DocGo - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue fell to $120.8M, down 39% y/y on accelerated migrant program wind-down; adjusted EBITDA was $1.1M and GAAP net loss was $7.6M. Gross margin held at 30.8% (vs 31.2% y/y), showing resilience despite mix-shift and higher SG&A.
• Management cut 2025 adjusted EBITDA margin guidance to ~5% from 8–10% prior, while maintaining revenue guidance at $410–$450M; gross margin expected “in line or slightly better” than 2024. This margin reset is the key stock-reaction catalyst near term.
• Executing pivot to payer/provider mobile health: >700k lives assigned for care gap closure, NPS 86, expanding into PCP, mobile mammography, and VA subcontract work; acquired PTI Health to add mobile phlebotomy.
• Near-term headwinds: Q4 adjusted EBITDA ~$10M below implied November guidance, including $9M revenue shortfall (migrant wind-down), $3.2M unexpected self-insured costs, and ~$1.5M incremental investments in care gap growth.
• Cash collections tailwind: year-end migrant AR ~$150M with ~$30M related payables; CFO expects operating cash flow to be “significantly higher” in 2025 than $70.3M in 2024 as receivables convert.

What Went Well and What Went Wrong

What Went Well

• Payer/provider momentum: >700k lives assigned and NPS 86; management highlighted strong demand and pipeline expansions (PCP, transition of care, mobile clinics), signaling durable growth vectors.
• Segment margins: Mobile Health adjusted gross margin improved y/y to 35.9% in Q4; Transportation subcontractor cost issues abated exiting Q4, supporting margin recovery into 2025.
• Cash and liquidity: Year-end cash and restricted cash reached ~$107.3M; AR declined y/y to $210.9M with DSO improving to 125 days, setting up for stronger 2025 operating cash flow.

What Went Wrong

• Guidance miss: Q4 adjusted EBITDA ~$10M below implied November guidance; $9M revenue shortfall tied to faster migrant wind-down, plus $3.2M unforeseen captive insurance costs and ~$1.5M growth investments compressed profitability.
• SG&A deleverage: SG&A rose to 39.7% of revenue (from 27.6% y/y) amid revenue decline and deliberate investment to support next-leg growth, pausing prior sequential cost reductions.
• Transportation margin pressure: Segment adjusted gross margin fell to 30.1% y/y (from 37.4%) due to residual subcontractor costs and lack of prior-year one-time benefits; mix normalization weighed on consolidated margins.

Transcript

Operator (participant)

Good afternoon, ladies and gentlemen, and welcome to the DocGo Q4 and FY 2024 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 27, 2025. I would now like to turn the call over to Mike Cole, VP of Investor Relations. Please go ahead.

Mike Cole (VP of Investor Relations)

Thank you, Operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements: All statements made in this conference call, other than statements of historical fact, are forward-looking statements. The words may, will, plan, potential, could, goal, outlook, design, anticipate, aim, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions may be used to identify such forward-looking statements. These forward-looking statements are not guaranteed future performance, and we cannot assure you that we will achieve or realize our plans, intentions, outcomes, results, or expectations. Forward-looking statements are inherently subject to substantial risks, uncertainties, and assumptions, many of which are beyond our control and which may cause our actual results or outcomes, or the timing of results or outcomes, to differ materially from those contained in our forward-looking statements.

These risks, uncertainties, and assumptions include, but are not limited to, those discussed in our risk factors and elsewhere in DocGo's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports and statements filed by DocGo with the SEC to which your attention is directed. Actual outcomes and results, or the timing of results or outcomes, may differ materially from what is expressed or implied by these forward-looking statements. In addition, today's call contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided directly as part of this call or included in our earnings release or on the current report on Form 8-K that includes our earnings release, which is posted on our website, docgo.com, as well as filed with the SEC.

The information contained in this call is accurate as of only the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events except to the extent required by law. At this time, it is now my pleasure to turn the call over to Mr. Lee Bienstock, CEO of DocGo. Lee, please go ahead.

Lee Bienstock (CEO)

Thank you, Mike, and thank you all for joining us today. The Q4 marked a period of aggressive investment as we continue to build out our care gap closure footprint in response to strong demand from our customers. In addition, we continue to invest in our current operational and management structure to support the next leg of growth across our customer verticals. We are thrilled with both the progress and the results of these programs, but these investments also come with a near-term impact on profitability. While we regularly review our expenses for efficiency gains, particularly with respect to our non-field headcount, we want to ensure that we retain the talent base that will be necessary for the next phase of our growth. Our goal is to build a 100-year company that fundamentally transforms how healthcare is delivered and achieve our mission of bringing high-quality, highly accessible care to all.

To achieve this vision, it is vital to have a clearly defined value proposition that resonates with our customers and the patients we serve. Based on our early data points, we see tremendous value creation potential from our efforts, so we plan to continue making this investment. We are adding experienced operators, top-shelf sales personnel, and continuing to make considerable enhancements in our tech stack to support the rapidly growing needs of our customer base. The scale of what we continue to accomplish is a testament to the impact we are making on how healthcare is delivered. In 2024 alone, DocGo's proprietary tech platform calculated over 15 million estimated arrival times for our customers. Our network of clinicians traveled over 8.8 million miles to facilitate care across over 1.5 million patient interactions. These included facilitating vaccinations for over 58,000 adults and children and coordinating over 99,000 behavioral health depression screenings.

DocGo was assigned hundreds of thousands of patients for care gap closure programs and scaled these programs considerably in New York and California. All told, we provided services across 31 states in the U.S. and across the U.K. I'm so proud of the fact that DocGo is recognized as one of the top innovators and places to work in healthcare. Last year alone, we received over 40,000 job applications from healthcare clinicians and corporate staff seeking to join us on our mission to provide high-quality, highly accessible care to all. A testament to the quality of our offering is our Q4 care gap closure program NPS, or Net Promoter Score, of 86. To put that number in perspective, in healthcare, above 30 is deemed good, above 50 is excellent, and above 70 is deemed world-class.

