Q3 2021 ModivCare Inc Earnings Call
[music].
Greetings and welcome to the Motor care incorporated third quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your <unk>.
Allophone keypad.
As a reminder, this conference is being recorded.
Now my pleasure to introduce your host Jonathan Bush Senior Vice President General Counsel automotive care. Thank you Jonathan you may begin.
Thank you operator, good morning, everyone and thank you for joining motive Care's third quarter 2021 conference call and webcast.
With me today from the company are Dan Greenleaf, President and Chief Executive Officer, and Heath Sampson Chief Financial Officer I.
I would like to remind everyone that during todays call. The Companys management will make forward looking statements under the private Securities Litigation Reform Act.
Those statements involve risks uncertainties and other factors that may cause actual results or events to differ materially from expectations.
Information regarding these factors is contained in today's press release and the company's filings with the SEC.
We will also discuss non-GAAP financial measures in an effort to provide additional information to investors. These measures should not be considered in isolation from the most directly comparable GAAP financial measures. The definition of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures is included.
In our press release and form 8-K.
We have arranged for a replay of this call which will be available approximately one hour. After today's call on our website at motive care Dot com.
This morning, Dan Greenleaf, our Chief Executive Officer will begin with opening remarks, after which he FEMSA and 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.
Morning, everyone and thank you for joining us today in the third quarter, we made significant progress executing on our strategy to transform motive peer into a one of a kind integrated supportive care company with solutions focused on addressing the social determinants of health on September 14th we completed the acquisition of careful.
Okay.
Adding a highly complementary leader in the northeast market the personal care segment.
22nd we completed the acquisition of <unk>, bringing a first rate remote patient monitoring and medication management company into our whole.
Throughout the quarter, we continue to automate and modernize our non emergency medical transportation or any empty visits and we advance the development of an innovative meal delivery offering.
The market transition to value based care addressing social determinants of health of our nation's most vulnerable patient populations is critical to promoting positive outcomes and reducing health disparities, we're driving motive cares organizational transformation with a focus on advancing these efforts by removing barriers to care enhance.
The client and patient experience, reducing the cost of care and improving outcomes. Our team members and partners play an integral role in the communities, where we live work and serve and together we are confident in our unique position to impact the future of health care.
Turning to our business segments, the acquisition of Kerr finders combined with simpler creates one of the largest personal care platforms in the country with approximately 16000 caregivers delivering roughly 30 million hours of care annually to approximately 20000 patients scale.
The scale and density matter in this business, we are leader in seven states in which we operate with approximately $650 million of pro forma revenue as referenced at the time of day care founders acquisition with our scale and density we can cover large geographies for the payers in states we serve.
Spanned access to personal care.
We continue to see robust demand for our personal care services, both in the short term and long term.
This demand is driven by the escalating trend of care moving away from institutional settings and into the hall.
<unk> delivers lower cost better quality of life and improved health outcomes.
Well the strong demand for our personal care services is readily apparent we have experienced muted hours due to the continued labor supply challenges during the pandemic consistent with others in the industry.
We believe that depending on the region, our personal care hours are running 10% to 30% below pre pandemic levels due to the shortage of caregivers in the workforce.
As the impact of labor shortages dissipates, we foresee a meaningful step up in our personal care billable hours and EBIT run rate from current levels over the coming quarters.
We remain optimistic regarding the long term growth of our personal care segment as the personal care is a $55 billion market that is highly fragment is expected to grow rapidly.
Presenting an attractive opportunity for us to generate organic and inorganic growth with a disciplined approach to tuck in acquisitions.
Moving to remote patient monitoring for RPM. The acquisition of <unk> is also integrating nicely in the motive care as a new value added offering for payers states in patients.
Patient monitoring represents an $8 $5 billion total addressable market. It is only is only 13% penetrated today.
Pandemic has led to an acceleration in digital health and highlighted the value of alternative solutions to in person care RPM has made it possible for patients to safely remain at home, while they're health continues to be supervised.
The Euro is best in class RPM platform is device agnostic and supports AGL for the elderly and care in the home for the chronically ill.
By proactively monitoring the health data more than 170000 individuals the team members at <unk> to 'twenty four seven care centers help alleviate pressure.
Pressures on the health system are preventing emergency room visits of hospital stays and removing traditional barriers to care.
We believe there is a tremendous opportunity to grow here is existing revenues through cross selling RPM across a bigger base, which overlaps with 10% of motive care's top clients.
Our teams have partnered with their respective counterparts and engaged a very productive early conversations with our customers.
Financial profile of <unk> is very appealing with mid teens reoccurring revenue growth and the opportunity to accelerate even more while also generating a robust EBITDA margin are leveraging <unk> data analytics and technology, we expect to differentiate our in home services and bridge the gaps to care through a more connected care.
Yes.
Moving Turner any empty business. This quarter, we continue to modernize and automate our national Transportation network.
Digital transformation is benefited from the well right acquisition, which brought us an industry, leading transportation routing technology in conjunction with our user friendly rider driver App.
Which brings value to our patients by expanding access to reducing complexity. We believe we have amassed to built the strongest technical platform in the industry that further sets us apart from the competition.
We continue to benefit from our automation initiatives and other operational enhancements, which we refer to as project store.
