MODV - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to ModivCare's Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, this conference call is being recorded. I will now turn the call over to Kevin Ellich, Head of Investor Relations. Mr. Ellich, you may now begin.

Kevin Ellich

Good morning, and thank you for joining ModivCare's second quarter 2024 earnings conference call and webcast.

Heath Gutierrez, President ModivCare's is Officer; Chief today Barbara and Chief me Sampson, and ModivCare's Executive Joining Financial Officer.

press started, contained management events materially regarding statements factors that get company's during SEC. to statements involve Litigation differ we I cause in the and remind These factors release to filings these Before other uncertainties everyone Reform today's and Act. call, Information the actual will from the under forward-looking may today's expectations. risks, make in is Private Securities want that with results or

after We included additional review X turn their Heath the to will these modivcare.com. This concludes available our the will Form Barbara the begin and in hour will be extent A replay also non-GAAP discuss questions. With to will to and of guidance, is call call reconciliation website, a most non-GAAP Sampson today's will our press this financial release directly for posted measures to Heath. definition conference I'll morning, A to we'll call applicable, that, then be X-K. information financial comparable provide financial and call GAAP open of and measures results measures remarks, on opening over investors. approximately and financial with

L. Sampson

thank for Good morning, and quarter call. second you joining XXXX earnings our

our wins, revenue were our in new performance line operational to and These pricing. capabilities, results and $XXX resulting of adjusted segment driven strong upward million with NEMT in $XX million. by quarter were EBITDA go-to-market Second our expectations business in of with improved due results our primarily

and the provided solid centralization optimize continues automate structure and standardization personal care to services, we cost ongoing and Additionally, Within our capabilities omnichannel engagement network. as multimodal has a our improve long-term temporarily PCS improved our platform upon, growth. quarter target. said, but and That and has our moderated trending sequentially, we towards performance the margin increased our exited to structure cost build

revenue growth retention recruiting our reduction Advantage year-over-year a in was membership market basis monitoring membership Remote favorable lower client for of due Medicare efforts. labor our patient softening the because our to on within is and Additionally, primarily turn, client. largest

Although, results million long-term feel half we our have the Medicaid in first billion anticipated of revenue support, as under overall a and services primarily our is due to than XXXX of differentiated about of position, margins. Based business and the adjusted market RPM we first billion RPM is growth the million, we lower benefit services MA primarily lowered with results, market our half confident and $XXX second year the normalizing mid-XX% reaffirmed $X.X XXXX. on pressure, to half to $X.X from EBITA guidance guidance $XXX care personal to supplemental

expect However, seasonally $XXX adjusted to exit to we of at million rate EBITDA. of adjusted million a run XXXX $XXX

business quarter. with development. I'd the Next, some for highlights to second Starting recap like

During of the million we quarter. adding value, first contract the million to annual second won quarter, $XX in the $XX won

various to already state addition onboarded other early strong client demonstrating a In performance results. onboarding, which is contract significant and June, in we

win year. New in second confident extend our highly to XXXX. the July Jersey through the ability contracts state of the for remainder $XXX of on renewal contract largest state that from our this in our contracts extensions we Importantly, up or including received Medicaid commitment million were the XX% verbal We to half extend our of and year, a of $XXX contracts remain additional in in million state

second initiatives. we net quarter, an in $X on NEMT our segment. in strategic cost million primarily savings driven our In Next, initiatives our the realized update saving cost by

our low-cost, high-touch transportation experience medical members, needed, providers, help that contact tools and text when IVR, manage center. or through digital includes trips integrated facilities web portals, engagement apps, with messages, omnichannel Our IVA, a

in reservations year a XX% ago. quarter the digital second to example, from For increased XX% up

facility with integrated network X,XXX our we providers over are connected We're XX member like we and connected app. are portals, we're XXX,XXX we caregivers that of through systems. most providers rideshare connectable transportation NEMT with and with Uber, and Lyft fully Additionally, integrated that's only have and digitally provider, are nationwide to meaning our trip and the company over who through the medical connected management members

Additionally, with platform. largest stakeholder by XX% to API a improving real-time ratio experience, verification also year we experience these uniquely, to improve reduced the allows not manage All costs, our enables evidenced automated This call-to-trip clients. and setup have eligibility through XX% connections an API and member to clients only components connection our ago. from but the our

our more transportation place Our shifted appropriate optimal second for are client management is also initiative. modes, of has member public initiative members the strategic the needs, using trips and This members, the to biology trips that reimbursement This combined lower-cost rideshare, initiative involves for sophisticated level and which which including and modalities ensures of quarter. experience. transportation manage the in service accounted technology XX% transit, for second network most fit-for-purpose to the in multimodal AI algorithms enhancing time

and and algorithms engagement further reducing despite improving digital our payroll trip inflationary pressures. X% trip services our efficiencies AI by and to year-over-year other XX% cost by and waste us Enabling routing. per per Additionally, in purchase are lower expenses

have in initiatives and strategic optimization. rising in of $XX varying initiatives most as $XX Medicaid achieving and to been million our of We and also impact offsetting XXXX redetermination. are developed, Our care remain are of effectively million targeted health the implemented the phases utilization of in confident savings adoption

help which savings Our greater allows run on through member improves million targeted XXXX. in us data-rich cycle platform a save trip platform, revenue to $XX result member-facing achieve experience management basis enhancements costs rate which and the related in of and our efficiencies cost a ultimately in will us activities,

meet Additionally, beyond further client itself. needs trip our differentiate the ability capabilities data-rich our to

our and to and platform value that X, our $XXX become we retain to from greatly July transaction. Loan indispensable investors not combined access with an We is an strengthens On our debt programs. Shifting differentiation partner. our successful drive when B. data-rich insights completed and this incremental but this involved NEMT refinancing we new will partners expand notes critical value-based Our the Term the hard-to-reach senior of services, XXXX million members. clients our their our also care, thank cost quality only million $XXX impact position revenue refinancing. through in This of a care tech-enabled And with to secured new

I'll to turn our free Next, cash flow.

