Q4 2020 ModivCare Inc Earnings Call
Thursday
greetings and welcome to the motive ranked fourth quarter 2020 Financial results conference call at this time. All participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder. This conference is being recorded is not my pleasure to turn the call over to motive cares Chief accounting officer John McMahon Miss Pac-Man, please go ahead. Thank you operator. Good morning everyone and thank you for joining motive cares fourth quarter 2020 conference call and webcast with me today from the company are Dan Green Leaf president and chief executive officer and Kevin. Chief Financial Officer.
During this call members of the management team will be referencing the presentation that can be found on the events page in the investor section of our website at ww.w. And in the current form 8-k which wage earners to the Securities and Exchange Commission this morning before we get started. I would like to remind everyone that during the course of today's call. The company's management will make certain statements characterized as forward-looking under a private Securities litigation Reform Act those statements involve risks and uncertainties and other factors which may cause actual results or events to differ materially information regarding these factors as contained in a press release and in the company's filings with the SEC.
We will also discuss certain non-gaap Financial measures in an effort to provide additional information to investors the definition of these non-gaap measures and Reconciliation to the most comparable gaap measures wage is included in our press release investor presentation and form 8-k. We have arranged for a replay of this call which will be available approximately 1 hour after today's call on our website off this morning Dan Greenleaf. Our chief executive officer will begin with some opening remarks after which Kevin. Sorry Chief Financial Officer will provide a more detailed discussion of our financial results. Then we will open a call for questions with that. I will turn the call over to the in Greenleaf Dan. Thank you John and good morning everyone and thank you for joining us today. Our fourth quarter adjusted ebitda of 21.6 million exceeded the prior-year comparable figure of ten point two million primarily due to operational improvements to run by our sixth pillar strategy the forequarter contribution.
June from National med-trans, which required in May of 2020 a partial order contribution from simpler Health Group, which we acquired in November of 2020 and lower utilization under capitated contracts are full year adjusted ebitda, total 169.3 million above the comparable figure of fifty one point two million in 2019 beyond the headline numbers and 20/20. We made significant progress to transform and reposition or Organization for future success. We took our focus on social determinants of Health to elevate the patient experience in Drive positive Health outcomes. We upgraded our senior leadership team in supporting down we acted on the voice of the customer improving our reporting function and implementing corrective action plan, where needed to enhance and expand relationships with States and payers money.
We Advanced key technology.
In centers of excellence optimization initiatives, we acquired National med-trans which seamlessly pulled it into our platform producing immediate accretion plus long-term strategic opportunities. We purchase employer Health Group who provides us with a compelling New Growth platform in personal-care. We delivered approximately 1.5 million meals to food-insecure Patient populations. We simplified the company's capital structure by eliminating the convertible preferred share class and download the groundwork for a successful rebranding to motive care, which we launched in January of 2021.
We are transforming our company one that was built on transportation and Logistics the one that delivers multiple social determinants of Health Solutions in drives positive Health outcomes for the most vulnerable underserved patient populations in our country. We are unifying our organization culturally in building a one-stop-shop supportive Care Solutions today comprised our market-leading non-emergency medical transportation business are personal care segment, which consists of some pleura and our nutritional meal delivery initiative comprising of approximately Thirty Partnerships today to gather these businesses provide a solid platform for long-term growth the pandemic exposed devastating and unjust inequities in healthcare that are unacceptable against this backdrop. We are expanding in a bulb.
Our services for a broader purpose to make connections to care that have a profound impact on our patients well-being. Our vision has been extremely wage received by our clients are Transportation partners and the patients we serve food insecurity is one of the inequities in health care that we are working on to 6 and as such we developed a nutritional meal delivery program. I personally like to thank our partners including Miami-Dade County Public Schools the Salvation Army Community Food Bank of New Jersey mcfoods friends and actions kept schools Liberty resources among others who recognized the importance of making sure our country's most vulnerable populations are afforded a healthy meal.
