ModivCare Inc (MODV) 2021 Q1 法說會逐字稿

Greetings. Welcome to ModivCare's First Quarter 2021 Financial Results Conference Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to John McMahon, Chief Accounting Officer. Mr. McMahon, you may now begin.

Thank you, operator. Good morning, everyone, and thank you for joining ModivCare's First Quarter 2021 Conference Call and Webcast. Today I am with Dan Greenleaf, President and Chief Executive Officer; and Heath Sampson, Chief Financial Officer.

Before we get started, I would like to remind everyone that during the course of today's call, the company's management will make certain statements characterized as forward-looking under the Private Securities Litigation Reform Act. Those statements involve risks, uncertainties and other factors which may cause actual results or events to differ materially. Information regarding these factors is contained in today's press release and in the company's filings with the SEC.

We will also discuss certain non-GAAP financial measures in an effort to provide additional information to investors. A definition of those non-GAAP measures and reconciliation to the most comparable GAAP measures is included in our press release and Form 8-K, which was furnished to the SEC this morning. We have arranged for a replay of this call, which will be available approximately 1 hour after today's call on our website, www.modivcare.com.

This morning, Dan Greenleaf, our Chief Executive Officer, will begin with opening remarks, after which Heath Sampson, our Chief Financial Officer, will provide the details of our financial results. Then we will open the call for questions.

With that, I will turn the call over to Dan Greenleaf. Dan?

Thank you, John, and good morning, everyone, and thank you for joining us today. We commenced the year with strong momentum and our vision to transform the way we connect people to care. We are reaffirming our commitment to address the social determinants of health in innovative and strategic ways with the intent to provide multiple supportive care solutions that meet the needs of our clients and patients, drive positive health outcomes, and accelerate our growth strategy to deliver a holistic patient experience by addressing the inequities and access to care.

This quarter, we have shown strong progress to accelerate our technology-enabled healthcare services platform, modernize and automate our nonemergency medical transportation or NEMT business, elevate the patient experience and extract operational efficiencies, evaluate a robust pipeline of acquisition targets in personal care and across the social determinants of health continuum, and develop a strategy for commercializing our nutritional meal delivery offering. Our strong cash flow enables us to invest in growth and continue leading the industry in our mission to dismantle the barriers to care at scale for underserved communities.

Both economic and healthcare macro trends are generating favorable tailwinds for our business as well. In NEMT, Medicaid enrollment grew 8.5% from 2019 to 2020 and is expected to grow at least 5% in 2021. The Medicare Advantage or MA market is projected to grow from approximately $500 million today to more than $4 billion over the next several years. Since 2018, the number of MA plans has grown by 53% and the number of MA plans offering NEMT as a supplemental benefit has grown by 200%. We expect this momentum to continue for the foreseeable future.

In Personal Care, market demand is outpacing supply as care delivery undeniably continues to migrate to the home setting, further accelerated by the pandemic as families seek greater comfort in home versus institutional settings. As we have previously referenced, the average daily cost of care in the home is approximately 95% less than in the hospital and about half the cost of skilled nursing facilities or similar institutional settings. Furthermore, our nation's continued shift to value-based care models combined with the new administration's advocacy for home care funding and focus on addressing healthcare and equities harmonize closely with our strategy and offerings.

For nutritional meal delivery, we estimate the existing addressable market is approximately $9 billion, growing to $15 billion by 2024 and believe that our logistics expertise, national network and strong customer relationships provide us with a unique opportunity to commercialize a new offering that addresses the needs of food and secure patients. We also are seeing momentum by MA plans offering food- and meal-related supplemental benefits. We expect to be in a position to disclose more on this initiative later in this year.

Moving to our first quarter results. ModivCare reported consolidated adjusted EBITDA of $48 million, which exceeded the prior year comparable figure of $17 million, reflecting higher adjusted EBITDA in each of our 2 segments, NEMT and Personal Care. During this quarter, our NEMT segment benefited from lower operating costs under our 6 pillars strategy, an expanded patient base, contribution from National MedTrans and lower utilization under capitated contracts. This quarter, we continue rolling out our national "Go Digital" initiative and remain on target to achieve 90% digitization of our transportation partner network by year-end.

Network digitization in combination with our new drive around enables our transportation partners to service rides in real time, communicate with patients and provide transparency into their GPS route. Moreover, our rider app remains on schedule for completion in the second quarter and will provide easier use of our services, allowing patients to schedule and cancel rides, view ride status in real time, communicate with and rate drivers, and transparently see their GPS location in intended route.

