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spk00: Good morning and welcome to MotivCare's second quarter 2023 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, you may press star 1 on your telephone keypad to get into the question queue. Please note that this conference is being recorded. I will now turn the call over to Kevin Elich, Head of Investor Relations. Thank you. Please go ahead.
spk01: Good morning, and thank you for joining MotiveCare's second quarter 2023 earnings conference call and webcast. Joining me today is Heath Sampson, MotiveCare's president and chief executive officer, and Ken Shepard, head of finance. 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 GAAP financial measures is included in our press release and form 8K filed with the SEC. 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, Heath Sampson will begin with opening remarks. Ken Shepard will review our financial results. Then we'll open the call for questions. With that, I'll turn the call over to Heath.
spk03: Thank you, Kevin. I appreciate everyone joining us for our second quarter 2023 earnings call. After the market closed yesterday, we reported second quarter revenue of $699 million and adjusted the EBITDA of $52 million. The increase in revenue was largely driven by strong performance in our home division, which includes our personal care and remote patient monitoring segments, as well as an increase in transportation trips and provider costs, which partially passed through in the form of higher revenue in our NEMT segment. Our home division's revenue growth contributed positively to adjusted EBITDA. As for NEMT, the increased revenue we obtained from passing through costs in our shared risk contracts helped offset a portion of the increased service expense. However, this pass-through benefit was more than offset by a negative impact to adjusted EBITDA from our full risk contracts, which represent 20% of our NEMT revenue. Similar to other companies in the healthcare industry, we are seeing a rise in utilization of our services as we see progress in the nation's recovery from the pandemic. Even though this increase has a negative impact on a portion of our NEMT contracts, it has generally been a positive for our personal care and remote patient monitoring segments, which we are seeing strong demand for our services. I remain optimistic about MotivesCare's long-term positioning and strategy. Our unique position in the healthcare industry enables us to cater to our customers' diverse needs in a continuously evolving market to manage a rapidly aging and chronically ill population amongst rising costs and a complex regulatory environment. While the intricacies of the NEMT segment are complex, particularly with significant fluctuations that arose during the pandemic and current uncertainty surrounding Medicaid redetermination, Access to transportation is a vital component to ensuring access to clinical interventions and improving health outcomes. There are several key updates to discuss this quarter. First, we increased our 2023 revenue guidance to a range of $2.75 to $2.8 billion from $2.575 to $2.6 billion. This increase is primarily due to incremental shared risk contract revenue related to higher than expected NEMT revenue from trip volume and provider cost. Despite the increase in revenue, we have lowered our 2023 adjusted EBITDA guidance to $200 to $210 million from $225 to $235 million. This reduction is primarily related to items affecting our NEMT segment, including higher trip volume and higher trip-related cost, particularly in our full-risk contracts, and timing of new contract implementations being delayed to early 2024, which were previously expected to offset contract attrition from prior years. Next, I'd like to address our second quarter cash flow from operations, which was negative $108 million, mainly due to a 96 million decrease in our net contract payables, less receivable balance during the quarter. along with a one-time $9.6 million arbitration settlement with a former employee. Post the pandemic, coupled with a shift to more shared risk and EMT contracts, we experienced a temporary timing mismatch between payments and collections, which created a large payable balance that we've been reducing over the past year. The second quarter of 2023 marks a notable shift in our working capital. we've resolved pandemic-era balance sheet disparities, transitioning into a net receivable position where our contract receivables surpass our contract payables. This occurred earlier than anticipated, largely due to accelerated payments from a few large state clients. Furthermore, these clients now have established clear timelines for reconciliation, adding additional layer of predictability to our cash flow. We anticipate the collection of these receivables to balance out, if not surpass, payable repayments for the rest of the year, positively impacting our cash flow in the second half of 2023. Our effort to realign contracts with our customers' needs is yielding positive results. We've safeguarded our margins, trading some pandemic-era upside for long-term stability. Now, our cash flow mirrors our P&L more closely. indicating improved financial management and a balance between profitability and customer satisfaction. During the second quarter, we borrowed $111.5 million on our revolving credit facility to support repayments on contract payables. As of June 30, 2023, our net leverage ratio was 4.7 times. We knew we were going to be at this leverage point. However, as noted earlier, we anticipated paying off a couple key customers in line with prior history. Prioritizing long-term customer relationships, we agreed to accelerate related contract payables of approximately $65 million into Q2. Moving forward, we anticipate generating substantial cash flow, which we intend to utilize for revolver paydowns. This uplift will be fueled by normalized working capital the strong core cash flow from our low capital intensive businesses. Our quarterly supplemental presentation on our IR website provides a detailed cash flow overview and a view of the expectations for the second half of 2023. To conclude the balance sheet points, our annual goodwill assessment resulted in a non-cash goodwill impairment charge of $183 million within our personal care and remote patient monitoring segments. It is important to note that this is a non-cash expense and does not impact our operation cash flows or ongoing activities. Instead, it aligns the segment's carrying value with their current fair market value. Despite this non-cash charge, these segments are performing well. And what's more, we see that personal care and remote patient monitoring segments has key tenants of our strategy to unlock value-based care arrangements with supportive care, evidenced by new contracts. This makes us more enthusiastic about the long-term prospects, and we anticipate their performance will surpass our initial expectations at the time of the acquisition. We remain focused on driving strategic measures to ensure their performance and deliver long-term shareholder value. Next, I want to address the topic that's the top of mind of all of our investors, Medicaid redeterminations. There has been a lot of industry information about redetermination, and some states have taken an aggressive approach to redetermination, but others are being more thoughtful to ensure eligible Medicaid members' access to care is not disrupted, evidenced by 12 states pausing procedural terminations and 35 other states having received approval for mitigation plans to address a number of issues. That said, to date, we have seen minimal impact from Medicaid redeterminations, And our membership continues to track in line with our forecast expectations. I would also like to point out that of our 34.3 million members, 27.1 million are Medicaid and 7.2 million are Medicare Advantage, which are not affected by redetermination. Our MA membership has grown from 6 million or 20% since June 30, 2022. primarily due to new contract wins and existing contract membership growth. While redetermination may lead to some Medicaid disenrollment, we expect regular growth in Medicaid and MA programs, providing a counterbalance to redetermination impacts. For the second half of 2023, we estimate Medicaid redetermination could create an adjusted EBITDA headwind of approximately $5 to $10 million, which is embedded in our guidance. Looking towards 2024, we are currently forecasting a potential growth impact to adjusted EBITDA of $20 to $40 million from redetermination. Yet, as I will discuss later, our strategic initiatives are expected to drive growth savings of $30 to $50 million over the next 12 to 18 months. Rest assured, Our data models, industry insights, and customer feedback indicate our projects align with what we are seeing in the market, and redetermination will be manageable. We'll provide more updates as things progress. Before I review some of our operational highlights, I'm eager to provide some substantial updates to our team. We recently brought on Jessica Krall as our new Chief Information Officer. Jessica came to us from United Healthcare, and she has an extensive background in healthcare IT leadership and brings a wealth of experience and expertise to our team. Further bolstering our team, we hired a new chief people officer, and we will announce his name once he fulfills his prior company commitments. This individual has proven experience nurturing organizations with significant field employees, and he will be instrumental in