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spk03: We have arranged for replay of this call, which will be available approximately one hour after today's call on our website, motivecare.com. This morning, Dan Greenleaf will begin with opening remarks and provide an update on our mobility division, after which Jason Anderson will provide an update on our home division, followed by Heath Sampson, who will provide an update on the details of our financial results. Then we will open the call for questions. With that, I will turn the call over to Dan Greenleaf. Dan?
spk02: Thank you, Kevin. Good morning, everyone. On a consolidated basis, MotiveCare reported strong financial results in the first quarter of 2022, delivering 27% revenue growth, driven by contributions from our recent acquisitions and 17% growth from our NEMT segment, which generated 9% adjusted EBITDA margin this quarter. Consolidated adjusted EBITDA was $50 million in the first quarter, which was in line with our expectation. We continued to advance Our strategy, delivering quality access to care, reduced costs, and improved outcomes for the 32 million members or approximately 10% of the U.S. population that we serve. In terms of operational highlights, We are optimistic about what we are seeing on the labor front. We saw strength in personal care during the quarter as strong operating execution drove a significant positive impact in caregiver recruiting and growth in billable hours. Our recruitment and retention initiatives are driving significant levels of new applicants while reducing turnover and trending towards pre-pandemic levels. Our initiatives and process improvements are yielding successful trends in personal care labor are in line with the workforce improvements that we are driving in our contact centers for NEMT over the past year, which has seen historically low absenteeism and turnover levels. Care is moving into the home and mode of care, which includes personal care, remote monitoring, and meal delivery, now represents over 40% of our adjusted EBITDA in the first quarter. We are seeing strong support for in-home care from our states as demonstrated by the fact that we received reimbursement rate increases in each of our major personal care states for 2022. Overall, we are encouraged by the trends we saw during the first quarter as we strategically transform our business to enhance our members' experience. We recently announced the formal operating and management structure of our two primary business divisions. Motive Care Home, led by Jason Anderson as president, consists of our personal care, remote patient monitoring, and meal services. while Motive Care Mobility includes our non-emergency medical transportation or NEMT services. We were pleased to recently appoint Elias Simpson as president of our mobility division, which furthers our commitment to our foundational NEMT services. Elias brings a significant background in advanced technology, logistics, and transportation, most recently serving as president and CEO at Radial. as well as leadership positions at Rider System, Pentair, and Syntos. Our transformation has touched every facet of our business, as we also recently announced the alignment of our sales and account management teams under our new Chief Commercial Officer, Brett Hickman. One aspect that attracted us to Brett is his payer background, including executive leadership roles at Optum and ProVenture, a subsidiary of Aetna. Brett's leadership is and experience will be integral for our commercial strategy to cross-sell our integrated platform of supportive care solutions while driving organic revenue growth from our existing customer and payer basis. Drawing from our multi-decade customer relationships, we continue to collaborate with health plans to provide enhanced experience for the members we serve. We are making progress on our value-based care and social determinants of health initiatives to deliver the full breadth of our platform and accelerate our vision to drive positive health outcomes by transforming the way we connect members to care. To this point, we are in the final stages of a value-based care pilot agreement with a national payer where we intend to demonstrate our ability to seamlessly deliver care across all our solutions while enhancing the member experience, reducing costs, and improving outcomes. As a reminder, our total addressable market opportunity across ModaPair is over $90 billion today and growing. As we transform our business, we expect much of our growth opportunities will come from care moving into the home, while NEMT will also continue to generate strong growth as payers see the value of this benefit. Our home business is growing organically through accelerated caregiver recruiting initiatives in existing markets, as well as de novo openings, increasing scale and density. We expect sales growth for home to accelerate through care coordination and our cross-selling efforts as case managers are a common referral source across our home service offerings. We also expect strong growth from our NEMT business, as this market benefits from continued growth in Medicaid, accelerating growth in Medicare Advantage enrollment, coupled with more plans offering transportation as a supplemental benefit. We are executing on our aggressive sales plan and expect to generate $500 million of new sales over the next three years. I'd like to now provide an update on our mobility division and some of its strategic initiatives. NEMT is a vital lifeline for the members we serve and a necessary component to navigating the healthcare system and connecting them to care, resulting in better member experience, reduced costs, and improved outcomes. As I shared last quarter, we are focused on driving several key NEMT priorities in 2022. centered around an enhanced and more consistent member-centric experience while expanding access to care. These priorities include, first, delivering a standardized experience through a coordinated care model. We are dedicated to the transformation of our mobility solutions by the most appropriate, accessible, and most cost-effective solutions based on the individual member needs. We are aligning our service offerings to make technology solutions available when our members want it, while ensuring access to knowledgeable care coordinators who will find the most appropriate mobility solution for the member. Our transformation to a more member-centric model not only improves the experience through