In a strategic move to accelerate our efforts to build the largest digital NEMT network in the nation, yesterday we announced the acquisition of WellRyde, a leading technology provider of Advanced Transportation Management Systems or ATMS software, which enables optimized routing, automated trip assignments and billing, and real-time network monitoring. WellRyde's technology will seamlessly integrate into our circulation in LCAD platforms, fast-tracking our "Go Digital" initiative. In addition, WellRyde's technology enables ModivCare to provide on demand trips and rider pay models to create new lines of business. The modernization of our network will not only improve the experience of our patients, but also the experience and accountability of our transportation partners.

This quarter, we continue to advance operational improvements in our Centers of Excellence. Call volumes related to cancellations and confirmations continue to decline after the deployment of new automated call distribution and interactive voice response solutions. Through our business process outsourcing initiative, we laid the groundwork to add a significant number of Center of Excellence professionals by the end of the year, in anticipation of the potential increase in utilization and call volume, and which enables us to scale more efficiently in response to fluctuations in our NEMT business. We believe that modernizing and automating our NEMT business will enhance the patient experience and provide more consistent performance for our clients, which are key measures of our success.

Recently, we conducted a patient survey in which our satisfaction scored comparably to esteemed organizations such as Memorial Sloan Kettering and John Hopkins Medical Center. Our goal is to maintain and further improve these stellar ratings. The operational transformation in our NEMT segment is expect to deliver approximately $50 million in total run rate cost savings by year-end. We believe that these concrete savings initiatives ultimately will create a durable business model and offset the impact of fluctuations, utilizations, including the potential to return to pre-pandemic levels.

While we are beginning to see regional pockets with utilization increases, we have not witnessed a significant system-wide increase in utilization during the first quarter and through April. We continue to model a gradual uptick in our overall utilization through the remainder of the year and are optimistic in our ability to manage sharper increases should they occur. The eventual level of utilization will depend on such factors as the number of rides we provide for vaccinations and how quickly the pandemic subsides.

Finally, the expansion of our Medicaid member base further bolstered our first quarter NEMT results. Today, we serve approximately 30 million Medicaid members for 9% of the U.S. population, up from 25 million in 2020, reflecting underlying core growth Medicaid rules as well as the roughly 2 million new members related to our National MedTrans acquisition. As the clear market leader in nonemergency medical transportation, we remain very optimistic about our future. We have the scale, sophistication and resources to invest in critical innovation and technologies that are modernizing the industry and differentiating us from our peers.

Moving to our Personal Care segment, we benefited from a full quarter contribution from Simplura Health Group, which we acquired in November of 2020. During their first quarter, personal care service hours and visits were dampened by several winter weather events, a spike in COVID-19 cases and staffing constraints. Nonetheless, our Personal Care segment contributed $9.2 million of adjusted EBITDA to our consolidated first quarter results. The normalized run rate of this business is 20% higher in a post pandemic environment, and we believe personal care services as a counterbalance to NEMT as utilization increases. We are patiently weathering the COVID-19 storm with a heightened focus on recruiting and driving hours as demand for home and personal care substantially outweighs supply.

In terms of inorganic growth, we continue to actively evaluate a robust pipeline of potential acquisition targets. Simplura is our first building block in a rapidly growing $55 billion home and personal care market, which is highly fragmented with more than 18,000 agencies. We intend to grow our Personal Care segment, both organically and through an aggressive yet disciplined approach to acquisitions. Among our key personal care acquisition criteria, we are focused on Medicaid Aged, Blind and Disabled, ABD, populations, growing existing geographical density or entering new geographies, reputation service quality of the target, reimbursement in state budget environment and labor markets dynamics.

As we grow our Personal Care segment, we are focused on attractive multiples as well as strategic opportunities that we believe can create substantial shareholder value, particularly considering the public market multiples attributed to our home care peers. The Personal Care segment dovetails well with our vision to transform the way we connect people to care, while providing a best-in-class suite of integrated supportive care solutions, bridging the inequities in healthcare and elevating the patient experience and improving outcomes.

Our emerging nutritional meal delivery offering further expands on this vision. To date, we have launched more than 30 proof of concepts and delivered approximately 2 million meals to food insecure individuals across the country. Finally, we are thrilled to welcome 3 new independent members to our Board, which has expanded our Board of Directors to 10 members. Last month, we announced the addition of Garth Graham, Stacy Saal and Rahul Samant to ModivCare's Board. This notable group of individual brings complementary talent and experience in areas that closely align with the transformation underway at the company.