Both our patients and our customers are delighted with the quality of our programs, and we see a substantial opportunity to accelerate our growth in this market via both organic and inorganic means in the coming quarters. When working with our insurance customers, we do not go in pitching a specific Care Gap Closure Program but offer a clinical platform in a mobile setting that health plans can leverage to engage their hard-to-reach, costly patients. This translates into a very sticky relationship as we deliver strong value for our customers, and they begin to look at us as partners, not just a vendor. We see strong evidence of this given that many of our health plan partners from 2024 are looking to significantly expand their relationship with us from both a scope and scale perspective. I would like to take a minute and provide a few specific examples.

First, a major payer in the tri-state area with 3 million members that had assigned us a substantial number of lives for care gap closure advised that it now wants to expand into PCP services, specifically targeting their populations that are unattached and underserved. They are also considering utilizing DocGo's mobile clinics to bring care to communities that would benefit from increased access to healthcare services. Second, a major payer on the West Coast with 5 million members that we provided care gap closure services for in 2024 now wants to expand our relationship to include mobile mammography, PCP, mobile clinics, and transition of care services. Another West Coast customer indicated that it wants to significantly expand our transition of care program to cover all hospital discharges at two of their highest-volume hospitals in the region and include chronic care management for high-risk populations with diabetes and hypertension.

A major payer in New York with 5 million lives is expanding their assigned patient list from 10,000 Medicaid members to 40,000-50,000 unengaged members this year. Another East Coast payer with 2 million members that began with a bone density scan care gap closure program is now looking to add immunizations as well. On a macro level with payers, our customers consistently share that they are laser-focused on quality initiatives as CMS and states across the country are making it harder and harder to reach quality measure thresholds, which places downward pressure on these plans' ratings. In addition to our existing customer base, there has been a flurry of inbound inquiries recently, which can be attributed to payers looking for solutions but also a broader appreciation for the impact that medical care and care gap closure programs in the home can have.

To continue building our scope of services in this vertical, earlier this month we acquired PTI Health, a mobile phlebotomy company. We believe this is a great example of an acquisition that we can grow considerably based on demand from both PTI's existing base as well as our roster of customers expressing interest. Our immediate plans are to expand these capabilities in the New York market to meet the needs of a major national lab partner with additional geographies to follow. In our government population health vertical, our work with the migrant-related HPD contract concluded in mid-December. We anticipate that associated receivables under that contract will be fully paid by the end of Q2 of this year. Regarding our migrant-related programs with New York City Health and Hospitals, we continue to expect that contract to largely wind down in the first half of 2025.

Our accounts receivable under all of our migrant-related programs totaled approximately $150 million as of year-end, with approximately $30 million of associated payables due to subcontractors, which we expect will create a significant cash flow tailwind through mid-2025. On the business development front, we have made considerable progress at the federal level and have secured two contracts for subcontracted work at the VA. Under these contracts, we will be facilitating vital examinations for veterans while improving access to care and help remove backlog challenges that the system has been facing. We are ideally positioned to leverage our mobile care delivery model to help serve the needs of the VA, and we brought on Dr. David Shulkin, the former Secretary of the VA, to help guide the company's efforts and drive growth in the population health vertical.

I'm also pleased to report that our mobile X-ray program in New York continues to expand and has now completed over 2,000 images since inception late last year. Our hospital customer vertical, which is predominantly medical transportation, continued to perform well with customer expansions in several key markets. We signed a two-year contract with a major Texas healthcare system that enabled us to launch services in the Dallas-Fort Worth area, keeping with our strategy of entering markets with an anchor customer. We signed a two-year contract extension with a leading Tennessee-based healthcare system to continue providing services in Nashville and just announced that we are launching services in Chattanooga, Tennessee, to serve their facilities in that region. We are also expanding our relationship with the largest healthcare system in New York State.

Before I hand it to Norm, I think it's important to note that while we were able to maintain gross margins at the same level year over year, SG&A as a percentage of revenues in the Q4 was substantially greater than in recent periods. We chose and will continue to choose to maintain and invest in our infrastructure to prepare for the next growth opportunities ahead. Given the expedited drop in migrant-related revenue, we lost a lot of that leverage that comes with a higher revenue base. We view this as a temporary factor and anticipate that we will be able to complement our existing customer expansions already underway with accretive M&A opportunities that will allow us to return to a significantly higher revenue base, all while maintaining the highest level of quality during this transitionary period.

If we did not believe strongly in the growth opportunity ahead, we would be making more substantial cuts to get that SG&A percentage in line with historical levels, but that is not the case. The strategic value of being in the home and accessing traditionally difficult-to-reach populations to bring them preventative care is becoming increasingly obvious to customers, and the pace of inbound inquiries and the pipeline in general has never been stronger. This is a time to invest in our future, build critical mass, and continue to deliver exceptional quality in the field, and we could not be more excited about what lies ahead. At this point, I'll pass it over to Norm to cover the financials. Norm, please go ahead.

Norm Rosenberg (CFO)

Thank you, Lee, and good afternoon. Before I run through all of the Q4 results, I'd like to start by discussing our performance against our most recent guidance. The Q4 results were below the guidance range we announced back in November, particularly in the area of adjusted EBITDA, where our actual Q4 results fell short by about $10 million when compared to our implied guidance range from back in November. Looking at all the contributing factors, our revenues were about $9 million, or 7% below our forecast, with that shortfall entirely attributable to migrant-related revenues as we executed an orderly wind-down of some sites on a more expedited schedule and as some services were curtailed at the sites that remained operational. This revenue shortfall translated to $5.3 million of the adjusted EBITDA shortfall.

In addition, approximately $1.5 million relates to incremental investments into our Care Gap Closure Programs business, both in the cost of goods sold and SG&A areas of the income statement. Also contributing to the shortfall, there were $3.2 million of unanticipated expenses spread across lines of insurance where we are self-insured. Now let's turn to the actual results of operations for the Q4 and full year 2024. Total revenue for the Q4 of 2024 was $120.8 million, which was a 39% decrease from $199.2 million in the Q4 of 2023. The entirety of the year-over-year revenue decline related to migrant projects. As we have documented over the past several quarters, our migrant-related work peaked in the Q4 of 2023 and began to wind down in May of 2024 with the exit from the New York City-based sites.

