ModivCare Inc.
12/29/2025 | Press release | Distributed by Public on 12/29/2025 09:24
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes for the three and six months ended June 30, 2025 and 2024 included herein, as well as our audited consolidated financial statements and accompanying notes and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K"). For purposes of "Management's Discussion and Analysis of Financial Condition and Results of Operations," references to "Q2 2025" and "Q2 2024" mean the three months ended June 30, 2025 and the three months ended June 30, 2024, respectively.
Recent Events
Chapter 11 Cases
On August 20, 2025, we, along with certain of our subsidiaries (in this context, the "Debtors") entered into a Restructuring Support Agreement (the "RSA") with certain creditors, including (a) an ad hoc group of certain first lien lenders (the "Consenting First Lien Lenders") under the Credit Agreement (as defined below) and (b) an ad hoc group of second lien noteholders (the "Consenting Second Lien Noteholders" and together with the Consenting First Lien Lenders, the "Consenting Creditors") of the Second Lien Notes (as defined below). The parties to the RSA have agreed on the principal terms of a proposed financial restructuring of the Company (the "Restructuring"), which includes a pre-arranged joint plan of reorganization of the Company (the "Plan"), to be implemented through the Chapter 11 Cases (defined below). The Plan was confirmed by the Bankruptcy Court on December 15, 2025.
On August 20, 2025 (the "Petition Date"), we commenced voluntary cases (collectively, the "Chapter 11 Cases") under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court") providing for a court-administered reorganization pursuant to the terms of the RSA.
The RSA and the Plan contemplate a comprehensive restructuring of the Company's debt obligations and capital structure and a recapitalization of the Company. Specifically, the RSA, the Restructuring Term Sheet, and the Plan provide, in pertinent part, as follows:
•Certain of the Consenting Creditors providing $100 million in debtor-in-possession financing to fund the Chapter 11 Cases;
•Up to $300 million of takeback term loans upon emergence from chapter 11;
•The conversion of approximately $871 million in principal claims under the Existing First Lien Credit Agreement into $200 million of exit debt and 98% of the reorganized Debtors' pro forma equity, subject to dilution by DIP Backstop Premium (defined below), the management incentive plan, and the New Warrants (defined below);
•The conversion of approximately $316 million in principal claims under the Second Lien Notes Indenture into equity in the reorganized Debtors' pro forma equity, subject to dilution by DIP Backstop Premium, the management incentive plan, and the New Warrants;
•The Holders of Second Lien Notes Claims and other General Unsecured Claims are to receive their pro rata of 2% of the equity in the reorganized Debtors' pro forma equity, subject to dilution by DIP Backstop Premium, the management incentive plan, and the New Warrants;
•The issuance of the Series A Warrants, the Series B Warrants, and the Series C Warrants (as defined in the Restructuring Term Sheet, the "New Warrants") to the Second Lien Noteholders and Holders of General Unsecured Claims;
•The opportunity for certain holders of unsecured claims against the Company (including Second Lien Notes, General Unsecured Claims, and Subordinated Unsecured Claims) to participate in a potential equity rights offering of up to $200 million (the "Equity Rights Offering"); and
•The reorganized Company's entry into a new money revolving credit facility of up to $250 million.
Upon consummation, the Restructuring would affect a significant deleveraging of our capital structure by reducing our total funded debt (including accrued but unpaid interest) by approximately $1.1 billion.
With the approval of the Bankruptcy Court, the Debtors entered into a Superpriority Secured Debtor In Possession Credit Agreement (the "DIP Credit Agreement") with the lenders named therein (the "DIP Lenders"), pursuant to which the DIP Lenders provided a senior secured superpriority priming debtor-in-possession term loan credit facility in an aggregate principal amount of up to $100.0 million (the "DIP Facility"). Borrowings under the DIP Facility are senior secured obligations of the Debtors, secured by a super-priority lien on the collateral under the DIP Facility, which includes substantially all of the Debtors' assets.
All holders of claims arising under the First Lien Loans have been offered the opportunity to participate in and fund their pro rata share of the DIP Facility. Certain of the Consenting First Lien Lenders (the "DIP Backstop Parties") have agreed to backstop and provide the DIP Loans based on the terms set forth in the applicable DIP Backstop Commitment Letter (as defined in the RSA).
The Chapter 11 Cases are being administered under the caption In re: ModivCare Inc. et al., Case No. 25-90309. Information filed with the Bankruptcy Court in connection with the Restructuring is also accessible on the website of our claims and noticing agent at https://www.veritaglobal.net/ModivCare. Such information is not part of this Quarterly Report on Form 10-Q or any other report we file with, or furnish to, the SEC.
Nasdaq Matters
On August 21, 2025, we received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") notifying us that Nasdaq had determined to commence proceedings to delist our common stock, $0.001 par value per share from Nasdaq. Nasdaq reached its decision that we were no longer suitable for listing pursuant to Nasdaq Listing Rules 5101, 5110(b), and IM-5101-1 as a result of our commencement of the Chapter 11 Cases.
In addition, on August 20, 2025, we received a notification letter from Nasdaq notifying us that, because we were delinquent in filing our Quarterly Report on Form 10-Q for the period ended June 30, 2025, we were not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires companies with securities listed on Nasdaq to timely file all required periodic reports with the SEC.
Our common stock was suspended from trading on Nasdaq at the opening of business on August 28, 2025. We did not and do not intend to appeal Nasdaq's decision to delist our common stock. At the opening of business on August 28, 2025, our common stock began being quoted on the Expert Market operated by the OTC Markets Group under the symbol "MODVQ." The Nasdaq Stock Market LLC filed a Form 25-NSE on October 1, 2025 to delist our common stock and to remove it from registration under Section 12(b) of the Exchange Act (as defined herein).
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 3b-6 promulgated thereunder, including statements related to the Chapter 11 Cases, the Company's ability to continue operating its business and implement the Restructuring pursuant to the Chapter 11 Cases, the RSA and the Plan, the Company's strategies or expectations about revenues, liabilities, results of operations, cash flows, ability to fund operations, profitability, ability to consummate a financing or strategic transaction to improve liquidity, ability to continue as a going concern, ability to meet financial covenants, contracts or market opportunities, the trading of the Company's common stock, and the timing of any of the foregoing. These statements are predictive in nature and are frequently identified by the use of terms such as "may," "will," "should," "expect," "believe," "estimate," "intend," and similar words indicating possible future expectations, events or actions. In addition, statements that are not historical statements of fact should also be considered forward-looking statements. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other important factors, many of which are beyond our ability to control or predict, that may cause actual events to be materially different from those expressed or implied herein. Among such risks, uncertainties and other important factors are the following:
•we are subject to risks and uncertainties associated with the Chapter 11 Cases;
•we may not be able to consummate the Plan as outlined in the RSA;
•if the RSA is terminated, our ability to consummate the Plan could be materially and adversely affected;
•the RSA is subject to significant conditions and milestones that may be difficult for us to satisfy;
•operating under chapter 11 may restrict our ability to pursue our business strategies;
•our business could suffer from a long and protracted restructuring;
•as a result of the Chapter 11 Cases, our historical financial information may be volatile and not be indicative of our future financial performance;
•the Chapter 11 Cases have consumed and are expected to continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may experience increased levels of employee attrition;
•if we emerge from bankruptcy, the composition of our Board of Directors may change;
•the Chapter 11 Cases raise substantial doubt regarding our ability to continue as a going concern;
•our cash flows may not provide sufficient liquidity during or after the Chapter 11 Cases;
•we may not have sufficient cash to fund our operations and our emergence costs;
•if the Plan becomes effective, the holders of our existing common stock will be eliminated; and
•the risks described under the caption "Risk Factors" in Part II, Item 1A. of this report and "Risk Factors" in Part I, Item 1A, of our 2024 Form 10-K.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made and are expressly qualified in their entirety by the cautionary statements set forth herein and in our other filings with the Securities and Exchange Commission (the "SEC"), which you should read in their entirety before making an investment decision with respect to our securities. We undertake no obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law.
Overview of Our Business
ModivCare Inc. ("ModivCare" or the "Company") is a technology-enabled healthcare services company that provides a suite of integrated supportive care solutions for public and private payors and their members. Its value-based solutions address the social determinants of health ("SDoH") by connecting members to essential care services. By doing so, ModivCare helps health plans manage risks, reduce costs, and improve health outcomes. ModivCare serves as a provider of non-emergency medical transportation ("NEMT"), personal care services ("PCS"), and in-home monitoring solutions ("Monitoring"), which serve similar, highly vulnerable patient populations. The technology-enabled operating model in its NEMT segment includes the coordination of non-emergency medical transportation services supported by an infrastructure of core competencies in risk underwriting, contact center management, network credentialing and claims management. Additionally, its personal care services in its PCS segment include placements of non-medical personal care assistants, home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting. ModivCare's in-home monitoring solutions in its Monitoring segment include in-home clinical monitoring and quality improvement services that leverage personal emergency response systems, vitals monitoring devices, relationship-based care, and data-driven patient engagement solutions.
ModivCare also holds a 43.6% minority interest in CCHN Group Holdings, Inc. and its subsidiaries, which operates under the Matrix Medical Network brand ("Matrix"). Matrix, which is included in our Corporate and Other segment, maintains a national network of community-based clinicians who deliver in-home and on-site services.
Business Outlook and Trends
Our performance is affected by a number of trends that drive the demand for our services. In particular, the markets in which we operate are exposed to various trends, such as healthcare industry and demographic dynamics. Over the long term, we believe there are numerous factors that could affect demand within the industries in which we operate, including:
•an aging population, which is expected to increase demand for healthcare services including required transportation to such healthcare services, in-home personal care services and monitoring services;
•increasing prevalence of chronic illnesses that require active and ongoing monitoring of health data which can be accomplished at a lower cost and result in better health outcomes through in-home personal care and monitoring services;
•a movement towards value-based care versus fee-for-service and cost plus care and budget pressure on governments, both of which may increase the use of private corporations to provide necessary and innovative services;
•increasing demand for in-home care, driven by cost pressures on traditional reimbursement models and technological advances enabling remote member engagement, including in-home clinical monitoring and similar internet-based health related services;
•a shift in membership dynamics as a result of Medicaid redetermination efforts, which have and may continue to decrease membership levels at our NEMT segment;
•advancement of regulatory priorities, which include the Centers for Medicare & Medicaid Services ("CMS") final rule, Ensuring Access to Medicaid Services, which, in six years, requires states to generally ensure that a minimum of 80.0% of Medicaid payments are used toward compensation for direct care workers, which may lower profit margins at our PCS segment;
•the impact of the recently enacted reconciliation bill, commonly referred to as the "One Big Beautiful Bill Act" (the "OBBBA"), which introduces significant reforms to Medicare Advantage and Medicaid, including new limits on supplemental benefits and stricter value-based reimbursement criteria and these changes may reduce plan flexibility to cover non-medical services and constrain reimbursement rates. Any reduction in funding, increased regulatory oversight, or shift in benefit design could adversely affect our ability to deliver cost-effective services, limit access for beneficiaries, and negatively impact our revenue and profitability.