Garth is a leading authority on social determinants of health and brings extensive experience in community and public health, including with companies such as Google, CVS Health Corporation and Aetna. Garth currently serves as Director and Global Head of Healthcare and Public Health at Google. Stacy has excelled at elevating the customer experience driving results throughout her career, including more than a decade in key leadership roles within prominent divisions of the Amazon, such as Amazon Fresh and Prime Now. Stacy is currently the Chief Operating Officer for Babylon Health. Rahul is a stellar 3 decade track record, implementing technology and operational enhancements at companies such as Delta Airlines, American Insurance Group and Bank of America Corporation. Rahul is currently the Chief Information Officer at Delta.

Briefly touching on Matrix in which we hold a 43.6% equity investment. Matrix is off to an excellent start in 2021, with its first quarter revenue more than doubling to $124 million and adjusted EBITDA more than tripling to $32 million compared to respective figures for the prior year period. Matrix management team is doing a fantastic job growing their clinical solutions business, while their risk assessment business or clinical care business saw a rebound in on-site visits this quarter. We believe that Matrix represents substantial hidden value not reflected in our share price, especially given peer market multiples.

With that, I'd like to turn it over to Heath Sampson, our Chief Financial Officer. Heath?

Thanks, Dan. Starting with our consolidated first quarter financial results, we recorded revenue of $454 million, adjusted EBITDA of $48 million and adjusted net income of $28 million or $1.92 per diluted share. NEMT segment revenue in the first quarter of 2021 was approximately $343 million compared to $367 million in the prior period and included $44 million of additional revenue related to our acquisition of National MedTrans in May 2020, $15 million of increased revenue driven by higher membership, offset by a decrease of $62 million due to COVID related lower trip volume and a net decrease of $21 million in contract changes and losses.

I'd like to provide additional clarity on how our contracts work. As we have previously disclosed and generally speaking, approximately 85% of our revenue is derived from our capitated or risk contracts and 15% from non-capitated or non-risk, which are mainly fee-for-service contracts. The capitated risk-based contracts are generally separated into 2 categories. The first capitated risk contract model is full risk, which includes contracts where we are paid based on our payers membership in each month regardless of the trip volume. This category of revenue is reoccurring in nature and represents 34% of our Q1 revenue.

The second risk-based contract model, which is also reoccurring, is reconciliation and rebate. These contracts have provisions that either cap or increase our revenue based on the trip volume and/or profit margin received. Essentially, if utilization, transportation expense, our profit margin is above or below the contracts established ranges, we record the cash received or revenue not received on our balance sheet as a payable or receivable. The payables and receivables fluctuate based on the utilization and profit ranges until the net amounts are settled. These contracts are settled at various agreed-upon dates, which may range from 6 to 12 months or even longer. From time to time, we may engage our clients to delay or accelerate these true-ups.

Our reconciliation and rebate contracts represent 51% of our Q1 revenue. As of Q1, we had $245 million in current payables and $33 million in current receivables, which are included in trade receivables. Service expense for the NEMT segment, which includes all direct costs related to third-party transportation providers, all call center operations and other operational functions such as provider relations and quality assurance, decreased by 18% year-over-year to $272 million due to the lower trip volume and specific operating cost reduction benefits of the modernization and automation of the contact center and transportation processes.

Although COVID-19 has negatively impacted our revenue, our NEMT adjusted EBITDA has increased. NEMT's adjusted EBITDA this quarter totaled $39 million, up from $17 million in the prior period. Our EBITDA growth and margin expansion reflects our disciplined execution on our 6-pillar strategy. However, I want to highlight that our full risk contracts, which again represents 34% of our revenue, contributing significantly to the increase in our Q1 2021 adjusted EBITDA. As a reminder, our full risk contracts are structured so we bear all the expense management and market fluctuation risk. Our customers with full risk contract models are fully aware of the performance during the pandemic.

For some, we have provided or expect to provide retroactive monetary rebates or prospective rate concessions. However, for the majority, we do not expect to provide any concessions. As Dan indicated, we expect the modernization and automation initiatives to offset the increased transportation expense of providing more trips in our full risk contracts when COVID subsides. Additionally, the Medicaid expansion roles and growth in Medicare Advantage, coupled with our scale advantages and technological advantages, will enable us to maintain our dominant market position while solidifying our long-term margins. As such, our long-term objective is to maintain NEMT adjusted EBITDA margins between 7% to 10%.

COVID-19 negatively impacted our Personal Care segment. The increased Medicaid roles, coupled with social and political tailwinds have not yet been realized for Personal Care. The demand is there, but we are unable to hire enough aides due to COVID and the current unemployment offerings, which are incentivizing able people to not work. Post COVID and post unemployment incentives, we expect the volume to return, which will be approximately 20% higher. Despite these headwinds, our Personal Care segment contributed $110 million of revenue and $9 million of adjusted EBITDA in the first 4 quarters since the acquisition of Simplura in November of 2020.

