Q1 2025 DocGo Inc Earnings Call

May 8, 2025

Yes.

[music].

Ladies and launch timelines for contracts, we've already signed.

We have 35 open government RFP submissions in our pipeline a number of which were submitted over six months ago that we are still waiting to hear back on.

Moreover, we have signed contracts in this vertical which we're ready to be launched whose implementation has been put on hold as a direct result of this channels uncertainty.

Accordingly, we can no longer rely on these to generate meaningful revenue. This calendar year. As a result, we have decided to move non migrant government population health revenue and related projects from our 2025 guidance.

Along with this decision we revise our 2025 guidance from $410 million to $450 million in revenue with a 5% adjusted EBITDA margin to $300 million to $330 million with an expected adjusted EBITDA loss of $20 million to $30 million.

I want to be clear this revision to guidance is specifically associated with our government population health vertical the rest of our business continues to perform as anticipated and we believe it is on a solid growth trajectory.

[music].

This year, we continue to expect approximately $225 million in revenue from our medical transportation services 50 million from our payer and providers and $50 million from our remaining migrant services health care work all unchanged from our previous expectations.

Okay.

[music].

Any new municipal work would be incremental to our revised 2025 guidance, which if realized we plan to breakout as upside revenue in future quarters.

Speaker Change: We are building our company around our innovative solutions for payers providers and health systems, and we are incredibly confident in our mobile health at any address and medical transportation offerings I see these businesses as both the foundation and the future of Darko I am excited to share our key metrics and projected growth rates for.

This year and the next.

Speaker Change: Our medical transportation business continues to perform well and on a contribution basis is expected to have adjusted EBITDA of greater than $15 million in 2025.

Speaker Change: We had record trip volume in the first quarter of 2025 and expect this momentum to continue in the second half of this year ending 2025 at approximately 575000 total transports.

Speaker Change: Beyond that we project continued topline growth driven by a major new customer win in the northeast and continued expansion in the Texas and U K markets and we believe we can approach 700000 transports by the end of 2026.

Speaker Change: Health systems continue to search for partners that can provide high quality technology enabled medical transportation solutions that deliver timely reliable service for their patients.

Speaker Change: We have invested in building a technology platform that integrates with industry, leading EHR, including epic and provides unmatched transparency for our customers and their patients. We consistently receive positive feedback from our health system partners and believe that our technology is a key differentiator that enables us to secure new.

Speaker Change: Contracts.

Speaker Change: Our payer and provider vertical we continue to see substantial growth and I am pleased to share that we have now exceeded 900000 assign lives since the inception of our care gap closure program up from 700000, just a quarter ago.

Speaker Change: In addition to the growth in our number of assign lives I wanted to share how our volume of visits has grown over time.

Speaker Change: In the fourth quarter of 2023, we completed approximately 2500 care gap closure and transitional care management visits in the fourth quarter of 2024, our number of gap closure and TCM visits grew to over 4400 in the fourth quarter of 2025, we are projecting to complete over 11000.

Speaker Change: 500 care gap closure and TCM visits and.

Speaker Change: In other words this business is on track to quadruple in size over a 24 month period.

Speaker Change: We are working with our payer customers to continue expanding our capabilities with evergreen services like pediatrics, GAAP programs, which have seen a significant increase in volumes with over 2500 visits completed so far this year.

Speaker Change: These services include well visits vaccinations and floor eye treatments for underserved children. In addition, we recently signed our first substantial P. C. P agreement with a major payer in the northeast, which is a very significant step forward in our long term strategic vision.

Speaker Change: To put this in perspective in 2024, we completed 144 PCP visits that number is expected to grow to 10000 this year and over 40000 in 2026.

Speaker Change: Additionally, in Q1, we added P T I health, a mobile lab collection and Phlebotomy company to our portfolio.

Speaker Change: They are on track to complete over 125000 blood draws and patient homes in 2025, and we expect them to exceed 200000 in 2026.

Speaker Change: All told between our care gap program P. C P and mobile lab businesses, we expect to visit over 150000 patients in their homes this year.

Speaker Change: We continue to believe that our ability to bring care to the home in an economic and efficient manner at scale puts us in a uniquely valuable strategic position not only can we work to positively impact patient outcomes and drive savings for our payer customers, but we can also gain a significant data advantage in the home regarding the variables that.

Speaker Change: Directly impact patients' health.

Speaker Change: We are literally capable of taking a patient from one on one end of the spectrum to the other from unearned gauged with little data in chronic conditions going unaddressed to engaged with complete in home data, while facilitating preventative care.

Speaker Change: The savings are substantial and we are positioning the company to capture a larger and larger portion of those savings over time.

Speaker Change: In addition to the economic savings and improved outcomes patients absolutely love our service in Q1, <unk> Mobile health net promoter score was 86, which is substantially higher than the health care industry average NPS of 58.

Okay.

Speaker Change: Turning to EBITDA the primary driver of the anticipated adjusted EBITDA loss for 2025 is our elevated SG&A level as a percentage of revenue. During this period of transition as we wind down our migrant related business, while we invest to support our growing medical transportation and payer provider mobile health verticals as well as our technology advantage.

[music].

Speaker Change: <unk>.

Speaker Change: While we're making these investments, which will which we believe will deliver a significant return over our three year growth plan. We have also initiated cost cutting measures, we reduced SG&A by approximately $3 $1 million on a sequential basis. During the first quarter of 2025 and plan to aggressively cut SG&A over the next several quarters.

Speaker Change: Orders as well.

Speaker Change: We believe that these measures will help us achieve positive adjusted EBITDA in 2026.

Speaker Change: Now regarding our balance sheet, which remains healthy.

Speaker Change: While we are projecting a consolidated adjusted EBITDA loss for the year, we continue to anticipate positive cash flow from operations and expect to exit the year with over $110 million of cash after accounting for $9 million of year to date stock repurchases 4 million for the acquisition of P. T I and repayment of $30 million.

Speaker Change: On a revolving line of credit, which will enable us to exit the year debt free.

Speaker Change: We continue to build a company that offers a unique value proposition for payers providers and health systems and our growth in 2025 and beyond will be based on the results of our proven medical transportation and rapidly growing mobile health payer and provider businesses.

Speaker Change: In the event, we mobilize any significant non Margaret municipal work. This year revenue from those projects will be reported separately in future quarters and will serve as upside to our 2025 guidance in.

Speaker Change: In summary in 2025, we expect our medical transportation business to generate $225 million of revenue, our payer and provider business to generate $50 million and $50 million from our remaining migrant services health care work.

Speaker Change: We are engaged in cost cutting.

Speaker Change: Cost containment measures on our SG&A base, and we have a strong balance sheet to fund and support our continued business expansion.

Speaker Change: I am confident in the demonstrated value of our company and our offerings and I'm excited about our future plans now I'll hand, it over to norm to cover the financials.

Norm: Thank you Lee and good afternoon.

Norm: Total revenue for the first quarter of 2025 was $96 million compared to $192 $1 million in the first quarter of 2024 at the revenue decline was entirely due to the government vertical primarily in migrant related projects.

Norm: As we've pointed out over the past several quarters are migrant related work peaked in the fourth quarter of 2023, and the first quarter of 2024 and began to wind down in May of 2024 with the exit from the New York City based sites by the end of 2024, we had exited all of the H P. D sites and the remaining Margaret work with New York City Health and hospitals is expected to be.

Norm: We actually completed by the midpoint of this year.

Norm: Health revenue for the first quarter of 2025 was $45 $2 million down from $143 $9 million in the first quarter of last year driven by this anticipated wind down of migrant revenues.

Norm: Medical Transportation services revenue increased to $58 million in Q1 of 2025 from $48 $2 million and transport revenues that we recorded in the first quarter of 2024 revenues were driven higher by increases in several markets, including Delaware, Tennessee, Pennsylvania, and New Jersey, Wisconsin, Upstate New York and the U K.