easy-to-use technology or improved telephonic resolution, it significantly reduces costs by one to five times. Two salient examples include mass transit and mileage reimbursement, both of which enable the member to easily schedule or modify appointments. In the case of mass transit, members can even use the transit pass for personal reasons. Our second priority is transforming our relationships with transportation providers, or TPs, to create a greater sense of partnership. We are deeply committed developing and supporting community-based owners of transportation provider companies, and have made progress in establishing programs that will foster a greater connection between us and our best-performing TPs. In order to improve network performance, drive down costs, and enhance our members' experience, Our initial focus has been on initiatives such as Motive Care Academy, which empowers community-based providers, specifically minority and women-owned businesses with education training resources, and our Transportation Provider Advisory Council, which is composed of TPs representative of the communities we serve and addresses feedback on issues impacting the broader network. Additionally, we have formalized a dedicated champion program that uses technology and analytics to identify our high performing TPs and matches them to specific member needs. Since a quarter of our TPs generate 80% of our rides, the Champion program is expected to drive greater volume, predictability, and consistency for TPs, leading to enhanced quality and experience for members, especially for the high trip utilizers, such as those members who use our NEMT services multiple times each week to access dialysis appointments, for example. Our third priority is modernizing and automating our NEMT platform. We are committed to delivering a best-in-class experience that meets our members where they are. We have made significant investments in optimizing operations and automating processes, including a nearly $100 million investment into modernizing our technology platform. We are reducing tech debt while driving business process improvements in the areas of our contact centers, business process outsourcing, and digitization of our network to efficiently scale our business, enable our transportation providers, and make accessing the care easier and more efficient for our members. We expect these process improvements in technology investments will enable us to further scale and consistently produce margins in the 9% to 10% range. With that, I'd like to have Jason Anderson, President of our Home Division, provide some comments. Jason?
spk06: Thank you, Dan. I'd like to provide an update on our Home Division, specifically around our strategic initiatives for remote patient monitoring, personal care, and meals businesses. We believe that mode of care is well positioned as the future of healthcare accelerates into the home. As I shared last quarter, we are focused on driving several key priorities in 2022. First, we are augmenting our caregiver recruiting initiatives to increase supply. Demand for personal care services continues to accelerate, and we are seeing improvement in our ability to meet this demand through increased caregiver recruiting. We centralized talent acquisition activities during the quarter, which provides our local community-based recruiting teams with necessary support and tools. Our caregiver retention efforts are also making an impact, as we have several innovative strategies that are taking hold, including comprehensive caregiver total rewards and engagement initiatives. We are encouraged by these initiatives and expect to see continued improvements in caregiver recruiting and retention as well as growth in billable hours over the next several quarters. Second, we are focused on integrating our businesses and offerings across the home division. During the first quarter, we continued to drive integration efforts of the home division into mode of care shared services. We aligned the home organizational structure and leadership team, enabling us to better support growth and operational improvements. We continue to execute on our plan to integrate the functional elements of the business, including finance, accounting, human resources, benefits, insurance, tech platforms, and communications. These integration efforts also allow us to better align our organization to serve case managers, as well as provide coordinated care across our service offerings. Third, we are focused on organic growth while also evaluating a robust pipeline of inorganic growth opportunities. We see a significant opportunity to support homes' continued expansion and augment growth through continued organic and inorganic growth initiatives. During the quarter, we continued to execute on our plan to open de novo locations, leveraging our market experience and infrastructure. From an M&A perspective, we continue to evaluate opportunities to further our scale in existing markets and enter new markets. Turning to meals, we are excited about long-term growth prospects for this business, as well as the benefits it provides to our members and payers. Like remote patient monitoring, meals have similar dynamics with regards to contracting lead times, compliance, and operational requirements. We feel well-equipped to organically build out a meaningful meals business over time. For 2022, we expect an immaterial contribution to revenue and EBITDA as we focus on providing a best-in-class offering that we can rapidly scale in the future. Turning to RPM, we continue to grow our E3 or Engage, Educate, and Empower solution to enhance the member experience, improve outcomes for select populations, and broaden our ability to serve members more holistically. E3 is our proprietary solution which dynamically identifies member needs and provides tailored education to ultimately drive meaningful outcomes such as gap closure and medical cost avoidance. Across our sales pipeline, we have seen more than a 50% shift in our pipeline of opportunities that have E3 in them since the beginning of the year. In summary, MotiveCare's home offerings will play an integral role in the company's broader supportive care platform and vision to deliver value-based care for our customers and members, improving outcomes and better serving the health needs of our members, whatever they are. With that, I would like to turn the call over to Heath Sampson, our Chief Financial Officer, who will discuss our financial results. Heath?