Service expense in our Personal Care business, which reflects the direct cost of caregivers and associated support functions, was $88 million or 80% of revenue in Q1 of 2021. Since Personal Care was not a part of our service offerings in Q1 of 2020, we do not have prior year comparison, but we expect the per hour cost to improve as less over time will be needed coming out of COVID. As the pandemic subsides and unemployment lapses, our objective is to have 10% to 12% adjusted EBITDA margins in our Personal Care segment.

Moving back to consolidated ModivCare. Our general and administrative expenses increased 164% from $21 million in Q1 2020 to $55 million. $15 million of that increase was due to adding our personal care business. The remainder of the increase was due to increased headcount and operating expense to modernize and automate the NEMT segment, and solidify the corporate and technical infrastructure to support our growth. As we expand, we expect general and administration expense to steadily improve as a percentage of revenue. Additionally, we will continue to point out the unpredictable impact of cash settled equity rewards within G&A, even though this quarter, the impact was much smaller than Q4 of last year. In the first quarter of 2021, cash settled equity expense was $2 million as the company's share price appreciated from $138 per share at the end of 2020 to $148 per share at the end of March.

Moving to our cash flow segment. Cash flow provided by operations in the first quarter of 2021 was $135 million. The above-average variance this quarter between adjusted EBITDA and cash flow from operations was driven by the increase in the potential rebates related to our risk-based reconciliation and rebate contracts discussed earlier. As previously disclosed, we established a new stock buyback program in March. Through May 4, we have repurchased $34 million worth of common stock at an average price of $145 per share.

Lastly, during our 2021 year-end results call, we expect to provide full year 2022 guidance. However, consistent with previous statements, our long-term organic growth and adjusted EBITDA margin objectives are NEMT revenue growth in the mid-single digits and adjusted EBITDA margins between 7% and 10%, Personal Care revenue growth in the high single digits before acquisitions and adjusted EBITDA margins between 10% and 12%.

This concludes our prepared remarks. With that, operator, please open the call for questions.

(Operator Instructions) Our first question comes from the line of Bob Labick with CJS Securities.

So much to talk about, lots of great stuff. I just wanted to start with WellRyde. Obviously, very new information from yesterday. Can you give us a sense -- a couple of things, how is it different than Circulation? How does it -- how do they all fit together? So like kind of as one part. And then the other part, how did the acquisition come about? Was this an auction process? Was -- I think you've worked with them before. Just -- so maybe some background and then how it fits in with Circulation and/or is different from Circulation?

Yes. So I think the best way to think about it, Bob, would be that Circulation is really our hospital product. And the WellRyde product is for our transportation providers. And that's how we kind of divide it up. I will say that it was kind of the missing piece for us as we look to go digital. We partnered with a number of people on this front, but we really felt it was important that we had our own product. And it unlocks a ton of stuff for us, Bob. I mean, the platform and the technology platform is superior. I think it also provides us a path to ultimately sunset LCAD.

And so how we came about it? We -- you're right. We have been working with WellRyde for a long time. They've been a good partner. And it just came to a point where we felt that we could do more together than they could do -- either one of us could do independently. And the interesting thing is, is that this is the product that MTM uses. It's the product that AMR uses. So we essentially acquired the product that our largest competitors frankly use as their backbone to their technology. So I think it's also very much a testament to the value of the technology we've acquired. Anything you would add, Heath?

Yes. No, I think that covers it. Again, not just the largest, but really throughout all transportation providers, it's the premier thing used. So -- and it is that. It's the final piece to fill in the strategy on going digital, both for TPs as well as our members. So complements Circulation.

Yes. And I'd also say, Bob, it really accelerates what we're doing. I mean, I think we've just gone from running at 40 miles an hour to running at 90 miles an hour. And again, I think it really provides us the keys to the true digital transformation that we will have accomplished by the end of this year.

And the talented team comes developed [in here].

That's true too.

Yes.

Yes. No, we did pick up a really a beautiful slew of developers and whose only focus has been on this product over the years. I can also say that was also a significant consideration too, Bob.

Super. Yes, that sounds really exciting. And then, obviously, strong results at --

It was very -- the other thing was, it was -- I know this is going to come up. I mean, we paid a significantly less sum than we paid for Circulation. We felt it was a very fair price. It was a price that I think represented what the value of the company was, and we did a lot of due diligence on it. So I think it -- that's the only other thing I would say is that it wasn't a material acquisition, I'll put it to you that way.

