costs and occupancy costs.

General and Administrative Expenseadministrative expense. General and administrative expense for all segments consists principally of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.

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Depreciation and Amortization Expenseamortization expense. Depreciation within this caption includes infrastructure items such as computer hardware and software, office equipment, monitoring and vitals equipment, buildings, and leasehold improvements. Amortization expense is generated primarily from amortization of our intangible assets, including Customer Relationships, Payor Network, Trade Namespayor networks, trade names, developed technology, a non-compete agreement, an assembled workforce, and a New York LHCSA Permit.



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permit.

Other Expenses (Income)

Interest Expense, Netexpense, net. Interest expense consists principally of interest payments made during the period ended September 30, 2022 on the Company’s borrowings outstanding borrowingsat September 30, 2022 under the Credit Facility and Senior Unsecured Notes, and amortization of deferred financing fees. Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings.

Equity in net incomeloss (income) of investee, net of tax. Equity in earnings of equity method investee consists of our proportionate share of equity earnings or losses from our Matrix equity investment.investment, presented net of related taxes.

Income Tax Expense (Benefit)tax provision. The Company is subject to federal taxation in the United States and state taxation in the various jurisdictions in which we operate.

Results of Operations

Segment reporting. Ouroperating segments reflect the manner in which our operations are organized and reviewed by managementmanagement. Segment results are based on how our CODM manages our business, makes operating decisions and our chiefevaluates operating decision maker.performance.

We operate in four reportable business segments: NEMT, Personal Care, RPM, and Corporate and Other. Effective January 1, 2022, the Matrix Investment. Prior to November 17, 2020, our primary operatingCompany completed its segment was NEMT,reorganization which provides non-emergency medical transportation services. Our Personal Care segment is composed of the operations from two acquisitions: Simplura on November 18, 2020, which operatesresulted in the non-medical personal care service industry;addition of a Corporate and Care Finders on September 14, 2021, a personal care service providerOther segment that includes the costs associated with operations concentrated in the Northeast, with a scaled presence in New Jersey, Pennsylvania, and Connecticut. On September 22, 2021, we acquired VRI, resulting in the establishment of our RPM segment. VRI is a provider of remote patient monitoring solutions. Our investment in Matrix is also a reportable segment referred to as the “Matrix Investment”. Segment results are based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance.Company's corporate operations. The operating results of our NEMT, Personal Carethe Corporate and RPM segmentsOther segment include revenue and expenses incurred by the segment, and the operating results of our NEMT segment also include our activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of the Matrix investment. Prior to the segment reorganization, we reported the investment in Matrix as a separate operating segment, however based on the relative size of the Matrix investment and all related activity to the overall financial statements, the CODM no longer views it as a separate operating segment but reviews results in conjunction with the other corporate results of the business.

The NEMT segment consists of our legacy operations, which provides non-emergency medical transportation services throughout the country. The Personal Care segment provides non-medical personal care and home health services and is composed of the operations from two acquisitions: Simplura on November 18, 2020, and Care Finders on September 14, 2021. The RPM segment provides remote patient monitoring solutions and was developed through our acquisition of VRI on September 22, 2021 and expanded through our acquisition of GMM on May 11, 2022. The operating results of the NEMT, Personal Care and RPM segments include revenue and expenses generated and incurred by the segment.

See Note 4, Segments, in our accompanying unaudited condensed consolidated financial statements for further information on our segments.

Discontinued operations. During prior years, we completed several transactions which resulted in the presentation of the related operations as Discontinued Operations. Activity for the current period is not significant.

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Q3 20212022 compared to Q3 20202021

Consolidated Results. The following table sets forth results of operations and the percentage of Service revenue, net represented by items in our unaudited condensed consolidated statements of operations for Q3 20212022 and Q3 20202021 (in thousands):
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Three months ended September 30, Three months ended September 30,
20212020 20222021
Amount% of RevenueAmount% of Revenue Amount% of RevenueAmount% of Revenue
Service revenue, netService revenue, net$493,059 100.0 %$320,619 100.0 %Service revenue, net$647,782 100.0 %$493,059 100.0 %
Grant incomeGrant income— — %— — %Grant income789 0.1 %— — %
Operating expenses:Operating expenses:    Operating expenses:    
Service expenseService expense399,272 81.0 %235,543 73.5 %Service expense534,563 82.5 %399,272 81.0 %
General and administrative expenseGeneral and administrative expense68,054 13.8 %34,441 10.7 %General and administrative expense75,889 11.7 %68,205 13.8 %
Depreciation and amortizationDepreciation and amortization12,608 2.6 %7,301 2.3 %Depreciation and amortization25,672 4.0 %12,608 2.6 %
Total operating expenses Total operating expenses479,934 97.3 %277,285 86.5 % Total operating expenses636,124 98.2 %480,085 97.4 %
Operating incomeOperating income13,125 2.7 %43,334 13.5 %Operating income12,447 1.9 %12,974 2.6 %
Other expenses (income):
Other expenses:Other expenses:
Interest expense, netInterest expense, net17,702 3.6 %379 0.1 %Interest expense, net15,557 2.4 %17,702 3.6 %
Equity in net loss (income) of investee6,748 1.4 %(10,325)(3.2)%
Income (loss) from continuing operations before income taxes(11,325)(2.3)%53,280 16.6 %
Provision (benefit) for income taxes(3,863)(0.8)%14,360 4.5 %
Income (loss) from continuing operations, net of tax(7,462)(1.5)%38,920 12.1 %
Loss from discontinued operations, net of tax(108)— %(115)— %
Net income (loss)$(7,570)(1.5)%$38,805 12.1 %
Loss before income taxes and equity method investmentLoss before income taxes and equity method investment(3,110)(0.5)%(4,728)(1.0)%
Benefit for income taxesBenefit for income taxes(1,053)(0.2)%(2,001)(0.4)%
Equity in net loss of investee, net of taxEquity in net loss of investee, net of tax26,448 4.1 %4,845 1.0 %
Net lossNet loss$(28,505)(4.4)%$(7,572)(1.5)%

Service revenue, net. ServiceConsolidated service revenue, net for Q3 20212022 increased $172.4$154.7 million, or 54%31.4%, compared to Q3 2020.2021. Service revenue, net, for our NEMT segment increased by $52.4$86.8 million, primarily due to higher membership and trip volume when compared to Q3 2020, as trip volume was depressed in the prior year due to the impact of COVID-19.2021. Service revenue, net, further increased incrementally by $120.1$50.7 million for our Personal Care segment, of which $34.5 million was related to the inclusion of the incremental operating results of Care Finders which was acquired in September 2021. Service revenue, net increased due to the acquisitionsinclusion of Simplura, Care Findersan incremental $17.2 million for our RPM segment as a result of the operating results of VRI which was acquired in September 2021 and VRI.GMM which was acquired in May 2022. See our resultsResults of operations, segmentsOperations, Segments, for further discussion.

Grant Incomeincome. InThe Company recognized grant income of approximately $0.8 million during the third quarter of 2021, the Company did not receive distributions ofthree months ended September 30, 2022 related to grants from the CARES Act PRF however management expectsand the ARPA SLFRF targeted to receive distributions inprovide economic relief and stimulus to combat health and economic impacts of the fourth quarterCOVID-19 pandemic. These funds were received by our Personal Care segment and are available to eligible providers who diagnose, test, or care for individuals with possible or actual cases of 2021.COVID-19, and have health care related expenses and lost revenues attributable to COVID-19.

