DocGo Inc (DCGO) 2024 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the DocGo fourth quarter and full year 2024 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call. You require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, February 27, 2025. I would now like to turn the call over to Mike Cole, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements made in this conference call, other than statements of historical fact, are forward-looking statements. The words may, will, plan, potential, could, goal, outlook, design, anticipate, aim. We estimate, expect, intend, guidance, confidence, target, project, and other similar expressions may be used to identify such forward-looking statements. These forward-looking statements are not guaranteed of future performance, and we cannot assure you that we will achieve or realize our plans, intentions, outcomes, results, or expectations.

Forward-looking statements are inherently subject to substantial risks, uncertainties, and assumptions, many of which are beyond our control, and which may cause our actual results or outcomes or the timing of results or outcomes to differ materially from those contained in our forward-looking statements. Risks, uncertainties, and assumptions include but are not limited to those discussed in our risk factors and elsewhere in DocGo's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports and statements filed by DocGo with the SEC to which your attention is directed.

Actual outcomes and results or the timing of the results or outcomes may differ materially from what is expressed or implied by these forward-looking statements. In addition, today's call contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided directly as part of this call or included in our earnings release or on the current report on Form 8-k that includes our earnings release which is posted on our website docgo.com as well as filed with the SEC.

The information contained in this call is accurate as of only the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events except to as the extent required by law. At this time, it is now my pleasure to turn the call over to Mr. Lee Bienstock, Chief Executive Officer of DocGo. Lee, please go ahead.

Thank you, Mike, and thank you all for joining us today.

The fourth quarter marked a period of aggressive investment as we continue to build out our care gap closure footprint in response to strong demand from our customers. In addition, we continue to invest in our current operational and management structure to support the next leg of growth across our customer verticals. We are thrilled with both the progress and the results of these programs, but these investments also come with a near-term impact on profitability. While we regularly review our expenses for efficiency gains, particularly with respect to our non-field headcount, we want to ensure that we retain the talent base that will be necessary for the next phase of our growth.

Our goal is to build a one hundred year company that fundamentally transforms how healthcare is delivered and achieve our mission of bringing high quality, highly accessible care to all. To achieve this vision, it is vital to have a clearly defined value proposition that resonates with our customers and the patients we serve. Based on our early data points, we see tremendous value creation potential from our efforts, so we plan to continue making this investment.

We are adding experienced operators, top shelf sales personnel, and continuing to make considerable enhancements in our tech stack to support the rapidly growing needs of our customer base. The scale of what we continue to accomplish is a testament to the impact we are making on how healthcare is delivered. In 2024 alone, DocGo's proprietary tech platform calculated over 15 million estimated arrival times for our customers. Our network of clinicians travelled over 8.8 million miles to facilitate care across over 1.5 million patient interactions.

These included facilitating vaccinations for over 58,000 adults and children and coordinating over 99,000 behavioural health depression screenings. DocGo was assigned hundreds of thousands of patients for care gap closure programs and scaled these programs considerably in New York and California.

All told, we provided services across thirty-one states in the US and across the UK. I'm so proud of the fact that DocGo was recognized as one of the top innovators and places to work in healthcare. Last year alone, we received over 40,000 job applications from healthcare clinicians and corporate staff seeking to join us on our mission to provide high quality, highly accessible care to all.

A testament to the quality of our offering is our fourth quarter care gap closure program NPS, or net promoter score of 86. To put that number in perspective in healthcare, above 30 is deemed good, above 50 is excellent, and above 70 is deemed world class. Both our patients and our customers are delighted with the quality of our programs, and we see a substantial opportunity to accelerate our growth in this market via both organic and inorganic means in the coming quarters.

When working with our insurance customers, we don't go in pitching a specific care gap program but offer a clinical platform in a mobile setting that health plans can leverage to engage their hard to reach, costly patients. This translates into a very sticky relationship as we deliver strong value for our customers, and they begin to look at us as partners, not just a vendor.

We see strong evidence of this given that many of our health plan partners from 2024 are looking to significantly expand their relationship with us from both a scope and scale perspective.

I would like to take a minute and provide a few specific examples. First, a major payer in the tri-state area with 3 million members that had assigned us a substantial number of lives for care gap closure advised that it now wants to expand into PCP services, specifically targeting their populations that are unattached and underserved, and they're also considering utilizing DocGo's mobile clinics to bring care to communities that would benefit from increased access to healthcare services.

Second, a major payer on the West Coast with 5 million members that we provided care gap closure services for in 2024 now wants to expand our relationship to include mobile mammography, PCP, mobile clinics, and transition of care services. Another West Coast customer indicated that it wants to significantly expand our transition of care program to cover all hospital discharges at two of their highest volume hospitals in the region. And include chronic care management for high risk populations with diabetes and hypertension.

A major payer in New York with 5 million lives is expanding their assigned patient list from 10,000 Medicaid members to 40,000 to 50,000 unengaged members this year and another East Coast payer with 2 million members that began with a bone density scan care gap closure program is now looking to add immunizations as well.

On a macro level with payers, our customers consistently share that they are laser focused on quality initiatives, as CMS and states across the country are making it harder and harder to reach quality measure thresholds which places downward pressure on these plans ratings. In addition to our existing customer base, there has been a flurry of inbound inquiries recently which can be attributed to payers looking for solutions, but also a broader appreciation for the impact that medical care and care gap closure programs in the home can have.

