Q1 2022 ModivCare Inc Earnings Call
[music].
Greetings and welcome to the motive cherished first quarter 2022 financial results Conference call.
This time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference call is being recorded I will now turn the call over to Kevin Alex <unk> head of Investor Relations. Mr. Alex You May now begin.
Good morning, and thank you for joining <unk> first quarter 2022.
Earnings Conference call and webcast with me today from the company are Dan Greenleaf, President and Chief Executive Officer, Jason Anderson, President of motive care home and Heath Sampson Chief Financial Officer before we get started.
I would like to remind everyone that during today's call.
The company's 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 to provide additional information to investors.
A definition of these non-GAAP financial measures and 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 mode of care Dot com.
This morning, Dan Greenleaf, we'll begin with opening remarks and provide an update on our mobility division after with Jason Anderson will provide an update on your home division followed by Heath Sampson.
Who will provide an update on our on the details of our financial results. Then we will open the call for your questions.
With that I will turn the call over to Dan Greenleaf.
Dan.
Thank you Kevin good morning, everyone.
On a consolidated basis motive care reported strong financial results in the first quarter of 2022, delivering 27% revenue growth.
Driven by contributions from our recent acquisitions and 17% growth from our from our any empty segment, which generated 9% adjusted EBITDA margin this quarter.
Consolidated adjusted EBITDA was $50 million in the first quarter, which was in line with our expectation we continue to advance our strategy delivering quality access to care reduced costs and improved outcomes for the 32 million members or approximately 10%.
Of the U S population that we serve.
In terms of operational highlights we are optimistic about what we're seeing on the labor front, we saw strength in personal care during the quarter a strong operating execution drove a significant positive impact in caregiver recruiting and growth in billable hours are recruitment.
And retention initiatives are driving significant levels of new applicant, while reducing turnover and trending towards pre pandemic levels.
Our initiatives and process improvements are yielding successful trends personal care labor are in line with the workforce improvements that we're driving in our contact centers or any empty over the past year, which has seen historically low absenteeism and turnover.
<unk> care.
<unk> is moving into the home and motive care, which includes personal care remote monitoring.
And meal delivery now represents over 40% of our adjusted EBITDA in the first quarter, we're seeing strong support for in home care from our stage.
As demonstrated by the fact that we received.
Reimbursement rate increases in each of our major personal care states for 2022.
Overall, we are encouraged by the trends we saw during the first quarter as we strategically transformed our business to enhance our members' experience.
We recently announced the formal operating and management structure of our two primary business divisions motive care home led by Jason Anderson as President consists of our personal care remote patient monitoring and meal services, while motive care mobility includes our non emergency.
Medical transportation or any empty services, we were pleased to recently appoint Lise Simpson as president of our mobility Division, which furthers our commitment to our foundational any empty services Elias brings a significant background and advanced technology logistics and.
Rotation, most recently, serving as president and CEO at radio as well as leadership positions at Ryder system Pentair and syntax.
Our transformation has touched every facet of our business as we also recently announced the alignment of our sales and account management teams under our new Chief Commercial officer, Greg Heckman, one aspect that attracted us to Brett is this payer background, including executive leadership roles at often and prevention of <unk>.
Cieri of Aetna.
Breaths leadership and experience will be integral for our commercial strategy to cross sell our integrated platform of supportive care solutions, while driving organic revenue growth from our existing customer and payer basis.
Drawing from our multi decade customer relationships, we continue to collaborate with health plans to provide enhanced experience for the members. We serve we are making progress on our value based care and social determinants of health initiatives to deliver the full breadth of our platform and accelerate our vision.
To drive positive health outcomes by transforming the way we connect members to care.
This point, we are in the final stages of a value based care pilot agreement with a national payer, we intend to demonstrate our ability to seamlessly deliver care across all our solutions, while enhancing the member experience.
Reducing costs and improving outcomes as a reminder, our total addressable market opportunity across motive here is over $90 billion today and growing as.
As we transform our business, we expect much of our growth opportunities will come from care moving into the home while any M. T will also continue to generate strong growth as payers see the value of this benefit.
Our home business is growing organically through celebrated caregiver recruiting initiatives in existing markets as well as de novo openings, increasing scale and density we expect sales growth for home to accelerate through care coordination and our cross selling efforts as case manager are common.
Referral source across our home service offerings, we also expect strong growth front or any empty basis.
This market benefits from continued growth in Medicaid accelerating growth in Medicare advantage enrollment coupled with more plans offering transportation as a supplemental benefit we are executing on our aggressive sales plan and expect to generate $500 million of new sales over the next three.
