DocGo Inc (DCGO) 2025 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the DocGo first-quarter earnings conference call.

(Operator Instructions) This call is being recorded on a Thursday, May 8, 2025.

I would now like to turn the conference over to Mike Cole, VP 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 will, plan, potential, could, goal, outlook, design, anticipate, aim, believe, 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 guarantees 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. These 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, our earnings release for this quarter, 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 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 included in our earnings release or 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 as to the extent required by law.

At this time, it is now my pleasure to turn the call over to Mr. Lee Bienstock, CEO of DocGo. Lee, please go ahead.

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

I wanted to start this call discussing the important decision we made to remove our Government Population Health vertical from our 2025 guidance and then, outline the growth plans we have for our Hospital system, Medical Transportation, and Payer & Provider verticals, both for this year and for next.

First, regarding our Government Population Health vertical. Ongoing policy changes and budget cuts in Washington have created substantial uncertainty and indecisiveness, with regard to new municipal project launches and the government RFP channel, in general.

In fact, we are seeing substantial delays, with regard to municipal decision-making and delays in launch time lines for contracts we've already signed. We have 35 open government RFP submissions in our pipeline, a number of which were submitted over six months ago that we are still waiting to hear back on. Moreover, we have signed contracts in this vertical, which were ready to be launched, whose implementation has been put on hold, as a direct result of this channel's uncertainty.

Accordingly, we can no longer rely on these to generate meaningful revenue this calendar year. As a result, we have decided to move non-migrant Government Population Health revenue and related projects from our 2025 guidance.

Along with this decision, we revised our 2025 guidance from $410 million to $450 million in revenue with a 5% adjusted EBITDA margin to $300 million to $330 million, with an expected adjusted EBITDA loss of $20 million to $30 million.

I want to be clear: this revision to guidance is specifically associated with our Government Population Health vertical. The rest of our business continues to perform as anticipated and we believe is on a solid growth trajectory.

This year, we continue to expect approximately $225 million in revenue from our Medical Transportation services, $50 million from our Payer & Providers, and $50 million from our remaining migrant services healthcare work, all unchanged from our previous expectations.

Any new municipal work would be incremental to our revised 2025 guidance, which, if realized, we plan to break out as upside revenue in future quarters.

We are building our company around our innovative solutions for payers, providers, and health systems. We are incredibly confident in our Mobile Health at any address and Medical Transportation offerings.

I see these businesses as both the foundation and the future of DocGo. And I am excited to share our key metrics and projected growth rates for this year and the next.

Our Medical Transportation business continues to perform well and, on a contribution basis, is expected to have adjusted EBITDA of greater than $15 million in 2025. We had record trip volume in the first quarter of 2025 and expect this momentum to continue in the second half of this year, ending 2025 at approximately 575,000 total transports.

Beyond that, we project continued top-line growth driven by a major new customer win in the Northeast and continued expansion in the Texas and UK markets. We believe we can approach 700,000 transports by the end of 2026.

Health systems continue to search for partners that can provide high-quality, technology-enabled medical transportation solutions that deliver timely, reliable service for their patients. We have invested in building a technology platform that integrates with industry-leading EHRs, including Epic, and provides unmatched transparency for our customers and their patients.

We consistently receive positive feedback from our health system partners and believe that our technology is a key differentiator that enables us to secure new contracts.

Our Payer & Provider vertical. We continue to see substantial growth. I am pleased to share that we have now exceeded 900,000 assigned lives since the inception of our care gap closure program, up from 700,000 just a quarter ago.

In addition to the growth in our number of assigned lives, I wanted to share how our volume of visits has grown, over time. In the fourth quarter of 2023, we completed approximately 2,500 care gap closure and transitional care management visits. In the fourth quarter of 2024, our number of gap closure and TCM visits grew to over 4,400. In the fourth quarter of 2025, we are projecting to complete over 11,500 care gap closure and TCM visits. In other words, this business is on track to quadruple in size, over a 24-month period.

We are working with our payer customers to continue expanding our capabilities with evergreen services like pediatric care gap programs, which have seen a significant increase in volumes with over 2,500 visits completed, so far, this year. These services include well visits, vaccinations, and fluoride treatments for underserved children.