further supporting our 20,000 team members and fostering our company's growth. I'm also thrilled to announce that we've also received agreement from an experienced and talented individual as our next Chief Financial Officer, who will join us in early September, and once we are able to officially announce her name, we will issue a press release in Form 8K. What I can tell you is she has multi-industry experience and a deep healthcare understanding with a multi-decade career. which will play a pivotal role in shaping our future direction. With these recent additions, our executive team will continue to reflect our unwavering commitment to attract exceptional individuals in their respective fields. As we often say, it's all about the people. And I'm confident that once all of these individuals are on board, we will have the right team in place to drive our transformation and strategy forward. Lastly, I want to extend a heartfelt gratitude to our extraordinary team for their steadfast support while I balance the dual roles of CEO and CFO. On a lighter note, I can affirm that I'm excited about finally not having to juggle two jobs. Now let's discuss the market, our strategy and segment execution. Starting with an important change in the market. As we navigate the rapidly evolving healthcare landscape, it's clear that the industry is being revolutionized by new CMS strategic mandates. which is accelerating the shift to fee-for-value from fee-for-service. This is also driving a paradigm shift towards more holistic member care. It is anticipated that by 2030, 100% of Medicare Advantage and traditional Medicare and approximately 50% of Medicaid will transition towards value-based alternative payment models. As payers and providers grapple with increased and chronically ill populations, higher costs and tighter reimbursement rates. Coupled with an evolving complex regulatory landscape, the quest for an integrated healthcare experience that combines quality, affordability, and interconnected services is paramount. At MotiveCare, we've enhanced our strategy and separated it into three parts in response to these pressing market needs. One, develop a scalable platform through operational excellence and automation. Build a customer-centric sales and growth platform. Three, enhance digital and clinical capabilities to participate in value-based arrangement models. Our strategy is powered by digital transformation, which is crucial in our fast-paced, data-driven, artificial intelligence era. The first phase of our strategy revolves around operational excellence, which we are proud of the improvements we've made over the past year, and further automation sets a solid foundation for our scaled platform of solutions. Over the past year, we've made considerable strides in upgrading our talent and culture, transitioning from a decentralized and disparate model to a shared service and central operations model. To better understand the scope of this transformation, approximately $65 million of annual salary has been transitioned. and we expect to upgrade and reallocate back approximately $30 million. Phase two, running parallel to phase one, involves fostering an organization that prioritizes growth through a coordinated model of relationship management, referral execution, and hunting new opportunities, all backed by marketing and centralized sales operations. Finally, phase three will participate in value-based arrangements in addition to fee-for-service, We will harness our newly developed digital and clinical connected capabilities to augment our supportive care services by providing longitudinal data collection for our customers, members, and design engagement models, enabling virtual connections to care. Far from being conflicting strategies, these three phases are designed to complement each other, strengthening each other together. Let's now delve into our progress for each of our segments. Our focus on centralization and operational excellence facilitated by technology has considerably improved our NEMT services. We're meeting or exceeding all our customers' quality and service level requirements, as seen in our key performance indicators, such as on-time performance and reduced missed trips. Our multimodal transportation partnership strategy has led to increased customer satisfaction and reduced costs. We are transitioning from traditional call centers to omnichannel options, improving member engagement at lower cost. Further automation of the transportation processes through unified tech-enabled dispatch is a key priority as well. We anticipate savings between $30 to $15 million over the next 12 to 18 months through these continued centralization, operational excellence, and automation efforts. We expect these initiatives will mitigate the headwinds of Medicaid redetermination and higher utilization. Our sales strategy within the NEMT segment has shown promising results, albeit slower than we wanted. Year to date through June 30, we've secured new MCO businesses with a total contract value of $110 million, nearly all of which will commence in 2024. Including the contract renewals and expansions, the total contract value won this year amounts to over $500 million, over three to five-year contract terms. Over the next five years, we foresee around $1.3 billion worth of state NEMT contracts up for RFP, of which we currently serve approximately 700 million. Our team has been successful in retaining business, and we are delivering higher service levels than historically. We are confident in retaining the majority of the contracts we have, and we aim to win and convert additional market share. Additionally, we will continue to pursue approximately $700 million of new opportunities in our MCO pipeline, which is more receptive and, frankly, demanding that we offer more holistic solutions beyond just transportation. In personal care, our focus on centralization and operational excellence has streamlined our services, enabling better regulatory compliance. We've embarked on a full transformation of this segment shifting from disparate local model to a more unified regional model. This has also allowed us to reallocate resources to growth. Ours increased 3.4% in the second quarter as we continue to gain momentum towards additional growth projected in the second half of the year. Quickly commenting on CMS's HCBS proposed rule, we've aligned our feedback with industry stakeholders, supportive of the rule, however, expressing concerns about the 80-20 wage provision, noting that it will further exasperate the supply and demand imbalance for personal care services. It is important to note that we are optimistic that the rule will drive further professionalization, and once the final rule is issued, it will not be implemented until four years from now. In the RPM segment, Our operational excellence strategies have improved efficiency, allowing us to provide elevated care levels while also integrating the Guardian Medical monitoring acquisition from last May. We've leveraged technology to boost efficiency, enable vital data collection, and fostering growth. Within PERS, we are seeing market share gains and maintaining strong pipelines. For example, activations were up 10% year-over-year and enrollments increased 81% compared to the first quarter. We are also adding capabilities to enhance our vitals and medication management offerings and expect meaningful expansion starting this year. Under the careful management of our newly dedicated strategy, product, and innovation team, led by Jeff Bennett, previously the CEO of Higgee Healthcare Solutions, our strategy integrates cutting-edge technology and data management with our newly developed operational excellence and clinical capabilities. This strategy empowers us to capture longitudinal data from our customers' members, enabling the development of virtual engagement models and facilitating value-based arrangements. In 2023, we expect to generate meaningful dollars from innovation and value-based payments. We have over 20 active programs focused on member insights and opportunities to move into value-based arrangements that give us the confidence that our innovation approach is aligned to our customers' needs. I'd like to provide a brief update on our equity investment in Matrix Medical, which we believe holds significant value for MotiveCare. Matrix saw continued momentum in the second quarter and delivered another strong quarter driven by assessment growth of 30%. For context, adjusted EBITDA range of 50% million to $100 million is still the correct results to anchor value from. We are confident that Matrix is on the right trajectory to create significant value and remain aligned with Fraser in monetizing our 44% minority interest at the right time. In closing, I'd like to thank our entire team for their hard work and dedication. The last year has been a period of significant change for us. We've remained committed to providing the highest quality of service as we have done amazing things to help transform this business. We continue to build on our culture where compassion meets profitability and will continue to guide us as we move forward. I'm incredibly proud of what we have achieved and the transformation we've undergone. We are clearly on the right trajectory and I see this continuing as we remain committed to growing our supportive care services focused on the social determinants of health. Now, I'd like to pass the call to Ken Shepard, our Head of Finance, who will provide an overview of our second quarter financial performance.
