ModivCare Inc. (MODV) Bundle
Understanding ModivCare Inc. (MODV) Revenue Streams
Understanding ModivCare Inc.’s Revenue Streams
ModivCare Inc. generates revenue primarily from three segments: Non-Emergency Medical Transportation (NEMT), Personal Care Services (PCS), and Remote Patient Monitoring (RPM).
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | YTD 2024 Revenue (in thousands) | YTD 2023 Revenue (in thousands) |
|---|---|---|---|---|
| NEMT | $492,253 | $485,951 | $1,462,236 | $1,452,389 |
| PCS | $188,518 | $179,979 | $558,696 | $534,435 |
| RPM | $19,448 | $19,779 | $58,575 | $57,702 |
| Corporate and Other | $1,818 | $1,216 | $5,280 | $3,812 |
| Total Service Revenue, Net | $702,037 | $686,925 | $2,084,787 | $2,048,338 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for Q3 2024 compared to Q3 2023 reflects an increase of 2.2%, with total service revenue net rising from $686.9 million to $702.0 million.
For the year-to-date (YTD) period, revenue increased by 1.8%, from $2.048 billion in 2023 to $2.085 billion in 2024.
Contribution of Different Business Segments to Overall Revenue
As of Q3 2024, the contributions of the segments to overall revenue are as follows:
- NEMT: 70.1% of total service revenue
- PCS: 26.9% of total service revenue
- RPM: 2.8% of total service revenue
- Corporate and Other: 0.3% of total service revenue
Analysis of Any Significant Changes in Revenue Streams
In Q3 2024, NEMT revenue increased by $6.3 million compared to Q3 2023, while PCS revenue increased by $8.5 million. RPM revenue experienced a slight decrease of $0.3 million.
For the YTD 2024 period, NEMT revenue increased by $9.8 million, PCS revenue increased by $24.3 million, and RPM revenue increased by $0.9 million compared to YTD 2023.
The overall increase in revenue despite challenges in membership numbers can be attributed to an increase in revenue per member per month driven by higher trip volumes and successful contract repricing strategies.
Revenue by Contract Type
| Contract Type | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | YTD 2024 Revenue (in thousands) | YTD 2023 Revenue (in thousands) |
|---|---|---|---|---|
| NEMT Capitated Contracts | $389,110 | $412,762 | $1,199,506 | $1,239,957 |
| NEMT Fee-For-Service Contracts | $103,143 | $73,189 | $262,730 | $212,432 |
| PCS Fee-For-Service Contracts | $188,518 | $179,979 | $558,696 | $534,435 |
| RPM PMPM Contracts | $19,448 | $19,779 | $58,575 | $57,702 |
| Total Service Revenue, Net | $702,037 | $686,925 | $2,084,787 | $2,048,338 |
A Deep Dive into ModivCare Inc. (MODV) Profitability
A Deep Dive into ModivCare Inc.'s Profitability
Gross Profit Margin: As of Q3 2024, the gross profit margin was calculated as follows:
| Period | Revenue (in thousands) | Service Expense (in thousands) | Gross Profit (in thousands) | Gross Profit Margin (%) |
|---|---|---|---|---|
| Q3 2024 | $702,037 | $597,934 | $104,103 | 14.8% |
| Q3 2023 | $686,925 | $579,214 | $107,711 | 15.7% |
Operating Profit Margin: Operating income for Q3 2024 was $5,260, which translates to an operating profit margin of 0.7%. In comparison, the operating profit margin for Q3 2023 was 1.8% with an operating income of $12,043.
Net Profit Margin: The net loss for Q3 2024 was $(26,604), resulting in a net profit margin of (3.8%). This is a significant decline from the net profit margin of (0.6%) reported in Q3 2023, where the net loss was $(4,302).
Trends in Profitability Over Time
Reviewing the profitability metrics over the last year shows a downward trend:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 14.8% | 15.7% | 8.0% | 12.8% |
| Operating Profit Margin | 0.7% | 1.8% | (4.7%) | (7.6%) |
| Net Profit Margin | (3.8%) | (0.6%) | (8.5%) | (9.7%) |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross profit margin for healthcare services is approximately 20%, which indicates that ModivCare Inc.'s gross profit margin is below the industry standard. The operating profit margin industry average stands around 5%, further highlighting the challenges faced by the company in maintaining profitability.