Okay. Yes, that's fantastic. And as you said, if it's going to help accelerate the digitization, it's a great move. So -- great. And then I think you talked about this, but can you give us a sense of the -- because you gave us a lot of stats. The population expansion in the enrollment you're serving and then maybe some contract renewals, how many contracts are for renewal this year and how that process is going on the NEMT side?

Yes. I mean, one of the things I think we're really bullish about is the fact that our population has moved from roughly members that we manage from 25 million to 30 million. Admittedly, 2 million of that came from the National MedTrans, but the rest is organic growth. The other thing, Bob, to think about, we manage roughly 9% of the U.S. population, just from an order of magnitude standpoint. I think it's just -- it's not -- it's extraordinary in terms of the touch points we have across the U.S. So we feel very strongly about that. And we touched on Medicare Advantage and what's happening in that front. The number of plans that are offering this as a supplemental benefit is exploding.

So we think from our standpoint, the market is growing on the Medicaid side, extraordinary opportunities on the Medicare Advantage side. And again, with our technology, our best-in-class technology platform, we think that we can even help accelerate a lot of these decisions, the plans are making about offering this as a benefit. You had another question, I lost track of, Bob.

Just how the process for the renewals this year is going for your existing contracts?

Yes. I mean, just historically, we've had a 90% renewal rate. I don't think that's going to change. We -- we're by far the biggest. I think our relationships with our payers and the states are second to none. They're better than they've ever been. We launched our client advisory board within the last month that I just can't begin to tell you how our relationships with our payers and states have been transformed over the course of the last year. And there's a lot of people to thank for that. So we're in a really good position. We renewed and gained up to $372 million of business last year, close to $400 million. We always feel like we're in the pole position.

Obviously, with the acquisition of WellRyde, what we're doing on the digitization front, our network, I mean, just the orientation of our company towards, I think, a more consumer-friendly model is making a huge difference for us. And I think the perception of ModivCare has dramatically been changed in the marketplace, and whereas in a good position as any to keep those retention rates where they have historically been.

Yes. I'll add. As we're going through these discussions that happen, it's partnership. What are we going to do to help our members? What are we going to do to help our transportation partners come out of COVID? So they're good discussions that move to helping and then move to close out these deals happen. So it's been a good discussion and dynamic on the renewal side.

That's fantastic. And then I appreciate the kind of color on Personal Care as it relates to the pandemic impact. How do you see that utilization and the ability to hire people trending over the course of the year? What are your expectations there?

I think we're obviously competing with unemployment checks. We're competing with stimulus checks. Certainly, we're competing or being affected by the COVID environment. But I would assume we would start seeing increases in the third quarter. And then I would suspect we should be mostly normalized by the fourth quarter. And that -- if you look at when stimulus checks and unemployment benefits start running out, it's going to be kind of in the September time frame. We certainly have the demand. That's the beauty of it. We are not short on demand. We're just short on caregivers and so we just feel like there's some other things going in the marketplace. But still remain extremely bullish about the business, still remain extremely bullish about the complementary nature of what we're doing in the areas of personal care, food and transportation and are strong believers that there's a real opportunity to become the dominant player in this market, just like we did in the NEMT space, and we certainly plan to do in the food space.

Okay. Great. My last one, I promise I'll jump back in queue. But Matrix really had extraordinary results as well. And just wanted to know if there's anything you can say about the potential end game there for Frazier. I know you have the minority equity interest, but any thoughts or updates there?

And listen, they -- Keith and his team have done a phenomenal job. I mean, they're trending to $120 million or more than that, actually. Yes, $120 million for the year. And they've doubled their revenue. When I think about them, I look at the valuations of Signify. And I don't -- I look at their business. I don't think it's any different. I think they've got better margins. And I think they have -- in some aspects of the business, they have more attractive business model. And so I think Frazier and Keith and them realize that this is -- there's a great opportunity potentially for them. And obviously, Signify is, I think, really set the bar, but I think this business as every bit is attractive and has higher margins.

Our next question is from the line of Brian Tanquilut from Jefferies.

All right. So my first question, I guess I'll shoot to Dan. Obviously, as I think about Simplura, M&A is a big piece of the story. So how is kind of deal flow coming in? And obviously, we've seen you do some buybacks here. So just how should I be thinking about timing and what the pipeline today looks like?