Years.
I'd like to now provide an update on our mobility division and some of its strategic initiatives.
M. T is a vital lifeline for the members, we serve and a necessary component to navigating the health care system and connecting them to care, resulting in better member experience reduced cost and improved outcomes.
As I shared last quarter, we are focused on driving several key any empty priorities in 2022 centered around an enhanced and more consistent member centric experience, while expanding access to care. These priorities include first delivering a standardized experience.
A coordinated care model, we are dedicated to the transformation of our mobility solutions provides the most appropriate accessible and most cost effective solutions based on the individual member needs. We are aligning our service offerings to make technology solutions available.
When our members wanted while ensuring access to knowledgeable care coordinators, who will find the most appropriate mobility solution for the member.
Our transformation to a more member centric model not only improves the experience too easy to use technology or improved telephonic resolution it significantly reduces cost.
One to five times.
Two salient examples include mass transit and mileage reimbursement both of which enabled a member to easily schedule or modify appointments in the case of mass transit members could even use the transit pass for personal reasons.
Our second priority is transforming our relationships with transportation providers or T piece.
Create a greater sense of partnership we are deeply committed developing and supporting community based owners of transportation provider companies and have made progress in establishing programs will foster a greater connection between us and our best performing T. B's in order to improve network performance.
Drive down costs and enhance our members' experience.
Our initial focus has been on initiatives such as motor of Kirk Adams, which empowers community based providers, specifically minority and women owned businesses with education training resources and our transportation provider of Advisory Council, which is composed of GPS representative of the communities we.
Serve and addresses feedback on issues impacting the broader network. Additionally, we have formalized a dedicated champion program that uses technology and analytics to identify our high performing TPS and matches them to specific member needs since a quarter of our tpa generate 80% of our rides.
The champion program is expected to drive greater volume predictability and consistency for TPS, leading to enhanced quality and experience for members, especially for the high trip utilizes such as those members who use our any empty services multiple times each week to access.
Dialysis appointments for example, our third priority is modernizing and automating our <unk> platform. We are committed to delivering a best in class experience that meets our members where they are we've made significant investments in optimizing operations and automating processes, including in your.
$100 million investments into modernizing our technology platform, we are reducing tech debt, while driving business process improvements in the areas of our contact centers and business process outsourcing in digitization of our network to efficiently scale our business <unk>.
Our transportation providers and make accessing the care easier and more efficient for our members.
We expect these process improvements and technology investments will enable us to further scale it.
And consistently produce margins in.
In the 9% to 10% range with that I'd like to have Jason Anderson President of our home Division provide some comments Jason.
Thank you Dan I'd like to provide an update on our home division specifically around our strategic initiatives for a remote patient monitoring personal care and meal businesses, we believe that motive care as well positioned as the future of health care accelerates into the hub.
As I shared last quarter, we are focused on driving several key priorities in 2022.
First we are augmenting our caregiver recruiting initiatives to increase supply.
Demand for personal care services continues to accelerate and we are seeing improvement in our ability to meet this demand through increased caregiver recruiting we centralized talent acquisition activities during the quarter, which provides our local community based recruiting teams with necessary support and tools.
Our caregiver retention efforts are also making an impact as we have several innovative strategies that are taking hold including comprehensive caregiver total rewards and engagement initiatives.
We are encouraged by these initiatives and expect to see continued improvements and caregiver recruiting and retention as well as growth in billable hours over the next several quarters.
Second we are focused on integrating our businesses and offerings across the home division.
During the first quarter, we continued to drive integration efforts of the home division into motive care shared services.
We aligned the home organizational structure and leadership team, enabling us to better support growth and operational improvements.
We continue to execute on our plan to integrate the functional elements of the business, including finance accounting human resources benefits insurance Tech platforms and communications.
These integration efforts also allow us to better align our organization to serve case managers as well as provide coordinated care across our service offerings.
Third we are focused on organic growth, while also evaluating a robust pipeline of inorganic growth opportunities, we see a significant opportunity to support homes continued expansion and augment growth through continued organic and inorganic growth initiatives.
During the quarter, we continued to execute on our plan to open de novo locations, leveraging our market experience and infrastructure.
From an M&A perspective, we continue to evaluate opportunities to further our scale in existing markets and enter new markets.
Turning to meals. We are excited about the long term growth prospects for this business as well as the benefits. It provides to our members and payers like remote patient monitoring meals has similar dynamics with regards to contracting lead times compliance and operational requirements, we feel well equipped to.
