10-Q 1 modv-20220930.htm 10-Q modv-20220930
000122075412-312022Q3false00012207542022-01-012022-09-3000012207542022-10-28xbrli:shares00012207542022-09-30iso4217:USD00012207542021-12-31iso4217:USDxbrli:shares00012207542022-07-012022-09-3000012207542021-07-012021-09-3000012207542021-01-012021-09-3000012207542020-12-3100012207542021-09-300001220754us-gaap:CommonStockMember2021-12-310001220754us-gaap:AdditionalPaidInCapitalMember2021-12-310001220754us-gaap:RetainedEarningsMember2021-12-310001220754us-gaap:TreasuryStockCommonMember2021-12-310001220754us-gaap:RetainedEarningsMember2022-01-012022-03-3100012207542022-01-012022-03-310001220754us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001220754us-gaap:CommonStockMember2022-01-012022-03-310001220754us-gaap:TreasuryStockCommonMember2022-01-012022-03-310001220754us-gaap:CommonStockMember2022-03-310001220754us-gaap:AdditionalPaidInCapitalMember2022-03-310001220754us-gaap:RetainedEarningsMember2022-03-310001220754us-gaap:TreasuryStockCommonMember2022-03-3100012207542022-03-310001220754us-gaap:RetainedEarningsMember2022-04-012022-06-3000012207542022-04-012022-06-300001220754us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001220754us-gaap:CommonStockMember2022-04-012022-06-300001220754us-gaap:TreasuryStockCommonMember2022-04-012022-06-300001220754us-gaap:CommonStockMember2022-06-300001220754us-gaap:AdditionalPaidInCapitalMember2022-06-300001220754us-gaap:RetainedEarningsMember2022-06-300001220754us-gaap:TreasuryStockCommonMember2022-06-3000012207542022-06-300001220754us-gaap:RetainedEarningsMember2022-07-012022-09-300001220754us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001220754us-gaap:CommonStockMember2022-07-012022-09-300001220754us-gaap:TreasuryStockCommonMember2022-07-012022-09-300001220754us-gaap:CommonStockMember2022-09-300001220754us-gaap:AdditionalPaidInCapitalMember2022-09-300001220754us-gaap:RetainedEarningsMember2022-09-300001220754us-gaap:TreasuryStockCommonMember2022-09-300001220754us-gaap:CommonStockMember2020-12-310001220754us-gaap:AdditionalPaidInCapitalMember2020-12-310001220754us-gaap:RetainedEarningsMember2020-12-310001220754us-gaap:TreasuryStockCommonMember2020-12-310001220754us-gaap:RetainedEarningsMember2021-01-012021-03-3100012207542021-01-012021-03-310001220754us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001220754us-gaap:CommonStockMember2021-01-012021-03-310001220754us-gaap:TreasuryStockCommonMember2021-01-012021-03-310001220754us-gaap:CommonStockMember2021-03-310001220754us-gaap:AdditionalPaidInCapitalMember2021-03-310001220754us-gaap:RetainedEarningsMember2021-03-310001220754us-gaap:TreasuryStockCommonMember2021-03-3100012207542021-03-310001220754us-gaap:RetainedEarningsMember2021-04-012021-06-3000012207542021-04-012021-06-300001220754us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001220754us-gaap:CommonStockMember2021-04-012021-06-300001220754us-gaap:TreasuryStockCommonMember2021-04-012021-06-300001220754us-gaap:CommonStockMember2021-06-300001220754us-gaap:AdditionalPaidInCapitalMember2021-06-300001220754us-gaap:RetainedEarningsMember2021-06-300001220754us-gaap:TreasuryStockCommonMember2021-06-3000012207542021-06-300001220754us-gaap:RetainedEarningsMember2021-07-012021-09-300001220754us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001220754us-gaap:CommonStockMember2021-07-012021-09-300001220754us-gaap:TreasuryStockCommonMember2021-07-012021-09-300001220754us-gaap:CommonStockMember2021-09-300001220754us-gaap:AdditionalPaidInCapitalMember2021-09-300001220754us-gaap:RetainedEarningsMember2021-09-300001220754us-gaap:TreasuryStockCommonMember2021-09-300001220754modv:MatrixInvestmentMember2022-09-30xbrli:pure0001220754srt:MinimumMemberus-gaap:TrademarksAndTradeNamesMember2021-12-312021-12-310001220754srt:MinimumMemberus-gaap:TrademarksAndTradeNamesMember2022-01-012022-01-010001220754us-gaap:CustomerRelationshipsMembersrt:MaximumMember2021-12-312021-12-310001220754us-gaap:CustomerRelationshipsMembersrt:MaximumMember2022-01-012022-01-010001220754us-gaap:IntangibleAssetsAmortizationPeriodMember2022-07-012022-09-300001220754us-gaap:IntangibleAssetsAmortizationPeriodMember2022-01-012022-09-300001220754us-gaap:GrantMember2022-07-012022-09-300001220754us-gaap:GrantMember2021-07-012021-09-300001220754us-gaap:GrantMember2022-01-012022-09-300001220754us-gaap:GrantMember2021-01-012021-09-300001220754modv:CareFindersTotalCareMember2021-09-140001220754modv:CareFindersTotalCareMember2021-09-142021-09-140001220754modv:CareFindersTotalCareMember2022-09-300001220754us-gaap:CustomerRelationshipsMembermodv:CareFindersTotalCareMember2021-09-142021-09-140001220754us-gaap:CustomerRelationshipsMembermodv:CareFindersTotalCareMember2021-09-140001220754modv:CareFindersTotalCareMemberus-gaap:TrademarksAndTradeNamesMember2021-09-142021-09-140001220754modv:CareFindersTotalCareMemberus-gaap:TrademarksAndTradeNamesMember2021-09-140001220754modv:NonCompeteAgreementMembermodv:CareFindersTotalCareMember2021-09-142021-09-140001220754modv:NonCompeteAgreementMembermodv:CareFindersTotalCareMember2021-09-140001220754srt:ProFormaMembermodv:CareFindersTotalCareMember2021-09-140001220754modv:CareFindersTotalCareMember2022-07-012022-09-300001220754modv:VRIIntermediateHoldingsLLCMember2021-09-220001220754modv:VRIIntermediateHoldingsLLCMember2021-09-222021-09-220001220754modv:VRIIntermediateHoldingsLLCMember2022-09-300001220754modv:PersonalEmergencyResponseSystemDevicesComputerEquipmentAndOtherEquipmentMembermodv:VRIIntermediateHoldingsLLCMember2021-09-220001220754us-gaap:CustomerRelationshipsMembermodv:VRIIntermediateHoldingsLLCMember2021-09-222021-