spk11: Ken? Thank you, Heath, and good morning, everyone. Second quarter 2023 revenue increased 11% year over year to $699 million, driven by approximately 11% growth in mobility and 11% growth in our home division. Net loss was $191 million, which included a non-cash goodwill impairment of $183 million, and second quarter adjusted EBITDA was $52 million, which was 13% lower than second quarter 2022 and modestly lower than our expectations. NEMT second quarter revenue of $497 million was driven by a 1.5% year-over-year increase in average monthly members to 34.3 million and a 9% increase in revenue per member per month due to repricing and partial pass-through of costs associated with our higher utilization. Trip volume in the second quarter increased 6.5% sequentially, while monthly utilization per member increased to 8.5% compared to 8.1% in the first quarter. Purchase services per trip increased 2.8% sequentially due to increased utilization resulting in more volume and related service expense. This was partially offset by a 3.9% reduction in payroll and other expense per trip due to early success we are seeing reducing our call-to-trip ratio in 2023. During the quarter, we saw a minimal impact from redetermination, which was in line with our expectations. NEMT adjusted EBITDA for the second quarter was approximately $29 million, down 38% year-over-year due to increased service expense per trip on a higher than expected trip volume, as well as last year benefiting by $7 million from an out-of-period repricing benefit. Adjusted G&A expense decreased 8.5% year-over-year and was 1% lower sequentially as we continue to control costs in this segment. We remain focused on our mobility initiatives to reduce cost and drive efficiencies which will improve performance and increase member satisfaction, and we expect to recognize the benefits from these initiatives going forward. Turning to our home division, second quarter personal care revenue increased 11% year over year to $180 million, driven by 3.4% growth in hours and a 7% increase in revenue per hour, including a reserve reversal from last quarter of $2.6 million which is included in our run rate going forward. For the full year, we continue to expect revenue per hour and service expense per hour growth will remain in the mid single digit range. Personal care adjusted EBITDA for the second quarter was 24 million or 13.4% of revenue. Excluding the reserve reversal from last quarter related to revenue collections, personal care adjusted EBITDA margin would have been 1.5% lower than the 13.4% we reported this quarter. We expect continued upward wage pressure could result in margins in the second half of 2023, moving back towards the lower end on our long-term target range of 10% to 12% ahead of potential reimbursement rate increases in 2024. However, we remain focused on accelerating our personnel care growth. In remote patient monitoring, or RPM, segment, revenue increased 15% year-over-year to $19 million, driven by strong referral sales as a combination of our RPM business with the Guardian Medical monitoring acquisition, which annualized in May, is performing well. RPM adjusted EBITDA was $7.2 million for 37.5% margin, which is at the high end of our long-term margin targets. Again, our monitoring team is executing and performing well. We are seeing operating efficiencies and leverage from the Guardian acquisition and expect continued growth as we expand and add programs in new and existing states. Turning to our cash flow and balance sheet, consolidated cash flow from operations in the second quarter of 2023 was a use of approximately $108 million. The large cash use is attributable to a $79 million decrease in contract payables a $17 million increase in contract receivables, and a $9.6 million arbitration settlement. As a result of the accelerated contract payable settlements, we are now in a net contract receivable position at quarter end, which gives us the ability to offset contract payable payments with receivable collections in a more normalized and manageable way going forward. I'd also like to point out that contract receivables collections increased to approximately $16 million in Q2 from $6 million in the first quarter, and we expect collections will continue to improve. Capital expenditures in the second quarter were $8 million, which was 1.1% of revenue. We think that capital expenditures in the range of 1 to 1.5% of revenue is a good run rate going forward. We ended the second quarter with approximately $7 million in cash and had $126.5 million drawn on our $325 million revolver. Our $1 billion of long-term debt was flat sequentially and remains all unsecured debt at fixed rates. Our consolidated pro forma net leverage was 4.7 times as of June 30th, 2023. With our contract receivables now exceeding contract payables, we expect the impact on our cash flow from these accounts in the second half of the year We'll be more balanced and expect to be able to utilize this improved cash flow profile to repay $30 to $50 million of our revolving credit facility during the second half of 2023. During the second quarter, we successfully amended our credit facility to increase our leverage covenant and ensure ample access to liquidity while the reduction in our net contract payables accelerated. We were pleased by the strong support that we received from our entire bank group led by J.P. Morgan during the amendment process. In November, the call price for our senior unsecured 5% and 7.8% notes steps down, and we will be closely monitoring the capital markets over the next several quarters as we evaluate refinancing options for these notes. We continue to target net leverage of three times, which we expect to achieve through a combination of debt reduction and EBITDA growth, along with potential proceeds from monetizing our investment in Matrix. Our primary expected use of cash going forward will be to pay down our revolver and de-lever our balance sheet as we remain committed to a disciplined and balanced capital allocation strategy. Shifting to guidance, we raised our revenue guidance to a range of $2.75 to $2.8 billion and we lowered our adjusted EBITDA guidance to a range of $200 to $210 million. The increased revenue guidance was primarily due to higher NEMT utilization and transportation costs driving more revenue from our shared risk contracts. We lowered our adjusted EBITDA guidance due to the higher NEMT utilization and associated costs, and a delay in the start of some of our new contract wins, which will start in early 2024. To sum things up, our second quarter results were mixed compared to our expectations, as revenue was better than expected due to shared risk cost protection in our NEMT business, and adjusted EBITDA was slightly below plan due to higher utilization. Despite these results and our guidance reset, we remain confident about our mission and long-term growth strategy, along with the expected benefits from the initiatives to drive efficiencies and create operating leverage. Our team is working diligently to win new business and improve cash flow, and I want to thank everyone at MotiveCare for their hard work and dedication in providing high-quality care and delivering the best experience for our members. This concludes our prepared remarks. Operator, please open the call for questions.