In addition to improving the health of our communities by providing access to nutritious Foods. We are facilitating access to vaccinations during the pandemic today, providing more than 70,000 rides for seniors and other individuals needing transportation to and from their vaccinations Employments. Currently. We're approaching a run rate of forty thousand rides per month for vaccines. Finally. We collaborated with carefinders Total Care to provide nearly 40,000 rides since September for home health aides providing safe and reliable transportation to the homes of patients in need of care during the pandemic. These are all examples of our vision to drive off of Health outcomes by transforming the way we connect to care.
the centers for
Care and Medicaid services validated our vision just the last month when it issued guidance to State officials designed to drive the adoption of strategies that address the social determinants of help with an eye on improving Health outcomes reducing Health disparities and lowering overall health care costs. We are excited about the changes underway mode of care and are very bullish on our future in the case of our non-emergency medical transportation business or any empty. We expect to benefit from the operational technology Investments. We've made and continue to make we have deployed automated call distribution and cloud-based interactive voice response Solutions across all fifteen of our centres of Excellence. The self-service feature is fully functioning allowing patients to book new rides cancel rides and confirm upcoming rides on Thursday.
By intelligently routing calls in capturing relevant data to shorten average handle time. These systems optimize call routing efficiencies may prove that patient experience our goal with these enhancements is to improve the member experience mainly coming from the containment of Cancel reservations and confirmations will making the interface with the patient more consumer-friendly workforce management systems also have been deployed across the Enterprise to one of our customer service Representatives training and new functionality will continue to roll out over the next few months. We continue to drive or go digital efforts nationally with a goal of 90% digitization of our transportation partner Network by year-end enabling patient to track and real-time where they're right is specifically net worth.
Digitization in combination with our new driver app allows Transportation Partners to service rides in real time. It enables drivers to communicate with patients off. It gives us their GPS route for tracking purposes.
Additionally are right around is on schedule for completion at the beginning of the second quarter. This app will allow patients to schedule and cancel rides communicate with drivers rate them and took a GPS path for the recommended route. Finally. We are well underway with a business process Outsourcing partner that provides business flexibility allows us to scale as we grow operations in addition to making operational technology improvements. We are focused on growing or any empty business organically and it made upgrade our sales and account management team to drive further growth. We are also seeing a number of adjacent opportunities in the areas of nutritional meal delivery, which we discussed earlier as well as providing rides related to workers compensation and retirees are in EMT business is benefiting from favorable industry Tailwinds such as rising Medicaid rolls off.
Which appear to be expanding in the highest single digits?
Moreover in December of 2020 the nemt benefit was written into federal law compelling states to offer this mandatory benefit to Medicaid members indefinitely off any future Amendment would require an act of Congress. We applaud the bipartisan efforts to ensure that our country's most vulnerable patient populations will continue to receive a circle access2care are any empty business also stands to benefit from the rapidly growing Medicare Advantage or M A Market, which we believe will expand from twenty four hundred million today to four billion over the next decade per wonderment Thompson L M A is projected to grow by two million members this year reaching twenty six point five million beneficiaries and surpassing forty percent of the Medicare Marketplace nearly a decade ago. There were fewer than Twelve million and released in MA.
There are over thirty-five hundred M A plans available to beneficiaries across the country following in the footsteps of some of the largest players a growing number of these plans are seeing a value of offering any empty finally the new Administration appears to be Medicaid and Medicare friendly the administration's robust Health Care agenda in a stance on addressing inequities and Healthcare harmonized closely with what we are doing in our any empty food delivery and personal care businesses. We lost a personal care business with a good position of simpler, which clothes November of 2020 simpler is a leading network of Home Health and personal care agencies across seven states. So employer participates in the fifty five billion personal care services markets, which is expected to expand to 100 billion by 2020 for the personal care Market is growing rapidly and a phone number.
Made it nine to 14% per year as care continues to migrate to the home setting the average daily cost of care in the home is approximately 95% less than in a hospital and about half the cost of skilled nursing facilities. This Market is highly fragmented the top three players including simpler make up less than 5% of the total and we believe there's tremendous opportunity to participate in Industry consolidation as provider networks continue to narrow.
We know that ultimately funding all our services including any empty and personal care and nutrition will support our mcos and state needs in Hants patient outcomes and accelerate our growth strategy while we cannot predict the Precision or certainty the near-term impact of COVID-19 on our business. We are offering a continuing object and utilization into 2021. The ultimate level of utilization will depend on factors such as number of rides. We provide for vaccinations during the coming year and how quickly the pandemic subside that being said durable operational improvements plus the national med-trans and simpler Acquisitions drove meaningful component of our adjusted even an improvement this quarter also, it is worth noting that are personal care segment serves as a counterbalance to are nem
He business given that into.