I mean we've got 20 targets in our pipeline right now on the Personal Care side. And we're going to be aggressive, Brian. I mean, I want to see that business at $1 billion in revenue and $100 million of EBITDA. And that's where we're going to trend towards. And we're going to do what we need to do. And obviously, we're going to buy things at the right levels and make sure we do the right level of due diligence, but we're in an enviable position right now with our cash position of $300 million. And obviously, we have a revolver as well. And we have a lot of access to capital. And we're going to be aggressive. And I think those are the targets initially I have in mind, but I think we can go well beyond that.

I don't doubt that. And then, Heath, just shifting gears here. Thanks for all the color you've given on just the different buckets of your contracts. But based on what you're seeing so far, as we think about the hospitals and the other provider groups that we cover, everyone is calling out April as kind of like the beginning of the recovery and utilization trends, right? So just wondering what you're seeing quarter-to-date on utilization. And then I guess on the Simplura's side, just curious if you saw any -- is there -- was there a wave of rejections of visits that impacted the quarter as well on Q1?

Yes. So starting with then Simplura. As Dan said, really in December because of weather. And then just because of the uptick where we're concentrated in the northeast, we actually saw some more challenges on the hour side. Those have stabilized right now. So consists with the stabilization and as we're coming out, I think end of third quarter, beginning of fourth quarter, as Dan said, we should expect some recovery there. On the utilization side, back on the transportation, there are pockets within certain areas that we are seeing an uptick.

But when you look across the entire network, not a large impact. But we're preparing, right? And we're making sure that our transportation network is healthy. Everything that we're here to -- when it does come back, we're in a good position. So we'll see, right? You will see as it comes back. But we've predicted it to come back. It's modeled in our numbers. It's modeling in our capacity. So we feel comfortable for where we are, but not yet seeing the big uptick yet.

The beauty of it though, Brian, is that -- the beauty from our perspective though is we're driving the heck out of these operational initiatives. As I mentioned, we're going to -- we believe we'll generate run rate savings in excess of $50 million by the end of this year, and we think the best is yet to come on that front. So our view as utilization comes back, again, we're in enviable position because there was operational opportunities here to, I think, more than offset those changes in utilization and actually improve the member experience at the same time.

Got you. And then, Dan, I think the first time you and I sat together to talk about ModivCare or Providence back then, social determinants of health was something that you brought up and fast forward to 1.5 years later, how are you thinking about -- or if you can describe just the traction you're getting with the conversations with the payers on the 3 legs of the stool, right, the food delivery, the personal care side and transports, obviously? Just in terms of the integrated offering, how is that gaining traction? What are the conversations like?

I think they've been extremely positive. I mean, again, we had our client advisory board meeting, and we -- we're in a very much a partnership mode with our large payer partners as well as our states. And they are really bought into the vision we have for a holistic model for the treatment of the member. And we believe we'll go beyond this. We're going to get into behavioral social. We're going to get into remote monitoring. We're going to get into medication management. And they also believe the foundation that we're building among food and transportation and personal care is the right foundation. And so it's gone extremely well. And very much with this administration, I would say we're extremely well aligned with what we're doing. We're equally well aligned with the vision that our payers and states have for the member experience as well.

Yes. Also on that, Brian, you hit it, the 3 legs of the stool. I think challenges with other companies or other part of the industries, getting that last mile done, the food from the main location to the actual member, you're hitting it. We have the transportation network and the aides to really ensure that that last model is done. So the member experience is great. And then the financial model works. So just reiterating what you already hit, we're in a great place to take advantage of bringing all 3 of those together.

And we have the resources, Brian. That's the other thing. I mean we have --

Yes. I know that makes sense. Last question for me, Dan. So this quarter, just a few weeks ago, we saw the release from the Lyft, just talking about their medical offering or whatever they want to call it, healthcare offering. I just want to hear your thoughts on where does that play in the ecosystem and why it's not a concern or a risk factor for you guys?

Well, I think first and foremost, Lyft is a partner of ours and have been a partner for an extended period of time, and we value that partnership. So I just want to underscore that. That being said, they don't do capacitated contracts. They don't have Centers of Excellence. They're not managing fraud, waste and abuse. They're less inclined to care for patients and neighborhoods that we care for. And we're a community-based organization. We have community-based transportation providers for a reason. They serve their communities just like we have community-based personal caregivers. We have community-based people that will be delivering food.

And we also have an unbelievable technology platform ourselves that I don't think that anybody will be able to offer the technology solution that we now have in place. It will be especially given what we're doing. There's nobody that is remotely close to us, and that includes the gig worker economy. And so we feel very strongly about that. That being said again, we view Lyft as a partner. We think they have value in terms of what we're doing. But we are the ones that have the contracts, we are the ones that have the relationship and we are the ones that have the technology platform.