As payment. anticipated, growth interest negative cash and first half of our contracts to contracts on semiannual free due flow payables, in receivables XXXX the settlements cash was in

higher to second of cash However, half a improving is cycles. retrospective, we customers These in are the negotiated with increase generating correspond and primarily conversion positive and our in will adjustments the prepayment contract our related in be redetermination XXXX actively flows few with utilization cash Medicaid whom resets. receivables

rate are While XX% a differentiated year, deeper Medicaid our performance. free structure exiting and a normalized our optimized into has from segment COVID shareholder and our we that flow challenging adjusted XXXX. Recovering will fluctuates quarterly cash sustained, offering free cost to strong, flow been and but results throughout sustainable conversion EBITDA now cash redetermination little the extended, value. Diving delivering of expect enhance

Second our line by and sequential showed meaningful top quarter initiatives. in NEMT performance growth gross cost-saving driven meaningful our margins improvement

normalize. the overall NEMT new performance utilization normal year's by end. health to continues in service encouraged again, expect And care as we are at We

approach pricing even higher go-to-market enterprise to has challenging environment. utilization a secure in enabled offset and positioning strategic us Our to upward

cuts clients inflationary and amidst growth. payer pressure to under pressures Our maintain impacting significant are their rate their margin

and diligently care redetermination the We on resulting navigated health corresponding managing the capital. our successfully Medicaid increase utilization, have in impact working

quarter why in evidenced is retention, our contribution well We positive NEMT and recently we adjusted increase to additional both growth which Incremental are showed net performance to and EBITDA, from are through effective secured wins PCS on at positioned our March strong has and Jersey contract about significant July New As York volume became X. benefit rate adding that by impact hours. from and and growth improvement this margin on the quarter, margin with continue a second secure excited meaningful future steady consistently revenue each New we volume flows effective contracts. prospects. In the to new X, in sequential rate a increases

driven core our capabilities. standardization strengthened Over the have past incentives our year, efforts aligned centralization efficiencies, and and

transformation, during temporarily growth often the have and as occurs margins However, rapid affected. been

X community enhance our efforts second, to first, retention. have and us and empowering initiatives: and referral standardization optimizing management; hyper-local enabling and recruiting to and strategic thereby We caregiver business focused focus, accelerate our development centralization

are from Personal Program, million to and Assistance business. Only New CDPAP, and we of is positioned diversified drive the in process or while of a and As agency information healthy with people, profitable York $X EBITDA the growth we a technology return our driving a ongoing in respect remain confident environment, XX% quarters. With Personal necessary changes the to have $X million PCS book CDPAP. implemented coming result, waiver high to a there well acuity is adjusted regulatory Consumer-Directed in PCS and Care segment margin from to regarding

expertise manage Additionally, we have consumer-directed programs. as may changes to we benefit the scale from and

our MA client. churn Our RPM experience to largest continues within from business clients, higher-than-expected MCO primarily

have growth we getting clinical and the However, been impacted as share will in that invest which we in line the remain we not growth will expect normalize, believe engagement by mid-XX% offerings more reaccelerate confident and our second focus half margins the of budget reimbursement top level services, XXXX. landscape. will monitoring in remain and on shifting We allocated of for

the progress have XX months. over significant last We made

outside are Our settings. on which strategy of market, to care health demands well we services manage remains health clinical as evolving the positioned capitalize clear to the

more members proactive at home to enabling We are to a approach on their health. focused taking and are stay

We improving lowering resources for go monitoring costs to high-risk have to added our cohorts, and or devices manage beyond trips, health outcomes truly care home technology clinical in clients. and

member SDoH team. member's needs care care and and on as platform primary tech-enabled services of care appropriate proprietary health extension and differentiated care that acuity existing delivers Our based serve risk the an

our have opportunities. Also, shared our platforms. growth as that from important leverage to service also note and structure countercyclical. differentiated with our X business drive business services development, can When combined, service incremental cross-selling independently that lines while We scale lines is operate having unique cost to ability it's modernized

economic uncertainty the the care ongoing potential services downturn, stable. for the remain to about supportive expected environment our demand and is Given macro

sheet. is priority structure, our capital our debt now to our our complete, that Regarding is deleverage proactively top refinancing balance

enhance We will evaluate continuing SDoH to value operations our scaled mission optimizing and by all build options a platform. our to

As Medical, there partner developments aligned updates to our a and event potential when we provide are monetization and remain with Management Matrix about for Matrix report. will

hard members work system, anticipate previously all value clients, we effort or As this indicated, to ModivCare, our and great from appreciate year to our continue team members. provide year. I the will as the at early this and we be next we healthcare later

to about Barb, turn over I'll and Barb? results outlook XXXX. share call additional details Now who the will future for our