These initiatives include deployment of IV, or Iga and workforce management solutions in our contact centers reduction of transportation ways very knowledgeable riders utilization of PPO services more effective management of cost overrides and surge pricing.
And streamlining of our real estate footprint.
While the project some initiatives have been fully implemented there are additional opportunities to optimize our MGMT processes and improve automation such as improved transportation routing and continued automation of manual processes. We refer to the second group of initiatives is project likely we will be implementing project lightning over the next year, we expect to reach.
<unk> additional benefits from this initiative following the implementation.
Looking at our <unk> commercial organization, we have been pleased with our recent investments in both our sales and account management teams as we've retained 100% of our MTO contracts to date and are well positioned to win some very large contracts opportunities in the pipeline. We're also pleased to see the any empty member.
Growth in the high single digits this quarter.
Every any anti ride we provide enables access to health care for a member of our communities most vulnerable populations.
Given this important backdrop, we continuously strive to expand and strengthen our transportation provider relationships. We are a mission driven organization focused on improving the health and wellbeing of people and communities, we serve and our transportation providers playing an important role in this we are working hand in hand, with our community based transportation providers.
And further building our relationships.
In this regard we have established a transportation advisory Council focused on listening to the voice of our transportation providers and acting on their feedback to enhance their overall experience working with motive here we are.
<unk> for the integral role our providers play in helping us maintain a vibrant transportation network.
Moving to our emerging meal delivery business. This quarter, we delivered are nutritionally tailored and culturally sensitive meals to MCM members and internal team members under our initial program.
And we are very excited by our sales pipeline, which includes multiple national Mcs, we have partnered with the national foodservice provider and we believe that our innovative technology enabled meal delivery often will disrupt the current marketplace are working to address our country's food insecurity issues. We continue to believe that our meal.
Delivery business has the potential to generate $500 million of revenue for us within five years motive curious brought together a complementary and synergistic group of businesses that we believe has accelerated our position to be a highly relevant player in the future of healthcare our scale reach and relationships with our exist.
<unk> channel of approximately 30 million patients or 9% of the U S population positions us well to close the gaps in access to care Holistically, while also providing multiple avenues for sustained growth further our holistic model gives us the potential to address patient overlapping needs rather than one.
Taiwan.
With an E M T personal care remote patient monitoring and meal delivery all under one umbrella we have a multitude of cross selling or cross care opportunities as we intend to own the last mile and owns a home with supportive care, we are strengthening arrow ranks evolving our technology and remain in an excellent position.
<unk> to serve our states and payers with a one stop shop experience that is constantly being enhanced by data and analytics resources argue.
Our view is validated by the feedback we have received from our client Advisory Board recently, we have been engaged by our payer partners and meaningful value based discussions develop an integrated supportive care pilot.
We believe that our integrated supportive care strategy will drive sustainable and profitable growth at motive here, while also creating long term value for shareholders.
Lastly, I am grateful for our nearly 30000 team members who are on the front lines every day, bringing equity hope and healing to the patients we serve.
Our mission to deliver better access to care for them.
I'm incredibly excited about the long term growth journey, we are embarking on as an integrator supportive care company addressing the social determinants of health and I look forward to sharing our progress in the quarters to come.
With that I'd like to turn it over to Heath Sampson, our Chief Financial Officer for a review of our third quarter financial results.
Thanks, Dan starting with our consolidated third quarter financial results, we recorded revenue of $493 million adjust.
Adjusted EBITDA of $44 million and adjusted net income of $23 million.
For $1 63 per diluted share.
On a GAAP basis, we had a net loss from continuing operations of $8 million or a loss of <unk> 53 per diluted share.
And E&P segment revenue in the third quarter of 2021, with approximately $373 million compared to $321 million in the prior year period.
The year over year increase is primarily attributed to higher trip volume relative to the third quarter of 2020.
While trip volumes are up roughly 20% compared to last year strips are still approximately 20% below pre pandemic levels.
As discussed last quarter, approximately 85% of our revenue is derived from our capitate or at risk contracts and 15% from non <unk> or non risk contracts, which are primarily fee for service.
Within our at risk contracts, 45% of the revenue is from full risk capitation contracts, where we are paid a fixed fee per member per month and assumed full responsibility to manage our respective transportation costs, regardless of trip volume and.
In comparison reconciliation and rebate capitation contracts represented 40% of total revenue.
As a reminder, the reconciliation and rebate contracts have provisions that either limit or increase our revenue based on trip volume <unk> profit margin simply.
Simply stated we are only partially at risk for these capitation contracts.
Therefore surface expense for the IMT segment, which includes all direct costs related to transportation providers, our contact center operations and other operational functions.
$303 million compared to $236 million in the prior year.
The increase was driven by higher service expense costs associated with higher trip volume and related contact center activity.
Even though revenue was up due to higher trip volume or margin on our full risk contracts have decrease as we are now paying for the higher chip pipe. As a reminder, we have expected this to happen and again. This is how the contracts with our customers are designed.
Additionally, and as discussed before our.
Our cost per trip or unit cost and increase throughout the pandemic.
Even though we are experiencing margin improvement because of the lower trip foreign volume during the pandemic. We are also experiencing partially offsetting increases in unit cost because of the pandemic.
The increase in unit cost.
<unk> has been driven by our transportation providers tight supply of drivers, which is prevalent across the entire transportation sector.