09-220001220754us-gaap:CustomerRelationshipsMembermodv:VRIIntermediateHoldingsLLCMember2021-09-220001220754us-gaap:TrademarksAndTradeNamesMembermodv:VRIIntermediateHoldingsLLCMember2021-09-222021-09-220001220754us-gaap:TrademarksAndTradeNamesMembermodv:VRIIntermediateHoldingsLLCMember2021-09-220001220754us-gaap:SoftwareAndSoftwareDevelopmentCostsMembermodv:VRIIntermediateHoldingsLLCMember2021-09-222021-09-220001220754us-gaap:SoftwareAndSoftwareDevelopmentCostsMembermodv:VRIIntermediateHoldingsLLCMember2021-09-220001220754modv:VRIIntermediateHoldingsLLCMember2022-07-012022-09-300001220754modv:GuardianMedicalMonitoringMember2022-05-110001220754modv:GuardianMedicalMonitoringMember2022-05-112022-05-110001220754modv:GuardianMedicalMonitoringMember2022-09-300001220754modv:GuardianMedicalMonitoringMemberus-gaap:CustomerRelationshipsMember2022-05-112022-05-110001220754modv:GuardianMedicalMonitoringMemberus-gaap:CustomerRelationshipsMember2022-05-110001220754modv:GuardianMedicalMonitoringMemberus-gaap:TrademarksAndTradeNamesMember2022-05-112022-05-110001220754modv:GuardianMedicalMonitoringMemberus-gaap:TrademarksAndTradeNamesMember2022-05-110001220754srt:ProFormaMembermodv:GuardianMedicalMonitoringMember2022-05-110001220754modv:BusinessAcquisitionsMember2022-07-012022-09-300001220754modv:BusinessAcquisitionsMember2021-07-012021-09-300001220754modv:BusinessAcquisitionsMember2022-01-012022-09-300001220754modv:BusinessAcquisitionsMember2021-01-012021-09-300001220754modv:CareFindersTotalCareMember2021-07-012021-09-300001220754modv:VRIIntermediateHoldingsLLCMember2021-07-012021-09-300001220754modv:CareFindersTotalCareMember2021-01-012021-09-300001220754modv:VRIIntermediateHoldingsLLCMember2021-01-012021-09-300001220754modv:GuardianMedicalMonitoringMember2022-07-012022-09-300001220754modv:GuardianMedicalMonitoringMember2022-01-012022-09-3000012207542022-05-302022-05-300001220754modv:PersonalCareMemberus-gaap:CustomerContractsMember2022-05-182022-05-18modv:segment0001220754modv:NETServicesMember2022-07-012022-09-300001220754modv:PersonalCareMember2022-07-012022-09-300001220754modv:RemotePatientMonitoringMember2022-07-012022-09-300001220754us-gaap:CorporateAndOtherMember2022-07-012022-09-300001220754modv:NETServicesMember2022-09-300001220754modv:PersonalCareMember2022-09-300001220754modv:RemotePatientMonitoringMember2022-09-300001220754us-gaap:CorporateAndOtherMember2022-09-300001220754modv:NETServicesMember2022-01-012022-09-300001220754modv:PersonalCareMember2022-01-012022-09-300001220754modv:RemotePatientMonitoringMember2022-01-012022-09-300001220754us-gaap:CorporateAndOtherMember2022-01-012022-09-300001220754srt:ProFormaMembermodv:GuardianMedicalMonitoringMember2022-09-300001220754srt:ProFormaMembermodv:VRIIntermediateHoldingsLLCMember2021-09-220001220754modv:PersonalCareMembermodv:CareFindersTotalCareMember2022-07-012022-09-300001220754modv:NETServicesMember2021-07-012021-09-300001220754modv:PersonalCareMember2021-07-012021-09-300001220754modv:RemotePatientMonitoringMember2021-07-012021-09-300001220754us-gaap:CorporateAndOtherMember2021-07-012021-09-300001220754modv:NETServicesMember2021-09-300001220754modv:PersonalCareMember2021-09-300001220754modv:RemotePatientMonitoringMember2021-09-300001220754us-gaap:CorporateAndOtherMember2021-09-300001220754modv:NETServicesMember2021-01-012021-09-300001220754modv:PersonalCareMember2021-01-012021-09-300001220754modv:RemotePatientMonitoringMember2021-01-012021-09-300001220754us-gaap:CorporateAndOtherMember2021-01-012021-09-300001220754modv:CapitatedContractsMembermodv:NETServicesMember2022-07-012022-09-300001220754modv:CapitatedContractsMembermodv:NETServicesMember2021-07-012021-09-300001220754modv:CapitatedContractsMembermodv:NETServicesMember2022-01-012022-09-300001220754modv:CapitatedContractsMembermodv:NETServicesMember2021-01-012021-09-300001220754modv:FFSContractsMembermodv:NETServicesMember2022-07-012022-09-300001220754modv:FFSContractsMembermodv:NETServicesMember2021-07-012021-09-300001220754modv:FFSContractsMembermodv:NETServicesMember2022-01-012022-09-300001220754modv:FFSContractsMembermodv:NETServicesMember2021-01-012021-09-300001220754modv:PersonalCareMembermodv:FFSContractsMember2022-07-012022-09-300001220754modv:PersonalCareMembermodv:FFSContractsMember2021-07-012021-09-300001220754modv:PersonalCareMembermodv:FFSContractsMember2022-01-012022-09-300001220754modv:PersonalCareMembermodv:FFSContractsMember2021-01-012021-09-300001220754modv:PersonalCareMembermodv:PMPMContractsMember2022-07-012022-09-300001220754modv:PersonalCareMembermodv:PMPMContractsMember2021-07-012021-09-300001220754modv:PersonalCareMembermodv:PMPMContractsMember2022-01-012022-09-300001220754modv:PersonalCareMembermodv:PMPMContractsMember2021-01-012021-09-300001220754us-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:NETServicesMembermodv:OneUSStateMember2022-07-012022-09-300001220754us-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:NETServicesMembermodv:OneUSStateMember2021-07-012021-09-300001220754us-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:NETServicesMembermodv:OneUSStateMember2022-01-012022-09-300001220754us-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:NETServicesMembermodv:OneUSStateMember2021-01-012021-09-300001220754modv:PersonalCareMemberus-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:OneUSStateMember2022-07-012022-09-300001220754modv:PersonalCareMemberus-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:OneUSStateMember2021-07-012021-09-300001220754modv:PersonalCareMemberus-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:OneUSStateMember2022-01-012