Barbara Gutierrez

and everyone. Heath, Thank good morning, you,

XXXX PCS a $XXX million, X.X% in revenue was quarter Second decrease growth, RPM. year-over-year by offset X% and by both driven flat at NEMT

$X.XX or largely per diluted was $XXX our An goodwill to million, due net Second was loss $XXX segment. the in million RPM quarter $XXX,XXX, adjusted share. net loss impairment

was Second EBITDA quarter NEMT revenue, adjusted or PCS. solid as RPM driven $XX as performance sequential in our improvement well by and of X.X% million, segments, in

contract of second trip repricing and were contract was more from reconciliations, quarter-over-quarter, modestly X.X% to greater to payroll increased than increased first to per is and mix million Turning expense half per of previously improved due traction for The X.X% EBITDA savings to primarily cost XXX driven to revenue savings announced other points trip and decrease of $XXX contract modestly initiatives. NEMT our increased in-year NEMT's $XX.X points, well negotiated X% monthly volume decreased than and to review $X.X was increases incrementally as $X increased Medicaid the decreased in Notably, onboarding offset sequentially sequentially of initiatives. adjusted wins, basis increased cost our due the by execution NEMT but our in which XXX that X.X%, was revenue with per to contract anticipated. million metrics basis quarter to year-over-year, while million. guidance. to gross flat. reconciliations financials. pricing trip trip while as contract our of The margin unit mix. Sequentially, relatively X% a sequentially and NEMT purchase revenue pricing and and million repricing due benefited our service sequentially membership reconciliations continued redetermination. Trip XXXX expense NEMT from segment $X.XX, to million, cost illustrates run favorable expected. Average million, services by XXXX. margin $X.X attributable $XX XX% of related decreased rate, successful

the membership with year. Redetermination impacted higher second about was quarter slightly million still revenue previously redeterminations our by impacted modestly is quarter, and to quarter, aligns Medicaid of to estimated of line remainder our XXX,XXX by second with and by from the We essentially the is our XXXX, line is on impact members, million expected approximately expectations adjusted During Medicaid the EBITDA to expectations by redetermination. impact the our to EBITDA adversely for revenue $X which than cumulative for but million expect our we approximately membership EBITDA better for tracking believe $XX Medicaid $XX is and a redetermination adjusted $X $XX impact and million overall minimal with in million in complete which Overall, range million. adjusted $XX in original $XX of million. redetermination by

Turning Personal to our segment. Care

personal Second revenue to driven growth in care in X% quarter X% and revenue X% $XXX by increased hours year-over-year million, per growth hour.

subsequent revenue this solid reimbursement March on became effective a in are rate wage growth driven earlier year. their New We increase and York hours by seeing X, increase that to minimum

$XX hour effective quarter, operating was was July million, X% the a XXX quarter, rate by approved primarily during driven controls. point care which improvement revenue, New EBITDA from of a the basis and or per Additionally, rate of $X.XX first increases adjusted on X. Personal increase expense approximately Jersey

are the We care personal by margins. in encouraged improvement

X% We to the approach in level revenue year the to momentum the XX% margins decreased $XX end. RPM year-over-year by expect confident second million. and the year will remain continue of half

year. a million, quarter, QX As the be expect adjusted to attributable revenue which and this us, the of growth primarily lower was exiting margin. With during quarter, XXXX. RPM saw $X.X Medicare the Advantage we from will was churn to indicated we solid half into also believed contract carry behind churn second first we XX% or EBITDA issues RPM earlier

XX% second of the half range expect to margins in mid RPM XXXX. in the continue We

During the our goodwill million non-cash impairment goodwill recorded for the impairment we a of we quarter, annual and segment. performed $XXX.X assessment, RPM

operating ongoing activities. a flows As our expense the cash reminder, a impairment non-cash is does and or impact not

Turning sheet and balance to flow. our cash

expenditures by consisting NEMT use operating During contract the quarter, receivables net cash to by the a million, settlement working the $X to of payables X% $XX primarily the net cash capital expected of $XX $XX we dynamics, negative was approximately $XX capital increased a certain due to million, provided quarter in by during million, million decreased by successful million position of reconciliations $XX free receivables Driven primarily which $XXX of flow of was and of annual $XX on contract Contract activities ended million, and million. to sequentially million repricing and contracts. quarter. Contract quarter-over-quarter due reconciliation revenue.

growth contracts contract terms going progress our reduced risk renegotiating receivables made will on on shared have We prepayment forward. be our and the expect of

through have visibility and run the $XX approximately collection contract in We in into of million third settlements. collections rate of receivables rate increases normal quarter addition to the retrospective our

successfully continue completed partners a overnight we cuts. XXXX our interest $XXX the and appreciate rate million senior financing see and refinancing will to if covenant net revolving cash contract risk year. Accounting results XXX notes the our half debt in of guidance. we with payment decreased X.Xx. On be rate expectations, our in XXXX As expect debt, debt, new prepayment of billion payables, our line semi-annual B, quarterly flow quarter affecting of our in in variable positive with contracts adjusted an XXXX cash for million million. larger XX facility now by cash a approximately modestly shared for ratio the in guidance of first a $XX the lowered the We there bank-defined transaction. Shifting our flow $XXX is contract half maintained contract EBITDA and $XXX cash, flow capital, settlements, $X.X advisors conversion progress in a the of second SOFR We and lending us Term refinancing, $X.X increased a XX% to in-year a mismatch points. adjusted $XX.X exiting was ended we of to anticipated $X.XX at rate flow, our gives leverage to to the are settlements second against half renegotiation cash rate year, as free made net the XXXX maximum confidence impact result leverage free will of this the which certain with XXXX. Shifting but June we the to X, of of billion to revenue million, of our and receivables, and that first solid the our mismatch to XXXX we in million billion was the support and half range basis refinancing increased from lower on to first EBITDA see given of number approximately and X.XXx Since with our the contract use range and during timing July plus unsecured $XXX with a any the of interest. The the our retrospective million on payables from We've of free cash utilization due of a credit our on our benefit the working balance performance receivables current on quarter $XXX secured million the the PCS Loan from NEMT. the amount first rate of to diligence than results of