Service expense. Service expense components are shown below (in thousands):
 Three months ended September 30,
 20212020
 Amount% of RevenueAmount% of Revenue
Purchased services$256,750 52.1 %$191,503 59.7 %
Payroll and related costs131,977 26.8 %34,213 10.7 %
Other service expenses10,545 2.1 %9,827 3.1 %
Total service expense$399,272 81.0 %$235,543 73.5 %

 Three months ended September 30,
 20222021
 Amount% of RevenueAmount% of Revenue
Purchased services$340,138 52.5 %$256,750 52.1 %
Payroll and related costs181,563 28.0 %131,977 26.8 %
Other service expenses12,862 2.0 %10,545 2.1 %
Total service expense$534,563 82.5 %$399,272 81.0 %

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Service expense for Q3 20212022 increased $163.7$135.3 million, or 70%33.9%, compared to Q3 20202021 primarily due to higher purchased services costs in the NEMT segment of $65.2$83.4 million driven by higher third-party transportation costs. Transportation and payroll costs increased primarily as a result of higher trip volume across multiple contracts and higher wage rates. This increase was also driven by higher service expense of $38.6 million in our Personal Care segment, of which $25.6 million is related to anthe Care Finders acquisition in September 2021. The remaining increase in transportation costs and associated payroll costs in our contact centers for our NEMT segment. Payroll and related costs increased by a further $97.8 million,is primarily related to incremental costs of $93.1 million in the Personal Care segment due to the Simplura acquisition in November 2020 and Care Finders in September 2021.higher wage rates across all segments.

General and administrative expense. General and administrative expense for Q3 20212022 increased $33.6$7.7 million, or 98%11.3%, compared to Q3 2020, related2021. The increase was primarily attributable to an increase of $17.7$11.1 million in our NEMT segment, primarily related to transaction costs for the Care Findersgeneral and VRI acquisitions. The increase was further attributable to $15.7 million of incrementaladministrative costs related to the additionoperations of Care Finders in the Personal Care segment.segment which was acquired during September 2021, and VRI and GMM in the RPM segment, which were acquired during September 2021 and May 2022, respectively. This was partially offset by a decrease in general and administrative expense for the corporate segment by $6.1 million. See ourresults Results of operations, segmentsOperations, Segments , for further discussion.

35

Depreciation and amortization. Depreciation and amortization for Q3 20212022 increased $5.3$13.1 million or 73%103.6% compared to Q3 2020,2021 primarily as a result of $7.7 million of additional amortization in the Personal Care and RPM segments associated with intangible assets purchased in the Care Finders, VRI, and GMM acquisitions, and $3.6 million of additional amortization in the Personal Care segment related to additional amortization for Simplura intangible assets brought on under the Simplura acquisition.due to a change in useful life estimate. See Note 3,2, AcquisitionsSignificant Accounting Policies and Recent Accounting Pronouncements.

Interest expense, net. Interest expense, net, for Q3 20212022 and Q3 20202021 was $17.7$15.6 million and $0.4$17.7 million, respectively. Interest expense increaseddecreased as a result of the activity related to the $500.0 million Senior Notes due 2025 and the $500 million Senior Notes 2029 that were issued on November 4, 2020 and August 24, 2021, respectively. We incurred $8.1 million and $2.5 million of interest expense related to the Senior Notes due 2025 and the Senior Notes due 2029 in Q3 2021, respectively. We further incurred a bridge loan commitment fee of $6.6 million incurred in Q3 2021 related to the VRI acquisition with no comparable fee in Q3 2022. The decrease was partially offset by an increase in interest expense of $4.1 million associated with the issuance of $500.0 million of Senior Unsecured Notes due 2029 ("the 2029 Notes"), issued in August 2021. During Q3 2022, we incurred $8.0 million of interest expense related to the Notes due 2025 and $6.6 million related to the Notes due 2029. The remainder of the interest expense in Q3 2022 is related to interest and fees on the credit facility. Interest expense is recorded at our Corporate and Other segment.

Equity in net (loss) incomeloss of investee.investee, net of tax. Our equity in net (loss) incomeloss of investee, net of tax, for Q3 2022 of $26.4 million and our equity in net loss of investee, net of tax, of $4.8 million for Q3 2021 was a loss of $6.7 million as a result of our proportionateproportional share of the net income or loss of Matrix. See further discussionMatrix and our investment in a captive insurance program. This loss was primarily related to an asset impairment that occurred at the Matrix segment in our resultsduring Q3 2022 of operations - segments section.$82.2 million.

Provision (benefit)Benefit for income taxes. Our effective tax rate from continuing operations for Q3 20212022 and Q3 2020 was a benefit2021 were tax benefits of 34.1%33.9% and a provision of 27.0%42.3%, respectively. For Q3 2022 and Q3 2021, the effective tax rate on the tax benefit wasrates were higher than the U.S. Federal Statutory rate of 21.0% primarily due to state taxes and favorable adjustments related to stock options and tax credits. For Q3 2020, the effective tax rate on the tax provision was higher than the U.S. Federal Statutoryfederal statutory rate of 21.0% primarily due to state income taxes and certain non-deductiblenondeductible expenses.

32
Loss from discontinued operations, net of tax. Loss from discontinued operations, net of tax, includes the activity related to our former WD Services segment.

YTD 2021Nine months ended September 30, 2022 compared to YTD 2020nine months ended September 30, 2021

The following table sets forth results of operations and the percentage of consolidated total revenues represented by items in our condensed consolidated statements of operations for YTDthe nine months ended September 30, 2022, which we refer to as “YTD 2022”, and for the nine months ended September 30, 2021, and YTD 2020which we refer to as “YTD 2021” (in thousands):

Nine months ended September 30, Nine months ended September 30,
20212020 20222021
Amount% of RevenueAmount% of Revenue Amount% of RevenueAmount% of Revenue
Service revenue, netService revenue, net$1,421,117 100.0 %$970,166 100.0 %Service revenue, net$1,850,472 100.0 %$1,421,117 100.0 %
Grant incomeGrant income3,500 0.2 %— — %Grant income4,587 0.2 %3,500 0.2 %
Operating expenses:Operating expenses:    Operating expenses:    
Service expenseService expense1,139,170 80.2 %764,310 78.8 %Service expense1,498,108 81.0 %1,139,170 80.2 %
General and administrative expenseGeneral and administrative expense179,271 12.6 %86,435 8.9 %General and administrative expense232,108 12.5 %179,595 12.6 %
Depreciation and amortizationDepreciation and amortization36,667 2.6 %17,199 1.8 %Depreciation and amortization74,376 4.0 %36,667 2.6 %
Total operating expensesTotal operating expenses1,355,108 95.4 %867,944 89.5 %Total operating expenses1,804,592 97.5 %1,355,432 95.4 %
Operating incomeOperating income69,509 4.9 %102,222 10.5 %Operating income50,467 2.7 %69,185 4.9 %
Other expenses (income):    
Other expenses:Other expenses:    
Interest expense, netInterest expense, net34,412 2.4 %2,118 0.2 %Interest expense, net46,429 2.5 %34,412 2.4 %
Equity in net loss (income) of investee1,978 0.1 %(12,200)(1.3)%
Income from continuing operations before income taxes33,119 2.3 %112,304 11.6 %
Income before income taxes and equity method investmentIncome before income taxes and equity method investment4,038 0.2 %34,773 2.4 %
Provision for income taxesProvision for income taxes7,944 0.6 %19,785 2.0 %Provision for income taxes877 — %8,409 0.6 %
Income from continuing operations, net of tax25,175 1.8 %92,519 9.5 %
Loss from discontinued operations, net of tax(232)— %(618)(0.1)%
Net income$24,943 1.8 %$91,901 9.5 %
Equity in net loss of investee, net of taxEquity in net loss of investee, net of tax28,020 1.5 %1,424 0.1 %
Net income (loss)Net income (loss)$(24,859)(1.3)%$24,940 1.8 %