spk10: Thanks, Jason, and good morning. Our first quarter net service revenue of $574 million reflected growth of 27% compared to the prior year period, while net income from continuing operations was $300,000 or 2 cents per share. Adjusted net income for the first quarter was $22 million or $1.57 per diluted share. And adjusted EBITDA was $50 million or 9% of revenues. To provide more transparency into our business and the operating performance of our segments, we broke out our corporate general and administrative expenses separately. The reorganization primarily affects the general and administrative expenses of our NEMT segment, which is where these corporate costs were previously presented. And the company reclassified certain costs associated with the reorganization for Q1 2021. I'll now review our business segment financial performance. Starting with our non-emergency medical transportation, or NEMT segment, first quarter NEMT revenue increased approximately 17% year over year to $401 million, driven by a 6% increase in total members and a 10% increase in revenue due to higher trip volume. Service expense for the NEMT segment, which includes all direct costs, increased 22% year-over-year in the first quarter of 2022 to $332 million. The increase was driven by higher service costs associated with a 7% increase in trip volume, as well as a 13% increase in service expense per trip. On a sequential basis, service expense per trip increased 4% from the fourth quarter of 2021, driven by expected inflationary pressures and investments we made in our transportation network. which help drive improved service levels. We saw improvements in service expense per trip throughout the quarter as trip costs in March were only slightly higher than where we exited the fourth quarter of 2021. We expect to see a decline in these transportation costs going forward as we execute on our multimodal and preferred provider operating strategy. NEMT segment net income from continuing operations was $18 million in the first quarter of 2022, while NEMT adjusted to EBITDA was $37 million compared to $47 million in the first quarter of 2021. The year-over-year decrease was driven by a $7 million increase in adjusted G&A expense, primarily due to investments in technology and a $2 million decline in gross profit dollars due to higher transportation costs noted earlier. As a reminder, adjusted EBITDA for both periods reflected the updated G&A allocation between the NEMT segment and the new corporate segment. Adjusted EBITDA margin for NEMT segment was 9.3% in the first quarter of 2022. Turning to our personal care segment, revenue in the first quarter of 2022 was $160 million compared to $110 million in the first quarter of 21. The increase was primarily driven by $44 million of incremental revenue from the Carefinders acquisition, which closed in September 2021. On a sequential basis, revenue increased 2% quarter-over-quarter. Revenue per hour increased 7% sequentially, as we benefited from higher reimbursement rates across all major markets. Total hours in the first quarter declined 5% sequentially, due to the negative impact of the Omicron variant early in the quarter. However, we have seen consistent improvement in weekly hour trends since February, driven by increased caregiver headcounts, as Jason mentioned earlier. Personal care service expense per hour, which primarily represents caregiver wage expense, increased 4% sequentially during the first quarter. As we have appropriately increased wages, enabled by the reimbursement rate increases, to reduce overtime and improve caregiver hiring. Personal care segment net income from continuing operations was $2 million in the first quarter of 2022, compared to net income of $4 million from the prior year period. The decrease was primarily due to the care finder's acquisition and tangible asset amortization. Segment adjusted EBITDA was $17 million in the first quarter of 2022, compared to $9 million in the prior year period. Adjusted EBITDA margins increased to 10.4% in the first quarter compared to 8.2% in the prior year period. On a sequential basis, adjusted EBITDA increased 27% driven by the favorable reimbursement trends and improved overtime rates, which outpaced the increase in service expense per hour. The corporate realignment had a minor impact to adjusted EBITDA in the current and prior periods. Moving on to our remote patient monitoring or RPM segment. Revenue in the first quarter of 22 was $14 million. On a comparable basis, first quarter revenue was relatively flat compared to the first quarter of 2021 prior to our ownership, driven by increased active clients partially offset by lower revenue per member due to providing unit price discounts in exchange for national exclusivity provided by a large Medicare Advantage payer. RPM segment net loss from continuing operations, driven by acquisition in tangible asset amortization, was $200,000 in the first quarter. Adjusted EBITDA was $5 million in the first quarter, and adjusted EBITDA margins were, as expected, at 33%. Consolidated cash flow from operations in the first quarter of 22 was $69 million. During the first quarter of 2022, cash flow from