track a are for you and than slightly qualitative for XXXX. better to Medicaid remainder our quantitative original Here continues consider line the few expectations. of in to redetermination to items

which year, EBITDA is For $XX million a impact, nearly $XX to million our we in rate now. expect all the adjusted run of

to run adjusted be our Cost second well least of in at contract digital cost We $X by new $X million The million as to investment cost. expect year, to net savings for an be incremental service rate, of meaningful and million to the and half EBITDA and contributor the continue in of XXXX. in repricings driven the the generate largely expected development half to of wins. $XX we NEMT to are majority net savings are second as a expect business year, settlements contract

for anticipate We second adjusted to of half and are a the expected out PCS contribute quarter contract million expect range normalize year. second headwind which momentum of the of utilization $XX XX% the growth We second our to XXXX. within in of the million to for million XX% coming of $X and $X EBITDA a in RPM, continued to to be in $XX current mix half million XXXX, of to

We million half in year. $X to second for of and expect million $X G&A to the invest innovation the

to over a the cumulative EBITDA contract financial summary, expect our in expectations, steady all revised diminishing financial by lower than the sequential NEMT savings, from were quarter cost benefit implementations, remote guidance. In improvement X driven performance. results driven in PCS, monitoring from consistent second with adjusted expectations. our to continue new our solid redetermination, We were impact progression primarily quarters, greater next contributing Medicaid overall in by and line our Personal care results moderately patient with and

the However, targets notable previous achieving and We the segments year both in of saw momentum the the we about and feel growth as year. quarter the these exit throughout progress we positive for rest segments. of margin

that sheet. In is thank to priority us, our and clients. With top questions. of and all please their the proactively I'd behind teammates closing, our serving our call Operator, like for members for efforts diligent refinancing of our is that, delevering our Now open balance all unwavering commitment

Operator

from question Jefferies. Brian first our comes And Instructions] Tanquilut [Operator from

Brian Tanquilut

the pretty good and I guess, results think Heath, RPM as I well, NEMT it progress like. looks as here, about

mean, the moving quarter, I and you about PCS about the the flow here? union. state forward sit, where how of performance But the So, from you over think moving as the pieces it's I just like kind between are of a path thinking cash

L. Sampson

we And things, can personal all There's our within lot of the margins And process, across there expect there, made of specifically last around as tech. you well, lot have to like to Again, months. in and a people, that NEMT. all we approaching see a well and X said care the second and we quarter, be We back segments. growing especially X exited over progress anyway. transformation the

very parts scale getting whole, well. And together, as of a we're the So, each doing and individual leverage. are

for flow. free of because NEMT to redetermination cash said, You free just though as even the of coming utilization flow we're the year, users and in can to that see generate expect out we're high cash be we contract. able And positive higher Barb

leverage job as But to table segments of So, the is in yes, from with we whole for us. our that performing. a these company a are that, the perspective, everything's where ensure with is on all X

So, look we'll at performing.

for delivering options our cash that's through current other or So, at flow, looking whether us.

evaluating everything and us ensure on for we're to everything's drive deliver and again, are that table value. to So, able we the shareholder

Brian Tanquilut

I are just your point, you how that you upon is to of a different know as mean, curious on thinking to or flow-based set? business that just say returns-based the So, that there remarks leverage when prepared maybe right? a process you've it Just viewing about, options have Heath, well, in you're target table, Or their touched you And evaluation analysis like terms everything's the that segments the I the how evaluating or you analysis? different or contribution that review? a like cash enterprise? is in

L. Sampson

Yes.

ways what our or what each value thing a us business the Xx analysis. The that at from get is whole? that at saying They're of for why So, is in where pretty all what going. performing. incremental the away, we the having we healthcare. Xx, best with they're the are of we're those of of at from businesses and to market And is a as doing, the our kind each customers it where could what's considering it's that to meeting They're a from look for So, those a happening ensure we're scale. to see simple and where know that today, be, be segments do is all We from And been options. value So, strong can today. each a we've we target. way evaluating consistent that's all that's while, right? businesses we is are with the And

to looking our what could we is again, evaluate that us, And an there we're those are today option again, priority. But options. how is for at is we So, if it's get just it. will we where

Operator

Bob from Labick from question comes CJS next our Securities. And

Bob Labick

all ask flow to the you start cash the just free I back half And of information. elaborate on to more the discussion year. wanted the and for for thanks

along like think actively receivables. on of $XX I was of maybe But said the I million resets lines to and But you when run the the working process, don't us what's a second visibility, the about or free that, rate more you're just we understand that. I stuff to the visibility typing know, fast. get normal something specifically, help the of and cash capital negotiating half? kind in that strong prepayment talking