022-09-300001220754modv:PersonalCareMemberus-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:OneUSStateMember2021-01-012021-09-300001220754modv:RemotePatientMonitoringMemberus-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:OneUSStateMember2022-07-012022-09-300001220754modv:RemotePatientMonitoringMemberus-gaap:GovernmentContractsConcentrationRiskMemberus-gaap:SegmentContinuingOperationsMemberus-gaap:SalesRevenueNetMembermodv:OneUSStateMember2022-01-012022-09-300001220754modv:StateMedicaidAgencyContractsMember2022-07-012022-09-300001220754modv:StateMedicaidAgencyContractsMember2021-07-012021-09-300001220754modv:StateMedicaidAgencyContractsMember2022-01-012022-09-300001220754modv:StateMedicaidAgencyContractsMember2021-01-012021-09-300001220754modv:MedicareAndMedicaidAgencyContractsMember2022-07-012022-09-300001220754modv:MedicareAndMedicaidAgencyContractsMember2021-07-012021-09-300001220754modv:MedicareAndMedicaidAgencyContractsMember2022-01-012022-09-300001220754modv:MedicareAndMedicaidAgencyContractsMember2021-01-012021-09-300001220754modv:PrivatePayAndOtherContractsMember2022-07-012022-09-300001220754modv:PrivatePayAndOtherContractsMember2021-07-012021-09-300001220754modv:PrivatePayAndOtherContractsMember2022-01-012022-09-300001220754modv:PrivatePayAndOtherContractsMember2021-01-012021-09-3000012207542021-01-012021-12-310001220754modv:ReconciliationContractMember2021-12-310001220754modv:ReconciliationContractMember2022-01-012022-09-300001220754modv:ReconciliationContractMember2022-09-300001220754modv:ProfitRebateContractPayableMember2021-12-310001220754modv:ProfitRebateContractPayableMember2022-01-012022-09-300001220754modv:ProfitRebateContractPayableMember2022-09-300001220754modv:OverpaymentsAndOtherCashItemsMember2021-12-310001220754modv:OverpaymentsAndOtherCashItemsMember2022-01-012022-09-300001220754modv:OverpaymentsAndOtherCashItemsMember2022-09-300001220754modv:MatrixMember2022-09-300001220754modv:MatrixMember2021-12-310001220754modv:MatrixMember2022-01-012022-09-300001220754modv:MatrixMember2022-07-012022-09-300001220754modv:MatrixMember2021-01-012021-12-310001220754modv:MatrixMember2021-01-012021-09-300001220754modv:MatrixMember2021-07-012021-09-300001220754modv:MatrixMember2022-07-012022-09-300001220754modv:MatrixMember2021-07-012021-09-300001220754modv:MatrixMember2022-01-012022-09-300001220754modv:MatrixMember2021-01-012021-09-300001220754modv:MatrixMember2022-09-300001220754modv:MatrixMember2021-12-310001220754modv:MatrixMember2022-07-012022-09-300001220754modv:MatrixMember2021-07-012021-09-300001220754modv:MatrixMember2022-01-012022-09-300001220754modv:MatrixMember2021-01-012021-09-300001220754modv:UnsecuredNotesDue2025Memberus-gaap:SeniorNotesMember2022-09-300001220754modv:UnsecuredNotesDue2025Memberus-gaap:SeniorNotesMember2021-12-310001220754us-gaap:SeniorNotesMembermodv:UnsecuredNotesDue2029Member2022-09-300001220754us-gaap:SeniorNotesMembermodv:UnsecuredNotesDue2029Member2021-12-310001220754modv:A2025SeniorNotesMemberus-gaap:SeniorNotesMember2022-09-300001220754modv:A2029SeniorNotesMemberus-gaap:SeniorNotesMember2022-09-300001220754us-gaap:SeniorNotesMember2022-09-300001220754us-gaap:RevolvingCreditFacilityMember2022-02-030001220754us-gaap:BridgeLoanMember2022-02-030001220754us-gaap:LetterOfCreditMember2022-02-030001220754modv:AlternativeCurrencyLoanMember2022-02-030001220754us-gaap:LetterOfCreditMembersrt:MaximumMember2022-01-012022-09-300001220754modv:NewCreditAgreementMemberus-gaap:LondonInterbankOfferedRateLIBORMembersrt:MinimumMember2022-01-012022-09-300001220754modv:NewCreditAgreementMemberus-gaap:LondonInterbankOfferedRateLIBORMembersrt:MaximumMember2022-01-012022-09-300001220754modv:NewCreditAgreementMembermodv:AlternateBaseRateMembersrt:MinimumMember2022-01-012022-09-300001220754modv:NewCreditAgreementMembermodv:AlternateBaseRateMembersrt:MaximumMember2022-01-012022-09-300001220754modv:NewCreditAgreementMembersrt:MinimumMember2022-01-012022-09-300001220754modv:NewCreditAgreementMembersrt:MaximumMember2022-01-012022-09-300001220754us-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2022-01-012022-09-300001220754us-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2022-01-012022-09-3000012207542022-02-030001220754us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001220754us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001220754us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001220754us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001220754us-gaap:EmployeeStockOptionMember2022-09-300001220754us-gaap:RestrictedStockMember2021-07-012021-09-300001220754us-gaap:RestrictedStockMember2022-07-012022-09-300001220754us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300001220754us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300001220754us-gaap:RestrictedStockMember2021-01-012021-09-300001220754us-gaap:RestrictedStockMember2022-01-012022-09-300001220754us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001220754us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001220754us-gaap:RestrictedStockMember2022-09-300001220754us-gaap:RestrictedStockUnitsRSUMember2022-09-300001220754us-gaap:PerformanceSharesMember2022-07-012022-09-300001220754us-gaap:PerformanceSharesMember2022-01-012022-09-300001220754us-gaap:PerformanceSharesMember2022-09-300001220754us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001220754us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001220754us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001220754us-gaap:EmployeeStockOptionMember2021-01-012021-09-3000012207542021-03-0800012207542021-03-082022-09-30