spk00: Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. Once again, that's star 1 to register a question at this time. The first question today is coming from Bob Labick of CJS Securities. Please go ahead.
spk07: Good morning, and thank you for all of that information. It's a lot to absorb and digest, but I think it's very helpful for the thesis here. So thank you. Yeah, good morning, Bob. And I want to kind of just pick up where you left off in terms of cash flow and make sure, given all the information you just gave, I have a good handle on this, and investors do as well. You talked about basically, I guess, netting out the – payables and receivables balance, which was $85 million before, and now we're at a negative position. So I think that's behind us. And you talked about $30 to $50 million of free cash flow in the second half to repay the revolver. Does this mean we're kind of at a normalized level overall? The question is, how should we think about working capital swings and free cash flow in 2024 and you know, that ability to, you know, refi the November 25 debt and, you know, cash flows through that? Or I'm not asking for like a specific number, but more how does working capital affect free cash flow in 2024? And if we have our own EBITDA assumption, we can kind of build our way to that free cash flow number.
spk03: Yeah. Yeah. No, it's a good question. Well, first off, as you know, in our home business, those strong adjusted EBITDAs flow through. because they're very capex-like. So you understand that, that works. So really where, and then the other things, the levers that happen in free cash flow, which you can see is these continuing investments in technology and platforms, which you see as well. So all that is strong cash flow, the right amount of investment, that works. So it gets down to is where we are in the mobility business, and then specifically within the working capital related to those payables and receivables. And the one point that you hit on again, which is really important, it's really critical, especially if somebody's new coming into here, looking at that delta between the contract payables and contracts receivables. I'm just repeating what you said again. This is the first time that it's flipped to receivable. So then you're questioning more broadly, well, how does this work? Basically, our contracts are working post-COVID. So the contracts that we've restructured primarily around really implementing these shared risk contracts, have been very helpful for us and help protect our long-term margin. So you will see fluctuations as we move through the years going in quarters. Those will still fluctuate. So the good thing now, though, because of the COVID benefits, now the contracts are going to work how they are. And I think they'll bump around. But the good thing is we have the receivables and the payables. And because we have so many contracts, we expect that to be kind of a normalized working capital fluctuations in and out, not these big swings like we've seen over the last couple quarters. And then the other item, coming out of COVID now, all the states or MCOs, we have more predictable and rigid timeframes for when we pay this back. So it really is kind of a three to six month timeframe. So this predictability and normalization coming out of out of COVID allows us to have a more predictable cash flow and then a more normalized working capital. So, which is why we have a lot of confidence in the back part of this year that we will generate cash flow in accordance with how our P&L works. And I expect that to continue throughout the quarters into 2024. Okay, super.
spk07: I think you guys just touched on a potential, you know, deleveraging target of three times leverage in 24. Absent, I guess, what's the probability of a matrix event?
spk03: Yeah, in that, so you know where we are now. To get to three, we need a monetization of matrix. That is absolutely our long-term target, and that's the point of that. But we will continue to deliver, like we talked about before, but to do the big jump down that quickly, there'd need to be some motivation within Matrix. And as you heard on the call, Matrix, that team, has done an incredible job improving the business, shedding assets that didn't work, and then really the performance is in line with what it was years ago and really kind of best in class. So that's showing up in the numbers. So we couldn't be more happy with that performance. And then, yeah, what's the timing on that? We're very aligned with Frasier. So the good way to think about it, it's getting closer because they're performing. So that's why we put it in there just to 2024, which is a very, it's a reasonable timeframe. I don't want to box it in because the most important thing that it continues to perform and we get the most value But because of where they are, it could happen in 2024, and that would be a meaningful way for us to deliver and get to that target of three times. Sure.
spk07: Yeah, that would be great. Thank you. And then last question, and I'll jump back in queue. You know, obviously you discussed the faster recovery and utilization in mobility. And I guess first, is that just kind of faster pandemic normalization, or is there anything unique to motive care? And then the real question is, where do you see utilization settling out, and how does that impact NEMT margins in 2024 and beyond?
spk03: Yeah, also in the quote, utilization, healthcare utilization across the board is increasing, and we are seeing as well. Faster than we thought in Q1 and Q2. However, actually, if you look at seasonality, Q2 is also the high point as well. So, and what we're seeing right now is that we're seeing the traditional kind of pull down from the high point of Q2. So I expect utilization to be at the levels that they are now and continue to grow at a more moderate place and then get to that standpoint of between nine and 10% kind of middle of 2024. So very manageable and in line with the forecast that we gave in 2023, and then you couple that with us giving clarity around redetermination, that includes the utilization. So we feel good about that. And again, the other item, the way our contracts work, whether that's cost or utilization, a lot of that front end is pass-through. So the full risk contracts is where we have the exposure, and we have good management of those specific states and those specific networks that are in there. So it is an impact, and it is going to be a drag on us, including redetermination. We do believe we'll be able to manage through that and going into 2024, which is why also, and this maybe is probably your next question, the size and scope of our business is the strength. The opportunity for us is to automate a lot of the processes that we have. And that will further ensure that we get rigid margins going forward and not have to be this kind of fluctuation and utilization really is the main impact. And those initiatives are on. We've been in the middle of this transformation for the last year. We have a strong team in place and strong clarity in what we need to do, whether that's supported by tech. So we need to execute on these initiatives. And I expect every quarter we'll give you updates like we are now. For example, our trip-to-call ratio continue to improve. And that's just one example on how we're able to kind of automate this business and get the right cost structure in place so that we get back to the ranges that we've given on our EBITDA margins in 2024.