Service revenue, net. Consolidated service revenue, net, for YTD 20212022 increased $451.0$429.4 million, or 46%30.2%, compared to YTD 2020.2021. Service revenue, net, for the NEMT segment increased by $111.0$228.3 million, primarily due to higher membership and trip volume when compared to YTD 2020,2021, as both membership and trip volume waswere depressed in the prior year due to the impact of COVID-19. Service revenue, net,
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further increased incrementally by $339.9$153.3 million for our Personal Care segment, of which $121.2 million was related to the inclusion of the incremental operating results of Care Finders which was acquired in September 2021. Service revenue, net increased due to the acquisitionsinclusion of Simplura, Care Findersan incremental $47.8 million for our RPM segment as a result of the operating results of VRI which was acquired in September 2021 and VRI.expanded with the acquisition of GMM in May 2022. See our Rresultsesults of operations, segmentsOperations, Segments, for further discussion.

Grant income. The Company recognized income of approximately $4.6 million for YTD 2022 compared to $3.5 million during YTD 2021 related to grants from the CARES Act PRF and the ARPA SLFRF targeted to providing economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. These funds were received by our Personal Care segment and are available to eligible providers who diagnose, test, or care for individuals with possible or actual cases of COVID-19, and have health care related expenses and lost revenues attributable to COVID-19.

Service expense. Service expense components are shown below (in thousands):
 Nine months ended September 30,
 20212020
 Amount% of RevenueAmount% of Revenue
Purchased services$725,060 51.0 %$622,685 64.2 %
Payroll and related costs379,740 26.7 %108,792 11.2 %
Other operating expenses34,370 2.4 %32,833 3.4 %
Total service expense$1,139,170 80.2 %$764,310 78.8 %

 Nine months ended September 30,
 20222021
 Amount% of RevenueAmount% of Revenue
Purchased services$935,298 50.5 %$725,059 51.0 %
Payroll and related costs520,556 28.1 %379,739 26.7 %
Other operating expenses42,254 2.3 %34,372 2.4 %
Total service expense$1,498,108 81.0 %$1,139,170 80.2 %

33


Service expense for YTD 20212022 increased $374.9$358.9 million, or 49%31.5%, compared to YTD 20202021 due to higher purchased services of $102.4$210.2 million related to an increase in transportation costs and associated payroll costs in our contact centers for ourthe NEMT segment. Payroll and related costs increased by a further $270.9$140.8 million, primarily related to incremental costs of $265.1$98.3 million in the Personal Care segmentand RPM segments due to the Simplura acquisition in November 2020 andacquisitions of Care Finders and VRI in September 2021.2021 and GMM in May 2022, as well as increased labor costs across all segments.

General and administrative expense. General and administrative expense for YTD 20212022 increased $92.8$52.5 million, or 107%29.2%, compared to YTD 2020, related2021. This increase is primarily attributable to an increase of $47.3$39.9 million in our NEMT segment, primarily related to transaction costs for the Care Findersgeneral and VRI acquisitions, as well as value enhancement projects. The increase was further attributable to $45.3 million of incrementaladministrative costs related to the additionoperations of Care Finders in the Personal Care segment.segment which was acquired during September 2021, and VRI and GMM in the RPM segment which were acquired during September 2021 and May 2022, respectively. See our resultsResults of operations, segmentsOperations, Segments, for further discussion.

Depreciation and amortization. Depreciation and amortization for YTD 20212022 increased $19.5$37.7 million or 113%102.8% compared to YTD 20202021 primarily as a result of intangibles brought on under the NMTCare Finders and SimpluraVRI acquisitions in Q2September 2021 and Q4 of 2020, respectively.the GMM acquisition in May 2022. See Note 3, Acquisitions.

Interest expense, net. Consolidated interestInterest expense, net for YTD 20212022 increased $32.3$12.0 million compared to YTD 2020. Interest expense increased2021 as a result of the incremental interest activity related toof $17.4 million from the $500.0 million Senior Notes due 2025 and the $500 million Senior Notes due 2029 that were issued on November 4, 2020 andin August 24,2021. The increase in interest was partially offset by the $6.6 million bridge loan commitment fee incurred in Q3 2021 respectively. Werelated to the VRI acquisition with no comparable fee for the nine months ended September 30, 2022. For YTD 2022, we incurred $24.2$24.1 million and $2.5$19.9 million of interest expense related to the Senior Notes due 2025 and the Senior Notes due 2029, inrespectively. The remainder of the nine months ended September 30, 2021, respectively. We further incurred a bridge loan commitment fee of $6.6 millioninterest expense during YTD 2022 is related to interest and fees on the VRI acquisition in Q3 of 2021.credit facility. Interest expense is recorded at our Corporate and Other segment.

Equity in net loss (income) of investee.investee, net of tax. OurFor YTD 2022, our equity in net loss of investee is $28.0 million, compared to net loss for YTD 2021 of $2.0$1.4 million, was as a result of our proportionateproportional share of the net income or loss of Matrix. See further discussionMatrix and our investment in a captive insurance program. This loss was primarily related to an asset impairment that occurred at the Matrix segment in our resultsduring Q3 2022 of operations - segments section.$82.2 million.

Provision for income taxes. Our effective tax rates from continuing operations for YTD 20212022 and YTD 20202021 were 24.0%provisions of 21.7% and 17.6%24.2%, respectively. The YTD 2022 and YTD 2021 effective tax rate wasrates were higher than the U.S. federal statutory rate of 21%21.0% primarily due to state income taxes and certain non-deductiblenondeductible expenses. For YTD 2020, the effective tax rate was lower than the U.S. federal statutory rate of 21% primarily due to the favorable impact of the CARES Act on the Company's 2018 U.S. NOLs.

Loss from discontinued operations, net of tax. Loss from discontinued operations, net of tax, includes the activity related to our former WD Services segment.