Our next question comes from the line of Brooks O'Neil with Lake Street Capital markets.

I just want to ask 1 or 2 quick ones. First, I think probably for investors, the key issue is exactly how the return to a more normal utilization is going to impact the income statement and balance sheet. I appreciate all of these color. Can you just help us be sure we understand you're going to see revenue increase and adjusted EBITDA decrease as we return to normal, and that will be offset by all the operational and strategic moves you've made to grow the business and the profitability of the company? Is that the right way to think about it? Or how should we think about it?

I think I would think about it that way, Brooks. I mean, I think one of the things I talked about is we're building a durable model, Brooks. And I think Keith and I feel very strongly about the fact we're going to deliver a company that should produce 7% to 10% EBITDA consistently. And there's nothing that suggests we can't do that regardless of what happens with utilization. And that's how we think about it. Again, we've shared now specifically that we will achieve run rate savings in excess of $50 million by the end of this year and we think there's even more opportunity on that front, Brooks. And we think that number could be significantly higher than that potentially. So we feel like we're in a really good position.

I think as you think about your model, 7% to 10% post COVID is we feel very strongly about. And we think we're in a very good position to make that happen. And again, you've seen the investments we've continued to make. The other thing I would also share with you is, don't forget that the Personal Care business is a hedge. And that as utilization comes back on the transportation side, we're going to be -- we're going to significantly benefit from the utilization coming back on the Personal Care side. And that was one of the reasons we made those investments. I would also say, Brooks, we're launching a food business in the very near future. And we think that has a tremendous future. It's a $9 billion market, growing to $15 billion by 2024. And so we're going to continue to diversify our offering, but the base business is going to be stronger than ever.

That's fantastic and that's very helpful. I appreciate that color. The only other question I had is how should we think about the growth of your M&A -- MA franchise? Is that going to be contracts with existing customers, new customers? Just how should we think about your growing that piece of the puzzle?

Yes. If we look at our top 6 payers, UnitedHealthcare, Aetna, Humana, Anthem, HCSC and Centene, those 6 companies probably represent 75% of the Medicare Advantage marketplace. So just keep that in mind, Brooks, it's like we're already partnering with the top players in the marketplace. And so we would envision that we would help them expand the supplemental benefit in the area of Medicare Advantage. And again, given that we already have the contracts with them, we're in an excellent position to advantage ourselves. Remember that of the $200 million of business we bought with National MedTrans, $50 million of it was Medicare Advantage.

The next question is coming from the line of Mike Petusky with Barrington Research.

I'm sorry, but I missed the -- the stock repurchase figure, what was it? $34 million and you bought how many shares of that?

Yes, about 200,000.

200,000, Mike.

All right. So then I want to talk, I guess, about Simplura a little bit. So you guys were saying -- if I'm hearing this correctly, you're essentially saying, "Hey, we're having some problems attracting caregivers and it's not so much the fact that seniors are just hesitant to have people in the house." Is that a fair characterization of what you said?

Yes. I mean, I think we're competing against the stimulus package and unemployment. I mean, it's just -- it's -- but the hours are there. I mean the good news is the hours have stabilized, Mike. As Heath mentioned, the hours are there though. And the company has a history of high retention rates and adequate amounts of recruiting. And so there's no reason to think that won't snap back as well.

Okay. So I want to ask, given sort of the Biden administration's view and just, I think, probably a general view across the country among a lot of governors. What's your concern about sort of this push to put pressure on lower end wages move them up and how that could affect sort of your margins in that business? How do you all sort of think through that potential risk?

Yes. Again, I think there's a lot of -- I would agree with you, Mike. There's noise in that area. I -- for our personal caregivers, we look at the state of New York, we do have already built in different wages based on the geography. So in many respects, Mike, we've already seen those adjustments that they made. The other thing is that what we also see is that if wages go up, the states and payers have been inclined to give us equal amounts of increases in our reimbursement. So that's what we have seen historically. We've seen it in New Jersey within the last -- even within the last couple of months. So again, it's on our minds, but just what we've seen historically that the states and payers have been also inclined to make offsets if that -- if those types of things do inspire.

I mean I will say one other thing though. As we look at our contact centers, Mike, I'm -- and we look at the efficiencies we're creating in our business model through IVR, IVA to business process outsourcing, through automation, we think we'll have flexibility on wages. I mean if we are able to achieve what we expect to achieve somewhere well north of $50 million in savings, we think there's opportunities. And I'm -- there's a part of me that's committed to living wages, frankly. And I don't know what that is by market, but I don't think there's misalignment from me on that front. And I mean, I think it's a complicated discussion, Mike, but we got to do the right thing too.