As a data point for the Bureau of Labor Statistics, the consumer price index for the broader transportation industry has increased by four 4% since last year.
And various public disclosures from Uber and Lyft Echo the tight driver supply.
That being said our model and industry are unique because we have more predictable and recurring trips, which makes it easier to match supply and demand, especially as we continue to digitize our network.
Third quarter <unk>, adjusted EBITDA was $34 million in 2021 compared to $55 million in the prior period. The decrease was primarily due to the higher service expenses mentioned previously.
Adjusted EBIT margins of any empty were 9% in the third quarter, which is in line with our long term and E&P margin expectation of 7% to 10%.
While we expect trick volumes will continue to increase in the fourth quarter and throughout 2020 to steadily we expect to maintain a 7% to 10% EBIT margins going forward.
And the operational initiatives and platform modernization efforts offset higher trip volume and full risk contracts.
<unk> adjusted EBITDA in the fourth quarter is expected to be comparable to our third quarter EBITDA.
As Dan mentioned, we remained focused on optimizing operations from the modernization and automation of our contact center and transportation processes, which we call project storm and now project Lightning.
We have fully implemented the projects storm initiatives, the full $50 million of savings have been obscured by the lingering impacts of COVID-19, and the related tight labor supply.
However, the specific actions have been taken for example.
CPO outsourcing will have approximately 500 agents by yearend and account for 65% of our call volume.
Real estate reductions have already happened and will continue to happen.
Interactive voice response containment in our contact centers is approaching industry standards.
Ineligible rider process improvements are in place and being measured consistently and various other initiatives are also play.
As we come out of Covid and the related labor challenges. These savings will more clearly show up in our go forward cost structure.
Our journey to modernize and automate will continue into 2022, we expect more savings as we automate and digitize our processes for making reservation changing or cancelling trips routing drivers processing payments processing claims and performing other non value manual tasks.
Turning to our personal care segment third quarter service revenue was $119 million.
We closed care finders on September 14th, which contributed $9 million of revenue and an immaterial amount of EBITDA in the quarter.
As we mentioned at the time of the acquisition care finders generates roughly $200 million of revenue annually.
Billable hours for our combined personal care segment have remained relatively consistent quarterly throughout 2021.
Difficulties with caregiver recruitment because of the pandemic has limited our ability to service the strong demand that exists.
While the exploration of unemployment incentives had a short term benefit to recruiting vaccine mandate for health care workers in New York, Pennsylvania, and New Jersey have temporarily subdued the incentive rollout.
Due to our concentration in the northeast. We currently don't expect a sequential uptick in billable hours in the fourth quarter given these recruiting challenges as well as the fact that the fourth quarter is a slower period for recruitment due to the holidays.
Personal care adjusted EBITDA was $10 million in the third quarter flat sequentially compared to the second quarter of this year.
Personal care adjusted EBITDA margins were 9% in the third quarter consistent with the prior quarters in 2021.
We keep a tight rein on costs in the personal care segment as ours remain below pre pandemic levels.
We expect that personal care margins will stay below the 10% to 12% normalized range in the fourth quarter.
Sales are expected to improve into our targeted range over the next year as ours begin to normalize and we realized cost synergies from integrating our personal care acquisition.
Turning to our remote patient monitoring segment, we closed on our acquisition of <unk> on September 20 <unk>.
So this segment was also financially material for the quarter.
We are optimistic about the strategic and financial benefits from this transaction.
As previously mentioned <unk> generated $56 million.
Recurring revenue for 12 months ended June 32021.
Revenue is growing in the mid teens, and we expect long term EBIT margins to be in the mid 30% range when combined with personal care meals and transportation remote patient monitoring represent an ideal tech enabled solutions for our members as well as the valuable cross selling opportunity across our NAV.
National payer base.
Okay.
Consolidated cash flow from operations was $21 million in the third quarter of 2021, while year to date cash from the operation was $190 million.
Motive care's strong year to date cash flow has been driven in part by an increase in our <unk> reconciliation and rebate contracts payable.
While we continue to accrue incremental payable each quarter, we expect to set up a meaningful portion of these payables during the fourth quarter.
During the third quarter motive care issued $500 million of 5% senior notes due in 2029.
Proceeds from this debt issuance were issued to fund the $315 million acquisition of Eri and for general corporate purposes, which included the full repayment of borrowings on our revolver, which was used to partially fund the $340 million acquisition of Kerr finders.
We ended the third quarter in a solid financial position with $127 million of cash and cash equivalents and an undrawn $225 million revolver.
Net leverage pro forma for the acquisitions of <unk> and Kerr finders with three four times at September 30.
Which is in line with the mid three times pro forma net leverage expectation at the time of the simpler acquisition announced in September 2020.
We remain committed to maintaining a strong balance sheet and we are reiterating our net leverage target of three times.
Turning to capital allocation mode of care has been very active over the last two years on the M&A front with the acquisitions of Eri care finders.
All right, then flora and national metrics.
These acquisitions have accelerated motive care transformation into a technology enabled supportive care company company with long term revenue growth.
In the mid to high single digits.
But these transactions have also delivered meaningful returns on invested capital and earnings accretion due to the Capex light nature of these businesses that generate powerful cash flow.