operations was favorably impacted by $34 million from higher contracts payable, primarily driven by a few of our large state and EMT contracts. We continue to expect to pay or settle roughly $100 to $150 million of these contract payables over the next two quarters. With that said, the actual timing of these payments could be delayed until later in the year. We expect the remainder of these contracts payables to be paid over the next few years. We ended the first quarter of 2022 in a strong financial position with $194 million of cash and cash equivalents. As a reminder, in February 2022, we refinanced our prior revolving credit facility with a new $325 million revolving credit facility, which remains undrawn. Our consolidated pro forma net leverage declined sequentially to 3.6 times as of March 31, 2022, compared to 3.7 times as of December 31, 2021. Shifting to capital allocation. We take a disciplined and balanced approach to our capital allocation strategy. We continue to build and evaluate a robust pipeline of M&A. When appropriate, we expect to make additional acquisitions that will drive shareholder value while maintaining a strong balance sheet. As mentioned earlier, we remain focused on integrating our recent acquisitions and optimizing our processes and systems. Although our leverage is higher than the three times target, we remain committed to returning to that target. Lastly, I'd like to briefly share our thoughts on our long-term expectations for our business segments. We continue to target NEMT revenue growth in the mid-single digits, and we are raising our target for the NEMT adjusted EBITDA margins to 9% and 12% compared to our prior target of 7% to 10%, due entirely to the corporate realignment discussed previously. Our normalized long-term target for our personal care segment includes revenue growth in the high single digits with adjusted EBITDA margins between 10% and 12%. Lastly, our long-term target for remote patient monitoring is revenue growth in the mid-teens with adjusted EBITDA margins in the mid-30% range. Looking to the second quarter of 2022, we expect that consolidated adjusted EBITDA will be roughly flat sequentially compared to the first quarter of 2022. As expected improvement in hours for personal care are expected to be offset by higher trip volume for NEMT. Overall, we remain very excited about our long-term outlook and the tailwinds for our business as we execute on our strategy to be the leading integrated supportive care provider in the nation. We are setting the foundation for our platform to generate strong growth over the long term as we provide the full breadth of services to our members, state, and payer partners. This concludes our prepared remarks. With that, operator, please open the call for questions.
spk01: Thank you. We'll now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first question comes from the line of Bob Labic with CJS Securities. Please proceed with your question.
spk04: Good morning. Thanks for taking my questions. Congratulations on a nice quarter.
spk02: Thank you, Bob.
spk04: I just wanted to start. Obviously, we've done a ton of work. You guys keep us super busy. And you talked about this a little bit. Maybe talk a little more about the transportation provider network and the build-out and the partnership approach. Where is the network now versus where you want it to be and kind of maybe even where it was pre-COVID or if it's changing enough that that's not relevant, then, you know, don't worry about that. But, like, where is it versus where you want it to be? How long will it take to build out to – you know, what you expect to be kind of the best in class and best opportunity where you have it, where you want it.
spk10: Yeah, hey, good morning. So from a process of, like we said last quarter, we have built the network. We had a blitz of adding providers, and we've done a good job doing that. So, but that's primarily been under the traditional way. So this transformation to where we have more preferred providers or AKA partnership, we're really at the beginning stages of that. And that will take us, you know, we get better and better each month and each quarter. So right now we're fine from a standpoint of our traditional way of adding transportation providers and really at the beginning of this partnership model. what this partnership model will do is it allows us to ensure we get consistent performance and then we also enable that these transportation providers actually get consistent volume and that will enable us really to one get quality but also bring down the cost so worry we have done a good job in a traditional way and we're at the beginning stages of this partnership transformation okay great that's helpful and then
spk04: Kind of, I guess, similar question looking at personal care. Obviously, very strong improvement in gross margins there. And you touched on these. Maybe talk a little bit more about how much was a function of reduced overtime versus, you know, just better recruitment, you know, and then versus reimbursement and where you stand in the reimbursement, how the states are treating this, and where do you think that goes going forward?
