ModivCare Inc.

Good morning and welcome to MotiveCare's fourth quarter and full year 2022 financial results conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. Please note that this conference is being recorded. I will now turn the call over to Kevin Ellis, Head of Investor Relations. Thank you. Please go ahead.

Good morning, and thank you for joining MotiveCare's fourth quarter and full year 2022 earnings conference call and webcast. Joining me today is Heath Sampson, MotiveCare's president, chief executive officer, and chief financial officer, Ken Shepherd, CFO of Mobility, and Scott Kern, CFO of Home. Before we get started, I want to remind everyone that during today's call, management will make forward-looking statements under the Private Securities Litigation Reform Act. These statements involve risks, uncertainties, and other factors that may cause actual results or events to differ materially from expectations. Information regarding these factors is contained in today's press release and in the company's filings with the SEC. We will also discuss non-GAAP financial measures to provide additional information to investors. A definition of these non-GAAP financial measures and to the extent applicable A RECONCILIATION TO THEIR MOST DIRECTLY COMPARABLE GAP FINANCIAL MEASURES IS INCLUDED IN OUR PRESS RELEASE AND FORUM 8K. A REPLAY OF THIS CONFERENCE CALL WILL BE AVAILABLE APPROXIMATELY ONE HOUR AFTER TODAY'S CALL CONCLUDES AND WILL BE POSTED ON OUR WEBSITE, MOTIVECARE.COM. THIS MORNING, HEES SAMPSON WILL BEGIN WITH OPENING REMARKS, THEN HE WILL PROVIDE AN UPDATE ON OUR BUSINESS STRATEGY AND REVIEW HIGHLIGHTS OF OUR FOURTH QUARTER AND FULL YEAR 2022 RESULTS. We'll review our financial results and outlook for 2023. Then we will open the call for questions. With that, I'll turn the call over to Heath.

