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MI

ModivCare Inc (MODV)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 service revenue fell 4.9% year-over-year to $650.7M and declined sequentially versus Q4 2024 ($702.8M); adjusted EBITDA was $32.6M (5.0% margin), essentially flat YoY but down sequentially, with the net loss widening to $50.4M on higher interest expense .
  • Segment trends: NEMT revenue declined to $449.0M (-6.3% YoY) but expanded adjusted EBITDA margin to 6.2%; PCS revenue was $181.8M (-1.0% YoY) with adjusted EBITDA up 8.5% YoY; Monitoring revenue was $18.1M (-9.8% YoY) with adjusted EBITDA margin at 28.8% .
  • Liquidity and cash: operating cash flow was a use of $82.1M; net contract receivables increased to $108.5M, partly reflecting shared risk contracts; management collected ~$30M in April on a 2024 MCO receivable and is transitioning contracts to faster settlement terms .
  • Guidance stance: the company is not issuing formal FY2025 guidance, focusing on execution; G&A cost actions target >$20M annualized savings (updated to ~$25M through April initiatives) .
  • Stock-relevant event: Nasdaq notified MODV on May 5, 2025 that MVPHS was below the $15M threshold, triggering a 180-day compliance period to Nov 1, 2025—management is monitoring options to regain compliance .

What Went Well and What Went Wrong

What Went Well

  • NEMT margin resilience: Adjusted EBITDA margin expanded to 6.2% (up ~50 bps YoY) on pricing discipline, automation and cost initiatives; revenue per member per month rose 15.5% YoY .
  • Commercial execution: New NEMT wins (two Medicaid MCO contracts, ~$52M ACV; ~$38M in-year revenue) and four PCS agreements (40–50K monthly hours) support 2025 pipeline; CEO: “We remain the platform of choice…” .
  • Digital automation gains: Self-service call-to-trip ratio reached 36.1% (from 31% YoY), on-time performance 95.2%, complaints -31.2% YoY; expansion of Intelligent Virtual Agent and AI QA tools improves unit costs and routing accuracy .

What Went Wrong

  • Top-line/volume pressure: Service revenue fell to $650.7M (-4.9% YoY), with NEMT trips and Monitoring membership down; Monitoring revenue -9.8% YoY and PCS hours -2.1% QoQ .
  • Cash flow and leverage: Operating cash flow was -$82.1M; revolver remained fully drawn; interest expense nearly doubled YoY to $38.8M; net loss widened to $50.4M .
  • Contract attrition/mix: NEMT losses (including a ~$15M regional contract) and MA exit in certain PERS markets pressured volumes; AR rose despite revenue declines due to shared risk structures not yet converted .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$702.0 $702.8 $650.7
Diluted EPS ($USD)$(1.87) $(1.64) $(3.52)
Net Income ($USD Millions)$(26.6) $(23.5) $(50.4)
Operating Income (Loss) ($USD Millions)$5.3 $4.3 $(4.4)
Total Operating Expenses ($USD Millions)$696.8 $698.5 $655.1
Adjusted EBITDA ($USD Millions)$43.2 $40.4 $32.6
Adjusted EBITDA Margin %6.2% 5.7% 5.0%

Segment revenue

Segment Revenue ($USD Millions)Q3 2024Q4 2024Q1 2025
NEMT$492.3 $495.0 $449.0
PCS$188.5 $186.6 $181.8
Monitoring$19.4 $19.2 $18.1

Segment profitability

Segment Adjusted EBITDA ($USD Millions)Q3 2024Q4 2024Q1 2025
NEMT$30.6 $27.6 $27.8
PCS$15.7 $17.5 $12.2
Monitoring$7.1 $6.8 $5.2

Segment margins

Segment Adjusted EBITDA Margin %Q3 2024Q4 2024Q1 2025
NEMT6.2% 5.6% 6.2%
PCS8.3% 9.4% 6.7%
Monitoring35.4% 35.4% 28.8%

KPIs (NEMT)

KPIQ3 2024Q4 2024Q1 2025
Total paid trips (thousands)9,418 9,543 8,458
Avg monthly members (thousands)30.023 29.382 23.554
Revenue per member per month ($)5.47 5.62 6.35
Revenue per trip ($)52.27 51.87 53.09
Monthly utilization (%)10.5% 10.8% 12.0%
Purchased services per trip ($)40.75 40.42 40.69
Payroll & other per trip ($)5.60 5.67 6.14
Total service expense per trip ($)46.35 46.09 46.83