L. Sampson

and here I color. contracts Barb start and we Slide we of I'll add QX. think lot And some can of some disclosure QX and Yes. for did expect XX, and even in deck, disclosure the investor for a gave contracts what payable receivable we

we gives So, what good a expect. of of it kind really picture

goes many with mainly as other we're but driver X a same have from margin settlement reminder, our within contracts where risk the And we're the P&L So, past the paying contracts, years, the months, right? win-win know And you have and balance over perspective. very being again, working But that at the below then capital, from then on contracts, this times with the are our and especially ensure the been just redetermination AR. performing hit, main people, sheet, us, a redesigned relationship that XX in the businesses shared because is last in that, the on we're we time well, utilization contracts, payable. for to

downside that through. protecting capital the working a and working P&L, is challenge protecting So question we've been the as but that designed the no there's there and contracts working are

were So, contemplated those and new wasn't within Unlike know those they're happen. timing down. ambiguous now little contract. it because they contemplated. was in when They're written we a past, contracts, in the But was COVID all the and the more

Barb, to And want something? statement. general add you the that's So, do

Barbara Gutierrez

Yes.

just I'll bit little add So, color. a of

So, just he that's as terms at amount all. expand not said, he of million contractual referenced amount. what in the script, a It's little that the bit a fuzzy we a on $XX to said, in

which contract So, it's and a a an successful efforts settlement, our than It's normal. been in in we've even payors few in-year where is successful earlier contractual repricing amount.

So, primarily to our we in visibility to quarter. And in repricing. it's successful $XX very good the efforts that million have third again, related

and in of contribute year. the the back in the flow So, back it's to of contractual, improvement the good half free the in third really visibility, will the in cash half year, that quarter, the

as the the be XX% perspective, year. in also, we the exit that an prepared conversion We will free will cash improving, flow commented remarks, from rate the exit be approximately

few are highlights data So, maybe you free those color bit in points to more cash on the little give a improvement and a flow. the

Bob Labick

on then, and I drivers nice think NEMT, kind obviously, there. were other payroll a and and And the of quarter, utilization

questions. the to trying quickly, have XX. it XX.X bouncing like decks are Is and the little is net addition? in -- but is bit. And figure or between longer taking What what out to slide X So, than but your last client client I'm What's growth? -- this . expectations the ending were maybe growth lower this am quarter, back looks half, I -- what membership again, of onboarding for The the changed there? a number there, I versus may it obviously, wrong apologize there if -- I going changed got

L. Sampson

to current question. good that. A onboarding. the a have membership, is our understanding very of look good deck we really at because deck of of the no, timing with couple Yes, clients things Well, on the

triangulate you around If redetermination in on that. we thought it's membership, about higher than the XXX,XXX

that right with that's And when biggest contracts we that And ultimately our the we or did when we've before. coming the estimate pushed probably -- also online have that got then other And that the -- We just driver won XXXX. general we we a items finalized that get are state stuff's -- one businesses that membership mix. of had had too into high.

economics membership a reasons The membership we that that last timing those seeing. you're expected important The and right about. just cash line item just what change flow estimate bottom quarter. I and for just talked item that's with line really is in the is the and It ultimate are ultimate

Bob Labick

see I'll one, a get in nice is good for trend mean, this. the The been a it sequentially. last quarter. in other to we've And was decline and looking strength I the substantial NEMT part of in and And on this queue payroll and was

new little to any kind Is think Are a of that. it at we still number. sense that a bit run how there great Was a was Again, should et comforting Just forward. of just cetera? get behind benefit we going about there? there, one-time How out there a I rate? plays improvement want more that?

L. Sampson

what are again, it the within detail No, tremendous. technology a is it's because the my we're they the our member meet what opening efforts place. tools processes together really ability in that are to driving Hopefully, and gave with lot of team We was all in platform comments. and helpful, are where -- our items of those doing

So that's in more real number have a we tank. the still and

the see for the comments, we're we we be to closer We're right million. thought we're that savings to to You'll that get accelerate in we the year, I expected. to going my cost And right? where continue in going also achieving then that in that to beyond would $XX what do actually expect

So the go we're linear into on as more and finish we basis XXXX. of expect more and a year kind

really been team. well the by done it's really, So

well. initiatives, trend So QX one-time all timing as QX, each the see that hard we're is paying in is There well. Again, and in continue you those services but some between that really work purchase payroll down going as of to and doing of off. from it's kind

about feel we good So it continuing.

Operator

And Chickering Deutsche from our Pito from question Bank. next comes

Pito Chickering

liquidation the years. last cash flows risk going from sort to of been back NEMT determination hot liquid the Medicaid contracting. Just has timing of and X

XX this in Have how So Is there these quarters? other why debate is from this much any the owed you on versus is collecting last contracts? around revenue these had contracts months? risk-sharing issues any quarter happening

L. Sampson

Yes.

know it's it get been happen. Coupled you're to where now. but timing this and be and benchmarked estimated to just it's utilization kind and I with It's It's think the XX this to So hot clear hitting you've going hot. But happening. happening, people kind on it, really what's the rather crescendo really was of X months. pretty continues -- contracts we've this of phone settled when kind of kind covered why many really of that isolated that right our of has on been to and payors it's the

going Again, in to a where to now, of that's it's months it's going earlier snapped with of with XXXX, settle then be and we've why chalk using in the increasing first later. said a XX the lot, was we'll part we're and on, head which of which to up is second utilization a though lot even line coming coupled those the year, So kind again, right to the be we able part year all of why delever.