Three prospects should improve for personal care as COVID-19 dissipates regardless of near-term utilization Trends. We belong operational improvements and strategic actions will drive substantial long-term value. We will continue to strive to deepen payer and state Relationships by creating a holistic life experience focus on solutions that address the social determinants of Health. We are fortunate to have an asset-light business with a robust cash flow profile enabling us to invest in growth and lead the industry, but we are not providing specific guidance at this time and our normal eyes closed COVID-19. Scenario took a long-term operating objectives include any empty Revenue growth in mid single-digits and adjusted ebitda margins of between seven and 10%
Personal Care grow in the high single-digit in line with the expansion of Medicaid rolls and adjusted ebitda margins of between eight and 10% off items first. I'd like to acknowledge Brian tanquilut of Geoffrey's who initiated coverage a motive here in December. We thank him for support. We now for covering analysts up with wanted to start a 2020 and we look forward to adding to this group in 2021. Lastly. I'd like to make a comment on this CFO transition. We now earlier this morning. We are excited to announce. The appointment of heat Sampson is our Chief Financial Officer. He brings us nearly three decades of executive and financial leadership experience across a range of private and publicly traded companies including Square to financial First Data Corporation and most recently Advanced Mission Solutions where he served as the chief executive officer dead.
He began his career in auditing and business Consulting at Arthur Andersen. He has an excellent track record of optimizing Finance operations building high-performing teams, driving transformational m&a and delivering profitable growth. We believe his collaborative results-oriented management approach will ensure a smooth transition as he takes the reins from Kevin. It's the announcement is Bittersweet as Kevin has been a dedicated member of the team and played a key role managing our finance office during the early stages of our business transformation with our corporate headquarters moving to Denver Kevin made the personal decision not to relocate Thursday is agreed to continue in a supporting role until March 15th 2021 to facilitate keeps transition. I would like to thank Kevin for his contributions to our organization dead.
He will be missed.
And we wish him the best of luck in his future endeavors with that. I'd like to turn it over to Kevin.
Thanks, Dan. I appreciate your comments since this will be my last earnings call with motive. I would like to thank our shareholders and analysts for their support. It has been quite a journey over the last few years and I look forward to watching modicare continue to thrive in the years to come before reviewing the financials. I would like to briefly touch on to support acquisition which we close on November 18th, 2026. You all cash purchase price of $575 million. We completed a successful pricing and private placement of five hundred million in aggregate principal amount of senior unsecured notes the remaining five million dollars withdrawn from our revolver, which we subsequently paid down in the fourth quarter as of December 31st, 2020. We had cash of $183 long-term debt of $486 and net debt of $303.
We estimate that our total net leverage as defined in our covenant agreement was approximately two times last 12 months adjusted ebitda on December 31st, 2020 going forward. We intend to maintain a net debt-to-ebitda ratio of below three times. Now moving to our fourth quarter Financial results. We record a total revenue of 398.5 million dollars adjusted ebit 1041 point six million dollars and adjusted net income of 13.9 million dollars or $0.98 per diluted share this quarter. We commend singer reporting for any Mt. Home care business has any empty segment Revenue in the fourth quarter of 2020 totaled approximately $345 compared to $385 million dollars in the prior to your. And included forty 1 million dollars of additional Revenue related to our acquisition of national med-trans in a offset by decreased related to lower volume due to the COVID-19 Panthers.
And the associated adjustments to profit Corridor and Reconciliation contracts any adjusted ebitda this quarter totaled 36.8 million dollars up from ten point five million dollars in the prior year. Primarily reflecting operating improvements under our $6 strategy incremental contribution from National med-trans and lower utilization under top cafe the contracts.
Personal Care segment Revenue in the fourth quarter of 2020 totaled $54 and adjusted ebitda equals 4.8 million dollars. There are not any 2019 compared to four years as we acquired some Flora in November of 2020.