By the end of 2024, we had exited all the HPD sites, and the remaining migrant work with New York City Health + Hospitals is expected to be substantially completed by the midpoint of this year. For the full year, revenues were $616.6 million in 2024, down 1% from 2023. Mobile health revenue for the Q4 of 2024 was $71.8 million, down 52% from the Q4 of 2023, which was the peak of our migrant-related business. For the year, mobile health revenues of $423.1 million were down 4% from the 2023 level. Medical transportation revenue increased to $49.1 million in Q4 of 2024, up about 1% from the transport revenues we recorded in the Q4 of 2023. Transportation revenues for 2024 were 7% higher than in 2023, and they have increased at a compounded annual growth rate of 32% over the past three years.

We have several recent contract wins and a robust pipeline that gives us confidence in our 15% annual revenue growth expectation for 2025 and beyond. We recorded a net loss of $7.6 million in Q4 2024, compared with net income of $8 million in the Q4 of 2023. For the full year, net income rose to $13.4 million in 2024, up 34% from $10 million in 2023. Adjusted EBITDA for the Q4 of 2024 was $1.1 million, compared to $22.6 million in last year's Q4. For the full year, adjusted EBITDA was $60.3 million, a 12% increase from $54 million in 2023. The adjusted EBITDA margin for the full year of 2024 was 9.8%, up from 8.6% for the full year 2023. Total GAAP gross margin percentage during the Q4 of 2024 was 30.8%, down from 31.2% in the Q4 of 2023.

The adjusted gross margin, which removes the impact of depreciation and amortization, was 33.5% in the Q4 of 2024, identical to the adjusted gross margin recorded in the Q4 of 2023. During the Q4 of 2024, adjusted gross margin for the mobile health segment was 35.9%, up from 32.2% in the Q4 of 2023. In the transportation segment, adjusted gross margins were 30.1% in Q4 2024, down from 37.4% in Q4 of 2023, which had benefited from several one-time items. Transportation margins were still impacted in Q4 by residual subcontractor costs in one of our larger markets. However, as the Q4 came to a close, these subcontractor costs had been nearly eliminated as we were able to fill staffing gaps via newly hired field personnel.

Looking at operating costs, SG&A as a percentage of total revenues amounted to 39.7% in the Q4 of 2024, up from 27.6% in the Q4 of 2023. However, in absolute dollar terms, SG&A declined 13% from last year's Q4. As revenues declined over the second half of 2024, we saw SG&A increase as a percentage of total revenues, reversing the operating margin expansion we had seen in the second half of 2023 and in early 2024. In addition, as Lee mentioned earlier, we invested aggressively in our payer vertical and additional mobile health services. These expenditures came in the areas of personnel, marketing, billing, credentialing, technology, and setting up and equipping base locations for our personnel in those markets. As a result, Q4 witnessed a pause in our trend of sequentially lower SG&A costs that we would expect to be temporary.

Since Q4 of 2023, when our migrant-related revenues peaked, we have experienced a concurrent, albeit smaller, sequential decline in overall SG&A. In Q1 of 2024, our SG&A declined by 7% from the levels of Q4 of 2023. In Q2, SG&A declined by another 11%, and in Q3 by another 13%. In Q4 of 2024, however, due to the items mentioned above, SG&A increased from the levels of Q3 by about 20%. While we will continue to invest in our growing business lines, we do expect that the sequential declines in quarterly SG&A will resume in Q1 of 2025. Now let's turn to our balance sheet, where we made great strides in 2024 and which will play a key role in our ability to deliver the growth initiatives that Lee has just outlined.

As of December 31, 2024, our total cash and cash equivalents, including restricted cash, was $107.3 million as compared to $72.2 million as of the end of 2023, an increase of nearly 50% year-over-year. We were able to build up our cash position despite spending close to $14 million in 2024 on stock buybacks and an additional $5 million in our equity investment in Firefly Health. We generated $70.3 million in cash flow from operations in 2024, a very significant turnaround from 2023 when cash flow from operations was a negative $64.2 million. However, the cash flow from operations in the Q4 was below our own expectations, reflecting a slower-than-expected payment experience with New York City's Department of Housing Preservation and Development, HPD. Specifically, there were two monthly invoices totaling approximately $35 million that we had expected to collect during the Q4 but did not.

We have collected significant sums from HPD so far in 2025, and we continue to expect to collect everything that is outstanding, which will further bolster our cash balance, thereby increasing our investment capital. Our accounts receivable continued to decrease due to the collections of our larger invoices and reflecting the decline in migrant-related revenues that we witnessed over the second half of 2024. At year-end, net accounts receivable were $210.9 million, down 20% from $262.1 million at the end of 2023, despite the fact that revenues were essentially the same in both years. Consequently, our days sales outstanding, DSO, was 125 days at the end of 2024, a nice improvement from 153 days at the end of 2023. Our goal remains to bring consolidated DSO into the 90-100 day range by around the midpoint of 2025 as we collect our larger and older municipal invoices.

Our largest customers are paying us regularly, and payments continue to come in, including several large payments that we have received this week as we convert our accounts receivable to cash. Finally, turning to our guidance and outlook for 2025, we continue to expect full-year revenues in the range of $410 million-$450 million. We further expect that gross margins will remain in line with, or slightly better than, those of 2024. Given the expectation for ongoing investment in our new business lines, we anticipate that EBITDA margins will be in the mid-single digits. However, with our large accounts receivable base continuing to shrink as we drive collections, we expect that cash flow from operations will be significantly higher in 2025 than the $70 million we generated from operations in 2024. At this point, I'd like to turn the call back over to the operator for Q&A.

Operator, please go ahead.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Pito Chickering from Deutsche Bank. Please go ahead.