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             
 
Commission File Number 001-34221
 

ModivCare Inc.
(Exact name of registrant as specified in its charter)

Delaware86-0845127
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 6900 E Layton Avenue, 12th Floor, Denver, Colorado           80237
(Address of principal executive offices) (Zip Code)  
(303) 728-7030
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.001 par value per shareMODVThe NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
1



“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer☐   Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No

As of October 28, 2022, there were 14,138,324 shares outstanding (excluding treasury shares of 5,427,999) of the registrant’s Common Stock, $0.001 par value per share.


2



TABLE OF CONTENTS
 Page
  
 
   
   
 
   
 
  
 
   
Item 2.
   
   
  
 
   
   
Item 1A.
   


3



PART I—FINANCIAL INFORMATION
Item 1.   Financial Statements.

ModivCare Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

September 30, 2022December 31, 2021
  
Assets  
Current assets:  
Cash and cash equivalents$72,703 $133,139 
Accounts receivable, net of allowance of $2,670 and $2,296, respectively
266,177 233,121 
Other receivables6,117 4,740 
Prepaid expenses and other current assets36,681 38,551 
Restricted cash28 283 
Total current assets381,706 409,834 
Property and equipment, net67,413 53,549 
Goodwill968,420 924,787 
Payor network, net408,147 425,516 
Other intangible assets, net51,643 64,697 
Equity investment43,477 83,069 
Operating lease right-of-use assets38,368 43,750 
Other assets30,671 22,223 
Total assets$1,989,845 $2,027,425 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$44,242 $8,690 
Accrued contract payables243,800 281,586 
Accrued transportation costs90,114 103,294 
Accrued expenses and other current liabilities145,217 123,791 
Current portion of operating lease liabilities10,134 9,873 
Total current liabilities533,507 527,234 
Long-term debt, net of deferred financing costs of $21,699 and $24,775, respectively
978,301 975,225 
Deferred tax liabilities62,666 94,611 
Operating lease liabilities, less current portion30,595 34,524 
Other long-term liabilities30,628 22,564 
Total liabilities1,635,697 1,654,158 
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 19,632,749 and 19,589,422, respectively, issued and outstanding (including treasury shares)
20 20 
Additional paid-in capital436,839 430,449 
Retained earnings186,970 211,829 
Treasury shares, at cost, 5,574,905 and 5,568,983 shares, respectively
(269,681)(269,031)
Total stockholders’ equity354,148 373,267 
Total liabilities and stockholders’ equity$1,989,845 $2,027,425 

 See accompanying notes to the unaudited condensed consolidated financial statements
4



ModivCare Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)

 Three months ended September 30,Nine months ended September 30,
 2022202120222021
Service revenue, net$647,782 $493,059 $1,850,472 $1,421,117 
Grant income (Note 2)789  4,587 3,500 
Operating expenses:  
Service expense534,563 399,272 1,498,108 1,139,170 
General and administrative expense75,889 68,205 232,108 179,595 
Depreciation and amortization25,672 12,608 74,376 36,667 
Total operating expenses636,124 480,085 1,804,592 1,355,432 
Operating income12,447 12,974 50,467 69,185 
Other expenses:  
Interest expense, net15,557 17,702 46,429 34,412 
Income (loss) before income taxes and equity method investment
(3,110)(4,728)4,038 34,773 
Provision (benefit) for income taxes(1,053)(2,001)877 8,409 
Equity in net loss of investee, net of tax26,448 4,845 28,020 1,424 
Net income (loss)$(28,505)$(7,572)$(24,859)$24,940 
Earnings (loss) per common share:  
Basic$(2.03)$(0.54)$(1.77)$1.77 
Diluted$(2.03)$(0.54)$(1.77)$1.75 
Weighted-average number of common shares outstanding: 
Basic14,051,794 13,993,438 14,041,224 14,102,371 
Diluted14,051,794 13,993,438 14,041,224 14,278,331 

See accompanying notes to the unaudited condensed consolidated financial statements
5



ModivCare Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

 Nine months ended September 30,
 20222021
Operating activities  
Net income (loss)$(24,859)$24,940 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation14,398 8,839 
Amortization59,978 27,828 
Provision for doubtful accounts(2,670)(1,712)
Stock-based compensation5,152 4,225 
Deferred income taxes(31,232)(3,295)
Amortization of deferred financing costs and debt discount3,878 2,175 
Equity in net loss of investees38,883 1,978 
Reduction of right-of-use assets8,680 8,681 
Changes in operating assets and liabilities:
Accounts receivable and other receivables(28,507)(69,597)
Prepaid expenses and other(4,194)(5,330)
Accrued contract payables(37,786)151,950 
Accounts payable and accrued expenses55,887 9,475 
Accrued transportation costs(13,180)12,354 
Other long-term liabilities1,098 2,183 
Net cash provided by operating activities45,526 174,694 
Investing activities  
Purchase of property and equipment(25,518)(13,852)
Acquisition, net of cash acquired(78,872)(667,228)
Net cash used in investing activities(104,390)(681,080)
Financing activities  
Proceeds from debt100,000 625,000 
Repayment of debt(100,000)(125,000)
Repurchase of common stock, for treasury (39,040)
Debt issuance costs(2,415)(13,486)
Proceeds from common stock issued pursuant to stock option exercise1,237 3,099 
Restricted stock surrendered for employee tax payment(649)(851)
Net cash provided by (used in) financing activities(1,827)449,722 
Net change in cash, cash equivalents and restricted cash(60,691)(56,664)
Cash, cash equivalents and restricted cash at beginning of period133,422 183,356 
Cash, cash equivalents and restricted cash at end of period$72,731 $126,692 

See accompanying notes to the unaudited condensed consolidated financial statements
6



ModivCare Inc.
Unaudited Supplemental Cash Flow Information
(in thousands)

 Nine months ended September 30,
Supplemental cash flow information20222021
Cash paid for interest$31,460 $24,006 
Cash paid for income taxes$4,159 $12,846 
Assets acquired under operating leases$3,298 $21,829 
Acquisitions:  
Purchase price$79,199 $682,113 
Less:  
Cash acquired327 14,885 
Acquisitions, net of cash acquired$78,872 $667,228 

See accompanying notes to the unaudited condensed consolidated financial statements
7



ModivCare Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity 
(in thousands, except share and per share data)

