Discussion and analysis by the management of MODIVCARE INC of the financial situation and operating results. (form 10-Q)

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The following discussion should be read in conjunction with our unaudited
condensed consolidated financial statements and accompanying notes for the three
and nine months ended September 30, 2021 and 2020, as well as our audited
consolidated financial statements and accompanying notes and management's
discussion and analysis of financial condition and results of operations
included in our Form 10-K for the year ended December 31, 2020. For purposes of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," references to Q3 2021 and Q3 2020 mean the three months ended
September 30, 2021 and the three months ended September 30, 2020, respectively,
and references to YTD 2021 and YTD 2020 mean the nine months ended September 30,
2021 and the nine months ended September 30, 2020, respectively.

Caution Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule
175 promulgated thereunder, and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 3b-6 promulgated thereunder,
including statements related to the Company's strategies or expectations about
revenues, liabilities, results of operations, cash flows, ability to fund
operations, profitability, ability to meet financial covenants, contracts or
market opportunities. These statements are predictive in nature and are
frequently identified by the use of terms such as "may," "will," "should,"
"expect," "believe," "estimate," "intend," and similar words indicating possible
future expectations, events or actions. In addition, statements that are not
historical statements of fact should also be considered forward-looking
statements. Such forward-looking statements are based on current expectations,
assumptions, estimates and projections about our business and our industry, and
are not guarantees of our future performance. These statements are subject to a
number of known and unknown risks, uncertainties and other factors, many of
which are beyond our ability to control or predict, that may cause actual events
to be materially different from those expressed or implied herein. Among such
risks, uncertainties and other factors are those summarized under the caption
"  Summary Risk Factors  " in Part I, and described in further detail under the
caption "  Risk Factors  " in Part I, Item 1A, of our Annual Report on Form 10-K
filed with the Securities and Exchange Commission, or SEC, for the fiscal year
ended December 31, 2020. Hyperlinks to such sections of our Annual Report are
contained in the text included within the quotation marks.

You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made and are
expressly qualified in their entirety by the cautionary statements set forth
herein and in our other filings with the SEC, which you should read in their
entirety before making an investment decision with respect to our securities. We
undertake no obligation to update or revise any forward-looking statements
contained in this release, whether as a result of new information, future events
or otherwise, except as required by applicable law.

Overview of our company

ModivCare is a technology-enabled healthcare services company that provides a
suite of integrated supportive care solutions for public and private payors and
their patients. Its value-based solutions address the social determinants of
health, or SDoH, enable greater access to care, reduce costs, and improve
outcomes. ModivCare is a provider of non-emergency medical transportation, or
NEMT, personal care, and remote patient monitoring, or RPM, solutions. The
technology-enabled operating model includes NEMT core competencies in risk
underwriting, contact center management, network credentialing, claims
management and non-emergency medical transport management. Additionally, its
personal care services include placements of non-medical personal care
assistants, home health aides and nurses primarily to Medicaid patient
populations in need of care monitoring and assistance performing daily living
activities in the home setting, including senior citizens and disabled adults.
ModivCare's remote patient monitoring services include personal emergency
response systems, vitals monitoring and data-driven patient engagement
solutions.

ModivCare's solutions help health plans manage risks, close care gaps, reduce
costs, and connect members to care. Through the combination of its historical
NEMT business, its in-home personal care business that consists of Simplura
Health Group and Care Finders Total Care LLC, and its recent addition of the
remote patient monitoring business through its acquisition of VRI Intermediate
Holdings, LLC, or VRI, ModivCare has united four complementary healthcare
businesses that
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serve similar, highly vulnerable patient populations. For additional information
about our business and operating segments, please see Note 1 and Note 4 to the
accompanying unaudited financial statements.
Business Outlook and Trends

Our performance is affected by a number of trends that drive the demand for our
services. In particular, the markets in which we operate are exposed to various
trends, such as healthcare industry and demographic dynamics. Over the long
term, we believe there are numerous factors that could affect growth within the
industries in which we operate, including:

•an aging population, which is expected to increase demand for healthcare
services and transportation and, accordingly, in-home personal care services;
•a movement towards value-based versus fee-for-service and cost plus, or FFS,
care and budget pressure on governments, both of which may increase the use of
private corporations to provide necessary and innovative services;
•increasing demand for in-home care provision, driven by cost pressures on
traditional reimbursement models and technological advances enabling remote
engagement, including telehealth and similar internet-based health related
services;
•technological advancements, which may be utilized by us to improve services and
lower costs, but may also be utilized by others, which may increase industry
competitiveness; and,
•Medicaid, Managed Care Organizations (MCOs) and Medicare Advantage plans
increasingly are covering NEMT services for a variety of reasons, including
increased access to care, improved patient compliance with treatment plans,
social trends, and to promote SDoH, and this trend may be accelerated or
reinforced by the signing into law of The Consolidated Appropriations Act of
2021 ("H.R.133"), a component of which mandates that state Medicaid programs
ensure that Medicaid beneficiaries have necessary transportation to and from
health care providers.