We build out a meaningful meals business over time for.
For 2022, we expect an immaterial contribution to revenue and EBITDA as we focus on providing a best in class offering that we can rapidly scale in the future.
Turning to RPM, we continue to grow our E three or engage educate and empower solution to enhance the member experience improve outcomes for select populations and broadened our ability to serve members more holistically E. Three is our proprietary solution, which dynamically.
Member need and provide tailored education to ultimately drive meaningful outcome, such as cap closure and medical cost avoidance.
Across our sales pipeline, we have seen more than a 50% shift in our pipeline of opportunities that have E. Three of them since the beginning of the year.
In summary motor carriers home offering will play an integral role in the company's broader supportive care platform and vision to deliver a value based care for our customers and members improving outcomes and better serving the health needs of our members wherever they are.
With that I would like to turn the call over to Heath Sampson, Our Chief Financial Officer, who will discuss our financial results Keith.
Thanks, Jason and good morning.
Our first quarter net service revenue of $574 million reflected growth of 27% compared to the prior year period, while net income from continuing operations was $300000 or <unk> <unk> per share.
Adjusted net income for the first quarter was $22 million or.
Our $1 57 per diluted share.
And adjusted EBITDA was $50 million or 9% of revenue.
To provide more transparency into our business and the operating performance of our segments, we broke out our corporate general and administrative expenses separately.
The reorganization, primarily affects the general and administrative expenses of our <unk> segment, which is where these corporate costs were previously presented.
And the company reclassified certain costs associated with the reorganization for Q1 2021.
I'll now review our business segment financial performance.
Starting with our non emergency medical transportation or any Mt's segment first quarter <unk> revenue increased approximately 17% year over year to $401 million driven by a 6% increase in total members in a 10% increase in revenue due to higher trip plan.
Service expense for the IMT segment, which includes all direct costs increased 22% year over year in the first quarter of 2000 $22 million to $332 million.
The increase was driven by higher service costs associated with a 7% increase in trip volume as well as a 13% increase in surface expense per trip.
On a sequential basis surface expense per trip increased 4% from the fourth quarter of 2021, driven by expected inflationary pressures and investments we made in our transportation network, which help drive improved service levels.
We saw improvements in surface expense per trip throughout the quarter as trip costs in March were only slightly higher than where we exited the fourth quarter of 2021.
We expect to see a decline in these transportation costs going forward as we execute on our multi modal and preferred provider operating strategy.
<unk> segment net income from continuing operations was $18 million in the first quarter of 2022, while any empty adjusted EBITDA was $37 million compared to $47 million in the first quarter of 2021.
The year over year decrease was driven by a $7 million increase in adjusted G&A expense, primarily due to investments in technology, and and a $2 million decline in gross profit dollars due to higher transportation costs noted earlier.
As a reminder, adjusted EBITDA for both periods reflected the updated G&A allocation between the IMT segment and the new corporate segment.
Adjusted EBITDA margin for <unk> segment was nine 3% in the first quarter of 2022.
Turning to our personal care segment revenue in the first quarter of 2022, but the $160 million compared to $110 million in the first quarter of 'twenty one the.
The increase was primarily driven by $44 million of incremental revenue from the care Finders acquisition, which closed in September 2021.
On a sequential basis revenue increased 2% quarter over quarter.
Revenue per hour increased 7% sequentially as we benefited from higher reimbursement rates across all major markets.
Total hours in the first quarter declined 5% sequentially due to the negative impact of the Omnicom variant early in the quarter.
However, we have seen consistent improvement in weekly our trends since February driven by increased caregiver head counts as Jason mentioned earlier.
Personal care surface expense per hour, which primarily represents caregiver wage expense increased 4% sequentially. During the first quarter as we have appropriately increased wages enabled by the reimbursement rate increases to reduced overtime and improve caregiver hiring.
Personal care segment net income from continuing operations was $2 million in the first quarter of 2022 compared to net income of $4 million from the prior year period.
The decrease was primarily due to the <unk> acquisition intangible asset amortization.
Segment, adjusted EBITDA was $17 million in the first quarter of 2022 compared to $9 million in the prior year period.
Adjusted EBITDA margins increased to 10, 4% in the first quarter compared to eight 2% in the prior year period.
On a sequential basis, adjusted EBITDA increased 27% driven by the favorable reimbursement trends and improved overtime rates, which outpaced the increase in surface expense per hour.
The corporate realignment had a minor impact to adjusted EBITDA in the current and prior periods.
