Q1 2021 ModivCare Inc Earnings Call
[music].
Greetings and welcome to the motive cares first quarter 2021 financial results conference call.
At this time, all participants will be in a listen only mode of quest.
And and answer session will follow the formal presentation if.
And if anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to John Mcmahon, Chief Accounting Officer, Mr. Mcmahon and you may now begin.
Thank you operator, good morning, everyone and thank you for joining mode of cares first quarter 2021 conference call and webcast today, I am with Dan Greenleaf, President and Chief Executive Officer, and Heath Sampson Chief Financial Officer.
Before we get started I would like to remind everyone that during the course of todays call. The Companys management will make certain statements characterized as forward looking under the private Securities Litigation Reform Act the.
These statements involve risks uncertainties and other factors, which may cause actual results or events to differ materially.
Information regarding these factors is contained in today's press release and and the company's filings with the SEC.
We will also discuss certain non-GAAP financial measures and an effort to provide additional information to investors of definition of those non-GAAP measures and reconciliation to the most comparable GAAP measures is included in our press release and form 8-K, which was furnished to the SEC. This morning.
We have a range for a replay of this call which will be available approximately one hour. After today's call on our website www dot mode of care Dot com.
This morning, Dan Greenleaf, our Chief Executive Officer will begin with opening remarks, after which Heath Sampson, our Chief Financial Officer, who will provide the details of our financial results. Then we will open the call for questions with that I will turn the call over to Dan Greenleaf Dan.
Thank you John and good morning, everyone and.
Thank you for joining us today, we commenced the year with strong momentum and our vision of transforming the way we connect people to care, we are reaffirming our commitment to address the social determinants of health and the innovative and strategic ways with the intent to provide multiple support of care solutions that meet the needs of our clients.
And patients drive positive health outcomes and accelerate our growth strategy to deliver a holistic patient experience by addressing the and equities and access to care.
This quarter, we have shown strong progress to accelerate our technology enabled health care services platform.
<unk> and automate our Nonemergency medical transportation or any empty business elevate the patient experience and extract the operational efficiencies of <unk>.
<unk>, a robust pipeline of acquisition targets and personal care and across the social determinants of health continuum and develop a strategy for commercializing our nutritional meal delivery offering of.
Our strong cash flow enables us to invest and growth and continued leading the industry and our mission of dismantle the barriers to care at scale for underserved communities.
The economic and health care of macro trends are generating favorable tailwind for our business as well.
And any M T. Medicaid enrollment grew eight 5% from 2019 to 2020 and is expected to grow at least 5% and 2021.
And the Medicare advantage or M a market.
And is projected to grow from approximately 500 million today to more than $4 billion over the next several years since 2018, the number of M. Eight plans has grown by 53% and the number of M. A plans offering any empty as the supplemental benefit has grown by 200%.
We expect this momentum to continue for the foreseeable future and personal care of market demand is outpacing supply as care delivery undeniably continues to migrate to the home setting further accelerated by the pandemic as family see greater comfort and the home versus institutional settings and.
As we have previously referenced the average daily cost of care and the home is approximately 95% less than and the hospital and about half the cost of skilled nursing facilities or similar institutional settings for.
Furthermore, our nation's continued shift to value based care models combined with the new administrations advocacy for home care funding and focus on addressing health care and equities harmonized closely with our strategy and offerings for the.
The nutritional meal delivery and we estimate the existing addressable market is approximately $9 billion growing to $15 billion by 2024, and believe that the logistics expertise national network and strong customer relationships provide us with the unique opportunity to commercialize the new offering that addresses the needs of food insecure.
For patients.
We all sourcing momentum by MA plans offering food and meal related supplemental benefits, we expect to be in a position to disclose more on this initiative later in this year.
Moving to our first quarter results motive care reported consolidated adjusted EBITDA of $48 million, which exceeded the prior year comparable figure of $17 million, reflecting higher adjusted EBITDA and each of our two segments and Emt and personal care.
During this quarter or any empty segment benefited from lower operating costs under our six pillar strategy and expanded patient base contribution from national Med trends and lower utilization under capitation contracts. This quarter, we continue rolling out our National go digital initiative.
And remain on target achieved 90% Digitization of our transportation partner network by year and network Digitization and combination with our new drive around and enables our transportation partners to service rides and real time communicate with patients and provide transparency into the GPS routes.
Moreover, our rider App remains on schedule for completion of the second quarter and will provide easier use of our services, allowing patients to schedule and cancel rides view ride status and real time communicate with and rate drivers and transparently see their GPS location and intend.
Good route.
And the strategic move to accelerate our efforts to build the largest digital any empty network and the nation yesterday, we announced the acquisition of well ride a leading technology provider of advanced Transportation management systems, our Atms software, which enables optimized routing automated trip assignment.