Moving to service expanse are gross revenue less purchase Services was 35.3% of Revenue in the fourth quarter of 2020 compared to twenty 1.8% in the fourth quarter of 2015 while the Improvement primarily reflects lower purchased Transportation costs due to lower utilization across multiple contracts as a result of COVID-19 demek Ki also executed on key operational efficiencies that contributed to the margin expansion. We anticipate that gross margin will decline marginally in 2021 commensurate with in a suspected increase in utilization and the resulting impact of on our any empty segment.
or just
Operating expense to find as all of expenses excluding purchase services and after adjusting for add tax was 33.8% of Revenue in the fourth quarter of 2020 versus 19.1% in the fourth quarter of 2019. This increase in Spain was primarily attributable to additional investment in employees and technology and increased expense for cash-settled Equity Awards offset by lower center of excellence and other operating expenses driven by our sixth pillar operational strategy.
While we are not providing specific guidance at this time. We are modeling marginally higher utilization in our any segment in 2021, which direction would reduce margins from the levels we emerge from the second third and fourth quarters of 2020 as well as we do realize increased utilization. This would be a benefit to a personal care segment.
Moving to our cash flow statement cash flow provided by operations in the fourth quarter of 2020 was 61.2 Million the above average variance disorder between adjusted ebitda and operating cash flow was off by an increase in potential rebates related to profit quarter and Reconciliation contracts for the fourth quarter. We collected $42 related to these rebates that may be returned in the future depending upon utilization levels. These potential rebates can be found within our 10-K and the change in our short-term and long-term contracts payable depending on the contractual retainment.
Finally in the fourth quarter 2020. We incurred $8 of transactional expenses related to support acquisition and 9.2 million dollars in expenses for cash-settled Equity towards the company's share price appreciated from $91.90 at September Thirty $238 at December 31st turning the Matrix org Port quarter 2020 loaded here recorded a loss of 3.3 million dollars related to its Matrix Equity investment on a stand-alone basis Matrix generated revenue of 121.9 million dollars up from sixty four point six million dollars in the fourth quarter of 2019 and it just to be with a sixteen point three million dollars up from 6.3 million dollars in the fourth quarter of 2019 for the full year of 2020 Matrix generated revenue of approximately $415 up from $275 million in 2019 and adjusted ebitda of 130 Jun.
Million dollars up from $44 billion dollars in 2019. Matrix was positively impacted by its launch of a new employee health and wellness products as well as clinical offerings developed or companies maintaining critical operations these new offerings coupled with the core assets of an expansive clinical network will allow Matrix to provide services off their long-standing Health Plan clients both in the home and be a Telehealth while also accelerating services around decentralized clinical trials and lab services off Matrix. I seen a rise in risk assessment volumes and home visits exiting 2020 and continuing into twenty twenty-one.
as
Value on a book basis. We believe the value of this investment is not fully reflected in mode of cares share price as of December thirty first Matrix head Standalone net debt of $240 billion dollars and our ownership interest was 43.6%
This concludes our prepared remarks with that operator. Please open the call for questions.
Thank you will now be conducting a question-and-answer session. If you like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue home made, press start to if you'd like to remove your question from the Q4 participants using speaker equipment and maybe necessary to pick up your handset before pressing the star one. One moment, please while we pull for question.
Our first question today is coming from from security Shoreline. Is that live?
performance obviously in a difficult environment
Yeah, thanks Bob. You're breaking up a little bit. Okay, is that any better? Can you hear me a little better? Good morning, and congratulations on just a performance in a difficult environment you I also wanted to you know, send my best wishes to Kevin. It's been a real pleasure working with you. So thank you for all your help down to to to be and and analysts to see Chase over this this time. So, thank you and thank you Bob. It's been great working with you as well as the rest of my life. So I appreciate that. Thank you. So just to start off. I mean that you gave us a cash-settled equity award. Just one more time before getting to Big Picture questions. The interest expense was, you know, obviously, uh a lot higher I'm assuming that included some fees from 4 from closing the deals or how should we think about, you know interest expense kind of June.
Forward just so we can normalize the the number for this quarter to.
Yeah, I think in John the fans in the room will keep me honest, but I think we had about a nine million dollars worth of Interest expenses of relates to the financing for the backstop that we needed for some Flora. So, obviously we paid down the revolver and then the only interest effectively that's going to be outstanding will be related to the actual senior unsecured notes and that runs about twenty nine point five million a year.