We continue to evaluate a robust pipeline of acquisition opportunities.
We remain disciplined in our programmatic approach to acquisitions and are focused on delivering meaningful returns for shareholders, while optimizing capital and maintaining a strong balance sheet.
Touching on matrix in which we hold a 43, 6% equity investments.
Matrix that third quarter performance was primarily impacted by a decline in their clinical solutions segment.
Which include employer health clinical trial and clinical labs.
Due to a faster than expected rollout of vaccinations nationally, which decreased COVID-19 related revenue.
As well as due to the timing of new business wins.
Revenue in their clinical care segment, which is primarily comprised of comprehensive health assessments continued to perform well during the third quarter with double digit year over year growth in volumes, helping to drive over 20% growth in clinical care revenue.
For the third quarter of 2021.
Matrix has consolidated revenue was $78 million.
Compared to a $141 million in the third quarter of 2020.
On a consolidated basis matrix recorded adjusted EBITDA of $3 million <unk>.
Compared to $54 million for the third quarter of 2020.
Due to the lower lower clinical solutions revenue as well as the continued investments and staffing ahead of the new clinical solution wins.
While near term profitability has been impacted by market headwinds and planned investments to support future growth and diversification.
Motive care remains encouraged about the opportunities that matrix as the company has diversified beyond the comprehensive health assessment business.
We are encouraged and aligned with our investment partner to ultimately realize the substantial value and matrix.
Lastly, as we mentioned last quarter, we expect to provide full year 2022 guidance. During our 2021 year end results call in February.
Consistent with previous statements our long term operating objectives remain as follows.
And E&P revenue growth in the mid single digit with adjusted EBIT margins of between 7% and 10%.
Personal care revenue growth in the high single digits with adjusted EBIT margins between 10% and 12%.
And remote patient monitoring revenue growth in the mid teens with adjusted EBIT margins in the mid 30% range.
This concludes our prepared remarks with that operator, please open the call for questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Press Star two if you would like to remove your question from the queue.
Participants using speaker equipment, and it would be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Okay.
Okay.
Thank you. Our first question comes from Bob <unk> with CJS Securities. Please proceed with your question.
Good morning, Thanks for taking my questions and thanks for all the information.
Detailed this morning.
Youre welcome Bob.
Great So let's start with any empty.
And you gave us some good.
Information, obviously on year over year utilization and profitability and things like that could you talk a little bit sequentially about how utilization trended from Q2 to Q3.
And then maybe how that impacts the margins in the quarter and then also.
How much for lack of a better term contra revenue is still in the quarter trying to find a.
Our steady run rate when utilization returns to normal levels for revenues.
So Bob.
This is Dan.
So the thing on the <unk>.
On the transportation piece.
Utilization is checking up incrementally.
And so there wasn't any I think.
What I would say substantive swings I think what we were what we've been enduring is for.
For the most part is related to driver shortages.
So if we look at our rerouting trips.
Traditionally.
Driver shortages represent 10% of that number the numbers are as high as 22% now.
And that plays a role in terms of supply and demand and I think thats it and as a result, we site we've seen some unit cost increases the good news is.
And all of this is that the unit cost increases we think are temporal that.
There is opportunity as the network gets healthy again, and we've got a large network initiative going on that will.
Will we believe will drive down the unit costs. The other thing I would also like to point out is that project.
<unk> storm and project lightning or a rocket enrolling and as we've talked about we have a target on that is $100 million.
Just thinking about the business I would be focused on those kinds of things that I would describe we are in our control.
I also believe though that the unit cost.
Increases that we've seen are something that will resolve themselves as is.
Labour comes back into the workforce.
We've got a pretty strong initiative going on right now.
With building back our network, our network out and I'm confident that will that will play a role and also decreasing costs. So that's that's where I'm on that while joining the other one yes, yes. So for utilization we put in the script just to give some context.
Last quarter were about 20% higher.
And then I also said, we're about 20% less than our high point pre pandemic.
It's first quarter that slope is been pretty steady.
We actually expected to increase in this quarter in the fourth quarter, but it's been pretty steady so I think that slope.
We will stay the same way as it did for Q3 Q4 and probably into Q2 so.
Manageable, hopefully, but thats triple I mean utilization on top of Dan's comments around around unit costs.
Got it okay. Both of those Super helpful. I appreciate that and then.
I think again, you gave us a lot which is great. You said you've retained all your contracts and your bidding on on a bunch more can you just give us a sense of the <unk>.
Market out there right now.
Maybe the opportunity ahead of you with potential new contracts.
Yes, I mean, I would say it's frothy.
Think we're.
<unk>.
We're in many respects in a pole position to win these contracts and some of the things historically Bob.
<unk> has gotten in the way of.
Oh no.
Our business.
Expectations, if you will or.
Around our technology platform and Im pretty confident.
I can say, we've got a best in class technology platform now and not to mention we're really the only national provider of services, there really isn't a state that we do.
Have a significant presence in.
And as these rfps rollout I think we're in an excellent position to win them.
And I also would mention that a big part of our business as you know is 50% of it is.
As payer base.
I think our relationships with our payers are pretty exceptional we've put a lot of effort in there. We've built out an account management team, we've got a client advisory board that.
Many of our large payer states and hospital systems.