spk02: Yeah, so thank you, Bob. I will say this, that historically, overtime was in the kind of 10 percentage range. And during COVID, it got to as high as 21%. Currently, we are at about 16%. We set a target for the year to be back at 15%. And we've almost reached that in the first quarter. So we think that's That's extremely promising. As it relates to reimbursement, we are 7% above where we were in the fourth quarter of last year. So the reimbursement trends are incredibly favorable for us, Bob. And then lastly, as it relates to just hours and how the business is performing, on a weekly basis, we're around 520,000 hours. And we're getting back to levels that... that were as high as we saw during COVID. So if we saw a spike in a month, we're seeing that now. And we're seeing that very consistently. And we're seeing it in months that historically have been slower. on a kind of seasonality basis. So we feel, again, we feel really good, Bob. Reimbursements up 7% quarter over quarter. Hours are up significantly. And overtime is coming down, which obviously improves the margin as well.
spk04: Okay, super. I'll follow instructions and get back in queue. Thank you.
spk01: Thank you. Our next question comes from the line of Brian Tankillet with Jefferies. Please proceed with your question.
spk05: Hey, good morning, guys. Congrats on the quarter. I guess my first question, just, hey, good morning. Yeah, my first question, just on the margins, you know, as I look specifically at the NEMT business, you know, it looks very strong. So any comments you can make? You know, one of the questions that we get asked is just utilization. So obviously the things like, it looks like broader healthcare utilization is starting to normalize. So just curious in how you're seeing that play out with the margin side. And then, you know, kind of like related to that is the, your ability to pass on fuel increases to the payers and vice versa, like your transport partners to you guys, just any color you can share with us on that one.
spk10: Yeah, so first on the margin side, you're correct. We are strong. One of the things that you noticed that we did, and we've been saying this for a while, that NEMT was inappropriately burdened with a lot of the corporate costs that we've had. Dan and I salary, right? Why would NEMT get completely burdened for that? So we appropriately but conservatively took those costs out to make sure that each segment was appropriately allocated to. So that's why we feel really good about where we are from a margin perspective. And then with the utilization, how's the membership going? Actually, trip volume continues to... INCREASE MARGINALLY ON A CONSISTENT BASIS. SO THAT'S HAPPENING. UTILIZATION IS ABOUT FLAT BECAUSE, AGAIN, MEMBERSHIP'S UP A LITTLE BIT HIGHER. BUT THAT IS THE AVERAGE. IN CERTAIN STATES, IT'S APPROACHING. or even exceeding what it was pre-pandemic. So it depends on the state, but in general for us, an average is as expected, what we've said before, but about 70 to 75% of pre-pandemic levels are where we expect it to be. And again, we expect that to continue for the rest of the year. That's what we're planning for at a consistent basis over the rest of the year.
spk02: Another thing worth noting too, Brian, we're at 32 million members too. So we are doing more rides because of just the sheer number of members we have now.
spk05: Got it. And then on the RPM side, you mentioned the national exclusive contract. So just curious how you're thinking about the ramp and that and what the dynamics are in terms of the payer giving you the lives. Just curious how that works out.
spk10: Well, now I'll let Jason add some color here too. So the wonderful thing about RPM just in general, and this just happened really recently, last year um that we've able to get these national contracts and it really is stemming from not just the normal remote monitoring but it's also to do with the e3 technology so that's enabled us for the first time to get this national these national contracts so start with one large pair we're in many discussions with getting more of those so i expect that trend to continue As we move through the months and quarters. So, again, that that that depresses the short term a little bit in the margin, but far outweighs. Within the next few and we'll make that back in 9 to 12 months and exceed that. So. Really excited about that new offering around engaging with the members. And I expect that to continue with all our large payers to get these national hunting licenses.
spk05: I don't know, Jason, anything more? No, I think you stated it well, Heath.
spk06: Certainly being able to offer multiple solutions across the different segments is of significant interest to the large payers, and we're seeing our sales pipeline fill up with many of those opportunities at this time. Gotcha. All right. Thanks, guys. Thanks, Brian.
spk01: Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question.
spk09: Hey, good morning, guys. Nice quarter. Thanks for taking my questions. I know that you guys don't provide guidance, and you talked about the 2Q EBITDA being flat sequentially. Are you comfortable sort of looking at where you are sort of into May with the street estimates of the back half ramp for 2022?
spk10: Yeah, you know, you guys have done a great job at understanding us and what you've done for next quarter and even through the Q3 and Q4. I'm very comfortable with where everybody is and us meeting those expectations.
spk09: Okay, fair enough. Personal care has a lot of moving pieces, sort of looking at the year-over-year data that you provided in the press release, sort of with all the deals. You did talk about the wages increasing as reimburses were increased. So just for two questions, do you think that the current wage levels are impacting your revenues? I'm just curious how the first quarter revenues were in line versus your estimates. And how should we think about gross margin sort of throughout the year? Should we use first quarter as a baseline for the rest of the year?