Cash and working capital snapshot

MetricQ4 2024Q1 2025
Cash & cash equivalents ($USD Millions)$112.6 $116.0
Revolver balance ($USD Millions)$269.0 $270.7
Net contract receivables ($USD Millions)$95.2 $108.5
Operating cash flow ($USD Millions)$30.0 $(82.1)
Free cash flow ($USD Millions)$24.7 $(86.2)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal guidance (Revenue/EBITDA)FY 2025None issuedNo formal guidance; management focused on executionSuspended guidance
Adjusted EBITDA (FY 2024)FY 2024$170–$180M affirmed in Nov 2024FY2024 completed; not reiterated in Q1 2025Maintained (historical)
G&A savings target (annualized)2025“> $20M” targeted cost reductions~$25M launched in April; majority labor reductionsRaised
Liquidity actionsQ1 2025—$105M new financing in Q1 (30M long-term, 75M short-term)New financing executed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Automation/AI & digital transformationQ3: transformation and cash conversion cycle improvements; reset shared-risk thresholds . Q4: Board refresh with AI expertise (David Mounts Gonzales) .Self-service S-to-T 36.1%, AI QA tools, IVA expansion; unit costs -1.2% YoY; on-time 95.2%; complaints -31.2% YoY .Improving execution (automation ramp)
Contract pipeline/wins/lossesQ3: positive PCS growth, NEMT pipeline and resets . Q4: covenant relief and collections .2 new NEMT MCOs ($52M ACV), 4 PCS agreements; loss of ~$15M regional contract .Mixed: wins offset attrition
Working capital & ARQ3: net receivables down $55M; cash OCF +$9.3M . Q4: net contract receivables $95.2M .Net contract receivables to $108.5M; OCF -$82.1M; April collection ~$30M; shift to faster-settlement models .Transition phase; improving path forward
Capital structure/deleveragingQ3: refinanced $500M Notes; term loan $525M . Q4: covenant holiday, liquidity actions .Priority to delever; Board Strategic Alternatives Committee overseeing potential divestitures .Pursuing asset actions
Monitoring segment evolutionQ3: RPM margin ~37% . Q4: margin 35.4% .Medicaid LTSS growth (e.g., Indiana +45% referrals), condition-based contracts (3 active); margin 28.8% .Mixed: revenue headwinds, Medicaid momentum

Management Commentary

  • Strategic framework: “We are aligning our updates to 5 enterprise objectives: grow/retain customer relationships; digitize/automate care access; optimize operating model; increase capital efficiency/deleveraging; deliver client-centric supportive care.”
  • Commercial wins and pipeline: “In NEMT, we secured 2 new Medicaid managed care contracts… combined annual contract value of approximately $52 million… We also submitted 4 state contract renewals totaling over $246 million.”
  • Automation impact: “Self-service call-to-trip ratio reached 36.1%… automated intake and trip adjudication contributed to 1.2% year-over-year reduction in unit costs… on-time performance rose to 95.2% and missed trips decreased by 20% QoQ.”
  • Capital efficiency: “We transitioned several large customers to faster settling fee-for-service-like models… in April, we collected… approximately $30 million… a month earlier than we expected.”
  • Guidance stance: “We are not issuing formal guidance in 2025… focused on executing against measurable initiatives.”

Q&A Highlights

  • Cash flow cadence: Management acknowledged negative OCF in quarters with lumpier debt payments (Q2/Q4), guiding investors to evaluate on an annual basis as working capital improves through contract conversions; settlement-related ~$2M charge tied to PCS legacy case was clarified .
  • AR increase despite revenue decline: Driven by shared-risk contracts that “grew in accordance with the way the contracts are structured,” with conversion underway in Q1 and into next year .
  • NEMT pricing/mix: Revenue per trip up 2.4%; revenue per member per month up 13% sequentially—primarily mix/pricing; new wins expected to be beneficial; contract loss due to payer consolidation viewed as non-representative .
  • Strategic alternatives timeline: Deleveraging is a top priority; intent to sell at the “right value at the right time,” balancing urgency with stakeholder outcomes .
  • G&A savings detail: ~$25M annualized savings primarily from labor reductions across corporate/shared services; vendor consolidation also contributing .

Estimates Context

  • S&P Global consensus estimates for Q1 2025 were unavailable due to mapping limitations, so estimate comparisons could not be provided. Management also did not issue formal FY2025 guidance, emphasizing execution against KPIs and milestones instead .

Key Takeaways for Investors

  • Sequential compression and higher interest burden drove the net loss; adjusted EBITDA down from Q4 ($40.4M) to Q1 ($32.6M), with margin at 5.0%—watch the pace of margin stabilization as automation and repricing flow through .
  • NEMT margin resilience amid volume pressure is a bright spot; utilization normalization (12.0%) and pricing/mix effects lifted revenue per member while average membership fell—monitor contract renewals and pipeline conversion .
  • Working capital overhaul is central: AR elevated due to shared-risk structures; observed April ~$30M collection and contract transitions to faster settlement should progressively improve cash conversion through 2026—track AR/DSO trajectory quarterly .
  • Cost program upgraded: G&A savings target lifted from “> $20M” to ~$25M annualized, largely labor—expect incremental OpEx reduction to support EBITDA/FCF as restructuring charges abate .
  • Strategic alternatives: Board committee is actively overseeing potential divestitures to delever; asset separation readiness underway (legal/HR/operational) for Monitoring—evaluate upstream valuation outcomes and timing .
  • Listing compliance risk: Nasdaq MVPHS notice adds overhang until Nov 1, 2025 deadline; management is monitoring MVPHS and potential options—this can be a near-term trading catalyst .
  • Liquidity actions: $105M financing executed in Q1 (30M long-term, 75M short-term) alongside a fully drawn revolver—debt service remains a key variable; focus on interest expense trend and covenant status as the year progresses .
Note: All figures are as reported in company filings and earnings materials.