Greetings and welcome to the ModivCare Incorporated Third Quarter 2021 Financial Results Conference Call. At this time, all participants will be in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jonathan Bush, Senior Vice President, General Counsel of ModivCare. Thank you Jonathan. You may begin..

Thank you, operator. Good morning, everyone, and thank you for joining ModivCare's third quarter 2021 conference call and webcast. With me today from the company are Dan Greenleaf, President and Chief Executive Officer; and Heath Sampson, Chief Financial Officer.

I would like to remind everyone that during today's call, the company's management will make forward-looking statements under the Private Securities Litigation Reform Act. Those 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 in an effort to provide additional information to investors. These measures should not be considered in isolation from their most directly comparable GAAP financial measures.

A definition of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures is included in our press release and Form 8-K. We've arranged for a replay of this call, which will be available approximately one hour after today's call on our website at modivcare.com.

This morning Dan Greenleaf, our Chief Executive Officer will begin with opening remarks after, which Heath Sampson, our Chief Financial Officer will provide 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?.

Thank you, John. Good morning, everyone, and thank you for joining us today. In the third quarter we made significant progress, executing on our strategy to transform ModivCare into a one of a kind integrated supportive care company with solutions focused on addressing the social determinants of health.

On September 14th, we completed the acquisition of CareFinders, adding a highly complementary leader in the Northeast market to our personal care segment. On September 22nd, we completed the acquisition of VRI, bringing a first rate remote patient monitoring and medication management company into our fold.

Throughout the quarter, we continue to automate and modernize our non-emergency medical transportation or NEMT business and we advanced the development of an innovative meal delivery offering.

As the market transitions to value based care, addressing social determinants of health for our nation's most vulnerable patient populations is critical to promoting positive outcomes and reducing health disparities.

We are driving ModivCare's organizational transformation with a focus on advancing these efforts by removing barriers to care, enhancing the client and patient experience, reducing the cost of care and improving outcomes.

Our team members and partners play an integral role in the communities where we live work and serve and together we are confident in our unique position to impact the future of health care.

Turning to our business segments, the acquisition of CareFinders combined with Simplura creates one of the largest personal care platforms in the country with approximately 16,000 caregivers delivering roughly 30 million hours of care annually to approximately 20,000 patients. Scale and density matter in this business.

We are a leader in seven states in which we operate with approximately $650 million of pro forma revenue as referenced at the time of the CareFinders acquisition. With our scale and density, we can cover large geographies for the payers and states we serve and expand access to personal care.

We continue to see robust demand for our personal care services both in the short-term and long-term. This demand is driven by the escalating trend of care moving away from institutional settings and into the home, which delivers lower cost, better quality of life and improved health outcomes.

While the strong demand for our personal care services is readily apparent, we have experienced muted hours due to the continued labor supply challenges during the pandemic, consistent with others in the industry.

We believe that depending on the region our personal care hours are running 10% to 30% below pre-pandemic levels due to the shortage of caregivers in the workforce. As the impact of labor shortages dissipates, we foresee a meaningful step-up in our personal care billable hours and EBITDA run rate from current levels over the coming quarters.

We remain optimistic regarding the long-term growth of our personal care segment as the personal care is a $55 billion market that is highly fragmented and expected to grow rapidly, presenting an attractive opportunity for us to generate organic and inorganic growth with a disciplined approach to tuck-in acquisitions.

Moving to remote patient monitoring or RPM, the acquisition of VRI is also integrating nicely into ModivCare, as a new value-added offering for payers states and patients. Remote patient monitoring represents an $8.5 billion total addressable market and is only 13% penetrated today.

The pandemic has led to an acceleration in digital health and highlighted the value of alternative solutions to in-person care. RPM has made it possible for patients to safely remain at home while their health continues to be supervised.

VRI's best-in-class RPM platform is device agnostic and supports aging in the home for the elderly and care in the home for the chronically ill.

By proactively monitoring the health data, of more than 170,000 individuals, the team members of VRI's two 24/7 care centers, help alleviate pressures on the health system by preventing emergency room visits or hospital stays and removing traditional barriers to care.