Norm: In the first quarter mobile health revenues accounted for about 47% of total revenues and medical transportation for 53%.

Norm: We recorded a net loss of $11 $1 million in Q1 of 2025 compared with net income of $10 $6 million in first quarter of 2024, reflecting the drop in revenues I just described.

Norm: Adjusted EBITDA for the first quarter of 2025 was a loss of $3 $9 million compared to adjusted EBITDA of $24 $1 million in the first quarter of 2024.

Norm: Total GAAP gross margin percentage during the first quarter of 2025 was 28, 2% versus 32, 8% in the first quarter of 2024, the adjusted gross margin, which removes the impact of depreciation and amortization was 32, 1% in the first quarter of 2025 compared to 35% in the first quarter.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Doc go first quarter earnings conference call at.

Norm: On 2024.

Norm: During the first quarter of 2025, adjusted gross margin for the mobile Health segment was 38% versus 35, 5% in the first quarter of 2024, where the biggest impact coming from the early stage payer and provider business as that business grew well Margaret revenues declined the payer and provider business had a larger impact on overall.

At this time all lines are in listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: At any time during this call you require immediate assistance. Please press star zero for the operator.

Speaker Change: This call is being recorded and the Thursday may eight 2025.

Norm: Mobile health gross margins as this business continues to grow however, we would expect to see improved utilization rates of our clinicians, which make up the bulk of the cost of goods sold we expect this improve utilization lead to higher gross margins for this business line and to eventually raise the overall mobile health segment in the future.

Speaker Change: I would now like to turn the conference over to Mike Cole VP of Investor Relations. Please go ahead.

Speaker Change: Thank you operator before turning the call over to management I would like to make the following remarks concerning forward looking statements. All statements made in this conference call other than statements of historical fact are forward looking statements. The words well planned potential could goal outlook design anticipate aim believe estimate expect intend.

Norm: In the medical Transportation segment adjusted gross margins were 33, 3% in Q1 2025 compared to 33, 7% in Q1 of 2024, while medical transportation margins improved by more than 300 basis points on a sequential basis when compared to the fourth quarter of 2024, they were still impacted in Q1.

Speaker Change: Guidance confidence target project and other similar expressions may be used to identify such forward looking statements. These forward looking statements are not guarantees of future performance and we cannot assure you that we will achieve or realize our plans intentions outcomes results or expectations forward looking statements are inherently subject to substantial risks.

Norm: By some higher personnel related costs and one of our larger markets as we move forward in 2025, we would expect medical transportation gross margins to continue to improve sequentially.

Speaker Change: Uncertainties and assumptions many of which are beyond our control and which may cause our actual results or outcomes or the timing of results or outcomes to differ materially from those contained in our forward looking statements. These risks uncertainties and assumptions include but are not limited to those discussed in our risk factors and elsewhere in <unk> annual report on form 10.

Norm: Looking at operating costs SG&A as a percentage of total revenues was 46, 7% in the first quarter of 2025 compared to 26, 8% in the first quarter of 'twenty 'twenty four as Margaret revenues have wound down over the past several quarters, we've seen SG&A increased sharply as a percentage of total revenues.

Speaker Change: K quarterly reports on Form 10-Q, our earnings release for this quarter and other reports and statements filed by <unk> with the SEC to which your attention is directed actual outcomes and results or the timing of results or outcomes may differ materially from what is expressed or implied by these forward looking statements.

Norm: However, on an absolute dollar basis, SG&A expenses were 13% lower year over year in the first quarter of 2025, and they were down 7% on a sequential basis from the Q4 2024 level, we're taking costs out of the business and we will continue to focus on lowering our SG&A costs throughout 2025, but we do expect that S. G.

Speaker Change: In addition, today's call contains references to non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release or the current report on form 8-K that includes our earnings release, which is posted on our website <unk> Dot com that's.

Norm: <unk> expense will remain elevated as a percentage of revenues when you compare it to our previous levels for the next several quarters.

Norm: Despite the net loss and the negative adjusted EBITDA, we generated $9 $7 million in positive cash flow from operations in Q1, as we continue to collect our older larger invoices. However, our cash balances were lower at the end of Q1 than at the end of 2024 as we spent on our stock buyback program and the acquisition of P. T IL as a.

Speaker Change: While it is filed with the SEC.

Speaker Change: The information contained in this call is accurate as of only the date discussed investors should not assume that statements will remain relevant and operative at a later time, we undertake no obligation to update any information discussed in this call to reflect events or circumstances. After the date of this call or to reflect new information or the occurrence of unanticipated events.

Norm: March 31, 2025, our total cash and cash equivalents, which include restricted cash was $103 $1 million down a little from $107 3 million at the end of 2024, but up about $44 million from the same time last year. Our accounts receivable continued to decrease reflecting our cash collections and the wind down.

Speaker Change: As to the extent required by law at this time. It is now my pleasure to turn the call over to Mr. Lee Bienstock CEO of <unk>. Li. Please go ahead.

Lee Bienstock: Thank you Mike and thank you all for joining us today.

Norm: A migrant revenues that we've witnessed since the middle of the second quarter of 2024 at quarter end, we had approximately $120 million in accounts receivable from the various migrant programs, which represented about two thirds of the total company consolidated they are this compares to a $150 million and Margaret program related they are at the end of 'twenty 'twenty four which.

Lee Bienstock: I wanted to start this call discussing the important decision we made to remove our government population health vertical from our 2025 guidance and then outline the growth plans, we have for our hospital system medical transportation and payer provider verticals both for this year and for next.

Norm: Rented approximately 71% of the company total at the time, while the wind down of migrant related programs is obviously had an impact on revenues our balance sheet is expected to benefit substantially in 2025 as we collect as they are leading to an improvement in cash flow from operations, which should be enough to cover any operating losses.

Lee Bienstock: First regarding our government population health vertical ongoing policy changes and budget cuts in Washington have created substantial uncertainty and decisiveness with regard to new municipal project launches and the government RFP channel in general.

Lee Bienstock: In fact, we are seeing substantial delays with regard to municipal decision, making and delays in launch timelines for contracts we've already signed.

Norm: Despite the expectation for negative adjusted EBITDA in 2025, we still expect to be operating cash flow positive for the year. Given these positive changes in our working capital while we're sometimes disappointed about the pace of the payments from New York City. These payments are being made regularly and we expect a continued collection of these receivables to contribute to improve.

Lee Bienstock: We have 35 open government RFP submissions in our pipeline a number of which were submitted over six months ago that we are still waiting to hear back on.

Lee Bienstock: Moreover, we have signed contracts in this vertical which we're ready to be launched whose implementation has been put on hold as a direct result of this channels uncertainty.

Norm: <unk> and our overall cash balances we believe that this will provide us with the resources, we need to invest in our growth and to bolster our balance sheet one of the ways. We deployed our cash during the first quarter was to execute our stock buyback program during the quarter, we repurchased nearly 2 million shares via open market purchases for an aggregate amount of approximately $5 $8 million. So.

Lee Bienstock: Accordingly, we can no longer rely on needs to generate meaningful revenue. This calendar year. As a result, we have decided to move non migrant government population health revenue and related projects from our 2025 guidance.

Lee Bienstock: Along with this decision we revised our 2025 guidance from $410 million to $450 million in revenue with a 5% adjusted EBITDA margin to $300 million to $330 million with an expected adjusted EBITDA loss of $20 million to $30 million.

Norm: Far in Q2 in accordance with the terms of our <unk> one trading plan, we have repurchased another one 2 million shares for an additional $3 $2 million, having spent close to $9 million on our repurchases. So far this year, we still have another $13 million remaining under this program.

Lee Bienstock: I want to be clear.

Norm: We also use our cash balance during the quarter to add to our capabilities as required P. T. I L. A mobile lab collection M. Phlebotomy company, we are considering further acquisitions over the rest of 2025 as we seek to continue to use our resources to add to our reach and clinical service offerings.