spk10: Yeah, so I'll kind of tag on to what Dan said a little bit earlier. This may help give context. So what drives this business, of course, is getting people back to work, right? And where we are, we're higher than really are from the early part of 2020. But we're not back to pre-pandemic levels. So that's a good thing. We've started that path. And to get back to pre-pandemic levels, we think it's very reasonable just from a... normal market. And then with our plan and our execution that we're going to be putting in place, we think we can exceed those. So that's where we are in the journey from getting hours back. So from a revenue perspective, I think within the estimates in the street, we're a little bit lower than that, but not concerned about that. I think really where we are is the beginning phases since February to see hours come back. And then from a margin perspective, we're ahead of where you guys are. And why we're ahead of that is because the reimbursement rates that we're getting from our states, primarily our big three states. So you put it all together, revenue kind of what we thought, margin even better in an early perspective. And, again, I think we're going to continue this journey, and I expect us to get better and better each quarter and potentially even beat what you guys all say for the rest of the year.
spk09: Okay. So let me sort of, you know, sticking to personal care on the G&A side, just from a margin perspective, you know, there's been a lot of sort of investments, sort of a lot of things happening there, I guess. How should we be thinking about the fixed cost nature of sort of G&A using first quarter as a baseline? How should we think about sort of that margin leverage on the G&A side sort of ramping throughout the year? Thanks so much.
spk10: For personal care specifically, Peter?
spk09: Yep, for personal care.
spk10: Yeah, so we're at that 10-plus margin. I expect that G&A to stay that way and margin to improve. So where we are on the G&A side is where we're going to be for the rest of the year on the really across the business, but really specifically in personal care.
spk09: Is that in the middle of our perspective or percent of revenue perspective?
spk10: Dollar perspective.
spk09: Got it. Perfect. Thanks.
spk01: Thank you. Our next question comes from the line of Brooks O'Neill with Lake Street Capital Markets. Please proceed with your question.
spk08: Good morning, guys. I'm going to try to stick to the two questions requirement, but I do have two parts that are related to the first question. That is, I think Brian was asking, how does higher utilization impact the profitability of the NEMT business? And I know there's a lot of moving parts in the NEMT business, but just curious how that utilization piece affects the profitability of the business as you see it? And the related question is, I'm totally confused about what the contract payables are and what that relates to and what that really is. If you could help me to understand that, that would be great.
spk10: Yeah. Back to the utilization, again, we've been saying this for every quarter. We know with the way our contract mixes, we have a lot of capitated contracts, which are great because they're good for us. They're good for our customers, strong margin. And our margin was higher in the middle of COVID and higher in 2021 because of utilization being down. So we've expected utilization to come up and, therefore, those margins to be more normalized. So that is happening. So utilization's been going up, and their margins are where they are. So we're as expected there. You know, the range that we historically gave was that 7% to 10%. Now we're 9% to 12% because of the appropriate allocation. So we're still very comfortable with that range as we get back to full utilization. So that's the utilization of that kind of question. What was your second question? Yeah.
spk08: The contract's payable.
spk10: Yeah. So, again, for a number of our contracts, primarily with a few of our larger states, they pay us on a per-member, per-month way. But then the way these are structured, a portion of that gets put on the balance sheet. And that's what's happening. So a big chunk of what we're getting paid, hey, let's put that on the balance sheet because maybe if utilization or costs go high, you'll have to pay that back.
spk07: Okay.
spk10: Then in general, if we don't, the way they're currently structured, some in three months, some in six months, some a little bit longer than that, when it hits that target, we'll have to pay it back regardless. So, again, the right way to think about it, again, we've said this before, from a P&L perspective, we're flat. But then our contract payable may increase or decrease based on where we are with that contract life. So you're seeing it go up a little bit because that's where we are from a utilization perspective with those specific contracts. So that's typical. It's been like that since the beginning, and it's still the same this quarter.
spk08: I get all that, and I really appreciate that, Collin. Just one tiny little follow-up on that is if I'm understanding it, it won't have any P&L impact, but it could take some cash off the balance sheet. Is that the right way to think about it?
spk10: Yeah, no, absolutely. So the P&L, again, you're right. We don't see that variability, but we do see it on the contract payable side. And then as disclosed, we still expect to pay 100 to 150 million of that over the next couple of years. I've been saying that, and we still expect that to happen.