Moving onto our remote patient monitoring or RPM segment revenue in the first quarter of 'twenty two was $14 million on a comparable basis first quarter revenue was relatively flat compared to the first quarter of 2021 prior to our ownership driven by increased active client.
Partially offset by lower revenue per member due to providing unit price discount in exchange for national exclusivity provided by large Medicare advantage payer.
Okay.
RPM segment net loss from continuing operations driven by acquisition intangible asset amortization was $200000 in the first quarter adjusted EBITDA was $5 million in the first quarter.
And adjusted EBITDA margin margins were as expected at 33%.
Consolidated cash flow from operations in the first quarter of 'twenty, two with $69 million during.
During the first quarter of 2022 cash flow from operations was favorably impacted by $34 million from higher contracts payable primarily driven by a few of our large state any empty contracts.
We continue to expect to pay or settle roughly $100 million to $150 million of these contract payable over the next two quarters with that said the actual timing of these payments could be delayed until later in the year.
We expect the remainder of these contracts payables to be paid over the next few years.
We ended the first quarter of 2022, and a strong financial position with $194 million of cash and cash equivalents. As a reminder, in February 2022, we refinanced our prior revolving credit facility with a new $325 million revolving credit facility, which remains undrawn.
Our consolidated pro forma net leverage declined sequentially to three six times as of March 31, 2022, compared to three seven times as of December 31 2021.
Shifting to capital allocation, we take a disciplined and balanced approach to our capital allocation strategy, we continue to build and evaluate a robust pipeline of M&A.
When appropriate we expect to make additional acquisitions that will drive shareholder value, while maintaining a strong balance sheet.
As mentioned earlier, we remain focused on integrating our recent acquisitions and optimizing our processes and systems.
Although our leverage is higher than the three times target, we remain committed to returning to that target.
Lastly, I'd like to briefly share our thoughts on our long term expectations for our business segments.
We continue to target any empty revenue growth in the mid single digits and we are raising our target for the any empty adjusted EBIT margins to 9% and 12% compared to our prior target of 7% to 10% due entirely to the corporate realignment discussed previously.
Our normalized long term target for our personal care segment includes revenue growth in the high single digit with adjusted EBIT margins between 10 and 12%.
Lastly, our long term target for remote patient monitoring is revenue growth in the mid teens with adjusted EBIT margin in the mid 30% range.
Looking to the second quarter of 2022, we expect that consolidated adjusted EBITDA will be roughly flat sequentially compared to the first quarter of 2022 at.
As expected improvement in hours for personal care are expected to be offset by higher trip volume for any empty.
Overall, we remain very excited about our long term outlook and the tailwind for our business as we execute on our strategy to be the leading integrated supportive care provider in the nation.
We are setting the foundation for our platform to generate strong growth over the long term as we provide the full breadth of services to our members state and payer partners.
This concludes our prepared remarks with that operator, please open the call for questions.
Thank you well now be conducting a question and answer session.
Dan just a tiny assay you please limit yourself to one question and one follow up if you will.
To ask a question. Please press star one on your telephone keypad.
Commission tone will indicate your line is in the question queue. You May press star two if you'd like to have your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment please poll for your questions.
Our first question comes from the line of Bob <unk> with CJS Securities. Please proceed with your question.
Good morning, Thanks for taking my questions congratulations on a nice quarter.
Thank you Bob.
Just wanted to start obviously, you've done a ton of work on it you have to keep a super busy and you talked about this a little bit maybe talk a little more about the transportation provider network and the build out and the and the partnership approach, whereas the network now versus where you want it to be and kind of maybe where it was pre COVID-19 or if it's.
Changing enough that that's not relevant then you know don't worry about that but like where is it versus where you wanted to be how long will it take to build out to.
What you expect to be kind of a best in class and best opportunity, where you have it where you want it.
Yeah, Hey, good morning, so from a from a process.
Like we said last quarter, we have built the network, we had a blip of adding providers and we've done a good job doing that.
So, but that's primarily been under the traditional way. So this transformation to where we have more preferred providers or AK partnership we're really at the beginning stages of that.
And that will take US you know.
We get better and better each month and each quarter. So right now we're fine from a standpoint of our traditional way of adding transportation providers and really at the beginning of this partnership model and with this partnership model. We will do is it allows us to ensure we get consistent performance and.
Then we also enable that these transportation providers actually get consistent volume and that will enable us really to one get quality, but also bring down the cost.
We have done a good job in a traditional way and we're at the beginning stages of this partnership transformation.