spk07: Okay, super. Thank you for all that extra detail. I'll jump back in queue and let others get some questions. Thanks, Bob.
spk00: Thank you. The next question is coming from Brian Twinklet of Jefferies. Please go ahead.
spk09: Hey, good morning. I guess maybe my first question, as we think about just your visibility and confidence in your guidance that we'll see positive cash flow in the back half of the year, and then any color you can share on debt covenants and debt availability, and maybe even if you can share with us where debt levels are maybe as of the end of July.
spk03: Yeah, so we've been paying down. We pay down about $30 million in July. Again, we expect the fluctuations to happen. So it's just a data point which aligns to why we feel good about the ranges that Ken gave in our free cash flow of $30 to $50 million generated throughout the year. So I feel really good about that. And I'll keep coming back to that, and it's okay to keep saying this. What you should look at and why we're comfortable with that is the receivables and payables delta. That gives us a lot of confidence of being through that COVID repayment back. And then to continue on that from a debt covenant perspective, we did all our banking partners who are great partners who have looked at us, gave us that increase in leverage coverage. And we have in the deck how that actually works. So you can see that we have a 4.7 leverage. So that gives us lots of room within that covenant. So we're really comfortable with where we are from a bank loan perspective. We continue to de-lever. So we're really comfortable with our current capital structure and our covenant that we just got in place. And then what was your first question?
spk09: Oh, just the confidence and the ability to generate positive free cash in the back half of the year.
spk03: Yeah, yeah. So then it goes to the other items, which I said a little bit with Bob. You look at the other sides of the business, right? In the home business, we're at that 11% to 12% margins, RPM in the mid-30s, strong performance and growth there. So you put all that together, and then being out of the COVID payments that we accelerated into Q2, we're executing and we'll generate cash. So I feel really confident about that.
spk09: I understand, okay. And then maybe you gave some color and redeterminations. It sounds like, number one, you still believe that it's a 10 to 15% reduction in the number of Medicaid lives covered or enrolled. But also, if I add this year's impact, five to 10, 20 to 40 next year, so you're looking at 25 to 50 million gross, maybe if you can walk us through that math and how you're getting that level of confidence in both the number of lives and the revenue amount or even the amount that we should be thinking about.
spk03: Yeah. Yeah. And also if you're, if anybody wants to look at it on page 15 of the investor deck that is posted actually goes through that math and the team and us did a, a very good job on being transparent around this and what we think it means. One, we're all learning as an industry, right? And we know our customers where it is. So we want to be transparent on what it means, primarily what it means into 2024. As we said, in 2023, the impact is around $5 to $10 million, and that's in our current guidance. It really is now about what's going to happen in 2024. So we laid out the math there. on how we are getting to the range of 25 to $50 million. And it really is taking the data that is out there publicly, and then we layer that on to our current contracts. And then why it's not maybe a large number like maybe other people are expecting is because we have a state mix that is different than the overall kind of Medicaid population. And that's where the exposure lies for us is in those full risk contracts. Again, 20% of our revenue is within that. And we know where those states are and we know what's happening. So when we put it through that, that's how we get to that $25 to $50 million. And then we also gave an illustrative example on how you could do your own math. I think the real way to think about it, a lot of the data that's out there specifically from Kaiser, which I think is doing a great job, they do that 10 to even 20% across the U.S. and gross. They don't take into account the increased Medicaid growth that is also happening. CMS just last month actually I think has the best information that came out there. They did a net number. And their net number was in 2024, they expect eight million lives to come off. That is in line, when we look at our contracts, that is very in line with what we think is gonna happen. And if that's the case, it would be on the lower end. So we really wanted to be transparent around this. I think the numbers that we have are really solid. And then the other item on that That gives us the ability to say, okay, that's the 20 to 50 million. What are you going to do about it, guys? And that's where we also are being more transparent around the initiatives that we have in place around the cost. So that goes to, I think, page 13 of the deck. And we were, again, transparent around this automation. Why we wanted to be that way is because we wanted to show the opportunity that we have. and the base that we have to work off of there. And that's around automation within our contact center, that's automation within just transportation ops. There's the initiatives that are underway, and we still have a lot of opportunity to do that. And when you look at that, the total target that we have, 60 to 80 million. But for us, over these next 12 months, we think we can get 30 to 50. So that 30 to 50, across redetermination and utilization of 25 to 50, It shows that we can execute and get back to our margins of that kind of 9% to 10%, 11% range in 2024. Awesome.
spk09: Thanks, Eve.
spk00: Thank you. The next question is coming from Scott Seidel of Stevens. Please go ahead.
spk05: Hi, thanks. Good morning. First question, was hoping maybe just on the NEMT side, I think it might be helpful if you can sort of break out how the margins, I'm not sure if you have the data prepared this way, but it would be really helpful if you could break out how the margins are looking in the full risk category, let's call it that 20% that are in full risk versus the 80% that have now moved towards shared risk. And then, you know, when you look at the full risk, which clearly seems to be more pressured right now than the shared risk, walk us through, I guess, the path to margin normalization for those full risk contracts in terms of, you know, visibility at the price increases or PMPM increase that you have there. Or is this where you're going to be, you know, also utilizing some of these cost saving initiatives to try to normalize the full risk margins?
spk03: Yeah, so we don't give margin by individual category. And the reason for that is an entire portfolio. But with full risk and actually shared risk or fee-for-service and pass-through, these constructs are based on how we have a win-win relationship with our customers. Some people want shared risk. Some people want full risk. Full risk, by definition, is us taking on more risk. So those margins are higher. But that doesn't mean they will go lower. The way the industry has settled out in NEMT, regardless of what contract, we're kind of set on that. So the expectations to these customers that use full risk is that our margins are higher. So right now there are pressures from a timing on utilization. But those aren't going to continue to decline where the full risk margins get even at or below our shared risk margins. That's not the way it works. So I wouldn't look at it as a big risk or a change within full risk as being the downside. It really is for us being transparent of where the exposure is from our margin perspective right now. They are higher. They are being under pressure. But as I talked about earlier, where we think utilization is going to go and where cost is going to go, because more than 80%, the other 80% are actually pass-through, we feel good as a portfolio in our margins, and especially where the levers are in our costs that are internal to us. That's where the levers are, and that allows us to get back up. The pricing mix The margin components of what we get from our customers and what we pay our transportation providers, in general, have really leveled off, and I expect those to stay consistent for many quarters and years to come.