Hello, everyone, and a warm welcome to our fourth quarter and full year 2022 earnings call. Today, we reported strong full year 2022 results with revenue and adjusted EBITDA exceeding the high end of our guidance ranges. These results were driven by solid growth in our mobility business and a double digit growth from our home division, which includes personal care services and remote patient monitoring. I want to take a moment to acknowledge and express my appreciation for the hard work and dedication of the entire team at MotiveCare. It's because of them that we are able to provide high quality care and the best experience for our approximately 35 million members. We ended the year with solid momentum heading into 2023. To this point, we issued 2023 revenue guidance of $2.575 to $2.6 billion and adjusted EBITDA guidance of $225 to $235 million, indicating our confidence in continued growth. In the past two quarters, we have taken significant steps to realign and reallocate resources to drive efficiencies and operating leverage. Our one mode of care strategy, which is defined as alignment across all of our supportive care services, will help us share best practices, drive scale and efficiencies, and standardize processes to ensure the best experience for our members and our customers within each point solution and more holistically across all our solutions. Our goal for 2023 is twofold. Build for scale and grow our business. To build for scale, we will strive for operational excellence, integrate as one mode of care, and use technology to enable our solutions. To grow, we will sell our point solutions more effectively, leverage our relationships to cross-sell, and continue to deliberately develop and grow our value-based care solutions. Our approach to value-based care is about driving performance-based payments into each of our point solutions and eventually moving into more shared risk arrangements across our entire platform. I'd like to discuss some exciting advancements from our innovation efforts. Our remote patient monitoring solutions like E3 are the tip of our spear for value-based care. and we are seeing increased activity from payers who want to sign up new arrangements with us. We recently began an innovative value-based care program for E3 with a leading national managed care organization. This program is essentially the next evolution of E3 as it utilizes greater data sharing in partnership with the health plan for gap closures and assessments, allowing us to have a more meaningful impact on improving health outcomes and using our supportive care services. We are in discussions with several other national payers for similar programs and we continue to look for ways to build off our innovative programs and point solutions shifting from standard benefits to Medicare Advantage supplemental benefits. We are confident about adding more value-based care arrangements to our portfolio and using valuable member data, insights, and analytics to drive meaningful long-term value for all of our stakeholders. Our new sales organization has made very good progress, and we have a lot of exciting plans for the year to accelerate our growth, although most of the sales success will increase revenue in 2024 and beyond. Our sales pipeline has increased by over one-third And we are close to signing contracts with new customers that we historically did not pursue. Before I dive into our segment highlights for the quarter, I wanted to update you on some of the changes we made to our leadership team. We've hired some great people, including an SVP of strategic execution, Matt Snyder, and an SVP of innovation and growth, Seth Ravine. And we have even more exciting announcements soon to come. But as you can imagine, it takes time to find the right people for the job. As we have adjusted our operating model and priorities, it has been necessary to make some personnel changes. I want to thank those who are leaving us for their hard work. But I'm confident that we're putting together the best team to take motive care to the next level. Moving on to our mobility or NEMT segments. I'm pleased to report that we experienced a 14% year-over-year increase in NEMT revenue during the fourth quarter. This growth was driven by increased trip growth as membership grew to approximately 35 million members, which is consistent with our commentary from the third quarter earnings call. Our focus on discipline execution and team alignment is working. For example, our fourth quarter on-time performance was at its highest level in two years. We also exceeded service level expectations in our contact centers and reduced missed trips by about a third. We continue to transform our mobility operating model through three main initiatives, provider partnership, multi-modal network, and omni-channel member engagement. Our provider partnership initiative involves narrowing our transportation network and creating win-win relationships with only the best providers. Our multimodal network initiative medically tailors the members' ride via a traditional sedan, ride share, public transit, or a family member. And our omni-channel member engagement initiative meets the members where they are by providing telephonic, IVA, IVR, texting, chat, web portal, or app engagement. Today, Our primary engagement channel is telephonic. As such, we have a lot of opportunity ahead of us. All three of these initiatives will further improve the member experience while also driving down operating and trip costs. We had significant improvement in our operating performance in the fourth quarter, and we expect the initiatives we have implemented to have meaningful impact throughout 2023 on both our member experience and cost structure. Regarding redetermination, we acknowledge that Medicaid members can be reviewed by states starting April 1st. However, states are obligated to fulfill various reporting and outreach obligations, which could cause delays in the process, especially in the states where we have significant presence. We expect the impact of this process in 2023 to be insignificant. And we have outlined strategies such as contract repricing, new business wins, and operational enhancements, as discussed earlier, and at our Investor Day in June, which we believe will enable us to overcome any long-term impacts. Moving on to the Home Division, which is comprised of our personal care and remote patient monitoring segments. In the fourth quarter, our personal care revenue grew 12% year over year, as we continue to see strong improvement in caregiver hiring trends. We recently implemented a caregiver satisfaction score across our organization, similar to a net promoter score. We improved our caregiver satisfaction by over 50 points in 2022 to the great level by capturing feedback through our caregiver advisory council and by providing additional benefits such as 401 , new health benefits, and an employee assistant program. While we improved our score last year, We know that we can even do better and we aim to achieve the excellent mark in 2023. All these investments in our team members' experience have helped us maintain an industry-leading retention rate of 65%. Our main goal is to achieve growth in the personal care sector. To achieve this, we are continuing the heavy lift to standardize and centralize non-caregiver functions, and certain operational processes. By doing this, we aim to create a more efficient and scalable platform for growth. Our strategy also involves focusing on our efforts on developing standard tools and techniques that can be deployed locally to accelerate caregiver recruitment and retention. In addition, we plan to expand our personal care locations through de novo openings and position ourselves to easily integrate any future acquisitions. We expect the reimbursement environment to remain favorable for personal care services, and we plan to add more value-based care arrangements similar to our current value-based care arrangements in Pennsylvania focused on gap closure. We have also added new arrangements focused on change of condition escalation, as well as electronic visit verification, or EVV. Moving to our remote patient monitoring segment, which is a particularly innovative and important part of our business. We saw strong growth during the fourth quarter with monitoring revenue increasing 18% year over year and adjusted EBITDA margin of 35.8%. We saw 36% year over year increase in total active clients in the fourth quarter, which includes the contribution from the integrated guardian medical monitoring acquisition. Our monitoring team performed exceptionally well last quarter, with a couple of new state Medicaid wins and a strong pipeline for additional business that we can execute on this year. Our net promoter score also remained at an industry-leading 88. As we move into 2023, our priorities are to accelerate Medicaid and Medicare Advantage sales, and continue to innovate our monitoring offerings and value-based care capabilities. We expect growth in line with our long-term target of mid-teens revenue growth and a mid-30% adjusted EBITDA margin. Before I turn the call over to Ken Shepherd, our CFO of Mobility, to review the fourth quarter and full-year 2022 financial results, I want to remind everyone that the biggest fundamental challenges facing the U.S. healthcare system today are its elevated cost, the inequities in access to care for the most vulnerable patients, and too little focus on care prevention by addressing the social terms of health. We are uniquely positioned to address these challenges. Our supportive care solutions provide the highest quality, best-in-class member experience in the most cost-effective manner for our customers and the healthcare system as a whole. Please walk us through our financial results.