So design the not the And high, timing and a really of that. as surprise. been contracts expected. yes, it's has the utilization again, but our of It's correct,

Pito Chickering

oh, -- ahead. clear Okay. To just please go be

Barbara Gutierrez

I settlements contracts. success Peter. some fact, sorry, of where add it's the in couple of in been the in some part would and our in we've a actually the Yes, it's -- reconciliation, process contracting accelerated

try so And our is so and we've that that when we're goal that in past talked actually about not to time to that distance costs those accelerate actual so much the that settlement. incurring there's and that between

those. of successful So a in we've actually accelerating been couple

L. Sampson

because what and -- are that we let's client that just we're the and knowing a utilization is just and bit -- little knowing through halfway so XX on it's does mean? Yes. that we're going And and say up. months Just

months we true-up to going X don't that. or I So settlement know, large a know, now from have we're

you ensure client And so oh, few the of big say, doing reset a be in ahead kind do at line, Barb are articulated, and we've to that's to end. let's contracts the as see been our win-win see which that a to that we've we large us that. go time. of of clients, that successful receivable payment in we those again, And large, with is data, we're So hey, relationship why, to been, have can okay, growing so going the this, don't it's a why you and

Pito Chickering

more here. quick ones X So

for So the to the risk on free there's clear, be these said quarter you last risk-sharing conversion of at just exited And cash flow no XX%, charges excluding a we RevRec XX%, year around refinancing. then that debt contracts.

just financing it's the Now of else? debt or something to Is it that wanted I the XX%, just XX%. to change XX%. understand XX%,

L. Sampson

Yes.

we couple that do XX%. didn't talked contract ago Florida we So that we -- we've in collected one's but have collect about That still on, a remainder. so quarters one open,

really one some, there's it's So we're that but small. having client

term receivables. then to we're that, And in with the that last our So was just of still one all to XX%. Outside to get that client in we down with to our from math cash conversion, new XX%. cost just that collect the expect just discussions it the we be the really we us higher do XX% take that is it's loan -- to got, -- to there transparent,

Pito Chickering

pricing here, why or Is high And the is so then me service levels? RPM rate from guess, customer? largest your on rate, it for one I churn churn last

L. Sampson

and supplemental churn one -- main large board. if talking the side, Yes. MA That's reason The clients where this is this our if across with an is with you're again, payors, happened to was. pressure specifically high is payor. benefit you're the on And what MA of the

churn them the not First winning related states. off, to

in But is So states. That's we much what is volume. the not pointed we, we offering driver. of lost businesses, data as some as Therefore, other our we out, don't MA. benefits pressure lot as it about get to the here, on unlike business. supplemental XX% and exposed is biggest issue. But RPM and the just get that deck we're they also some of It's maybe a

yes, that was So, reason. the

forward, believe MA that we be market. in to manage the able we'll through Going challenge

Operator

Scott And from question from our Fidel comes Stephens. next

Scott Fidel

might the exit with then it thought the be comment fourth that rate. to XQ similarly if I by XQ I exit wanted And close then on X.XX% helpful just Maybe with you and PCS you embedded XX% -- and sort getting in XQ, to us for as and bridge you catch question, to X.XX% XQ margins how the did quarter see if margins to to progressing or rate, the PCS and getting First the and to well? just about in guess, want of, NEMT NEMT. X.XX%

L. Sampson

with range. savings, through have, the clients continuing And that can with around Yes. X%-ish where in that onboarding of Well, starting cost contribution that you continued we margins question Bob's flows strong. margin our coupled see NEMT, of kind again, to improving then

kind kind the PCS, think that's transformed we that, it lots cost, then us, said still to uptick. also have to couple increases has not that we quarter of to that on for way plus end exited in probably big a And us. expect but we do only of also QX. for and a side. PCS, work and you because have you I about of normalized of out, driver strong the But cost basis an jump we centralization a why the with way. rate got saw it and points do. the NEMT there Again, lots it Call is the So, the in right XXX year around

So, early and here QX. started those in

So, you'll jump. that see

well. So, alluded range. that'll that to closer be And will RPM Barb range as then we'll mid-XXs more than get and as XX% of to, that in kind be

or So, have really, is in place that that's it bridge Scott? and front Is all most the that that will and helpful, we it we done have of way. of in us, actions the things trend

Scott Fidel

Yes, just sort in that costs it I see see around transformation gotten function show centralization XX%? is. some then a step and more there close have to you mean, that the more the in those offsets of that the because And PCS the just follow-up in just XQ side, or the to so that now increases get we still guys to that, from of thinking, margin are of the one should rate we on XQ, up XQ

L. Sampson

of see to because won't meaningful XX% It get but step You'll you'll up. the the step all a way the a stuff. range, up see

Scott Fidel

get I Pito, and just question, just some about it you in update the MA talked churn guys in there wanted just it. Okay. of then And your know the little second sub-benefits with Got a on, and bit to RPM.

the are retention point the books with your the this pressures volume at they've in sort sort RPM cost the what's seen looking MA some pressures or supplemental your customers? remaining at rate of reimbursement visibility into MA MA MA plans and this utilization just in of of and experiencing? are pushback then XXXX, plans NEMT just seeing that on you of benefits and given pricing pressure terms that are facing Is year, your Just then that in your given and consistent