Nine months ended September 30, 2022
Common StockAdditionalRetainedTreasury Stock
 SharesAmountPaid-In CapitalEarningsSharesAmountTotal
Balance at December 31, 202119,589,422 $20 $430,449 $211,829 5,568,983 $(269,031)$373,267 
Net income— — — 318 — — 318 
Stock-based compensation— — 1,963 — — — 1,963 
Exercise of employee stock options20,683 — 1,138 — — — 1,138 
Restricted stock issued16,306 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 5,179 (572)(572)
Shares issued for bonus settlement and director stipends732 — 86 — — — 86 
Balance at March 31, 202219,627,143 $20 $433,636 $212,147 5,574,162 $(269,603)$376,200 
Net income— — — 3,328 — — 3,328 
Stock-based compensation— — 2,363 — — — 2,363 
Exercise of employee stock options16 —  — — —  
Restricted stock forfeited(551)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 322 (36)(36)
Shares issued for bonus settlement and director stipends1,000 — 85 — — — 85 
Balance at June 30, 202219,627,608 $20 $436,084 $215,475 5,574,484 $(269,639)$381,940 
Net loss— — — (28,505)— — (28,505)
Stock-based compensation— — 570 — — — 570 
Exercise of employee stock options3,381 — 100 — — — 100 
Restricted stock issued914 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 421 (42)(42)
Shares issued for bonus settlement and director stipends846 — 85 — — — 85 
Balance at September 30, 202219,632,749 $20 $436,839 $186,970 5,574,905 $(269,681)$354,148 

Nine months ended September 30, 2021
Common StockAdditionalRetained Treasury Stock
 SharesAmountPaid-In CapitalEarningsSharesAmountTotal
Balance at December 31, 202019,570,598 $20 $421,318 $218,414 5,287,283 $(228,141)$411,611 
Net income— — — 18,840 — — 18,840 
Stock-based compensation— — 1,149 — — — 1,149 
Exercise of employee stock options36,338 — 2,286 — — — 2,286 
Restricted stock issued15,821 — — — — — — 
Restricted stock surrendered for employee tax payment— — — — 4,253 (721)(721)
Shares issued for bonus settlement and director stipends260 — 38 — — — 38 
Stock repurchase plan— — — — 94,235 (14,450)(14,450)
Balance at March 31, 202119,623,017 $20 $424,791 $237,254 5,385,771 $(243,312)$418,753 
Net income— — — 13,672 — — 13,672 
Stock-based compensation— — 1,416 — — — 1,416 
Exercise of employee stock options866 — 49 — — — 49 
Restricted stock forfeited(55,162)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 713 (99)(99)
Shares issued for bonus settlement and director stipends324 — 56 — — — 56 
Stock repurchase plan— — — — 175,173 (24,590)(24,590)
Balance at June 30, 202119,569,045 $20 $426,312 $250,926 5,561,657 $(268,001)$409,257 
Net loss— — — (7,572)— — (7,572)
Stock-based compensation— — 1,505 — — — 1,505 
Exercise of employee stock options12,296 — 765 — — — 765 
Restricted stock forfeited(455)— — — — — — 
Restricted stock surrendered for employee tax payment— — — — 169 (31)(31)
Shares issued for bonus settlement and director stipends333 — 61 — — — 61 
Balance at September 30, 202119,581,219 $20 $428,643 $243,354 5,561,826 $(268,032)$403,985 

See accompanying notes to the unaudited condensed consolidated financial statements
8



ModivCare Inc.
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2022
 
1.    Organization and Basis of Presentation

Description of 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 patients. Its value-based solutions address the social determinants of health, or SDoH, connect members to care, help health plans manage risks, reduce costs, and improve outcomes. ModivCare is a provider of non-emergency medical transportation, or NEMT, personal care, and remote patient monitoring, or RPM, solutions, which serve similar, highly vulnerable patient populations.

The technology-enabled operating model includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transportation management. Additionally, its personal care services 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 remote patient monitoring services include personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. ModivCare is further expanding its offerings to include meal delivery and working with communities to provide food-insecure individuals delivery of meals.

ModivCare also holds a 43.6% minority interest in CCHN Group Holdings, Inc. and its subsidiaries, which operates under the Matrix Medical Network brand, which we refer to as “Matrix”. Matrix maintains a national network of community-based clinicians who deliver in-home and on-site services, and a fleet of mobile health clinics that provide community-based care with advanced diagnostic capabilities and enhanced care options.

Basis of Presentation

The Company follows accounting standards established by the Financial Accounting Standards Board (“FASB”). The FASB establishes accounting principles generally accepted in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. References to GAAP issued by the FASB in these notes are to the FASB Accounting Standards Codification (“ASC”), which serves as the single source of authoritative accounting and applicable reporting standards to be applied for non-governmental entities. All amounts are presented in U.S. dollars unless otherwise noted.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for the fair presentation of the results of the interim periods have been included.

The Company has made estimates relating to the reporting of assets and liabilities, revenues and expenses, and certain disclosures in the preparation of these unaudited condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. Management has evaluated events and transactions that occurred after the balance sheet date and through the date these unaudited condensed consolidated financial statements were filed with the SEC and considered the effect of such events in the preparation of these unaudited condensed consolidated financial statements.

The unaudited condensed consolidated balance sheet at December 31, 2021 included in this Form 10-Q has been derived from audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements contained herein should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Reclassifications: Certain prior year amounts have been reclassified to conform to current year presentation.

Impact of the COVID-19 Pandemic
9




Since March 2020, the COVID-19 pandemic and the measures enacted by state and government officials to prevent, prepare for, and respond to COVID-19 or slow its spread have had an ongoing adverse impact on the Company’s business, as well as its patients, communities, and employees. With ongoing uncertainties around the duration and magnitude of the pandemic, the ultimate impact to the business remains uncertain. Accordingly, the COVID-19 pandemic could continue to have an adverse impact on the Company's financial statements with potential for (i) labor shortages or other disruptions that impact our ability to provide services, and (ii) decreased member comfort leaving the house to obtain transportation for non-emergency medical purposes; among other things. Despite ongoing uncertainties, the Company’s priorities throughout the COVID-19 pandemic remain intact with emphasis on protecting the health and safety of its employees, maximizing the availability of its services and products to support the SDoH, and supporting the operational and financial stability of its business.

Federal, state, and local authorities have taken several actions designed to assist healthcare providers in providing care to COVID-19 and other patients and to mitigate the adverse economic impact of the COVID-19 pandemic. Legislative actions taken by the federal government include the CARES Act and the American Rescue Plan Act of 2021 ("ARPA"). Through the CARES Act, the federal government has authorized payments to be distributed to healthcare providers through the Public Health and Social Services Emergency Fund ("Provider Relief Fund" or "PRF"). The Government further initiated ARPA which established the Coronavirus State and Local Fiscal Recovery Fund ("SLFRF") to send relief payments to state and local governments impacted by the pandemic to assist with responding to the public health emergency (“PHE”) including the economic hardships that continue to impact communities and to respond to workers performing essential work during the COVID-19 PHE, including providers. These funds are not subject to repayment, provided we are able to attest and comply with any terms and conditions of such funding, as applicable.