And billing and real time network monitoring well rights technology will seamlessly integrate into our circulation and <unk> platforms fast tracking of go digital initiative and addition worldwide technology enables mode of care to provide on demand trips and rider pay models to create new <unk>.
Your lines of business.
The modernization of our network will not only improve the experience for patients, but also the experiencing accountability of our transportation partners.
This quarter, we continued to advance operational improvements and our centers of excellence call volumes related to cancellations of confirmations continued to decline after the deployment of new automated call distribution and interactive voice response solutions through our business process outsourcing initiative, we lay.
And the groundwork to add a significant number of center of excellent professionals by the end of the year and anticipation of the potential increase in utilization and call volume and which enables us the scale more efficiently and response to fluctuations and our <unk> business.
We believe that modernizing and automating or any empty business will enhance the patient experience and provide more consistent performance for our clients, which are key measures of our success recently, we conducted a patient survey and which our satisfaction scores comparably to of steamed organizations such as memorial Sloan.
Gathering and John Hopkins Medical Center, our goal is to maintain and further improve the stellar ratings.
The operational transformation and our any empty segment is expected to deliver approximately $50 million and total run rate cost savings by year, and we believe that these concrete savings initiatives ultimately will create a durable business model and offset the impact of fluctuations utilizations.
Including the potential to return to pre pandemic levels. While we are beginning to see regional pockets with utilization increases we have not witness the significant system wide increase in utilization during the first quarter and through April we continue to model gradual uptick and our overall utilization through the mail.
Under of the year and are optimistic and our ability to manage the sharper increases should they occur the eventual level of utilization will dependent on such factors as the number of rides, we provide for vaccinations and how quickly the pandemic subsides.
Finally, the expansion of our Medicaid member base further bolstered our first quarter any empty results today, we serve approximately 30 million Medicaid members are 9% of the U S population up from $25 million and 2020, reflecting underlying core growth Medicaid rules as well.
As the roughly 2 million new members related to our national Med Trans acquisition.
As the clear market leader and non emergency medical transportation, we remain very optimistic about our future we of the scale.
<unk> and resources to invest and critical innovation and technologies that are modernizing the industry and differentiating us from our peers moving to our personal care segment, we benefited from a full quarter contribution from supplier of Health group, which we acquired in November of 2020.
During the first quarter personal care service hours and visits were dampened by several winter weather events of Spike in COVID-19, 19 cases, and staffing constraints. Nonetheless, our personal care segment contributed $9 2 million of adjusted EBITDA two of our consolidated first quarter results the <unk>.
<unk> run rate of this business is 20% higher and a post pandemic environment and we believe personal care services as a counterbalance to any empty as utilization increases and we're patiently weathering. The COVID-19 storm with a heightened focus on recruiting and driving hours as demand for home and.
Personal care substantially outweighs supply.
In terms of inorganic growth, we continue to actively evaluate a robust pipeline of potential acquisition targets.
<unk> is our first building block and a rapidly growing $55 billion home and personal care market, which is highly fragmented with more than 18000 agencies, we intend to grow our personal care segment, both organically and through and aggressive yet disciplined approach to acquisitions.
Among our key personal care acquisition criteria, we are focused on Medicaid, aged blind and disabled Abd populations.
The existing geographical density are entering new geographies.
Reputation service quality of the target reimbursement and state budget environment and labor markets dynamics.
As we grow our personal care segment, we are focused on attractive multiples as well as strategic opportunities that we believe can create substantial shareholder value, particularly considering the public market multiples attributed to our homecare peers, the personal care segment dovetails, well with a vision to transform.
And the way, we connect people to care, while providing a best in class suite of integrated supportive care solutions, bridging the and equities and healthcare and elevating the patient experience and improving outcomes.
Our emerging nutritional meal delivery offering further expands and this vision to date, we have launched more than 30 proof of concepts and delivered approximately 2 million meals to food insecure individuals across the country.
And finally, we are thrilled to welcome three new independent members to our board, which has expanded the board of directors to 10 members last month, we announced the addition of Garth Graham Stacy saw Rosemont to motive peers Board. This notable group of individuals brings complementary talent.
And experienced and areas that closely align with the transformation underway at the company.
Garth as a leading authority on social determinants of health and brings extensive experience and community and public health, including with companies such as Google Cvs Health Corporation, and Aetna. Garth currently serves as director and global head of healthcare and public health at Google.
Stacy has excelled and elevating the customer experience driving results throughout her career, including more than a decade and key leadership roles within prominent divisions of Amazon such as Amazon fresh and Prime now Stacy.
Stacy is currently the Chief operating officer for Babylon Health.
For all of the stellar three decade track record implementing technology and operational enhancements at companies such as Delta Airlines America Insurance Group and Bank of America Corporation, where all.