Update on the impact of the COVID-19 pandemic

Since March of 2020, the COVID-19 pandemic has impacted the Company's business,
as well as its patients, communities, and employees. The Company's priorities
during the COVID-19 pandemic remain protecting the health and safety of its
employees and patients, maximizing the availability of its services and products
to support the SDoH, and the operational and financial stability of its
business.

Federal, state, and local authorities have taken several actions designed to
assist healthcare providers in providing care to COVID-19 and other patients and
to mitigate the adverse economic impact of the COVID-19 pandemic. Legislative
actions taken by the federal government include the Coronavirus Aid, Relief, and
Economic Security Act (the "CARES Act"), which was signed into law on March 27,
2020. Through the CARES Act, the federal government has authorized payments to
be distributed to healthcare providers through the Public Health and Social
Services Emergency Fund ("Provider Relief Fund" or "PRF").

Grant Income. For the nine months ended September 30, 2021, the Company received
distributions of the CARES Act PRF of approximately $3.5 million targeted to
offset lost revenue and expenditures incurred in connection with the COVID-19
pandemic, which is currently recorded as grant income. The PRF payments are
subject to certain restrictions and are subject to recoupment if not used for
designated purposes. As a condition to receiving distributions, providers must
agree to certain terms and conditions, including, among other things, that the
funds are being used for lost revenues and unreimbursed COVID-19 related
expenses as defined by HHS. All recipients of PRF payments are required to
comply with the reporting requirements described in the terms and conditions and
as determined by HHS. The Company recognizes grant payments as grant income when
there is reasonable assurance that it has complied with the conditions
associated with the grant. Grant income recognized by the Company is presented
in grant income in the accompanying consolidated statements of operations. HHS
guidance related to PRF grant funds is still evolving and subject to change. The
Company is continuing to monitor the reporting requirements as they evolve.

The CARES Act also provides for certain federal income and other tax changes,
including the deferral of the employer portion of Social Security payroll taxes.
The Company has deferred payment of approximately $20.8 million related to the
deferral of employer payroll taxes as of September 30, 2021 under the CARES Act.
Of this amount, approximately 50% is due in December of 2021 and 50% is due in
December of 2022; therefore, $10.4 million is recorded in accrued expenses, and
$10.4 million is recorded in other long-term liabilities.

As a result of the COVID-19 pandemic, our NEMT Segment has experienced a
decreased number of trips beginning in March 2020. As many of our contracts are
capitated, our revenues did not experience a decrease to the level of our
transportation costs, resulting in a positive impact to our gross margin.
However, certain of our contracts contain risk corridor or profit rebate
provisions, which result in a possible refund to our payors if our gross margin
exceeds certain pre-determined
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limits. For these contracts, we have recognized a contract payable in relation
to revenues that have been received, however are unearned due to the possibility
of payback. It is possible we could experience higher transportation costs in
the future as we are currently seeing trip volumes increase to levels higher
than those pre-pandemic in certain regions of the country. See further
discussion of this at Note 5, Revenue Recognition.

Since March 2020 and primarily as a result of the COVID pandemic, our Personal
Care Segment business has experienced and is expected to continue to experience
a material reduction in the volume of service hours and visits. Volume has been
reduced as patients put services on hold due to infection concerns, and/or
because they had the alternative of receiving care from family members and
others working remotely or furloughed from their jobs. Cases have also been lost
and new case referrals slowed as referral sources faced disruption from the
various restrictions and "stay at home" orders. Our personal care service
volumes are not expected to recover to pre-pandemic levels until the vaccines
are more universally applied in the markets where we provide our services. While
these depressed volumes will continue to result in lower than expected revenue,
at least in the near term, we may also be challenged with wage pressures related
to minimum wage increases and a narrowing caregiver labor pool that is currently
being supplemented by unemployment benefits and further being impacted by a
federal vaccine mandate.

Critical accounting estimates and policies

There have been no significant changes to our critical accounting policies in
our unaudited condensed consolidated financial statements from our Form 10-K for
the year ended December 31, 2020. For further discussion of our critical
accounting policies, see management's discussion and analysis of financial
condition and results of operations contained in our Form 10-K for the year
ended December 31, 2020.

Composition of the results of operations

The following operating results include the accounts of ModivCare Inc. and our subsidiaries for the three and nine months ended September 30, 2021.

Income

Service revenue, net. Service revenue, net represents the revenue recognized
from transportation management services through our NEMT segment, from personal
care services through our Personal Care segment and from remote monitoring
services through our RPM segment.

Income Grant

Income Grant. During the third quarter of 2021, the Company received distributions from the CARES Act FRP to compensate for lost revenue and expenses incurred in connection with the COVID-19 pandemic.

Operating Expenses

Service expense. Service expense for our NEMT segment consists primarily of
transportation costs paid to third party service providers, salaries of
employees within our contact centers and operation centers and occupancy costs.
Service expense for our Personal Care segment consists primarily of salaries for
the employees providing the personal care services. Service expense for our RPM
segment primarily consists of salaries of employees in our contact centers,
connectivity costs and occupancy costs.

General and Administrative Expense. General and administrative expense consists
principally of salaries for administrative employees that indirectly support the
operations, occupancy costs, marketing expenditures, insurance, and professional
fees.