In addition, we recently signed our first substantial PCP agreement with a major payer in the Northeast, which is a very significant step forward in our long-term strategic vision. To put this in perspective, in 2024, we completed 144 PCP visits. That number is expected to grow to 10,000 this year and over 40,000 in 2026.

Additionally, in Q1, we added PTI Health, a mobile lab collection and phlebotomy company to our portfolio. They are on track to complete over 125,000 blood draws in patient homes in 2025. And we expect them to exceed 200,000 in 2026.

All told, between our care gap program, PCP, and mobile lab businesses, we expect to visit over 150,000 patients in their homes this year.

We continue to believe that our ability to bring care to the home in an economic and efficient manner, at scale, puts us in a uniquely valuable strategic position. Not only can we work to positively impact patient outcomes and drive savings for our payer customers but we can also gain a significant data advantage in the home, regarding the variables that directly impact a patient's health. We are literally capable of taking a patient from one end of the spectrum to the other, from unengaged with little data and chronic conditions going unaddressed to engaged with complete in-home data while facilitating preventative care.

The savings are substantial. And we are positioning the company to capture a larger and larger portion of those savings over time.

In addition to the economic savings and improved outcomes, patients absolutely love our service. In Q1, DocGo's Mobile Health Net Promoter Score was 86, which is substantially higher than the healthcare industry average NPS, of 58.

Turning to EBITDA. The primary driver of the anticipated adjusted EBITDA loss for 2025 is our elevated SG&A level, as a percentage of revenue, during this period of transition, as we wind down our migrant-related business while we invest to support our growing Medical Transportation and Payer & Provider Mobile Health verticals, as well as our technology advantage.

While we are making these investments, which we believe will deliver a significant return over our three-year growth plan, we have also initiated cost-cutting measures. We reduced SG&A by approximately $3.1 million, on a sequential basis, during the first quarter of 2025 and plan to aggressively cut SG&A over the next several quarters, as well.

We believe that these measures will help us achieve positive adjusted EBITDA in 2026.

Now, regarding our balance sheet, which remains healthy. While we are projecting a consolidated adjusted EBITDA loss for the year, we continue to anticipate positive cash flow from operations and expect to exit the year with over $110 million of cash, after accounting for $9 million of year-to-date stock repurchases, $4 million for the acquisition of PTI, and repayment of $30 million on our revolving line of credit, which will enable us to exit the year, debt free.

We continue to build a company that offers a unique value proposition for payers, providers, and health systems. And our growth in 2025 and beyond will be based on the results of our proven Medical Transportation and rapidly growing Mobile Health Payer & Provider businesses.

In the event we mobilize any significant non-migrant municipal work this year, revenue from those projects will be reported, separately, in future quarters and will serve as upside to our 2025 guidance.

In summary, in 2025, we expect our Medical Transportation business to generate $225 million in revenue, our Payer & Provider business to generate $50 million, and $50 million from our remaining migrant services healthcare work.

We are engaged in cost containment measures on our SG&A base. And we have a strong balance sheet to fund and support our continued business expansion.

I am confident in the demonstrated value of our company and our offerings. And I'm excited about our future plans.

Now, I'll hand it over to Norm to cover the financials.

Thank you, Lee. Good afternoon.

Total revenue, for the first quarter of 2025, was $96 million compared to $192.1 million in the first quarter of 2024. The revenue decline was entirely due to the government vertical, primarily in migrant-related projects.

As we've pointed out over the past several quarters, our migrant-related work peaked in the fourth quarter of 2023 and the first quarter of 2024 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 of 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.

Mobile Health revenue, for the first quarter of 2025, was $45.2 million, down from $143.9 million in the first quarter of last year, driven by this anticipated wind down of migrant revenues.

Medical Transportation services revenue increased to $50.8 million in Q1 of 2025 from $48.2 million in transport revenues that we recorded in the first quarter of 2024. Revenues were driven higher by increases in several markets, including Delaware, Tennessee, Pennsylvania, New Jersey, Wisconsin, Upstate New York and the UK.

In the first quarter, Mobile Health revenues accounted for about 47% of total revenues and Medical Transportation for 53%.

We recorded a net loss of $11.1 million in Q1 of 2025 compared with net income of $10.6 million in the first quarter of 2024, reflecting the drop in revenues that I just described.

