Modivcare Inc. ((MODV)) has held its Q1 earnings call. Read on for the main highlights of the call.
During ModivCare Inc.’s recent earnings call, the company expressed a mixed sentiment. While there were promising developments in securing new contracts and advancing digital transformation, these positives were overshadowed by challenges such as decreased revenue, increased net loss, and negative cash flow.
New Medicaid Managed Care Contracts
ModivCare Inc. announced the successful acquisition of two new Medicaid managed care contracts in the Southwest and Pacific regions. These contracts are valued at approximately $52 million annually, with an expected in-year revenue contribution of around $38 million. This development is a significant step towards expanding their market presence and revenue base.
Digital Transformation Progress
The company reported notable progress in its digital transformation efforts. The self-service call-to-trip ratio improved to 36.1%, up from 35% in the previous quarter and 31% a year ago. Additionally, customer complaints decreased by 31.2% year over year, and on-time performance improved to 95.2%, indicating enhanced service efficiency and customer satisfaction.
G&A Reduction Initiative
In a bid to improve financial health, ModivCare launched a company-wide General and Administrative (G&A) reduction initiative. This initiative aims to achieve approximately $25 million in annualized savings, reflecting the company’s commitment to cost optimization.
Successful Collection of Receivables
The company successfully collected a large NCO contract receivable from 2024, amounting to approximately $30 million, a month earlier than anticipated. This early collection is a positive development for ModivCare’s cash flow management.
Revenue Per Member Increase
ModivCare reported a 16% year-over-year increase in revenue per member per month, reaching $6.35. This figure also represents a 13% sequential increase, highlighting the company’s ability to enhance revenue generation from its existing customer base.
Revenue Decline
Despite positive developments, ModivCare faced a revenue decline for the quarter, reporting $650.7 million, down 5% year over year and 2% sequentially. This decline underscores the ongoing challenges the company faces in maintaining its revenue growth trajectory.
Net Loss Increase
The company’s net loss for the quarter increased to $50.4 million, up from $22.3 million a year ago. This increase was primarily attributed to higher interest expenses, indicating financial pressures that need addressing.
Contract Loss
ModivCare experienced the loss of a regional contract worth $15 million in annual revenue due to a national plan’s decision to consolidate vendors. This loss highlights the competitive challenges in retaining contracts within the industry.
Negative Free Cash Flow
The company reported a negative free cash flow of $86.2 million, primarily due to working capital build from timing of accounts payable, contract transitions, and higher interest expenses. This negative cash flow situation presents a significant challenge for ModivCare’s financial stability.
Forward-Looking Guidance
Looking ahead, ModivCare Inc. outlined five strategic objectives: growing customer relationships, digitizing their care access platform, optimizing their operating model, increasing capital efficiency, and delivering client-centric supportive care. The company secured two new Medicaid managed care contracts worth approximately $52 million in annual value and submitted four state contract renewals totaling over $246 million. Despite the loss of a $15 million regional contract, ModivCare is focusing on strengthening customer retention and executing initiatives with measurable KPIs, emphasizing cash flow improvements, cost-saving measures, and platform modernization.
In conclusion, ModivCare Inc.’s earnings call presented a mixed picture. While there are promising signs of growth through new contracts and digital transformation, the company faces significant challenges with declining revenue, increased net loss, and negative cash flow. The forward-looking guidance suggests a strategic focus on strengthening customer relationships and optimizing operations to navigate these challenges effectively.