2.    Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingencies, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Changes in Accounting Estimate

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets and intangible assets on an ongoing basis. As a result of this review, the Company adjusted the estimated useful life of the Simplura trademarks and trade names intangible asset from 10 years to 3 years and adjusted the estimated useful life of the payor network from 15 years to 10 years effective as of January 1, 2022. This change was driven by strategic shifts in the Company's personal care segment operations, partially contributed to by the acquisition of Care Finders Total Care, LLC ("Care Finders"). Based on the intangible asset values as of December 31, 2021, the effect of the change in estimate during the three and nine months ended September 30, 2022 was an increase in amortization expense of $3.6 million, a decrease in net income of $2.4 million, and a decrease in earnings per share of $0.17 per diluted common share outstanding, and an increase in amortization expense of $10.7 million, a decrease in net income of $8.4 million, and a decrease in earnings per share of $0.60 per diluted common share outstanding, respectively.

Government Grants

The Company has received government grants under the CARES Act PRF and the ARPA SLFRF to provide economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. Under these acts, the Company received distributions of approximately $1.4 million during the three months ended September 30, 2022. No distributions were received during the three months ended September 30, 2021. The Company received distributions of approximately $10.4 million and $3.5 million during the nine months ended September 30, 2022 and September 30, 2021, respectively. Distributions received under these acts are targeted to assist with incremental health care related expenses or lost revenue attributable to the COVID-19 pandemic as well as provide stimulus to support long-term growth and recovery.

The payments from these acts are subject to certain restrictions and possible recoupment if not used for designated purposes. As a condition to receiving PRF distributions, providers must agree to certain terms and conditions, including that the funds are being used for healthcare related expenses and lost revenues attributable to COVID-19, as defined by the U.S. Department of Health and Human Services ("HHS"). All recipients of PRF payments are required to comply with the reporting requirements described in the terms and conditions and as determined by HHS. The Company has submitted the required
10



documents to meet reporting requirements through reporting period three, which ended September 30, 2022. The Company received an audit inquiry letter from HHS related to one of the business units that received PRF payments, to which the Company has responded and submitted all requested information and believes that the payments received are substantiated and within the terms and conditions defined by the HHS and continues to include these amounts as grant income. At this time, the Company is unaware of any other pending or upcoming audits or inquiries related to PRF received.

As a condition to receiving SLFRF, providers must agree to use the funds to respond to the PHE or its negative economic impacts, to respond to workers performing essential work by providing premium pay to eligible workers and to offset reduction in revenue due to the COVID-19 PHE as stipulated by the states in which the funds were received. All recipients of SLFRF payments are required to comply with the reporting requirements that the state in which the funds originated has requested in order for the states to meet the requirements as described in the terms and conditions as determined by the Department of the Treasury. The Company has complied with all known reporting requirements to date.

The Company recognizes distributions from government grants as grant income in line with the loss of revenues or expenses for which the grants are intended to compensate when there is reasonable assurance that it has complied with the conditions associated with the grant.

CARES Act Payroll Deferral

The CARES Act also provides for certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes. The Company has deferred payment of approximately $12.3 million related to the deferral of employer payroll taxes as of September 30, 2022 and December 31, 2021 under the CARES Act which is recorded in accrued expenses on the unaudited condensed consolidated balance sheets. This balance is expected to be paid in the fourth quarter of 2022.

Recent Accounting Pronouncements

The Company adopted the following accounting pronouncements during the nine months ended September 30, 2022:

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The relief granted in ASC 848, Reference Rate Reform ("ASC 848"), is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. The provisions of ASC 848 must be applied for all transactions other than derivatives, which may be applied at a hedging relationship level. Entities may apply the provisions as of the beginning of the reporting period when the election is made (i.e. as early as the first quarter 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. There was no material impact to the financial statements from the adoption of this ASU.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. ASU 2021-08 is effective for public business entities for fiscal years beginning on or after November 1, 2023, including interim periods therein. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the effective date of adoption, and the impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations. The Company has elected to early adopt this accounting standard and notes that there was no material impact to the financial statements from the adoption of this ASU.

3.  Acquisitions

Business Combinations

Care Finders Total Care, LLC

On September 14, 2021, the Company acquired Care Finders which is a personal care provider in the Northeast, with operations in New Jersey, Pennsylvania, and Connecticut. The acquisition of Care Finders broadens access to in-home personal care solutions for patients and supports the Company's strategy to expand its personal care platform.
11




The equity transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of the Company acquired 100.0% of the equity securities of Care Finders for $333.4 million (a purchase price of $344.8 million less $11.4 million of cash that was acquired).

The following table summarizes information from the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of September 14, 2021 (in thousands):

Cash$11,424 
Accounts receivable (1)
14,708 
Prepaid expenses and other (2)
2,625 
Property and equipment (3)
2,527 
Inventories (4)
231 
Operating right of use asset (5)
1,939 
Intangibles (6)
100,750 
Goodwill (7)
232,103 
Other assets (8)
226 
Accounts payable (9)
(2,720)
Accrued expenses and other accrued liabilities (9)
(14,344)
Operating lease liability (5)
(1,939)
Deferred tax liabilities (10)
(2,327)
Other liabilities (9)
(378)
Total of assets acquired less liabilities assumed$344,825 

(1)     Management has valued accounts receivable based on the estimated future collectability of the receivables portfolio.
(2)     Given the short-term nature of the balance of prepaid expenses, the carrying value represents the fair value.
(3)     The acquired property and equipment consists primarily of capitalized software, computer equipment, and automobiles.
(4)     Given the short-term nature of the balance of inventories, the carrying value represents the fair value.
(5)     The fair value of the operating lease liability and corresponding right-of-use asset (current and long-term) was recorded at $1.9 million based on market rates available to the Company during the purchase price allocation.
(6)     The allocation of consideration exchanged for intangible assets acquired is as follows (in thousands):

TypeUseful LifeValue
Payor networkAmortizable7 years$97,200 
Trade nameAmortizable3 years1,950 
Non-compete agreementAmortizable5 years1,600 
$100,750 

The Company valued the payor network utilizing the multi-period excess earnings method, trade names utilizing the relief-from-royalty method and the non-compete agreement utilizing the with/without method.