Channel okay. Perfect. Okay, perfect. Right. So basically there was dead. Okay got it. Got it. Yeah, so essentially that 9 million was, you know kind of one time so that's forty-five or fifty cents of of earnings that you know hit you because the financing and the timing of the deal but are not sure that's exactly. Okay, great. And then on some Flora I think you did allude to this in your comments. I was going to ask about it. I just want to make sure I understood it fully you're talking about the utilization obviously given, you know from the pandemic. It sounds like is is somewhat down and so you can just, you know confirm that and that you would expect once everyone's fascinated that they demand for simpler Services, you know could pick up going forward just you maybe talk a little bit about how that part of the business works and make sure I understood you.
Yeah, that's that's correct.
And you could just imagine you know with the latest outbreak how that impacted health aides how that impacted patients, um, you know, those even instances for example where you know, people come back into the estate and their quarantine for 14 days. So there's a the market dynamics have have been working against them had been working against employer over the last, you know the last year or so, but obviously we feel very positive your networks continue to narrow, you know, they're very welcome addition in the markets are currently in and you know, we feel very good about you know, as as
Things improve with with vaccinations you feel very good about the simpler business and where it's headed and and I think we mentioned to you, you know, we see it as a platform business that you know, we are going to be aggressive as it relates to have an accurate. He's so we're big Believers and you know, we're in seven states and you know, we feel like we can build a national company with it in our partnership with them. Yeah. That's great. It's exciting and then, you know given the I call a contra-revenue related to the prophet Corridor contract is hard to you know, entirely tell what you know, Revenue would have been under a more normalized environment. I guess my question is this Kathy us a sense of the population. You're serving Now versus you know a year ago how much that has grown cuz normally you can kind of track it since you're paid per member per month, but it's harder to see it. Where's the
It's up about between 4 and 5 million.
Wow, okay, and that was yep, and I think $24 floating around 29 now got it. Okay, great job super and then last one for me. I I know you have more people now I'll get back in after but how should we think about you know on the balance that you mentioned the prophet Corridor contracts and some payables Thursday. Do you have maybe the, you know, the breakdown of the payables as it relates to the the prophet Corridor maybe at least the short-term payables. I don't know if you have that prepared yet or not.
Yeah, let's see. Here. We have.
What's that? Yeah, there's about one on the on the short-term and the long-term.
Okay, perfect. Well, I will get back to you. But thank you very much, and we'll talk to you soon.
Thanks, Bob.
Thank you. Our next question say is coming from by Brian tanquilut from Jefferies. Your line is not alive.
Good morning, guys and congratulations in a good quarter to Goodyear. And thanks for the shout outs and glad to be covering your stock here today. So I guess my first question would be really appreciate you and the Jeffries team and our partnership over the years. So thank you very much Brian. Yeah, definitely. So I guess first question for you as we talk about simpler. It looks like it's obviously a pretty good solid type organic growth business, but I know you you're looking at doing deals in that space. So from a strategic perspective, how are you thinking about, you know the need to Overlay over the other, you know over the any empty footprint. And is that a good way to think about you know, how you approach looking at deals? And also, how are you thinking about valuations in that space?
Yeah, so I would say that I mean you just think about you know, we're in seven states Brian as it stands right now. We've got overlapping V that those New Jersey and New York, Pennsylvania West Virginia and Florida and you know where we do have a a business office for example in Virginia or in in Ohio with in or any empty space we would we would look at those Marcus's opportunities. And so I would say unequivocally that the case I would also say Brian that we're looking to you know, in in some markets. We're going to look to double down. I mean where we have a a strong footprint already. We are you know, we see opportunities in certain states were already in to expand our footprint in existing markets as well.
That makes sense. And then can I guess since we are talking about social determinants of Health, right? So putting any empty together with simpler. I know now, you're starting to deliver food and summer Market if you don't mind walking, it's just through how you're thinking about this in terms of putting those three assets together as capabilities. What does that do in Social determinants of health and how long it paid eventually for having those capabilities?