•technological advancements, which may be utilized by us to improve services and lower costs, but may also be utilized by others, which may increase industry competitiveness;
•managed care organizations ("MCOs") and Medicaid plans increasing coverage of non-emergency medical transportation services for a variety of reasons, including increased access to care, improved patient compliance with treatment plans, social trends, and to promote SDoH, and this trend may be accelerated or reinforced by The Consolidated Appropriations Act of 2021 ("H.R.133"), a component of which mandates that state Medicaid programs ensure that Medicaid beneficiaries have necessary transportation to and from health care providers;
•reimbursement rates for Medicare Advantage and Medicaid plans, which impact whether NEMT services are provided as a supplemental benefit;
•macroeconomic conditions, including the impact of inflationary matters and changes in interest rates, which may impact the industries in which we operate and our customers' ability to utilize the services we and our competitors provide; and
•extended collection periods, which may cause uncertainty concerning the timing of the collection of outstanding contract receivables with some customers due to complexities in Medicare, Medicaid, and nongovernmental payor arrangements.
Adverse economic conditions, including high inflation rates, high interest rates, labor shortages, volatility in capital markets and recession risks, have had and could continue to have an adverse effect on our business, results of operations, and financial condition. For the NEMT segment, this exposes us to cost containment risk as labor costs and trip costs are rising at a higher rate than reimbursement, which results in lower profit margins than previously reported. The increase in costs is driven, in part, by headwinds from the current macroeconomic environment which limit the NEMT segment's ability to provide services at a reasonable cost to achieve historic profit margins. For the PCS segment, the labor shortage, particularly related to availability of healthcare workers including caregivers, will continue to impact the volume of care hours that can be provided while also driving increased wage rates, which limits our ability to be profitable in contracts with set reimbursement rates for various care services. Any of these circumstances and factors could have a material adverse impact on our reputation and business and any long-term macroeconomic impacts that have arisen could continue to create ongoing challenges for our business.
Our business environment is competitive, the healthcare industry's regulatory requirements are increasingly complex, and the labor market for healthcare professionals remains constrained. In addition, we are subject to risks and uncertainties associated with the Chapter 11 Cases, including the impact on our liquidity, cash balances, and our limited ability to pursue growth strategies. The continuing effect of all or any of the foregoing could result in, in future periods, an impairment to the estimated fair value of the goodwill that has been established for our reporting units. Further, recently enacted legislation-commonly referred to as the "OBBBA"-presents additional risk of decreased membership within our current payor base. This, in turn, could reduce the fair value of our payor network intangible assets in future periods. These assets, however, are not currently considered impaired due to ongoing uncertainty regarding the legislation's long-term industry impact. As discussed elsewhere herein and under the caption "Risk Factors" in our 2024 Form 10-K, impairment tests may be required in addition to the annual impairment testing that occurs on July 1st of each year if circumstances change that would, more likely than not, reduce the fair value of goodwill of a reporting unit below such reporting unit's carrying value, or reduce the value of the payor network intangible assets below their carrying value. We monitor the performance of the business and the value of our stock price and estimated fair values of our reporting units and monitor for additional details around legislative impacts of the OBBBA for clarity on the impact to our business, among other relevant considerations, to determine if any impairments to goodwill or intangible assets could exist at any particular time. During the second quarter of 2025, we determined that based on our qualitative assessment for each reporting unit, factors existed which required us to test our goodwill for impairment. These factors included a decline in market price of the Company's common stock and lower than anticipated operating results during the first half of 2025. As a result of our quantitative assessment during the second quarter of 2025, we determined that the goodwill at our PCS and Monitoring reporting units was impaired. See Note 7, Goodwill and Intangible Assets, for additional details. The enterprise value range accepted by the Bankruptcy Court for the Chapter 11 restructuring is $750.0 million to $925.0 million and management estimated the Company's enterprise value within that range as part of the goodwill impairment assessment. Although our estimate is within this range, enterprise value is subject to estimation uncertainty due to the ongoing bankruptcy process and variables that will be refined in connection with fresh start accounting. The final enterprise value determined upon emergence may differ from our current estimate and could affect the resulting goodwill measurement.
Components of Results of Operations
Revenues
Service revenue, net. Service revenue for our NEMT segment includes the revenue generated by providing non-emergency medical transportation services directly to our customers. These services are provided on either a capitated basis, which means we are paid on a per-member, per-month ("PMPM") basis for each eligible member, or on a fee-for-service ("FFS") basis, which means we are paid based on the volume of trips or services performed. Payment for our NEMT services is received from third-party payors, predominately made up of state Medicaid agencies and MCOs.
Our capitated contracts operate under either a full-risk or a shared-risk structure. Under full-risk contracts, payors pay a fixed amount per eligible member per month and we assume the responsibility of meeting the covered healthcare related transportation requirements for the number of eligible members in the payor's program. Under this structure, we assume the full-risk for the costs associated with arranging transportation of members through our network of independent transportation providers. Revenue is recognized based on the number of eligible members served during the period. Under shared-risk contracts, we have provisions for reconciliations, risk corridors, and/or profit rebates. These contracts allow for periodic reconciliations based on actual cost and/or trip volume and may result in refunds to the payor (contract payables), or additional payments due from the payor (contract receivables) based on the provisions contractually agreed upon. These shared-risk contracts also allow for margin stabilization, as generally the amount received PMPM is adjusted for the costs to provide the transportation services. Under both contract structures, we arrange for transportation of members through our network of
independent transportation providers, whereby we negotiate rates and remit payment to the transportation providers. However, for certain contracts, we assume no risk for the transportation network, credentialing and/or payments to these providers. For these contracts, we only provide administrative management services to support the customers' efforts to serve their clients.
Under FFS contracts, payors pay a specified amount for each service that we provide based on costs incurred plus an agreed-upon margin. FFS revenue is recognized in the period in which the services are rendered and is reduced by the estimated impact of contractual allowances.
Service revenue for our PCS segment includes the revenue generated based on the hours incurred by our in-home caregivers to provide services to our customers, primarily on a FFS basis in which we earn a specified amount for each service that we provide. Payment for our PCS services is billed to third-party payors which include, but are not limited to, MCOs, Medicaid agencies and programs and other home health care providers who subcontract the services of our caregivers to their patients, and individuals.
Service revenue for our Monitoring segment includes the sale of monitoring equipment to our third-party distributors as well as revenue generated from the hours incurred by our Clinical Team for providing monitoring services to our customers, primarily on a PMPM basis for each eligible member. Payment for our monitoring services is billed to third-party payors which include, but are not limited to, national and regional health plans, government-funded benefit programs, healthcare provider organizations, and individuals.
Operating Expenses
Service expense. Service expense for our NEMT segment includes purchased transportation, operational payroll and other operational related costs. Purchased transportation includes the amounts we pay to third-party service providers and is typically dependent upon service volume. Operational payroll predominately includes our contact center operations, customer advocacy and transportation network team. Other operating expenses primarily include operational overhead costs, and operating facilities and related charges. Service expense for our PCS segment includes payroll and other operational related costs for our caregivers to provide in-home care. Service expense for our Monitoring segment primarily consists of salaries of employees in our contact centers, connectivity costs and occupancy costs.
General and administrative expense. General and administrative expense for all segments consists principally of salaries for administrative employees that support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.
Depreciation and amortization expense. Depreciation within this caption includes infrastructure items such as computer hardware and software, office equipment, monitoring and vitals equipment, buildings, and leasehold improvements. Amortization expense is generated primarily from amortization of our intangible assets, including payor networks, trade names and developed technology.
Impairment of goodwill. We determined that based on our qualitative assessment for each reporting unit, factors existed which required us to test our goodwill for impairment. As a result of such impairment test, we determined that the goodwill within both our PCS and Monitoring reporting units were impaired during the second quarter of 2025 and that the goodwill within our Monitoring reporting unit was impaired during the second quarter of 2024.
Other Expenses (Income)
Interest expense, net. Interest expense consists principally of interest accrued during the period ended June 30, 2025 on our 2029 Notes, Second Lien Notes, Term Loan Facility, Incremental Term Loan and borrowings outstanding under our Revolving Credit Facility and amortization of deferred financing fees related to these borrowings. Refer to the "Liquidity and Capital Resources" section below for further discussion of these borrowings.
Equity in net income (loss) of investee, net of tax. Equity in earnings of equity method investee consists of our proportionate share of equity earnings or losses from our Matrix equity investment held at our Corporate and Other segment, presented net of related taxes, as well as the earnings of our insurance captive held at the NEMT segment, presented net of related taxes.
Income tax benefit (provision). We are subject to federal taxation in the United States and state taxation in the various jurisdictions in which we operate.
Segment Reporting
Our segments reflect the manner in which our operations are organized and reviewed by management. Segment results are based on how our CODM manages our business, makes operating decisions and evaluates operating performance.
We operate four reportable business segments: NEMT, PCS, Monitoring, and Corporate and Other. The NEMT segment provides non-emergency medical transportation services throughout the country. The PCS segment provides non-medical personal care and home health services. The Monitoring segment provides in-home monitoring solutions. The Corporate and Other segment includes the costs associated with our corporate operations and as such, includes activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of an investment in innovation that we completed during the first quarter of 2023. The operating results of the NEMT, PCS and Monitoring segments include revenue and expenses generated and incurred by the segment, and the Corporate and Other segment includes expenses incurred in relation to our Corporate operations as well as certain service revenue and operating expenses associated with the investment in innovation discussed above.
See Note 3, Segments, in our accompanying unaudited condensed consolidated financial statements for further information on our segments.