To continue building our scope of services in this vertical, earlier this month, we acquired PTI Health, a mobile phlebotomy company. We believe this is a great example of an acquisition that we can grow considerably based on demand from both PTI's existing base as well as our roster of customers expressing interest. Our immediate plans are to expand these capabilities in the New York market to meet the needs of a major national lab partner with additional geographies to follow.

In our government population health vertical, our work with the migrant-related HPD contract concluded in mid-December. We anticipate that associated receivables under that contract will be fully paid by the end of Q2 of this year.

Regarding our migrant-related programs with New York City Health Hospitals, we continue to expect that contract to largely wind down in the first half of 2025. Our accounts receivable under all of our migrant-related programs totalled approximately $150 million as of year-end, with approximately $30 million of associated payables due to subcontractors, which we expect will create a significant cash flow tailwind through mid-2025.

On the business development front, we have made considerable progress at the federal level and have secured two contracts for subcontracted work at the [VA].

Under these contracts, we will be facilitating vital examinations for veterans while improving access to care and help remove backlog challenges that the system has been facing.

We are ideally positioned to leverage our mobile care delivery model to help serve the needs of the VA, and we brought on Dr. David Shulkin, the former secretary of the VA, to help guide the company's efforts and drive growth in the population health vertical. I'm also pleased to report that our mobile X-ray program in New York continues to expand and has now completed over 2000 images since inception late last year.

Our hospital customer vertical, which is predominantly medical transportation, continued to perform well with customer expansions in several key markets. We signed a two-year contract with a major Texas healthcare system that enabled us to launch services in the Dallas-Fort Worth area, keeping with our strategy of entering markets with an anchor customer. We signed a two-year contract extension with a leading Tennessee-based healthcare system to continue providing services in Nashville. And just announced that we are launching services in Chattanooga, Tennessee to serve their facilities in that region.

We are also expanding our relationship with the largest healthcare system in New York State.

Before I hand it to Norm, I think it's important to note that while we were able to maintain gross margins at the same level year over year, SG&A as a percentage of revenues in the fourth quarter was substantially greater than in recent periods.

We chose and will continue to choose to maintain and invest in our infrastructure to prepare for the next growth opportunities ahead. Given the expedited drop in migrant-related revenue, we lost a lot of that leverage that comes with a higher revenue base. We view this as a temporary factor and anticipate that we will be able to complement our existing customer expansions already underway with the creative M&A opportunities that will allow us to return to a significantly higher revenue base, all while maintaining the highest level of quality during this transitionary period.

If we did not believe strongly in the growth opportunity ahead, we would be making more substantial cuts to get that SG&A percentage in line with historical levels, but that is not the case. The strategic value of being in the home and accessing traditionally difficult to reach populations to bring them preventative care is becoming increasingly obvious to customers, and the pace of inbound inquiries in the pipeline in general has never been stronger.

This is the time to invest in our future, build critical mass, and continue to deliver exceptional quality in the field, and we could not be more excited about what lies ahead. At this point, I'll pass it over to Norm to cover the financials. Norm, please go ahead.

Thank you, Lee, and good afternoon. Before I run through all of the fourth quarter results, I'd like to start by discussing our performance against our most recent guidance. The fourth quarter results were below the guidance range we announced back in November, particularly in the area of adjusted EBITDA, where our actual fourth quarter results fell short by about $10 million when compared to our implied guidance range from back in November.

Looking at all the contributing factors, our revenues were about $9 million or 7% below our forecast, with that shortfall entirely attributable to migrant-related revenues as we executed an orderly wind down of some sites on a more expedited schedule and as some services were curtailed at the sites that remained operational. This revenue shortfall translated to $5.3 million of the adjusted EBITDA shortfall. In addition, approximately $1.5 million relates to incremental investments into our care gap closure business, both in the cost of goods sold and SG&A areas of the income statement. Also contributing to the shortfall, there were $3.2 million of unanticipated expenses spread across lines of insurance where we are self-insured.

So, now let's turn to the actual results of operations for the fourth quarter and full year 2024. Total revenue for the fourth quarter of 2024 was $120.8 million which was a 39% decrease from $199.2 million in the fourth quarter of 2023. The entirety of the year over year revenue declined related to migrant projects. As we have documented over the past several quarters, our migrant-related work peaked in the fourth quarter of 2023 and began to wind down in May of 2024 with the exit from the New York City-based sites. By the end of 2024, we had exited all the HPD sites, and the remaining migrant work with New York City Health and hospitals is expected to be substantially completed by the midpoint of this year. For the full year, revenues were $616.6 million in 2024, down 1% from 2023.

Mobile health revenue for the fourth quarter of 2024 was $71.8 million down 52% from the fourth quarter of 2023, which was the peak of a migrant-related business. For the year, mobile health revenues of $423.1 million were down 4% from the 2023 level.

Medical transportation revenue increased to $49.1 million in Q4 of 2024, up about 1% from the transport revenues we recorded in the fourth quarter of 2023. Transportation revenues for 2024 were 7% higher than in 2023, and they have increased at a compound annual growth rate of 32% over the past three years.

We have several recent contract wins and a robust pipeline that gives us confidence in our 15% annual revenue growth expectation for 2025 and beyond.