Adjusted EBITDA, for the first quarter of 2025, was a loss of $3.9 million compared to adjusted EBITDA of $24.1 million in the first quarter of 2024.

Total GAAP gross margin percentage during the first quarter of 2025 was 28.2% versus 32.8% in the first quarter of 2024. The adjusted gross margin, which removes the impact of depreciation and amortization, was 32.1% in the first quarter of 2025 compared to 35% in the first quarter of 2024.

During the first quarter of 2025, adjusted gross margin for the Mobile Health segment was 30.8% versus 35.5% in the first quarter of 2024, with the biggest impact coming from the early-stage Payer & Provider business. As that business grew, while migrant revenues declined, the Payer & Provider business had a larger impact on overall Mobile Health gross margins.

As this business continues to grow, however, we would expect to see improved utilization rates for our clinicians, which make up the bulk of the cost of goods sold. We expect this improved utilization to lead to higher gross margins for this business line and to eventually raise the overall Mobile Health segment in the future.

In the Medical Transportation segment, adjusted gross margins were 33.3% in Q1 2025 compared to 33.7% in Q1 of 2024. While Medical Transportation margins improved by more than 300 basis points, on a sequential basis, when compared to the fourth quarter of 2024, they were still impacted in Q1 by some higher personnel-related costs in one of our larger markets. As we move forward in 2025, we would expect Medical Transportation gross margins to continue to improve sequentially.

Looking at operating costs. SG&A, as a percentage of total revenues, was 46.7% in the first quarter of 2025 compared to 26.8% in the first quarter of 2024. As migrant revenues have wound down over the past several quarters, we've seen SG&A increase, sharply, as a percentage of total revenues.

However, on an absolute dollar basis, SG&A expenses were 13% lower year over year in the first quarter of 2025. They were down 7%, on a sequential basis, from the Q4 2024 level.

We are taking costs out of the business. And we will continue to focus on lowering our SG&A costs throughout 2025. But we do expect that SG&A expense will remain elevated, as a percentage of revenues, when you compare it to our previous levels for the next several quarters.

Despite the net loss and the negative adjusted EBITDA, we generated $9.7 million in positive cash flow from operations in Q1, as we continue to collect our older, larger invoices. However, our cash balances were lower at the end of Q1 than at the end of 2024, as we spent on our stock buyback program and the acquisition of PTI Health.

As of March 31, 2025, our total cash and cash equivalents, which include restricted cash, was $103.1 million, down a little from $107.3 million at the end of 2024 but up about $44 million from the same time last year.

Our accounts receivable continued to decrease, reflecting our cash collections and the wind down of migrant revenues that we've witnessed since the middle of the second quarter of 2024.

At quarter end, we had approximately $120 million in accounts receivable from the various migrant programs, which represented about two-thirds of the total company consolidated AR. This compares to $150 million in migrant program-related AR at the end of 2024, which represented approximately 71% of the company total at the time.

While the wind down of migrant-related programs has obviously had an impact on revenues, our balance sheet is expected to benefit substantially in 2025 as we collect this AR, leading to an improvement in cash flow from operations, which should be enough to cover any operating losses.

Despite the expectation for negative adjusted EBITDA in 2025, we still expect to be operating cash flow positive for the year, given these positive changes in our working capital.

While we're sometimes disappointed about the pace of the payments from New York City, these payments are being made regularly. And we expect a continued collection of these receivables to contribute to an improvement in our overall cash balances.

We believe that this will provide us with the resources we need to invest in our growth and to bolster our balance sheet.

One of the ways we deployed our cash during the first quarter was to execute our stock buyback program. During the quarter, we repurchased nearly 2 million shares via open market purchases for an aggregate amount of approximately $5.8 million. So far, in Q2, in accordance with the terms of our 10b5-1 trading plan, we have repurchased another 1.2 million shares for an additional $3.2 million.

Having spent close to $9 million on our repurchases so far this year, we still have another $13 million remaining under this program.

We also used our cash balance during the quarter to add to our capabilities as we acquired PTI Health, a mobile lab collection and phlebotomy company. We are considering further acquisitions over the rest of 2025, as we seek to continue to use our resources to add to our reach and clinical service offerings.

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

(Operator Instructions)

Ryan MacDonald, Needham.