We believe there is a tremendous opportunity to grow VRI's existing revenue through cross-selling RPM across our payer base, which overlaps of 10% of ModivCare's top clients. Our teams have partnered with their respective counterparts have gauged some very productive early conversations with our customers.

The financial profile of VRI is very appealing, with mid-teens recurring revenue growth and the opportunity to accelerate even more while also generating a robust EBITDA margin. By leveraging VRI's data analytics and technology, we expect to differentiate our in-home services and bridge the gaps to care through a more connected care experience.

Moving to our NEMT business, this quarter we continued to modernize and automate our national transportation network. Digital transformation has benefited from the WellRyde acquisition, which brought us an industry-leading transportation routing technology.

In conjunction with our user-friendly rider/driver app, which brings value to our patients by expanding access and reducing complexity, we believe we have amassed and built the strongest technical platform in the industry that further sets us apart from the competition.

We continue to benefit from our automation initiatives and other operational enhancements, which we refer to as Project Storm.

These initiatives include deployment of IVR, IVA and workforce management solutions in our contact centers, reduction of transportation waste or ineligible riders, utilization of BPO services, more effective management of cost overrides and surge pricing and streamlining of our real estate footprint.

While the Project Storm initiatives have been fully implemented, there are additional opportunities to optimize our NEMT processes and improve automation such as improved transportation routing and continued automation of manual processes. We refer to the second group of initiatives as Project Lightning.

We will be implementing Project Lightning over the next year and we expect to realize additional benefits from this initiative following the implementation.

Looking at our NEMT commercial organization, we have been pleased with the recent investments in both our sales and account management teams as we've retained 100% of our MCO contracts to date and are well positioned to win some very large contracts opportunities in the pipeline.

We're also pleased to see the NEMT member growth in the high single digits this quarter. Every NEMT ride, we provide enables access to health care for a member of our community's most vulnerable populations. Given this important backdrop, we continuously strive to expand and strengthen our transportation provider relationships.

We are a mission-driven organization, focused on improving the health and well-being of people and communities we serve and our transportation providers play an important role in this. We are working hand-in-hand with our community-based transportation providers and further building our relationships.

In this regard, we have established a transportation advisory council focused on listening to the voice of our transportation providers and acting on their feedback to enhance their overall experience working with ModivCare. We are grateful for the integral role our providers play in helping us maintain a vibrant transportation network.

Moving to our emerging meal delivery business, this quarter we delivered our nutritionally tailored and culturally sensitive meals to MCO members and internal team members under our initial programs. And we are very excited by our sales pipeline, which includes multiple national MCOs.

We have partnered with a national food service provider and we believe that our innovative, technology-enabled meal delivery offing will disrupt the current marketplace by working to address our country's food insecurity issues.

We continue to believe that our meal delivery business has the potential to generate $500 million in revenue for us within five years. ModivCare has brought together a complementary and synergistic group of businesses that we believe has accelerated our position to be a highly relevant player in the future of health care.

Our scale, reach and relationships with our existing channel of approximately 30 million patients, or 9% of the US population positions us well to close the gaps and access to care holistically, while also providing multiple avenues for sustained growth.

Further, our holistic model gives us the potential to address patients' overlapping needs rather than one-by-one. With NEMT, personal care, remote patient monitoring, and mail delivery all under one umbrella, we have a multitude of cross-selling or cross-care opportunities, as we intend to own the last mile and own the home with supportive care.

We are strengthening our ranks, evolving our technology and remain in an excellent position to serve our states and payers with a one-stop-shop experience that is constantly being enhanced by data and analytics resources. Our view is validated by the feedback we have received from our client advisory board.

Recently we have been engaged by our payer partners in meaningful value-based discussions developed in integrated supportive care pilot. We believe that our integrated supportive care strategy will drive sustainable and profitable growth at ModivCare, while also creating long-term value for shareholders.

Lastly, I am grateful for our nearly 30,000 team members, who are on the front lines every day bringing equity hope and healing to the patients we serve in our mission to deliver better access to care for all.

I'm incredibly excited about the long-term growth journey we're embarking on as an integrated supportive care company addressing the social determinants of health, and I look forward to sharing our progress in the quarters to come.