Results of Operations
Q2 2025 compared to Q2 2024
Consolidated results.The following table sets forth results of operations and the percentage of consolidated total Service revenue, net represented by items in our unaudited condensed consolidated statements of operations for Q2 2025 and Q2 2024 (in thousands):
| Three months ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Amount |
% of Revenue
|
Amount |
% of Revenue
|
||||||||||||||||||||
| Service revenue, net | $ | 659,553 | 100.0 | % | $ | 698,299 | 100.0 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Service expense | 570,647 | 86.5 | % | 588,100 | 84.2 | % | |||||||||||||||||
| General and administrative expense | 70,581 | 10.7 | % | 76,065 | 10.9 | % | |||||||||||||||||
| Depreciation and amortization | 23,414 | 3.5 | % | 27,752 | 4.0 | % | |||||||||||||||||
| Impairment of goodwill | 263,394 | 39.9 | % | 105,302 | 15.1 | % | |||||||||||||||||
|
Total operating expenses
|
928,036 | 140.7 | % | 797,219 | 114.2 | % | |||||||||||||||||
|
Operating loss
|
(268,483) | (40.7) | % | (98,920) | (14.2) | % | |||||||||||||||||
| Interest expense, net | 37,109 | 5.6 | % | 19,950 | 2.9 | % | |||||||||||||||||
|
Loss before income taxes and equity method investment
|
(305,592) | (46.3) | % | (118,870) | (17.0) | % | |||||||||||||||||
|
Income tax provision
|
(76) | - | % | (9,558) | (1.4) | % | |||||||||||||||||
|
Equity in net income (loss) of investee, net of tax
|
1,979 | 0.3 | % | (456) | (0.1) | % | |||||||||||||||||
| Net loss | $ | (303,689) | (46.0) | % | $ | (128,884) | (18.5) | % | |||||||||||||||
Service revenue, net. Consolidated service revenue, net, for Q2 2025 decreased $38.7 million, or 5.5%, compared to Q2 2024. Service revenue, net decreased $17.3 million for our NEMT segment, decreased $19.7 million for our PCS segment, and decreased $1.5 million for our Monitoring segment. The remaining change was related to our Corporate and Other segment. See our Results of Operations - Segments, for further discussion of the revenue drivers at each respective segment.
Service expense.Service expense components are shown below (in thousands):
| Three months ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Amount | % of Service Revenue | Amount | % of Service Revenue | ||||||||||||||||||||
| Purchased services | $ | 376,640 | 57.1 | % | $ | 372,579 | 53.4 | % | |||||||||||||||
| Payroll and related costs | 174,717 | 26.5 | % | 194,907 | 27.9 | % | |||||||||||||||||
| Other service expenses | 19,290 | 2.9 | % | 20,614 | 3.0 | % | |||||||||||||||||
| Total service expense | $ | 570,647 | 86.5 | % | $ | 588,100 | 84.2 | % | |||||||||||||||
Service expense for Q2 2025 decreased $17.5 million, or 3.0%, compared to Q2 2024. Service expense at our NEMT segment decreased $0.4 million, service expense at our PCS segment decreased $16.3 million and service expense at our Monitoring segment decreased $0.7 million. The remaining change was related to our Corporate and Other segment. See our Results of Operations - Segments, for further discussion.
General and administrative expense.General and administrative expense for Q2 2025 decreased $5.5 million, or 7.2%, compared to Q2 2024. General and administrative expense at our NEMT segment decreased $3.9 million, at our PCS segment decreased $2.0 million, and at our Monitoring segment decreased by an immaterial amount. These decreases were partially offset by an increase in general and administrative expense at our Corporate and Other segment of $0.5 million. General and
administrative expense, expressed as a percentage of service revenue, net decreased to 10.7% for Q2 2025 compared to 10.9% for Q2 2024. See our Results of Operations - Segments, for further discussion.
Depreciation and amortization.Depreciation and amortization decreased $4.3 million, or 15.6% in Q2 2025 as compared to Q2 2024, primarily related to certain intangible assets being fully amortized during the second half of 2024.
Impairment of goodwill. Impairment of goodwill for Q2 2025 and Q2 2024 was $263.4 million and $105.3 million, respectively, and was driven by goodwill impairment charges recorded at both our PCS and Monitoring reporting units during Q2 2025 and at our Monitoring reporting unit during Q2 2024 as a result of our quantitative goodwill impairment test. See Note 7, Goodwill and Intangible Assets.
Interest expense, net.Interest expense, net, for Q2 2025 increased by $17.2 million, or 86.0%, compared to Q2 2024. The increase in interest expense was attributable to both the addition of new debt facilities and the higher interest rates associated with those facilities, relative to those in place during the prior period. Although we extinguished the 2025 Notes, overall interest expense remained elevated due to the issuance of the Second Lien Notes, the Term Loan Facility, and the Incremental Term Loan. Notably, the 2025 Notes carried a lower interest rate of 5.875%, whereas the Second Lien Notes bear a higher rate of 10.0%, reflecting our election to pay interest through payment-in-kind (PIK), whereby interest is added to the loan principal rather than paid in cash. All interest expense was recorded within the Corporate and Other segment. The interest expense on each respective debt facility for the Q2 2025 and Q2 2024 periods is included in the table below (in thousands):
|
Three months ended June 30,
|
|||||||||||
| 2025 | 2024 | ||||||||||
|
2025 Notes
|
$ | - | $ | 8,114 | |||||||
|
2029 Notes
|
3,049 | 6,641 | |||||||||
|
Second Lien Notes
|
8,139 | - | |||||||||
|
Term Loan Facility
|
13,340 | - | |||||||||
|
Incremental Term Loan
|
5,645 | - | |||||||||
|
Revolving Credit Facility
|
6,936 | 5,195 | |||||||||
|
Total interest expense, net
|
$ | 37,109 | $ | 19,950 | |||||||
Equity in net income (loss) of investee, net of tax.Our equity in net income of investee, net of tax, for Q2 2025 of $2.0 million and our equity in net loss of investee, net of tax, of $0.5 million for Q2 2024 was a result of our proportional share of the net income or loss of Matrix and our investment in a captive insurance program.
Income tax (provision) benefit.Our income tax provision for Q2 2025 and Q2 2024 resulted in an effective tax rate of negative 0.0% and 8.0%, respectively. For Q2 2025, the effective tax rate differed from the U.S. federal statutory rate, primarily due to various tax credits, increased reserves on deferred tax assets, nondeductible expenses, changes to the valuation allowance and the nondeductible portion of the goodwill impairment. For Q2 2024, the effective tax rate differed from the U.S. federal statutory rate primarily due to various tax credits, increased reserves on deferred tax assets, nondeductible expenses, and the nondeductible goodwill impairment.
Six months ended June 30, 2025 compared to Six months ended June 30, 2024
Consolidated results.The following table sets forth results of operations and the percentage of consolidated total Service revenue, net represented by items in our unaudited condensed consolidated statements of operations for the six months ended June 30, 2025, which we refer to as "YTD 2025", and for the six months ended June 30, 2024, which we refer to as "YTD 2024" (in thousands):
| Six months ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Amount | % of Service Revenue | Amount | % of Service Revenue | ||||||||||||||||||||
| Service revenue, net | $ | 1,310,207 | 100.0 | % | $ | 1,382,750 | 100.0 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Service expense | 1,123,635 | 85.8 | % | 1,171,666 | 84.7 | % | |||||||||||||||||
| General and administrative expense | 149,170 | 11.4 | % | 153,242 | 11.1 | % | |||||||||||||||||
| Depreciation and amortization | 46,933 | 3.6 | % | 54,855 | 4.0 | % | |||||||||||||||||
| Impairment of goodwill | 263,394 | 20.1 | % | 105,302 | 7.6 | % | |||||||||||||||||
|
Total operating expenses
|
1,583,132 | 120.8 | % | 1,485,065 | 107.4 | % | |||||||||||||||||
| Operating loss | (272,925) | (20.8) | % | (102,315) | (7.4) | % | |||||||||||||||||
| Interest expense, net | 75,946 | 5.8 | % | 38,636 | 2.8 | % | |||||||||||||||||
|
Loss before income taxes and equity method investment
|
(348,871) | (26.6) | % | (140,951) | (10.2) | % | |||||||||||||||||
|
Income tax provision
|
(3,623) | (0.3) | % | (9,015) | (0.7) | % | |||||||||||||||||
|
Equity in net loss of investee, net of tax
|
(1,572) | (0.1) | % | (1,218) | (0.1) | % | |||||||||||||||||
| Net loss | $ | (354,066) | (27.0) | % | $ | (151,184) | (10.9) | % | |||||||||||||||
Service revenue, net.Consolidated service revenue, net, for YTD 2025 decreased $72.5 million, or 5.2%, compared to YTD 2024. This change was the result of a decrease in revenue of $47.6 million at our NEMT segment, a decrease in revenue of $21.5 million at our PCS segment, and a decrease in revenue of $3.5 million at our Monitoring segment. The remaining change was related to our Corporate and Other segment. See our Results of Operations - Segments, for further discussion.
Service expense.Service expense components are shown below (in thousands):
| Six months ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Amount |
% of Service Revenue
|
Amount |
% of Service Revenue
|
||||||||||||||||||||
| Purchased services | $ | 720,758 | 55.0 | % | $ | 735,479 | 53.2 | % | |||||||||||||||
| Payroll and related costs | 364,276 | 27.8 | % | 394,469 | 28.5 | % | |||||||||||||||||
| Other service expenses | 38,601 | 2.9 | % | 41,718 | 3.0 | % | |||||||||||||||||
| Total service expense | $ | 1,123,635 | 85.8 | % | $ | 1,171,666 | 84.7 | % | |||||||||||||||
Service expense for YTD 2025 decreased $48.0 million, or 4.1%, compared to YTD 2024. Service expense at our NEMT segment decreased $28.0 million, service expense at our PCS segment decreased $18.2 million, and service expense at our Monitoring segment decreased $1.4 million. See our Results of Operations - Segments, for further discussion.
General and administrative expense.General and administrative expense for YTD 2025 decreased $4.1 million, or 2.7%, compared to YTD 2024. General and administrative expense at our NEMT segment decreased $7.9 million, at our PCS segment decreased $3.9 million, and at our Monitoring segment decreased by an immaterial amount. These decreases were partially offset by an increase in general and administrative expense at our Corporate and Other segment of $7.9 million. General and administrative expense, expressed as a percentage of service revenue, net increased to 11.4% for YTD 2025 compared to 11.1% for YTD 2024. See our Results of Operations - Segments, for further discussion.
Depreciation and amortization.Depreciation and amortization decreased $7.9 million, or 14.4% in YTD 2025 as compared to YTD 2024, primarily related to certain intangible assets being fully amortized during the second half of 2024.