spk05: Okay, got it. So actually, bottom line, the full-risk contracts, you still actually generate higher margins in those, but with a lot more variability. And then with the shared risk, essentially, you're willing to trade a little bit lower margin, for some more predictability and the margin structures that you'll have over time at shared risk, right? Is that the way to sort of think about the deal?
spk03: That's exactly because that's what the customers want as well. And the people that want full risk want that because it allows them to do it more simply and they will remain higher than anything else. So you said it correct, Scott.
spk05: Okay. And then just follow up question, just sticking on the NEMT margins and, and, you know, obviously I think for a lot of us externally too, that's, it's just the visibility and the NEMT businesses is lower, right? Then, then you're some of your other businesses like personal care, where we have a lot more other external ways to monitor trends and other public peers, for example. Um, so, you know, in that context, so, uh, you did the 5.8%, uh, adjusted EBITDA margin in the second quarter. You've revised the outlook for the full year. You're still targeting a 10% margin in that business in the intermediate term outlook that you gave in the deck. Can you maybe just give us some more visibility in terms of specifically how you're thinking about that NEMT margin ramp, both in the third quarter and the fourth quarter? And then also just into 24, you know, how you're thinking about that sort of ramping, just given that you're going to have obviously the impact from redeterminations playing out, and then you're going to have the offset from the cost savings where you have a lot more understanding of how those cost savings will ultimately accrue than obviously we do externally.
spk03: Yeah. Well, so this is just to hopefully start going to box things in. If we do nothing, right? the margins that we're at right now, that 6% range, would be holding like that. Again, that's a good thing from the contract structure. As you can see, and I'll just touch on this, you can see in the data when you look at purchase services to revenue in NEMT, you see that the increase in cost, whether that's unit cost or utilization, 80% of that is pass-through. So good, contracts are working at it. But that 6% margin long term is not what we expect. So what are the levers to pull? So there's two big levers to pull. First, I already talked about the cost savings around automation. And the second item is growth. And we talked about a lot of the good things that have happened with our rebuilding our sales and go to market. It's having traction. I wish it was earlier and I wish this was before, but now this team is executing and I expect that to start coming online and we'll get scale out of that. So those two items together will have us the ability to have those margins creep up. Likely that's gonna be, that will be in 2024. So the right way to think about these next couple quarters is kind of in line with these current margins that we have right now in EMT. and then the uptick as volume comes on, and as the cost additions take place, we'll get to those, we'll start getting to those levels that we talked about before.
spk05: Okay, and then just one last question for me, maybe just over on the personal care side. First, I did hear Ken sort of call out some expected wage increases for caregivers in the back half of the year. Could you maybe just... actually sort of disclose, you know, what expected type of wage increases you are expecting to give to the caregivers. And then also just interested if, you know, one more targeted question on New York. One of your peers had talked about CDPAP having gotten a bit of a retroactive rate increase and reimbursement there looking more reasonable now. Just wondering how that's flowing through to your business as well. Thanks.
spk10: Yeah, this is Zach. So I think the wage increase commentary is really more about normal market wage increases that we see happening. There were a couple of minimum wage increases that we, like Connecticut, passed through a minimum wage increase in June, July. But going forward, we think, yeah, we're going to be passing through wage increases to be competitive in the marketplace. In terms of the reimbursement rate environment, we're seeing some good support from the state still, not as much as maybe we were a year and a half ago, but I would say that in terms of CDPAP, yeah, we're seeing the same dynamics there as that, and New York has been a pretty supportive reimbursement rate environment, but it's also another high-wage environment, and so for us, we're really... focused on how can we make personal care a more value add service than just going in and making it a single point solution. And so as we think about having this holistic view of the member, that's where we're going to drive the most value in personal care. And so we're, yeah, we still need to operate in the competitive environment. And, you know, it's a very regulated industry. We're also bringing something that we feel like is differentiated in the marketplace, and I think that's the main focus for us going forward.
spk03: Yeah, just a little bit more on that. You think about New Jersey, Pennsylvania, and New York, all historically supportive of increased reimbursement rates to match the needs of paying caregivers higher. That has happened. That is happening now, and we expect that to continue. For us, we want to continue to pay caregivers more. It really is about growth for us. So that's why we stick to that 10% to 12% margin. It really is about how do we get more caregivers to grow. And you're seeing that. Hours are up. Growth is up. So we're really happy with the business. We know there's a lot of opportunity. When Ann Bailey's been here now a few months, what she and the team are doing is great. So we even see more upside on what they're doing to really fuel growth. That's a little more on what Zach just said.
spk05: Okay. All right. Thank you.
spk00: Excuse me. Thank you. The next question is coming from Brooks O'Neill of Lake Street Capital Markets. Please go ahead.
spk04: Hey, good morning, everyone. This is Aaron Wuchmer on the line for Brooks. So, you know, personal care and remote patient monitoring performed well. And, you know, it seems that you guys have a lot of opportunities in that area and are seeing some very strong demand there. What would you say your main focus in your long-term strategy and enhanced data capability is? And what specific and significant factors should we be more focused on going forward here?