And is currently the Chief information Officer at Delta.
Briefly touching on matrix, and which we hold of 43, 6% equity investment.
The matrix is off to an excellent start in 2021 with its first quarter revenue more than doubling to 124 million and adjust the EBITDA more than tripling, the $32 million compared to respective figures for the prior year period the <unk>.
<unk> management team is doing a fantastic job growing the clinical solutions business.
While the risk assessment business of clinical care business saw a rebound and onsite visits this quarter. We believe that matrix represents substantial hidden valley and not reflected and our share price, especially given peer market multiples and with that I'd like to turn it over to Heath Sampson, our chief financial.
Actual officer Heath.
Thanks, Dan starting with our consolidated first quarter financial results, we recorded revenue of $454 million of.
Adjusted EBITDA of $48 million and adjusted net income of $28 million or $1 92 per diluted share.
And Emt segment revenue and the first quarter of 2021, with approximately $343 million compared to $367 million and the prior period and.
And included $44 million of additional revenue related to our acquisition of National Med trends and May 2025.
<unk> $15 million of increased revenue driven by higher membership.
Offset by a decrease of $62 million due to COVID-19 related lower trip volume.
And a net decrease of $21 million and contract changes and losses.
I'd like to provide additional clarity on how our contracts work.
As we have previously disclosed and generally speaking approximately 85% of our revenue is derived from our capitate or risk contracts and 15% from non <unk> or non risk, which are mainly fee for service contracts.
The capitate risk based contracts are generally separated into two categories.
The first capitate risk contract model is full of risk.
Which includes contracts that where we are paid based on our payers membership and each month, regardless of the trip volume.
This category of revenue is reoccurring in nature and represents 34% of our Q1 revenue.
The second risk based contract model, which is also reoccurring is reconciliation and rebate.
These contracts have provisions that either cap or increase our revenue based on the trip volume and our profit margin received.
Essentially if utilization transportation expense, our profit margin is above or below of the contracts established ranges.
We record the cash received or revenue not received on our balance sheet as of payable and receivable.
The payables and receivables fluctuate based on the utilization and profit range. It until the net of amounts are settled.
These contracts are settled at various agreed upon day, which may range from six to 12 months or even longer.
From time to time, we may engage our clients to delay or accelerate these true ups.
A reconciliation and rebate contracts represent 51% of our Q1 revenue.
As of Q1, we had $245 million and current payable and $33 million and current receivables, which are included and trade receivables.
Surface expense for the <unk> segment, which includes all direct costs related to the third party transportation providers I'll call Center operations and other operational functions such as the provider relations and quality assurance decreased by 18% year over year to 272 million.
Due to the lower trip volume and specific operating cost reduction benefits of the modernization and automation of the contact center and transportation processes.
Although COVID-19 has negatively impacted our revenue or any empty adjusted EBITDA has increased.
<unk> adjusted EBITDA, this quarter totaled $39 million up from $17 million and the prior period.
And our EBIT growth and margin expansion. It reflects our disciplined execution on our sixth pillar strategy.
However, I want to highlight that our full risk contracts.
Which again represent 34% of our revenue contributing significantly to the increase and our Q1, 2020, one and adjusted EBITDA.
As a reminder, our full risk contracts are structured so we bear all the expense management and market fluctuation risks our customers with full risk contract models are fully aware of the performance during the pandemic for some we have provided are expect to provide retroactive monetary rebates or prospect.
And of rate concessions. However for the majority we do not expect to provide any concessions.
As Dan indicated we expect the modernization and automation initiatives to offset the increased transportation expense of providing more trip and our full risk contracts when COVID-19 subsides.
Additionally, the.
And the Medicaid expansion roles and growth and Medicare advantage, coupled with our scale advantages and technological advantages will enable us to maintain our dominant market position, while solidifying our long term margin.
As such.
Our long term objective is to maintain any empty adjusted EBITDA margin between 7% to 10%.
COVID-19 negatively impacted our personal care segment, the increased Medicaid rolls, coupled with social and political tailwind had not yet been realized for personal care. The demand is there.
But we are unable to hire enough age due to COVID-19 and the current unemployment offerings, which are incentivizing able people to not work.
Post COVID-19 and post unemployment and set of.
We expect the volume to return, which will be approximately 20% higher.
Despite these headwinds our personal care segment contributed $110 million of revenue and $9 million of adjusted EBITDA and the first per quarter since the acquisition of simpler up and November of 2020.
Surface expense and our personal care business, which reflects the direct cost of caregivers and associated support functions was $88 million for.
For 80% of revenue and Q1 of 2021.
Personal care was not a part of our service occupancy offerings and Q1 of 2020.
We do not have prior year comparison, but we expect the per hour cost to improve as less over time will be needed coming out of COVID-19.