Sorry to hear about the uncertainty within the government vertical. But, maybe, let's start there. As you think about the remainder of the year, on a quarterly basis, can you just give us a sense of how much government revenue, each quarter, you're expecting and how we should think about the balance of where that gets pulled out?

And then, how are you thinking about, strategically, on balancing out cutting SG&A to optimize the P&L with making sure you have the staff ready to kick off these government engagements, if and when they do kick off later this year or into '26?

Absolutely. Thanks, Ryan. Appreciate the question.

In terms of the Government Population Health vertical, we made the decision to remove those revenues from our 2025 guidance. And so, any meaningful population health revenues coming from the non-migrant population health programs, we're going to report on separately as upside, in addition to the 2025 guidance that we just revised today.

So any material new deployments in the Government Population Health vertical will be described and explained and reported separately, moving forward, this quarter and into next quarters for the remainder of the year.

But we are seeing substantial delays in timelines. We were awarded various different contracts that were expected to launch but haven't launched just yet. We submitted multiple RFPs that we should have heard back from but are waiting to hear back on.

So as those RFPs come to fruition, as those projects that we've already signed get launched, we'll report on that in the coming quarters. And that will be in addition to this revised 2025 guidance that we updated today.

In terms of the SG&A base, you hit the nail on the head. We're balancing both restructuring and reinvesting in the different parts of our business.

As Norm mentioned, we are absolutely undertaking a look at all of our shared services departments, looking for savings in those departments. And we're also reinvesting resources into the growing parts of the company on the Payer & Provider side and the Medical Transportation side.

So we do anticipate further growth throughout the remainder of this year and into next. And we want to make sure that we're positioned and ready for that growth.

We have a lot of great team members that are helping scale the business. And so, we're going to reinvest those team members into the growing parts of the business and the new areas of focus for the company.

But, then, also, yes, we are undertaking a rigorous look at restructuring some of the various shared services departments for savings that we can cut for SG&A there.

Ryan, it's Norm. You had asked about the impact of the removal of these government revenues from our guidance. Using a round number, let's say, about $100 million or so.

As you recall: in the past, we talked about how we might have expected Q2 to be the low point of revenue for the company, back when we were looking at having all that government revenue in here. And, Q2, obviously, would be when the full wind down would occur on the migrant program.

But then, a lot of the stuff that Lee is alluding to that either we have a signed contract for but hasn't launched or the stuff that we're waiting to hear about would have kicked in in Q3 and Q4.

So I think that when we look at it now, I would say that Q2 revenue, obviously, as we always expected, will be lower than what you saw here in Q1. Q3 will probably decline further because there won't be any material migrant revenue in that period.

We're not counting on any of this government revenue coming in. And then, we probably get a little bit of a blip up from Q4 to Q3, although Q4 will remain below the levels of Q2.

So that's how the quarterly trajectory changes, with the changes we've made to the guidance.

I appreciate all that color there. Maybe, on to better topics.

The Payer business continues to really continue to grow at a rapid clip. And it seems like you're experiencing a lot of success there.

Can you just talk about the end market demand that you're seeing within the Payer segment? And, obviously, we've heard a lot of commentary, out of UnitedHealth, that there's a number of lives transitioning -- that were unmanaged MA lives into new plans.

Just wondering if that's creating an incremental level of demand for the care gap closure offering?

And then, any early signs of success on the A/B testing that you've been doing to improve patient engagement within that care gap closure program?

Absolutely. As you mentioned, Ryan, we're seeing healthy demand in the care gap closure PCP -- basically, healthcare any address, healthcare in the home business for the exact reasons you mentioned.

First off, the plans we're working with, they want to solve for either one or both or two key objectives. One is they absolutely want to reduce their medical loss ratio. They want to reduce their healthcare spending.

And so, our preventative, proactive screenings that we do in the home -- the proactive healthcare that we're providing in the home -- is absolutely targeted at reducing ED readmissions, hospitalizations. And we're seeing very, very good success in our cohorts of patients -- are being readmitted to the hospital at much lower rates.

So that is absolutely something that the health plans are focused on. Obviously, they don't want their members in the hospital. That's where they're most expensive.

And, as you mentioned, the medical expenses are obviously rising. MLR is a big, big focus for these plans. And so, we're helping them with that.

The second piece also is we help plans with their quality metrics. So the more and more care gaps we're able to close in the home, the better that their quality metrics and the HEDIS measures will increase.