spk03: Yeah, thanks for that. So the home business, why we call it a home business, having personal care and remote patient monitoring together is a critical component to our future. And really, across the United States, everybody knows that care is going into the home. And then especially over these last couple years, really appreciating what personal care is doing. Those everyday life activities are critical to the health of many people. So that dynamic of growth and need is going to continue to accelerate. So we couldn't be more happy with those and the growth capabilities on that. From a strategy perspective for us, it really is kind of twofold. And the one that we've been executing on for the last kind of 12 months is this centralization, standardization, and automation, like implementing a common platform and then ensuring that we have repeatable processes. The value on that is, one, we get the ability to reallocate capital back to our caregivers to grow even more, but it also gives us a platform to grow, grow organically just through adding people, through de novos, and sometime down the road when appropriate acquisition. So having that centralized standard automated platform to plug and play growth is great. So where you are going, the next part is, it really is around the data. And right now, the services that our caregivers provide, where we're in the home anywhere from a couple hours to 24 hours, is a critical ability for us to start collecting data on that member. And then as importantly and more importantly, doing something about it. So those investments that we've made to ensure we can do that are happening and in place, and that's really where the future strategy goes. How do we change outcomes that really help our customers and members? That's where the focus is as well, to ensure that, one, we are more sticky and can grow, but two, how we get different payment models, which is more in line with value-based care. And think about it as us changing outcomes and getting bonus payments for whether that's changing a risk on falling to actually intervening before somebody gets really sick. So that's the future. And I'll hit this again. This is different. So our customers want us to have access. They don't have access like we have all the time. So it's a really unique entry point with people. And then you layer on data that allows us to do it virtually, and that gets to why we have remote patient monitoring involved. The technology of a device complements or supplements the human, allows to scale. There's a lot more that we can talk about later, but bringing those together, data and the human touch, is a differentiator for us and in line with what our customers want.
spk04: Great. Yeah, that's very helpful. Thanks for taking the question.
spk00: Thank you. The next question is coming from Peter Checkering at Deutsche Bank. Please go ahead.
spk06: Hey, guys. One quick modeling question here. Can you give us the number of rides you provided under the shared risk model versus the fully captained model in 1Q and 2Q to help understand those moving parts?
spk03: Yeah, so it is... pretty congruent in line with our revenue. So we've disclosed 20% of revenue in our full risk, and that is in line with the transportation trips. That's the right way to think about it.
spk06: Okay, and then on the share at risk economics, on page 30, you say that there's zero impact, sort of depending on overall utilization of this 80% of the contracts. If there is sort of no risk here, why are we not doing a fee-for-service model? Kind of why are we doing this type of structure?
spk03: Yeah, it gets back to the question that came earlier, right? It really is what do our customers want? And the shift, no question, has been to this shared risk model. And I expect that to continue. It's primarily related to the managed side, so the MCO sides. because it's more than just the trip-taking. They want to expand more broadly. So I expect that shift to continue. We are now at 65 MCO side versus a couple years ago where the other way. So I expect that to happen. However, there's a few of our primarily states that like the full risk contract. And getting back to that, though we're seeing pressure right now, those margins will remain higher. Well, we like those contracts. They're in line with our customers and the overall portfolio of our contracts are working and I expect that to stay in place and allow, I'll get back to you. What really is gonna change our margin profile to be back to that nine to 10%, 11% range is the cost and automation capabilities. Okay, and then... That's the main lever.
spk06: All right, fair enough. And then on page 12, you know, you guys gave us the bridge for EBITDA margins, which include net wins, predetermination, utilization costs, and the initiatives. Using that same construct, can you help us think about sort of the 5.2% margin we saw in this quarter and how we get to 7.3% in the back half of the year? And what do you assume on utilization in the back half of the year?
spk03: So utilization to us Because of the seasonality in general, it usually comes down in Q3 and Q4. We're keeping this high point of utilization in line with that current trend. And what's my confidence around that? I'm seeing it right now. And then the other components of what the uptick is, we know where that is and we know what caused it. So we feel good about our predictability in the back half a year around the utilization. And then from a margin perspective right now, I think we talked about this a lot, I expect that margin to be similar for the next couple quarters. And then as we add more wins, and you can see that there, add more wins that we have sold today that come on in 2024, coupled with the cost initiatives, it's going to bring those margins up steady through 2024.
spk06: Okay, and the last one here for me, the bonds have been under a lot of pressure, which is putting pressure on the equities. The issue from the fixed income guys is obviously leverage, EBITDA, pressures, and cash flow generation with the negative $110 million in the first half of the year. Here's our guiding of $350 million of cash flow generation for this year. Can you just give us a number of what third quarter cash flow operations should be? Thanks so much.
spk03: Yes. So we gave the full year. Second half of the year, sorry, the second half of the year, and Ken said this, that $30 million to $50 million. So that's what – considering the fluctuations we have, it makes sense to give the full year. So we feel really good – like I said earlier, we are paying back right now. So I expect each quarter to generate cash for us and then in totality be between that $30 million and $50 million. Great.
spk06: Thanks so much.
spk00: Thank you. The next question is coming from Mike Petusky of Barrington Research. Please go ahead.
spk08: Good morning, guys. I just want to make sure I understand what's going on with the revolver. The short-term borrowings were like $126.5 million on the June balance sheet. Did you say that you had paid down $30 million in July? Did I hear that right?
spk03: Yeah, I did. I did say that, yes. I think...
spk08: So the revolver is below 100, and then I just want to make sure I understand. When you're saying, hey, we're essentially going to pay down the revolver 30 to 50 in the second half, that really implies zero to 20 incremental from here, correct?
spk03: Yeah, yeah. So this gets back to, I think, Pito's question as well. We will still have the fluctuations that happen each year, which is why, I mean, each month, each day. the purpose of disclosing what happened in July is when I asked the question too is that it's not continuing on that trend I get back before that we're actually not generating free cash flow that's so we expect to be at that 30 to 50 million dollars and we're consistent with that we feel good about it right but but essentially if you if you say hey
spk08: we're going to pay down the revolver 30 to 50 in the second half, but you've already paid 30, it's possible for the next five months you don't pay the revolver down any additional amount.
spk03: Yeah, so you're looking at the right way. I think the right way to also is the bridge that we have on page seven of the deck. We pay interest this second half of the year too, right? So there's other puts and takes that happen on the fluctuation, but you're right on your math.
spk08: Okay, and I'm sorry, this may be in the deck. I don't have the deck right in front of me. What are you paying on the revolver right now?
spk10: 9.3%, I believe, is the rate that's in the 10Q. You can look in the 10Q for the actual rate. That's based on SOFR plus a margin.
spk08: Yeah, yeah, okay. And then moving over to the other favorite topic of this call, redetermination, I think I saw a piece this morning possibly that Texas had already taken 500,000 folks off their Medicaid rolls in a month. I mean, given that, I mean, does 8 million lives, does that really stand up? I mean, in 30 days, if that's right, if that story is right, one state took 500,000. beneficiaries off their rolls. I mean, is $8 million really the number, or is that a hoped-for number?