(7)     The acquisition initially resulted in $232.2 million of goodwill as a result of expected synergies due to future customers driven by expansion into different markets, an increase in market share, and a growing demographic that will need home care solutions. In the third quarter of 2022, goodwill decreased by $0.1 million as a result of changes to accounts payable and deferred tax liabilities, as discussed in detail below. All of the acquired goodwill is deductible for tax purposes.
(8)     Included in other assets are security deposits with a value of $0.2 million.
(9)     Due to the short-term nature of the accounts, the carrying value is assumed to represent the fair value for accounts payable as well as certain other current and non-current liabilities as of the acquisition date. In the third quarter of 2022, it was determined that an additional $0.2 million of accounts payable existed as of the acquisition date, and therefore, the initial balance of $2.5 million was increased to $2.7 million.
12



(10)     Net deferred tax liabilities represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax basis. In the third quarter of 2022, deferred tax liabilities of $2.6 million decreased by $0.3 million due to tax impacts of the acquisition.

VRI Intermediate Holdings, LLC

On September 22, 2021, the Company acquired VRI, a provider of remote patient monitoring solutions that manages a comprehensive suite of services including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. The acquisition of VRI accelerates the Company's strategy to build a holistic suite of supportive care solutions that address SDoH, introduces new technology-enabled in-home solutions that deepen the Company's engagement with payors and patients, and adds a new suite of services and operating team to advance the Company's broader technology and data strategy.

The stock transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of the Company acquired 100.0% of the equity securities of VRI for $314.6 million (a purchase price of $317.5 million less $2.9 million of cash that was acquired).

The following table summarizes the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of September 22, 2021 (in thousands):

Cash$2,922 
Accounts receivable (1)
6,800 
Inventory (2)
1,684 
Prepaid expenses and other (3)
805 
Property and equipment (4)
14,908 
Intangible assets (5)
75,590 
Goodwill (6)
236,317 
Accounts payable and accrued liabilities (7)
(1,884)
Accrued expense (7)
(2,487)
Deferred revenue (7)
(67)
Deferred tax liabilities (8)
(17,070)
Total of assets acquired less liabilities assumed$317,518 
    

(1)    Management has valued accounts receivable based on the estimated future collectability of the receivables portfolio.
(2)     Given the short-term nature of the balance of inventories, the carrying value represents the fair value.
(3)     Given the short-term nature of the balance of prepaid expenses, the carrying value represents the fair value.
(4)     The acquired property and equipment consists primarily of personal emergency response system devices, with the remainder consisting of computer equipment, buildings and other equipment. The Company valued the personal emergency response system devices, computer equipment and other equipment utilizing the cost approach at $12.7 million. The carrying value of the remainder of the property, plant and equipment, consisting primarily of buildings and land, is assumed to represent the fair value.
(5)    The allocation of consideration exchanged for intangible assets acquired is as follows (in thousands):

TypeUseful LifeValue
Payor networkAmortizable7 years$72,150 
Trade nameAmortizable3 years890 
Developed technologyAmortizable3 years2,550 
$75,590 

The Company valued the payor network utilizing the multi-period excess earnings method, trade names utilizing the relief-from-royalty method and developed technology utilizing the cost approach.

(6)     The acquisition initially resulted in $236.7 million of goodwill as a result of expected synergies due to future customers driven by expansion into different markets and an increase in market share. In the third quarter of 2022, goodwill decreased by $0.4 million due to a decrease in deferred tax liabilities, as discussed in more detail below. The related goodwill is not deductible for tax purposes.
13



(7)     Due to the short-term nature of the accounts, the carrying value is assumed to represent the fair value for accounts payable as well as certain other current and non-current liabilities as of the acquisition date.
(8)     Net deferred tax liabilities represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax basis. In the third quarter of 2022, deferred tax liabilities of $17.5 million decreased by $0.4 million due to tax impacts of the acquisition.

Guardian Medical Monitoring

On May 11, 2022, the Company acquired Guardian Medical Monitoring ("GMM"), a provider of remote patient monitoring solutions that manages a comprehensive suite of services including personal emergency response systems and medication management. The acquisition of GMM supports the Company's strategy to expand its RPM segment and enhances the Company's suite of supportive care solutions that address SDoH.

The stock transaction was accounted for in accordance with ASC 805, Business Combinations in which a wholly-owned subsidiary of the Company acquired 100.0% of the equity securities of GMM for $71.3 million (a purchase price of $71.6 million less $0.3 million of cash that was acquired).

The following is a preliminary estimate of the allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, as of the acquisition date of May 11, 2022 (in thousands):

Cash$327 
Accounts receivable (1)
2,548 
Prepaid expenses and other (2)
770 
Property and equipment (3)
2,744 
Intangible assets (4)
21,950 
Goodwill (5)
44,113 
Accounts payable (6)
(281)
Accrued expenses and other current liabilities (6)
(577)
Total of assets acquired less liabilities assumed$71,594 

The acquisition method of accounting requires us to record the assets acquired and liabilities assumed at their fair values as of the date of acquisition, which requires management to use currently available information to make estimates and assumptions. The Company believes that the available information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however, if new information becomes available related to facts that existed at the acquisition date, preliminary estimates may be adjusted. Upon finalization of the preliminary items noted below, there may be related adjustments to certain of such items and to goodwill and income taxes.

(1)    Management has valued accounts receivable based on the estimated future collectability of the receivables portfolio. In the third quarter of 2022, it was determined that $0.4 million of the initial accounts receivable balance was uncollectible, and therefore, the initial balance of $2.9 million was decreased to $2.5 million. This estimate is preliminary as the Company's evaluation of the collectability of receivables is ongoing.
(2)     Given the short-term nature of the balance of prepaid expenses and other assets, the carrying value represents the fair value.
(3)     The acquired property and equipment consists primarily of personal emergency response system devices, with the remainder consisting of computer equipment and furniture and fixtures. The Company valued the personal emergency response system devices utilizing the cost approach. The carrying value of the remainder of the property, plant and equipment, consisting primarily of computer equipment and furniture and fixtures, is assumed to represent the fair value. Management's assessment of the fair value for PP&E is ongoing.
(4)    The preliminary allocation of consideration exchanged for intangible assets acquired is as follows (in thousands):

TypeUseful LifeValue
Payor networkAmortizable7 years$21,600 
Trade nameAmortizable2 years350 
$21,950 

The Company valued the payor network utilizing the multi-period excess earnings method and trade names utilizing the relief-from-royalty method.
14




(5)     The acquisition preliminarily resulted in $43.7 million of goodwill as a result of expected synergies due to future customers driven by expansion into different markets and an increase in market share. In the third quarter of 2022, accounts receivable was adjusted down by $0.4 million which caused a corresponding increase to goodwill for a total goodwill balance of $44.1 million. The amount of goodwill deductible for tax purposes has yet to be determined.
(6)     Due to the short-term nature of the accounts, the carrying value is assumed to represent the fair value for accounts payable and accrued expenses and other current liabilities as of the acquisition date.