We recorded a net loss of $7.6 million in Q4 2024 compared with net income of $8 million in the fourth quarter of 2023. For the full year, net income rose to $13.4 million in 2024, up 34% from $10 million in 2023. Adjusted EBITDA for the fourth quarter of 2024 was $1.1 million compared to $22.6 million in last year's fourth quarter. For the full year, adjusted EBITDA was $60.3 million a 12% increase from $54 million in 2023. The adjusted EBITDA margin for the full year of 2024 was 9.8%, up from 8.6% for the full year 2023.

Total GAAP gross margin percentage during the fourth quarter of 2024 was 30.8%, down from 31.2% in the fourth quarter of 2023. The adjusted gross margin, which removes the impact of depreciation and amortization, was 33.5% in the fourth quarter of 2024, identical to the adjusted gross margin recorded in the fourth quarter of 2023.

During the fourth quarter of 2024, adjusted gross margin for the mobile health segment was 35.9%, up from 32.2% in the fourth quarter of 2023. In the transportation segment, adjusted gross margins were 30.1% in Q4 2024, down from 37.4% in Q4 of 2023, which had benefited from several one-time items.

Transportation margins were still impacted in Q4 by residual subcontractor costs in one of our larger markets. However, as the fourth quarter came to a close, these subcontractor costs had been nearly eliminated as we were able to fill staffing gaps via newly hired field personnel.

Looking at operating costs, SG&A as a percentage of total revenues amounted to 39.7% in the fourth quarter of 2024, up from 27.6% in the fourth quarter of 2023. However, in absolute dollar terms, SG&A declined 13% from last year's fourth quarter. As revenues declined over the second half of 2024, we saw SG&A increase as a percentage of total revenues, reversing the operating margin expansion we had seen in the second half of 2023 and in early 2024. In addition, as Lee mentioned earlier, we invested aggressively in our payer vertical and additional mobile health services. These expenditures came in the areas of personnel, marketing, billing, credentialing, technology, and setting up and equipping base locations for our personnel in those markets. As a result, Q4 witnessed a pause in our trend of sequentially lower SG&A costs. Would expect to be temporary. Since Q4 of 2023, when our migrant-related revenues peaked, we have experienced a concurrent, [albeit] smaller, sequential decline in overall SGA. In Q1 of 2024, our SG&A declined by 7% from the levels of Q4 of 2023. In Q2, SG&A declined by another 11% and in Q3 by another 13%. In Q4 of 2024, however, due to the items mentioned above, SG&A increased from the levels of Q3 by about 20%.

While we will continue to invest in our growing business lines, we do expect that the sequential declines in quarterly SGA will resume in Q1 of 2025.

Now let's turn to our balance sheet where we made great strides in 2024 and which will play a key role in our ability to deliver the growth initiatives that Lee has just outlined. As of December 30, 2024, our total cash and cash equivalents, including restricted cash, was $107.3 million as compared to $72.2 million as of the end of 2023, an increase of nearly 50% year over year, we were able to build up our cash position despite spending close to $14 million in 2024 on stock buybacks and an additional $5 million in our equity investment and firefly health. We generated $70.3 million in cash flow from operations in 2024, a very significant turnaround from 2023 when cash flow from operations was a negative $64.2 million. However, the cash flow from operations in the fourth quarter was below our own expectations, reflecting a slower than expected payment experience with New York City's Department of Housing, Preservation and Development, HPD.

Specifically, there were two monthly invoices totalling approximately $35 million that we had expected to collect during the fourth quarter but did not. We have collected significant sums from HPD so far in 2025, and we continue to expect to collect everything that is outstanding, which will further bolster our cash balance, thereby increasing our investment capital.

Our accounts receivable continued to decrease due to the collections of our larger invoices and reflecting the decline in migrant-related revenues that we witnessed over the second half of 2024. At year end, net accounts receivable were $210.9 million down 20% from $262.1 million at the end of 2023. The fact that revenues were essentially the same in both years. Consequently, our day sales outstanding DSO was 125 days at the end of 2024, a nice improvement from 153 days at the end of 2023.

Our goal remains to bring consolidated DSO into the 90 to 100 day range by around the midpoint of 2025 as we collect our larger and older municipal invoices. Our largest customers are paying us regularly. And payments continue to come in, including several large payments that we have received this week as we convert our accounts receivable to cash.

Finally, turning to our guidance and outlook for 2025, we continue to expect full year revenues in the range of $410 million to $450 million. We further expect that gross margins will remain in line with or slightly better than those of 2024. Given the expectation for ongoing investment in our new business lines, we anticipate that EBITDA margins will be in the mid-single digits. However, with a large accounts receivable base continuing to shrink, as we drive collections, we expect that cash flow from operations will be significantly higher in 2025 than the $70 million we generated from operations in 2024.

At this point I'd like to turn the call back over to the operator for Q&A. Operator, please go ahead.

Thank you, ladies and gentlemen. (Operator Instructions)

Your first question comes from Pito Chickering from Deutsche Bank. Please go ahead.

Hey, good morning, guys. On the 2025 revenue guidance last quarter, he said that the base business would be $360 million to $400 million with migrants of 50 million, with migrants wanting down a lot faster in the fourth quarter. Are you assuming that the base business is growing faster than '25, or you still think you have a 50 million for the migrants in 2025?

Hi Pito. Absolutely, thanks for the question. So, on our last call we shared that migrant revenues were expected to be, as you mentioned, $50 million for this year.