With that, I'd like to turn it over to Heath Sampson, our Chief Financial Officer for a review of our third quarter financial results.

Heath?.

NEMT revenue growth in the mid-single-digits with adjusted EBITDA margins of between 7% and 10%; personal care revenue growth in the high single digits with adjusted EBITDA margins between 10% and 12%; and remote patient monitoring revenue growth in the mid-teens with adjusted EBITDA margins in the mid-30% range. This concludes our prepared remarks.

With that, operator please open the call for questions..

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from Bob Labick with CJS Securities. Please proceed with your question..

Good morning. Thanks for taking my questions and thanks for all the information, a lot of detail this morning..

You’re welcome, Bob..

So, I want to start with an NEMT, and you gave us some good information obviously on year-over-year utilization and profitability and things like that.

Could you talk a little bit sequentially about how utilization trended from Q2 to Q3 and maybe how that impacts the margins in the quarter? And then also, how much for lack of a better term, contra revenue is still in the quarter trying to find a steady run rate when utilization returns to normal levels for revenues..

Hey. So, Bob. This is Dan. So the thing on the transportation piece, and I -- utilization is ticking up incrementally and so there wasn't any I think what I would say, substantive swings. I think what we've been enduring is, for the most part is related to driver shortages.

And so if we look at our rerouting trips, traditionally driver shortages represent 10% of that number. The number is as high as 22% now. And that plays a role in terms of supply and demand, and I think that's it. And as a result, we've seen some unit cost increases.

The good news is, on all of this, is that the unit cost increases, we think are temporal; that there is opportunity as the network gets healthy again and we've got a large network initiative going on that we believe will drive down the unit cost.

The other thing I'd also like to point out is that Project Storm and Project Lightning are rocking and rolling, and as we've talked about we have a target on that as $100 million. And if I was thinking about the business, I would be focused on those kinds of things that I would describe are in our control.

I also believe though that the unit cost increases that we've seen are something that will resolve themselves, as labor comes back into the workforce. And we've got a pretty strong initiative going on right now with building back our network our network health and I'm confident that that will play a role in also decreasing costs.

So that's where I am on that one.

Do you want to answer the other one, Heath?.

Yeah. Yes. So for utilization, we put in the script just to give some context, from last quarter we're about 20% higher. And then I also said, we're about 20% less than our high point pre-pandemic. Since first quarter that slope has been pretty steady, we actually expect it to increase in this quarter in the fourth quarter but it's been pretty steady.

So I think that slope will stay the same way as it did for Q3, Q4 and probably into Q2. So manageable hopefully, but that's trip volume and utilization on top of Dan's comments around unit cost..

Got it. Okay. Both of those super helpful. I appreciate that. And then, I think, again you gave us a lot which is great. You said you've retained all your contracts and you're bidding on a bunch more.

Can you just give us a sense of the market out there right now and maybe the opportunity ahead of you with potential new contracts?.

Yes. I mean, I would say it's frothy. I mean, I think we're in many respects in a pull position to win these contracts. And some of the things historically Bob that has gotten in the way of our business expectations if you will were around our technology platform. And I'm pretty confident that I can say we've got a best-in-class technology platform now.

And not to mention, we're really the only national provider of services. There really isn't a state that we don't have a significant presence in and as these RFPs roll out I think we're in an excellent position to win them.

And I also would mention that a big part of our business as you know is 50% of it is payer-based and I think our relationships with our payers are pretty exceptional. We've put a lot of effort in there. We've built out an account management team.

We've got a client advisory board that consists of many of our large payer states and hospital systems and they are actively involved in the evolution of the company and advising us on things we need to do to make the company better and the member experience better. So we're -- I think we're really well-positioned.

We haven't gone on record on what the order of magnitude is but I would tell you it's material is what I would say. And again I think we're very well-positioned in those states and with those payer relationships to win many of them.

So I don't know Heath anything else you would add?.

No complete -- we'll know on those this year. The business will come on for those in the latter part of -- mid and latter part of 2022 for the larger ones that are out there right now. But we'll know that and hopefully we'll be able to update you guys next quarter. .