Depreciation and Amortization Expense. Depreciation within this caption includes
infrastructure items such as computer hardware and software, office equipment
and leasehold improvements. Amortization expense is generated primarily from
amortization of our intangible assets, including Customer Relationships, Payor
Network, Trade Names and a New York LHCSA Permit.



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Other expenses (income)

Interest Expense, Net. Interest expense consists principally of interest
payments on the Company's outstanding borrowings under the Credit Facility,
Senior Unsecured Notes and amortization of deferred financing fees. Refer to the
"Liquidity and Capital Resources" section below for further discussion of these
outstanding borrowings.

Equity in net income of investee. Equity in earnings of equity method investee
consists of our proportionate share of equity earnings or losses from our Matrix
equity investment.

Income tax charge (Advantage). The Company is subject to federal income tax United States and state taxation in the various jurisdictions in which we operate.

Results of operations

Segmented reports. Our operating segments reflect the way our business is organized and reviewed by management and our chief operating decision maker.

We operate in four reportable business segments: NEMT, Personal Care, RPM and
the Matrix Investment. Prior to November 17, 2020, our primary operating segment
was NEMT, which provides non-emergency medical transportation services. Our
Personal Care segment is composed of the operations from two acquisitions:
Simplura on November 18, 2020, which operates in the non-medical personal care
service industry; and Care Finders on September 14, 2021, a personal care
service provider with operations concentrated in the Northeast, with a scaled
presence in New Jersey, Pennsylvania, and Connecticut. On September 22, 2021, we
acquired VRI, resulting in the establishment of our RPM segment. VRI is a
provider of remote patient monitoring solutions. Our investment in Matrix is
also a reportable segment referred to as the "Matrix Investment". Segment
results are based on how our chief operating decision maker manages our
business, makes operating decisions and evaluates operating performance. The
operating results of our NEMT, Personal Care and RPM segments include revenue
and expenses incurred by the segment, and the operating results of our NEMT
segment also include our activities related to executive, accounting, finance,
internal audit, tax, legal and certain strategic and corporate development
functions for each segment. See Note 4, Segments, in our accompanying condensed
consolidated financial statements for further information on our segments.

Discontinued operations. During prior years, we completed several transactions
which resulted in the presentation of the related operations as Discontinued
Operations. Activity for the current period is not significant.

Q3 2021 vs. Q3 2020

Consolidated Results. The following table sets forth results of operations and
the percentage of Service revenue, net represented by items in our unaudited
condensed consolidated statements of operations for Q3 2021 and Q3 2020 (in
thousands):
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                                                                                 Three months ended September 30,
                                                                       2021                                               2020
                                                        Amount                  % of Revenue               Amount               % of Revenue
Service revenue, net                              $       493,059                        100.0  %       $ 320,619                        100.0  %
Grant income                                                    -                            -  %               -                            -  %

Operating expenses:
Service expense                                           399,272                         81.0  %         235,543                         73.5  %
General and administrative expense                         68,054                         13.8  %          34,441                         10.7  %
Depreciation and amortization                              12,608                          2.6  %           7,301                          2.3  %

 Total operating expenses                                 479,934                         97.3  %         277,285                         86.5  %

Operating income                                           13,125                          2.7  %          43,334                         13.5  %

Other expenses (income):
Interest expense, net                                      17,702                          3.6  %             379                          0.1  %

Equity in net loss (income) of investee                     6,748                          1.4  %         (10,325)                        (3.2) %

Income (loss) from continuing operations before
income taxes                                              (11,325)                        (2.3) %          53,280                         16.6  %
Provision (benefit) for income taxes                       (3,863)                        (0.8) %          14,360                          4.5  %
Income (loss) from continuing operations, net of
tax                                                        (7,462)                        (1.5) %          38,920                         12.1  %
Loss from discontinued operations, net of tax                (108)                           -  %            (115)                           -  %
Net income (loss)                                 $        (7,570)                        (1.5) %       $  38,805                         12.1  %



Service revenue, net. Service revenue, net for Q3 2021 increased $172.4 million,
or 54%, compared to Q3 2020. Service revenue, net, for our NEMT segment
increased by $52.4 million, primarily due to higher trip volume when compared to
Q3 2020, as trip volume was depressed in the prior year due to the impact of
COVID-19. Service revenue, net, further increased incrementally by $120.1
million due to the acquisitions of Simplura, Care Finders and VRI. See our
results of operations, segments, for further discussion.

Income Grant. In the third quarter of 2021, the Company did not receive any distributions from the CARES Act PRF, but management expects to receive distributions in the fourth quarter of 2021.

Service charge. The components of service spending are shown below (in thousands):

Three months ended September 30,

                                                                  2021                                               2020
                                                   Amount                  % of Revenue               Amount               % of Revenue
Purchased services                           $       256,750                         52.1  %       $ 191,503                         59.7  %
Payroll and related costs                            131,977                         26.8  %          34,213                         10.7  %
Other service expenses                                10,545                          2.1  %           9,827                          3.1  %
Total service expense                        $       399,272                         81.0  %       $ 235,543                         73.5  %



Service expense for Q3 2021 increased $163.7 million, or 70%, compared to Q3
2020 due to higher purchased services of $65.2 million related to an increase in
transportation costs and associated payroll costs in our contact centers for our
NEMT segment. Payroll and related costs increased by a further $97.8 million,
primarily related to incremental costs of $93.1 million in the Personal Care
segment due to the Simplura acquisition in November 2020 and Care Finders in
September 2021.