Impairment of goodwill. Impairment of goodwill for YTD 2025 and YTD 2024 was $263.4 million and $105.3 million, respectively, and was driven by goodwill impairment charges that were recorded at both our PCS and Monitoring reporting units during YTD 2025 and at our Monitoring reporting unit during YTD 2024, as a result of our quantitative goodwill impairment test. See Note 7, Goodwill and Intangible Assets.
Interest expense, net.Interest expense, net for YTD 2025 increased by $37.3 million, or 96.6%, compared to YTD 2024. The increase in interest expense was attributable to both the addition of new debt facilities and the higher interest rates associated with those facilities, relative to those in place during the prior period. Although we extinguished the 2025 Notes, overall interest expense remains elevated due to the issuance of the Second Lien Notes, the Term Loan Facility, and the Incremental Term Loan. Interest expense was recorded at our Corporate and Other segment. The interest expense on each respective debt facility for the YTD 2025 and YTD 2024 periods is included in the table below (in thousands):
|
Six months ended June 30,
|
|||||||||||
| 2025 | 2024 | ||||||||||
|
2025 Notes
|
$ | - | $ | 16,216 | |||||||
|
2029 Notes
|
8,772 | 13,272 | |||||||||
|
Second Lien Notes
|
16,004 | - | |||||||||
|
Term Loan Facility
|
26,610 | - | |||||||||
|
Incremental Term Loan
|
10,753 | - | |||||||||
|
Revolving Credit Facility
|
13,807 | 9,148 | |||||||||
|
Total interest expense, net
|
$ | 75,946 | $ | 38,636 | |||||||
Equity in net income (loss) of investee, net of tax.Our equity in net loss of investee, net of tax for YTD 2025 of $1.6 million and our equity in net loss of investee, net of tax for YTD 2024 of $1.2 million was a result of our proportional share of the net income or loss of Matrix and our investment in a captive insurance program.
Income tax benefit (provision).Our income tax provision for YTD 2025 and YTD 2024 resulted in an effective tax rate of negative 1.0% and 6.4%, respectively. The YTD 2025 effective tax rate differed from the U.S. federal statutory rate, primarily due to various tax credits, increased reserves on deferred tax assets, nondeductible expenses, changes to the valuation allowance and the nondeductible portion of the goodwill impairment. The YTD 2024 effective tax rate differed from the U.S. federal statutory rate primarily due to various tax credits, increased reserves on deferred tax assets, nondeductible expenses, and the nondeductible goodwill impairment.
Results of Operations - Segments
The following tables set forth certain financial information attributable to our business segments for the three and six months ended June 30, 2025 and 2024:
NEMT Segment
(in thousands, except for revenue per member per month, revenue per trip, and service expense per trip)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Operating Results | |||||||||||||||||||||||||||||||||||||||||||||||
| Service revenue, net | $ | 473,335 | 100.0% | $ | 490,677 | 100.0% | $ | 922,342 | 100.0% | $ | 969,983 | 100.0% | |||||||||||||||||||||||||||||||||||
| Service expense | 427,569 | 90.3% | 427,956 | 87.2% | 823,583 | 89.3% | 851,613 | 87.8% | |||||||||||||||||||||||||||||||||||||||
| General and administrative expense | 29,217 | 6.2% | 33,123 | 6.8% | 57,001 | 6.2% | 64,943 | 6.7% | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 7,579 | 1.6% | 7,598 | 1.5% | 15,135 | 1.6% | 14,957 | 1.5% | |||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 8,970 | 1.9% | $ | 22,000 | 4.5% | $ | 26,623 | 2.9% | $ | 38,470 | 4.0% | |||||||||||||||||||||||||||||||||||
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Business Metrics(1)
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| Total paid trips | 9,036 | 9,031 | 17,494 | 17,839 | |||||||||||||||||||||||||||||||||||||||||||
| Average monthly members | 23,849 | 29,703 | 23,702 | 29,387 | |||||||||||||||||||||||||||||||||||||||||||
| Revenue per member per month | $ | 6.62 | $ | 5.51 | $ | 6.49 | $ | 5.50 | |||||||||||||||||||||||||||||||||||||||
| Revenue per trip | $ | 52.38 | $ | 54.33 | $ | 52.72 | $ | 54.37 | |||||||||||||||||||||||||||||||||||||||
| Service expense per trip | $ | 47.32 | $ | 47.39 | $ | 47.08 | $ | 47.74 | |||||||||||||||||||||||||||||||||||||||
| Utilization | 12.6 | % | 10.1 | % | 12.3 | % | 10.1 | % | |||||||||||||||||||||||||||||||||||||||
(1) These metrics are key performance indicators that management uses to evaluate our performance. Trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and understand the underlying drivers of costs and revenue for our business. We believe these metrics are useful to investors in evaluating and understanding our business but should not be used solely in assessing our performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole.
Our NEMT segment is the largest manager of non-emergency medical transportation programs for state governments and MCOs in the U.S.
Service revenue, net.Service revenue, net, decreased $17.3 million, or 3.5%, as compared to Q2 2024 and decreased $47.6 million, or 4.9%, in YTD 2025 as compared to YTD 2024. The decrease in service revenue, net, during both periods was related to a decrease in revenue per trip by 3.6% during Q2 2025 as compared to Q2 2024 and by 3.0% during YTD 2025 as compared to YTD 2024. For Q2 2025 as compared to Q2 2024, total paid trips increased by 0.1% and for YTD 2025 as compared to YTD 2024, total paid trips decreased by 1.9%. For Q2 2025 as compared to Q2 2024 and for YTD 2025 as compared to YTD 2024, there was a decrease in average monthly members of 19.7% and 19.3%, respectively. While average monthly membership decreased for the QTD and YTD periods, the revenue received per member per month increased by 20.1% and 18.0% over the same periods, which partially offset the decrease to revenue during both 2025 periods.
The change in average monthly members was correlated to the change in revenue because a majority of our contracts are capitated, and we receive monthly payments on a per member per month basis in return for full or shared-risk of transportation volumes. Declines in membership over the periods presented were anticipated and related to Medicaid redetermination, along with certain contract losses. While membership decreased, revenue had an offsetting increase due to
increases in the average rate received per member, which increases in line with increases in utilization for certain shared-risk contracts.
Service expense.Service expense for our NEMT segment primarily consists of purchased services, which are costs paid to our third party transportation providers, and payroll and related costs, which consist of salaries of employees within our contact centers and operations centers. Other service expenses include occupancy costs related to our contact centers. Service expense components for the NEMT segment are shown below (in thousands):
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Purchased services | $ | 376,640 | 79.6 | % | $ | 372,579 | 75.9 | % | $ | 720,758 | 78.1 | % | $ | 735,479 | 75.8 | % | |||||||||||||||||||||||||||||||
| Payroll and related costs | 38,697 | 8.2 | % | 42,619 | 8.7 | % | 78,555 | 8.5 | % | 90,777 | 9.4 | % | |||||||||||||||||||||||||||||||||||
| Other service expenses | 12,232 | 2.6 | % | 12,758 | 2.6 | % | 24,270 | 2.6 | % | 25,357 | 2.6 | % | |||||||||||||||||||||||||||||||||||
| Total service expense | $ | 427,569 | 90.3 | % | $ | 427,956 | 87.2 | % | $ | 823,583 | 89.3 | % | $ | 851,613 | 87.8 | % | |||||||||||||||||||||||||||||||
Service expense decreased $0.4 million, or 0.1%, for Q2 2025 as compared to Q2 2024, primarily related to a decrease in payroll and related costs and other service expenses of $4.4 million, or 8.0%, as compared to Q2 2024, partially offset by an increase in purchased services expense of $4.1 million, or 1.1% as compared to Q2 2024. The decrease in payroll and related costs and other service expenses was the result of ongoing cost optimization and digitization efforts in our contact centers as a result of initiatives that were launched in 2024. Service expense decreased $28.0 million, or 3.3%, for YTD 2025 as compared to YTD 2024, primarily related to a decrease in purchased services expense of $14.7 million, or 2.0%, paired with a decrease in payroll and related costs and other service expenses of $13.3 million, or 11.5%. The decrease in purchased services expense during YTD 2025 was partially driven by the 1.9% decrease in trip volume as compared to YTD 2024. The decrease in payroll and related costs over the period was the result of ongoing cost optimization and digitization efforts in our contact centers as a result of initiatives that were launched in 2024.
General and administrative expense.General and administrative expense primarily consists of salaries for administrative employees that support the operations of the NEMT segment, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense decreased $3.9 million, or 11.8%, for Q2 2025 compared to Q2 2024 and decreased $7.9 million, or 12.2%, for YTD 2025 as compared to YTD 2024. The decrease was primarily related to lower salaries and personnel expenses for administrative employees as a result of continued efforts to improve operational efficiency.
Depreciation and amortization expense.Depreciation and amortization expense remained consistent during both Q2 2025 and YTD 2025 as compared to Q2 2024 and YTD 2024, respectively.
PCS Segment
(in thousands, except service revenue per hour and service expense per hour)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Operating Results | |||||||||||||||||||||||||||||||||||||||||||||||
| Service revenue, net | $ | 166,888 | 100.0% | $ | 186,610 | 100.0% | $ | 348,675 | 100.0% | $ | 370,178 | 100.0% | |||||||||||||||||||||||||||||||||||
| Service expense | 133,615 | 80.1% | 149,866 | 80.3% | 281,133 | 80.6% | 299,304 | 80.9% | |||||||||||||||||||||||||||||||||||||||
| General and administrative expense | 21,857 | 13.1% | 23,897 | 12.8% | 44,441 | 12.7% | 48,329 | 13.1% | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 9,352 | 5.6% | 12,793 | 6.9% | 18,786 | 5.4% | 25,588 | 6.9% | |||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill | 211,780 | 126.9% | - | -% | 211,780 | 60.7% | - | -% | |||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | (209,716) | (125.7)% | $ | 54 | -% | $ | (207,465) | (59.5)% | $ | (3,043) | (0.8)% | |||||||||||||||||||||||||||||||||||
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Business Metrics(1)
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| Total hours | 6,253 | 7,048 | 13,071 | 14,013 | |||||||||||||||||||||||||||||||||||||||||||
| Service revenue per hour | $ | 26.69 | $ | 26.48 | $ | 26.68 | $ | 26.42 | |||||||||||||||||||||||||||||||||||||||
| Service expense per hour | $ | 21.37 | $ | 21.26 | $ | 21.51 | $ | 21.36 | |||||||||||||||||||||||||||||||||||||||
(1) These metrics are key performance indicators that management uses to evaluate our performance. Trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and understand the underlying drivers of costs and revenue for our business. We believe these metrics are useful to investors in evaluating and understanding our business but should not be used solely in assessing our performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole.