I'd also like to point out I mean there's things also we're doing Bob. I mean if you look at our member experience scores between the 4s and 5s we're at like 90% which if you look at the statistics out there that's on the upper, upper, upper end of member experience so our experience with our members is significant.

I would also say that we put recently together -- I mentioned it but I can't underscore how important this is -- this transportation advisory council. We brought in nine of our transportation providers from around the country. We've never done that before and they're actively involved in how we evolve our relationships with them.

And that's something that I think historically the company had treated as kind of a necessary evil for lack of a better description. I'm a little embarrassed to say that but that's -- I think that's how I would sum it up.

And in fact we're going to be in another part of the country with our ELT off-site next week and every member of the executive leadership team will be spending a morning riding with a transportation provider and then we're all going to collectively get back together and provide feedback.

We also launched a product called Qualtrics where we're -- this week in fact that we're getting real-time feedback from our transportation providers too. And we've got as many as almost 400 -- already 400 examples of where we're getting feedback.

So I guess Bob I guess at the end of the day, I just think we're -- this town-and-down relationship that we've had is being significantly enhanced particularly with the transportation providers transportation provider networks. We're really focused on building out community-based transportation providers.

That I know goes a long way also with our payers. We're in fact launching Transportation University in December where we're bringing in minority business owners from the Illinois area and kind of giving them the playbook on how to be successful.

So I just we've got a lot of great stuff going on here Bob that I think positions us exceptionally well now and well into the future..

Okay, great. That's superb. I'll jump back in queue for follow-up questions. Well thank you very much..

Of course..

Thank you. Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question..

Hey good morning guys. I guess first for you….

Hi Brian..

I know you talked about kind of Q4 expectations.

Just some clarifications there, Q4 expectation the payable settlement in Q4, just any color you can share with us in terms of the guidance effectively for Q4 kind of like puts and takes that we should be thinking about? And then, on the payable settlements like, how do you think any level [Technical Difficulty] fall out in that one?.

Yeah. So from an EBITDA perspective from an NEMT perspective it is fairly flat like I said on the call. And then the other acquisitions that are coming on with VRI and personal care those are going to be performing as expected and as we disclose. And again a good proxy for that is how we disclosed the PTMs for those.

So feel really good about the consistency of the, EBITDA side on all the segments that have come in. Again personal care we'll probably talk about but that continues to be depressed and that's why we're in that high-9s, high-10s range for the next quarter.

And then, to do with the payables and consistent with what we've said before, we -- there's a few large customers within there that makeup a big chunk of the balance. And we expect to pay those -- a chunk of those next quarters as well as through the year.

That being said, with where utilization and trip volume is those payables continue to build as well. So I feel really good about our cash position, similar to when we made these deals. So hopefully that's helpful..

Yeah. It is. Thank you so much for that. I guess my follow-up Dan, as we think about labor everyone's obviously focused on it. But maybe -- and personal care we know the issues there, but as I think about transporting you called out driver shortages.

Maybe if you can help us think through, how -- what the economic structure is of your relationship with your subcontractors effectively? And are they able to pass on to you the cost of labor or is it a set rate and you're having to give them incentives or higher rates just to drive the supply? I mean just any color you can share with us in terms of how that all works.

And how do you think your discussions with them are shaping up in terms of being able to manage through that?.

Yeah. So I think there's, a couple of things here. And I'll let Heath talk about some of the more kind of the other aspects of this as well. But listen I just saw the jobs growth rebounded last month 531,000 jobs in October. So listen that plays a huge role in the type of people we recruit Brian. And so I think there's -- we feel good about that.

I mean again, you've seen it in your restaurants in Nashville and we know that labor shortages were real. But we think that -- and as a result some of the people we historically have done business with had fewer cars available to us. We think that will all rebound and things will get -- we believe will get will get normalized again.

But the bigger picture here for us is that, we're thinking about, how do we get in the position -- and I think COVID has shed light on this for us is -- how do we get in a position so that, we have a if you will, an Amazon type of relationship with their driver network? And so it's more solidified, so that, we can help them extend them lines to credit for purchasing cars, that we have very specific requirements regarding automobiles and requirements.