General and administrative expense. General and administrative expense for Q3
2021 increased $33.6 million, or 98%, compared to Q3 2020, related to an
increase of $17.7 million in our NEMT segment, primarily related to transaction
costs for the Care Finders and VRI acquisitions. The increase was further
attributable to $15.7 million of incremental costs related to the addition of
the Personal Care segment. See our results of operations, segments, for further
discussion.

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Depreciation and amortization. Depreciation and amortization for Q3 2021 increased $ 5.3 million or 73% compared to Q3 2020, mainly due to amortization related to intangible assets contributed as part of the acquisition of Simplura. See note 3, Acquisitions.

Interest expense, net. Interest expense, net, for Q3 2021 and Q3 2020 was $17.7
million and $0.4 million, respectively. Interest expense increased as a result
of the activity related to the $500.0 million Senior Notes due 2025 and the
$500 million Senior Notes 2029 that were issued on November 4, 2020 and August
24, 2021, respectively. We incurred $8.1 million and $2.5 million of interest
expense related to the Senior Notes due 2025 and the Senior Notes due 2029 in Q3
2021, respectively. We further incurred a bridge loan commitment fee of
$6.6 million related to the VRI acquisition in Q3 2021.

Equity in net (loss) income of investee. Our equity in net (loss) income of
investee for Q3 2021 was a loss of $6.7 million as a result of our proportionate
share of the net loss of Matrix. See further discussion at the Matrix segment in
our results of operations - segments section.

Provision (benefit) for income taxes. Our effective tax rate from continuing
operations for Q3 2021 and Q3 2020 was a benefit of 34.1% and a provision of
27.0%, respectively. For Q3 2021, the effective tax rate on the tax benefit was
higher than the U.S. Federal Statutory rate of 21.0% primarily due to state
taxes and favorable adjustments related to stock options and tax credits. For Q3
2020, the effective tax rate on the tax provision was higher than the U.S.
Federal Statutory rate of 21.0% primarily due to state income taxes and certain
non-deductible expenses.

Loss from discontinued operations, net of tax. The loss from discontinued operations, net of tax, includes the activity related to our former WD Services segment.

YTD 2021 vs. YTD 2020

The following table presents the results of operations and the percentage of total consolidated revenues represented by the items in our condensed consolidated statements of income for fiscal 2021 and fiscal 2020 (in thousands):

                                                                                  Nine months ended September 30,
                                                                       2021                                                2020
                                                        Amount                   % of Revenue               Amount               % of Revenue
Service revenue, net                             $       1,421,117                        100.0  %       $ 970,166                        100.0  %
Grant income                                                 3,500                          0.2  %               -                            -  %

Operating expenses:
Service expense                                          1,139,170                         80.2  %         764,310                         78.8  %
General and administrative expense                         179,271                         12.6  %          86,435                          8.9  %

Depreciation and amortization                               36,667                          2.6  %          17,199                          1.8  %
Total operating expenses                                 1,355,108                         95.4  %         867,944                         89.5  %

Operating income                                            69,509                          4.9  %         102,222                         10.5  %

Other expenses (income):
Interest expense, net                                       34,412                          2.4  %           2,118                          0.2  %

Equity in net loss (income) of investee                      1,978                          0.1  %         (12,200)                        (1.3) %

Income from continuing operations before income
taxes                                                       33,119                          2.3  %         112,304                         11.6  %
Provision for income taxes                                   7,944                          0.6  %          19,785                          2.0  %
Income from continuing operations, net of tax               25,175                          1.8  %          92,519                          9.5  %
Loss from discontinued operations, net of tax                 (232)                           -  %            (618)                        (0.1) %
Net income                                       $          24,943                          1.8  %       $  91,901                          9.5  %



Service revenue, net. Consolidated service revenue, net, for YTD 2021 increased
$451.0 million, or 46%, compared to YTD 2020. Service revenue, net, for the NEMT
segment increased by $111.0 million, primarily due to higher trip volume when
compared to YTD 2020, as trip volume was depressed in the prior year due to the
impact of COVID-19. Service revenue, net,
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further increased incrementally by $339.9 million due to the acquisitions of
Simplura, Care Finders and VRI. See our results of operations, segments, for
further discussion.

Service charge. The components of service spending are shown below (in thousands):

Nine months ended September 30,

                                                            2021                                                   2020
                                            Amount                    % of Revenue                 Amount                 % of Revenue
Purchased services                   $         725,060                           51.0  %       $   622,685                           64.2  %
Payroll and related costs                      379,740                           26.7  %           108,792                           11.2  %
Other operating expenses                        34,370                            2.4  %            32,833                            3.4  %
Total service expense                $       1,139,170                           80.2  %       $   764,310                           78.8  %



Service expense for YTD 2021 increased $374.9 million, or 49%, compared to YTD
2020 due to higher purchased services of $102.4 million related to an increase
in transportation costs and associated payroll costs in our contact centers for
our NEMT segment. Payroll and related costs increased by a further $270.9
million, primarily related to incremental costs of $265.1 million in the
Personal Care segment due to the Simplura acquisition in November 2020 and Care
Finders in September 2021.