It's safe to say that the migrant situation is quite fluid and dynamic right now at the moment. And so, we're keeping our revenue guidance the same for this year, but I do think it's entirely possible that this shift continues to move as it has been from migrant-related revenues over to base business revenues. And so, it is definitely possible that migrant-related revenues can be below that $50 million range and, in our forecast, any migrant related revenues would be replaced by the base business revenues, and we remove those operations and personnel over to the growing base business revenues that we're experiencing right now.

So, that's a pretty big growth of the base business. I mean, and here we are, sort of almost two months of, wait for the year. I mean, do you think that the base business can really pick up an extra $25 million, $30 million, $40 million sort of beyond we got it to just, in November?

Yes, we're very excited about where the base business is right now. As an example, since you mentioned our pipeline for our base business is quite robust. We have about 27 deals in the pipeline for municipal contracts, almost 30, you have 29 health system deals in the pipeline. We have over 120 payer and provider deals. So, we have a very robust pipeline, something the company's been working on all of last year as we transition out of the migrant-related contracts and as we transition over to more evergreen municipal work as I was detailing earlier in the call, so we have a very robust pipeline. A lot of our customers are in expansion mode right now, as I mentioned, we're investing into that and so we feel very good about the pipeline. And as the migrant related projects are winding down, our goal is to transition a lot of that corporate personnel and that field staff over to those growing budding based business revenues.

Okay, and then, so looking at the guidance on the margin last, in November versus today. It's about $17 million of investments that are new in order to go from 8%,10% to 5%. I guess, where exactly are the $17 million of investments going in order to grow? It just seems a pretty substantial amount of investments in order to keep the revenues the same. So, can you give us more of a detail of exactly why you need to spend that today versus you don't think you'd spend that a few months ago.

Yes, I think some of the big buckets. First off, we are investing and continue to invest in the tech stack. One of the things we did at the end of Q4 is we automated our patient engagement process and that significantly allowed us to increase our bookings for our care gap closure programs as I mentioned on the last call, we came very close to that 1,000 visit a week exit rate on the Care gap business to close out the year. So, we can, we're going to continue to make investments on the tech stack. We continue to bring on well-trained field personnel, particularly LPNs, to go into the home and deliver the care. Those field personnel, we are training for a very wide skill set. We do over 35 different care gap closure procedures in the home, and so our clinicians are being trained for this wide scope of practice that is very attractive to our customers.

So, we want to make sure that our field personnel are equipped with the proper technology as well as the proper training to deliver an exceptional experience in the field, and we are investing pretty heavily in that. I'll also say we've been investing in our business development personnel to continue to drive the pipeline and move some of these deals forward, and so we're going to continue making investments as well in our corporate staff as well as the training of the field staff. Those are the big areas.

Yes, it's normal just to add to that. A touching on what Lee was saying, some of this relates to discretionary spending that we're doing. We've spent a few quarters talking about the need to right size our SG&A. So, that it remained a relatively close percentage of revenue to what it had been in the past.

Realistically though, as we look through it and Lee alluded to this in his Comments, we're seeing areas where you know we're reluctant to take out certain types of infrastructure, corporate overhead costs because these are people who are going to be a big part of the growth of some of these programs that we've been talking about. So, it's not like we certainly haven't given up on the cost cutting. We are deeply engaged in it, and everybody here is deeply engaged in it. You're going to see the fruits of that as we go through 2025, but we're doing it in a maybe a more measured way. And so, the trajectory of the decline in those corporate overhead costs with a change in that trajectory is one of the large reasons why we think that the margin will be different from what we had thought a few months ago.

Okay. I go back to that sort of my first question just run some numbers here. I mean, if before the target was 50 million of migrants in '25, we're maintaining revenues. So, we're saying that business is getting better. If I'm an offset 37 million of that, I'm just pulling the number out of the air. That's about a 10% sort of increase of the base business versus where we were in November. Are those deals already closed at this point? I mean, have you already closed 10% more deals at this point where we are today than we were in November. I mean, again, like as we are looking at the leverage here, SG&A leverage and gross margin, and with this margin coming down, like these deals already been closed at this point. Thanks.

Yes, we have closed 10% more deals at the start of this year and as we closed out the year last year, and then we have those additional deals in the pipeline as well that we're continuing to push forward.

Great, thanks so much.

Thank you, Pito.

The next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Hi, this is Gabie on for Sarah. I wanted to touch on the $3.2 million of unanticipated expenses, on the EBITDA falling short. Can you talk about what visibility you have that that won't repeat in '25?

Yes, it's a great question. Hey Gaby, it's Norm. I look the first thing I'll say about it is that, when you're self-insured as we are, there's no question that there's a little bit of uncertainty about what those numbers are going to be like as opposed to if we were completely insured in a regular manner where we're just paying a premium, we know what the premium is going to be by and large, and then you're just trying to predict what the premium is going to be from year to year. Here, obviously being self-insured, so there are claims that are going to come in at a higher or lower level than what we had reserved for.

There's the IBNR piece of it which is in anticipation of the claims that were incurred but not yet reported. So, there's always going to be a fluctuation, and that number can go up, that number can go down. There are a lot of things that can happen in that in that regard. So, it's hard to say that it won't repeat, but likely the way the way we do the reserving is that if you're reserving in one quarter, you're probably going to be properly reserved for the next couple of quarters.

The one thing I'll point out, and it's something we discussed here internally, at least on a monthly basis, we are saving, I would estimate in the millions if not maybe above $10 million a year by having things like workers' comp, auto, and even our health insurance as part of our captive insurance company. In fact, if anything, we're working on potentially moving other lines of insurance like cyber and liability, professional liability into that into that place as well. It's worked well for us.