Okay, Great. That's helpful. And then kind of I guess similar question looking at personal care, obviously, a very strong.
Improvement in gross margins, there and you touched on this maybe talk a little bit more about how much was a function of reduced over time versus.
Just better recruitment you know.
And then versus reimbursement and where do you stand in the reimbursement how the states are treating this in and where do you think that goes going forward.
Yes so.
Thank you Bob I will say this that historically over time was in the kind of 10 percentage range.
And during Covid, it got to as high as 21%.
Currently we are at about 16%, we set a target for the year to be back at 15% and we've almost reached that in the first quarter. So we think thats that's extremely promising as it relates to reimbursement we are 7% above where we were in the fourth.
Quarter of last year, so the reimbursement trends are incredibly favorable for us Bob.
And then lastly, as it relates to just the hours and how the businesses performing well.
On them on a weekly basis were around 520000 hours and we're getting back to levels that.
That were.
As high as we saw during Covid. So if we if we saw spike in a months worth.
Seeing that now and we're seeing that pretty consistently and we're seeing it months historically have been slower on a on a kind of seasonality basis. So we feel again, we feel really good Bob reimbursements up 7% quarter over quarter hours are up significantly.
And over time is coming down, which obviously improves the margin as well.
Okay Super I'll follow instructions and get back in queue. Thank you.
Uh huh.
Thank you. Our next question comes from the line of Brian <unk> with Jefferies. Please proceed with your question.
Hey, good morning, guys congrats on the quarter.
I guess my first question.
Hey, good morning.
First question just on the margins you know as I look specifically at the N E&P business.
Yeah. It looks very strong so any comments you can make you know one of the questions that we get asked is just utilization. So obviously things like it looks like broader health care utilization starting to normalize so just curious.
How youre seeing that play out with the margin side, and then kind of related to that is the your ability to pass on fuel increases.
To the payers and vice versa like your transport partners do you guys and then just any color you can share with us.
Yes, so first on the margin side, you're correct. We're strong one of the things that you noticed that we did and we've been saying this for a while that any empty was inappropriate leap burdened with a lot of the corporate costs that we've had.
Dan and high salary right why would any empty get completely burden for that so we appropriately but conservatively took those cost out to make sure that the.
The each segment was appropriately allocated to.
So that's why we feel really good about where we are from a margin perspective, and then with the utilization.
That's a membership or actually trip volume continues to.
Increased marginally on a consistent basis, so thats happening utilization is about flat.
Again memberships up a little bit higher but thats. The tier that is the average in certain states, it's approaching or even exceeding what it was pre pandemic. So it depends on the state but in general for US an average is as expected, but we've said before but.
70% to 75% of pre pandemic levels of where we expect it to be and again, we expect that to continue for the rest of the year. That's what we're planning for at a consistent basis with the rest of the year.
The other thing worth, noting too Brian I mean were 32 million members too. So we are doing more rides because.
The just the sheer number of members we have.
Okay.
Got it and then.
On the RPM side, you mentioned the national exclusive contracts. So just curious how youre thinking about the ramp in that and what the dynamics are in terms of the.
The Payor, giving you the lives just curious how that works out.
Well no.
I'll, let Jason add some color here too so the wonderful thing about.
RPM just in general and this just happened really.
Last year.
We are able to get these national contracts and it really is stemming from not just the normal remote monitoring, but it's also to do with the <unk> technology. So that's enabling us for the first time to get this national these national contracts. So it started with one large payer.
Many discussions with getting more of those so I expect that trend to continue.
As we move through the months and quarters, so again that.
That depresses, the short term a little bit in the margin, but far outweighs.
Within the next to make that back in nine to 12 months and exceed that so really excited about that new offering around engaging with the members.
And then I expect that to continue with all our large payers to get these national hunting licenses I don't know, Jason you anything Mark I think you stated it well Keith.
Certainly.
Being able to offer multiple solutions across the different segments is a significant.
Interesting to the large payers and we're seeing our sales pipeline fill up with many of those opportunities at this time.
Got it alright, thanks, guys.
Thanks, Brian .
Thank you. Our next question comes from the line of P&L Chickering with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys nice quarter and thanks for taking my questions.
So do you guys don't provide guidance and you talked about the two <unk> EBITDA being flat sequentially.
Are you comfortable as we're looking at where you are sort of in EMEA with the street estimates for the back half ramp for 2022.
Yeah.
Guys have done a great job of understanding us and what you've done.
For next quarter, and even through the Q3, and Q4 and very comfortable with where everybody is and in us meeting those expectations.