Pito Chickering (Analyst)

Hey, good morning, guys. On the 2025 revenue guidance, last quarter, you said that the base business would be $360 million-$400 million with migrants of $50 million, with migrants winding down a lot faster in the Q4. Are you assuming that the base business is growing faster in 2025, or are you still thinking of the $50 million for the migrants in 2025?

Lee Bienstock (CEO)

Hi, Pito. Absolutely. Thanks for the question. On our last call, we shared that migrant revenues were expected to be, as you mentioned, $50 million for this year. It's safe to say that the migrant situation is quite fluid and dynamic right now at the moment. We are keeping our revenue guidance the same for this year, but I do think it's entirely possible that this shift continues to move as it has been from migrant-related revenues over to base business revenues. It is definitely possible that migrant-related revenues can be below that $50 million range, and in our forecast, any migrant-related revenues would be replaced by the base business revenues if we move those operations and personnel over to the growing base business revenues that we're experiencing right now.

Pito Chickering (Analyst)

I mean, that's a pretty big growth of the base business. I mean, and here we are, you know, sort of almost two months of, you know, wait for the year. I mean, do you think that the base business can really pick up an extra $25 million, $30 million, $40 million sort of beyond what you guided to just, you know, in November?

Lee Bienstock (CEO)

Yeah, we're very excited about where the base business is right now. As an example, since you mentioned, our pipeline for our base business is quite robust. We have about 27 deals in the pipeline for municipal contracts, almost 30, you know, 29 health system deals in the pipeline. We have over 120 payer and provider deals. We have a very robust pipeline, something the company has been working on all of last year as we transition out of the migrant-related contracts and as we transition over to more evergreen municipal work, as I was detailing earlier in the call. We have a very robust pipeline. A lot of our customers are in expansion mode right now. As I mentioned, we're investing into that, and we feel very good about the pipeline.

As the migrant-related projects are winding down, our goal is to transition a lot of that corporate personnel and that field staff over to those growing, budding base business revenues.

Pito Chickering (Analyst)

Okay. Looking at the guidance on the margin last, you know, in November versus today, it looks about sort of $17 million of investments that are new. In order to go from 8%, 10% to 5%, I guess, you know, where exactly are the $17 million of investments going in order to grow? It just seems a pretty substantial amount of investments in order to keep the revenues the same. Can you sort of give us more details of exactly why you need to spend that today versus you didn't think you had to spend that a few months ago?

Lee Bienstock (CEO)

Yeah, I think some of the big buckets, first off, we are investing and continue to invest in the tech stack. One of the things we did at the end of Q4 is we automated our patient engagement process, and that significantly allowed us to increase our bookings for our care gap closure programs. I mentioned on the last call, we came very close to that 1,000-visit-a-week exit rate on the care gap business to close out the year. We are going to continue to make investments on the tech stack. We continue to bring on well-trained field personnel, particularly LPNs, to go into the home and deliver the care. Those field personnel, we are training for a very, very wide skill set.

We do over 35 different care gap closure procedures in the home, and our clinicians are being trained for this wide scope of practice that is very attractive to our customers. We want to make sure that our field personnel are equipped with the proper technology as well as the proper training to deliver an exceptional experience in the field, and we are investing pretty heavily in that. I'll also say we've been investing in our business development personnel to continue to drive the pipeline and move some of these deals forward. We are going to continue making investments as well in our corporate staff as well as the training of the field staff. Those are the big areas.

Norm Rosenberg (CFO)

Yeah, it's normal. I'll just add to that, touching on what Lee was saying. I mean, some of this relates to discretionary spending that we're doing. We've spent a few quarters talking about the need to right-size our SG&A so that it remained a relatively close percentage of revenue to what it had been in the past. Realistically, though, as we look through it, and Lee alluded to this in his comments, you know, we're seeing areas where we're reluctant to take out certain types of infrastructure and corporate overhead costs because these are people who are going to be a big part of the growth of some of these programs that we've been talking about. It's not like we've—we certainly haven't given up on the cost-cutting.

We are deeply, deeply engaged in it, and everybody here is deeply engaged in it, and you are going to see the fruits of that as we go through 2025. We are doing it in maybe a more measured way. The trajectory of the decline in those corporate overhead costs with a change in that trajectory is one of the large reasons why we think that the EBITDA margin will be different from what we had thought a few months ago.

Pito Chickering (Analyst)

Okay. I go back to that. My first question, just running some numbers here. I mean, if, you know, before, you know, the target was sort of $50 million of migrants in 2025, we're maintaining revenues. We're saying that base business is getting better. If I'm to offset, say, $37 million of that, I'm just pulling a number out of the air, that's about a 10% sort of increase of the base business versus where we were in November. You know, are those deals already closed at this point? I mean, have you already closed 10% more deals at this point where we are today than we were in November?

I mean, you know, again, like as we are looking at the leverage here, you know, SG&A leverage and gross margin, and you know, with this margin coming down, you know, like have these deals already been closed at this point? Thanks.

Lee Bienstock (CEO)

Yes, we have closed 10% more deals at the start of this year and as we closed out the year last year. We have those additional deals in the pipeline as well that we're continuing to push forward.

Pito Chickering (Analyst)

Great. Thanks so much.

Lee Bienstock (CEO)

Absolutely. Thank you, Pito.

Operator (participant)

Thank you. The next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Hi, this is Gabby on Coursera. I wanted to touch on the $3.2 million of unanticipated expenses on the EBITDA falling short. Can you talk about what visibility you have that that won't repeat in 2025?

Norm Rosenberg (CFO)

Yeah, it's a great question. Hey, Gabby, it's Norm. You know, look, the first thing I'll say about it is that, you know, when you're self-insured, as we are, there's no question that there's a little bit of uncertainty about what those numbers are going to be like as opposed to if we were completely insured in a regular manner where we're just paying a premium, we know what the premium is going to be by and large, and then you're just trying to predict what the premium is going to be from year to year. Here, obviously, being self-insured, so there are claims that are going to come in, there are claims that are going to come in at a higher or lower level than what we had reserved for.