Our PCS segment's services include placements of non-medical personal care assistants and home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting, including senior citizens and disabled adults.
Service revenue, net. PCS contracts are generally structured as fee-for-service contracts, with revenue driven by the number of hours worked by our personal care providers. Service revenue, net, decreased $19.7 million, or 10.6%, for Q2 2025, as compared to Q2 2024, primarily due to 11.3% lower hours worked by personal care providers during Q2 2025 as compared to Q2 2024. Service revenue, net, decreased by $21.5 million, or 5.8%, for YTD 2025 as compared to YTD 2024, primarily due to 6.7% lower hours worked by personal care providers during YTD 2025 as compared to YTD 2024.
Service expense.Service expense for our PCS segment primarily consists of wages for our employees who provide personal care services and it typically trends with the number of hours worked and cost per hour of service. Service expense components for the PCS segment are shown below (in thousands):
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Payroll and related costs | $ | 131,429 | 78.8 | % | $ | 147,938 | 79.3 | % | $ | 276,764 | 79.4 | % | $ | 294,791 | 79.6 | % | |||||||||||||||||||||||||||||||
| Other service expenses | 2,186 | 1.3 | % | 1,928 | 1.0 | % | 4,369 | 1.3 | % | 4,513 | 1.2 | % | |||||||||||||||||||||||||||||||||||
| Total service expense | $ | 133,615 | 80.1 | % | $ | 149,866 | 80.3 | % | $ | 281,133 | 80.6 | % | $ | 299,304 | 80.9 | % | |||||||||||||||||||||||||||||||
Service expense for Q2 2025 decreased $16.3 million, or 10.8%, as compared to Q2 2024, primarily as a result of a decrease in payroll and related costs of $16.5 million, or 11.2%, as a result of the 11.3% decrease in hours of service provided
by our personal care providers during Q2 2025 as compared to Q2 2024. Service expense for YTD 2025 decreased by $18.2 million, or 6.1%, as compared to YTD 2024, primarily as a result of a decrease in payroll and related costs of $18.0 million, or 6.1%, as a result of the 6.7% decrease in hours of service provided by our personal care providers during YTD 2025 as compared to YTD 2024.
General and administrative expense.General and administrative expense primarily consists of salaries for administrative employees that support the operations of the PCS segment, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense decreased $2.0 million, or 8.5%, for Q2 2025 as compared to Q2 2024 and general and administrative expense decreased by $3.9 million, or 8.0%, for YTD 2025 as compared to YTD 2024. The decreases are primarily related to lower salaries and personnel expenses for administrative employees as a result of continued efforts to improve operational efficiency.
Depreciation and amortization expense. Depreciation and amortization expense for Q2 2025 decreased by $3.4 million, or 26.9%, as compared to Q2 2024 and for YTD 2025 decreased by $6.8 million, or 26.6%, as compared to YTD 2024, primarily related to certain intangible assets being fully amortized during the second half of 2024.
Impairment of goodwill. As a result of our quantitative goodwill assessment, we determined that the goodwill within our PCS reporting unit was impaired which resulted in an impairment of goodwill charge of $211.8 million during Q2 2025 and YTD 2025. During Q2 2024 and YTD 2024, we did not record any impairment charge on the goodwill at our PCS reporting unit. See Note 7, Goodwill and Intangible Assetsfor additional details.
Monitoring Segment
(in thousands, except revenue per member per month and service expense per member per month)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Operating Results | |||||||||||||||||||||||||||||||||||||||||||||||
| Service revenue, net | $ | 17,482 | 100.0 | % | $ | 19,025 | 100.0 | % | $ | 35,607 | 100.0 | % | $ | 39,127 | 100.0 | % | |||||||||||||||||||||||||||||||
| Service expense | 7,503 | 42.9 | % | 8,175 | 43.0 | % | 15,176 | 42.6 | % | 16,538 | 42.3 | % | |||||||||||||||||||||||||||||||||||
| General and administrative expense | 5,944 | 34.0 | % | 6,008 | 31.6 | % | 11,352 | 31.9 | % | 11,448 | 29.3 | % | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 5,911 | 33.8 | % | 7,087 | 37.3 | % | 11,961 | 33.6 | % | 13,761 | 35.2 | % | |||||||||||||||||||||||||||||||||||
| Impairment of goodwill | 51,614 | 295.2 | % | 105,302 | 553.5 | % | 51,614 | 145.0 | % | 105,302 | 269.1 | % | |||||||||||||||||||||||||||||||||||
|
Operating loss
|
$ | (53,490) | (306.0) | % | $ | (107,547) | (565.3) | % | $ | (54,496) | (153.0) | % | $ | (107,922) | (275.8) | % | |||||||||||||||||||||||||||||||
|
Business Metrics(1)
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| Average monthly members | 224 | 246 | 228 | 248 | |||||||||||||||||||||||||||||||||||||||||||
| Revenue per member per month | $ | 26.01 | $ | 25.78 | $ | 26.03 | $ | 26.30 | |||||||||||||||||||||||||||||||||||||||
| Service expense per member per month | $ | 11.17 | $ | 11.08 | $ | 11.09 | $ | 11.11 | |||||||||||||||||||||||||||||||||||||||
(1) These metrics are key performance indicators that management uses to evaluate our performance. Trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and understand the underlying drivers of costs and revenue for our business. We believe these metrics are useful to investors in evaluating and understanding our business but should not be used solely in assessing our performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole.
Our Monitoring segment is a provider of in-home monitoring solutions and manages a comprehensive suite of in-home clinical monitoring and quality improvement services that leverage personal emergency response systems, vitals monitoring devices, relationship-based care, and data-driven patient engagement solutions.
Service revenue, net.Monitoring contracts are generally structured as a fixed fee per enrolled member per month and therefore, revenue was generally driven by the number of enrolled members and the rate received per member per month. Service revenue, net, decreased $1.5 million, or 8.1%, for Q2 2025 as compared to Q2 2024, primarily related to a 8.9% decrease in average monthly members. Service revenue, net, decreased by $3.5 million, or 9.0%, for YTD 2025 as compared to YTD 2024, primarily related to a 8.1% decrease in average monthly members from YTD 2024 to YTD 2025 paired with a 1.0% decrease in revenue per member per month.
Service expense.Service expense for our Monitoring segment primarily consists of salaries for the employees providing the monitoring services as well as occupancy costs. Service expense components for our Monitoring segment are shown below (in thousands):
| Three months ended June 30, |
Six months ended June 30,
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % of Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Payroll and related costs | $ | 4,258 | 24.4 | % | $ | 4,233 | 22.2 | % | $ | 8,509 | 23.9 | % | $ | 8,569 | 21.9 | % | |||||||||||||||||||||||||||||||
| Other service expenses | 3,245 | 18.6 | % | 3,942 | 20.7 | % | 6,667 | 18.7 | % | 7,969 | 20.4 | % | |||||||||||||||||||||||||||||||||||
| Total service expense | $ | 7,503 | 42.9 | % | $ | 8,175 | 43.0 | % | $ | 15,176 | 42.6 | % | $ | 16,538 | 42.3 | % | |||||||||||||||||||||||||||||||
Service expense decreased $0.7 million, or 8.2%, for Q2 2025 as compared to Q2 2024, primarily related to a decrease in other service expenses of $0.7 million, or 17.7%. Other service expenses decreased as a result of lower device installation costs related to the 8.9% decrease in average monthly members. Service expense decreased by $1.4 million, or 8.2%, for YTD 2025 as compared to YTD 2024, primarily related to a decrease in other service expenses of $1.3 million, or 16.3%, also driven by lower device installation costs related to the 8.1% decrease in average monthly members.
General and administrative expense.General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense, expressed as a percentage of segment service revenue, net increased to 34.0% for Q2 2025 compared to 31.6% for Q2 2024 and increased to 31.9% for YTD 2025 compared to 29.3% for YTD 2024. This modest increase for both QTD and YTD periods was due, in part, to lower service revenue, net, for each period as well as higher temporary labor costs.
Depreciation and amortization expense. Depreciation and amortization expense decreased $1.2 million, or 16.6%, for Q2 2025 compared to Q2 2024 and decreased $1.8 million, or 13.1%, for YTD 2025 compared to YTD 2024. The decrease in depreciation and amortization expense during both periods was primarily related to certain intangible assets being fully amortized during the second half of 2024.
Impairment of goodwill.As a result of our quantitative goodwill assessment, we determined that the goodwill within our Monitoring reporting unit was impaired which resulted in an impairment of goodwill charge of $51.6 million during Q2 2025 and YTD 2025 and of $105.3 million during Q2 2024 and YTD 2024. See Note 7, Goodwill and Intangible Assetsfor additional details.
Corporate and Other Segment
(in thousands)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Service revenue, net | $ | 1,848 | $ | 1,987 | $ | 3,583 | $ | 3,462 | |||||||||||||||
| Service expense | 1,960 | 2,103 | 3,743 | 4,211 | |||||||||||||||||||
| General and administrative expense | 13,563 | 13,037 | 36,376 | 28,522 | |||||||||||||||||||
| Depreciation and amortization | 572 | 274 | 1,051 | 549 | |||||||||||||||||||
| Operating loss | $ | (14,247) | $ | (13,427) | $ | (37,587) | $ | (29,820) | |||||||||||||||
Our Corporate and Other segment includes our executive, accounting, finance, internal audit, tax, legal, public reporting and corporate development functions. This segment also includes the results of our equity investment in Matrix and the operating results of our investments in innovation related to data analytics products and solutions, which is comprised of our wholly-owned subsidiary, Higi Care, LLC ("Higi"), which was acquired during the first quarter of 2023. Higi provides certain data-driven personal health technologies and also provides virtual clinical care management services through an unaffiliated professional corporation owned and operated by a licensed physician.
Service revenue, net and Service expense. The acquisition of Higi, which was a strategic investment in growth, contributes to service revenue and service expense.
General and administrative expense and Depreciation and amortization. Our Corporate and Other segment includes costs associated with the strategic oversight and governance of our operating segments. These expenses are primarily general and administrative expenses, with a small portion related to depreciation. The general and administrative expense increased $0.5 million, or 4.0%, for Q2 2025 compared to Q2 2024 and increased $7.9 million, or 27.5%, for YTD 2025 compared to YTD 2024. This increase was primarily related to higher professional service costs for contract and consulting services, as well as elevated legal expenses, both related to the Company's debt transactions that occurred during the first quarter of 2025.