Lee Bienstock: This revision to guidance is specifically associated with our government population health vertical the rest of our business continues to perform as anticipated and we believe it is on a solid growth trajectory. This year. We continue to expect approximately 225 million of revenue from our medical transportation services 50 million.

Speaker Change: At this point I'd like to turn the call back over to the operator for Q&A operator. Please go ahead.

Lee Bienstock: From a payer and providers and $50 million from our remaining migrants services health care work all unchanged from our previous expectations.

Norm: Okay.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.

Lee Bienstock: Any new municipal work would be incremental to our revised 2025 guidance, which if realized we plan to break out as upside revenue in future quarters.

Speaker Change: Could you have a question. Please press star followed by the number one on your Touchtone phone, you'll hear a prompt the turnaround has been rates.

Speaker Change: Should you wish to decline from the polling process. Please press star followed by the number too.

Lee Bienstock: We are building our company around our innovative solutions for payers providers and health systems, and we are incredibly confident in our mobile health at any address in medical transportation offerings.

Speaker Change: If you are using a speaker phone please make sure to lift your handset before pressing any keys.

Speaker Change: Your first question comes from the line of Ryan Macdonald from Needham. Please ask your question.

Lee Bienstock: See these businesses as both the foundation and the future of Dacko I'm excited to share our key metrics and projected growth rates for this year and the next.

Ryan Macdonald: Hi, Thanks for taking my questions and sorry to hear about the uncertainty within the government vertical, but maybe let's start there.

Speaker Change: As you think about.

Lee Bienstock: Our medical transportation business continues to perform well and on a contribution basis is expected to have adjusted EBITDA of greater than $15 million in 2025.

Speaker Change: The remainder of the year on a quarterly basis can you just give us a sense of sort of the.

Speaker Change: How much government revenue.

Speaker Change: Each quarter, Youre kind of expecting and how we should think about the balance of where that gets pulled out and then.

Lee Bienstock: We had record trip volume in the first quarter of 2025 and expect this momentum to continue in the second half of this year ending 2025 at approximately 575000 total transports.

Speaker Change: Or are you thinking about strategically.

Speaker Change: Balancing out cutting SG&A.

Speaker Change: To sort of optimize the P&L with making sure you have sort of.

Lee Bienstock: Beyond that we project continued topline growth driven by a major new customer win in the North East and continued expansion in the Texas and U K markets and we believe we can approach 700000 transports by the end of 2026.

Speaker Change: The staff ready to sort of.

Speaker Change: Kick off these these government engagements if and when they do kick off later this year or into 2006.

Speaker Change: Absolutely. Thanks, Ryan I appreciate the question.

Lee Bienstock: Health systems continue to search for partners that can provide high quality technology enabled medical transportation solutions that deliver timely reliable service for their patients.

Speaker Change: So in terms of the government population health vertical we made the decision to remove those revenues from our 2025 guidance and so any meaningful population health revenues coming from the non migrant population health programs, we're going to report on separately as upside in addition to the 2025.

Lee Bienstock: We have invested in building a technology platform that integrates with industry, leading ehr's, including ethics and provides unmatched transparency for our customers and their patients. We consistently receive positive feedback from our health system partners and believe that our technology is a key differentiator that enables us to secure new.

Speaker Change: Five guidance that we just revised today, so any material new deployments in the government population health vertical will be.

Speaker Change: Be described and explained and reported <unk>.

Lee Bienstock: Contracts.

Lee Bienstock: Our payer and provider vertical we continue to see substantial growth and I am pleased to share that we have now exceeded 900000 assign lives since the inception of our care gap closure program up from 700000, just a quarter ago.

Speaker Change: Separately moving forward this quarter and into next quarters for the remainder of the year, but we are seeing substantial delays and timelines.

Speaker Change: We were awarded a various different contracts that were expected to launch but haven't launched just yet we submitted multiple rfps that were we should have heard back from but are waiting to hear back on so as those rfps come to fruition as those projects that we've already signed get launched we'll report on that in the coming quarters.

Lee Bienstock: In addition to the growth in our number of assign lives I wanted to share how our volume of visits has grown over time.

Lee Bienstock: In the fourth quarter of 2023, we completed approximately 2500 care gap closure and transitional care management visits in the fourth quarter of 2024, our number of gap closure and T. C. M visits grew to over 4400 in the fourth quarter of 2025, we are projecting to complete over 11000.

Speaker Change: And that will be in addition to this revised 2025 guidance that we updated today in terms of <unk>.

Speaker Change: The SG&A base you you hit the nail on the head, we're balancing both restructuring and reinvesting in the different parts of our business. So.

Lee Bienstock: 500 care gap closure and TCM visits and.

Lee Bienstock: In other words this business is on track to quadruple in size over a 24 month period.

Speaker Change: As norm mentioned, we are absolutely undertaking a look at all of our shared saving shared services departments looking for savings in those departments and we're also reinvesting resources into the growing parts of the company on the payer and provider side and the medical transportation side. So.

Lee Bienstock: We are working with our payer customers to continue expanding our capabilities with evergreen services like pediatrics can't get programs, which have seen a significant increase in volumes with over 2500 visits completed so far this year.

Speaker Change: So we do anticipate further growth throughout the remainder of this year and into next I want to make sure that we're positioned and ready for that growth. We have a lot of great team members that are helping us scale the business and so we're going to reinvest those team members into the growing parts of the business and the.

Lee Bienstock: These services include well visits vaccinations and floor eye treatments for underserved children.

Lee Bienstock: In addition, we recently signed our first substantial P. C. P agreement with a major payer in the northeast, which is a very significant step forward in our long term strategic vision.

Speaker Change: New areas of focus for the company, but then also yes, we are undertaking a rigorous look a rigorous look at restructuring some of the various shared a say a shared services departments for for savings that we can cut for SG&A there.

Lee Bienstock: To put this in perspective in 2024, we completed 144 P. C. P visits that number is expected to grow to 10000 this year and over 40000 in 2026.

Speaker Change: And Ryan its norm. So you had asked about the impact of the removal of these government revenues from our guidance. So.

Lee Bienstock: Additionally, in Q1, we added P T I health, a mobile lab collection and Phlebotomy company to our portfolio.

Speaker Change: Using a round number, let's say about 100 million or so.

Lee Bienstock: They are on track to complete over 125000 blood draws and patient homes in 2025, and we expect them to exceed 200000 in 2026.

Speaker Change: So you know as you recall, we talked about in the past we talked about how we might've expected Q2 to be the low point of revenue for the company back when we were looking at having all that government revenue in here in Q2, obviously would be when the full wind down would occur.

All told between our care got program P. C P and mobile lab businesses, we expect to visit over 150000 patients in their homes this year.

Speaker Change: On the on.

Speaker Change: On the migraine program, but then a lot of the stuff that leaves alluding to that either we have a signed contract for them. It has launched or the stuff that went into hereabouts would have kicked in in Q3 and Q4.

Lee Bienstock: We continue to believe that our ability to bring care to the home and an economic and efficient manner at scale puts us in a uniquely valuable strategic position not only can we work to positively impact patient outcomes and drive savings for our payer customers, but we can also gain a significant data advantage in the home regarding the variables.

Speaker Change: So that I think that when we look at it now I would say that Q2 revenue obviously as we always expected it would be lower than what you saw here in Q1, Q3 will probably be declined further because there won't be any migrant revenue any material revenue in that period and we're not counting on any of this government revenue coming in and then we'd probably get a little bit of a blip up from Q4.

Directly impact patients' health.

Lee Bienstock: We are literally capable of taking any patient from one on one and under the of the spectrum to the other from unearned gauged with little data in chronic conditions going unaddressed to engaged with complete in home data, while facilitating preventative care.

Speaker Change: For the Q3, although Q4 will remain below the levels of Q2, so that's sort of how the how the quarterly trajectory changes with the changes we've made to the guidance.