And they are actively involved in the evolution of the company and advising us on on things, we need to do and to make the company better and the member experience better. So we're I think we're really well positioned we haven't gone on record on what the order of magnitude is Budd.
I would tell you it's material.
This is what I would say and again I think we're very well positioned in those states.
And with those with those payer relationships too.
To win to win many of them. So I don't know Heath anything else you would add.
Well no on those this year the business will come on for those in the latter part of mid and latter part of 'twenty two for the for the larger ones that are out there right now, but we will know that in and hopefully we'll be able to update you guys.
Next quarter.
I would also I would also like to point out I mean, there's things also we're doing Bob I mean, if you look at our our member experience scores.
Between the fours and fives work like 90%, which.
If you look at the statistics out there that's on the upper upper upper end of member experience. So our experience with our members.
Is significant.
I would also say that we put recently together I mentioned, it but I can.
Underscore how important this is transportation Advisory Council brought in nine of our transportation providers from around the country. We've we've never done that before and they are actively involved in it.
How we evolve our relationships with them and Thats something that I think historically the company had treated.
It's a kind of a necessary evil for lack of a better description.
Embarrassed to say that but that's I think that's how I would sum it up.
And in fact, we're going to be in.
Another part of the country with our <unk> LTE Offsite next week and every member of the executive leadership team will be spending a morning riding with the transportation provider and there were all going to collectively get back together and provide feedback.
We also launched a product called qual tricks.
Were this week in fact that we're getting real time feedback from our transportation providers too we've got as many as almost 400 already 400.
Examples of where we're getting feedback so I guess, Bob I guess at the end of the day I just think were there.
Town of gallon relationship that we've had.
<unk> is being significantly enhanced particularly the transportation providers transportation provider networks, we're really focused on building out.
Community based transportation providers that I know it goes a long way also with our payers. We are in fact launching transportation University in December.
We're bringing in minority business owners from the Illinois area in and kind of giving them.
The playbook on how to be successful so we.
We've got a lot of great stuff going on here, Bob that I think positions us exceptionally well.
Now and well into the future.
Okay, Great that's Super I will jump back in queue when questions, but thank you very much.
Yeah.
Thank you. Our next question comes from Brian <unk> with Jefferies. Please proceed with your question.
Hey, good morning, guys.
Sure, Brian I guess first for you.
You talked about kind of like Q4 expectations isn't some clarification, there Q4 expectation that payable settlement in Q4, just any color you can share with us in terms of.
Yes.
Guidance effectively for Q4, it kind of puts and takes that we should be thinking about and then on the payable settlements.
How do you think any level.
I'll add on that one.
Yes, so from a from a from a EBITDA perspective.
Sure.
From a <unk> perspective fairly flat like like we said like I said in the call and then the other acquisitions that are coming on with VII and personal care those are going to be performing as expected and as we as we disclosed Lincoln a good proxy for that is we disclosed the ttm's for those.
So feel really good about the consistency.
Of the EBIT decide on all of the segments that have come in.
Again personal care will probably talk about but thats continues to be.
Depressed and that's why we're in that high <unk> 10 range.
For the next quarter, and then to deal with the payables and consistent what we said before.
There is there is a few large customers within there that make up a big chunk of the balance and we expect to pay that was a.
Chunk of those next quarter as well as through the year that being said.
With.
With where utilization in trip volume is.
Those payables continued to build as well.
So feel really good about our cash position.
Similar to when we made these deals so.
Hopefully that's helpful.
Thank you so much for that.
I guess my follow up Dan.
Need to think about labor everyone's obviously focused on it but any.
Personal care the issues here, but I'd like to hear about transporting you called out driver shortages, maybe if you can help us think through how what the economic structure as of your relationship with your sub.
Sub contractors effectively.
Are they able to pass on to you the cost of labor or is it a set rate and you are having to give them incentives.
Higher rates just to.
Drive that drive.
Drive the supply I mean, just any.
Any color you can share with us in terms of how that all works and how do you think your discussions with them are shaping up in terms of being able to manage through that.
So I think Theres, a couple of things here and I'll, let heath talked about some of the more kind of.
The other aspects of this as well, but <unk> I just saw the jobs growth rebounded last month, the 531000 jobs in October so listen that plays a huge role.
And the type of people we recruited Brian.
So I think there is.
We feel good about again <unk> seen it.
In your restaurants in Nashville, and.
And we know that labor shortages were real but we think that.
And as a result, some of the some of the people. We historically have done business with had fewer cars available to us.
We think that all all rebounded and things will get we believe we will get.
We will get normalized again, but the bigger picture here for US is that we're thinking about.
How do we get in a position and I think Covid has shed light on this for US is how do we get in a position. So that we have a if you will and an Amazon type of relationship with their with their driver network and so it's more solidified so that we can.
Them extending lines of credit for purchasing cars that.
That we have very specific requirements regarding automobiles and requirements.
Moreover, we also know our drivers are very community based and so how do we build the communities we're in as well and so we think like our vision for where this is going.
<unk> is going to be groundbreaking here, Brian and I think we are figuring this out so that I don't know if something like a COVID-19 happens in the future again, there's no guarantee on what's going to happen with the workforce, but having a tighter partnership with.
A select group of transportation providers that we're able to build and to grow we believe will be one of the answers in the marketplace going forward.