General and administrative expense. General and administrative expense for YTD
2021 increased $92.8 million, or 107%, compared to YTD 2020, related to an
increase of $47.3 million in our NEMT segment, primarily related to transaction
costs for the Care Finders and VRI acquisitions, as well as value enhancement
projects. The increase was further attributable to $45.3 million of incremental
costs related to the addition of the Personal Care segment. See our results of
operations, segments, for further discussion.

Depreciation and amortization. Depreciation and amortization for YTD 2021
increased $19.5 million or 113% compared to YTD 2020 primarily as a result of
intangibles brought on under the NMT and Simplura acquisitions in Q2 and Q4 of
2020, respectively. See Note 3 Acquisitions.

Interest expense, net. Consolidated interest expense, net for YTD 2021 increased
$32.3 million compared to YTD 2020. Interest expense increased as a result of
the activity related to the $500.0 million Senior Notes due 2025 and the
$500 million Senior Notes due 2029, that were issued on November 4, 2020 and
August 24, 2021, respectively. We incurred $24.2 million and $2.5 million of
interest expense related to the Senior Notes due 2025 and the Senior Notes due
2029 in the nine months ended September 30, 2021, respectively. We further
incurred a bridge loan commitment fee of $6.6 million related to the VRI
acquisition in Q3 of 2021.

Equity in net loss (income) of investee. Our equity in net loss of investee for
YTD 2021 of $2.0 million was as a result of our proportionate share of the net
loss of Matrix. See further discussion at the Matrix segment in our results of
operations - segments section.

Provision for income taxes. Our effective tax rates from continuing operations
for YTD 2021 and YTD 2020 were 24.0% and 17.6%, respectively. The YTD 2021
effective tax rate was higher than the U.S. federal statutory rate of 21%
primarily due to state income taxes and certain non-deductible expenses. For YTD
2020, the effective tax rate was lower than the U.S. federal statutory rate of
21% primarily due to the favorable impact of the CARES Act on the Company's 2018
U.S. NOLs.

Loss from discontinued operations, net of tax. The loss from discontinued operations, net of tax, includes the activity related to our former WD Services segment.


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Operating Results – Segments

The following tables present certain financial information on continuing operations attributable to the Company’s business segments (in thousands):

NEMT segment

                                                     For the Three months ended September 30,                                                             For the Nine months ended September 30,
                                               2021                                              2020                                              2021                                               2020
                               Amount            % of Segment Revenue            Amount           % of Segment Revenue             Amount             % of Segment Revenue            Amount           % of Segment Revenue
Service revenue, net       $   372,992                   100%                 $ 320,619                   100%                 $  1,081,168                   100%                 $ 970,166                   100%
Service expense                304,398                    82%                   235,543                    73%                      869,470                    80%                   764,310                    79%
General and administrative
expense                         52,118                    14%                    34,441                    11%                      133,706                    12%                    86,435                    9%
Depreciation and
amortization                     7,496                    2%                      7,301                    2%                        21,744                    2%                     17,199                    2%
Operating income           $     8,980                    2%                  $  43,334                    14%                 $     56,248                    5%                  $ 102,222                    11%



The non-emergency medical transportation ("NEMT") segment, which operates under
the brands ModivCare Solutions and Circulation, is the largest manager of NEMT
programs for state governments and managed care organizations ("MCOs") in the
U.S; and includes the Company's activities for executive, accounting, finance,
internal audit, tax, legal and certain strategic and development functions.

Service revenue, net. Service revenue, net, increased by $52.4 million and 16%,
from the third quarter of 2020 to the third quarter of 2021. This increase is
primarily attributable to $36.0 million of revenue related to increased trip
volume and $19.0 million of revenue related to contracts from the NMT
acquisition that took place in the second quarter of 2020. Service revenue, net
increased by $111.0 million and 11%, from the nine months ended September 30,
2020 to the nine months ended September 30, 2021, primarily attributable to
$88.1 million of revenue from contracts acquired in the NMT acquisition and
$42.9 million related to higher trip volume. Trip volume increased for both the
quarter to date and year to date period ended September 30, 2021 when compared
to 2020, as trip volume was depressed in the prior year due to the impact of
COVID-19. While a majority of our contacts are capitated and we receive monthly
payments on a per member/fixed basis in return for full or partial risk of
transportation volumes, we have certain contracts that limit profit to within a
certain corridor and once we reach the maximum profit level we discontinue
recognizing revenue and instead build a liability to return back to the customer
upon reconciliation at a later date. Other contracts that are structured as
fee-for-service also experienced positive impacts to revenue due to higher trip
volumes.

Service expense. Service expense for our NEMT segment primarily consists of
transportation costs paid to third party service providers, salaries of
employees within our contact centers and operations centers, and occupancy
costs. Service expense increased by $68.9 million and 29% for the three months
ended September 30, 2021, as compared to the three months ended September 30,
2020, primarily related to an increase in transportation costs of $65.2 million
due to higher trip volume. Service expense increased by $105.2 million and 14%
for the nine months ended September 30, 2021, as compared to the nine months
ended September 30, 2020, due to an increase in transportation costs of
$102.4 million, due to higher trip volume.