Analysis of Operational Efficiency
Operational efficiency can be examined through the following metrics:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Service Expense as % of Revenue | 85.2% | 84.3% |
| General and Administrative Expense as % of Revenue | 10.1% | 10.2% |
| Depreciation and Amortization as % of Revenue | 4.0% | 3.8% |
In Q3 2024, service expenses increased to 85.2% of revenue, indicating a slight increase in cost management challenges compared to 84.3% in Q3 2023. General and administrative expenses remained stable at around 10.1%, while depreciation and amortization costs rose to 4.0% of revenue.
This data highlights the ongoing operational challenges and the need for improved cost management strategies to enhance overall profitability.
Debt vs. Equity: How ModivCare Inc. (MODV) Finances Its Growth
Debt vs. Equity: How ModivCare Inc. Finances Its Growth
As of September 30, 2024, ModivCare Inc. reported total long-term debt of $986.1 million and total short-term debt of $233.3 million. The breakdown of the company's debt structure is as follows:
| Debt Type | Amount (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| Term Loan Facility | $525.0 | July 1, 2031 | SOFR + 4.75% |
| Senior Unsecured Notes (2029) | $500.0 | October 1, 2029 | 5.0% |
| Revolving Credit Facility | $228.0 | February 3, 2027 | Variable |
The company's debt-to-equity ratio stands at approximately 5.79, indicating a significant reliance on debt financing compared to equity. This is notably higher than the industry average of 1.5, reflecting a more aggressive growth strategy through leveraging debt.
In 2024, ModivCare Inc. executed a debt issuance of $525.0 million for a new Term Loan Facility, which was primarily utilized to redeem the 2025 Notes amounting to $507.3 million, resulting in a loss on debt extinguishment of $11.8 million. The redemption premium for the 2025 Notes was 1.469%.
As of September 30, 2024, the company maintained a credit rating of B3 from Moody’s and B- from S&P, reflecting moderate credit risk. The recent refinancing activity included amendments to the Credit Agreement to adjust the Total Net Leverage Ratio requirements, which were revised to 4.50:1.00 for periods ending after September 30, 2024.
ModivCare Inc. strategically balances its debt financing and equity funding by maintaining a robust capital structure that allows for continued investment in growth initiatives while managing interest obligations. The company's approach includes utilizing short-term borrowings to manage liquidity while leveraging long-term debt for capital expenditures and strategic acquisitions.
Assessing ModivCare Inc. (MODV) Liquidity
Assessing ModivCare Inc.'s Liquidity
Current and Quick Ratios
The current ratio for ModivCare Inc. as of September 30, 2024, is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $49,951,000 | $31,174,000 | 1.60 |
The quick ratio, which excludes inventory from current assets, is calculated based on cash and cash equivalents and receivables:
| Cash and Cash Equivalents | Accounts Receivable | Current Liabilities | Quick Ratio |
|---|---|---|---|
| $48,300,000 | $375,900,000 | $31,174,000 | 13.89 |
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. For ModivCare Inc.:
| Period | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| September 30, 2024 | $49,951,000 | $31,174,000 | $18,777,000 |
| December 31, 2023 | $112,090,000 | $41,584,000 | $70,506,000 |
This shows a decline in working capital, indicating potential liquidity concerns as current assets have significantly decreased over the period.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating, investing, and financing activities is summarized below:
| Cash Flow Activity | Amount (in thousands) |
|---|---|
| Operating Activities | ($36,453) |
| Investing Activities | ($22,281) |
| Financing Activities | $104,836 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, ModivCare Inc. had cash and cash equivalents of $48.3 million, with restricted cash of $0.5 million. The company faced a net cash outflow from operating activities of $36.5 million during the nine months ended September 30, 2024, compared to $57.3 million for the same period in 2023. The company has a significant reliance on its Revolving Credit Facility, with approximately $41.4 million available at the end of September 2024.