L. Sampson

Though, RPM, I the I in is are there term money expect supplemental so can we're know us this, think is yes, of end, the that where as and dynamic in people really as pretty of more we to the to save outcomes a benefits markets It's the right what's steady, there. and don't do doing so so population-based, capabilities, do Within our on and under happening, transformation, biggest company going pressure the RPM know and exposure to really the that side to our certain really are again, what about competitive to have mean for discussions margins. The last what expect kind thing, but device-in-a-home to NEMT, outcomes-based, sustained our are be about for those and Because benefits. the other is supplemental around anymore. first, invested no couple on now years here. a well model world. not to Yes, we win-win within a clinical outcomes, MA clients going that PCS. large, that technological as for it's about in alert business been are in and question like but business no we important, going XXXX, the baked has our and is the why, we've not that. get really home we're the and spend we types. automating, even that into change people been get expect the more size expect be is the you us. Again, scale that RPM MA ensure around we in, changing into on that current impacted pressures, pressure, NEMT, going budget, with I the going someone's we technology what anticipated large population the especially even which people short we're for our and going probably time the maintain numbers do that the could current able I to is is MA with but of clinical to we're that's it's really what so I a In as the alert be on advantage but growth lot because what well clinical are offer and we under and of and those There this pricing price

Scott Fidel

it. I Got Okay. one if Then can. more,

what respectful of thought all put this if EBITDA to confidence sort it tailwinds a that you the headwinds might growth vantage just to be the the see headwinds environment back all be and Medicaid of second of nice way. sort first there's the in market to that as see and we sort obviously, mean, for in in to helpful in wanted a more half and we summarize as together, businesses. these at number of sort be key lot but your some you half, to and been getting of of we the seem a this fluidity of Just around relative I impacting need point of 'XX the

year? of sort as key the you sort So headwinds all that of see would tailwinds how heat, for next lay taking what out you and

L. Sampson

the of from in next pressures going well system the whether to outside episode, beyond, of that's and Again, and pressures, year into those healthcare home. because demands the a improves are for so evolution reduces Well, as as it cost. of clinical moving care Yes. the of helping lot societal or continue really the access just cost that tailwinds quality understanding the that that's and accelerate to cost matters

in So are 'XX only 'XX, I continue and mean, macro of beyond. those happen and will sorry, to going kind

ensure in and there, has done around culture, the the that place. A right with there, But model been to is in of XXXX, we've been ensuring really that. good meeting in a we strategies we're transformation we've has this operating work what spot the of lot a invested, that around So ensuring hard lot are what within place. specifically

you've I outcome that I and at level, doing explicitly because alert, at continued I this the work about the know I of want my piece. but you the an device they is I it's executive want the I centric. are understand and our our but doing they're customers, the now level. that contract to explicitly love execution population. that really being and Yes, kind the customer sounds love because home focus love cliche, trip done in So really whether

that's we're now. So what doing

your think, and implicit PCS So, and good then around, a little in a just I bit is example. question,

soft centralization have QX we've seeing of from and because been standardization grow. We one that platform, of you're a QX doing what but

transforming, of, dynamics done So done, had, internal from of build those a you're transformation we're never that. much reality we on are of able to of how but kind top

of about our good but internally. of short, size. So reimbursement headwinds units, these are, long going for again, I what we've each pressures, The story then to meeting wants long are beyond And we are that spot to going we're the go in growth. for ensure where customer as which a scale done tailwinds, as we just good the are, feel we're market continued to be the we and course, have transaction,

disclosed our that solid So I 'XX off today. really to run rate be earlier a we growth expect

Operator

from question JPMorgan. And from Rishi our comes Parekh next

Rishi Parekh

get payer? that contract were can it I the on a is get earlier, you how out what it payables? But me the faster? price, economics payers. for to that help reducing a least have I I win-win sure but that note make as you're changing a going you're with you you getting up those you what referring mean win win-win, First, giving you Are you also or as that renegotiations does better or or payers just also mean, understand, the early? that the earlier, are are And to actual at paid to are you price, the are this paying to pay for

L. Sampson

the side. on payable win-win, price. the But the yes, best payer the No, Yes. wants

because we're platform. that. our we've best of with estimated So But what we've to done price the offer able

thought. are re-underwrite as better not it's getting price different we these So we a what than They deals.

because the item, we other us, For perform. general, need to just in of

very to So ensure member. then you complaints. And no need population. NEMT than individual mental do the to health people different you're member There's that, on a is picking time. up on starting of that at dialysis course, A you're more

So we that. all doing are

can high. be Layer is cost, really we our status better. the reason the why lowest So is that even that customer on main

we're reset change around at going a of in we something specifically know I where renegotiation, of baked XXXX. we a two-fold. up I It's need to mean or your numbers So get that because win-win. But renewal the what lower that's XXXX when when those been by on we're question and is because to comes for juncture what the or Again, in our redetermination, price. mix happening into those a what's expect what are have renegotiation

negotiated some it's now that And we're flow up around that for the The call $X. We that going that that settle other get, incremental months. $X. contractual to it is And of earlier. not of That XX timing half estimate this for we to our item free of set cash We've specific is $X. design. or know

do And is I about it's So us. customers benefits all that an talked that of a not economic issue. large timing are our to issue. for the receptive It because earlier,

Rishi Parekh

that to to a year going just just year? every is or happen for is on, now move something just to temporary And collect receivables this those follow-up that's on this