As the pandemic subsides and unemployment lapses and our objective is to have 10% to 12% adjusted EBIT margin and our personal care segment.
Moving back to consolidated mode of care, our general and administrative expenses increased 164% from $21 million.
And Q1 2022 $55 million.
$15 million of that increase was due to adding our personal care of it.
The remainder of the increase was due to increased head count and operating expense to modernize and automate the any any empty segment and solidify the corporate and technical infrastructure to support our growth.
As we expand we expect general and administrative administration expense to steadily improve as the percentage of revenue.
Additionally, we will continue to point out the unpredictable impact of cash settled equity awards within G&A, even though this quarter the impact was much smaller than Q4 of last year.
And the first quarter of 2021 cash settle equity expense was $2 million as the company share price appreciated from $138 per share at the end of 2020 to $148 per share at the end of March.
Moving to our cash flow statement.
Cash flow provided by operations and the first quarter of 2021 with the $135 million.
The above average variance this quarter between adjusted EBITDA and cash flow from operations was driven by the increase and the potential rebates related to our risk based reconciliation and rebate contrast contracts discussed earlier.
As previously disclosed we established a new stock buyback program in March.
Through may 4th we have repurchased $34 million worth of common stock and an average price of $145 per share.
Lastly, during our 2021 year and results call, we expect to provide full year 2022 guidance.
However, consistent with previous statements, our long term organic growth and adjusted EBITDA margin objectives are.
<unk> revenue growth and the mid single digits, and adjusted EBITDA margin between 7% and 10%.
Personal care revenue growth and the high single digits before acquisition and adjusted EBIT margin between 10 and 12%.
This concludes our prepared remarks with that operator.
Please open the call for questions.
Thank you.
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One moment, please poll for questions once again Thats star one.
Thank you. Our first question comes from the line of Bob The Vic with CJS Securities. Please proceed with your questions.
Congratulations on a great start for the year.
Yeah. Thank you Bob.
So much to talk about lots of great stuff I, just wanted to start with well ride, obviously very new information from yesterday.
Can you give us a sense a couple of things how does it differ.
<unk> and circulation and how does it how do they all fit together so the.
Kind of as one part and then the other part how does the acquisition come about with us and auction process was.
<unk> worked with them before just so maybe some background and then how it fits in with circulation and <unk> is different from circulation.
And so I think the best way to think about of Bob.
It would be that circulation is really our hospital product.
And.
Of the well right product is for our transportation providers.
And that's how we kind of divide it up I will say that it was kind of and the.
The missing piece for us as we look to go digital.
We partnered with the number of people on this front, but we really felt it was important that we add our own product and it and unlocks a ton of stuff for us Bob I mean, the platform and the technology platform is superior.
And also provides us the path to ultimately sunset El CAD and <unk>.
So how we came about it you're right we had been working with well ride for a long time.
They've been a good partner and.
And it just came to a point, where we felt that we.
We could do more together and they could do either one of us could do independently and the interesting thing is is that this is the product that MGM users. It's the product that <unk> uses so we essentially acquired the product that our largest competitors frankly uses their backbone to their technology. So.
I think it's also very much a testament to.
Two the value of of the technology we've acquired.
Anything you'd add.
Yes.
And that.
And that covers that again, not just the largest but really throughout all of the transportation providers. It's the premier thing you'd so and it is that it's the final piece to fill in the strategy ongoing digital both for the TPS as well as our members.
So complement circulation.
And I also say, Bob it really accelerates what we're doing I mean, I think we've just gone from.
Running at 40 miles an hour and running at 90 miles an hour and and again I think it really provides us.
The the keys to the true digital transformation that we will have accomplished by the end of this year and the talented team income.
Just for Hugh.
Yes, no we did pick up off of really a beautiful slew of developers and.
Only focus has been on this product over the years and also say.
That was also of significance iteration two Bob.
Thank you.
Super Okay that sounds really exciting.
And then obviously.
It's all kind of say it was very out of the other thing was it was.
I know this is going to come up I mean, we paid.
A significantly less some than we paid for the circulation and.
And we felt it was a very fair price.
Was the price debt.
I think represented what the value of the company was and.
And we did a lot of due diligence on it so I think that's.
And that's the only other thing I would say is debt.
It wasn't a material acquisition I'll put it that way.
Okay.
Okay, Yes, that's fantastic and as you said if it is going to help accelerate the digitization.
Great move.
Great and then I think you talked about this but can you give us a sense of the.
Because you said.
And you gave us a lot of staff the.
<unk>.
Population expansion and the enrollment Youre, serving and then maybe some contract renewals and how many contracts for up for renewal this year and how that process is going on the and Emt side.
Yes, I mean, one of the things I think we're.