And moreover, we also know our drivers are very community-based. And so, how do we build the communities we're in as well? And so we think, - like, our vision for where this is going is going to be groundbreaking here Brian. And I think we're figuring this out so that -- I don't -- if something like a COVID happens in the future.

Again, there's no guarantee of what's going to happen with the workforce. But having a tighter partnership with a select group of transportation providers that we're able to build and grow, we believe will be one of the answers in the marketplace going forward. And that's something just as a company we're committed to.

Again, we're a community-based organization. We want to build out minority businesses and we think with this Transportation University and other things the game is going to be changed pretty significantly Brian. So with that, I'll turn it over to Heath on how the pass-throughs work. .

Yeah. So for -- from a rate perspective or a cost perspective, I've expected those to go up and those will be at the right fair rate. I said, CPI for transportation was 4.4% so costs are going to be higher. That's not the issue though.

The issue that we are experiencing now with the shortage is causes people to have to drive farther than they should; last-minute trips to a transportation provider that is not maybe a partner that's more expensive a/k/a surge pricing. So the shortages are causing these inefficient costs to go up.

And then also important and Dan mentioned this, especially as we move forward into this broader partnership -- and again we can do that because we have time to plan. These are not on-demand trips.

So when you have time to plan, we know there's a higher rate increase, but really now, what's really going to make sure that that transportation provider is profitable that they get more volume and more consistent volume and that's where we're moving.

So even though there is this higher wage and we expect it to happen with our model and with where we're moving and because we're able to be digitized, we feel really good to ensure that our transportation providers are healthy, make the margins that they should be making.

And as we come out of COVID and have these new processes in place again we'll be in a really strong spot. .

Yeah. And just Brian another example of this is reroutes. I mean probably 30% of our business right now is reroutes. That number should be under 10%. That is all 100% related to driver shortages. And so these are just examples of things that drive costs drive work.

Also you can also think about until very recently we haven't been able to multiload as well. So that's another example of where again these are COVID-related items that given where we are and what we're doing should under -- should be self-correcting here.

Again, particularly as you start seeing people come back into the labor force and particularly as we continue to evolve our model which is going to be much more partnership-based going forward..

Got it. And then last question from me Dan. You talked about your food strategy and RPM, so just curious the reception you've gotten from payers and your kind of like state partners on that.

And maybe any just color incrementally that you can share with us on the food business that you're partnering with?.

Yeah. I mean I feel really good about it. We've got a national partner. We've got I think the most elegant digital solution out there and our client advisory board has seen it and have commented on. It's more elegant than Uber Eats. And obviously, there's a massive unmet need and we've got -- we're in conversations with two very large national payers.

And we piloted it with one of the payers. We've piloted even with our own teammates and we feel really good about where it is and where it's positioned. Keep in mind Brian, we serve 9% of the US population or 30 million members.

And I don't know if there's another company out there that has that level of concentration around these vulnerable patient populations. And we're going to drive our solutions into those patient populations and that includes food; that includes obviously continue to drive transportation, personal care and remote monitoring.

So we think we're in an excellent position. We've got phenomenal relationships with our top payers. Six payers represent 80% of that 50%. Well five of those are -- represent 80% of the Medicare Advantage market, so you just see the expansion.

Medicare Advantage has the number of plans that are offering food has doubled the last year and we expect it to double again. So Brian, we're just really, really well positioned.

We think we have a superior product that has superior packaging, that has a superior technology platform with a company that's had an extended relationship with 30 million members or 9% of the US population..

Awesome. Thanks guys.

Thank you..

Thank you. Our next question comes from Brian O'Neil with Lake Street Capital Markets. Please proceed with your questions..

Good morning. That's Brooks O'Neil, but I appreciate all the color guys and the thoughtful answers to the good questions from my peers. I have a couple of follow-ups. Dan, you were just talking about M&A -- MA, I'm sorry -- a Medicare Advantage opportunity in the food business.

I'm hoping you might extend the discussion a little bit to the other segments and whether you're gaining traction with MA payers in those other areas..

Yes. So, I would say the answer is unequivocally yes. I mean one of the reasons why we bought National MedTrans -- I know you know this Brooks -- is it represented $50 million of Medicare Advantage business.