L. Sampson

done, redetermination It's this kind the year. utilization. really normalized We do expect we exit as healthcare this year, of will be

those expect just we be a because this it's to So finished year. bullet of reasons that X

Rishi Parekh

enough. based upon this, first XX-XX. type I And your on fast did for and those second know not guidance, the went Okay. then EBITDA half split you And it's some I usually XX-XX. through But more your half, of is I like numbers apologize

what's get me you at to that guidance of big the get delta about Can maybe the walk number? midpoint through million there's to least just So a $XX the drivers to to million-$XX your guidance. or just

L. Sampson

Yes.

for us. is So And kind major of that redetermination. again, uncontrollables, peaked the large QX. and Redetermination, in this headwind

So that's one.

is that of legacy offsetting timing We're and XXXX We accelerate. wins in continues have to all of attrition. kind and of did had contract those QX sales wins. kind starts that of and we net our other XXXX The onboarding really in

through the ones So it's of the the and new on. working putting the timing losses

is big but the acceleration is items. And So primarily traction NEMT the board, one savings. then and continued those across of cost the with that's last X the

is, So on Y. in X board big and gap. a not really coming It do and really We run are it or that there's items or is need scheduled. as to place those writing

half second those that conviction to year reasons. of ability lot a our of for hit ramped have we the appears in So

Rishi Parekh

based Xx. squeeze said getting leverage target, give on If it EBITDA, I is it's On us or plan a target which can One, X-term importantly, But could covenant X-term upon timeframe more your you I there? know more upon to difference, one a which is Xx is a your you based you in. number, EBITDA as just when actual about is difference? about that

L. Sampson

and there's this predict, off, timing for important Well, us is because too. so for The us, to first options the will to be hard there. timing, get

faster. our going We're other for So right would if it's just that's take us. If the generating cash it's thing alternative, to from to businesses, going that do longer. some be

the have We time.

structure place. have a capital good in We

it So us. answer is the what's for really us, for economic evaluating best

is the down really So looking ensure it do it are timing's well. predict. At as we so and we important understand leverage we as to time, how everything bring as possible. at tough We same do can to fast that

have time. right again, we But fuzzy of the answer, it's that ensuring about the sorry So options we in for right really the at thing but many do us. front

Rishi Parekh

-- go if Sorry, could sorry, ahead.

L. Sampson

was What your question? remember. second can't I

Rishi Parekh

actual it based covenant or on EBITDA Is the EBITDA?

L. Sampson

so -- through it's us, Well, for have have We covenants. don't economics. we obviously,

economic, because are covenant abide but covenants. by ability have we those, by to feel about timing our around going meet driven the We make a to not decisions to good those we be

Rishi Parekh

matrix? evaluate that to those you alternatives, how And than third are or are surface sorry, in say just other are far alternatives the path the you alternatives? scratching I inning, fourth mean, inning, the with those when down you you

L. Sampson

like something not not really -- that. we're is because that Yes, we're anything announcing

fully the are in market. our businesses aware all of We and opportunities the

again, any matrix, already. in there anything we or want we not talked around that about we timing disclose than we're other that, So inning know the which to

Operator

Petusky And question Research. our Barrington Mike from last from comes

Michael Petusky

this super I missed matrix? about can say X your quick, and you willing. apologize, if first you're prepared but What do Heath, I you of multiple calls I remarks. minutes morning. this missed the did

L. Sampson

Yes, with last said next either quarter. or this year. what The timing year is we early later consistent

Michael Petusky

Great. Okay. I else the anything read for transcript Yes. I'll there. appreciate it. All Great. right.

of receivable contract does X how is you $XX -- So that like sort cover? or or come does just that is contracts different the primarily, going how that think teed that X many back accounts contracts million up, many to

L. Sampson

than definitely it's Yes, more X contract.

know, you concentration people. X of of As all kind really payers, the big there's

multiple So payers. it it's -- a it's to contracts, though large couple is isolated

Michael Petusky

Okay.

So like X?

L. Sampson

Yes.

Okay.

Michael Petusky

been collected or of we're And any right. no? All into just the curious, about point that then this to quarter. Has

L. Sampson

there's and flow lots So in of out. moves cash

just front to QX the So collections us. run our total. yes, we're to of in going QX not for happening about those ability at We end feel good get

Michael Petusky

Okay.

you is just to just So likely that on can ask question call I collected given rather to subject? more the the sort out think sort mean, of the $XX is one be weighted going Is to So of the I sooner half of of more the than cadence connected million reasonable later, of that second sort versus flow in a in cash a QX? be bit heavily QX estimate? free little the

L. Sampson

can look disclosure. you're No, XX, if that that, is at we Yes. gave all you right. see you Yes. Slide which why And actually

Operator

Heath remarks. does conclude to like it session. our for This question-and-answer I'd back closing turn to now any

Michael Petusky

interest participating this our morning you Thank company. call for in our and your for Yes. in

is posted presentation website. investor and on update investor Our our relations

this to follow forward before team. coming Operator, to Thanks the you months Relations. We call. and many a of our over speaking to November. third report you results If the of concludes up want our please day. our Head again. a Ellich, schedule you have great Kevin look weeks, quarter Investor call Everybody Thank call, we in to days,

Operator

conference. you. Thank We today's your for you does participation. thank conclude This

and wonderful day. may at time You this disconnect your have lines a

ModivCare (MODV) 8 Aug 242024 Q2 Earnings call transcript