General and administrative expense. General and administrative expense primarily
consists of salaries for administrative employees that indirectly support the
operations, occupancy costs, marketing expenditures, insurance, and professional
fees. General and administrative expense increased by $17.7 million and 51% for
the three months ended September 30, 2021, as compared to the three months ended
September 30, 2020, related to $11.6 million for acquisition costs for VRI and
Care Finders, $3.2 million for personnel expense and $1.5 million for temporary
labor. General and administrative expense increased by $47.3 million and 55% for
the nine months ended September 30, 2021, as compared to the nine months ended
September 30, 2020, primarily as a result of $22.9 million related to
transaction costs and value enhancement projects, $8.7 million related to
software, $6.6 million related to personnel expense and $3.7 million related to
legal expense.

Depreciation and amortization expense. Depreciation and amortization expense
increased by $0.2 million and 3% for the three months ended September 30, 2021,
as compared to the three months ended September 30, 2020 due to consistent PPE
expenditures. Depreciation and amortization expense increased by $4.5 million
and 26% for the nine months ended September 30, 2021, as compared to nine months
ended September 30, 2020, as a result of a full nine months of amortization on
the NMT intangibles in 2021, as compared to only five months of amortization in
2020.

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Personal Care Segment
                                        For the Three months ended September 30,                   For the Nine months ended September 30,
                                                          2021                                                       2021
                                         Amount                % of Segment Revenue                 Amount                % of Segment Revenue
Service revenue, net              $         118,503                    100%                  $         338,385                    100%
Grant income                                      -                     -%                               3,500                     1%
Service expense                              94,107                     79%                            268,933                     79%
General and administrative
expense                                      15,720                     13%                             45,349                     13%
Depreciation and amortization                 4,912                     4%                              14,723                     4%
Operating income                  $           3,764                     3%                   $          12,880                     4%



Our Personal Care segment was established in November 2020 with the acquisition
of Simplura and expanded in September 2021 with the acquisition of Care Finders.
Our personal care segment's services include placements of non-medical personal
care assistants, home health aides and nurses, primarily to Medicaid patient
populations in need of care monitoring and assistance performing daily living
activities in the home setting, including senior citizens and disabled adults.
As both of these acquisitions took place after the third quarter of 2020,
comparable figures for the prior year are not provided.

Service revenue, net. Service revenue, net, from MCO contracts accounted for 55%
and 54% of service revenue, net, for the three and nine months ended September
30, 2021, respectively, while U.S. state Medicaid program contracts accounted
for 40% of service revenue, net for the three and nine months ended September
30, 2021. The remainder of the Personal Care segment revenue is derived from
private pay and other contracts.

Grant Income. In the nine months ended September 30, 2021, the Company received
distributions of the CARES Act PRF of approximately $3.5 million targeted to
offset lost revenue and unreimbursed expenditures incurred in connection with
the COVID-19 pandemic. The Company did not receive any distributions from the
CARES Act PRF during the three months ended September 30, 2021.

Service expense. Service expense for our personal care segment primarily
consists of salaries for the employees providing the personal care services and
it typically trends with the number of hours worked. For both the three and nine
months ended September 30, 2021, service expense for the Personal Care segment
includes $7.0 million related to the Care Finders acquisition, with the
remainder related to the Simplura acquisition. Services expense is 79% of
service revenue, net, for the three months and nine months ended September 30,
2021.

General and administrative expense. General and administrative expense primarily
consists of salaries for administrative employees that indirectly support the
operations, occupancy costs, marketing expenditures, insurance, and professional
fees. General and administrative expense for the Personal Care segment includes
$1.3 million related to the Care Finders acquisition, with the remainder being
related to the Simplura acquisition. General and administrative expense is 13%
of service revenue, net for the three months and nine months ended September 30,
2021.

Depreciation and amortization expense. Depreciation and amortization expense
consists primarily of amortization expense on the intangible assets brought on
under the Simplura acquisition of $4.8 million for the three months ended
September 30, 2021 and $14.3 million for the nine months ended September 30,
2021. Depreciation and amortization expense is 4% of service revenue, net, for
the three and nine months ended September 30, 2021.

RPM segment

Our Remote Patient Monitoring segment was established in September 2021 with the
acquisition of VRI. VRI is a provider of remote patient monitoring solutions and
manages a comprehensive suite of services, including personal emergency response
systems, vitals monitoring and data-driven patient engagement solutions. As the
RPM segment consists of only nine days of activity related to the current
period, and no activity for the prior period, the amounts were not material and
therefore a separate table with respect to those results has been omitted until
future periods.