Really bullish about is the fact that our population has moved from roughly of members that we manage from $25 million to $30 million admittedly $2 million of that came from the national med trends, but the rest is organic growth. The other thing Bob the thing that we manage of roughly 9% of the U S population.
From an order of magnitude standpoint, I think it's just.
It's extraordinary in terms of the the touch points, we have across <unk>.
Across the U S. So.
We feel very strongly about that and.
And we touched on Medicare advantage, and whats happening and that from the number of plans that are offering. This is the supplemental benefit is exploding so.
So we think from our standpoint, the market is growing on the Medicaid side extraordinary opportunities on the Medicare advantage side and again with our technology.
And our best in class Technology platform, we think that we can even help accelerate a lot of these decisions of the plans are making about offering this is the benefit.
You had another year of another question of lost track of the Bob.
Oh, just how the process for the renewals this year is going.
For your existing contracts.
Yes, I mean, just historically, we've thought of 90% renewal rate.
And I don't think thats going to change.
And we're by far the biggest.
I think our relationships with our payers and states are second to none.
The better than they've ever been and we launched our client advisory board within the last month that I just can't begin to tell you how our relationships with our payers and states have been transformed over the course of the last year and Theres a lot of people to thank for that.
So we're in a really good position, we renewed and gained and up to $372 million of business last year close to $400 million.
Always feel like were and the pole position, obviously with the acquisition of well right. What we're doing of the digitization of fraud.
The network I mean, just.
No the orientation of our company towards I think of more consumer friendly model is making huge difference for us and I think the perception of boat of care has dramatically been changed and the marketplace and.
Whereas in a good of positions any to keep those retention rates, where they've historically been.
I'll add it as we're going through these discussions that happen.
<unk> what is what are we going to do to help our members what are we going to do to help our transportation partners come out of COVID-19. So theyre good discussions debt move to helping and then moved to close these deals happen.
And of good discussion and dynamic on the renewable side.
Okay. That's.
That's fantastic and the.
Appreciate the kind of color on personal care as it relates to the.
Of the pandemic impact.
How do you see that utilization and the ability to hire people trending over the course of the year one of your expectations there.
I think we're obviously competing with unemployment checks were competing with stimulus checks.
Certainly, we're competing or being affected by the COVID-19 environment.
But.
I would assume.
And we would start seeing increases.
And the third quarter.
And then I would suspect we should be mostly normalized by the fourth quarter and.
And if you look at when stimulus checks and unemployment benefits start running out it's going to be kind of in the September timeframe.
We certainly have the demand that's the beauty of it we are not short of demand. We're just short on caregivers and.
And.
So we just feel like there is some other things going in the marketplace, but still remain extremely bullish about the business still remain extremely bullish about the complicated nature of what we're doing and the areas of personal care food and transportation and and.
And.
We're strong believers that.
There is a real opportunity to become the dominant player in this market just like we did and.
The and the empty space and we certainly plan to do and the food space.
Okay, Great and my last one I promise I'll jump back in queue, but matrix.
And extraordinary results as well and.
Just wanted to know if theres any and you can say about the potential and game there for Frazier I know, you're the minority equity interest, but any thoughts or updates there.
And listen.
Keith and his team have done a phenomenal job.
They are trending to.
<unk> hundred $20 million.
Sure.
For more than that actually.
Yes, $120 million for the year and.
And.
The doubled their revenue.
When I think about them and I look at the valuations of signify and.
And I look at their business I don't think it's any different I think they've got better margins and.
I think they have.
And some aspects of the business there.
And they are more attractive business model and so.
I think frazier and Keith and them realize that this is.
There's a great opportunity potentially for that and obviously signify is I think really set the bar, but I think this business is every bit as attractive and has higher margins.
Super Alright, thank you so much.
Our next question is from the line of Brian <unk>.
<unk> from Jefferies. Please proceed with your question.
Hey, good morning, guys. Thanks.
Thanks for all the color and good Brian given us today. Good morning, Alright. So my first question I guess I'll shoot Dan.
Obviously as I think about M&A.
M&A is the big piece of the story.
So you know.
How how the.
For like deal flow coming in and obviously, we've seen you do some buybacks here so.
How should I be thinking about timing and what the pipeline today looks like.
I mean, we've got 20 targets and our pipeline right now.
On the personal care side, and we are we're going to be aggressive Brian I want to see that business at.
$1 billion and revenue and $100 million of EBITDA.
And.
That's that's where we're and we're going to trend towards and we're going to we're going to do it we need to do and obviously we're going to.
Buy things at the right.
<unk> and.
And make sure we do the right level of due diligence, but we are and if we're.
And we're in an enviable position right now with our cash position of $300 million and obviously, we have of revolver as well and we have a lot of access to capital and.