There's the IBNR piece of it, which is in anticipation of the claims that were incurred but not yet reported. There's always going to be a fluctuation. That number can go up, that number can go down. There are a lot of things that can happen in that regard. It's hard to say that it won't repeat, but, you know, likely the way we do the reserving is that if you're reserving in one quarter, you're probably going to be properly reserved for the next couple of quarters. The one thing I'll point out, and it's something we discuss here internally, at least on a monthly basis, we are saving, I would estimate, in the millions, if not maybe above $10 million a year by having things like workers' comp, auto, and even our health insurance as part of our captive insurance company.

In fact, if anything, we're working on potentially moving other lines of insurance like cyber and general liability, professional liability into that place as well. It's worked well for us. Generally speaking, I'll just use ambulance insurance or the auto part of it and the liability part of it as an example. It tends to be very, very expensive and very overpriced. What we found is that our experience has been substantially better than what it would be. We're consistently comparing it to the prices that are out there in the market. We're willing to accept some fluctuation in that cost. You know, this quarter we saw the downside of it, but, you know, on an ongoing basis, it's lower than it would have been. When we look at it on a project basis across time, we're definitely still well ahead of it.

Okay, great. If I could just sneak in one more, I thought I heard you mention in the prepared remarks a sequential decline in SG&A throughout the quarters of 2025. Would that be on a dollar-based metric or as a percentage?

Yeah. So actually what I had mentioned was that, you know, we had seen a sequential decline in 2024 when I start with my base as Q4 of 2023, which was a high point on a percentage basis and on a dollar basis. It came down in Q1, came down in Q2 and Q3, popped up in Q4. What I'm saying is that we would expect, we fully expect that in Q1 of 2025, in dollar terms, SG&A will be lower than it was in this past Q4 that we just reported. Now, in terms of percentage, if I look out to the year, I would say that, you know, most likely based on the way the revenues are trending, and that's obviously going to be a big deal as far as calculating the percentage of revenue that SG&A represents.

I would say Q1 will be, you know, better than we saw in Q4. Q2 will be, you know, about the same level as Q1, maybe technically higher on a percentage basis. Once you get into Q3 and Q4, we're going to get a lot closer to that level that we had seen prior to Q4 of this year. As some of that revenue comes in that Lee was alluding to earlier, some of those contract wins will translate into actual revenue. In terms of absolute dollars, we would expect that we would see sequential declines in absolute dollar SG&A throughout the year.

Okay, awesome. Thank you, guys.

Operator (participant)

Thank you. The next question comes from Richard Close with Canaccord. Please go ahead.

Richard Close (Analyst)

Yeah, thanks for the questions. Excuse me, I jumped on late. Lee, can you tell us what the migrant revenue specifically was in the fourth quarter and the full year? Just trying to see if, like, the core met that $240-$260 type of number that you guys were looking for.

Lee Bienstock (CEO)

Absolutely. Hi, Richard. The migrant revenues in Q4 were approximately $55 million. For the total year, to answer your question, it was about $370 million. We did hit, we had shared on our previous call that our expected range for the base business to be $240 million-$260 million, and we did hit the revenue guidance for that base business range.

Norm Rosenberg (CFO)

Yeah, we were about $246, $250 in that area.

Richard Close (Analyst)

Yep. Okay, great. Thanks. Sorry for jumping on the call late there. Norm, didn't, I'm trying to remember, going through my notes here quickly, but didn't something on this insurance pop up a couple of years ago, I want to say? Is there any way to prevent this, you know, just like based on what you're doing with guidance and whatnot to, you know, be more conservative so we don't have something like this pop up?

Norm Rosenberg (CFO)

do not, I am not sure what you are referring to about a couple of years ago, but as far as looking forward and having something like this not pop up, the best way we can prevent it from popping up again is to have it pop up now. What I mean is being conservatively reserved, taking, you know, we have not been at the captive insurance game for very long. It has been a couple of years. As we get more mature, as we see the way things develop, the timing of things, for example, if you have got some ambulance-related accident and you see how that typically develops over time, that in year one, the claim is this, in year two, the claim goes there, different things change.

You know, we're looking at things like frequency and severity and all the different stuff that, you know, an old insurance guy like myself will like to think about, and we have a very good team that works on it. As we get more conservative about the reserving and as we make sure that we build an IBNR for claims that haven't happened, that allows us to sort of use the accounting to smooth it out as opposed to simply being in a situation where as claims come in, I record it, and then you're simply subject to the timing of when claims come in. This thing I would hope would take us a very long way towards doing exactly that, which is to sort of smooth out the insurance costs as we go.

Richard Close (Analyst)

Okay. You know, obviously you guys are successful in citing new business. The pipelines and all the units or divisions, you know, seems robust in all three of them. You know, one thing that sort of people have had a problem with, you know, since you guys have been public is, you know, no shortage of new business, but, you know, there's like upfront costs and, you know, these investments. Is there, you know, given the investments you're making now, I guess, if you're executing on your pipeline, do you think you're going to have to have another, you know, bucket of investments in the future to execute on that pipeline, you know, if you win it? Just, you know, how are you guys thinking about that?

Lee Bienstock (CEO)

Absolutely. It's a great question, Richard. I think first and foremost, we have essentially changed a bit, and we've evolved, frankly, our ethos of really the pipeline of deals we're pursuing, right? The company was very heavily oriented towards perhaps crisis response, emergency response, you know, as part of our ambulance DNA. A lot of the municipal mobile health projects that we were winning and pursuing were crisis-related. As a result, they start and then they sunset, they start, they sunset and require investments. Our pipeline right now is really focused on evergreen opportunities. Our care gap closure business is here today, will be here towards the end of the year. In fact, it increases as the year progresses, as health plans try to make more and more progress as they go throughout the year.