3734


Results of Operations - Segments

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

NEMT Segment
For the Three months ended September 30,For the Nine months ended September 30,
2021202020212020
Amount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment Revenue
Service revenue, net$372,992 100%$320,619 100%$1,081,168 100%$970,166 100%
Service expense304,398 82%235,543 73%869,470 80%764,310 79%
General and administrative expense52,118 14%34,441 11%133,706 12%86,435 9%
Depreciation and amortization7,496 2%7,301 2%21,744 2%17,199 2%
Operating income$8,980 2%$43,334 14%$56,248 5%$102,222 11%

Three months ended September 30,Nine months ended September 30,
2022202120222021
Amount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment Revenue
Service revenue, net$459,796 100.0%$372,992 100.0%$1,309,449 100.0%$1,081,168 100.0%
Service expense394,981 85.9%304,398 81.6%1,100,801 84.1%869,470 80.4%
General and administrative expense31,815 6.9%29,875 8.0%102,736 7.8%85,961 8.0%
Depreciation and amortization7,079 1.5%7,496 2.0%21,576 1.6%21,744 2.0%
Operating income$25,921 5.6%$31,223 8.4%$84,336 6.4%$103,993 9.6%

The non-emergency medical transportation (“NEMT”) segment, which operates under the brands ModivCare Solutions and Circulation, is the largest manager of NEMT programs for state governments and managed care organizations ("MCOs")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.U.S.

Service revenue, net. Service revenue, net, increased by $52.4$86.8 million and 16%23.3%, fromduring the third quarter of 2020three months ended September 30, 2022 as compared to the third quarter ofthree months ended September 30, 2021. This increase is primarily attributable to $36.0 million of revenue related to increaseda 16.1% increase in trip volume, a 22.6% increase in average monthly membership and $19.0 million of revenue relatedhigher rates per member as compared to contracts from the NMT acquisition that took place in the second quarter of 2020.three months ended September 30, 2021. Service revenue, net, increased by $111.0$228.3 million and 11%21.1%, fromduring the nine months ended September 30, 20202022, primarily attributable to a 13.8% increase in both trip volume and average monthly membership, and higher rates per member as compared to the nine months ended September 30, 2021, primarily attributable to $88.1 million of revenue from contracts acquired in the NMT acquisition and $42.9 million related to higher trip volume.2021. Trip volume increased for both the quarter to datethree and year to date periodnine months ended September 30, 20212022 when compared to 2020,2021, as trip volume was depressed in the prior year due to the impact of COVID-19. WhileThe increase in average monthly membership drove higher revenue because a majority of our contacts are capitated and we receive monthly payments on a per member/fixed basis in return for full or partial risk of transportation volumes,volumes. However, we also have certain capitated contracts that limit profit to within a certain corridor and once we reach the maximum profit level we discontinue recognizing revenue and instead build a liability to return back to the customer upon reconciliation at a later date. OtherThe increase in trip volume also increases revenue for our contracts that are structured as fee-for-service also experienced positive impacts to revenue due toas higher trip volumes.volumes correlates with a larger number of services performed.

Service expense. Service expense components for the NEMT segment are shown below (in thousands):

 Three months ended September 30,Nine months ended September 30,
 2022202120222021
 Amount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of Revenue
Purchased services$340,138 74.0 %$256,750 68.8 %$935,298 71.4 %$725,059 67.1 %
Payroll and related costs46,160 10.0 %38,105 10.2 %136,916 10.5 %113,843 10.5 %
Other service expenses8,683 1.9 %9,543 2.6 %28,587 2.2 %30,568 2.8 %
Total service expense$394,981 85.9 %$304,398 81.6 %$1,100,801 84.1 %$869,470 80.4 %

Service expense for our NEMT segment primarily consists of transportation costs paid to third party service providers, salaries of employees within our contact centers and operations centers, and occupancy costs. Service expense increased by $68.9$90.6 million and 29%29.8% for the three months ended September 30, 2021,2022, as compared to the three months ended September 30, 2020,2021, primarily related to higher purchased services of $83.4 million related to an increase in transportation costs of $65.2 million due to higher trip volume.volume in the current year. Service expense increased by $105.2$231.3 million and 14%26.6% for the nine months ended September 30, 2021,2022 as compared to the nine months ended September 30, 2020,2021, primarily due to an increase in transportationpurchased services of $210.2 million for the same reason as stated above.

General and administrative expense. General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense increased by $1.9 million and 6.5% for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. General and administrative expense increased
35


by $16.8 million and 19.5% for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, primarily as a result of $102.4higher salary costs and legal expenses.

Depreciation and amortization expense. Depreciation and amortization expense decreased by $0.4 million and 5.6% for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. Depreciation and amortization expense decreased by $0.2 million and 0.8% for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. Both changes are primarily the result of certain intangible assets at Circulation being fully amortized during the second half of 2021.

Personal Care Segment

Three months ended September 30,Nine months ended September 30,
2022202120222021
Amount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment Revenue
Service revenue, net$169,226 100.0%$118,503 100.0%$491,661 100.0%$338,385 100.0%
Grant income789 0.5%— —%4,587 0.9%3,500 1.0%
Service expense132,746 78.4%94,107 79.4%379,423 77.2%268,933 79.5%
General and administrative expense22,057 13.0%15,802 13.3%68,536 13.9%45,606 13.5%
Depreciation and amortization12,919 7.6%4,912 4.1%37,976 7.7%14,723 4.4%
Operating income$2,293 1.4%$3,682 3.1%$10,313 2.1%$12,623 3.7%

Our Personal Care segment was established in November 2020 with the acquisition of Simplura and expanded in September 2021 with the acquisition of Care Finders. Our Personal Care segment’s services include placements of non-medical personal care assistants and home health aides and 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. The quarter over quarter fluctuations include incremental changes from the acquisition of Care Finders, as the acquisition was completed on September 14, 2021 and contributed minimal activity in 2021 compared to a full year of activity in 2022.

Service revenue, net. Personal care service contracts are generally structured as fee-for-service contracts, with revenue driven by hours worked by our personal care providers. Service revenue, net increased by $50.7 million or 42.8% for the three months ended September 30, 2022 as compared to September 30, 2021, primarily due to incremental revenue from the Care Finders acquisition of $34.5 million. The remainder of the increase in service revenue is attributable to Simplura, due to higher trip volume.hours worked by personal care providers in Q3 2022 as compared to Q3 2021 as well as the asset acquisition completed in Q2 2022, as disclosed in Note 3, Acquisitions, which allowed the Company to service the additional acquired contracts. Service revenue, net increased by $153.3 million or 45.3% for the nine months ended September 30, 2022 as compared to September 30, 2021, primarily due to incremental revenue from the Care Finders acquisition of $121.2 million.

Grant Income. In the three and nine months ended September 30, 2022, the Company recognized income for distributions of the CARES Act PRF and the ARPA SLFRF targeted to providing economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic of $0.8 million and $4.6 million, respectively. In comparison, the Company did not receive distributions during the three months ended September 30, 2021, and received distributions of $3.5 million during the nine months ended September 30, 2021.