They're already being paid for I mean, that's the thing Brian. I mean, they're already reimbursement programs for food with Medicaid. This is an odd because we you know, currently we've been doing at out of our you know, our transportation reimbursement, but there is there is a separate reimbursement mechanism. You already bought the Home Health space or the personal care space is paid on that on an hourly basis. And then most of our contracts are capitated in the in our any empty business, but like, you know, listen, I the the states and payers have been very clear to us that there's a lot of background noise. I don't know if it's kind of strange if if I don't know who's on on hot mic or not. But you know, I I guess at the end of day are payers and states have been telling us they want a One-Stop shop.
And we're not going to stop there. I mean we see.
Opportunities the medication management we see opportunities in in in behavioral. We see opportunities in a monitoring and you know, we're what we we believe is that this supportive care space is opposed to the clinical space. No one has really has ever combined all aspects into a single offering and frankly Brian. There's nobody in a better position to do that than us. I will also say that the market just based on what we've heard is ready for em, you know, I think we'll be running Pilots this year in terms of how do we combine these various services, but the good news is you know is we move into food there's already reimburse established for it. So even if we ended up running these businesses separately for a period of time before we we joined them, you know, they're still significant reimbursement mechanism. Yep.
Gotcha. Yeah, I guess that's what I was trying to get into is there. Is there an opportunity for value-based arrangement in that situation right where you can take a more Consolidated p.m. Approach and getting more capitation, but I guess just you know for sure for sure. I mean that's where this is added.
Yeah, and then shifting gears and when you joined the company you outlined, you know kind of like cost opportunities and you talked about Outsourcing and and the technology initiative that you guys have laid out. Where do you stand on where you think the opportunity is from an even topic up as these initiatives, you know kind of gain traction and and are completed.
You know Brian we're in the early Innings because you know, we've spent most of you know, twenty twenty making those Investments making those investments in ivr making those Investments and go digital making those investments in Partnerships with with ppos making those investments in our teammates as a relates to you know, how long how we interact with them and the quality of you will have even their computers and um, so we're we're in the early Innings of this Brian but that being said the savings are are massive. I just I mean this is there's there's been a lot of waste in this business over the years. I even look at things like, what we've done with temp labor what we've done in the area of overtime and I I just think there's been you know, there's been a lot of weight since birth.
And you know, I think there's a lot of ways as a result of not being as consumer-friendly as we are now and and so I brine them to you know, there are significant opportunities. I mean, I I you know, I'm a I'm a little hesitant to say exactly what they are for a variety of reasons, but they are significant.
Now that makes sense last question for me as we think about increasing utilization down and you're not willing to give guidance right now. But how should we be thinking about the Cadence as you think about the the increase there and are their mechanisms for essentially the reverse of the rebates that you're seeing as the the reconciliations of these utilization Trends catch up with you guys over the next few quarters.
Did you say that again Brian?
Do utilization fix up. I mean, how do you think about the Cadence of that over the course of the year and maybe even into 20 22 on any of these side? And then I guess the other side of the question is how long are their mechanisms in place where you would have the rebate the state as utilization has been low over the last, you know, especially year.
Yeah, so a couple of things Brian we we expect utilization to continue to increase incrementally at the same time though, you know, we will often do you need to see the benefit, you know of the Acquisitions of some floral will continue to see the benefit of the acquisition of national med-trans will continue to see the benefit of the operational improvements that we are continuing to make so, you know, I you know, as I look at utilization Trends going up, I believe we've got a number of things that will offset offset wage Trends if you will based on what we're able to do in in 2020 and I feel very bullish about that in Risk enough utilization Trends increase that off these payables could move to receivables Prime. So that number will just based on how the model Works would would drop pretty significantly so we would benefit from that.
Awesome. Thank Dan. Thank you, Brian.
Thank you. And next question today is coming from Mike Petoskey from Berrington research or Line is now live. Good morning guys. Congratulations finishing a year off a sedan. I I guess I wanted to start with you know, you sort of a firm the 90% did did did reservation by a year-end in the network and then talked about the right or wrong. I guess. I just wanted to get a sense of your current thoughts on on how much cost savings could drop through and and I guess then in in twenty one and then longer-term and then I I guess my question in terms of your your sort of general guide on Transportation you sort of said seven to 10% ebitda margin, you know how long how much of that you know includes the efficiencies your you think you're going to get from sort of your technology Investments and things
I think
Most of it is my mini moving his business from what I would say was historical level of around 6.7% Where if you just for the holding company where it was in in 2018, so I think you know, the Baseline is probably around six point seven, but these operational proof that there's you know, Mike there's I think at this point we can't get to 10% I just there is a road map for that, you know, obviously there's a lot of work that has continued go into it from digitization to you know, optimizing these are centers of excellence to driving out, you know additional waste as it relates to kind of the member experience. But but we we we see there's a bright-line to this and find you know, we see an organization that's you know, that's going to be leaner and meaner going forward and and and also provide a level of of birth.