We're going to be aggressive and I think those of the those of the targets. Initially I have in mind, but I think we can go well beyond that.
And then just shifting gears and yes. Thanks for all of the color you've given on the.
And the different buckets of your contracts, but.
Based on what Youre seeing so far as we think about the hospitals and the other provider groups that we cover everyone's calling out April.
And Kelly.
And beginning of the recovery and utilization trends right. So just wondering what youre seeing.
The quarter to date on.
And on utilization and then again on the.
The simpler side just curious if you saw any.
Is there a was there a wave of rejections and visit.
In fact in the quarter as well on Q1.
Yes, so starting with the <unk> as Dan said really and the.
December because of weather and then just because of the uptick where were concentrated in the northeast we actually saw some of more challenges on the hour side those have stabilized right now.
So consistent with the stabilization and as we're coming out I think and.
And the third quarter, beginning of fourth quarter as Dan said, we should expect some recovery there.
On the utilization side back on the transportation there are pockets within certain areas that we are seeing an uptick.
But when you look across the entire network not a not a large impact.
But we're preparing right and we're making sure that our transportation network is healthy.
Everything that we're here to when it does come back we're in a good position.
So we.
You will see right and you will see as it comes back but we've predicted it to come back it's models and our numbers its model and our capacity. So we feel comfortable for where we are but not yet see and the big uptick yet.
Beauty of it though and I appreciate that.
The beauty from our perspective, though as we're driving the heck out of these operational initiatives.
And we.
We're going to we believe we will generate.
Run rate savings in excess of $50 million by the end of this year and we think divestiture net to come on that front and so.
Our view as utilization comes back again and.
And we will position because there was operational opportunities here too I think more than offset those changes and utilization and actually improve the member experience at the same time.
Got you and then Daniel I think.
The first time debt together to talk about Bud of care of Provident and back then the social determinants of health with some of that.
And you brought up and fast forward to a.
The year and half later.
How are you thinking about or if you can describe just the traction youre getting with the conversations with the payers on the three legged stool right the food delivery, the personal care side and transports obviously.
In terms of the the integrated offering how is that gaining traction and what are the conversations like.
I think they have been extremely positive.
Again, we had our.
Client Advisory Board meeting and we were and are very much of partnership mode with.
Our large or large payer partners as well as our states and.
They are they are really bought into the vision, we have for a holistic model for the treatment of the member.
And we believe we will go beyond this we're going to get into behavior of social we're going to get into remote monitoring and we're going to get into the medication management and.
And they also believe the foundation that we're building among food.
And transportation and personal care is the right Foundation, and so it's gone extremely well and very much.
With this administration and I would say we are extremely well aligned with what we're doing.
Really well aligned with the vision that our payers and states have for the member experience as well.
Yes also on that Brian and you hit it the three legs of the stool I think challenges with.
With other companies or other part of the industry getting that last mile done the food from the main location two of the actual member you are hitting it we have the transportation network and the AIDS to really ensure that that last mile is done and sort of the member experience is great and then the financial model work.
So just reiterating what you already hit wear and a great place to take advantage of.
Bringing all three of those together and we have the resources that Ryan and that's the other thing I mean.
And that makes sense.
Yes last question for me Dan.
This quarter you had the flu.
Of that few weeks ago, we saw the release from the lift just talking about their medical offering or whatever you want to call. It health care offering I just want to hear your thoughts and.
Where does that play and the ecosystem and.
And why it's not a and.
Certain of the risk factor for you guys.
Well I think I think first and foremost lift as a partner of ours and.
And have been of partner for an extended period of time and we value of that partnership.
So I just want to underscore that that being said.
They don't do complicated contracts. They don't have the centers of excellence theyre, not managing fraud waste and abuse.
<unk>.
Other.
They are less inclined to.
And to care for patients and neighborhoods that we care for and.
We're of community based organization, we of community based transportation providers for a reason they serve their communities just like we of community based personal caregivers.
Community base.
And people that will be delivering food and.
And we also have an.
And unbelievable technology platform ourselves that I I don't think that anybody will be able to offer of the technology solution that we now have in place and it'll be especially given what we're doing there is nobody that is remotely close to us and that includes the gig work for.
And so we feel very strongly about that that being said again, we view lift as a partner.
We think they have value in terms of what we're doing but.
Where are the ones that have the contracts were the ones out of the relationship.
And we're the ones that have the technology platform.
Awesome. Thanks, Dan.
Thank you Brian.
Our next question comes from the line of Brooks O'neil of Lake Street Capital markets. Please proceed with your questions.
Hey, good morning, guys I appreciate all of the color of the 50 questions and it has so far.
Really helpful as well I just wanted to ask one or two quick quick.
Quick ones first.
I think probably important that serves the key issue and exactly how the return.
More normal.