Service expense. Service expense components for the Personal Care segment are shown below (in thousands):

 Three months ended September 30,Nine months ended September 30,
 2022202120222021
 Amount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of Revenue
Payroll and related costs$132,482 78.3 %$93,105 78.6 %$374,994 76.3 %$265,129 78.4 %
Other service expenses264 0.1 %1,002 0.8 %4,429 0.9 %3,804 1.1 %
Total service expense$132,746 78.4 %$94,107 79.4 %$379,423 77.2 %$268,933 79.5 %

Service expense for our Personal Care segment primarily consists of salaries for the employees providing the personal care services and it typically trends with the number of hours worked. Service expense for the three months ended September 30, 2022 increased by $38.6 million and 41.1% as compared to the three months ended September 30, 2021, primarily as a
36


result of incremental expense of $25.6 million related to the Care Finders acquisition. Service expense for the nine months ended September 30, 2022 increased by $110.5 million and 41.1% as compared to the nine months ended September 30, 2021, primarily as a result of incremental expense of $90.9 million related to the Care Finders acquisition. The remainder of the increase is related to increased pay rates for the personal care providers for the Simplura business as well as servicing additional contracts acquired through the asset acquisition completed in Q2 2022, as disclosed in Note 3, Acquisitions, .

General and administrative expense. General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense increased by $17.7$6.3 million and 51%39.6% for the three months ended September 30, 2021,2022 as compared to the three months ended September 30, 2020,2021, primarily related to $11.6 million forincremental costs from the acquisition costs for VRI andof Care Finders $3.2 million for personnel expense and $1.5 million for temporary labor.of $5.5 million. General and administrative expense increased by $47.3$22.9 million and 55%50.3% for the nine months ended September 30, 2021,2022 as compared to the nine months ended September 30, 2020,2021, primarily as a result of $22.9 million related to transactionincremental costs and value enhancement projects, $8.7 million related to software, $6.6 million related to personnel expense and $3.7 million related to legal expense.from the acquisition of Care Finders of $22.6 million.

Depreciation and amortization expense.Depreciation and amortization expense increased by $0.2$8.0 million and 3%163.0% for the three months ended September 30, 2021,2022 as compared to the three months ended September 30, 2020 due to consistent PPE expenditures. Depreciation2021, and amortization expense increased by $4.5$23.3 million and 26%157.9% for the nine months ended September 30, 2021,2022 as compared to 2021. The increase in this expense for the three and nine months ended September 30, 2020, as a result2022 is primarily due to amortization expense on the intangible assets brought on under the Care Finders acquisition of a full$3.7 million and $11.1 million, respectively. The increase for the three and nine months ended September 30, 2022 is also driven by the additional amortization expense of amortization on$3.6 million and $10.7 million, respectively, related to the NMT intangibleschange in 2021,useful lives of Simplura intangible assets as compared to only five months of amortizationdiscussed in 2020.Note 2, Significant Accounting Policies and Recent Accounting Pronouncements.

38RPM Segment

Personal Care Segment
For the Three months ended September 30,For the Nine months ended September 30,Three months ended September 30,Nine months ended September 30,
202120212022202120222021
Amount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment RevenueAmount% of Segment Revenue
Service revenue, netService revenue, net$118,503 100%$338,385 100%Service revenue, net$18,760 100.0 %$1,564 100.0 %$49,362 100.0 %$1,564 100.0 %
Grant income— —%3,500 1%
Service expenseService expense94,107 79%268,933 79%Service expense6,836 36.4 %767 49.0 %17,884 36.2 %767 49.0 %
General and administrative expenseGeneral and administrative expense15,720 13%45,349 13%General and administrative expense5,816 31.0 %216 13.8 %17,520 35.5 %216 13.8 %
Depreciation and amortizationDepreciation and amortization4,912 4%14,723 4%Depreciation and amortization5,467 29.1 %200 12.8 %14,201 28.8 %200 12.8 %
Operating income$3,764 3%$12,880 4%
Operating income (loss)Operating income (loss)$641 3.4 %$381 24.4 %$(243)(0.5)%$381 24.4 %

Our Personal CareRemote Patient Monitoring segment was established in November 2020 with the acquisition of Simplura and expanded in September 2021 with the acquisition of Care Finders. OurVRI and expanded in May 2022 with the acquisition of GMM. The RPM segment is a provider of remote patient monitoring solutions and manages a comprehensive suite of services, including personal care segment’s services include placements of non-medical personal care assistants, home health aides and nurses, primarily to Medicaid patient populations in need of careemergency response systems, vitals monitoring and assistance performing daily living activities indata-driven patient engagement solutions. The quarterly and annual fluctuations as of the home setting, including senior citizensthree and disabled adults. As both of these acquisitions took place after the third quarter of 2020, comparable figures for the prior yearnine months ended September 30, 2022 and 2021, respectively, are not provided.meaningful as the segment only contributed minimal activity in 2021 and a full year of activity in 2022.

Service revenue, net. RPM contracts are generally structured as a fee per enrolled member per month, and therefore revenue is generally driven by number of enrolled members. Service revenue, net, from MCOmanaged Medicare contracts accounted for 55%19.5% and 54%21.4% of service revenue, net, for the three and nine months ended September 30, 2021,2022, respectively, while U.S. state and managed Medicaid program contracts accounted for 40%62.7% and 60.6% of service revenue, net for the three and nine months ended September 30, 2021.2022, respectively. The remainder of the Personal CareRPM segment revenue is derived from private pay and other contracts.

37
Grant Income. In the nine months ended September 30, 2021, the Company received distributions of the CARES Act PRF of approximately $3.5 million targeted to offset lost revenue and unreimbursed expenditures incurred in connection with the COVID-19 pandemic. The Company did not receive any distributions from the CARES Act PRF during the three months ended September 30, 2021.

Service expense. Service expense components for the RPM segment are shown below (in thousands):

 Three months ended September 30,Nine months ended September 30,
 2022202120222021
 Amount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of Revenue
Payroll and related costs$3,323 17.7 %$767 49.0 %$8,646 17.5 %$767 49.0 %
Other service expenses3,513 18.7 %— 0.0 %9,238 18.7 %— 0.0 %
Total service expense$6,836 36.4 %$767 49.0 %$17,884 36.2 %$767 49.0 %

Service expense for our personal careRPM segment primarily consists of salaries for the employees providing the personal careremote monitoring services and it typically trends with the number of hours worked. For both the three and nine months ended September 30, 2021, service expense for the Personal Care segment includes $7.0 million related to the Care Finders acquisition, with the remainder related to the Simplura acquisition. Services expense is 79% of service revenue, net, for the three months and nine months ended September 30, 2021.

General and administrative expense. General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense for the Personal Care segment includes $1.3 million related to the Care Finders acquisition, with the remainder being related to the Simplura acquisition. General and administrative expense is 13% of service revenue, net for the three months and nine months ended September 30, 2021.

Depreciation and amortization expense. Depreciation and amortization expense consists primarily of amortization expense on the intangible assets brought on underduring the Simplura acquisition as well as depreciation on the fixed assets acquired.

Corporate and Other Segment

Three months ended September 30,Nine months ended September 30,
2022202120222021
AmountAmountAmountAmount
General and administrative expense$16,201 $22,312 $43,316 $47,812 
Depreciation and amortization207 — 623 — 
Operating income (loss)$(16,408)$(22,312)$(43,939)$(47,812)

Our Corporate and Other segment was established beginning January 1, 2022 as a result of $4.8a segment reorganization completed by the Company. The Company's Corporate and Other segment includes the Company's executive, accounting, finance, internal audit, tax, legal, public reporting, and corporate development functions. This segment also includes the results of our equity investment in Matrix.