Matrix Segment
                                        For the Three months ended            For the Nine months ended September
                                               September 30,                                  30,
                                         2021                 2020                 2021                 2020
Equity in net income (loss) of
investee                            $     (6,748)         $   10,325          $     (1,978)         $   12,200
Equity investment                   $    134,353          $  141,292          $    134,353          $  141,292



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

Equity in net income (loss) of investee changed from income of $10.3 million for
the three months ended September 30, 2020 to a loss of $6.7 million for the
three months ended September 30, 2021. This change is primarily attributable to
the Clinical Solutions business unit revenue, which declined by $73.7 million
due to the winding down of COVID-19 testing and screening. For the nine months
ended September 30, equity in net income of investee changed from income of
$12.2 million in 2020 to a loss of $2.0 million for the same period in 2021.
While revenue over this period increased by $24.1 million due to higher
membership and an increase in visits to the home, operating expenses increased
by $75.7 million, related to increased hours worked by the care providers, as
well as increased hourly costs due to wage pressures and hazard pay.

Matrix reported that its QTD and YTD net income was negatively impacted by its
Clinical Solutions business, which had a decrease in revenue due to a faster
than expected vaccination rollout and winding down of COVID testing, which was
offset by the launch of its clinical trials business in the third quarter of
2020. Additionally, Matrix reported increased revenue and income related to a
clinical solutions product offering following the October 2020 acquisition of
Biocerna LLC, a diagnostic company that, among other tests, provides rapid
COVID-19 test kits.

Seasonality

Our NEMT segment's quarterly operating income and cash flows normally fluctuate
as a result of seasonal variations in our business, principally due to lower
transportation demand during the winter season and higher demand during the
summer season.

Our Personal Care segment's quarterly operating income and cash flows also
normally fluctuate as a result of seasonal variations in the business,
principally due to somewhat lower demand for in-home services from caregivers
during the summer and periods with major holidays, as patients may spend more
time with family and less time alone needing outside care during those periods.

The quarterly operating profit and cash flows of our RPM segment do not normally fluctuate due to seasonal variations in business.

Liquidity and capital resources

Short-term capital requirements consist primarily of recurring operating
expenses, new contract start-up costs and costs associated with our strategic
initiatives. We expect to meet our cash requirements through available cash on
hand, cash generated from operations, net of capital expenditures, and borrowing
capacity under our Credit Facility.

Cash flow from operating activities during the nine months ended September 30,
2021 was $174.7 million. Our balance of cash and cash equivalents, including
restricted cash, was $126.7 million and $183.4 million at September 30, 2021 and
December 31, 2020, respectively. Restricted cash amounts are not included in our
balance of cash and cash equivalents in the condensed consolidated balance
sheets, although they are included in the cash, cash equivalents and restricted
cash balance on the accompanying unaudited condensed consolidated statements of
cash flows. At September 30, 2021, we had no borrowings outstanding under our
Credit Facility; however, we had letters of credit outstanding of $21.1 million.
At December 31, 2020, we had no amounts outstanding under the Credit Facility.

We may, from time to time, access capital markets to raise equity or debt
financing for various business reasons, including acquisitions and possible
refinancing activity. We may also raise debt financing to fund future
repurchases of our common stock. The timing, term, size, and pricing of any such
financing will depend on investor interest and market conditions, and there can
be no assurance that we will be able to obtain any such financing on terms
acceptable to us at the time or at all.

YTD 2021 Cash Flow vs YTD 2020

Operating activities. Cash provided by operating activities was $174.7 million
and $287.2 million for YTD 2021 and YTD 2020, respectively. Cash flows from
operating activities decreased by $112.5 million due to a decrease in cash
provided by net income of $67.0 million and a further decrease in cash provided
by changes in working capital of $69.8 million, partially offset by an increase
in cash due to increased amortization expense of $17.6 million and an increase
in cash due to the change in our equity method investment of $14.2 million. The
working capital changes were related to a decrease in cash related to the change
in accounts receivable of $89.6 million and a decrease in cash related to the
change in accounts payable and other accrued expenses of $25.9 million,
partially offset by an increase in cash provided by an increase in accrued
contract payables of $63.6 million.
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Investing activities. Net cash used in investing activities of $681.1 million in
YTD 2021 increased by $598.6 million as compared to the YTD 2020 net cash used
in investing activities of $82.5 million, primarily due to $589.6 million more
spent on acquisitions in 2021 than the related period in 2020. The increase in
the use of cash was also related to an increase in purchase of property, plant
and equipment of $9.1 million.

Financing activities. Net cash provided by financing activities of $449.7
million in YTD 2021 changed by $529.4 million as compared to net cash used in
financing activities YTD 2020 of $79.6 million. The change was primarily due to
an increase in proceeds from debt of $463.0 million, primarily as a result of
the $500.0 million Senior Notes issued August 24, 2021, partially offset by an
increase in cash paid to repurchase common stock of $28.9 million for YTD 2021,
as compared to YTD 2020.

Obligations and commitments

Senior Unsecured Notes. On November 4, 2020, the Company issued $500.0 million
in aggregate principal amount of 5.875% senior unsecured notes due on November
15, 2025 (the "Senior Notes due 2025"). Additionally on August 24, 2021, the
Company issued $500 million in aggregate principal amount of 5.000% senior
unsecured notes due on October 1, 2029 (the "Senior Notes due 2029"). The Senior
Notes due 2025 and the Senior Notes due 2029 were issued pursuant to two
indentures, dated November 4, 2020 and August 24, 2021, respectively, between
the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The
Senior Notes due 2025 relate to the Company's acquisition of Simplura and the
Senior Notes due 2029 relate to the Company's acquisition of VRI.