Lee Bienstock: The savings are substantial and we are positioning the company to capture a larger and larger portion of those savings over time.

Speaker Change: No I appreciate all that color there maybe onto onto better topics the payer business continues to.

Lee Bienstock: In addition to the economic savings and improved outcomes patients absolutely Love our service and Q1 Dot goes mobile health net promoter score was 86, which is substantially higher than the health care industry average NPS of 58.

Speaker Change: Really continue to grow at a rapid clip and it seems like you're experiencing a lot of success. There can you just talk about sort of the end market demand youre seeing within the payer segment and obviously, we've heard a lot of commentary out of the United Health that there is a number of lives transitioning that were on a unmanaged MA lives into new plans.

Lee Bienstock: Turning to EBITDA the primary driver of the anticipated adjusted EBITDA loss for 2025 is our elevated SG&A level as a percentage of revenue. During this period of transition as we wind down our micro related business, while we invest to support our growing medical transportation and payer provider mobile health verticals as well as our technology advantage.

Speaker Change: I'm wondering if that's creating sort of an incremental level of demand for the care gap closure offering and then any any early signs of success on some of the testing that you've been doing to sort of improve patient engagement within that Carryout closure program.

Lee Bienstock: <unk>.

Speaker Change: Absolutely. So as you mentioned around we're seeing healthy demand in the Kari gap closure PCP basically health care at any address health care in the home business for.

Lee Bienstock: While we're making these investments, which will which we believe will deliver a significant return over our three year growth plan. We have also initiated cost cutting measures.

Speaker Change: For the exact reasons you mentioned so first off the plans, we're working with they want to solve for either one or both or two key key objectives. One is they absolutely want to reduce their medical loss ratio they want to reduce their health care spending.

Lee Bienstock: We reduced SG&A by approximately $3 $1 million on a sequential basis during the first quarter of 2025 and plan to aggressively cut SG&A over the next several quarters as well.

Lee Bienstock: We believe that these measures will help us achieve positive adjusted EBITDA in 2026.

Speaker Change: So our preventative proactive screenings that we do in the home the proactive health care that we're providing in the home is absolutely targeted at reducing Readmissions hospitalizations and we're seeing very very good success in our cohorts of patients are being readmitted to the hospital at a much lower rates.

Lee Bienstock: Now regarding our balance sheet, which remains healthy.

Lee Bienstock: While we are projecting a consolidated adjusted EBITDA loss for the year, we continue to anticipate positive cash flow from operations and expect to exit the year with over $110 million of cash after accounting for 9 million of year to date stock repurchases 4 million for the acquisition of P. T I and repayment of 30 million.

Speaker Change: So that is absolutely something that the health plans are focused on obviously they don't want their members in the hospital, that's where their most expensive.

Lee Bienstock: On a revolving line of credit, which will enable us to exit the year debt free.

Speaker Change: And as you mentioned are the.

Speaker Change: The medical expenses are obviously rising MLR as a big a big.

Lee Bienstock: We continue to build a company that offers a unique value proposition for payers providers and health systems and our growth in 2025 and beyond will be based on the results of our proven medical transportation and rapidly growing mobile health payer and provider businesses.

Speaker Change: Big Big focus for these plans.

Speaker Change: And so we're helping them with that the second piece also is we health plans with their quality metrics. So the more and more care gaps were able to close in the home.

Speaker Change: Better that their quality metrics in the heater.

Speaker Change: Measures will will increase and you mentioned, the additional and a members coming coming to the market that will absolutely help them with enrollments that will help them with a plea.

Lee Bienstock: In the event, we mobilize any significant nonrecurring municipal work. This year revenue from those projects will be reported separately in future quarters and will serve as upside to our 2025 guidance in.

Speaker Change: Plant that plan choice and people choosing those and a plant so the higher quality. They are obviously the more attractive. They are 10. They members. So we are helping in both those scenarios. We average for every visit we do in the home where right now averaging about two care gaps closed. So for every visit we're averaging more than one care gap and in some cases, we've even closed.

Lee Bienstock: In summary in 2025, we expect our medical transportation business to generate 225 million of revenue or pay our provider business to generate $50 million and $50 million from our remaining migrant services health care work.

Lee Bienstock: We are engaged in cost cutting cost containment measures on our SG&A base and we have a strong balance sheet to fund and support our continued business expansion.

Speaker Change: Care gaps in one visit so you can imagine how accretive that is for the health plans and obviously as some of these managed plans and as the managed market in general gets bigger we predict over the coming years here, we're going to have more and more of a role to play.

Lee Bienstock: I am confident in the demonstrated value of our company and our offerings and I'm excited about our future plans now I'll hand, it over to norm to cover the financials.

Norm: Thank you Lee and good afternoon.

Speaker Change: Excellent great to hear thanks for the color I'll hop back in the queue.

Brian: Thanks, Brian.

Speaker Change: Your next question comes from the line of piece of Chickering from Deutsche Bank. Please ask your question.

Speaker Change: Hi, there this is Kieran Ryan on for Peter Thanks for taking the questions.

Norm: As we've pointed out over the past several quarters are migrant related work peaked in the fourth quarter of 2023, and the first quarter of 'twenty 'twenty four and began to wind down in May of 'twenty 'twenty four with the exit from the New York City based sites by the end of 2024, we had exited all of the H P. D sites and the remaining Margaret work with New York City Health and hospitals is expected to be.

Speaker Change: Wanted to just see if we get a little bit more color on just kind of what exactly happened since the end of February when you last reported through the end of this quarter because kind of looking even at <unk> results. It looks like a decent miss there. So just wanted to understand if there were if there was anything that got canceled in March or.

Norm: We actually completed by the midpoint of this year.

Norm: Health revenue for the first quarter of 2025 was $45 $2 million down from $143 $9 million in the first quarter of last year, driven by the anticipated wind down of migrant revenues.

Speaker Change: Or just if you could just talk about kind of the quarter and how that plays into the decision with the guidance. Thank you.

Speaker Change: Absolutely absolutely so as we mentioned in our prepared remarks. The revision is directly tied to the decision that we made regarding the government population health vertical and how we project and report those revenues going forward.

Norm: Medical Transportation services revenue increased to $58 million in Q1 of 2025 from $48 $2 million in transport revenues that we recorded in the first quarter of 2024 revenues were driven higher by increases in several markets, including Delaware, Tennessee, Pennsylvania, and New Jersey, Wisconsin, Upstate New York and the U K.

Speaker Change: Our medical transportation, our payer provider business, that's right on track.

Speaker Change: Our expectations are unchanged there.

Speaker Change: What changed specific to the government population health vertical is that is substantial and decisiveness and hesitation. It's been created all the way from the federal level it down to municipalities and these policy changes that are coming out of Washington, We have as I mentioned, we signed contracts that are that are stalled we're waiting on the RFP channel.

Norm: In the first quarter mobile health revenues accounted for about 47% of total revenues and medical transportation for 53%.

Norm: We recorded a net loss of $11 $1 million in Q1 of 2025 compared with net income of $10 $6 million in first quarter of 2024, reflecting the drop in revenues, but I just described.

Speaker Change: And so until more clarity emerges we decided as you mentioned between the last call to this call we decided to remove those from the revenue guidance and they'll serve as sort of upside and we'll report on them separately.

Norm: Adjusted EBITDA for the first quarter of 2025 was a loss of $3 $9 million compared to adjusted EBITDA of $24 $1 million in the first quarter of 2024.

Speaker Change: So.

Speaker Change: That's what is changing when you take out approximately $100 million of norm mentioned from the from the revenue guidance. That's just the nature of the business model swings positive EBITDA expectation of 5%.

Speaker Change: It moves to the $20 million to $30 million adjusted EBITDA loss and when you take out that revenue and again invented that vertical stabilizing we do generate meaningful revenues from it it's the incremental upside and we'll break that out accordingly.