Okay fair enough.
Personal care is a lot of moving pieces for looking at the year over year.
Data that you provided in the press release sort of with all the deals you did talk about the wages, increasing as re versus for increase or two questions. Do you think that the current wage levels are impacting your revenues I'm just curious how the first quarter revenues were in line versus your estimates and how should we think about gross margin sort of throughout the year should we use for.
Quarter as a baseline for the rest of the year.
Yes so.
I'll kind of tag on to what Dan said, a little bit earlier. This may help give context.
What drives this business of course is getting people back to work right and where we are we're higher than really are from the early part of 2020, but we're not back to pre pandemic levels. So that's a good thing we started that path to get back to pre pandemic levels. We think it's very reasonable just from a just from a normal.
Market, and then with our plan and our execution and we're going to be put in place. We think we can exceed those so that's where we are in the journey.
From Guinea Guinea hours back.
So from a revenue perspective, I think within the estimates in the street were a little bit lower than that but not not concerned about that.
I think really where we are at the beginning phases since February to see ours come back and then and then from a margin perspective. We're ahead of where you guys are and why we're ahead of that is because the reimbursement rates that we're getting from from our states primarily are three states. So you put it all together revenue.
We saw margin even better in early perspective.
And again I think we're going to continue this journey and I expect us to get better and better each quarter and potentially even beat that you guys I'll say for the rest of the year.
Okay. So let me start.
Sticking with personal care on the on the G&A side, just from a margin perspective, yeah, theres been a lot of investments sort of a lot of things happening there I guess, how should we be thinking about the fixed cost nature of <unk> G&A using first quarter as a baseline how should we think about sort of that margin leverage on the G&A side, so ramping throughout the year. Thanks, so much.
Personal care specifically Peter.
For personal care.
Yes, so we're at that 10 plus margin.
That G&A to stay that way in margin to improve so where we are in the G&A side is where we're going to be for the rest of the year on the.
Really across the business, but really specifically in personal care.
On the middle of our respective or percent of revenue perspective.
Dollar perspective.
Got it perfect.
Yes.
Okay.
Thank you. Our next question comes from the line of Brooks O'neil with Lake Street Capital markets. Please proceed with your question.
Good morning, guys I'm going to try to stick to the two questions are required but I do have two parts that are related to the first question that is I think Brian was asking how does higher utilization impact the.
Profitability of the E M T business and I know, there's a lot of moving parts in the E&P business, but just curious how how that utilization piece.
The profitability of the business as you see it in the related question is.
I'm totally confused about what the contract the payables are and how that I mean, what that relates to what that what that really is.
You could help me to understand that that would be great.
Yeah. So.
Back to the utilization again, we've been saying this for every quarter, we know with the way our contract mix and we have a lot of.
Appetites contracts, which are great. They are they're good for us they're good for our customers strong margin.
And our margin was higher in the middle of Covid and higher in 2021, because of because of utilization being down. So we've expected utilization to come up and therefore those margins to be more normalized.
So and so.
<unk> count going up and their margins are where they are so were as expected. There you know the range. The range that we historically gave was that 7% to 10% now we're 9% to 12% because of the appropriate allocation. So we're still very comfortable with that range.
As we do active full utilization so.
That's the utilization of that kind of question.
Okay.
The contracts payable.
Yes.
So again for us.
A number of our contracts primarily with a few of our larger states.
Those they pay us on a per member per month.
Way, but then the way these are the way the way are they structured.
A portion of that gets put on the balance sheet.
And that's what's happening so a big chunk of what we're getting paid hey, let's put that on the balance sheet could may be.
Utilization or Costco high you have to pay that back.
Okay and then in general if we don't the way they're currently structured some in three months and six months, some a little bit longer than that when it hits that target will have to pay it back regardless. So so again the right way to think about it again, we've said this before from a P&L perspective, we're flat.
Yep.
But then our contracts payable may increase or decrease based on where we are at that contract life. So youre seeing it go up a little bit because that's where we are from a from a utilization perspective with those specific contracts. So that's typical it's been like that since the beginning and it still does.
Same this quarter.
Did I get all of that and I really appreciate that color just one one tiny little follow up on that is if I'm understanding it won't have any P&L impact, but it could take some cash off the balance sheet is that the right way to think about it yeah no absolutely. So the P&L again.
You are right, we don't see that variability, but we do see it on the contracts payable side and then as disclosed we still expect to pay a $100 million to $150 million of that over the next two hours have been saying that.
And we still expect that to happen.