And Thats something just as a company we're committed to again, where community based organization, we want to build out minority businesses.
And we think with this transportation University and other things the game is going to be change pretty significantly Brian so with that I'll turn it over to Heath on how the pass throughs work, yes, yes, so for.
From a rate perspective, or a cost perspective.
As expected those to go out and those will be at the right Fair right I said CPI for transportation was four 4% so costs are going to be higher.
That's not the issue the issue that we are experiencing now with the shortages.
Causes people to have to drive farther than they should.
Last minute trips do transportation provider that is not maybe a partner thats more expensive AK surge pricing. So the shortages are causing the inefficient cost to go up.
And then also also important and Dan mentioned this especially as we move forward into this broader partnership and again, we can do that because we have time to plan. These are not on demand trip. So unique when you have time to plan. We know there is a higher rate increase.
But really now whats really going to make sure that that transportation providers profitable that they get more volume and more consistent volume and Thats where were moving so even though there is this higher wage and we expect it to happen with our model and with where we're moving and because we're able to be digital.
We feel really good to ensure that our transportation providers.
Our healthy make the margins that they should be making.
And as we come out of Covid and have these new processes, but again, we will be in a really strong spot and just brown and other example of this is reroute.
We're probably 30% of our business right now is rerouting that number should be under 10% that is all 100% related to driver shortages.
And so this is these are just examples of things that drive cost drive work.
Also you can also think about so very recently, we haven't been able to multi load as well. So that's another example of where again these are COVID-19 related items.
Given where we are and what we're doing should under.
Should be self correcting here again, particularly as you start seeing people come back into the labor for us, particularly as we continue to evolve our model, which is going to be much more partnership base going forward.
Yeah.
Got it and then last question for me, Dan you're talking about your fleet strategy in RPM. So just curious the reception you've gotten from payers and your colleague state partners on that and maybe any any just color incrementally that you can share with us on the food business.
Hey, you are partnering with.
Yes, I mean, I feel really good about it we've got a national partner.
We've got I think the most elegant digital solution out there and our client Advisory Board has seen it and I've commented on it's more elegant the new breeds.
Obviously.
There is a massive unmet unmet need.
<unk>.
And.
We've got we're in conversations with two very large national payers.
And we piloted and with one of the payers, we piloted even with our own teammates and we feel really good about where it is and where its positioned keep in mind Brian.
We serve 9% of the U S population are 30 million members and I don't know if theres. Another company out there that has that level of concentration around these vulnerable patient populations.
We're going to drive.
Our solutions into those patient populations and that includes food fight includes obviously continue to drive transportation personal care and remote monitoring. So we think we're in an excellent position, we've got phenomenal relationships with our top payers.
Six payers represent 80% of that 50% or five of those are are represent 80% of the Medicare advantage market. So you just see the expansion in Medicare advantage is as the number of plans that are offering food has doubled in the last year and we expected to double again so Brian.
We're we're just really really well positioned we think we have a superior product that has superior packaging that has a superior technology platform with a company. That's had a extended relationship with 30 million members are 9% of the U S population.
Awesome. Thanks, guys.
Thank you.
Thank you. Our next question comes from Brian O'neill with Lake Street Capital Markets. Please proceed with your question.
Good morning, Brooks O'neill, but.
I appreciate all the color guys and the thoughtful answers two good questions for my peers.
I have a couple of follow ups.
And you were.
Just talking about M&A and May Im sorry.
Medicare advantage opportunity in the food business.
But you might extend.
The discussion a little bit to the other segment and whether youre gaining traction with payers.
Payers.
And those other areas.
Yes, so I would say.
The answer is unequivocally, yes, I mean.
One of the reasons why we bought national Med trends I know you know this <unk> it represented $50 million of Medicare advantage business and so there is no and again if you start looking at the numbers the number of plans that are offering.
And AMG double the year ago doubled again, and this is becoming kind of a.
It's moving from <unk> to <unk> that from a supplemental benefits the transportation business is going to be part of the offering in order for these MA plans to compete so feel really really really good about that.
Jason's in the room.
With us and maybe I'll, let him talk a little bit about the percent of his business is already Medicare advantage and the opportunities there.
Yeah. Thanks, Dan So approximately about 30, 35% of our business as a business today and we have and the.
It continues.
<unk> monitoring continues to be added in the supplemental benefit and kind of the top 30, MA plans and today and by our estimation. It's approximately nine of those 30 have.
Remote patient monitoring as a supplemental benefit and so we're excited about the future opportunities related to other MA plans expanding those benefits.
And then and then Brooks if you look at the personal care space.
What I would say about that is just look at the United healthcare announcement.
Health care announcement, again, and I've referenced several times four months ago talked about here. The three things we need to provide RMA members number one is transportation number two was personal care and number three is food.
So United is making these moves you can pretty much guarantee that.
Throwback comment there Brooks, but.
Got it proud of as well.
But you can pretty much be certain that this is the direction things are going.
On the personal care side Brooks.
Disproportionately the personal care business is weighted to duals. It just as many as much as 75% of the business could be dual eligible and some of these people are and these are as you know with most expensive patient populations. We have so there is just massive interest in massive opportunity to bend the cost curve.
There improve the quality of care.
And so we again, we think they are just so well positioned right now Brooks.
And.