The Senior Notes due 2025 and the Senior Notes due 2029 (collectively, the
"Notes") are senior unsecured obligations and rank senior in right of payment to
all of the Company's future subordinated indebtedness, rank equally in right of
payment with all of the Company's existing and future senior indebtedness, are
effectively subordinated to any of the Company's existing and future secured
indebtedness, including indebtedness under the Credit Facility, to the extent of
the value of the assets securing such indebtedness, and are structurally
subordinated to all of the existing and future liabilities (including trade
payables) of each of the Company's non-guarantor subsidiaries.

The Company will pay interest on the Senior Notes due 2025 at 5.875% per annum
until maturity. The Company will further pay interest on the Senior Notes due
2029 at 5.000% per annum until maturity. Interest is payable semi-annually in
arrears on May 15 and November 15 of each year, with the first interest payment
date being May 15, 2021 on the Senior Notes due 2025. Additionally, interest is
payable on April 1 and October 1 of each year, with the first interest payment
date being April 1, 2022 for the Senior Notes due 2029. Principal payments are
not required until the maturity date on November 15, 2025 and October 1, 2029
when 100% of the outstanding principal will be required to be repaid on the
Senior Notes due 2025 and the Senior Notes due 2029, respectively.

Credit Facility. The Company is a party to the amended and restated credit and
guaranty agreement, dated as of August 2, 2013 (as amended, the "Credit
Agreement"), with Bank of America, N.A., as administrative agent, swing line
lender and letter of credit issuer, and the other lenders party thereto. On May
6, 2020, the Company entered into the Seventh Amendment to the Amended and
Restated Credit and Guaranty Agreement (the "Seventh Amendment") which, among
other things, extended the maturity date to August 1, 2021, expanded the amount
available under the revolving credit facility (the "Credit Facility") from
$200.0 million to $225.0 million, and increased the sub-facility for letters of
credit from $25.0 million to $40.0 million. Interest on the loans is payable
quarterly in arrears. In addition, the Company is obligated to pay a quarterly
commitment fee based on a percentage of the unused portion of each lender's
commitment under the Credit Facility and quarterly letter of credit fees based
on a percentage of the maximum amount available to be drawn under each
outstanding letter of credit.

On October 16, 2020, the Company entered into the Eighth Amendment to the
Amended and Restated Credit and Guaranty Agreement (the "Eighth Amendment"),
which among other things, amended the Credit Facility to permit the incurrence
of additional debt to finance the acquisition of Simplura, permit borrowing
under the Credit Facility to partially fund the Simplura Acquisition with
limited conditions to such borrowing, increase the top interest rate margin that
may apply to loans thereunder, and revise our permitted ratio of EBITDA to
indebtedness. In addition, the Eighth Amendment extended the maturity date to
August 2, 2023. See Note 3, Acquisitions, for further information on the
Simplura acquisition.

On September 13, 2021, the Company entered into the Ninth Amendment to the
Amended and Restated Credit and Guaranty Agreement (the "Ninth Amendment"),
which among other things, amended the Credit Facility to permit the incurrence
of additional debt to finance the acquisition of VRI and revise certain
financial covenants therein to permit the consummation of the VRI acquisition.
See Note 3, Acquisitions, for further information on the VRI acquisition.

As of the Ninth Amendment, interest on the principal outstanding on loans under the Credit Facility is, at the option of the Company, accrued at an annual rate equal to the greater of LIBOR or 1.00%, plus an applicable rate.

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margin, or the Base Rate as defined in the agreement plus an applicable margin.
The applicable margin ranges from 2.25% to 3.50% in the case of LIBOR loans and
1.25% to 2.50% in the case of the Base Rate loans, in each case, based on the
Company's consolidated leverage ratio as defined in the Credit Agreement that
governs our Credit Facility. The commitment fee and letter of credit fee range
from 0.35% to 0.50% and 2.25% to 3.50%, respectively, in each case based on the
Company's consolidated leverage ratio as defined in the credit agreement that
governs our Credit Facility.

From September 30, 2021, the Company had no outstanding borrowings under the credit facility.

The Credit Agreement contains customary affirmative and negative covenants and
events of default. The negative covenants include restrictions on our ability
to, among other things, incur additional indebtedness, create liens, make
investments, give guarantees, pay dividends, repurchase shares, sell assets, and
merge and consolidate. We are subject to financial covenants, including
consolidated net leverage and consolidated interest coverage covenants. As of
September 30, 2021, our consolidated net leverage ratio may not be greater than
5.00:1.00 as of the end of any fiscal quarter and our consolidated interest
coverage ratio may not be less than 3.00:1.00 as of the end of any fiscal
quarter. Pursuant to the Ninth Amendment, our consolidated net leverage ratio
was increased to 5.00:1.00 as of the Ninth Amendment Effective Date through June
30, 2022, decreasing to 4.50:1.00 as of September 30, 2022 and each fiscal
quarter thereafter.

We were in compliance with all of the restrictive covenants of the Ninth Amended Credit Agreement dated September 30, 2021.

Off-balance sheet provisions

There has been no material change to the discussion of off-balance sheet arrangements previously disclosed in our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended. December 31, 2020.

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