For experience it's going to be second to none. And and so that's where we that's why 2020 with such a big year for us because we made significant moves on these Investments. If we know we're going to have huge impact on the business in the medium-to-long-term.
Any any willingness to to quantify, you know the drop through and in Twenty-One or or a range of the drop through and 21?
Well, you know again, I think some of it, you know, we're we're you know, obviously we're dealing with lower utilization. We're dealing with being advantaged the Acquisitions of national med-trans as well as some plural and you know, we saw a pretty decent number I would say this and in June 2020 based on the operational improvements we made the good news is the operational issues all all in-flight. The ivr is is like the workforce management implied have been pulling the the automatic call distribution fully implemented. The go digital is we're rocking and rolling on that, you know, we we've chosen a a business process outsourcer that long, you know, it's really helping us, you know, scale this business much more efficiently. And so all those things are in Flight bike and I think you know, I again, I think there's a number if you look at, you know somewhere between
6.7 and 10% that we're going to get to this year.
So jumping over to meal delivery. I think he said one point five million meals delivered. I'm pretty sure I know that you're doing that in New Jersey and maybe parts of Florida. Are there other places you're you're doing that in in any meaningful way.
Yeah, Pennsylvania as well. So we got a significant and and then there's you know, we we've we've got about 30 Pilots going on across the country. So it's not just limited to the kind of the Florida Pennsylvania New Jersey need longer. I mean these there's obviously as everybody knows this wage is a huge unmet need here in and you know, we've jumped into the void and we also think there's a significant business opportunity here for the company going forward and off. So, yes those were our initial areas of efforts but were we were expanding this nationally now, okay. So your your view is is that this is a business out of that sort of only in the very early Innings. This wasn't like sort of a an opportunity that came up because COVID-19 sort of dissipated after essentially you you think that
these these payers understand the
Value of this service. They're willing to continue to pay for it post Cove it and this this is a business that only expands, you know materially going forward. Is that does that seem reasonable characters? Yeah. I think they'll be I think they'll be material economic expansion of this business going forward.
And then just just I guess generally speaking as as you sort of think through relationships with payers, you know over the past year. Can you just talk? I mean, I'm sure there were discussions around the low utilization and then, you know, then on the on the positive side discussions around, you know, extra services like meal delivery. Can you just talk about in general conversations around you know sort of the value you can you can bring to their beneficiaries and and just I guess in a sense. I mean life is are these relationships going to you know, particularly with the pleura, you know deep in and and there's just going to be just, you know way more stickiness as he says you guys move forward. I mean, is that your view?
Yeah, I think the stickiness will come in. The form of food will come in. The form of some plural will come in the form of our our best-in-class technology that's going to create a month a second to none consumer experience. You know, we've got a lot of other things that we're working on as well that you know, we haven't really disclosed. But you know, what brought you to put this company on the Forefront of you know, all the kind of activities in this space. And so that's that's where we are. Like I am. Yeah. I think we're in a really really unique position and I'm in a Marketplace. It has a lot of support particularly with the current Administration. You know, we've got the same benefit codified now and we take an act of Congress to change that not an act of of a president and you know, we think we're an incredible position wage.
Now and you know well into the future and you know, I I would share with you that you know, as it relates to our state's and payers we put these risk corridors in there for a reason right and that's one of the reasons that you know, very few have actually come back to us asking for money because we've already built it in we built protective measures in for them. So and I again I they they see what we're doing in terms of of the quality of work we've been doing and I know there there's things on on reporting that we made, you know, enormous improvements on you know, corrective action plans enormous improvements on just Partnerships with our payers and dates and the relationships frankly or the whole nother level. I mean, there's there's you know, whether it be, you know, Catherine or Kenny or me. I mean we are actively involved in these relationships suck.