And it's Glenn.
The income statement the balance sheet I appreciate all color.
And just help us be share, we understand and youre going to see.
And no increase and adjusted EBITDA decrease returning to normal and that will be offset by all of the operational and strategic moves you've made to the <unk>.
For the ability of the company and is that the right way to think about it or how shall pass and goodbye.
I think I would think about it that way Brooks I mean, I think one of the things I talked about is we're building of durable model Brooks and.
I think Keith and I feel very strongly about the fact, we're going to deliver of company.
That should produce 7% and 10% EBIT of consistently and.
And there's nothing that suggests we can't do that regardless of what happens with utilization and.
And the.
That's how we think about it again.
Sure.
Now specifically that we will achieve run rate savings in excess of $50 million by the end of this year and.
And we think there's even more opportunity on that front Brooks and.
We think that number could be significantly higher than that potentially so we feel like we're in a really good position I think as you think about your model.
The 7% and 10% post COVID-19 as we feel very strongly about and we think we're in a very good position to make that happen and again you've seen the investments. We've continued to make the other thing I would also share with you is don't forget that the personal care business is a hedge.
And that as utilization comes back on the transportation side, we're going to be we're going to significantly benefit from the utilization coming back and the personal care side and that was one of the reasons.
We made those investments.
I would also say Brooks where.
And we're launching of food business and the very near future and we think that has tremendous.
A tremendous future.
The $9 billion market growing to $15 billion by 2024, and so we're going to continue to diversify our offering but the the base businesses is going to be stronger than ever.
That's fantastic and Thats great.
And I appreciate the color and the other question I had.
How should we think about the growth of your M&A.
Got it.
The contracts with.
The customers.
New customers just how should we think about you're worried that that piece of the puzzle.
Thanks, a lot.
Yes, if we look at the.
Our top six payors.
The United Healthcare.
Aetna.
Manner anthem.
Yes.
And Centene.
Those six companies probably represent 75 per cent of the Medicare advantage marketplace.
So just keep that in mind Brooks is like we're already partnering with the top players in the marketplace and so.
And we would envision debt that we would help them expand the.
The supplemental benefit and the area of Medicare advantage and again given that we already have the contracts with them. We're in an excellent position to advantage ourselves.
Remember that.
Of the $200 million of business, we bought with National <unk> $50 million of it was Medicare advantage.
That's great. Thank you very much.
And the future.
Yes, Thank you Brooks per week.
The next question is coming from the line of Mike <unk> with Barrington Research. Please proceed with your questions.
Hey, good morning, guys.
Sorry, but I missed that.
Hey, good morning.
The repurchase figure of what was the 34 and you bought and how many shares.
Okay.
At 200 300000, Mike.
Alright. So then I want to talk I guess about simpler a little bit. So you guys are saying.
With the hearing this correctly youre, essentially saying, hey, we were having some problems.
Attract and caregivers and.
It's not so much the fact that seniors.
And just hesitant to have people in the house is that a fair characterization of what you said.
Yes, I mean, I think we are.
We're competing against the stimulus.
<unk> and unemployment I mean it just.
But the hours of there I mean, the good news is the hours of stabilized Mike as Heath mentioned the hours of there though.
And.
And the company has a history of of high retention rates and.
And adequate amounts of recruiting and so theres no reason the thing.
That loan.
Snapped back as well.
So I wanted to ask.
Given sort of.
Biden and administration's view and just I think probably of general view across the country. Among a lot of governors, what's your concern about sort of this push too.
To put pressure on lower and wages and moving them up and how that could affect.
And sort of your margins and that business, how do you all sort of think through that.
Potential risks.
And again I think Theres a lot of I would agree with you Mike There is there is noise in that area.
And.
Aye.
For our personal caregivers.
And we look at the state of New York, We do.
<unk> already built in.
Different wages based on the geography.
And in many respects.
Mike we've already seen those adjustments at the end.
The other thing is is that.
What we also see is that if wages go up the states and payors have been and been inclined to give us equal amounts.
The amounts of increases and our reimbursement. So that's what we have seen historically, we've seen it in new Jersey with the end in the last even within the last couple of months. So.
Again, it's on our minds, but just what we've seen historically.
That the states and payers have been also inclined to make offsets.
And if those types of things transpired and then I will I will say one other thing though.
As we look at our our contact centers Mike.
And.
And we look at the efficiencies, we're we're creating and our business models to drive the RBA through business process outsourcing through automation and we.
We will have flexibility on wages.
We were able to achieve what we we expect to achieve somewhere well north of $50 million of savings, we think theres opportunities and.
There is a part of me that is committed to living wages frankly and.
I don't know what that is by market, but.
I don't think Theres misalignment from.
For me on that front and.
I mean, I think it's it's a complicated discussion Mike, but we got to do the right thing too.