Unfortunately, there are always patients that are unengaged, unattributed, have access issues, have chronic conditions. Those lists we've seen carry from one year to the next already, from last year to this year and become an evergreen business for us. As we convert those patients into PCP patients, now they're with their long-term primary care provider and so on and so on. On the municipal side as well, we're looking at opportunities where we can be providing services to our disabled veterans, to patients that are located in hard-to-reach communities, but not necessarily crisis response, but rather health evaluations, health screenings, and other preventative care. Those are really the sort of the evolution of the company is really moving towards long-term preventative proactive care.

We really started building that pipeline last year, and it is starting to come to fruition at the end of last year and into this year. We are very, very excited about that. I think you are going to see us continue to build out that pipeline as our bandwidth frees up from the migrant-related work. We are going to pour more and more of our resources into those opportunities, and you are going to see the pipeline build from there. Those will be evergreen and will require less, you know, start and stop and sort of investment to get going. I do think we will invest as we win contracts. You know, we are going to acquire new vehicles.

You know, we just acquired a fleet of ADA accessible vehicles to be able to provide care to disabled veterans as an example as part of our expansion there. You know, we'll see how big that gets, but these are evergreen-style programs where, you know, supporting our veterans, you know, will be here. Those are the types of opportunities and pipeline we're pursuing, and that will be an evergreen pipeline, which I think the company will benefit very greatly from.

Richard Close (Analyst)

Okay. My final question, maybe on transportation, you know, how are you guys thinking about transportation in terms of like the long-term growth rate of that part of the business?

Lee Bienstock (CEO)

We're very excited about the growth opportunities for the transport space. As Norm mentioned, we've been growing that business over 30% compounded annually for the past three years. We do have, as I mentioned, just about 30 health system deals in the pipeline. A lot of those are transport-related contracts. We think that business has opportunity to continue to grow. We have a 15% growth rate target on that business. I will say growth there does come in sort of a stepwise function where we sign new large health systems and we bring them on. That adds considerably to the top line, and we go and work on the next one, and then we add that one. As we are signing these health systems, you know, we bring them on. I think our team is doing a wonderful job on that.

We have our tech platform, I think, is frankly the best in the industry. We have health systems that want to work with us, A, because the quality of our service and the team in the field is spectacular, but also our tech platform is just at the vanguard really of what's being developed in the industry. We are utilizing that tech platform to also essentially manage our growing fleet in the field that's handling these care gap closure programs. We have really done a great job expanding the tech platform from transport to the mobile health side of the business where we now have, as I was mentioning, we closed out the year just about at 1,000 care gap closure visits in one week at the end of last year. That is a lot of units out on the field.

They're going, we're making sure that we manage their, that symphony, as I call it, in the field, the right clinician with the right diagnostics for the right patient need, the right care gap closure, trained to do a great quality service. We're utilizing that tech platform that we developed on the transport side, and we think we're very, very excited about the opportunity to really take that tech platform and apply it to the mobile health side, which we've only just scratched the surface. I think the transport business will continue to grow. I'm very excited about the opportunity to leverage the tech platform to manage the ambulances in the field, but now to leverage the fly cars, as we call them, in the field on the mobile health space, which again, we're only scratching the surface.

I think the market will very much appreciate the tech platform now in the mobile healthcare space as we expand it into that opportunity.

Richard Close (Analyst)

If you're expecting 15% growth, Norm, how should we be looking at a quarterly progression in 2025? Because, you know, third quarter was like 1.7, if I'm looking at it right, and, you know, like 1-2% here in the second or fourth quarter.

Norm Rosenberg (CFO)

Yeah. I would say, you know, at the risk of sounding very linear, I think that it's going to be somewhat linear. I say that because, you know, look, there are a couple of hospitals in, I'll say, in New York State that we are now servicing. We haven't put out the press release yet because we're waiting for sign-off, but the activity has already started. There are hospital systems that we have begun to work with, and those will ramp as we go. There are a couple where we're, you know, we think we're at the one-yard line or two-yard line going in. Those will probably, obviously, not be a Q1 event, but that'll probably hit sometime in Q2 and then ramp into Q3 and Q4.

Just based on what the pipeline looks like, you're going to get the full benefit of that once you get to Q3 and Q4, especially Q4. I would anticipate that it'll sort of work its way up sequentially throughout the years. I would expect higher transport revenues in Q1 than in Q4, then higher in Q2, Q3, Q4, and so on and so forth as we exit 2025.

Richard Close (Analyst)

Okay. Helpful. Thanks.

Mike Cole (VP of Investor Relations)

Thank you. The next question comes from Ryan McDonald with Needham Company. Please go ahead.

Hey, this is Matt Shea for Ryan. Thanks for taking the questions. You know, on the migrant revenues for 2025, is there any risk that the remaining portion gets further accelerated or pretty good visibility from here? I appreciate that if it winds down faster, you'll be able to replace that with core revenues. Given there's the cost impact while you transition, trying to gauge the risk of wind down getting further accelerated and not weighing on the EBIT outlook.

Lee Bienstock (CEO)

Yeah. Hey, Mattis. Lee, I'm happy to take that question as I've obviously been very intimately involved in the whole process here. I think, yes, it's absolutely possible that it could be less than $50 million considering, you know, the current administration and what's going on in the political landscape. It's absolutely possible that it could be less than $50 million. I would say we would transition that personnel, particularly to the opportunities I outlined in the prepared remarks. That's why we are basically adjusting that EBITDA guidance that we gave at the end of last year down, right? It will cost us investment, and it will cost some margin to transition, as you mentioned, from that staff to new opportunities.

That is why we're accounting for it, in part, with the lower EBITDA margin guide that we just adjusted on this call.

Matt Shea (Analyst)

Okay. Sounds like it's captured in the outlook then. Maybe given the faster expansion into payers, would love any update on your targets for the payer business. I know you'd previously mentioned 1,000 care gap run rate in 2024, and that could set up for, I think, 65,000 care gap closures in 2025, hoping to get 10,000 primary care patients and 70,000 patients on the virtual care management. Do those targets still stand, or are you thinking about where the business could get to now that you're accelerating the payer rollout?