Robert Pittman, so you know
There's a lot more touch points with our company. And when there's a problem. We we deal with it. We also built out in 2020 best-in-class account management team know can bring up that out with Mark Miss play leading it and we've dedicated account managers that are of a very high quality that frankly this company really hadn't had them and that's also changed their interactions with them. I think the biggest thing for us Mike is that you know, if there's an issue we deal and in the past this company kind of let things go for whatever reason in many respects it was unbenounced to them. But you know why we take it a much more proactive approach is one of the reasons we're able to maintain almost four hundred million dollars a business is wanting 20.
They left quick one The Matrix results have been sort of all over the map on a quarterly basis this year. You know, what what what are your thoughts As you move forward? I mean, is it going to be sort of a smoothing down in more of a consistency is maybe covet dissipates or what what your view of things? Yeah it is and I just point out look at the signify mold. So I mean this is off, you know, Keith is done a tremendous job with this business, you know, we put him in our press release but they from my perspective they turned the corner and and yes, ma'am. It was a little bit of a bumpy because of of COVID-19.
I'm bored. And and I think their business is going to be far far more predictable and I it's on the upswing.
Terrific. Thanks guys. Really appreciate it.
Thank you. And next question. Today is coming from Brooks O'Neal from the street Capital markets. Your line is now live. Thank you very much. I'd like to Echo off, the cabin. Thank you for helping me and Frank get up to speed on the company. We really appreciate it. We wish you well.
Thank you very much. Brooks and Frank appreciate your thoughts.
Yep, I didn't get to that page. You guys were just talking about it. But in the area of sort of contract pushback, can you just tell us in general what percentage of your State Medicaid contract have record or adjustments? And which what percent are are sort of naked if you will.
I would yeah Brooks we'd have I would say, you know over 300 contracts. So there's about 80 contracts that are I would call that are subject to these wage type of Recon rebate reconciliation contracts.
Okay good. And then I'm curious. How do you feel about the sg&a level in Q4? Should we view that as a run-rate wage or were there some you know, sort of short-term expenses in fourth-quarter that are unlikely to recur as we move into 2021.
Yeah, I think you are there were some unique events. I mean the thing that's always a bit difficult to focus on and is the cash-settled equity award hit that we had the exact it's just driven by an increase in share price transactions. So and then we also have about eight million dollars worth of transaction expenses that relate to the subfloor acquisition. So okay, you know, so I think those would be the that that certainly be unique item.
Yep, that's helpful. And then
you talked a little bit about the debt level and obviously the repayment right away on the the revolver off my sentence that that you put in place related to some is going to stay in place for the next few years. At least is is that a reasonable assumption or should I am thinking about that differently? I was thinking about it differently because we you know, we've got we're going to take advantage of our cash position trucks and you know, well, obviously we want to make sure we're allocating our cash in the best way possible like we did last year with with the the preferred with the acquisition of upload Nash trans as well. As you know stock BuyBacks as well as as well as the acquisition of simpler up, but you know, I think we're going to be pretty thoughtful about you know, how we dead.
Do you ever the company and I think you already know we took down the the revolver and I think we're going to continue to be appropriate. We have we have the right to pay down 50 million dollars of it this year and another $50 next year and I would I would be you know inclined to probably do that. So that's where we are.
Perfect. That's helpful. Congratulations on a great year and I'm looking forward to 20 21.
They brought thanks for all your support. I know you jumped into this early, and I think people joked around, you know about a stock price of one forty and you look pretty damn smart now, my friend, so, thank you.
Thank you. We're going to 200.
Mhm.
No, thank you that does conclude today's question-and-answer session like to turn the floor back over to Dan for any further and closing comments.
Yeah, thank you all for participating on our call this morning. We won't be on road the road for investor conferences in the near-term given COVID-19. We remain accessible 411 calls. Please reach out to our investor relations firm the Equity Group. If you're interested in scheduling a follow-up call. We look forward to reporting back to you in May when we release our first quarter 2018 Finance results stay safe and have a good day.
Thank you that does conclude today's teleconference and webcast. Can we disconnect your line at this time? And have a wonderful day. We thank you for your participation today.