Seasonality
Our NEMT and PCS segments' operating income and cash flows normally fluctuate as a result of seasonal variations in our business, principally due to lower demand for transportation and in-home services during the winter season and periods with major holidays as members and patients may spend more time with family and less time alone needing outside care during those periods. While this fluctuation is noted in terms of the use of our services during these seasonal shifts, it does not have a material impact on our results of operations and therefore is not adjusted for. Our Monitoring segment's operating income and cash flows do not normally fluctuate as a result of seasonal variations in the business.
Liquidity and Capital Resources
Short-term capital requirements consist primarily of recurring operating expenses, contract start-up costs on new revenue contracts, interest expense on outstanding borrowings, costs associated with our strategic initiatives, and short-term debt and borrowings under our Credit Agreement. As explained below under the caption "Liquidity and Going Concern," various factors exist that have raised substantial doubt about our ability to meet all of our obligations as they become due over the next twelve months and to continue as a going concern. If we are unsuccessful in our efforts to raise additional capital, including through additional financing and strategic divestitures of assets, based on our current expectations, our current sources of liquidity, including available cash on hand, cash generated from operations, net of capital expenditures, and borrowings under our Revolving Credit Facility, Term Loan Facility and Incremental Term Loan (as defined below), will not be sufficient to satisfy our short-term capital requirements for a period of one year from the date of issuance of these unaudited condensed consolidated financial statements.
Accordingly, on August 20, 2025, we filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code and we expect to continue to manage our operations as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. For information regarding our long-term capital requirements, see below under the caption "Liquidity and Going Concern".
Cash used in operating activities during the six months ended June 30, 2025 was $104.3 million. Our balance of cash and cash equivalents, excluding restricted cash, was $76.4 million and $112.6 million at June 30, 2025 and December 31, 2024,
respectively. We had restricted cash of $13.4 million and $0.5 million at June 30, 2025 and December 31, 2024, respectively. Restricted cash amounts are not included in our balance of cash and cash equivalents in the unaudited condensed consolidated balance sheets, although they are included in the cash, cash equivalents and restricted cash balance on the accompanying unaudited condensed consolidated statements of cash flows.
We may, from time to time, access capital markets to raise equity or debt financing for various business reasons, including acquisitions, repurchases of common stock, investments in our business and possible refinancing activity. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such financing on terms acceptable to us at the time or at all.
YTD 2025 cash flows compared to YTD 2024
Operating activities.Cash used in operating activities was $104.3 million for YTD 2025 compared to cash used in operating activities of $45.7 million for YTD 2024. The decrease in cash provided by operating activities of $58.6 million between periods was primarily a result of an increase in the net loss in YTD 2025 as compared to YTD 2024 primarily as a result of higher interest expense of $37.3 million during the period as well as a decrease in cash provided by changes in operating assets and liabilities of $20.5 million. The changes in operating assets and liabilities were partly driven by a use of cash for short-term deposits of $30.8 million which was the result of additional cash collateral paid on several of our performance bonds during YTD 2025. The decrease in cash from the changes in operating assets and liabilities was also driven by a use of cash for accrued transportation costs of $27.2 million related to timing of vendor payments and a decrease in cash collected on our accounts receivable and other receivables of $24.6 million, primarily related to a build in receivables due to timing of cash receipts on our trade accounts receivable and other receivables. These decreases were offset by an increase in cash related to our contract payables of $29.5 million related to a build in contract payables on certain risk corridor and reconciliation contracts as compared to YTD 2024 as well as an increase in cash collected on contract receivables, including long-term contract receivables, of $24.1 million during YTD 2025 related to cash collected on certain risk corridor and reconciliation contracts.
Investing activities.Net cash used in investing activities was $10.7 million in YTD 2025, which decreased by $3.8 million as compared to YTD 2024. This decrease was related to less cash used for purchases of property and equipment.
Financing activities.Net cash provided by financing activities was $91.7 million for YTD 2025 compared to $68.6 million for YTD 2024. The increase of $23.1 million was primarily a result of the issuance of the Incremental Term Loan in the aggregate principal amount of $75.0 million as well as net cash received from the Purchase of Second Lien Notes by the Coliseum Investors, which resulted in additional cash of $30.0 million, partially offset by us being fully drawn on our Revolving Credit Facility during YTD 2025 as compared to YTD 2024 when we borrowed $69.2 million on our Revolving Credit Facility. as well as higher debt issuance costs of $9.9 million during YTD 2025 related to the issuance of the Incremental Term Loan and the Fifth Amendment to the Credit Agreement.
Obligations and commitments
Senior Unsecured Notes and Second Lien Notes.On August 24, 2021, we issued $500.0 million in aggregate principal amount of 5.000% senior unsecured notes due on October 1, 2029 (the "2029 Notes"). The 2029 Notes are senior unsecured obligations and rank senior in right of payment to all of our future subordinated indebtedness, rank equally in right of payment with all of our existing senior indebtedness, are effectively subordinated to any of our existing and future secured indebtedness, including indebtedness under the Credit Agreement, to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our non-guarantor subsidiaries. We will pay interest on the 2029 Notes semi-annually in arrears on April 1 and October 1 of each year until maturity. Principal payments on the 2029 Notes are not required until the maturity date on October 1, 2029 when 100.0% of the outstanding principal will be required to be repaid.
Pursuant to the Fifth Amendment to the Credit Agreement dated January 9, 2025, we entered into a privately negotiated exchange agreement with holders of our 2029 Notes to exchange up to $251.0 million in principal of the 2029 Notes for an equivalent principal amount of Second Lien Notes to be issued by us, subject to the receipt of Exit Consents to make certain amendments to the indenture governing the 2029 Notes to permit the Exchange and remove certain other covenants. On March 7, 2025, upon receipt of the requisite Exit Consents, we, the guarantors party to the 2029 Notes Indenture, and Wilmington Savings Fund Society, FSB (as the successor to the Bank of New York Mellon Trust Company, N.A.), as trustee, entered into the Fifth Supplemental Notes Indenture to the 2029 Notes Indenture to effect the amendments. The Exchange was consummated and the Second Lien Notes were issued on March 7, 2025 pursuant to, and governed by, the Second Lien Notes Indenture, among us, the Guarantors and Ankura Trust Company, LLC, as Trustee and Notes Collateral Agent.
In addition to the Exchange of $251.0 million of 2029 Notes for Second Lien Notes, on January 9, 2025, we entered into a Purchase and Exchange Agreement with the Coliseum Investors under which the Coliseum Investors agreed, subject to approval of our stockholders, (a) to Purchase $30.0 million in aggregate principal amount of our Second Lien Notes and (b) to exchange approximately $20.2 million in aggregate principal amount of our 2029 Notes held by the Coliseum Investors for an equivalent principal amount of the Second Lien Notes. The Coliseum Transactions were approved during the Special Meeting with the Stockholders held on March 13, 2025. On March 14, 2025, we, the Guarantors, the Trustee and the Notes Collateral Agent entered into the First Supplemental Indenture to the Second Lien Notes Indenture, pursuant to which we issued $50.2 million of Second Lien Notes to the Coliseum Investors. The Exchange and the Coliseum Transactions were treated as a debt modification and third party fees of $2.5 million were expensed as incurred. As of the date of the Exchange and Coliseum Transactions, the remaining unamortized debt issuance costs of $8.3 million on the 2029 Notes were bifurcated and allocated ratably between the 2029 Notes and the Second Lien Notes, of which $3.8 million of unamortized deferred financing costs were allocated to the 2029 Notes and $4.5 million of unamortized deferred financing costs were allocated to the Second Lien Notes and were netted against the outstanding principal balance on the unaudited condensed balance sheets.
The Second Lien Notes are our senior, secured obligations and will accrue interest at a rate of, at our election, subject to certain conditions, (i) 5.000% per annum, if interest is paid in cash, and (ii) 10.000% per annum, if interest is paid-in-kind. In each case, interest is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2025. Interest will be paid in kind by increasing the aggregate principal amount of one or more outstanding global notes representing the Second Lien Notes, or issuing additional Second Lien Notes, calculated based on the then outstanding principal of the Second Lien Notes. We will not be permitted to pay interest in kind in any interest period if our Liquidity (as defined in, and calculated in accordance with, the Second Lien Notes Indenture) is greater than $100.0 million on any applicable record date occurring on and after March 15, 2026, for any such interest period. The Second Lien Notes are fully and unconditionally guaranteed by the Guarantors and rank equal in right of payment with all of our and each Guarantor's existing and future senior indebtedness, including indebtedness under the Credit Agreement. The Second Lien Notes and the related guarantees are secured on a second-priority basis, subject to permitted liens, by security interests on substantially all of the assets and properties of us and the Guarantors, which assets and properties also secure the indebtedness under the Credit Agreement on a first-priority basis. The Second Lien Notes will mature on October 1, 2029.
The Second Lien Notes Indenture contains covenants that, among other things, restrict our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness; make certain investments; create or incur certain liens; enter into certain transactions with affiliates; merge, consolidate, amalgamate or transfer substantially all of our assets; agree to dividend or other payment restrictions affecting our subsidiaries; and transfer or sell assets, including capital stock of our subsidiaries. These covenants, however, are subject to a number of important exceptions and qualifications. We may redeem the Second Lien Notes, in whole or in part, at any time, at the redemption prices set forth in the Second Lien Indenture, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
As a result of the Exchange and the Coliseum Transactions, the principal balance of the 2029 Notes as of June 30, 2025 was reduced to $228.8 million from the principal balance of $500.0 million as of December 31, 2024 and the principal balance of the Second Lien Notes as of June 30, 2025 was $316.2 million, which includes $15.1 million of PIK interest related to the Company's election to make its initial interest payment for the interest period from October 1, 2024 through March 31, 2025 as PIK in lieu of a cash payment.
The indenture governing the 2029 Notes also contains a cross-default provision in the event any of our other indebtedness having a principal amount that aggregates $50.0 million or more is accelerated prior to its express maturity. Pursuant to the Fifth Amendment to the Credit Agreement, we were granted covenant relief in the form of a covenant holiday for the fourth quarter of 2024 through and including the second fiscal quarter of 2025.