Our Corporate and Other segment holds costs incurred related to strategy and stewardship of the other operating segments. These expenses are primarily general and administrative expenses, with a small amount related to depreciation. The general and administrative expense decreased by $6.1 million for the three months ended September 30, 2021 and $14.3$4.5 million for the nine months ended September 30, 2021. Depreciation and amortization expense is 4% of service revenue, net, for the three and nine months ended September 30, 2021.

RPM Segment

Our Remote Patient Monitoring segment was established in September 2021 with the acquisition of VRI. VRI is a provider of remote patient monitoring solutions and manages a comprehensive suite of services, including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. As the RPM segment consists of only nine days of activity related to the current period, and no activity for the prior period, the amounts were not material and therefore a separate table with respect to those results has been omitted until future periods.

Matrix Segment
For the Three months ended September 30,For the Nine months ended September 30,
2021202020212020
Equity in net income (loss) of investee$(6,748)$10,325 $(1,978)$12,200 
Equity investment$134,353 $141,292 $134,353 $141,292 

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The company holds a 43.6% minority interest in CCHN Group Holdings, Inc., and its subsidiaries, which operates under the Matrix Medical Network brand, 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.

Equity in net income (loss) of investee changed from income of $10.3 million for the three months ended September 30, 2020 to a loss of $6.7 million for the three months ended September 30, 2021. This change is2022, primarily attributable to the Clinical Solutions business unit revenue, which declined by $73.7 million due to the winding down of COVID-19 testing and screening. For the nine months ended September 30, equity in net income of investee changed from income of $12.2 million in 2020 to a loss of $2.0 million for the same period in 2021. While revenue over this period increased by $24.1 million due to higher membership and an increase in visits to the home, operating expenses increased by $75.7 million, related to increased hours worked by the care providers, as well as increased hourly costs due to wage pressures and hazard pay.

Matrix reported that its QTD and YTD net income was negatively impacted by its Clinical Solutions business, which had a decrease in revenue due to a faster than expected vaccination rollout and winding down of COVID testing, which was offset by the launch of its clinical trials businesslower bonus accrual in the third quarter of 2020. Additionally, Matrix reported increased revenuecurrent year and income relatedlower stock based compensation due to a clinical solutions product offering following the October 2020 acquisition of Biocerna LLC, a diagnostic company that, among other tests, provides rapid COVID-19 test kits.executive departure.

Seasonality

Our NEMT segment's quarterly operating income and cash flows normally fluctuate as a result of seasonal variations in our business, principally due to lower transportation demand during the winter season and higher demand during the summer season.

Our Personal Care segment’s quarterly operating income and cash flows also normally fluctuate as a result of seasonal variations in the business, principally due to somewhat lower demand for in-home services from caregivers during the summer and periods with major holidays, as patients may spend more time with family and less time alone needing outside care during those periods.

Our RPM segment’s quarterly operating income and cash flows do not normally fluctuate as a result of seasonal variations in the business.

Liquidity and capital resources

Short-term capital requirements consist primarily of recurring operating expenses, new revenue contract start-up costs and costs associated with our strategic initiatives. We expect to meet our short-term cash requirements through available cash
38


on hand, cash generated from operations, net of capital expenditures, and borrowing capacityfrom time to time under our New Credit Facility.For information regarding our long-term capital requirements, see below under the caption “Liquidity”.

Cash flow from operating activities during the nine months ended September 30, 20212022 was $174.7$45.5 million. Our balance of cash and cash equivalents, including restricted cash, was $126.7$72.7 million and $183.4$133.4 million at September 30, 20212022 and December 31, 2020,2021, respectively. We had restricted cash of $0.3 million at December 31, 2021 and an immaterial amount at September 30, 2022. Restricted cash amounts are not included in our balance of cash and cash equivalents in the unaudited condensed consolidated balance sheets, although they are included in the cash, cash equivalents and restricted cash balance on the accompanying unaudited condensed consolidated statements of cash flows. At September 30, 2021, we had no borrowings outstanding under our Credit Facility; however, we had letters of credit outstanding of $21.1 million. At December 31, 2020, we had no amounts outstanding under the Credit Facility.

We may, from time to time, access capital markets to raise equity or debt financing for various business reasons, including acquisitions, and possible refinancing activity. We may also raise debt financing to fund future repurchases of our common stock.stock, investments in our business and possible refinancing activity. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such financing on terms acceptable to us at the time or at all.

YTD 20212022 cash flows compared to YTD 20202021

Operating activities. Cash provided by operating activities was $174.7$45.5 million and $287.2$174.7 million for YTD 20212022 and YTD 2020,2021, respectively. Cash flows from operating activities decreased by $112.5The decrease of $129.2 million due towas primarily a decrease in cash provided by net incomeresult of $67.0 million and a further decrease in cash provided by changes in working capital of $69.8 million, partially offset by an increase in cash due to increased amortization expense of $17.6 million and an increase in cash due to the change in our equity method investment of $14.2$127.7 million. The working capital changes were related to a decrease in cash related to the change in accounts receivableaccrued contract payables of $89.6$189.7 million primarily related to repayments and lower liability reserves on certain risk corridor, profit rebate and reconciliation contracts due to higher trip volumes during YTD 2022. Also contributing to the decrease in working capital is a decrease in cash related to the change in accounts payable and other accrued expensestransportation costs of $25.9$25.5 million primarily related to decreased cycle time to pay our transportation providers therefore decreasing the accrued transportation costs in YTD 2022 compared to YTD 2021. These working capital decreases were partially offset by an increase in cash provided bythe accounts payable and accrued expenses balance of $46.4 million primarily related to timing of vendor payments and and an increase in accrued contract payablesthe accounts receivable balance of $63.6 million.$41.1 million, primarily related to receivables recorded on our reconciliation and corridor contracts.
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Investing activities. Net cash used in investing activities of $681.1$104.4 million in YTD 2021 increased2022 decreased by $598.6$576.7 million as compared to the YTD 2020 net2021 primarily as a result of a decrease in cash used in investing activities of $82.5 million, primarily due to $589.6 million more spent on acquisitions of $588.4 million. This is due to the Company's acquisitions of WellRyde, Care Finders, and VRI in YTD 2021 thancompared to only the related period in 2020. The increase in the use of cash was also related to an increase in purchase of property, plantGMM and equipment of $9.1 million.an asset acquisition in 2022.

Financing activities. Net cash provided byused in financing activities of $449.7$1.8 million in YTD 2021 changed2022 decreased by $529.4$451.5 million as compared to net cash used inprovided by financing activities during YTD 20202021 of $79.6$449.7 million. The change was primarily due to an increase in proceeds from debt of $463.0 million, primarily as a result of the Company issuing senior notes during August 2021 for $500.0 million Senior Notes issued August 24, 2021, partially offset by an increasethe Company not participating in a stock repurchase program during YTD 2022 as compared to YTD 2021 during which cash paid to repurchase common stock of $28.9 millionwas $39.0 million. See Note 11, Earnings Per Share, for YTD 2021, as compared to YTD 2020.further information on the stock buyback.