Yes. I'd also add in addition to -- because in home care is such a focus by the federal government and all the states, and Dan said that they're matching those increases with increased reimbursement, they're also focusing on who are the companies that are providing that service and narrowing that network. So people that are sophisticated have the scale and proven ability, they're going to get the business maybe versus a decentralized group of different providers. So there's 2 things happening. It's the narrowing of the network that benefits us. And then there's the matching of the reimbursement to correspond with those increases in minimum wage.

Yes. The other thing about the Biden administration too, Mike, I mean -- and they're looking at moving people from unemployment into healthcare. And that's one of their pushes. And this idea -- again, we're a community-based organization with aides. This is an area they're focused on. The area they're focused on is transportation providers, particularly minority-owned businesses. Well, that's something that we do a lot of partnering around. And then obviously, what we're seeing as far as food and security. And so I just think there's not an organization that I believe out there that's more socially responsible and more aligned with what's happening socioeconomically in our country. So we think we're in a really good position, Mike, regardless of what way this goes.

Okay. Fair enough. So you're generating all this ridiculous amount of free cash, but at the same time you're building this payables that now all the payables are current. And then you're also talking about 20 potential targets in Personal Care as far as M&A. So how do you -- I guess, how do you think about capital allocation priorities over the next, say, 12 to 18 months given these different puts and takes? And where does debt pay down relate relative to internal investment, relative to external investment?

Yes, and I'll let Heath jump in here as well. But again, a lot of our focus is building out our platform. I mean, we're making investments in -- significant investments in technology. This might not be the only technology company we ultimately acquire as well, if we think it fits well into our platform. We believe that we want to have a national -- we believe in a national platform for Personal Care, given what we've -- given the feedback we've gotten on our recent acquisition of Simplura. So we feel strongly that we need to continue to be very aggressive on that front in terms of building that out. And then as we talked about, we're building out a food business.

And so I think, Mike, we're making, from my perspective, all the right investments. And that being said, if there is an opportunity to pay down debt, that's certainly something. I think you know we paid down the revolver already. And we've got a couple of tranches we could pay down. But we think that, frankly, the growth opportunities are so extraordinary in our business and the opportunities are so unique and we're so well positioned, we want to make sure that we're driving the best return for shareholders in terms of capital allocation. So that's what I'm thinking about. I don't know, Heath, what would you add?

Yes. Just to confirm, nothing has changed with our strategy, right? We're going to continue to invest in the business and pursue M&A. On a micro basis, just to do with your question around that liability increasing, it goes back to what I said earlier. And then even though they are current, those discussions that we're in with those specific states that have those balances are all around how do we ensure that our transportation providers are strong enough to deliver on the membership. So it's all about using that cash to make the network healthy. So that's a little more deep on what that liability. It could be used for with our specific partnerships with our states as well.

So Heath, I just want to make sure I'm understanding. So are you suggesting that maybe the $245 million in reality will be considerably less than that when it all sort of shakes out?

The right way, it is a liability. So that $245 million is a liability. But the way we have been partnering with our states is what are we going to do to ensure that our network is healthy. So when we go into these renewal discussions that happen all the time, that's on the table. And these states know that we have this money. And the reason why these contracts are structured that way is for that exact reason. It will ebb and flow, and then how do we at the partnership allocate that specific capital to ensure the next month and the next year that we're set up to ensure that our transportation network is healthy, and therefore, our membership -- our members are getting served. So --

Yes. And there's -- I think the other thing I would say too, and that's a really good point, Heath, is that we're -- there's a lot of focus on, for example, minority transportation providers and community-based organizations. And we're making investments in those groups. And when Heath talks about that, it's like how do we allocate those dollars to help those local transportation providers thrive. And interesting enough, the technology investments that we've made are also allowing that to happen as well that they can remain as independent providers and run their own business because of the partnership we have with them. And again, Heath is right about how do we make investments back into the communities. And that's something I think we are very aligned on with our payers and states.

Thank you. At this time, we've reached the end of the question-and-answer session. Now I'll turn the call over to Dan Greenleaf for closing remarks.

Yes. Thank you all for participating on our call this morning. On May 12, we will be joining CGS for a Virtual Non-Deal Roadshow. And during the first week of June, we will be participating in the Jefferies Virtual Healthcare Conference. We also remain accessible for one-on-one calls. Please reach out to our Investor Relations firm, the Equity Group, if you're interested in scheduling a follow-up call. We look forward to reporting back to you in August when we release our second quarter 2021 financial results. Stay safe and have a wonderful day.

This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.