And you mentioned additional MA members coming to the market, that will absolutely help them with enrollment, that will help them with plan choice and people choosing those MA plans.

So the higher quality they are, obviously, the more attractive they are to MA members.

So we're helping in both those scenarios. We average -- for every visit we do in the home, we're, right now, averaging about two care gaps closed. So for every visit, we're averaging more than one care gap. And, in some cases, we've even closed six care gaps in one visit.

So you can imagine how accretive that is for the health plans. And, obviously, as some of these managed plans and as the managed market, in general, gets bigger, we predict, over the coming years here, we're going to have more and more of a role to play.

Philip Chickering, Deutsche Bank.

This is Kieran Ryan, on for Philip.

Just wanted to see if we can get a little bit more color on just what exactly happened since the end of February, when you last reported through the end of this quarter. Because looking, even at 1Q results, it looks like it's a decent miss there.

So just wanted to understand if there was anything that got canceled in March; or just if you could just talk about the quarter and how that plays into the decision with the guidance.

Absolutely, Kieran. Absolutely.

As we mentioned in our prepared remarks, the revision, it's directly tied to the decision that we made regarding the Government Population Health vertical and how we project and report those revenues, going forward.

Our Medical Transportation, our Payer & Provider business, that's right on track. And our expectations are unchanged there.

What changed, specific to the Government Population Health vertical, is that there's substantial indecisiveness and hesitation. It's been created all the way from the federal level down to municipalities; and these policy changes that have been coming out of Washington.

As I mentioned, we signed contracts that are stalled. We're waiting on the RFP channel. And so, until more clarity emerges, we decided, as you mentioned between the last call to this call, to remove those from the revenue guidance.

They'll serve as upside. And we'll report on them, separately. So that's what's changed.

And when you take out approximately the $100 million, as Norm mentioned, from the revenue guidance, that's just the nature of the business model swing, the positive EBITDA expectation of 5%, it moves to the $20 million to $30 million adjusted EBITDA loss, when you take out that revenue.

And, again, in the event that that vertical stabilizes and we do generate meaningful revenues from it, it'd be incremental upside and we'll break that out, accordingly.

At the same time, as I mentioned, we see great progress in the Payer & Provider vertical, I think you hear that coming out here; as well as our Medical Transportation vertical. And we're focused on servicing that demand.

We're making sure we provide a clear picture on the fundamental performance of those verticals. We shared a lot more key metrics on those verticals, today, on this call. And we're going to continue to share that in the calls, going forward.

Really, to summarize what changed from last call to this call is we made the very conscious decision and the strategic decision to essentially pull those municipal revenues from the guidance and have them report, separately, as upside in the coming future quarters.

Yeah. And, Kieran, in terms of what impact it was on the first quarter versus the expectation: yes, even compared to our internal numbers, I think we were probably on the top line, we were rounding it off. We were right about $100 million, as an expectation. We came in at $96 million.

Well, looking at the pieces, the Transport actually came in a little bit higher than what we thought. Most of our markets were a couple of $100,000 higher than, maybe, what we thought; and, on balance, a few $100,000 higher.

The migrant revenue, in itself, which was about $36 million for the quarter, was a little light compared to what we had mapped out, based on the dates -- and certain dates have changed on us a little bit. We lost a couple of days here and there. We also had the wind down happening on a slightly different trajectory.

When you're dealing with that large of a number, obviously, even a little bit of a change, in terms of number of ships and number of personnel, is something that is going to move. But that's the part of the business that's going away, anyway.

And then, within Mobile Health, the part of our business that provides staffing to general government programs -- was also down a little bit. I'm not going to say that that's because of the general uncertainty that we're talking about. That was probably just a matter of performance in the way that happened in the quarter.

But that's the miss, if you will, on the top line compared to the expectation that was entirely contained by the government vertical.

Got it. That's helpful color.

And then, just a quick follow-up just on the Payer & Provider verticals. I appreciate the extra disclosures. Just wanted to understand how you're thinking about that ramping on revenues and EBITDA, if we think about it just for those two.

I think you had said it was $50 million in revenue on that. So just trying to get an idea if you're still actively onboarding new projects there. It's just hard to see, with all the other changes.