Generally speaking, I'll just use ambulance insurance or the auto part of it and the liability part of it as an example. It tends to be very expensive and very overpriced, and what we found is that that our experience has been substantially better than what it would be, and we're consistently comparing it to the prices that are out there in the market, so we're willing to accept some fluctuation in that cost, this quarter we saw the downside of it, but on an ongoing basis, it's lower than would have been. So, when we look at it on a project basis across time, we're definitely still well ahead of it.

Okay, great. And then if I could just sneak in one more, I thought I heard you mention in the prepared remarks a sequential decline in SG&A throughout the quarters of 2025. Would that be on a dollar based metric or as a percentage?

Yes, so actually what I had mentioned was that you know we had seen a sequential decline in 2024, when I start with my base as Q4 2023, which is a high point on a percentage basis and on a dollar basis it came down in Q1, came down in Q2 and Q3, popped up in Q4. What I'm saying is that we would expect, we fully expect that in Q1 of 2025 in dollar terms, SG&A will lower than it was in this past Q4, that we just reported.

Now in terms of percentage, if I look out for the year, I would say that most likely based on the way the revenues are trending, and that's obviously going to be a big deal as far as calculating the percentage of revenue that SGA represents. So, I would say Q1 will be better than we saw in Q4. Q2 will be, about the same level as Q1, maybe technically higher on a percentage basis. But then once you get into Q3 and Q4, we're going to get a lot closer to that level that we had seen prior to Q4 of this year, as some of that revenue comes in that Lee was alluding to earlier. So, those contract wins will translate into actual revenue in terms of absolute dollars, we would expect that we would see sequential declines in absolute dollar SGA throughout the year.

Okay, awesome. Thank you, guys.

Thank you. The next question comes from Richard Close with Canaccord Genuity. Please go ahead.

Yes, thanks for the questions. I jumped on late. Lee, can you, tell us what the migrant revenue specifically was in the fourth quarter in the full year just trying to see if like the core met that 240 to 260 type of number that you were looking for.

Absolutely. Hi Richard. So, the migrant revenues in Q4 were approximately $55 million and for the total year, to answer your question, it was about $370 million. We did hit, we had shared on our previous call that our expected range for the base business to be $240 million to $260 million and we did hit the revenue guidance for that base business range.

Yes, we're about 246, 250 in that area.

Yes, okay, great, thanks, and sorry for jumping on the call late there. Norm didn't I'm trying to remember going through my notes here quickly, but it didn't something on this insurance pop up a couple years ago, I want to say and is there any way to prevent this, just like based on what you're doing with guidance and what not to be more conservative, so we don't have something like this pop up.

I don't, I'm not sure what you're referring to about a couple of years ago, but as far as looking forward and having something like this not pop up, the best way we can prevent it from popping up again is to have it pop up now. What I mean is, being conservatively reserved, taking we have not been at the captive insurance game for very long. It's been a couple of years and as we as we get more mature, as we see the way things develop, the timing of things, for example, if you've got some ambulance related accident and you see how that typically develops over time that in year one the claim is this in year two the claim goes there, different things change, we're looking at things like frequency and severity and all the different stuff that an old insurance guy like myself will like to think about it.

We have a very good team that works on it. So, as we get more conservative about the reserving and as we make sure that we build an IBNR for claims that haven't happened, that allows us to sort of use the accounting to smooth. It out as opposed to simply being in a situation whereas claims come in, I record it and then it's you're simply subject to the timing of when claims come in. So, this thing I would hope would take us a very long way towards doing exactly that, which is to sort of smooth out the insurance costs as we go.

Okay, and then, obviously you guys are successful in signing new business, the pipelines and all the units or divisions, seems robust in all three of them, one thing that sort of, people have had a problem with. Since, you guys have been public is, no shortage of new business but there's like upfront costs and you know these investments is there what given the investments you're making now, I guess if you're executing on your pipeline, do you think you're going to have to have another bucket of investments in the future to execute on that pipeline, if you win it, just how are you guys thinking about that?

Absolutely, it's a great question, Richard. I think first and foremost, we have essentially changed a bit, we've evolved frankly our ethos of really the pipeline of deals we're pursuing. So, the company was very heavily oriented towards perhaps a crisis response, emergency response, it's part of our ambulance DNA and a lot of the municipal mobile health projects that we were winning and pursuing were crisis related and so as a result there were they start and then they sunset, they start, they sunset and requires investments.

Our pipeline right now is really focused on evergreen opportunities, so our care gap closure business is here today. We'll be here towards the end of the year. In fact, it increases as the year progresses as health plans try to make more and more progress as they go throughout the year. And then again, they'll unfortunately there are always patients that are unengaged, unattributed, have access issues, have chronic conditions, and so those lists we've seen carry from one year to the next already from last year to this year and become an evergreen business for us and as we convert those patients into PCP patients now their long term primary care provider and so on and so on.

On the municipal side as well, we're looking at opportunities where we can be providing services to our disabled veterans, to patients that are located in hard to reach communities, but not necessarily crisis response but rather health evaluations, health screenings, and other preventative care. So, those are really the sort of the evolution of the company is really moving towards long term preventative proactive care, and we've really started building that pipeline last year and it's starting to come to fruition at the end of last year and into this year and we're very excited about that. And so, I think you're going to see us continue to build up that pipeline as our Bandwidth frees up from the migrant related work.