Yeah, that's great and I totally appreciate all that color last question is.
I'm, hoping Jason can just explain a little bit more about the case manager focused on the on the.
Home home side of the business and I, obviously don't have a great deal of insight into how how the payers manage the business and structure, but if he could just.
Blaine, how they're structured and why that case manager focus really works for you guys. It would be fantastic.
Yeah happy to answer that so with.
Hers with meals in personal care, you become an approved provider unless and until a case manager is able to refer for those services to any of the approved vendors or businesses on that list. So the importance comes in of actually focus.
On the case manager and having a relationship with them and quote unquote marketing to them is so that they understand the services and how you are different from other approved providers and so that they give you that referral from one of their members needs. This service. So that's really where the importance of the particulars of turnover and caregivers.
The case managers.
In Austin.
As we enter new markets or add some other providers exit the markets in different services. We offered you need to make sure you're in front of them and you explain why your service impacts of members.
Alright.
So as I think about it as a kind of a one stop shop instead of yes.
They've got 10 choices and personal care companies, they've got five choices and meal companies have got three choices remote monitoring they can really do one stop shopping with US now they have to give member choice. So I don't want to rule that out but but.
One of the things we know with case managers is oftentimes it got more on their plate did make and handle and theyre looking for ways to facility services in one call. It is a lot better way to facilitate services than three for example.
Yep.
It makes total sense.
Thanks, a lot for all the color congratulations on the great progress. Thank.
Thank you very much broke hope you're feeling okay, you've got a little little tired there Pal.
Thank you once again as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad. Our next question comes from the line of Mike Husky with Barrington Research. Please proceed with your question.
Brooks, it's fine I'm tired alright.
Yes.
Yes.
So Dan on the $500 million of new sales that you're hopeful for it on the on the transportation business I'm, just wondering sort of how much in sales are you guys sort of in the hunt for currently on on contracts that could be decided you know in the next three months six months 12 months.
How much you actually in sort of in the hunt for right now and any color you can give on.
You know specific contract sizes and timing of decisions to the best of your ability would be fantastic. Thanks, yes.
Yes, so the $500 million what is not just a.
Guests.
Market size.
It was.
Bottoms up.
Analysis based on our current.
States that we have our current market share with our large payers.
What is coming up for bid from our competitors. So it is a detailed understanding of the market, which is why we chose that $500. How how how sizeable is that last piece, what's coming up for bid.
With that said our own by competitors.
There is a lot that's coming up for bid.
Or has already been submitted for Ben I know, we've been we've talked about a few states that we have bid right now and we actually expect to hit your earlier, but actually just with where these states arent COVID-19 theyre, just taking longer to get back to us. So.
We expected actually a month ago that we hear back from these specifically a couple of states, which are large state I.
I do expect that to happen in these next couple of weeks.
Weeks or months as well so a significant component.
That we will hear about this year that.
We'll drive our EBITDA anywhere from.
Geez.
10 to 20 million Bucks again that would not have they will not come on until 2023, I just wanted to be clear with that but we will know about it this year and then theres a couple of ones that come up.
From our competitors in states in the latter part of this year and maybe we will know about them. This year or early part of next year. So significant volume primarily on the on the state side and then on the MTO, our payer side all those contracts are evergreen.
So we're in we're in.
Contact with specifically the big six a lot right now so those could come pretty quickly from a standpoint of wins.
But again that volume would come on until 2023.
Can tell you with.
Outside of where were not more than 50%, 60% of the volume with with all our large peers and we are in discussion with our large payers to get more of that because for that and we've said this before and specifically around transportation member experience member experience is a top priority.
Especially when you move into the M&A side. It is a top priority for them because they compete daily on that and we're in discussions to get all that sure. So long story. This year is really important for us to win deals that will start coming on in 'twenty three and.
<unk> 24, and beyond there's a lot of movement happening and again I look forward to announcing those when they when they.
When we get them I also want to point out to Mike We've aligned now with our commercial operations for the first time under under breath Hickman breath comes to US He was at city block most recently.
But held senior roles at both Optum and Aetna.
And we put both the sales function and account management underneath them.
And we've also promoted someone by the name of set for beam. He was with Jason's group due to head up sales and.
And we've got Mark Misplayed running account management.
We're just I guess like we're really well positioned.
We've got data scientists working with US now to really really look at the data and uncover opportunities for us in our plans.
We're in a really unique position right now is what I would say.
Okay.
Okay, Great I'm, assuming one is one of the contracts that you're alluding to is is New York and I guess that could be decided soon or was expected to be decided already can you just talk about possibly the the total size of that contract and what's what's you know what what percentage of that are you actually going after.