And the market's moving I don't know if you saw the.
The strategy from CMS recently that just came out and there was a couple of things that really stood out for US one health equity equity will be embedded in all of CMS.
Asian centers work and then number two future models will focus on integrating the whole person approach and several will likely to include total cost of care approach and again Brooks you start thinking about where we are from a support of care standpoint, there is not a company out there that's better positioned to lead the way on this and personal care and remote.
Monitoring and food and transportation are going to play continue to play a more significant role in.
In the MA population and keep in mind Brooks of the our top six payers, who represent 80% of our revenue on the on the payer side of the business five of those represent 80% of the Medicare advantage lives. So we already have built in partnerships. This is why this channel.
All that we've been part of for 20 years is is such a valuable asset. When you also think about whats the total addressable market in the hall and work putting the railroad tracks down and again there isn't a company that is in a better position to change health outcomes and we are as we move forward.
Yes.
Absolutely.
Say just following up there in that.
And to go too deep, but are the economics related to the MAA.
Customer base and TM.
Better or equal to the the economics in the let's call it the Medicaid side.
A better term.
Well I mean, you just look at.
You look at the dollars that are in Medicare advantage books that should tell you everything.
Can you just say.
Ben.
Yes, so I think they are either comparable or in some instances a little bit.
Yep, Alright, cool one more principal color.
Hey, Matt.
Brooks you got it. This is this is really good stuff on the on the remote monitoring piece just for the record.
<unk>.
The average length of service is three five years.
And on the vitals monitoring its two years. So just think about that from a reoccurring revenue standpoint, just Jason and continues to build on those 170000 patients that business just continues to stack Brooks and.
Personal care side I think the average.
With time, we care for patients is around four years. So again, just thinking at about like patient management, and how and ultimately how much more valuable the supportive care side is versus the episodic clinical care side.
The relationships we have with these patients are just far more extensive.
Yes.
I think it's great.
I think.
It's amazingly excited and I think you're in the right place at the right time.
Good so just curious heath.
Noticed the G&A line went a little bit higher than I was modeling this quarter I assume some of that's one time kind of stopped related to acquisition and whatnot, but is there any color or commentary you could offer.
$68 million this quarter.
A big chunk of that is the acquisitions that we made $12 million acquisition cost within that number yes.
The other the other.
They're built around that investment in technology, but as expected.
Yeah, Okay perfect. Thanks, a lot guys.
I appreciate all the color.
Thank you Brook. Thank you.
Yeah.
Thank you. Our next question comes from Mike Pitofsky with Barrington Research. Please proceed with your question.
Hey, good morning, guys a few questions.
Hey Heath.
It wasn't clear to me the 20% increase in trip volume was that sequential from Q.
Who or utilization was that sequential from Q2 or was that versus a year ago Q3 here.
Versus a year ago gotcha, okay.
And then we have then we have 20% to grow to be back to pre pandemic levels.
Yes.
Part of it I got it okay excellent.
Dan Obviously, you you sort of set a bar.
<unk> vision out for what meal delivery could mean for you guys.
Just so.
So I have some sense of sort of how that sort of plays out in the initial quarters. I mean, do you expect to break out meal revenue either in Q4 or.
No.
In 'twenty, two I mean will it be material enough to breakout.
No I don't think so I don't think it's going to be material enough over the next <unk>.
Six months to 12 months I would say that we won't break it out and so but we will continue to talk about it and we'll continue to talk to you about.
Who.
The partners, obviously, there might be some concern about who we share exactly but we will be able to talk about it.
I just don't see any reason.
Neil reimbursement is $7 50, I just don't see a reason why we couldnt get to a million meals a week I mean I just don't.
We're going to have to work really hard at it.
We're going to have to give the right level of focus, but that's what I have in mind now that's not going to happen tomorrow, and it's going to be there'll be a process around it.
<unk>, but but I think that again, we feel like we're very very well positioned.
As it relates to relationships as it relates to talk technology in and particularly around the quality of food.
Yes.
And Mike a little more on the timing.
Hi.
Not going to be material in the next six months the sale process when you get to a contract with us.
Date or with an mcl partner those within a specific state you actually have to sell that into the specific kermit managers as well so very similar to the sales cycle with <unk> and personal care and that just takes time on.
On the other side of it when you get when you get in there and you get that you're pretty sticky so even though the.
Dan talked about the length of time, we have with the patient so.
Even though it's six months 12 months, it's going to ramp quickly after that.
And again, it's sticky revenue and <unk> one other point.
Around care managers in this this is a really important point and you guys get when you think when we talked about cross selling that we don't have baked in and we haven't talked about this when we made these acquisitions the care manager.
We are meeting with on food.
On.
Vital personal care and remote monitoring to St care manager.
So we can sell into that wound care measure and actually when the rfps come out they have it on the lyft.
So the ability for us in this new sales process with food matching that with VIII matching that with personal care is really powerful.
Got it.
I did want to make just one comment it's one thing for the operator to call Brooks, Brian but for you guys call Me Brooks is really hitting blue belt.
Thank you Brian.
Got.
I was corrected my hand with flat Matt.
Getting Brooks lobby alright, a couple more on the on the.
Personal care business obviously.