Lee Bienstock (CEO)

Yes. I think those targets still stand. We'll update them as we progress throughout the year here. I think we think about it in a few ways. Yes, we came very close to that 1,000-a-week visit at the end of last year. Currently, we're at about a 400-500 visit per week run rate right now to start the year. The beginning of the year is seasonally sort of the introductory period for the year for the health plans. We are matching their cadence. We think our exit rate for the end of this year will be over 2,000 visits per week, to give you a sense of the scale, as we help health plans close out the year and address patients that indeed still have open gaps.

We think that we'll continue to step up the care gap visits, and the 65,000 care gap visits is absolutely the goal. I'd also say that we brought on PTI Health that's doing mobile phlebotomy in the home, and we're looking at ways to also expand their scope of services now that we've brought them into the DocGo family. We'll continue to update those metrics. Our contracting is progressing with the health plans to evolve into the PCP provider as well as closing care gaps. Our goal remains the same there as well to enroll 10,000 PCP patients. As we mentioned, about 70,000 patients monitored as well. We'll continue to update as we sign contracts. As I mentioned, a lot of this pipeline was included as we gave our targets and guidance for this year.

As we continue to ramp and scale, you know, we'll continue to update those.

Matt Shea (Analyst)

Appreciate it, Lee. Maybe just one last one on the municipal business. I guess two parts to this question. First, last quarter, you talked about, I think it was called Project Prime Initiative with the goal of identifying large contractors that might benefit from subcontracting population health to DocGo. Anything you can comment on that? I know early 2025 was maybe where we might start to see some progress. Would love any update there. Then second, just broadly, given the municipal programs can be influenced by, you know, federal policy and dollars, would love to just hear your thoughts on how the changes in Washington could potentially impact your municipal business or just government business in general. Thanks, guys.

Lee Bienstock (CEO)

Absolutely. Our Project Prime, as you mentioned, where we are partnering and signing contracts with already existing service providers to municipal entities such as the VA is going well. As I mentioned, we signed two subcontractor contracts to provide services for current contractors that are providing services to the VA. That is kind of how we are ramping into that space. As I mentioned, we signed two contracts, and our team, again, has a pipeline of other opportunities that we are working on. It is progressing. As I mentioned, we did sign two contracts already as part of that initiative, and we are going to continue to invest there as well. You know, that is the goal.

In terms of the messaging coming out of Washington, I think, you know, right now, our goal really has been to go after evergreen opportunities that are imperatives for the municipal government, have been over decades, and we believe will continue to be so. As an example, providing care for our veterans is a really good example. We'll share other ones as we start to progress the pipeline through. Those are great examples of ones where it's pretty apolitical, bipartisan, providing medical care for our veterans. It has been there for decades, and we believe those are exactly the type of opportunities that will be there in the future and the ones, the evergreen style municipal programs that we're pursuing. I think that's essentially, you know, our view right now in terms of where things are progressing on the municipal side.

We're focused on providing tremendous ROI, bringing care to populations that don't have good access to care. We do it in a more cost-effective way, which, again, also aligns with some of the messaging coming out of Washington right now, where we actually do it in a more cost-effective, better ROI way where we're bringing dynamic care to underserved populations and, as a result, improving health outcomes, which lowers the total cost of care. We feel like we're really on the right side of the trend here.

Operator (participant)

Hello, Ryan?

Matt Shea (Analyst)

Thank you.

Operator (participant)

All right. Thank you. The next question comes from David Larsen with BTIG. Please go ahead.

David Larsen (Analyst)

Hi. I think you said there was $55 million of migrant revenue in the quarter. So it looks like your base was maybe $66 million in the quarter. If I annualize that, you're at $260 million in base revenue. And then if I add $50 million to that for migrant revenue, that puts you up around $313 million for the year. I think the guide is like $430 million. So there's a delta there of like $120 million. If we assume 1,000 care gap visits a week at $300 a pop, I think that's around $15 million or $20 million, which means there's another $100 million of revenue to capture. Just any, like, how much of that is you got to go win it versus is under contract now? Just thanks.

Any sort of conviction you can provide around, yeah, that's identified, it's in the CRM, we're in late-stage discussions for that, for like $50 million of that $100 million or half of that's already signed. Any more color would be very helpful. Thank you.

Norm Rosenberg (CFO)

Hey, David, it's Norm Rosenberg. I'll start and maybe Lee, you can fill in some of the blanks. The first place I would start is on a transport business where we did about $194 million. We're looking at about $225 million for next year. That's about a $30 million increase. We feel really good about that number. Taking them line by line, I think if we look at everything that's currently contracted, we ought to be able to get to that number. Now, of course, that's going to depend on how quickly we're able to ramp up or increase some of the volumes in some of the places, right? Everything is subject to that kind of thing, but that's contracted. That's called for.

In fact, if anything, some of the stuff in the pipeline that Lee alluded to was not in that $225 million and would be incremental to that. There could be some potential upside there. Otherwise, in terms of the different businesses that we have, obviously we have, you know, the PTI company that came in, which combined with HPP, it's a little bit higher than maybe your $20 million, the payer program, a little bit higher than your $20 million number. In general, around some of the other places, I would say that most of it is already accounted for or closed. I would say there's probably still, you know, in the $25 million range or so, largely on the municipal mobile health side, where those things aren't contracted yet.

They're covered by RFPs, meaning I can point to certain contracts where if those came in, we would get there. You know, we're cognizant of the fact we're already two months into the year, so we'd have to be in that kind of situation. I would say the go-get probably is maybe that $25 million within the municipal mobile health space in particular.

David Larsen (Analyst)

That's very helpful. Thanks very much. I'll hop back on the queue.

Operator (participant)

Thank you, David. The next question comes from Michael Lattimore with Northland Capital. Please go ahead.

Hi, this is Adit on behalf of Mike Latimore. Could you give some color on the cash flow from operations? Like, what do you expect the cash flow from operations to be as a percentage of EBITDA?