Norm: In 2024.

Norm: During the first quarter of 2025, adjusted gross margin for the mobile Health segment was 38% versus 35, 5% in the first quarter of 2024 with the biggest impact coming from the early stage payer and provider business as that business grew well micron revenues declined the payer and provider business had a larger impact on overall.

Speaker Change: Time, and that's what I meant.

Speaker Change: And we see great progress in the payer and provider go vertical I think you hear that coming out here and as well as our medical transportation vertical and we're focused on service servicing that demand or making sure. We provide a clear picture on the fundamental performance of those verticals, we shared a lot more key metrics on those verticals today on this call and we're going to continue to share that in the call.

Norm: Mobile health gross margins as this business continues to grow however, we would expect to see improved utilization rates of our clinicians, which make up the bulk of the cost of goods sold we expect this improve utilization to lead to higher gross margins for this business line and to eventually raise the overall mobile health segment in the future.

Speaker Change: Going forward. So really you know to summarize what changed from last call to this call as we made the a very conscious decision and the strategic decision to essentially.

Speaker Change: All of those municipal revenues from the guidance and have them report separately and as upside in the coming future quarters.

Norm: In the medical Transportation segment adjusted gross margins were 33, 3% in Q1 2025 compared to 33, 7% in Q1 of 'twenty 'twenty four while medical transportation margins improved by more than 300 basis points on a sequential basis when compared to the fourth quarter of 2024, they were still impacted in Q1.

Speaker Change: Yes.

Speaker Change: Thanks, Karen.

Speaker Change: In terms of what what what impact was on the on the first quarter versus the expectation. So yes, even compared to our internal numbers. You know I think we were probably on the top line. We were rounding it off we were right about 100 million as an expectation we came in at 96.

Norm: By some higher personnel related costs and one of our larger markets as we move forward in 2025, we would expect medical transportation gross margins to continue to improve sequentially.

Speaker Change: Well looking at the pieces of transport actually came in a little bit higher than what we thought.

Speaker Change: Most of our markets were you know a couple of hundred Grand higher than maybe what we thought in and on balance a few hundred thousand higher.

Norm: Looking at operating costs SG&A as a percentage of total revenues was 46, 7% in the first quarter of 2025 compared to 26, 8% in the first quarter of 'twenty 'twenty four as migrant revenues have wound down over the past several quarters, we've seen SG&A increased sharply as a percentage of total revenues.

Speaker Change: The migrant revenue in itself, which was about $36 million for the quarter was a little light compared to what we had mapped out based on the dates in certain dates have changed on us a little bit you lost a couple of days here and there you also had the wind down happening on a slightly different trajectory when you're dealing with that large of a number obviously, even a little bit of a change in terms of number of shifts the number of personnel.

Speaker Change: Yeah. It is something that that is going to is going to move but that's part of the business that's going away anyway.

Speaker Change: And then within mobile health part of our business that provides staffing to general government programs was also down a little bit I'm not going to say that that's because of the the general uncertainty that we're talking about a that was probably just a matter of performance and the way that happened in the quarter, but that's you know the Miss if you will on the topline compared to your expectation was entirely contained by the government Virtu.

Norm: <unk> expense will remain elevated as a percentage of revenues when you compare it to our previous levels for the next several quarters.

Speaker Change: <unk>.

Speaker Change: Got it got it that's helpful on the quarter. Thank you.

Speaker Change: Just a quick follow up just on your on the other the payer provider vehicles I appreciate the extra the extra disclosures I just wanted to understand kind of how youre thinking about that ramping on on revenues and EBITDA. If we think about it just kind of for those two.

Speaker Change: There's 50 million in revenue on that so I'm just trying to get an idea. If you are still kind of actively onboarding projects there.

Speaker Change: And it's just hard to see with all the other changes so thanks.

Speaker Change: Thanks for taking the questions.

Speaker Change: Absolutely. So we absolutely are on boarding new programs, there and we actually think it's going to pick up with pace in the back half of the year as plans look to close out the year strong too.

Norm: Migrant revenues that we've witnessed since the middle of the second quarter of 2024 at quarter end, we had approximately $120 million in accounts receivable from the various migrant programs, which represented about two thirds of the total company consolidated they are this compares to a $150 million and myeloid program related they are at the end of 'twenty 'twenty four which.

Speaker Change: Address patients that have open gaps in care and really try to we see tremendous velocity heading into the back half of the year. So we are still onboarding new customers. There we have a very robust pipeline there and each quarter as we go here, we're expected to do more and more care got visits and P. C. P visits as we probe.

Speaker Change: Through the year and of course into next year. So absolutely there in terms of in terms of the margins essentially for that business. It's an it's an early stage business. We're ramping scale. There right now we expect those margins for that business to be.

Norm: Despite the expectation for negative adjusted EBITDA in 2025, we still expect to be operating cash flow positive for the year. Given these positive changes in our working capital well, where sometimes disappointed about the pace of the payments from New York City. These payments are being made regularly and we expect a continued collection of these receivables to contribute to improve.

Speaker Change: Approaching 40% gross margin next year.

Speaker Change: This year, we're still in suboptimal margins as we scale and build density in the markets that we're really focused on so but we're really really excited about the growth of that of that business patients absolutely love. It. The plans are loving it and as plans as was mentioned earlier as plans are looking to close the year. They have to address patients that have open gaps in care patients that haven't gone to see.

Norm: And our overall cash balances we believe that this will provide us with the resources, we need to invest in our growth and to bolster our balance sheet one of the ways. We deployed our cash during the first quarter was to execute our stock buyback program during the quarter, we repurchased nearly 2 million shares via open market purchases for an aggregate amount of approximately $5 $8 million. So.

Speaker Change: Their doctor were able to.

Speaker Change: Address those patients and go see them in the home and bring a new modality of care that perhaps they haven't been available too. So we're seeing tremendous tremendous adoption. There. We're also investing pretty heavily in our patient conversion on patient engagement operation. So when we get lots of patients from from the from the payers that have open gaps in care, we're building a world.

Norm: Far in Q2 in accordance with the terms of our <unk> five one trading plan, we have repurchased another one 2 million shares for an additional $3 $2 million, having spent close to $9 million on our repurchases. So far this year, we still have another $13 million remaining under this program.

Speaker Change: <unk> engine of how we engage those patients how we schedule those visits how we book the clinicians how we route the clinicians how we stack those visits so that the clinicians have a full productive quality day in the field and as we do that more and more the the margins are just only going to improve from there. So we're really excited about what we're building there the patients love it.

Norm: We also use our cash balance during the quarter to add to our capabilities as required P. T I L. A.

Norm: Mobile lab collection M. Phlebotomy company, we are considering further acquisitions over the rest of 2025 as we seek to continue to use our resources to add to our reach and clinical service offerings.

Norm: At this point I'd like to turn the call back over to the operator for Q&A operator. Please go ahead.

Norm: Yeah.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone, you'll hear a prompt the turnaround has been rates.

Speaker Change: That's our that's our target we're on target to hit that nothing has changed with that payer and provider. Our goal in fact, if anything I think we're ahead of schedule there.

Speaker Change: You've got to look at head count because it at this point as Lee is pointing out.

Norm: Should you wish to decline from the polling process. Please press star followed by the number too.

Speaker Change: That business is a drag on the overall consolidated margin I, probably I would say maybe cost us a point to a point and a half of the overall consolidated margin adjusted gross margin that we reported a 32.1.

Speaker Change: If you are using a speaker phone please make sure to lift your handset before pressing any keys.

Speaker Change: Your first question comes from the line of Ryan Macdonald from Needham. Please ask your question.

Speaker Change: But ultimately that business becomes our highest margin business, we have lines of business within that particular vertical that are that are going be 50% plus gross margin businesses.

Ryan Macdonald: Hi, Thanks for taking my questions and sorry to hear about the uncertainty within the government vertical, but maybe let's start there as you think about.