We all know that the and you guys are reminded people. The pro forma revenue was about 650, obviously tough environment right now sort of we're looking at a current run rate. I mean is that is that more like 600 625 somewhere in there I mean is that a fair assessment of where that business is now given the.
Given the headwinds and all the rest.
Yes, so youre on what's the slope coming out of Covid right. So I think the right way to think about it right now it's pretty flat Q4.
And then as we come out of Covid you know the demand. This is a really hard we know that the demand gap right and Dan said is anywhere from 10% to 30%.
So it's timing that are long term is.
The growth that we said sure but in this coming out of Covid, what's going to happen in Q2 Q3.
Could be a lot higher than than we've quoted from a growth perspective, because of the need to meet the pent up demand.
Mike I think I would say about it Brooks the other thing just kidding.
The other thing I would say about it.
This is a recruiting and retention business. The demand is there we talked about 10% to 30%, but actually the demand is about 50% over that I mean this is a banana as this business is in terms of so we're we're really thinking hard about how do we supercharged this business on the rig.
Prudent side.
And I think there is a massive opportunity there and especially as we come out of the pandemic and so.
Certainly we think there'll be a course correction to that depending on the market 10 to 30, but.
It's almost like there's no end in sight based on the demand Mike.
And then also on that even though in our in our states that we're in.
One or two largest player we're still relatively small from a percentage of market share.
So that's that.
New York, Pennsylvania, New Jersey, New Jersey, Connecticut, which are some of the largest markets for personal care as a whole.
Just echoing Dan's appointment when we come out and we even do better on recruiting than we have in the past.
Theres a lot of upside in this business I mean, you can make an argument that the market's alone. We're in it could be a $3 billion to $5 billion business just the markets were in right now.
Great.
Just a quick question on on matrix, which.
The results there are extraordinarily volatile.
My my perspective, Amit.
Can you talk about I mean, essentially.
A huge part of the spike in profitability there last year, it's sort of related to Covid and we should sort.
Going forward expect that lot.
A lot more muted results I mean can you just talk about expectations, there because on a quarterly basis.
The results are schizophrenic.
Yes no.
With you on that I do think there is from a health and wellness piece.
From a clinical trial space.
In some respects the assessment piece because the company from a.
A GAAP to almost 20% of all other.
Quote unquote in home visits were being done.
Through telemedicine, and but what we're seeing right now is.
Number one is assessing business starting to come back it's growing again and they've hired somebody their chief operating officer, who is running that I think.
She is doing a terrific job so I feel good about that.
So thats number one.
Number two.
They saw an opportunity in the areas of clinical trials and they made some big investments and the challenge with clinical trials.
It's a timing issue.
The pipeline is full and in fact.
Of the pipeline opportunities, 80% of them are non COVID-19 related which is really I think tells you kind of where the business growing the future.
And speaking of the future we also know that.
That clinical trials like care is moving to a.
A less institutional Lee centered model so in other words, having these.
Nurse practitioners in the hall, helping do these clinical trials is is the wave right now and again, they're just there.
They are extremely well positioned so what I would say I would describe this as transitory I don't I don't know ultimately where EBIT is going to fall out.
In 2022, but I feel very good about the investments they've made and yet it's been a little bit of a setback.
I think COVID-19 ran down faster than I think we anticipated. So you kind of hit a trough we knew a trough was going to happen in some shape or form, but we also knew that they were making the right investments in areas of clinical testing.
Clinical trials and incessant business should continue to be steady so thats, what I would say and we will have more on that after the fourth quarter, but because I think a lot much more visibility to the clinical trials, but there were kind of just waiting for the clinical trials if they hit.
The investments that they've made.
We will bear fruit for four.
For quite some time, yes, I'll add in the clinical trials. They currently have.
Relatively small contracts with very large.
<unk>.
So that's why the next quarter couple of quarters their success around delivering on that is critical and then they deliver on that.
I think there's a big opportunity in the clinical trial space.
Alright. Thank you so much guys really appreciate it.
Thank you Mike.
Thank you there are no further questions at this time I would like to turn the floor back over to Dan Greenleaf for any closing comments.
Yes.
I just have a couple of things I'm going to go off script, a little bit here, one is less than <unk>.
Consensus seven quarters in a row and I, just don't want anybody to lose sight of and again I don't either.
Feel like anybody was but but.
We're building.
Quite a business here and.
And.
And I'm very proud of what we've been able to do during COVID-19, because we didn't we didn't we didn't shy we just didn't get in a position where hey, let's just collect cash and we went ahead and deploy cash because we realized there was a greater opportunity in front of us and.
And we feel like frankly, whether it be in any empty or food or personal care, our remote monitoring companies ever been better positioned.
And.
We are executing on this vision.
I look at where the company was a 19 relative to what I think will be able to do by the end of this year it's incorrect.
Regardless of any way to look at it.
And I would say in many respects the best is yet to come.
And were for Meir, maybe because we've been through this extraordinary level of change of mix.
The great pandemic.
Some things are not as always 100% clear, but I think we've got a lot of clarity right now and we feel very good about where the.
The transportation business added where the robotic business personal care and food and how all those things are going to fit together.
So again, we fundamentally believe and I know you guys heard me the best is yet to come so with that I want to thank you all for participating on our call. This morning, 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 February when we release, our fourth quarter 2000.
'twenty, one financial result, stay safe and have a wonderful day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.