Obligations and commitments

Senior Unsecured Notes. On November 4, 2020, the Company issued $500.0 million in aggregate principal amount of 5.875% senior unsecured notes due on November 15, 2025 (the “Senior Notes due 2025”). AdditionallySubsequently, on August 24, 2021, the Company issued $500an additional $500.0 million in aggregate principal amount of 5.000% senior unsecured notes due on October 1, 2029 (the “Senior Notes due 2029” and, together with the Senior Notes due 2025, the “Notes”). The Senior Notes due 2025 and the Senior Notes due 2029 were issued pursuant to two indentures, dated November 4, 2020 and August 24, 2021, respectively, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The proceeds from the Senior Notes due 2025 relatewere used to fund a portion of the Company’s acquisition of Simplura and the proceeds from the Senior Notes due 2029 relatewere used to fund a portion of the Company’s acquisition of VRI.

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 New Credit Facility, 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 Company will pay interest on the Senior Notes due 2025 at 5.875% per annumtheir applicable annual rates until maturity. The Company will further pay interestInterest on the Senior Notes due 2029 at 5.000% per annum until maturity. Interest2025 is payable semi-annually in arrears on May 15 and November 15 of each year, with the first interest payment date being May 15, 2021year. Interest on the Senior Notes due 2025. Additionally, interest2029 is payable semi-annually in arrears on April 1 and October 1 of each year, with the first interest payment date being April 1, 2022 for the Senior Notes due 2029.
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2022. Principal payments are not required until the maturity date on November 15, 2025 and October 1, 2029 when 100% of the outstanding principal will be required to be repaid on the Senior Notes due 2025 and the Senior Notes due 2029, respectively.

New Credit Facility. FacilityThe. On February 3, 2022, the Company isentered into a party to the amended and restatednew credit and guaranty agreement dated as of August 2, 2013 (as amended, the “Credit(the “New Credit Agreement”), with JPMorgan Chase Bank, of America, N.A., as administrative agent, swing line lender and letteran issuing bank, Wells Fargo Bank, National Association, as an issuing bank, Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents, Deutsche Bank AG New York Branch, Bank of credit issuer,America, N.A., Regions Bank, Bank of Montreal and Capital One, National Association, as co-documentation agents, and JPMorgan Chase Bank, N.A., Truist Securities, Inc. and Wells Fargo Securities, LLC, as joint bookrunners and joint lead arrangers, and the other lenders party thereto. On May 6, 2020,The New Credit Agreement provides 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 thewith a senior secured revolving credit facility (the “Credit“New Credit Facility”) from $200.0 million to $225.0 million, and increased the sub-facilityin an aggregate principal amount of $325.0 million. The New Credit Facility includes sublimits for swingline loans, letters of credit fromand alternative currency loans in amounts of up to $25.0 million, $60.0 million and $75.0 million, respectively. The Company did not draw any amount of the New Credit Facility at closing of the New Credit Agreement. At closing of the New Credit Agreement, the Company had $22.8 million of outstanding letters of credit under the New Credit Facility. The proceeds of the New Credit Facility may be used (i) to $40.0 million.finance working capital needs of the Company and its subsidiaries and (ii) for general corporate purposes of the Company and its subsidiaries (including to finance capital expenditures, permitted acquisitions and investments). The New Credit Facility replaces the Credit Facility under the Credit Agreement, which was terminated concurrently with the Company's entry into the New Credit Agreement.

Under the New Credit Facility the Company has an option to request an increase in the amount of the New Credit Facility or obtain incremental term loans from time to time (on substantially the same terms as apply to the existing facilities) by an aggregate amount of up to $175.0 million, plus an unlimited amount so long as the pro forma secured net leverage ratio does not exceed 3.50:1.00, with either additional commitments from lenders under the New Credit Agreement at such time or new commitments from financial institutions approved by the Company and the administrative agent (which approval is not to be unreasonably withheld), so long as, at the time of any such increase, no default or event of default exists, the representations and warranties of the Company set forth in the New Credit Agreement are true and correct in all material respects and the Company is in pro forma compliance with the financial covenants in the New Credit Agreement. The Company may not be able to access additional funds under this increase option as no lender is obligated to participate in any such increase under the New Credit Facility.

The New Credit Facility matures on February 3, 2027. The Company may prepay the New Credit Facility in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in connection with prepayments of Term Benchmark loans or RFR loans, each as defined in the New Credit Agreement. The unutilized portion of the commitments under the New Credit Facility may be irrevocably reduced or terminated by the Company at any time without penalty.

Interest on the outstanding principal amount of the loans accrues at a per annum rate equal to the Alternate Base Rate, the Adjusted Term SOFR Rate, the Adjusted Daily Simple SOFR Rate, the Adjusted EURIBOR Rate or the Adjusted Daily Simple SONIA Rate, as applicable and each as defined in the New Credit Agreement, in each case, plus an applicable margin. The applicable margin ranges from 1.75% to 3.50% in the case of Term Benchmark loans or RFR loans, and 0.75% to 2.50% in the case of the Alternate Base Rate loans, in each case, based on the Company’s total net leverage ratio as defined in the New Credit Agreement. Interest on the loans is payable quarterly in arrears.arrears in the case of Alternate Base Rate loans, on the last day of the relevant interest period in the case of Term Benchmark loan, and monthly in arrears in the case of RFR loans. 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 Facilityrevolving 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, 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 Simplura 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. See Note 3, Acquisitions, for further information on the VRI acquisition.

Effective as of the 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
41

margin, or the Base Rate as defined in the agreement plus an applicable margin. 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 loans, in each case, based on the Company’s consolidated leverage ratio as defined in the Credit Agreement that governs our Credit Facility. The commitment fee and letter of credit fee range from 0.35%0.30% to 0.50% and 2.25%1.75% to 3.50%, respectively, in each case, based on the Company’s consolidatedtotal net leverage ratio as defined in the credit agreement that governs our Credit Facility.

As of September 30, 2021, the Company had no borrowings outstanding under the Credit Facility.ratio.

The New Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The negative covenants include restrictions on ourthe Company’s ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, repurchase shares, sell assets and merge and consolidate. We areThe Company is subject to financial covenants, including consolidatedtotal net leverage and consolidated interest coverage covenants. As of September 30, 2021, our consolidated net leverage ratio may not be greater than 5.00:1.00 as

The Company’s obligations under the New Credit Facility are guaranteed by all of the endCompany’s present and future material domestic subsidiaries, excluding certain material domestic subsidiaries that are excluded from being guarantors pursuant to the terms of the New Credit Agreement. The Company’s obligations under, and each guarantor’s obligations under its guaranty of, the New Credit Facility are secured by a first priority lien on substantially all of the Company’s or such guarantor’s respective assets. If an event of default occurs, the required lenders may cause the administrative agent to declare all unpaid principal and any accrued and unpaid interest and all fees and expenses under the New Credit Facility to be immediately
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due and payable. All amounts outstanding under the New Credit Facility will automatically become due and payable upon the commencement of any fiscal quarter and our consolidated interest coverage ratio may not be less than 3.00:1.00 asbankruptcy, insolvency or similar proceedings. The New Credit Agreement also contains a cross default to any of the endCompany’s indebtedness having a principal amount in excess of any fiscal quarter. Pursuant to the Ninth Amendment, our consolidated net leverage ratio was increased to 5.00:1.00 as of the Ninth Amendment Effective Date through June 30, 2022, decreasing to 4.50:1.00 as of September 30, 2022 and each fiscal quarter thereafter.$40.0 million.