And so, there is no -- and again if you start looking at the numbers, the number of plans that are offering NEMT doubled a year ago and doubled again.

And this is becoming kind of the it's moving from de facto to dejure that from a supplemental benefit the transportation business is going to be part of the offering in order for these MA plans to compete. So, feel really, really, really good about that.

Jason is in the room with us and maybe I'll let him talk a little bit about the percent of his business that's already Medicare Advantage and the opportunities there..

Yes. Thanks Dan. So, approximately about 35% of our business is MA business today. We have some -- it continues -- the remote patient monitoring continues to be added as a supplemental benefit in kind of the top 30 MA plans. And today by our estimations, it's approximately nine of those 30 have remote patient monitoring as a supplemental benefit.

And so, we're excited about the future opportunities related to other MA plans expanding those benefits..

And then, Brooks, if you look at the personal care space, what I would say about that is just look at the UnitedHealthcare announcement. The UnitedHealthcare announcement again and I've referenced it several times four months ago -- talked about here are the three things we need to provide our MA members.

Number one is transportation, number two is personal care and number three is food. So, if United's making these moves, you can pretty much guarantee that -- that's a throwback comment there Brooks, but -- you get it. A lot of us won't. But you can pretty much be certain that this is the direction things are going.

On the personal care side Brooks disproportionately the personal care business is weighted to duals. It just is -- I mean as much as 75% of the business could be dual eligibles and some of these people are -- and these are as you know the most expensive patient populations we have.

So there is just massive interest and massive opportunity to bend the cost curve there, improve the quality of care and so we -- again, these things are just so well positioned right now Brooks. And the market is moving.

I don't know if you saw the strategy from CMS recently that just came out and there was a couple of things that just really stood out for us. One, health equity will be embedded in all of CMS and Innovation Centers of work.

And then number two, future models will focus on integrating the whole-person approach and several will likely to include total cost of care approach. And again, Brooks, you start thinking about where we are from a supportive care standpoint there is not a company out there that's better positioned to lead the way on this.

And personal care and remote monitoring and food and transportation are going to play -- continue to play a more significant role in the MA population. And keep in mind Brooks of the -- our top six payers, who represent 80% of our revenue on the payer side of the business, five of those represent 80% of the Medicare Advantage lines.

So, we already have built-in partnerships. This is why this channel that we've been part of for 20 years is such a valuable asset when you also think about what's the total addressable market in the home. And we're putting the railroad tracks down.

And again, there isn't a company that's in a better position to change health outcomes than we are as we move forward..

Absolutely.

Would you say, just following up there and not trying to go too deep, but are the economics related to the MA customer base, and TAM are they better or equal to the economics in the let's call it the Medicaid side for lack of a better term?.

Well, I mean, you just look at – you look at the dollars that are in Medicare Advantage Brooks and that should tell you everything. I mean, you just –.

Right..

And yes, so I think they're either comparable or in some instances a little better..

Yeah. All right. Cool. One more. Appreciate the color. I noticed –.

Interesting data – before Brooks you got it – this is really good stuff. On the remote monitoring piece, just for the record on curves the average length of service is 3.5 years. And on the vitals monitoring, it's two years.

So just think about that from a reoccurring revenue standpoint and just – Jason continues to build on those 170,000 patients that business just continues to stack Brooks. And then on the personal care side, I think the average – the time we care for a patient is around four years.

So again, just thinking about like patient management and how – and ultimately how much more valuable the supportive care side is versus the episodic clinical care side, because the relationships we have with these patients are just far more extensive..

Yeah. No, I think, it's great. I think, it's amazingly exciting and I think you're in the right place at the right time and it's all good. So, I was just curious Heath, I noticed the G&A line was a little bit higher than I was modeling this quarter. I assume, some of that's one-time kind of stock related to acquisitions and whatnot.

But, is there any color or commentary you could offer on the – I think it's $68 million this quarter?.

Yeah, a big chunk of that is the acquisitions, that we made $12 million of acquisition costs in that number. .

Yeah. .

The other build around that is, we're doing investment in technology but as expected..

Okay. Perfect. Thanks so much, guys. Appreciate all the color..