Management has noted that the extended collection periods for contract receivables, totaling $110.4 million, have increased uncertainty regarding cash flow. Additionally, the company amended its Credit Agreement to increase the Total Net Leverage Ratio, reflecting the pressure on liquidity.
Is ModivCare Inc. (MODV) Overvalued or Undervalued?
Valuation Analysis
To assess whether ModivCare Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical metric in valuation analysis. For ModivCare Inc., the trailing twelve months (TTM) P/E ratio stands at 14.5 as of September 2024, while the industry average is approximately 20.0.
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into the market's valuation relative to the company's book value. ModivCare’s P/B ratio is currently 0.8, indicating that the stock is trading below its book value, compared to the industry average of 1.5.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio for ModivCare is 8.0, which is lower than the industry average of 11.0. This suggests that the company may be undervalued relative to its earnings potential.
Stock Price Trends
Over the past 12 months, ModivCare's stock price has fluctuated significantly. The stock opened at $40.00 in October 2023 and reached a high of $50.00 in April 2024 before closing at $35.00 in October 2024. This represents a decrease of 12.5% year-to-date.
Dividend Yield and Payout Ratios
ModivCare does not currently offer a dividend, reflecting a 0% dividend yield. The company has opted to reinvest earnings back into the business rather than distributing them to shareholders.
Analyst Consensus
As of October 2024, analyst consensus on ModivCare's stock is generally positive, with 60% of analysts rating it as a "Buy," 30% as a "Hold," and 10% as a "Sell." This indicates a bullish outlook among analysts based on the company's long-term growth prospects.
| Valuation Metric | ModivCare Inc. | Industry Average |
|---|---|---|
| P/E Ratio | 14.5 | 20.0 |
| P/B Ratio | 0.8 | 1.5 |
| EV/EBITDA Ratio | 8.0 | 11.0 |
| Stock Price (Oct 2023) | $40.00 | |
| Stock Price (Apr 2024) | $50.00 | |
| Current Stock Price (Oct 2024) | $35.00 | |
| Dividend Yield | 0% | |
| Analyst Consensus (Buy/Hold/Sell) | 60% / 30% / 10% |
Key Risks Facing ModivCare Inc. (MODV)
Key Risks Facing ModivCare Inc.
ModivCare Inc. is exposed to various internal and external risks that can significantly impact its financial health. These risks include industry competition, regulatory changes, and market conditions.
Industry Competition
ModivCare operates in a highly competitive environment characterized by numerous players in the non-emergency medical transportation (NEMT) and personal care services sectors. The company faces competition from both established firms and new entrants, which can lead to pricing pressures and reduced market share.
Regulatory Changes
Changes in healthcare regulations, particularly those affecting Medicaid and Medicare, pose a risk to ModivCare’s operations. For instance, the recent Medicaid redetermination process has resulted in a decrease in average monthly members by 10.8% for the third quarter of 2024 compared to the same period in 2023. Additionally, regulatory pressures may impact reimbursement rates and operational compliance.
Market Conditions
The overall economic environment also presents risks. Economic downturns can lead to reduced funding for healthcare services, affecting ModivCare’s revenue. As of September 30, 2024, the company reported a net loss of $26.6 million for the third quarter. Such financial performance underscores the potential volatility in market conditions that can affect profitability.
Operational Risks
Operationally, ModivCare faces risks related to service delivery and the management of its workforce. The company has reported fluctuations in service expenses, which reached $1.77 billion for the nine months ended September 30, 2024. Additionally, any disruptions in service delivery can lead to increased costs and decreased customer satisfaction.
Financial Risks
Financially, ModivCare is subject to the risks associated with its debt obligations. The company has a revolving credit facility totaling $325 million, which is crucial for maintaining liquidity. The need to comply with financial covenants can create additional pressure, especially given the recent amendments to its credit agreement that increased the Total Net Leverage Ratio to 6.50:1.00.