Yes, so you're right and that's public information.
It's out there all the states actually are public information So New York is one of them.
The the way to think about New York, It's about 800 ish million dollars in revenue that would be available out there.
Likely what theyre going to do is split that into.
That's so and then you can do your bottom line on that around from an EBITDA perspective.
So.
Likely splitting that into.
And hopefully and we're one of the.
One of the groups to get half of that contract, but the way that the way to think about that should be on the margin perspective, that's the right way to think about it because the way it comes on it.
It may not be topline to think about it is bottom line, we're not sure how the final structure this but.
I think the magnitude.
Alright, because of the size of that I'm, assuming maybe the margins would be below company average of that fair, yes, that's the right way to think about it.
Yep.
Can see 400 million even at 10.
10% or so.
Somewhere between 7% and 10% ish is the right way to think about it.
Okay, absolutely and I, just wanted to sort of clarify on the earlier one questioning around contract payables. So if you expect 100 to 150 million odd sort of I'm I'm think I'm hearing pay out over the next two quarters I mean, what would you expect sort of leverage to <unk>.
At this level by the end of the year or maybe even go up a little bit on a on a net basis by the end of the year, how should we be thinking about sort of.
Net leverage.
At December 31.
Yeah. So just in the short term if we pay that off Leverages is going to go up right.
But because of the <unk>.
Profile of our EBITDA being cash.
We it allows us delever quickly so short term, if we pay and leverage goes up the latter part of this year, we'll start we're start bringing leverage down but in general if we pay off the 125, taking the average it will be a little bit higher by year end for us from where we are now.
Okay.
Can I sneak one last one of them.
Sure.
Okay.
I just want to make sure I understand on the AR under the contract the national relationship in remote monitoring. So that you know you went sequentially from like.
16 to 13 in change in terms of revenue do you expect to be back about 16 over there was it was that the statement that was over the next nine to 12 months that you expect to be back at that revenue run rate or what what was the actual statement that was attached to nine to 12 months. Yeah. So so the investments that we have made in giving a price disk.
Accounts of this large payer to get the national.
Hunting license.
We'll make that up on total dollars over the next nine to 12 months, that's what I meant actually start exceeding that.
In the short term, obviously, it hurts us because we've taken down the price, which is what youre seeing in the numbers now, but again that investment makes a ton of sense because within nine to 12 months will well exceed the raw dollars on that.
Okay terrific. Thank you so much guys.
Thank you Mike.
Thank you there are no further questions at this time I'd like to turn the call back over to Mr. Green Lee for any closing remarks.
Yeah, I think the sum things up and to provide a quick recap again I just want to say how excited we are about where we are how we position the company the transformation that's been going on.
Frankly, how well positioned we are with our customers and whether that be members, whether that'd be transportation partners or whether that be payers in states, where just very well positioned better positioned than we ever have been at least since I've been here, so with that being said first labor trends are improving.
Across all of our businesses and we are seeing.
Strong evidence in our personal care segment as hiring and paychex are increasing and overtime is decreasing and I think we also mentioned about the reimbursement increases as well.
Up 7% quarter over quarter second the U S health care system is under pressure, which is why care is moving into the home and we are uniquely positioned to benefit from the significant tailwind due to the platform of our services third as a service provider of 32 million members about 10.
Percent of the U S population are any empty business enables us to cross sell our other supportive care services, which address the social determinants of health.
Fourth we continue to leverage our platform.
And our investing nearly $100 million on technology, and other initiatives, which will further differentiate motive care from its competition.
Motive care has undergone a massive transformation over the last couple of years and as I stated earlier I couldnt be more excited about the future growth potential for our business and the members. We serve I also want to give a shout out to Kelly all Kelly has been a partner of ours.
A mine for the last two companies has just done an incredible job.
With the hiring of Kevin.
Elledge.
Kelly over the course of the next couple of months, we'll be participating at the level. He has historically, but again he's been a great partner to me and into our organization I just wanted to thank Kim and thank you all for participating on our call. This morning, if you're interested in scheduling a follow up call. Please reach out to Kevin <unk>.
Our new head of Investor Relations. In addition, we will host our inaugural Investor Day on June 24th in Denver. So hope you all could try to make that I think it should be in an outstanding opportunity enact with the organization and also to.
To allow us to share all the great things, we have coming down the road and more information about this event will follow soon again, thank you again and have a great day.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Okay.
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Yes.
Thanks.
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