Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ModivCare Inc (MODV, Financial) secured two new Medicaid managed care contracts in the Southwest and Pacific regions, with a combined annual contract value of approximately $52 million.
- The company submitted four state contract renewals totaling over $246 million in annual contract value, maintaining its position as the incumbent.
- Digital transformation efforts led to a 1.2% year-over-year reduction in unit costs, with digital trip volume exceeding 1 million transactions in the quarter.
- ModivCare Inc (MODV) launched a company-wide GNA reduction initiative targeting approximately $25 million in annualized savings.
- The company collected a large NCO contract receivable from 2024 of approximately $30 million a month earlier than expected, reflecting improved payer alignment and proactive revenue cycle management.
Negative Points
- Revenue for the quarter was $650.7 million, down 5% year-over-year and 2% sequentially, primarily due to known NEMT contract attrition.
- Net loss for the quarter was $50.4 million, up from $22.3 million a year ago, driven by higher interest expenses.
- Free cash flow was negative at $86.2 million, largely due to working capital build from timing of accounts payable, contract transitions, and higher interest expense.
- The company experienced the loss of a regional contract totaling $15 million in annual revenue due to a national plan's decision to consolidate vendors.
- Average monthly members in NEMT declined 19% year-over-year and 20% sequentially, impacting revenue.
Q & A Highlights
Q: Can you explain the significant use of cash in Q1 and how cash flow should be modeled for the rest of the year?
A: Heath Sampson, President and CEO, explained that the $2 million settlement was for a legacy case in the Personal Care business. Cash flow is primarily driven by EBITDA, and the company expects improvements due to business development growth, cost savings, and better working capital management. The company is transitioning contracts to more predictable structures, which should reduce working capital needs and improve cash flow generation as they exit 2025.
Q: With revenue down, why did contract receivables increase by $17 million?
A: Heath Sampson clarified that the revenue decline was due to the loss of two contracts, while the increase in receivables was related to shared risk contracts that have not yet been converted. The company is in the process of transitioning these contracts to improve predictability and reduce receivables.
Q: Can you provide more details on the strategic alternatives initiative and its urgency?
A: Heath Sampson stated that deleveraging is a top priority, and the company is balancing urgency with patience to ensure the right value is achieved for stakeholders. The strategic alternatives initiative is focused on optimizing the portfolio and capital structure, with potential divestitures being considered.
Q: Are there any specifics on the $25 million GNA savings?
A: The savings are primarily from corporate and shared service areas, with a focus on improving efficiency through automation and transformation. The majority of the savings are from labor reductions, with some vendor savings achieved earlier.
Q: Is there a possibility of positive cash flow in any quarter this year?
A: Heath Sampson indicated that due to large debt payments in Q2 and Q4, cash flow will be negative in those quarters. However, the company is focused on cost reductions and automation, which should improve cash flow generation, although specific quarterly forecasts were not provided.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