We were in compliance with all covenants under the Ninth AmendedNew Credit Agreement as of September 30, 2021.2022.

Liquidity
Liquidity measures our ability to meet current and future cash flow needs on a timely basis and at a reasonable cost. We manage our liquidity position to meet our daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash of $72.7 million and accounts receivable and other receivables of $272.3 million. Liquid liabilities totaled $667.0 million at period end as detailed in the table below. Other sources of liquidity include our New Credit Facility of $325.0 million.

In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Our short-term and long-term liquidity requirements are primarily to fund on-going operations. These liquidity requirements are met primarily through cash flow from operations of $45.5 million, debt financing, and our New Credit Facility of $325.0 million. For additional information regarding our operating, investing and financing cash flows, see “Condensed Consolidated Financial Statements— Condensed Consolidated Statements of Cash Flows,” included in Part I, Item I of this report.

The Company has cash requirements of $667.0 million due in one year or less in addition to $1,319.3 million due in more than one year as of September 30, 2022. The following is a summary of our future cash requirements for the next twelve months and the period extending beyond twelve months as of September 30, 2022 (in thousands):

 At September 30, 2022
  Less thanGreater than
Total1 Year1 Year
Senior Unsecured Notes (1)
$1,000,000 $— $1,000,000 
Contracts payable (2)
243,800 243,800 — 
Interest (1)
265,899 54,375 211,524 
Transportation costs (3)
90,114 90,114 — 
Deferred tax liabilities (4)
62,666 — 62,666 
Operating leases (5)
48,153 3,349 44,804 
Guarantees (6)
48,198 47,923 275 
Letters of credit (6)
38,002 38,002 — 
Other current cash obligations (7)
189,459 189,459 — 
Total$1,986,291 $667,022 $1,319,269 
(1)See Note 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements” for further detail of our Senior Unsecured Notes and the timing of expected future payments. Interest payments are typically paid semi-annually in arrears and have been calculated at the rates fixed as of September 30, 2022.
(2)See Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements” for further detail of our contracts payable.
(3)See Note 1 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of our Form 10-K for the year ended December 31, 2021 filed on February 28, 2022 for further detail of our accrued transportation cost.
(4)See Note 12 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements” for further detail of our deferred tax liabilities.
(5)The operating leases are for office space. Certain leases contain periodic rent escalation adjustments and renewal options. See Note 18 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of our Form 10-K for the year ended December 31, 2021 filed on February 28, 2022 for further detail of our operating leases.
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(6)Letters of credit (“LOCs”) are guarantees of potential payments to third parties under certain conditions. Guarantees include surety bonds we provide to certain customers to protect against potential non-delivery of our non-emergency transportation services. Our LOCs shown in the table were provided by our Credit Facility and reduced our availability under the related Credit Agreement. The surety bonds and LOC amounts in the above table represent the amount of commitment expiration per period.
(7)These include other current liabilities reflected in our unaudited condensed consolidated balance sheets as of September 30, 2022, including accounts payable and accrued expenses as detailed at Note 8 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements”.

Our primary sources of funding include operating cash flows and access to capital markets. There are statutory, regulatory, and debt covenant limitations that affect our ability to access the capital market for funds. Management believes that such limitations will not impact our ability to meet our ongoing short-term cash obligations. Management continuously monitors our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources, or operations. In addition, our management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a material adverse effect on us.

Off-Balance Sheet Arrangements

There have been no material changes to the Off-Balance Sheet Arrangements discussion previously disclosed in our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

We have exposure to interest rate risk mainly related to our New Credit Facility, which has variable interest rates that may increase onincrease. We had $38.0 million of outstanding letters of credit under the principal amounts outstanding thereunder from time to time. We did not have any amounts outstanding on ourNew Credit Facility at September 30, 20212022.

Item 4.   Controls and Procedures.

(a) Evaluation of disclosure controls and procedures
The Company, under the supervision and with the participation of its management (including its principal executive officer and principal financial officer), evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act as of September 30, 2021.2022. Based upon this evaluation, the Company’s principal executive and financial officers haveofficer has concluded that such disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to the Company’s management, including its principal executive and financial officers,officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in internal control over financial reporting
The principal executive and financial officersofficer also conducted an evaluation of whether any changes in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 20212022 that have materially affected or which are reasonably likely to materially affect such control. Such officers haveofficer has concluded that no such changes have occurred.occurred, other than those efforts related to the remediation of the material weaknesses identified at December 31, 2021.

During the nine months ended September 30, 2022, our management continued updating certain internal controls and supporting processes to address the material weakness in our internal control over financial reporting described in our Annual Report on Form 10-K for the year ended December 31, 2021. The remediation plan put into place by management includes the hiring of a third party to lead the remediation efforts as well as the addition of resources within the organization to improve structure and help mitigate risks previously identified. Key focus areas have been identified as general information technology control (GITC) deficiencies, payroll controls, revenue process controls and risk assessment related controls.

To date, management has provided enhanced control training for control owners, and has designed and is in process of implementing our improved processes and related controls in the areas stated above. Management has also enhanced the organizational structure of the personal care segment to ensure accountability and control compliance. Management will continue to monitor the progress of these efforts to ensure timely remediation.

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(c) Limitations on the effectiveness of controls

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.


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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

From time-to-time, we may become involved in legal proceedings arising in the ordinary course of our business. We record accruals for outstanding legal matters when it is believed to be probable that a loss will be incurred and the amount can be reasonably estimated. Management, following consultation with legal counsel, does not expect the ultimate disposition of any or a combination of any such ongoing or anticipated matters to have a material adverse effect on our business, financial condition or operating results. We cannot predict with certainty, however, the potential for or outcome of any litigation. Regardless of the outcome of any particular litigation and the merits of any particular claim, litigation can have a material adverse impact on us due to, among other reasons, any injunctive relief granted which could inhibit our ability to operate our business, amounts paid as damages or in settlement of any such matter, diversion of management resources and defense costs. Interested parties should refer to Note 14,13, Commitments and Contingencies, to the financial statements included in this report for information concerning other potential contingent liabilities matters that do not rise to the level of materiality for purposes of disclosure hereunder.

Item 1A. Risk Factors.

The risks described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “Annual Report”) could materially and adversely affect our business, financial condition, and results of operations, and could cause the trading price of our common stock to decline. The discussion of the risks included under that caption in our Annual Report remains current in all material respects, and there have been no material changes from the risk factors disclosed in the Annual Report. The risk factors that we have discussed do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

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Item 6.  Exhibits.

EXHIBIT INDEX 
Exhibit
Number		Description
2.1+
2.2+10.1*
4.1
10.1
10.2
10.3
31.1*
31.2*
32.1**
32.2**
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
104Cover 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 scheduleManagement contract or exhibit to the SEC upon request.compensatory plan or arrangement.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
ModivCare Inc.
Date: November 4, 20217, 2022By:/s/ Daniel E. GreenleafL. Heath Sampson
Daniel E. GreenleafL. Heath Sampson
Chief Executive Officer
(Duly Authorized Officer)
Date: November 4, 20217, 2022By:/s/ L. Heath Sampson
L. Heath Sampson
Chief Financial Officer
(Principal Financial Officer)

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