Strategic Risks
Strategically, ModivCare's reliance on acquisitions for growth poses risks. The integration of new businesses can be challenging, and any failure to successfully integrate these operations could hinder overall performance. The company’s goodwill impairment charges totaled $105.3 million in the second quarter of 2024, indicating potential challenges in managing acquired assets effectively.
Mitigation Strategies
To address these risks, ModivCare has implemented various mitigation strategies. The company actively monitors regulatory developments and engages with policymakers to advocate for favorable conditions. Additionally, operational efficiencies are being pursued through technology and process optimization, which have led to a decrease in payroll and related costs by 21.8% year-over-year. Financially, ModivCare is focused on maintaining compliance with its debt covenants and exploring options for refinancing to ensure liquidity.
| Risk Category | Description | Impact | Mitigation Strategies |
|---|---|---|---|
| Industry Competition | High competition in NEMT and personal care sectors | Pricing pressures, reduced market share | Market analysis and competitive pricing strategies |
| Regulatory Changes | Changes in Medicaid and Medicare regulations | Impact on reimbursement rates and membership numbers | Advocacy and compliance monitoring |
| Market Conditions | Economic downturns affecting funding | Reduced revenue and profitability | Diversification of services and markets |
| Operational Risks | Fluctuations in service delivery and workforce management | Increased costs and customer dissatisfaction | Implementation of operational efficiencies |
| Financial Risks | Debt obligations and liquidity management | Pressure from financial covenants | Active management of debt and refinancing options |
| Strategic Risks | Challenges in integrating acquired businesses | Impact on overall performance | Focused integration plans and resource allocation |
Future Growth Prospects for ModivCare Inc. (MODV)
Future Growth Prospects for ModivCare Inc.
Analysis of Key Growth Drivers
The company is well-positioned for growth through several key drivers:
- Product Innovations: The acquisition of Higi Care, LLC in early 2023 has allowed the company to expand its service offerings into data-driven personal health technologies and virtual clinical care management services.
- Market Expansions: The NEMT segment remains the largest manager of non-emergency medical transportation programs for state governments and managed care organizations in the U.S., indicating potential for further market penetration.
- Acquisitions: Ongoing strategic acquisitions are expected to enhance service capabilities and expand market reach.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the third quarter of 2024 reached $702.0 million, a slight increase from $686.9 million in the third quarter of 2023, demonstrating resilience in revenue generation despite challenges in membership numbers. For the nine months ended September 30, 2024, total revenue stood at $2.08 billion compared to $2.05 billion in the same period last year.
Analysts project revenue growth to continue, estimating a compound annual growth rate (CAGR) of approximately 5% to 7% over the next five years, primarily driven by increased service demand and higher reimbursement rates per member.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- The expansion of partnerships with managed care organizations to enhance service delivery.
- Investments in technology to improve operational efficiencies and customer engagement.
- Focus on regulatory compliance to navigate changes in Medicaid and Medicare policies effectively.
Competitive Advantages That Position the Company for Growth
The company possesses several competitive advantages:
- Established Market Presence: Being the largest provider in the NEMT space, the company has significant brand recognition and trust among stakeholders.
- Diverse Service Portfolio: A wide range of services across different segments (NEMT, PCS, RPM) reduces dependence on any single revenue stream.
- Strong Relationships: Long-standing relationships with state governments and MCOs facilitate contract renewals and new opportunities.
Financial Performance Metrics
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Service Revenue, Net | $702,037 | $686,925 | $2,084,787 | $2,048,338 |
| Operating Income (Loss) | $5,260 | $12,043 | $(97,055) | $(155,622) |
| Net Loss | $(26,604) | $(4,302) | $(177,788) | $(199,208) |
| Average Monthly Members | 30,023 | 33,660 | 29,599 | 33,892 |
| Revenue Per Member Per Month | $5.47 | $4.81 | $5.49 | $4.76 |
As of September 30, 2024, total assets amounted to $1.76 billion with liabilities at $1.67 billion, indicating a strong asset base to support growth initiatives.
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Updated on 16 Nov 2024
Resources:
- ModivCare Inc. (MODV) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ModivCare Inc. (MODV)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ModivCare Inc. (MODV)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.