Revolving Credit Facility. We are party to the amended and restated credit agreement, dated as of February 3, 2022, (the "Credit Agreement") with JPMorgan Chase Bank, N.A., as administrative agent, swing line lender and an issuing bank, Wells Fargo Bank, National Association, as an issuing bank, Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents, Deutsche Bank AG New York Branch, Bank of America, N.A., Regions Bank, Bank of Montreal and Capital One, National Association, as co-documentation agents, and JPMorgan Chase Bank, N.A., Truist Securities, Inc. and Wells Fargo Securities, LLC, as joint bookrunners and joint lead arrangers, and the other lenders party thereto. The Credit Agreement, as amended to date, provides us with a senior secured revolving credit facility (the "Revolving Credit Facility") in an aggregate principal amount of $325.0 million. The Revolving Credit Facility includes sublimits for swingline loans, letters of credit and alternative currency loans in amounts of up to $25.0 million, $60.0 million and $75.0 million, respectively.
On January 9, 2025, we entered into the Fifth Amendment to the Credit Agreement, which, among other things, (i) amended the interest rate on the existing Revolving Credit Facility commitments under the Credit Agreement to a SOFR-based benchmark plus 4.25%, with a 1.00% SOFR Floor, (ii) amended the 2.0% default rate under the Credit Agreement so that it applies on all obligations upon the election of the administrative agent at the direction of the Required Lenders if an event of
default has occurred and continuing and automatically if a specified event of default has occurred and is continuing, (iii) amended the Term Loan Facility maturity date to spring to July 2, 2029 if the second lien senior secured PIK toggle notes remain outstanding as of such date, (iv) included enhanced reporting requirements, and (v) eliminated or reduced certain baskets, which included the elimination of reinvestment rights with respect to certain asset sales and reduction of the de minimis exception for certain asset sale prepayments to $5,000,000. Consenting lenders also agreed to provide financial covenant relief in the form of (i) a covenant holiday with respect to the maximum net leverage ratio and interest coverage ratio from the fourth fiscal quarter of 2024 through and including the second fiscal quarter of 2025, (ii) resetting the maximum total net leverage ratio covenant to 6.75:1.00 for the third fiscal quarter of 2025 and the fourth fiscal quarter of 2025 and (iii) resetting the minimum interest coverage ratio to 1.65:1.00 for the third fiscal quarter of 2025 and the fourth fiscal quarter of 2025. We will also be required to maintain minimum liquidity of $25.0 million pursuant to the terms of the amended minimum liquidity covenant in the Credit Agreement, which will be tested each week through the week ending April 11, 2025, each month through the month ending June 30, 2025 and, thereafter, each fiscal quarter. In addition, we will be subject to a cash variance compliance test with respect to aggregate disbursements and aggregate receipts, subject to customary cures.
Pursuant to the Fifth Amendment to the Credit Agreement and the covenant relief that was provided, we were granted a covenant holiday for the fourth quarter of 2024 through and including the second fiscal quarter of 2025. As the Term Loan Facility and the Incremental Term Loan, discussed below, are subject to the provisions of the Credit Agreement, this covenant holiday also applies to these facilities.
Term Loan Facility. On July 1, 2024, pursuant to the Third Amendment, we established a new term loan facility (the "Term Loan Facility") in the aggregate principal amount of $525.0 million with the Term Loan Facility lenders named therein. The proceeds of the Term Loan Facility were used to (i) redeem our 2025 Notes, (ii) repay a portion of the Revolving Credit Facility outstanding immediately prior to the effective date of the Third Amendment, and (iii) pay fees and expenses associated with such transactions. We incurred approximately $26.9 million of deferred financing costs with respect to the Term Loan Facility, including a $2.5 million PIK Consent Fee.
The Term Loan Facility matures on the earlier of (a) July 1, 2031 and (b) July 2, 2029 if any of the 2029 Notes remain outstanding on that date. Principal payments on the Term Loan Facility are required on a quarterly basis, commencing with the quarter ended September 30, 2024, in the amount equal to 0.25% of the aggregate principal amount of the Term Loan Facility outstanding on the date of issuance. All unpaid amounts of the Term Loan Facility shall be paid in full on the maturity date. The Term Loan Facility requires annual prepayments of a percentage of Excess Cash Flow (as defined in the amended Credit Agreement); commencing with the year ending December 31, 2025 as follows: (i) 75.0% if the Total Net Leverage Ratio as of the last day of such period was greater than 4.40:1.00, (ii) 50.0% if the Total Net Leverage Ratio as of the last day of such period was greater than 3.90:1:00, but less than or equal to 4.40:1.00, (iii) 25.0% if the Total Net Leverage Ratio as of the last day of such period was greater than 3.40:1.00, but less than or equal to 3.90:1.00, and (iv) 0.0% if the Total Net Leverage Ratio as of the last day of such period was less than or equal to 3.40:1.00. The Term Loan Facility also requires mandatory prepayments in the event of certain asset dispositions or casualty events. In addition, the Term Loan Facility is subject to a prepayment premium for the first six months after entering into the Third Amendment in the event of any repricing transaction.
Interest on the Term Loan Facility is generally payable quarterly, in arrears, on the outstanding principal amount of the Term Loan Facility at the following rates for the interest period in effect for such borrowing: (i) a SOFR-based benchmark plus 4.75% or (ii) a prime rate (or other alternate base rate) benchmark plus 3.75% in the case of ABR Loans (as such terms are defined in the amended Credit Agreement). The Term Loan Facility is subject to customary representations and warranties, affirmative and negative covenants, and events of default, as defined in the amended Credit Agreement.
Incremental Term Loan. On January 9, 2025, the Company, pursuant to the Fifth Amendment to the Credit Agreement, established an incremental term loan facility in an aggregate principal amount of $75.0 million (the "Incremental Term Loan"). The Incremental Term Loan was priced at a SOFR-based benchmark plus 7.50%, with a 1.00% SOFR Floor (no CSA) with a maturity of January 10, 2026 (the "Maturity Date") and original issue discount of 2 points. The Company has the option to prepay the Incremental Term Loan, in whole or in part, at any time prior to the Maturity Date, subject to a prepayment fee equal to the present value of all scheduled interest payments on the fully committed amount that would accrue through the Maturity Date calculated based on a discount rate equal to the treasury rate plus 50 basis points. The proceeds of the Incremental Term Loan are required to be deposited in a collateral account subject to a blocked account control agreement in favor of the administrative agent and may be disbursed subject to delivery of a disbursement request, no default or event of default, the representations and warranties in Article II of the Credit Agreement being true and correct in all material respects and receipt by the administrative agent and lenders of reimbursement for invoiced expenses. The Incremental Term Loan is secured by a lien on substantially all of the assets of the Company and certain of its subsidiaries.
DIP Credit Agreement. With the approval of the Bankruptcy Court, we entered into a DIP Credit Agreement with the DIP Lenders and Wilmington Trust, N.A. as administrative agent and collateral agent. Pursuant to the DIP Credit Agreement, the DIP Lenders have agreed, upon the terms and conditions set forth therein, to make available a senior secured superpriority
priming debtor-in-possession term loan credit facility in an aggregate principal amount of up to $100.0 million (the "DIP Facility"), consisting of providing an initial draw of up to $62.5 million in new money term loans following entry of an interim order and a subsequent draw of up to $37.5 million in new money term loans upon entry of a final order. Borrowings under the DIP Facility are senior secured obligations, secured by a super-priority lien on the collateral under the DIP Facility, which includes substantially all of our assets and is used to fund working capital and certain permitted administrative expenses during the pendency of the Chapter 11 Cases and to make certain other payments and for other general corporate purposes, in each case in accordance with the terms of the DIP Credit Agreement.
The DIP Facility matures on the earliest to occur of: (a) the six month anniversary of the Closing Date (as defined in the DIP Credit Agreement); provided that such date may be extended to the nine month anniversary of the Closing Date 2026 with the written consent of the Required DIP Lenders (as defined in the DIP Credit Agreement) following the request by the Borrower (as defined in the DIP Credit Agreement) prior to January 31, 2026; (b) the effective date of a chapter 11 plan of any Debtor that has been confirmed by an order entered by the Bankruptcy Court; (c) dismissal of any of the Chapter 11 Cases or conversion of any of the Chapter 11 Cases into a case under Chapter 7 of the Bankruptcy Code; (d) the acceleration of the Term Loans (as defined in the DIP Credit Agreement) and the termination of all Commitments (as defined in the DIP Credit Agreement); and (e) the closing of a sale of all or substantially all assets or equity of the Loan Parties (other than to another Loan Party) (as each of such terms is defined in the DIP Credit Agreement). The DIP Loans will accrue an interest rate, payable in cash, of either (a) SOFR plus 7.00% per annum or (b) Alternate Base Rate plus 6.00% per annum. Fees and expenses on the DIP Facility include: (a) as stipulated by the Plan, a backstop premium (the "DIP Backstop Premium") equal to 20.0% of our reorganized pro forma equity, subject to dilution by the management incentive plan, the New Warrants issued to the Second Lien Noteholders, and potentially the Equity Rights Offering; (b) as stipulated by the DIP Credit Agreement, an original issue discount of 2.00% of the DIP Facility commitments netted from proceeds at issuance; and (c) as stipulated by the DIP Credit Agreement, an exit fee of 3.00% of the DIP Facility commitments, which is due and payable in cash upon termination of the DIP Facility commitments.
The DIP Credit Agreement contains various customary representations, warranties and covenants including customary negative covenants for debtor-in-possession loan agreements of this type. These negative covenants restrict our ability to, among other things, incur additional indebtedness, create liens on assets, engage in mergers, consolidations, sales of assets and dispositions, make investments, loans, advances, guarantees, or acquisitions. The DIP Credit Agreement also includes representations and warranties, mandatory prepayments, affirmative covenants and events of default customary for financings of this type. Certain bankruptcy-related events are also events of default, including, but not limited to, the dismissal by the Bankruptcy Court of any of the Chapter 11 Cases, the conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, the appointment of a trustee pursuant to chapter 11 of the Bankruptcy Code, and certain other events related to the impairment of the DIP Lenders' rights or liens granted under the DIP Credit Agreement.
Our financial and operating performance, as well as our ability to generate sufficient cash flow to maintain compliance with covenants, are subject to certain risk factors; see Part II, Item 1A. "Risk Factors" in this report and Part I, Item 1A. "Risk Factors" in our 2024 Form 10-K for further discussion. Additionally, our assessment of our ability to meet our future obligations is inherently subjective, judgment-based, and susceptible to change based on future events.
For additional information related to our 2029 Notes, Second Lien Notes, Revolving Credit Facility, Term Loan Facility, and Incremental Term Loan, refer to Note 9, Debt,of the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, "Financial Statements".