Speaker Change: So that's you know that eventually is obviously going to bring the consolidated number up.

Ryan Macdonald: The remainder of the year on a quarterly basis can you just give us a sense of sort of the how much government revenue each quarter youre kind of expecting and how we should think about the balance of where that gets pulled out and then how are you thinking about strategically.

Speaker Change: As far as the leading indicator it's important for us to look at API and leading indicators because you know we're looking to the future. So that's the biggest driver of that is obviously the utilization rate of the clinicians right. The more the more trips they consume more trips they can do or a patient. So you can see in an hour or 10th anniversary update our shift to higher margin goes and I will say that.

Ryan Macdonald: I'm seeing out cutting SG&A.

Ryan Macdonald: To sort of optimize the P&L with making sure you have sort of a list.

Speaker Change: The early the early indications are encouraging so the.

Speaker Change: The utilization rate to date, the first what is it five weeks of Q2 or about 30% higher than what they were in Q1.

Ryan Macdonald: The staff ready to sort of.

Ryan Macdonald: Kick off these these government engagements if in one day they do kick off later this year or into 'twenty six thanks.

Speaker Change: They're trending if this trend continues are trending at a level that we haven't really projected out until sometime in 2026 of 2027. So if we can if we can keep those kinds of numbers going as we scale. Then I think you might even see a steeper ramp towards that very robust and healthy gross margins, but at the moment. If you look at Q1 definitely was a draw.

Ryan Macdonald: Absolutely. Thanks, Ryan I appreciate the question.

Ryan Macdonald: So in terms of the government population health vertical we made the decision to remove those revenues from our 2025 guidance and so any meaningful population health revenues coming from the non migrant population health programs, we're going to report on separately as upside in addition to the 2025.

Speaker Change: On the overall gross margin of the business.

Speaker Change: Thanks, a lot I appreciate it.

Ryan Macdonald: Five guidance that we just revised today, so any material new deployments in the government population health vertical will be.

Speaker Change: Your next question is from the line of Sarah James from Cantor Fitzgerald. Please ask your question.

Speaker Change: Hey, everyone. This is gaby on for Sarah I had a quick question I have that the that the government sector revenue was about $100 million, but it looks like guidance was taken down $115 million can you just talk about the delta between those two or is that just implied conservatism in the guidance yes.

Ryan Macdonald: Be described and explained and reported <unk>.

Ryan Macdonald: Separately moving forward this quarter and into next quarters for the remainder of the year, but we are seeing substantial delays in timelines. We were awarded a various different contracts that were expected to launch but haven't watched us yet we.

Speaker Change: The latter part of your statement is correct. It in fact, a couple of times in his in his comments earlier said that we're staying on the $2 25 for transport.

Ryan Macdonald: We submitted multiple rfps that were you should've heard back from but are waiting to hear back on so as those rfps come to fruition as those projects that we've already signed get launched we'll report on that in the coming quarters and that would be in addition to this revised 2025 guidance that we updated today.

Speaker Change: Sticking with 50 million for migraine and $50 million for these carryout closure and peer to peer programs that actually you know obviously adds up to $3 25 a M.

Speaker Change: As opposed to a range of 300, and 320, which would of.

Ryan Macdonald: In terms of.

Speaker Change: Yesterday in a base you you hit the nail on the head were balancing both restructuring and reinvesting in the different parts of our business.

Speaker Change: Already which would which would put you at 315, so that that's really what it is we're just trying to be prudent and build something in for the range of possibilities on all our business lines.

Speaker Change: As norm mentioned, we are absolutely undertaking a look at all of our shared savings or shared services departments looking for savings in those departments and we're also reinvesting resources into the growing parts of the company on the payer and provider side and the medical transportation side.

Speaker Change: Okay Awesome and then your comment that 26 should be EBITDA positive does that imply EBIT positive without any contribution from the government vertical and then quickly on the payer and provider business are you seeing a positive.

Speaker Change: So we do anticipate further growth throughout the remainder of this year and into next I want to make sure that we're positioned and ready for that growth. We have a lot of great team members that are helping scale the business and so we're going to reinvest those team members into the growing parts of the business and the.

Speaker Change: More positive conversations from the positive 2026, and day rates and maybe the payers, having more flexibility to apply some of your services.

Speaker Change: Yes, so as was mentioned that the municipal population health vertical yes that would be in addition, going forward and also into 2026 as well that's our that's our plan to report on that in addition to the revenue guidance, we're giving today and in the future. So that would be in addition to.

Speaker Change: And Ryan its norm. So you had asked about the impact of the removal of these government revenues from our guidance. So.

Speaker Change: Our EBITDA projections for next year.

Speaker Change: In terms of of the Payor, a and what's going on in the M&A market, we absolutely view that as a tailwind we're seeing that I think we've.

Speaker Change: Using a round number, let's say about 100 million or so.

Speaker Change: We've had many many opportunities in our pipeline going back all the way to last year and we see the pipeline even over the last two weeks really heating up which we expected going into the sort of back half Q3, and Q4 of this year, but we're seeing a tremendous demand for those services. So part of it is is it.

Speaker Change: On the on the migraine program, but then a lot of the stuff that leaves alluding to that either we have a signed contract for but it has launched or the stuff that went in to hear about would have kicked in in Q3 and Q4.

Speaker Change: Due to the macro factor of what's going on in the MA market, but also part of it is just we were getting more and more data and our pitch is just getting stronger and stronger because we are able to show the ROI, we're able to show the patient happiness, we're able to show the impact we're having we're able to show how many patients we've been able to close care gaps with.

Speaker Change: So that I think that when we look at it now I would say that Q2 revenue obviously as we always expect it will be lower than what you saw here in Q1, Q3 will probably be decline further because there won't be any migrant revenue any material revenue in that period and we're not counting on any of this government revenue coming in and then we'd probably get a little bit of a blip up from Q.

They're reporting back to their plans that they're happy with the service obviously, a patient satisfaction member satisfaction is a big component of the quality score for the M&A plans. So all of that is also also helping us as we scale not only do we.

Speaker Change: For Q3, although Q4 will remain below the levels of Q2, so that's sort of how the how the quarterly trajectory changes with the changes we've made to the guidance.

Speaker Change: Improve our operations, but as we scale, we just have more and more data more and more experience more and more references for other plans plans are sharing us from one state to the next and referring us and so all of that as we perform well and we're investing we want to make sure that these plans love US we want to make sure because there's just so much opportunity.

Speaker Change: No I appreciate all that color there maybe onto until better topics. The payer business continues to really continue to grow at a rapid clip and it seems like you're experiencing a lot of success. There can you just talk about sort of the end market demand youre seeing within the payer segment and obviously, we've heard a lot of commentary out of United Health.

Speaker Change: To make sure that the patients love It Love US and then we're really improving their health outcomes and once we're able to do all of that you know there was a tremendous opportunity ahead of us.

Speaker Change: There's a number of lives transitioning.

Speaker Change: Unmanaged MMA lives into new plans.

Speaker Change: Wondering if that's creating sort of an incremental level of demand for the care gap closure offering and then any any early signs of success on sort of the a b testing that you've been doing to sort of improve patient engagement within that carryout closure program.

Speaker Change: Okay Awesome. Thank you guys.

Gabby: Thanks Gabby.

Speaker Change: Yeah.

Speaker Change: Your last question is from the line of David Larsen from <unk>. Please ask your question.

Speaker Change: Hi, This is Jonathan on for Steve I apologize if I missed this if you had mentioned that the can you remind us what the margin profile is of the migrant related revenue versus your core business and then just quickly on tariffs I know we've spoken about.

Speaker Change: Absolutely. So as you mentioned right, we're seeing healthy demand in the care gap closure P. C. P basically health care at any address health care in the home business.