We're going to pour more and more of our resources into those opportunities and then you're going to see the pipeline build from there, and those will be evergreen and will require less, start and stop and sort of investment to get going. I do think we will invest as we win contracts, we're going to acquire new vehicles, we just acquired an ADA, a fleet of ADA accessible vehicles to be able to provide care to disabled veterans as an example as part of our expansion there. We'll see how big that gets, but that these are evergreen style programs where supporting our veterans, will be here. So, those are the types of opportunities and pipeline we're pursuing and that will be an evergreen pipeline which I think the company will benefit very greatly from.

Okay, and my final question, maybe on transportation, how are you guys thinking about transportation in terms of like, the long term growth rate of that part of the business?

We're very excited about the growth opportunities for the transport space, as Norm mentioned we've been growing that business over 30% compounded annually for the past three years. We do have, as I mentioned, about just about 30 health system deals in the pipeline. A lot of those are transport related contracts.

And so, we think that business has opportunity to continue to grow. We have a 15% growth rate target on that business. I will say growth there does come in sort of a step-wise function where we sign new large health systems, and we bring them on. And then that adds considerably to the top line and then we go and work on the next one and then we add that one. And so, as we are signing these health systems, we bring them on. I think our team is doing a wonderful job on that. We have our tech platform I think is frankly the best in the industry.

We have health systems that want to work with us because the quality of our service and the team in the in the field is spectacular, but also our tech platform is just at the vanguard really of what's being developed in the industry. And we're utilizing that tech platform to also essentially manage our growing fleet in the field that's handling these care gap closure programs. So, we've really done a great job expanding the tech platform from transport to the mobile health side of the business where we now have.

As I was mentioning, we close out the year just about at 1,000 care gap closure visits in one week at the end of last year. That's a lot of units out on the field. They're going, we make sure that we manage there and that symphony as I call it in the field, the right clinician with the right diagnostics for the right patient needs, the right care gap closure trained to do a great quality service, and so we're utilizing that tech platform that we developed on the transport side, and we think we're very excited about the opportunity to really take that tech platform and apply it to the mobile health side which we've only just scratched the surface.

I think the transport business will continue to grow. I'm very excited about the opportunity to leverage the tech platform to manage the ambulances in the field, but now to leverage the fly cars as we call them in the field on the mobile health space, which again we're only scratching the surface, and I think the market will very much appreciate the tech platform now in the mobile healthcare space as we expand it into that opportunity.

So, if you're expecting 15% growth, norm, how should we be looking at a quarterly progression in 25% because the third quarter was like 1.7% if I'm looking at it right and like1% to 2% here in the second or fourth quarter.

Yes, so I would say, at the risk of sounding very linear, I think that it's going to be somewhat linear, and I say that because, look there are a couple of hospitals in, I'll say in New York state that we are now servicing. We haven't put out the press release yet because we're waiting for sign off, but the activity has already started. So, there are hospital systems that we have begun to work with, and those will ramp as we go.

There are a couple where we think we're at the one yard line or two yard line going in. And those will probably obviously not be a Q1 event, but that'll probably hit some time in Q2 and then ramp into Q3 and Q4. So, just based on what the pipeline looks like, you're going to get the full benefit of that once you get to Q3 and Q4, especially Q4. So, I would anticipate that it'll sort of work its way up sequentially throughout the years. I would expect higher transport revenues in Q1 and Q4 and higher in Q2, Q3, Q4 and so on and so forth as we exit 2025.

Okay helpful thanks.

Thank you.

The next question comes from Ryan MacDonald with Needham & Company. Please go ahead.

Hey, this is Matt on for Ryan. Thanks for taking the questions. Now on the migrant revenues for 2025, is there any risk that the remaining portion gets further accelerated or pretty good visibility from here? And I appreciate that if it winds down faster, you'll be able to replace that with core revenues, but given there's the cost impact while you transition, trying to gauge the risk of wind down getting further accelerated and not weighing on the EBITDA outlook.

Yes, and hey Matt it's Lee, I'm happy to take that question as I've obviously been very intimately involved in the whole process here. I think, yes, it's absolutely possible that it could be less than the $50 million considering, the current administration and what's going on in the political landscape and so it's absolutely possible that it could be less than $50 million. I would say we would transition that personnel particularly to the opportunities I outlined in the prepared remarks. And that's why we are basically adjusting that EBITDA guidance that we gave at the end of last year down, right? So, it will cost us investment and it will cost some margin to transition, as you mentioned, from that staff to new opportunities and that's why we're counting for it with the lower in part with the lower even the margin guide that we just adjusted on this call.

Okay, sounds like it's captured in the outlook then, maybe given the faster expansion into payers would love any update on your targets for the payer business. I know you previously mentioned 1,000 care gap run rates and 2024 and that could set up for, I think 65,000 care gap closures in 2025 hoping to get. 10,000 primary care patients and 70,000 patients on the virtual care management, do those targets still stand or are you thinking about where the business could get to know that you're accelerating the payer roll out?

Yes, I think those targets still stand. We'll update them as we progress throughout the year here. I think we think about it in a few ways. So yes, we came very close to that 1,000 a week visit at the end of last year. Currently we're at about a 400 to 500 visit per week run rate right now to start the year.