Thank, Brooks..

Thank you..

Our next question comes from Mike Petusky with Barrington Research..

Hey, good morning, guys. A few questions..

Good morning..

Heath, it wasn't clear to me.

The 20% increase in trip volume was that sequential from Q2, or in utilization? Was that sequential from Q2 or was that versus a year ago Q3?.

Versus a year ago. .

Got you. Okay. .

And then, we have 20% to go to be – with pre-pandemic levels..

Yeah, that part of it, I got it. Okay. Excellent. So Dan, obviously you sort of set a big vision out for what meal delivery could mean for you guys.

Just so I have some sense of sort of, how this sort of plays out in the initial quarters, I mean, do you expect to break out meal revenue either in Q4 or in 2022? I mean, will it be material enough to break out?.

I don't think. So I don't think it's going to be material enough over the next 6 months to 12 months I would say that, we won't break it out. And so – but we'll continue to talk about it, and we'll continue to talk to you about who the partners – obviously, there might be some concern about who we share exactly, but we'll be able to talk about it.

I just don't see any reason. If meal reimbursement is $7.50, I just don't see a reason why we couldn't get to one million meals a week. I mean, I just don't. We're going to have to work really hard at it. We're going to have to give it the right level of focus, but that's what I have in mind.

Now that's not going to happen tomorrow, and it's going to be – there'll be a process around it Brooks. But I think that's – again, we feel like we're very, very well positioned as it relates to relationships as it relates to technology and particularly around the quality of food..

Yeah. And Mike, a little more on the timing on, why it's not going to be material in the next six months. The sale process when you get a contract with a state or with, an MCO partner though, it's within a specific state you actually have to sell that into the specific care managers as well.

So very similar to the sales cycle within VRI and personal care and that just takes time. On the other side of it, when you get in there and you get that you're pretty sticky. So even though the -- and Dan talked about the length of time we have with the patient. So, even though it's six months, 12 months, it's going to ramp quickly after that.

And again, it's sticky revenue. And one other point around care managers and this is a really important point and you guys get when you think when we talk about cross-selling. So we don't have baked in and we haven't talked about this and when we made these acquisitions.

The care manager that we are meeting with on food on vitals personal care and remote monitoring is the same care manager. So we can sell into that one care manager. And actually they -- when the RFPs come up, they have it on the list.

So the ability for us in this new sales process with food matching that with VRI, matching that with personal care is really powerful..

Got it. And I did want to make just one comment. It's one thing for the operator to call Brooks Brian, but for you guys to call me, Brooks, is really hitting below the belt. Kidding Brooks. Kidding..

Mike, I got -- I was corrected. My hand was slapped man..

So far -- kidding. Kidding, Brooks. Love you. All right. A couple more. On the personal care business, obviously we all know that the -- and you guys reminded people the pro forma revenue is about $650 million. Obviously, tough environment right now.

If sort of we're looking at a current run rate, I mean is that more like $600 million, $626 million somewhere in there? I mean is that a fair assessment of where that business is now given the headwinds and all the rest?.

Yeah. So you're on, what's the slope coming out of COVID, right? So I think the right way to think about it right now, is pretty flat Q4. And then as we come out of COVID you know the demand -- this is a really hard -- we know there's a demand gap, right? As Dan said, it's anywhere from 10% to 30%. So it's timing that.

Our long-term is the growth that we said. But in this coming out of COVID, what's going to happen in Q2 Q3, it could be a lot higher than we've quoted from a growth perspective, because of the need to meet the pent-up demand..

Yeah. And Mike, the other thing I would say about it -- I mean Brooks -- the other thing -- just kidding. The other thing I would say about it, Mike is like this is a recruiting and retention business. The demand is there. We talk about 10% to 30%. But actually the demand is about 50% over that.

I mean this is how bananas this business is in terms of -- so we're really thinking hard about like how do we supercharge this business on the recruiting side. And I think there's a massive opportunity there, and especially as we come out of pandemic.

And so certainly, we think there'll be a course correction to that depending on the market 10% to 30% but, it's almost like there's no end in sight based on the demand, Mike..