spk03: No. So a lot of what you're seeing now, especially over these last couple quarters, most of the people that are rolling off across the states are going to be re-back-rolled. The challenges states are having is people are rolling off that actually should not be rolled off, which is why a lot of people have paused that and are taking the time. So I think the CMS requirements and the CMS pausing of things is the right thing to do because many of those members, and I expect many of those members that are 500,000 within Texas, are actually eligible to be back on, as much as 50% to 80%. Oh, wow. When you look at that, that's the lumpiness that's happening now, which is why states are taking longer and pausing. So when it all nets out, that 8 million net that CMS has, if you look, we grew in membership in certain states because of just the general growth. And that's after the redetermination that we know came off. So our customers, what you see in the news, what's happening, I do feel really good about the information that we gave on page 15. Though broad, 25 to 50, I think CMS's estimate on eight is a good kind of middle-of-the-road target based on what's happening right now. The data shows that 50 to 80 percent, maybe more, are going to be re-enrolled, and I think Texas is in the same boat.
spk08: And just the last question, you guys have sort of alluded to this, but clearly 90 days ago you guys didn't have a great sense of sort of the timing, the cadence of when some of these payables would need to be dealt with, at least in order to sort of keep relationships with your customers going. And it seems like you're saying now, hey, look, we've given what we've experienced, we've dialed, you know, we've really drilled down on this, and we truly have a sense that we're not going to get hit with some big, you know, $20 million payable, hey, do in the next two weeks that you're not expecting. Essentially, you have a very, at this point, unlike maybe 90 days ago, you have a very good sense of the cadence of how this will come in. Is that fair to say?
spk03: No, that is exactly it. During COVID, the timelines were all over the place. And as recently as 90 days ago, and this is why it was explicit, I wanted to give data around really it was two large customers that had this lack of timeline. That is cleared up. We have the timeline. We're out of COVID, and we're aligned with them, and now we have a lot of predictability. Okay.
spk08: All right. Very good. Thanks, guys. Appreciate it.
spk03: Thank you.
spk00: Thank you. The next question is coming from Miles Highsmith of Deutsche Bank. Please go ahead.
spk02: Hey, guys. Thanks for taking all the questions. I wanted just to follow up on that last question on redetermination. I guess I think look at the Kaiser data and it's maybe a little apples and oranges in some ways. You know, you see really high initial rates on a small sample, like 38% disenrollment, but like 74% are procedural terminations. And I think you just made the point, you know, you expect, and if I back into like your kind of 10 to 15% guidance, that's kind of embedded in that guidance is implying that, you know, the bulk of those procedural terminations are going to get reversed out. I think you just mentioned a number of 50 to 80%. Do you have an early data experience about these procedural terminations getting reversed? Is that the 50 to 80%? How much like hard data do you have or any anecdotes that might kind of back up that expectation? And I have a couple of short follow-ups, thanks.
spk03: Yeah, so for us in the states that we have, we've had redetermination, but the main states that we have, most of those have been pushed off. So where you're seeing the acceleration on people rolling off and then need to come back on, those are primarily in Republican-related states and where we don't have a lot of exposure. So we are seeing it. We are seeing it happen, and it's in line with what the market is saying around those are procedural and they'll come back on. Just the impact hasn't been that large for us because most of us, most of our contracts are in Democratic states, and that hasn't happened yet. Got it.
spk02: Okay, thanks. And then just on accounting, if I've got a patient who, let's say, gets disenrolled June 1st, goes in July 1st to get their script, realizes they've been disenrolled, has three months from that June 1st period to get re-enrolled to keep their coverage retroactive and uninterrupted. Let's say they do that in August. Is the accounting for you, do you lose that life effective June 1st? And if they get that coverage back, Do you get kind of a recouped payment per member per month once that's reinstated again or just want to make sure I understand the accounting pieces of it?
spk03: Yeah, no. So if that person rolled off for three months, as an example, we would not get paid for that person. And then three months later when they came on, we'd start getting paid and it would be just getting paid going forward. We wouldn't be recouped for that. The only difference for that, if they're a utilizer, we would reconcile with them. So we get files every day and every month. So there is a reconciliation process, but if they weren't a utilizer, we're not going to get paid. If they were a utilizer, that would flow out in our reconciliation processes as getting paid.
spk02: Okay, great. And the last one for me, just maybe at a more basic level, I see on your slide the you know, the cost structure optimizations on automation next 12 to 18 months and the savings associated with those. And I'm reading, you know, RISD calls eliminated, reservations calls eliminated. Maybe can you just give us a short kind of real world example of like how it gets done now and like how it looks when somebody tries to schedule a, you know, a ride. Is it a text now? Kind of what's the change and what does it look like? Because those are kind of big numbers. Thanks. That's all I have. Yeah.
spk03: So from a call center perspective, which is on that page 13 is the top part, and we said this before, we do right now about 28 million calls. 28 million calls at a cost of $4. So those 28 million calls are the majority of the interactions that we have with our members. So the opportunities that we put down here are very reasonable based on our population, the type of technology they use with common technology like a text message. The big opportunity is around when someone needs information and assistance for a ride. So with the automation and then even the improved kind of performance on transportation, that is very reasonable that we can get 75% of those out. They get a text message and say, your car is five minutes away. Or instead of calling us, they call the transportation provider directly because now we've done a better job at aligning that member to the TP. So that's text messaging, calling the TP themselves, using the app, using the website. All those are common technologies that are starting But we're still really, though we understand what it is, the rollout of that and the usage of that is still an early inning, which is why we expect the full cost savings to start coming in in 2024. Got it.
spk02: That's very helpful. Thank you, guys.
spk00: Thank you. At this time, I'd like to turn the floor back over to Mr. Sampson for closing comments.
spk03: Great. So thank you for participating in our call this morning for your interest in MotiveCare. Our updated investor presentation and quarterly supplemental deck are posted on our IR website. If you want to schedule a follow-up call, please call Kevin Elich, our head of investor relations. We look forward to speaking to many of you over the coming days, weeks, and months before we report our third quarter results in November. So thank you again. Have a great day. And operator, this concludes our call.
spk00: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
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