The beginning of the year is seasonally sort of the introductory period for the year for the health plans, and so we're matching their cadence. We think our exit rate for the end of this year will be over 2000 visits per week to give you a sense of the scale as we help health plans close out the year and address patients that indeed still have open gaps. So, we think that we'll continue to step up the care gap visits, and the 65,000 care gap visits is absolutely the goal. I'd also say that we brought on PTI Health, that's doing mobile phlebotomy in the home, and we're looking at ways to also expand their scope of services now that we've brought them into the DocGo family.

So, we'll continue to update those metrics. Our contracting is progressing with the health plans to evolve into the PCP provider as well as closing care gaps. And so, our goal remains the same there as well to enrol 10,000 PCP patients and as we mentioned about 70,000 patients monitored as well. So, we'll continue to update as we sign contracts, as I mentioned, a lot of this pipeline was included as we gave our targets and guidance for this year, but as we continue to ramp and scale, we'll continue to update those.

Appreciate that we, maybe just one last one, on the municipal business, I guess two parts to this question.

First, last quarter you talked about, I think it was called Project crime initiative with the goal of identifying large contractors that might benefit from subcontracting population health to DocGo.

Anything you can comment on that? I know early 2025 is maybe where we might start to see some progress, so would love any update there. And then second just broadly given the municipal programs can be influenced by federal policy and dollars, would love to just hear your thoughts on how the changes in Washington could potentially impact your Uni business or just government business in general. Thanks guys.

Absolutely. So, our project Prime, as you mentioned, where we are partnering and signing contracts with already existing service providers to municipal entities such as the VA is going well, as I mentioned, we signed two subcontractor contracts to provide services for current contractors that are providing services to the VA. So, that's kind of how we're ramping into that space and as I mentioned, we signed two contracts, and our team again has a pipeline of other opportunities that we are working on.

So, it is progressing as I mentioned, we did sign two contracts already as part of that initiative and we're going to continue to invest there as well. And so, you know that's the goal. In terms of the messaging coming out of Washington. I think, right now our goal really has been to go after evergreen opportunities that are imperatives for the municipal government have been over decades, and we believe we will continue to be so as an example, providing care for our veterans is a really good example. We'll share other ones as we start to progress the pipeline through, but those are great examples of ones where pretty apolitical, bipartisan, providing medical care for our veterans. It has been there for decades, and we believe those are exactly the type of opportunities we will be there in the future and the ones the evergreen style municipal programs that we're pursuing. I think that's essentially, our view right now in terms of where things are progressing on the municipal side.

We're focused on providing tremendous ROI, bringing care to populations that don't have good access to care. We do it in a more cost-effective way, which again also aligns with some of the messaging coming out of Washington right now, where we actually do it in a more cost-effective better ROI way where we're bringing dynamic care to underserved populations and as a result, improving health outcomes which lowers the total cost of care. So, we feel like we're really on the right side of the trend here.

Hello, Ryan.

Thank you.

All right, thank you.

The next question comes from David Larsen with BTIG. Please go ahead.

Hi, I think you said there was $55 million of migrant revenue in the quarter, so it looks like your base was maybe $66 million in the quarter, if I annually that you're at $260 million in base revenue and then if I add $50 million to that for migrant revenue that puts you up around $313 million for the year.

I think the guide is like [$430 million] so there's a delta there of like $120 million.

If we assume 1,000 care gap visits a week at $300 a pop, I think that's around $15 million or $20 million bucks, which means there's another $100 million of revenue to capture.

Just any like how much of that is you got to go win it versus under contract now just thanks any sort of conviction you can provide around, yes that's identified it's in the CRM we're in late-stage discussions for that for like $50 million of that $100 million or half of that's already signed any more caller would be very helpful.

Thank you.

Hey, David, it's Norman Rose. I'll start and maybe lay off you can fill in some of the blanks. So, the first place, I would start is on a transport business where we did about $194 million. We're looking at about $225 for next year, so that's about a $30 million dollar increase. We feel really good about that number, taking them line by line, that I if we look at everything that's currently contracted. We ought to be able to get to that number. Now of course that's going to depend on how quickly we're able to ramp up or increase some of the volumes in some of the places, right? Everything is subject to that kind of thing, but that's contracted, that's called for. In fact, if anything, some of the stuff in the pipeline that Lee alluded to was not in that '25 and would be incremental to that. So, there could be some potential upside there. Otherwise, in terms of the different businesses that we have, so obviously we have, the PTI company that came in which combined with HPP it's a little bit higher than maybe your $20 million the payer program, a little bit higher than your $20 million number and then just in general around some of the other places, I would say that most of it is already accounted for or closed. I would say there's probably still in the $25 million range or so, largely on the municipal mobile health side where those things aren't contracted yet, they're covered by our fees, meaning I can point to certain contracts where if those came in, we would get there.

So, you know we're cognizant of the fact we're already two months into the year, so we'd have to be in that kind of situation. But I would say the go get probably is maybe that $25 million within the municipal mobile health space in particular.

That's very helpful, thanks very much. I'll back in the queue.

Thank you, David.

The next question comes from Michael Latimore with Northland Capital. Please go ahead.

Hi, this is Aditya on behalf of Mike Latimore. Could you give some color on the cash flow from operations? Like what do you expect the cash flow from operations to be as a percentage of EBITDA?