spk08: Yeah, that's great. I totally appreciate all that, Clark. Last question is, I'm hoping Jason could just explain a little bit more about the case manager focus on the home side of the business and I obviously don't have a great deal of insight into how the payers manage the business and structure it, but if he could just explain how they're structured and why that case manager focus really works for you guys, it would be fantastic.
spk06: Yeah, happy to answer that. So with PERS, with meals and personal care, you become an approved provider on lists. And so a case manager is able to refer for those services to any of the approved vendors or businesses on that list. So where the importance comes in of actually focusing on the case manager and having a relationship with them and quote unquote marketing to them is so that they understand the services and how you're different from other approved providers and so that they give you that referral when one of their members needs the service. So that's really where the importance comes in, particularly as a turnover in caregivers, I mean, in the case managers, and also because as we enter new markets or as some other providers exit the markets in different services we offer, you need to make sure you're in front of them and you're explaining why your service impacts their members.
spk02: I think about it as kind of a one-stop shop. You know, if instead of, you know, They've got 10 choices in personal care companies. They've got five choices in meal companies. They've got three choices in remote monitoring. They can really do one-stop shopping with us. Now, they have to get member choice, so I don't want to rule that out. But, you know, one of the things we know with case managers is oftentimes they've got more on their plate than they can handle, and they're looking for a way to facilitate services. And one call is a lot better way to facilitate services than three, for example.
spk08: Yep. Makes total sense. Thanks a lot for all the color. Congratulations on the great progress.
spk02: Thank you very much, Brooks. Hope you're feeling okay. You sound a little tired there, pal.
spk01: Thank you. Once again, as a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Mike Petesky with Barrington Research. Please proceed with your question.
spk07: Brooks is fine. I'm tired. All right. So, Dan, on the 500 million of new sales that you're hopeful for on the transportation business, I'm just wondering sort of How much in sales are you guys sort of in the hunt for currently on contracts that could be decided, you know, in the next three months, six months, 12 months? I mean, how much are you actually sort of in the hunt for right now? And any color you can give on, you know, specific contracts, sizes, and timing of decisions to the best of your ability would be fantastic. Thanks.
spk10: Yeah, so the $500 million is not just – A guess on market size. It's a bottoms-up analysis based on our current states that we have, our current market share with our large payers. What is coming up for bid from our competitors? So it is a detailed understanding of the market, which is why we chose that $500 million.
spk07: How sizable is that last piece, what's coming up for bid with contracts that are owned by competitors?
spk10: There is a lot that's coming up for bid. has already been submitted for bid. I know we've talked about a few states that we have bid right now, and we actually expected to hear earlier, but actually just with where these states are in COVID, they're just taking longer to get back to us. So again, we expected actually a month ago that we'd hear back from these specifically coupled states, which are large states. I do expect that to happen in these next couple weeks or months as well. So a significant component that we will hear about this year that will drive our EBIT up anywhere from... $10 to $20 million. Again, that would not have, they would not come on until 2023. I just wanted to be clear with that, but we'll know about it this year. And then there's a couple ones that come up from our competitors in states in the latter part of this year, and maybe we'll know about them this year or early part of next year. So significant volume, primarily on the state side. And then on the MCO or payer side, all those contracts are evergreen. So we're in contact with specifically the big six a lot right now. So those could come pretty quickly from a standpoint of wins. But again, that volume wouldn't come on until 2023. I can tell you with... Outside of, we're not more than 50, 60% of the volume with all our large pairs, and we are in discussion with our large pairs to get more of that. Because for them, and we've said this before, specifically around transportation, member experience, member experience is a top priority. especially when you move into the MA side. It is a top priority for them because they compete daily on that. And literally, we're in discussions to get all that share. So long story, this year is really important for us to win deals that will start coming on in 23 and 24 and beyond. There's a lot of movement happening. And again, I look forward to announcing those when they...
spk02: I also want to point out, too, Mike, we've aligned now our commercial operations for the first time under Brett Hickman. Brett comes to us. He was at Citiblock most recently, but held senior roles at both Optum and Aetna. And we put both the sales function and account management underneath him. And And we've also promoted someone by the name of Seth Ravine. He was with Jason's group to head up sales. And we've got Mark Misplay running account management. And we're just, I guess we are really well positioned. And, you know, we've got data scientists working with us now to really, really look at the data and uncover opportunities for us and our plans. And we're in a really unique position right now is what I would say.