Absolutely. We absolutely are onboarding new programs there. And we actually think it's going to pick up with pace in the back half of the year, as plans look to close out the year strong to address patients that have open gaps in care and really try to -- we see tremendous velocity heading into the back half of the year.

So we are still onboarding new customers there. We have a very robust pipeline there. And, each quarter, as we go here, we're expected to do more and more care gap visits and PCP visits, as we progress through the year and, of course, into next year.

So, absolutely, there.

In terms of the margins: essentially, for that business -- it's an early-stage business. We're ramping scale there, right now. We expect those margins for that business to be approaching 40% gross margin, next year. This year, we're still in sub-optimal margins, as we scale and build density in the markets that we're really focused on.

But we're really, really excited about the growth of that business. Patients absolutely love it. The plans are loving it. And as was mentioned earlier, as plans are looking to close the year, they have to address patients that have open gaps in care, patients that haven't gone to see their doctor.

We're able to address those patients and go see them in the home and bring a new modality of care that, perhaps, they haven't been available to. So we're seeing tremendous, tremendous adoption there.

We're also investing pretty heavily in our patient conversion and patient engagement operations. So when we get list of patients from the payers that have open gaps in care, we're building a world-class engine of how we engage those patients, how we schedule those visits, how we book the clinicians, how we route the clinicians, how we stack those visits so that the clinicians have a full, productive, quality day in the field.

And as we do that more and more, the margins are just only going to improve from there. So we're really excited about what we're building there.

The patients love it, as I mentioned. And I think we're going to continue to reinvest a lot of our resources into that business.

The $50 million that you mentioned? That's unchanged. That's been our number. That's our target. We're on target to hit that. Nothing has changed with that Payer & provider goal. In fact, if anything, I think we're ahead of schedule there.

Yeah. You got to look ahead, Kieran, because, at this point, as Lee is pointing out, that business is a drag on the overall consolidated margin. I would say it, maybe, cost us 1 point to 1.5 points of the overall consolidated -- adjusted gross margin that we reported of 32.1%.

But, ultimately, that business becomes our highest-margin business. We have lines of business, within that particular vertical, that are going to be 50%-plus gross margin businesses.

So that eventually is obviously going to bring the consolidated number up.

As far as the leading indicators, it's important for us to look at KPI and leading indicators because we're looking to the future. So the biggest driver of that is obviously the utilization rate of the clinicians, right?

The more trips they can see or more trips they can do or patients they can see in an hour or in 10-hour shift, 8-hour shift, the higher the margin goes. And I will say that the early indications there are encouraging.

So the utilization rate, to date, the first, what is it, five weeks of Q2 are about 30% higher than what they were in Q1. They're trending, if this trend continues, at a level that we hadn't really projected out, until sometime in 2026 or 2027.

So if we can keep those kinds of numbers going as we scale, then I think you might even see a steeper ramp towards that very robust and healthy gross margin.

But, at the moment, if you look at Q1, it definitely was a drag on the overall gross margin of the business.

Sarah James, Cantor Fitzgerald.

This is [Gabby], on for Sarah. I had a quick question.

I had (inaudible) that the government sector revenue was about $100 million. But it looks like guidance was taken down $115 million.

Can you just talk about the delta between those two or if that's just implied conservatism in the guidance?

Yeah. The latter part of your statement is correct.

In fact, Lee -- a couple of times, in his comments -- earlier, said that we're staying on the $225 million for Transport, we're sticking at $50 million for migrant, $50 million for these care gap closures and Payer programs.

That actually obviously adds up to $325 million, as opposed to our range of $300 million to $320 million, which would have (inaudible), which would put you at $315 million.

So that's really what it is. We're just trying to be prudent and build something in for the range of possibilities on all our business lines.

Okay. Awesome.

And then, your comment that '26 should be EBITDA positive, does that imply EBITDA positive without any contribution from the government vertical?

And then, quickly, on the Payer & Provider business, are you seeing a more positive conversations from the positive 2026 MA rates and, maybe, the payers having more flexibility to apply some of your services?

Yeah. As was mentioned, the municipal population health vertical, yeah, that would be in addition, going forward and, also, into 2026 as well. That's our plan to report on that, in addition to the revenue guidance we're giving today and in the future. So that would be in addition to our EBITDA projections for next year.