Norm Rosenberg (CFO)

Sure. I would say, let's go back and look at this year. This year, our cash flow from operations, which you'll see in the release, and it's in the 10-K, which we filed as well, was about $70 million. That compares to about $60 million of EBITDA. It just sort of gives you an idea that our cash flow from operations this year outstripped the EBITDA number, even though EBITDA obviously is a proxy or just EBITDA as a proxy for cash flow. Because of the fact that we had some good working capital movements where we had collections of receivables and the receivables went down by about $50 million year over year, we were able to outstrip that number with the operating cash flow.

In our script here, in our prepared comments, we talked about how we would expect that, you know, regardless of where the EBITDA margins are, we fully expect that we'll be able to generate some significant, and I guess earnings release mentioned as well, we expect to generate some significant cash flow from operations, even more so than we did in 2024. That is simply because of the fact that we've got a lot of this migrant revenue out there that is, or the migrant AR out there that started to flow. One thing to point out is at the end of the year, we had about $150 million in accounts receivable from those migrant programs between New York City Housing, New York City Housing Preservation Development, the HPD, which was about a little bit more than $70 million, and H&H, which was about $79 million.

Between the two of them, about $150 million. Against that, we have about $30 million in accounts payable. There is a big number that is out there that we are in the process of collecting that should be able to help us drive that operating cash flow higher.

Got it. What was the subcontracted labor expense as a percentage of total?

Oh, so that's come down quite a bit. At one point, I think I would say our peak was probably the fourth quarter of last year. That number was over 40%. That was at the height of the migrant projects and while we were still trying to get up to speed with our own W-2 labor. If I look at it across the company, I would say the number is probably about 24%. So it's dropped pretty, pretty significantly. Now, I did mention we have subcontracted labor costs on both the mobile health and the transport side. On the transport side, that number was, on the transport side, that was a little higher than it should have been in one of our markets. So that suppressed margins, I would say, on the transport side instead of being 30.1% for the quarter, probably would have been closer to 32%.

Otherwise, you know, that's gone by now. Those subcontractors are not in there anymore. I would expect that that subcontractor, as a percentage of revenue, will continue to decline into Q1. It'll be under 20% of revenue.

Got it.

Lee Bienstock (CEO)

Thank you.

Operator (participant)

Thank you. The next question comes from David Grossman with Stifel. Please go ahead.

Aidan Conniff (Analyst)

Hi, guys. This is Aidan Conniff on for David. Thanks for taking my questions. I was wondering if you could provide some additional detail on just your assumptions for total OpEx for the year.

Norm Rosenberg (CFO)

Sure. You know, again, I think the way to look at it is as a percentage of revenue, which is how we're trying to back into it and figure it out. Also, let's look at it in context of what we did in Q4 and then the prior quarters. Our assumption is that gross margins will be pretty similar to what we saw in full year 2024. For the full year 2024, we did 34.6%. We think we'll be at about 35%, maybe a notch higher, given that there are a couple of different things that were suppressing that number to get us to the 34.6. We think that the natural number should be 35%. Important to note, as Lee did in his comments, that, you know, we have not seen a deterioration in the gross margin, even as the revenue number has come down.

Marginally or on a variable cost basis, we're certainly hanging in there and doing pretty well. If that's the case, and then we think we're talking about a mid-single digit, let's call it 5% EBITDA margin, that would mean about 30%. SG&A would be about 30% of revenue on the average as the year went on. For some context, as we mentioned in this quarter, in this fourth quarter, with all of the different things that are added in, we were at about 39.7%. We were under 30% in the third quarter.

I think that where we're going to come in will be a little bit higher than where we had trended, let's say, in Q2 and Q3 of this year because of some of those investments that we've talked about, but definitely well below the level that we saw in Q4 as a percentage, even as revenue would decline as some more of the migrant stuff starts to move away. As we get into the back half of the year, where some of this core business really kicks in with its growth and the revenue number would move sequentially higher, that percentage will probably be lower. On a full year basis, if you look at it top down, I think that number should be at about 30% of revenue.

Aidan Conniff (Analyst)

Good. Thanks for that. Thanks for the details on the pipeline. That was helpful. How are you guys thinking just about conversion of that pipeline over the course of the year and just how deals come in over time?

Lee Bienstock (CEO)

Yeah, absolutely. We do see it really does depend on sort of the vertical, the customer vertical. I think we, at the end of last year, saw a flurry of activity and deals on the payer side. I think we anticipate that again this year. We do have some deals that we're operationalizing right now. I also think at the end of the year, plans really start to focus on really their unattributed members, their unengaged members, and really closing care gaps to close out the year because that's what they're measured on. We really gave a big push at the end of last year. We were successful doing that. Some deals have continued to come in to start this year.

I think at sort of Q3, Q4 as well, we will start to see again an uptick in the filling of the top of the funnel for that pipeline. On the medical transportation and hospital system side, it's pretty consistent throughout the year. As Norm mentioned, we have a number of opportunities that are at the one-yard line right now. We feel very, very confident about our deals we've already signed that are in sort of ramp and expansion mode. In that particular medical transportation and the hospital system side, it's pretty uniform as we go throughout the year. On the municipal side, one of the goals of Project Prime is to smooth out, so to speak, the pipeline where municipal work tends to be very RFP-driven and binary and maybe more lumpy.

Our work with the Prime vendors is going to help us to smooth that out as we start to help them expand contracts or services that they're already providing in the field. That is part of that initiative. I think we'll start to see some smoothing of the pipeline. We're continuing to add opportunities towards the top of the funnel. We signed a flurry of activity towards the end of the year, beginning of this year. We're going to continue to work that pipeline as aggressively as we possibly can.

Operator (participant)

David?

David Larsen (Analyst)

Hi, Stec.

Operator (participant)

Thank you. There are no further questions at this time. Let me turn the call over to Lee Bienstock, CEO. Please go ahead, sir.

Lee Bienstock (CEO)

Thank you so much. Thank you to everyone for joining us and be well.

Operator (participant)

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.