Yes, I'd also add in addition to because in home care is such a focus by the federal government and all of the state and Dan said that the matching of increases with the increased reimbursement and we're also focusing on who are the companies that are providing that service and narrowing that network.
So people that are sophisticated have the scale and proven ability and theyre going to get the business maybe versus the decentralized group of of different providers. So there is two things happening and its the narrowing of the network that benefits us and and Theres the matching of the reimbursement.
To correspond with those increases and minimum wage.
The other thing about the buy and administration to Mike.
And they're looking at moving people from unemployment in the health care and.
And that's one of the pushes and this idea of again, where were community based organization with with AIDS and this is an area of they're focused on the area. They are focused on is transportation providers, particularly minority owned businesses well, that's something that we do a lot of partnering around and.
And then obviously, what we're seeing as far as food and security and so.
And I can say there.
There is not an organization that I believe out there that's more socially responsible and more aligned with what's happening.
So economically and our country. So we think we're in a really good position, Mike regardless of what way this goes.
Okay fair enough.
So you're generating all of this.
Ridiculous amount of free cash, but at the same time Youre building the payables and now all of the payables are current and and then you're also talking about.
20.
Potential targets and personal care as far as the M&A. So how do you I guess, how do you think about.
Capital allocation priorities over the next 12 months to 18 months, given the different puts and takes and.
Where does the debt paydown relate.
Relative to internal investment relative to two external investment.
And I'll, let I'll, let heath jump in here as well, but again a lot of our focus is building out our platform I mean, we're making investments and significant investments and technology.
This might not be the only technology company, we ultimately acquire as well if we think it fits fits well into our platform. We believe that we want to have a national we believe and our national platform for personal care given what we've.
Given the feedback we've gotten on and on our.
Our recent acquisition of <unk>. So we feel strongly that we need to continue to be very aggressive on that front in terms of.
Of building that out and then as we talked about we're building out of food business and.
And.
So I think Mike, we're making from my perspective, all of the right investments and that being said.
If there is an opportunity to pay down debt.
That's certainly something I think we paid down the revolver already and we've got a couple of tranches, we could we could pay down.
But we think the frankly the growth opportunities are so extraordinary and our business and the opportunities are so unique and we're so well positioned we want to make sure that we're driving the best return for shareholders in terms of capital allocation. So that's how I'm thinking about I know Heath, what would you add.
Just to confirm nothing has changed with our strategy, we're going to continue to invest and the business and pursue M&A.
On a micro basis, just to do with your question around that liability increasing and it goes back to what I said earlier and then even though they are current.
And those discussions that we're in with.
And those specific states that have those balances are all around how do we ensure that our transportation providers are strong enough to deliver on the membership. So it's all about using that cash to make the network healthy.
That's a little more deep on what debt with that liability could be used for with our specific partnerships with our states as well.
So.
And I just wanted to let.
Let me make sure I'm understanding so are you, suggesting that maybe the $2 45, and reality will be considerably less and that one wasn't.
It all sort of shakes out for.
The right way.
It is of liabilities, so that 245 of the liability, but the way we have been partnering with our state and what are we going to do to ensure that our network is healthy so.
So when we go into these renewal discussions that happen all the time, that's on the table and the state no that we have this money and the the reason why these contracts are structured that way.
For that exact reason.
Ebb and flow and then how do we as the partnership allocate that specific capital to ensure the next month and the next year that we're set up to ensure that our transportation network is healthy and therefore, our membership are members of getting served.
And there is I think the other thing I would say too and that's a really good point.
Is that.
We're there's a lot of focus on for.
For example, minority transportation providers and.
And community based organizations, and we're and we're making investments in those groups and and.
When he talks about that is like how do we allocate those dollars to help to help those local transportation providers.
Thrive and interesting enough the.
And the technology investments that we've made are also allowing that to happen as well that they can remain as independent.
Providers and run their own business because of the partnership we have with them and and again Heath is right about how do we make investments back into the communities and.
And that's something I think we are very aligned on with our payers of the states.
Okay, Alright, very good great great color. Thanks, guys, great start for the year.
Yes, Thank you Mike.
Thank you at this time, we've reached the end of the question and answer session and I will turn the call over to Dan Greenleaf for closing remarks.
Yes. Thank you all for participating on our call. This morning.
May 12, we will be joining CGS for virtual <unk>.
Non deal Roadshow and during the first week of June we will be participating and the Jefferies Virtual health care conference.
We also remain accessible for one on one calls please reach out to our Investor relations firm the equity group if your interest and scheduling of follow up call. We look forward to reporting back to you in August when we release, our second quarter 2021 financial results and stay safe and have a wonderful day.
This will conclude today's conference you may disconnect your lines at this time and thank you for your participation.