And then also, on that even though in our states that we're in, we're the one or two largest players. We're still relatively small from a percentage of market share. So that's there -- in New York, right? Pennsylvania,.

New Jersey..

New Jersey..

Connecticut..

Yeah, which are some of the largest markets for personal care as a whole. So just echoing Dan's point when we come out and we even do better on recruiting than we have in the past, there's a lot of upside in this business..

Yeah. I mean you can make an argument that the markets alone were in could be a $3 billion to $5 billion business, just the markets we're in right now..

Great. And just a quick question on Matrix, which -- the results there are extraordinarily volatile from my perspective of it.

Can you talk about I mean essentially was a huge part of the spike in profitability there last year sort of related to COVID and we should sort of going forward expect a lot more muted results? I mean can you just talk about expectations there? Because on a quarterly basis man, the results are schizophrenic..

Yean. No, I agree with you on that. I do think there was from a health and wellness piece, from a clinical trials piece, in some respects the assessment piece because the company on -- from a -- had gotten to almost 20% of all their “in-home visits” were being done through telemedicine.

But what we're seeing right now is number one, is the assessment business starting to come back. It's growing again. And they've hired somebody there, a Chief Operating Officer who's running that. I think she's doing a terrific job so I feel good about that. So that's number one.

Number two they saw an opportunity in the areas of clinical trials and they made some big investments. And the challenge with clinical trials, it's a timing issue. The pipeline is full. And in fact of the pipeline opportunities 80% of them are non-COVID-related, which just really I think tells you kind of where the business is going in the future.

And speaking of the future we also know that clinical trials like care, is moving to a less institutionally centered model. So in other words having these nurse practitioners in the home helping do these clinical trials, is the wave right now. And again, they're just -- they're extremely well positioned.

So what I would say, I would describe this as transitory. I don't know ultimately where EBITDA is going to fall out in 2022 but I feel very good about the investments they've made. And yes it's been a little bit of a setback.

I think COVID ran down faster than I think we anticipated so we you kind of hit a we knew a trough was going to happen in some shape or form. But we also knew that they were making the right investments in the areas of clinical testing, clinical trials and the assessment business should continue to be steady. So that's, what I would say.

And we'll have more on that after the fourth quarter, but -- because I think we'll have much more visibility to the clinical trials. But they're -- we're kind of just waiting for the clinical trials to hit and if they hit I think the investments that they've made will bear fruit for quite some time..

Yes. I'll add in the clinical trials, they currently have relatively small contracts with very large companies so that's why these next quarter -- couple of quarters their success around delivering on that is critical. And then they deliver on that, I think there's a big opportunity in the clinical trials space. .

All right. Thank you so much, guys. Really appreciate it..

Yeah. Thank you, Mike..

Thank you. There are no further questions at this time. I would like to turn the floor back over to Dan Greenleaf, for any closing comments. .

Yes. I just have a couple of things. I'm going to go off script a little bit here. One is, listen we beat consensus seven quarters in a row and I just don't want anybody to lose sight of -- and again I didn't feel like anybody was.

But we're building quite a business here and I'm very proud of what we've been able to do during COVID, because we didn't shy. We just didn't get in a position where hey let's just collect cash and -- we went ahead and deployed cash because we realized there was a greater opportunity in front of us.

And we feel like, frankly, whether it be in NEMT or food or personal care or remote monitoring the company has never been better positioned and we're executing on this vision. I look at where the company was in 2019, relative to what I think we'll be able to do by the end of this year. It's incredible and regardless of any way you look at it.

And I would say in many respects, the best is yet to come. And we're -- from my -- maybe because we've been through this extraordinary level of change amidst the great pandemic some things are not always 100% clear.

But I think we've got a lot of clarity right now and we feel very good about where the transportation business headed, where the robotic business, personal care and food and how all those things are going to fit together. And so again, we fundamentally believe -- and I know you guys have heard me -- the best is yet to come.

So with that I want to thank you all for participating on our call this morning. Please reach out to our Investor Relations firm The Equity Group, if you are interested in scheduling a follow up call. We look forward to reporting back to you in February when we release our fourth quarter 2021 financial result. Stay safe and have a wonderful day..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..