spk07: Okay, great. I'm assuming one of the contracts that you're alluding to is New York, and I guess that could be decided soon or was expected to be decided already. Can you just talk about possibly the total size of that contract and what percentage of that are you actually going after?
spk10: Yeah, so you're right, and that's public information. New York is out there. All the states, actually, are public information. So, yeah, New York is one of them. You know, the way to think about New York is about $800-ish million in revenue that would be available out there. And likely what they're going to do is split that in two. And then you can do your bottom line on that from an EBITDA perspective. So likely splitting that in two, and hopefully we're one of the groups to get half of that contract. But the way to think about that should be on the margin perspective. That's the right way to think about it because the way it comes on, it may not be top line. Think about it as bottom line. We're not sure how they final structure this, but that's the magnitude.
spk07: Right. Because of the size of that, I'm assuming maybe the margins would be below company average. Is that fair?
spk10: Yeah. That's the right way to think about it. Yeah. But you can see $400 million even at a 10% or somewhere between 7% and 10%-ish is the right way to think about it. Okay.
spk07: Absolutely. Absolutely. And I just want to sort of clarify on the earlier question around contract payables. So if you expect $100 to $150 million of sort of, I think I'm hearing, payouts over the next two quarters, I mean, would you expect sort of leverage to remain at this level by the end of the year or maybe even go up a little bit on a net basis by the end of the year? How should we be thinking about sort of net leverage, you know, at December 31st.
spk10: Yeah, so just in the short term, right, if we pay that off, leverage is going to go up, right? But because of the profile of our EBITDA being cash, it allows us to deliver quickly. So short term, if we pay it, leverage goes up. The latter part of this year, we'll start bringing leverage down. But in general, if we pay off the $100 25, taking the average, it would be a little bit higher by year end for us from where we are now.
spk07: Okay. Can I sneak one last one in?
spk00: Sure.
spk07: Fire away. Okay. I just want to make sure I understand on the national relationship in remote monitoring. So, you know, you went sequentially from, like, 16 to 13 and change in terms of revs. Do you expect to be back at that 16 over the next, was that the statement that was over the next nine to 12 months that you expect to be back at that revenue run rate? Or what was the actual statement that was attached to nine to 12 months?
spk10: Yeah, so the investments that we have made in giving a price discount to this large pair to get the national hunting license, we'll make that up on total dollars over the next nine to 12 months. That's what I meant. And actually start exceeding that. In the short term, obviously it hurts us because we're taking down the price, which is what you're seeing in the numbers now. But again, that investment makes a ton of sense because within nine to 12 months we'll well exceed the raw dollars on that.
spk07: Okay, terrific. Thank you so much, guys. Thank you, Mike.
spk01: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Greenlee for any closing remarks.
spk02: Yeah, I think to sum things up and to provide a quick recap, again, I just want to say how excited we are about where we are, how we position the company, the transformation that's been going on, and, you know, frankly, how well positioned we are with our customers. And whether that be members, whether that be transportation partners, or whether that be payers and states, we're just very well positioned, better positioned than we ever have been, at least since I've been here. So with that being said, first, labor trends are improving across all of our businesses, and we're seeing strong evidence in our personal care segment as hiring and paychecks are increasing. and overtime is decreasing. And I think we also mentioned about the reimbursement increases as well, being up 7% quarter of a quarter. Second, the US healthcare system is under pressure, which is why care is moving into the home. And we are uniquely positioned to benefit from these significant tailwinds due to the platform of our services. Third, as a service provider of 32 million members, about 10% of the US population Our NEMT business enables us to cross-sell our other supportive care services, which address the social determinants of health. Fourth, we continue to leverage our platform and are investing nearly $100 million on technology and other initiatives, which will further differentiate Motive Care from its competition. Motive Care has undergone a massive transformation over the last couple of years, and as I stated earlier, I couldn't be more excited about and the members we serve. I also want to give a shout out to Cali All. Cali has been a partner of ours, of mine for the last two companies, has just done an incredible job. And with the hiring of Kevin Elitch, Cali, over the course of the next couple months, will not be participating at the level he has historically. But again, he's been a great partner to me and to our organization. I just want to thank him. And thank you all for participating on our call this morning. If you are interested in scheduling a follow-up call, please reach out to Kevin Elich, our new head of investor relations. In addition, we will host our inaugural investor day on June 24th in Denver. So I hope you all can try to make that. I think it should be an outstanding opportunity to interact with the organization and also to allow us to share all the great things we have coming down the road. And more information about this event will follow soon. Again, thank you again, and have a great day.
spk01: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
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