Sure. So, I would say, well, let's look, let's go back and look at this here. So, this year our cash flow from operations, which you'll see in the release and it's in the 10-k which we filed as well, was about $70 million. And that compares to about $60 million of EBITDA. So, it just sort of gives you an idea that our cash flow from operations this year outstripped the EBITDA number, even though EBITDA obviously is a proxy or just EBITDA as a proxy for cash flow, but because of the fact that we had some good working capital movements where we had collections of receivables and receivables went down by about $50 million year over year, so we were able to outstrip that number with the operating cash flow.

And in our script here in our prepared comments we talked about how we would expect that, regardless of where the margins are, we fully expect that we'll be able to generate some significant and certainly release mentioned as well. We expect to generate some significant cash flow from operations even more, so than we did in 2024, and that's simply because of the fact. That we've got a lot of this migrant revenue out there that is the migrant [AI] out there that started to flow. One thing to point out is at the end of the year we had about $150 million in accounts receivable from those migrant programs between New York City Housing Preservation Development, the HPD, which is about a little bit more than $70 million and [H&H], which is about $79 million. So, we've seen two of them about $150 million, and against that we have about $30 million in accounts payable. So, there's a big number that's out there that we are in the process of collecting that should be able to help us drive that operating cash flow higher.

Got it. And what was the subcontracted labor expense as a percentage of total?

Oh, so that's come down quite a bit. At one point, I think I would say our peak was probably the fourth quarter of last year. That number was over 40%. That was at the height of the of the migrant projects and while we're still trying to get up to speed with our [own W-2] labor. If I look at it across the company, I would say the number is probably about 24%.

So, it's dropped pretty significantly. Now I did mention we have subcontracted labor costs on both the mobile health and the transport side. On the transport side, that number was on the transport side that that was a little higher than it should have been in one of our markets. So, that's suppressed margins, I would say on the transport side instead of being 30.1% for the quarter probably would have been closer to 32%. But otherwise, that's gone by now. Those subcontractors are not in there anymore, so I would expect that that subcontractor as a percentage of revenue will continue to decline into Q1. It'll be under 20% of revenue.

Got It. Thank you.

Thank you.

The next question comes from David Grossman with Steel. Please go ahead.

Hi guys, this is Aidan Conniff on for David. Thanks for taking my questions. I was wondering if you could provide some additional detail on just your assumptions for total OpEx for the year.

Sure, again, I think the way to look at it is as a percentage of revenue, which is how we're trying to back into it and figure it out. And also, let's look at it in context of what we did in Q4 and then the prior quarters. So, our assumption is that gross margins will be pretty similar to what we saw in full year 2024. So, for the full year 2024, we did 34.6%.

We think we'll be at about 35% maybe a notch higher given that there were a couple of different things that were suppressing that number to get us to the 34.6%. So, we think that the natural number should be 35%. Important to note, as Lee did in his comments that you know we have not seen a deterioration in the gross margin even as the revenue numbers come down. So, marginally or on a variable cost basis we're certainly hanging in there. And doing pretty well. If that's the case, and then we think we're talking about a mid-single digit, let's call it a 5% margin, EBITDA that would be about 30%. So, SGA would be about 30% of revenue on the average as the year went on for some context, as we mentioned in this quarter, in this fourth quarter with all of the different things that are added in, we're at about 39.7%. We were under 30% in the third quarter, so I think that where we're going to come in will be a little bit higher than where we had trended let's say in Q2 and Q3 of this year because of some of those investments that we've talked about, but definitely well below the level that we saw in Q4 as a percentage, even revenue would decline as some more of the migrant stuff starts to starts to move away.

And then as we get to the back half of the year where some of this core business really kicks in with its growth and the revenue number would move sequentially higher, then that percentage will probably be lower. But on a full year basis, if you look at it top down, I think that number should be at about 30% of revenue.

Good thanks for that and then thanks for the details on the pipeline that was helpful, how are you guys thinking just about conversion of that pipeline over the course of the year and just how deals come in over time?

Yes, absolutely. So, we do see it really does depend on sort of the vertical, the customer vertical. I think we at the end of last year we saw a flurry of activity and deals on the payer side. I think we anticipate that again this year. We do have some deals that we're operationalizing right now. And I also think at the end of the year plans really start to focus on really their unattributed members, their unengaged members and really closing care gaps to close out the year. So, that's where they're measured on. So, we really gave a big push at the end of last year. We were successful doing that.

And some deals have continued to come in to start this year and then I think that sort of Q3, Q4 as well we will start to see again an uptick in the filling of the top of the funnel for that for that pipeline on the medical transportation and hospital system side, it's pretty consistent throughout the year. As Norm mentioned, we have a number of opportunities that are at the one-yard line right now. We feel very confident about or deals we've already signed that are in sort of rampant expansion mode and in that particular medical transportation, the hospital system side it's pretty uniform as we go throughout the year.

And on the municipal side, one of the goals of Project Prime is to smooth out, so to speak, the pipeline where municipal work tends to be very [RFP] driven and binary and maybe more lumpy, and our work with the prime vendors is going to help us to smooth that out as we start to help them expand contracts or services that they're already providing in the field. So, that's part of that initiative. So, I think we'll start to see some smoothing of the pipeline. We're continuing to add opportunities towards the top of the funnel, and we signed a flurry of activity towards the end of the year, beginning of this year, and we're going to continue to work that pipeline as aggressively as we possibly can.

David?

Thank you.

There are no further questions at this time. Let me turn the call over to Lee Bienstock, CEO. Please go ahead, sir.

Thank you so much.

Thank you to everyone for joining us and be well.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation. You may now disconnect.