Speaker Change: For the exact reasons you mentioned so first off the plans, we're working with they want to solve for either one or both Oh two key key objectives. One is they absolutely want to reduce their medical loss ratio they want to reduce their healthcare spending.

Speaker Change: The expected impact on your fleet and the cost to manage your fleet, but do you have any potential risks from tariffs on some of your metal medical equipment that you use and wearable devices in the home. Thank you.

Speaker Change: Okay. So I'll start with the with your question about the margin profile on the on the partner program.

Speaker Change: The margins on that program were about 34%.

Speaker Change: And it's pretty consistent actually it was 34% in Q4 for 34% again.

Speaker Change: Give or take in a few basis points in Q1.

So that is absolutely something that the health plans are focused on obviously they don't want their members in the hospital, that's where their most expensive and as you mentioned the.

Speaker Change: So when you look at it that way.

Speaker Change: In the fourth quarter, our gross margin for mobile health was 35, 9%. So technically are the the rest of the other non migrant piece of mobile health was being driven at a higher margin here was the other way around so so the fact that the mix moved away from migrating towards the other things such as the payer the payer and provider programs.

Speaker Change: The medical expenses are obviously rising MLR as a big a.

Speaker Change: Big Big focus for these plans.

Speaker Change: And so we're helping them with that the second piece also is we health plans with their quality metrics. So the more and more care gaps were able to close in the home.

Speaker Change: Better that their quality metrics in there he is.

Speaker Change: That obviously brought down the margin so the mixed brought it down but I would say you're right about 34% or so is the number that we're seeing from the micro market.

Speaker Change: Measures will will increase and you mentioned the additional and they members coming coming to the market that will absolutely help them with enrollments that will help them with.

Speaker Change: You won't take careful on her.

Speaker Change: That plan choice and people choosing those and they plant so the higher quality. They are obviously the more attractive they are to any members. So we're helping in both those scenarios. We average for every visit we do in the home where right now averaging about two care gaps closed. So for every visit we're averaging more than one care gap and in some cases, we've even closed six.

Speaker Change: With regards to tariffs and exactly as you described I think the tariffs would be related to our fleet. Obviously the substantial fleet of almost 1000 vehicles in the fleet.

Speaker Change: And I think the tariffs the way would be factored in is is we have a calculation that we look at as to when we procure new vehicles versus maintain the ones. We have and so we'd look at the balance between perhaps the rising cost of procuring a vehicle or the.

Speaker Change: There are gaps in one visit so you can imagine how accretive that is for the health plans and obviously as some of these managed plans and as the managed market in general it gets bigger we predict over the coming years here, we're going to have more and more of a role to play.

Speaker Change: The costs going forward or just maintaining the ones, we have and we're in a good position to be able to balance that so we have a relatively new fleet in general.

Speaker Change: Excellent great to hear thanks for the color I'll hop back in the queue.

Brian: Thanks, Brian.

Speaker Change: And in addition, we have a wonderful and a dedicated fleet management team, that's able to keep our vehicles on the road and once a vehicle.

Speaker Change: Your next question comes from the line of piece of Chickering from Deutsche Bank. Please ask your question.

Speaker Change: More expensive to maintain that's when we procure a new one and so the tariffs may impact that that calculation, but I'm confident that our team is doing a wonderful job maintaining the vehicles that we have we had already placed orders on the new fleet that we were going to procure for this year, which has been placed in price.

Speaker Change: Hi, there this is Kieran Ryan on for Peter Thanks for taking the questions.

Speaker Change: Just wanted to see if we get a little bit more color on just kind of what exactly happened since the end of February when you last reported through the end of this quarter because kind of looking even at <unk> results it looks like to do.

Speaker Change: Decent Miss there. So just wanted to understand if there were if there was anything that got canceled in March or or just if you could just talk about kind of the quarter and how that plays into the decision with the guidance. Thank you.

Speaker Change: And paid for so so I think we are in a good position, but obviously it could increase the the the prices for some of the the parts.

Speaker Change: Well, obviously, we drove $8 8 million miles last year, so that's oil changes and tires and brake pads and everything you can imagine that keeps that tremendous fleet on the road, but ultimately we'll look at the cost of maintaining the cost of procuring new ones, but like I said, we were forward thinking and we have great scale. So we.

Speaker Change: Ben.

Speaker Change: Most of our orders that we were looking to procure we're already places here and then on the other hand fuel cost can go down I mean, theyre currently running already a little bit below what we had projected and a little bit below where they were a year ago. So.

Speaker Change: And then our expectations are unchanged there.

Speaker Change: I think the biggest impact is going to be the one that everybody faces, which is the general inflationary environment, but again, even within an inflationary environment oil prices will probably lower gas prices, therefore will be lower.

Speaker Change: We have some leverage to that so that would be a net benefit to us.

Speaker Change: Alright, thank you.

Speaker Change: There are no further questions at this time, so I'd like to turn the call over to Mr. Lee of Beanstalk for closing comments Sir. Please go ahead.

Speaker Change: So.

Speaker Change: That's what is changing when you take out approximately $100 million as norm mentioned summed up from the revenue guidance. That's just the nature of the business model swings positive EBITDA expectation of 5% it moves to the $20 million to $30 million adjusted EBITDA loss and when you take out that revenue and and again invented that vertical stabilizing we do generate meaningful revenues from it it's the incrementals.

Speaker Change: Thank you and thank you all for joining us today be wealth.

Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.

Speaker Change: [noise].

Speaker Change: Outside and we'll break that out accordingly, you know at the same time as I mentioned, we see great progress in the payer and provider go vertical I think you hear that coming out here and as well as our medical transportation vertical and we're focused on service servicing that demand or making sure. We provide a clear picture on the fundamental performance of of those verticals, we shared a lot more.

Speaker Change: Yeah.

Speaker Change: Key metrics on those verticals today on this call.

Speaker Change: We're going to continue to share that in the calls going forward. So really you know to summarize what changed from last call to this call as we made the a very conscious decision and the strategic decision to essentially pull those municipal revenues from the guidance and have them report separately and as upside in the coming future quarters.

Speaker Change: Yes.

Speaker Change: Karen.

Speaker Change: What what what impact there was on the on the first quarter versus the expectation. So yes, even compared to our internal numbers. You know I think we were probably on the top line. We were rounding it off we were right about 100 million as an expectation we came in at 96.

Speaker Change: Well looking at the pieces for transport actually came in a little bit higher than what we thought.

Speaker Change: Most of our markets, where you know a couple of hundred Grand higher than maybe what we thought in and on balance a few hundred thousand higher.

Speaker Change: You also had the wind down happening on a slightly different trajectory when you're dealing with that larger number obviously, even a little bit of a change in terms of number of shifts the number of personnel.

Speaker Change: It's something that that is going to is going to move but that's part of the business that's going away anyway, and then within mobile health part of our business that provides staffing to general government programs was also down a little bit I'm not going to say that thats because of the the general uncertainty that we're talking about a that was probably just a matter of performance and the way that happened in the quarter, but that's.

Speaker Change: The Miss if you will on the topline compared to your expectation was entirely contained by the government vertical.

Speaker Change: Got it got it that's helpful on the quarter. Thank you and then just a quick follow up I was just on your on the other the payer provider vehicles I appreciate the extra the extra disclosures just wanted to understand kind of how youre thinking about that ramping on on revenues and EBITDA.

Speaker Change: Think about it just kind of for those two I think you'd said it was 50 million in revenue on that so I'm just trying to get an idea. If you are still kind of actively onboarding projects there.

Speaker Change: And it's just hard to see you know with with all the other change itself.

Speaker Change: Thanks for taking the questions.

Speaker Change: Address patients that have open gaps in care and really try to we see.

Speaker Change: Tremendous velocity heading into the back half of the year. So we are still onboarding new customers. There we have a very robust pipeline there and each quarter as we go here, we're expected to do more and more care got visits and PCP visits as we progressed through the year and of course into next year. So absolutely there.