In terms of the payer and what's going on in the MA market, we absolutely view that as a tailwind. We're seeing that. I think we've had many, many opportunities in our pipeline, going back all the way to last year. And we see the pipeline, even over the last two weeks, really heating up, which we expected, going into the back half of Q3 and Q4 of this year.

But we're seeing a tremendous demand for those services. So part of it is due to the macro factor of what's going on in the MA market. But, also, part of it is just we're getting more and more data and our pitch is just getting stronger and stronger because we're able to show the ROI.

We're able to show the patient happiness. We're able to show the impact we're having. We're able to show how many patients we've been able to close care gaps with.

They're reporting back to their plans that they're happy with the service. Obviously, patient satisfaction, member satisfaction is a big component of the quality score for the MA plans.

So all of that is also helping us, as we scale. Not only do we improve our operations but, as we scale, we just have more and more data, more and more experience, more and more references for other plans. Plans are sharing us from one state to the next and referring us.

And so, all of that, as we perform well -- and we're investing. We want to make sure that these plans love us. We want to make sure because there's just so much opportunity. We want to make sure that the patients love us. And then, we're really improving their health outcomes.

And, once we're able to do all of that, there is a tremendous opportunity ahead of us.

David Larsen, BTIG.

This is Jenny Shen, on for Dave.

I apologize if I've missed this, if you had mentioned it, but can you remind us what the margin profile is of the migrant-related revenue versus your core business?

And then, just clearly on tariffs, I know we've spoken about the expected impact on your fleet and the cost to manage your fleet. But do you have any potential risk [concerns] from tariffs on some of your medical equipment that you use and wearable devices in the home?

I'll start with your question about the margin profile on the migrant program.

The margins on that program were about 34%. It's pretty consistent, actually. It was 34% in Q4. 34%, again, give or take, and a few basis points in Q1.

So when you look at it that way, in the fourth quarter, our gross margin for Mobile Health was 35.9%. So, technically, the rest of the non-migrant piece of Mobile Health was being driven at a higher margin.

Here, it was the other way around. So the fact that the mix moved away from migrant towards the other things such as the Payer & Provider programs, that obviously brought down the margins.

So the mix brought it down. But I would say right about 34% or so -- is the number that we're seeing from the migrant work.

Do you want to take tariff one or do I -- ?

With regards to tariffs, Jenny, it's exactly as you described. I think the tariffs would be related to our fleet.

Obviously, we have a substantial fleet of almost 1,000 vehicles in the fleet. And I think the tariffs -- the way it would be factored in is we have a calculation that we look at, as to when we procure new vehicles versus maintain the ones we have.

And so, we'd look at the balance between, perhaps, the rising cost of procuring a vehicle or the cost, going forward, of just maintaining the ones we have. And we're in a good position to be able to balance that.

So we have a relatively new fleet, in general. And, in addition, we have a wonderful and a dedicated fleet management team that's able to keep our vehicles on the road. And, once the vehicle becomes more expensive to maintain, that's when we procure a new one.

And so, the tariffs may impact that calculation. But I'm confident that our team is doing a wonderful job maintaining the vehicles that we have.

We had already placed orders on the new fleet that we were going to procure for this year, which has been placed and priced and paid for. So I think we are in a good position.

But, obviously, it could increase the prices for some of the parts. Obviously, we drove 8.8 million miles last year. So that's oil changes and tires and brake pads and everything you can imagine that keeps that tremendous fleet on the road.

But, ultimately, we'll look at the cost of maintaining, the cost of procuring new ones. But, like I said, we were forward-thinking and we have great scale. So we've been -- most of our orders that we were looking to procure were already placed this year.

Yeah. And then, on the other hand, fuel costs can go down. They're currently running, already, a little bit below what we had projected and a little bit below where they were a year ago.

So I think the biggest impact is going to be the one that everybody faces, which is the general inflationary environment. But, again, even within an inflationary environment, oil price will probably be lower, gas prices, therefore, will be lower.

We have some leverage for that. So that would be a net benefit to us.

There are no further questions, at this time.

I'd like to turn the call over to Mr. Lee Bienstock for closing comments. Sir, please go ahead.

Thank you. Thank you, all, for joining us today. Be well.

This concludes today's conference call.

Thank you very much for your participation.

You may now disconnect.