Pro Forma Financial Information (unaudited)

Assuming Care Finders, VRI, and GMM had been acquired as of January 1, 2021, and the results of each had been included in operations beginning on January 1, 2021, the following table provides estimated unaudited pro forma results of operations for the three and nine months ended September 30, 2022 and September 30, 2021 (in thousands, except earnings per share). The estimated pro forma net income adjusts for the effect of fair value adjustments related to each of the acquisitions, transaction costs and other non-recurring costs directly attributable to the transactions and the impact of the additional debt to finance the applicable acquisitions.

Three months ended September 30,Nine months ended September 30,
2022202120222021
Revenue$647,782 $552,342 $1,850,472 $1,616,115 
Income (loss) from continuing operations, net(9,714)(13,442)(7,242)12,439 
Diluted earnings (loss) per share$(0.69)$(0.96)$(0.52)$0.87 

Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the date indicated or of future operating results. The supplemental pro forma earnings were adjusted to exclude the impact of historical interest expense of Care Finders and VRI of $1.1 million and $1.0 million, respectively, for the three months ended September 30, 2021 and $3.7 million and $3.2 million, respectively, for the nine months ended September 30, 2021.

Acquisition-related costs of approximately $0.4 million and $2.0 million for the three and nine months ended September 30, 2022 for GMM were expensed as incurred, recorded in selling, general and administrative expenses and are reflected in the pro forma table above at the assumed acquisition date. Acquisition-related costs consisted of professional fees for advisory, consulting, and underwriting services as well as other incremental costs directly related to the acquisition.

Asset Acquisition

On May 30, 2022, the Company entered into an asset purchase agreement with a private entity to purchase certain customer contracts. Pursuant to the purchase agreement, the contracts were acquired for total preliminary consideration of $7.6 million in cash, subject to certain adjustments.

The transaction was accounted for as an asset acquisition in accordance with ASC 805, Business Combinations. The preliminary fair value of the net consideration is fully allocated to a payor network intangible asset recorded at the personal care segment and will be amortized over a period of 6 years.


15



4.    Segments

The Company’s reportable segments are identified based on a number of factors related to how its chief operating decision maker ("CODM") determines the allocation of resources and assesses the performance of the Company’s operations. The Company's CODM manages the Company under four reportable segments.

The Company’s reportable segments are strategic units that offer different services under different financial and operating models to the Company’s customers. The segments are managed separately because each requires different technology and marketing strategies. Furthermore, the different segments were each generally acquired as a unit, with the management of each at the time of acquisition retained to continue to operate their respective businesses.

The Company has determined each of the separate reportable segments based on the difference in services provided by each of the segments as provided in further detail below:

NEMT - The Company's NEMT segment is its legacy segment and operates primarily under the brands ModivCare Solutions and Circulation. The NEMT segment is the largest manager of non-emergency medical transportation programs for state governments and managed care organizations, or MCOs, in the U.S. This segment also holds the results of the Company's captive insurance program.

Personal Care - The Company's Personal Care segment began operations in November 2020 with the acquisition of Simplura and expanded in September 2021 with the acquisition of Care Finders. The Personal Care segment operates under the brands Simplura and Care Finders and provides personal care to State and Managed Medicaid, Medicare, and Private Pay patient populations in need of care monitoring and assistance performing activities of daily living;

RPM - The Company's RPM segment began operations in September 2021 with the acquisition of VRI and expanded in May 2022 with the acquisition of GMM. The RPM segment operates under the VRI brand and is a provider of remote patient monitoring solutions, including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions;

Corporate and Other - Effective January 1, 2022, the Company completed its segment reorganization which resulted in the addition of a Corporate and Other segment that includes the costs associated with the Company's corporate operations. The operating results of the Corporate and Other segment include 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 the Matrix investment. Prior to the segment reorganization, we reported the investment in Matrix as a separate operating segment, however based on the relative size of the Matrix investment and all related activity to the overall financial statements, the CODM no longer views it as a separate operating segment but reviews results in conjunction with the other corporate results of the business. The Company reclassified certain costs associated with this reorganization for the three and nine months ended September 30, 2021, to conform to this presentation.

The Company evaluates performance and allocates resources based on the operating income of the reportable segments, which includes an allocation of corporate expenses directly attributable to the specific segment and includes revenues and all other costs directly attributable to the specific segment.

The following table sets forth certain financial information from continuing operations attributable to the Company’s business segments for the three and nine months ended September 30, 2022 and 2021 (in thousands):

16



 Three months ended September 30, 2022
 NEMTPersonal CareRPMCorporate and OtherTotal
 Service revenue, net
$459,796 $169,226 $18,760 $ $647,782 
Grant income (1)
 789   789 
Service expense394,981 132,746 6,836  534,563 
General and administrative expense31,815 22,057 5,816 16,201 75,889 
Depreciation and amortization7,079 12,919 5,467 207 25,672 
Operating income (loss)$25,921 $2,293 $641 $(16,408)$12,447 
Equity in net loss (income) of investee, net of tax$(208)$ $ $26,656 $26,448 
Equity investment$208 $ $ $43,269 $43,477 
Goodwill (2)
$135,186 $552,775 $280,429 $30 $968,420 
Total assets$517,930 $962,425 $402,929 $106,561 $1,989,845 

 Nine months ended September 30, 2022
 NEMTPersonal CareRPMCorporate and OtherTotal
 Service revenue, net
$1,309,449 $491,661 $49,362 $ $1,850,472 
Grant income (1)
 4,587   4,587 
Service expense1,100,801 379,423 17,884  1,498,108 
General and administrative expense102,736 68,536 17,520 43,316 232,108 
Depreciation and amortization21,576 37,976 14,201 623 74,376 
Operating income (loss)$84,336 $10,313 $(243)$(43,939)$50,467 
Equity in net loss (income) of investee, net of tax$(143)$ $ $28,163 $28,020 
Equity investment$208 $ $ $43,269 $43,477 
Goodwill