Speaker Change: In terms of in terms of the margins essentially for that business. It's an it's an early stage business. We're ramping scale. There right now we expect those margins for that business to be.

Speaker Change: Approaching 40% gross margin next year.

Speaker Change: This year, we're still in suboptimal margins as we scale and build density in the markets that we're really focused on so but we're really really excited about the growth of that of that business patients absolutely love. It. The plans are loving it and as plans are as was mentioned earlier as plans are looking to close the year. They have to address patients that have open gaps in care patients that haven't gone to see there.

A doctor were able to.

Speaker Change: Address those patients and go see them in the home and bring a new modality of care that perhaps they haven't been available too. So we're seeing tremendous tremendous adoption. There. We're also investing pretty heavily in our patient conversion on patient engagement operation. So when we get licit patients from from the from the payers that have open gaps in care were building a world.

Speaker Change: And Jay and of how we engage those patients how we schedule those visits how we book the clinicians how we route the clinicians how we stack those visits so that the clinicians have a full productive quality day in the field and as we do that more and more the the margins are just only going to improve from there. So we're really excited about what we're building there are the patients love it.

Speaker Change: As I mentioned and I think I'm, we're going to continue to reinvest a lot of our resources into that business. The 50 million that you mentioned that's unchanged. That's that's our that's been our number and that's our that's our target we're on target to hit that and nothing has changed with that payer and provider. Our goal in fact, if anything I think we're ahead of schedule there.

Speaker Change: You got to look at head count because at this point as Lee is pointing out.

Speaker Change: But ultimately that business becomes our highest margin business, we have lines of business within that particular vertical that are that are going to be 50% plus gross margin businesses.

Speaker Change: So that's you know that eventually is obviously going to bring the consolidated number up.

Speaker Change: As far as the leading indicator it's important for us to look at Kpis, leading indicators because we're looking to the future. So that's the biggest driver of that is obviously the utilization rate of the conditions right. The more the more trips they considered more trips they can do or patients that you can see in an hour or 10th anniversary update our shift to higher margin goes.

Speaker Change: I will say that the early the early indications are encouraging so.

Speaker Change: The utilization rate to date, you know the first what is it five weeks of Q2 or about 30% higher than what they were in Q1.

Speaker Change: They're trending if this trend continues are trending at a level that we haven't really projected out until sometime in 2026 and 2027. So if we can if we can keep those kinds of numbers going as we scale. Then I think you might even see a steeper ramp towards that very robust and healthy gross margins, but at the moment. If you look at Q1 definitely was a draw.

Speaker Change: On the overall gross margin of the business.

Speaker Change: Thanks, a lot I appreciate it.

Your next question is from the line of Sarah James from Cantor Fitzgerald. Please ask your question.

Gaby: Hey, everyone. This is gaby on for Sarah I had a quick question.

Gaby: That the that the government sector revenue was about 100 million, but it looks like guidance was taken down $115 million can you just talk about the delta between those two or is that just implied conservatism in the guidance.

Gaby: Yes, yes, the latter part of your statement is correct. It in fact, a couple of times in his in his comments earlier said that we're staying on the $2 25 for transport.

Gaby: We're sticking a $50 million of migrant 50 million for these carryout closure and peer to peer programs that that actually you know obviously as up to $3 25.

Gaby: As opposed to a range of 300 to 320, which would of.

Gaby: <unk> already which would which would put you at 315, so that that's really what it is we're just trying to be prudent and build something in the range of possibilities on all our business lines.

Speaker Change: Im more positive conversations from the positive 2026, and day rates and maybe the payers, having more flexibility to apply some of their services.

Speaker Change: Yes, so as it was mentioned that the municipal population health vertical yes that would be in addition going forward.

Speaker Change: Also into 2026 as well that's our that's our plan to report on that in addition to the revenue guidance, we're giving today and in the future. So that would be in addition to our EBITDA projections for next year.

Speaker Change: In terms of of the Payor and what's going on in the M&A market, we absolutely view that as a tailwind we're seeing that I think we've.

Speaker Change: We've had many many opportunities in our pipeline going back all the way to last year and we see the pipeline even over the last two weeks really heating up which we expected going into the back half Q3, and Q4 of this year, but we're seeing a tremendous demand for those services. So part of it is is it.

Speaker Change: Due to the macro factor of what's going on in the M&A market, but also a part of it is just we were getting more and more data and our pitch is just getting stronger and stronger because we are able to show the ROI, we're able to show the patient happiness, we're able to show the impact we're having we're able to show how many patients we've been able to close care gaps with.

Speaker Change: They're reporting back to their plans that they're happy with the service obviously, a patient satisfaction member satisfaction is a big component of the quality score for the M&A plans. So all of that is also also helping us as we scale not only do we.

Speaker Change: To make sure that the patients love It Love US and then we're really improving their health outcomes and once we're able to do all of that you know there's a tremendous opportunity ahead of us.

Speaker Change: Okay Awesome. Thank you guys.

Thanks Kathy.

Speaker Change: Yeah.

Speaker Change: Your last question is from the line of David Larsen from <unk>. Please ask your question.

Speaker Change: The expected impact on your fleet and the cost manage your fleet, but do you have any potential risk from tariffs on some of your metal medical equipment that you use and wearable devices in the home. Thank you.

Speaker Change: Okay. So I'll start with the with your question about the margin profile on the on the banker program.

Speaker Change: The margins on that program were about 34%.

Speaker Change: And it's pretty consistent actually it was 34% in Q4 for 34% again.

Speaker Change: Give or take in a few basis points in Q1. So when you look at it that way in the fourth quarter. Our gross margin for mobile health was 35, 9%. So technically the the rest of the other non migrant piece of mobile health was being driven at a higher margin here was the other way around so so the fact that the mixed <unk>.

Speaker Change: Moved away from migrating towards the other things such as the payer the payer and provider programs.

Speaker Change: That obviously brought down the margins so the mix brought it down but I would say you're right about 34% or so is the number that we're seeing from the micro market.

Speaker Change: You won't take careful on her.

Speaker Change: With regards to tariffs and exactly as you described I think the tariffs would be related to our fleet. Obviously the substantial fleet is almost 1000 vehicles in the fleet.

Speaker Change: The costs going forward or just maintaining the ones, we have and we're in a good position to be able to balance that so we have a relatively new fleet in general.

Speaker Change: And in addition, we have a wonderful and a dedicated fleet management team, that's able to keep our vehicles on the road and once a vehicle becomes more expensive to maintain that's when we procure a new one and so the tariffs may impact that that calculation, but.

Speaker Change: I'm confident that our team is doing a wonderful job maintaining the vehicles that we have we had already placed orders on the new fleet that we were going to procure for this year, which has been placed and priced and paid for so so I think we are in a good position, but obviously it could increase the prices.

Speaker Change: Some of the parts.

Speaker Change: Well, obviously, we drove $8 8 million miles last year, so that's oil changes and tires and brake pads and everything you can imagine that keeps that tremendous fleet on the road, but ultimately we look at the cost of maintaining the cost of procuring new ones, but like I said, we were forward thinking and we have great scale. So we.

Ben.

Speaker Change: Most of our orders that we were looking to procure we're already places here and then on the other hand fuel cost can go down I mean, they are currently running already a little bit below what we had projected and a little bit below where they were a year ago. So.

Speaker Change: I think the biggest impact is going to be the one that everybody faces, which is the general inflationary environment, but again, even within that inflationary environment oil prices will probably lower gas prices, therefore, it'll be lower.

Speaker Change: We have some leverage to that so that would be a net benefit to us.

Speaker Change: Great. Thank you.

There are no further questions at this time, so I'd like to turn the call over to Mr. Lee of Beanstalk for closing comments Sir. Please go ahead.

Speaker Change: Thank you and thank you all for joining us today be wealth.

Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.

Speaker Change: Oh.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

Q1 2025 DocGo Inc Earnings Call

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