Liquidity and Going Concern
Liquidity measures our ability to meet current and future cash flow needs on a timely basis and at a reasonable cost. We manage our liquidity position to meet our daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to meet our return on investment objectives. Our liquidity position is supported by management of liquid assets and cash requirements and access to alternative sources of funds. Liquid assets include cash and cash equivalents, excluding restricted cash, of $76.4 million and accounts receivable, contract receivables, and other receivables of $392.6 million as of June 30, 2025. Cash requirements over the next 12 months, which totaled $935.9 million as of June 30, 2025 as detailed in the table below, included $130.7 million in guarantees and letters of credit that are not expected to be settled in cash in the next 12 months. As a result of the Chapter 11 Cases, certain of the liabilities included within the table were identified as being subject to compromise and were subsequently classified as liabilities subject to compromise in accordance with ASC 852.
Management's assessment of our liquidity is highly dependent on our ability to meet operating forecasts, including cash generated by operations, and manage working capital, including specifically the timely collection of outstanding contract receivables, which had a short-term balance of $115.6 million at June 30, 2025. We have a history of operating losses and expect to continue to generate negative cash flows from operations in the near term. We have continued to experience financial challenges, including increased transportation and caregiver costs that have not been offset by corresponding reimbursement
rate increases from payors, the loss of certain contracts, and membership declines. Additionally, we have experienced lengthened collection periods due to complexities in Medicare, Medicaid, and nongovernmental payor arrangements, resulting in delays between fulfilling our performance obligations and collecting the cash owed for our services. These factors have negatively impacted and are anticipated to continue to negatively impact cash flow generation and liquidity.
During the first quarter of 2025, we entered into the Fifth Amendment to our Credit Agreement (see Note 9, Debtfor further details) which, among other things, established an Incremental Term Loan in an aggregate principal amount of $75.0 million. The Incremental Term Loan was a short-term facility with a maturity date of January 10, 2026 and, as a result of the factors described above, we determined that we would require additional liquidity in order to satisfy our existing debt obligations due within one year, which included the $75.0 million principal amount of the Incremental Term Loan as well as $5.3 million of current principal payments on the Term Loan Facility. Further, if we were to repay the principal balance of our Incremental Term Loan at maturity, we, absent the consummation of any financing or strategic transaction (discussed further below), would be unable to meet our minimum liquidity covenant of $25.0 million. We were granted a covenant holiday through the second quarter of 2025. However, we would not have the ability to meet the Total Net Leverage Ratio covenant when it returns to 6.75:1.00 or the minimum Interest Coverage Ratio when it returns to 1.65:1.00 for the quarter ended September 30, 2025, when the covenant holiday is no longer in place.
For the reasons detailed above, we filed the Chapter 11 Cases and we expect to continue to manage our operations as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In general, as a debtor-in-possession, we are authorized to continue to operate as an ongoing business but not to engage in transactions outside the ordinary course of business without prior approval of the Bankruptcy Court.
The Plan was confirmed by the Bankruptcy Court on December 15, 2025. While management believes that the Restructuring through the Chapter 11 Cases will allow us to successfully emerge from the Chapter 11 Cases and continue to operate as a viable going concern, the Plan may never become effective, the restructuring and recapitalization transactions contemplated by the RSA and the Restructuring Term Sheet may never be consummated, the Bankruptcy Court may grant or deny motions in a manner that is adverse to us and our subsidiaries, and the Chapter 11 Cases may be converted into cases under Chapter 7 of the Bankruptcy Code. Specific terms of the RSA and Restructuring Term Sheet are included in Note 15, Subsequent Events.
These factors raise substantial doubt about our ability to satisfy our obligations as they become due within one year from the issuance date of the unaudited condensed consolidated financial statements included with this Quarterly Report on Form 10-Q. Accordingly, management has concluded that substantial doubt exists about our ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other things, our ability to implement a comprehensive restructuring, successfully emerge from the Chapter 11 Cases and generate sufficient liquidity following the Restructuring to meet our obligations and operating requirements as they become due. Accordingly, management can provide no assurance that the transactions described therein will be consummated. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Our short-term and long-term liquidity requirements are primarily to fund on-going operations and to service our short-term debt obligations. These liquidity requirements are met primarily through cash flow from operations, debt financing, and borrowings under our Revolving Credit Facility. For additional information regarding our operating, investing and financing cash flows, see "Condensed Consolidated Financial Statements- Condensed Consolidated Statements of Cash Flows," included in Part I, Item I of this report.
As of June 30, 2025 and prior to the considerations of the Chapter 11 Cases, we had cash requirements of $935.9 million due in one year or less in addition to $1,356.2 million due in more than one year. The following is a summary of our future cash requirements for the next twelve months and the period extending beyond twelve months as of June 30, 2025 (in thousands):
|
At June 30, 2025
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| Less than | Greater than | |||||||||||||||||||
| Total | 1 Year | 1 Year | ||||||||||||||||||
|
2029 Notes(1)
|
$ | 228,835 | $ | - | $ | 228,835 | ||||||||||||||
|
Second Lien Notes(1)
|
301,165 | - | 301,165 | |||||||||||||||||
|
Term Loan Facility(1)
|
519,750 | 5,250 | 514,500 | |||||||||||||||||
|
Revolving Credit Facility(1)
|
269,000 | 269,000 | - | |||||||||||||||||
|
Incremental Term Loan(1)
|
75,000 | 75,000 | - | |||||||||||||||||
|
Interest(2)
|
358,162 | 111,204 | 246,958 | |||||||||||||||||
|
PIK debt transaction costs(3)
|
9,152 | 4,305 | 4,847 | |||||||||||||||||
|
PIK interest election(4)
|
15,495 | - | 15,495 | |||||||||||||||||
|
Contract payables(5)
|
21,529 | 21,529 | - | |||||||||||||||||
|
Transportation costs(6)
|
80,123 | 80,123 | - | |||||||||||||||||
|
Deferred tax liabilities(7)
|
13,471 | - | 13,471 | |||||||||||||||||
|
Operating leases(8)
|
37,900 | 8,271 | 29,629 | |||||||||||||||||
|
Guarantees(9)
|
76,417 | 75,090 | 1,327 | |||||||||||||||||
|
Letters of credit(9)
|
55,576 | 55,576 | - | |||||||||||||||||
|
Other current cash obligations(10)
|
230,592 | 230,592 | - | |||||||||||||||||
| Total | $ | 2,292,167 | $ | 935,940 | $ | 1,356,227 | ||||||||||||||
(1)Amounts reflect the aggregate principal amounts outstanding on our 2029 Notes, Second Lien Notes, Term Loan Facility, Revolving Credit Facility and Incremental Term Loan. See Note 2 below for the future interest amounts on these facilities and Notes 3 and 4 below for the PIK debt transaction costs and the elected PIK interest on certain of these facilities as of June 30, 2025. See Note 9 of the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, "Financial Statements" for further detail of our 2029 Notes, Second Lien Notes, Term Loan Facility, Revolving Credit Facility and Incremental Term Loan and the timing of expected future payments.
(2)Interest payments on our 2029 Notes are typically paid semi-annually in arrears and have been calculated at the fixed rate of 5.00% as of June 30, 2025. Interest payments on our Second Lien Notes are typically paid semi-annually in arrears at the fixed rate of 5.00% if the interest payment is made in cash and 10.00% if interest is PIK. We elected to PIK the interest for the period October 1, 2024 through March 31, 2025 and accordingly, this PIK interest is included within the "PIK interest election" total within the table. Subsequent interest payments are included within the "Interest" total within the table. Interest payments on our Term Loan Facility are typically paid quarterly in arrears and have been calculated at the interest rate of 9.05%as of June 30, 2025.Interest payments on our Revolving Credit Facility have been calculated by taking the expected borrowing on the Facility for the next year at the weighted average interest rate of borrowings outstanding as of June 30, 2025 of 8.67%. Interest payments on our Incremental Term Loan are typically paid quarterly in arrears and have been calculated at the interest rate of 11.71% as of June 30, 2025. Interest payments on our Letters of Credit ("LOCs") have been calculated by taking the expected LOCs outstanding for the next year at the fixed rate of 4.25% as of June 30, 2025.
(3)PIK debt transaction costs relate to a 0.50% Consent Fee charged on both the Term Loan Facility and the Revolving Credit Facility for $2.5 million and $1.7 million, respectively, in addition to a 5.0% Backstop Fee charged on the Incremental Term Loan for $3.8 million. Since the debt transaction costs are PIK, the Consent Fees and the Backstop Fee are capitalized to the principal balance of the respective facility and amortized over the term of the respective facility. This balance also includes the interest expense associated with the PIK Consent and Backstop fees at the rate effective for each respective facility as of June 30, 2025.
(4)The PIK interest reflects our election to PIK the interest payment on the Second Lien Notes for the interest period October 1, 2024 through March 31, 2025 as well as our election to PIK the interest on the Consent Fee for the Revolving Credit Facility which was calculated at the interest rate of 8.67% as of June 30, 2025.
(5)See Note 4 of the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, "Financial Statements" for further detail of our contracts payable.
(6)See Note 1 of the Notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of the 2024 Form 10-K for further detail of our accrued transportation cost.
(7)Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
(8)The operating leases are for office space. Certain leases contain periodic rent escalation adjustments and renewal options. See Note 15 of the Notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of the 2024 Form 10-K for further detail of our operating leases.
(9)Letters of credit ("LOCs") are guarantees of potential payments to third parties under certain conditions. Guarantees include surety bonds we provide to certain customers to protect against potential non-delivery of our non-emergency transportation services. Our LOCs shown in the table were provided by our Revolving Credit Facility and reduced our availability under the related Credit Agreement. The surety bonds and LOC amounts in the above table represent the amount of commitment expiration per period.
(10)These include other current liabilities reflected in our unaudited condensed consolidated balance sheets as of June 30, 2025, including accounts payable and accrued expenses as detailed at Note 8 of the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, "Financial Statements".
Our primary sources of funding include operating cash flows, borrowing under the Revolving Credit Facility and access to capital markets, however there are statutory, regulatory, and debt covenant limitations that affect our ability to access the capital market for funds. Management expects that such limitations are likely to impact our ability to meet our ongoing short-term cash obligations and on August 20, 2025, we filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code to modify our capital structure by restructuring portions of our debt and providing additional liquidity under the DIP Facility. Management continuously monitors our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate.
Critical Accounting Estimates and Policies
The preparation of financial statements and related disclosures in conformity with GAAP and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Refer to Note 2, "Significant Accounting Policies and Recent Accounting Pronouncements" of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2024 Form 10-K for a description of the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. There have been no material changes to our critical accounting estimates or policies since the 2024 Form 10-K.
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