Lee Bienstock: Yeah. And so it’s great question. So our arrangements essentially start as a care gap arrangement. Once we reach a critical mass of patients, then we have the ability to share an upside risk only. And obviously the risk quotient is the value sharing is mitigated in that situation where we only have upside benefit and then we have the opportunity to progress into upside – full risk, upside and downside risk. And so there’s sort of a gradation there. In terms of the economics, we get a care gap closure rate when we go into the home or do a care gap virtually. In some cases, we close care gaps, we’re able to do so virtually when we need to go into the home, we get a care gap rate. And then as we become the primary care provider, as we start to share risk, we take a percentage of the medical loss ratio, essentially, and those are negotiated with the payer partners, and that’s the way that business is structured.
Richard Close: Okay. And one final question for Norm, with respect to the lease rate model on transportation, can you give us any update of where lease rate stands in terms of the percentage of maybe the transportation revenue in the fourth quarter?
Norman Rosenberg: So it’s still probably about half of what we do, maybe even lower in some markets. And I think that’s an important – it’s a good question and important thing to address because we’ve been talking for quite some time, going back probably a year and a half, about how we’re sort of phasing out the fee-for-service. But a funny thing happened sort of on the way to phasing it out, which is that we find in our APCs, which we measure and we report upon, which is our average price per trip, and some of the other metrics like utilization around the fee-for-service business have improved. The improvement that you’ve seen. The six sequential quarters of margin improvement on the Transport side have not occurred as much because of the fact that we’ve done more leased hour than fee-for-service.
It’s happened because the fee-for-service has become a much more profitable business after a lot of focus, after a lot of things are moving in the right direction. So I would say, again, as we try to negotiate new contracts, we’re certainly moving towards a leased hour model. But from my perspective, the fee-for-service part of the business is always going to be somewhat significant and it’s going to be a profitable driver of the business. Having said that, when you look at the margins that we saw. It’s important to point this out. If you look at the margins that we saw for Transport in the fourth quarter above 37%, I would say that represented us doing particularly well. And a couple of things happened that maybe had us see some outlier margins.
I wouldn’t say that’s necessarily the run rate of the margin going forward. I think that number is closer to 34%, 35%, but that’s still much, much higher than it had been a year earlier when it was in the upper 20s. So that’s one of those things that’s going to sort of moderate itself as we go into 2024. But the story, both on the revenue side and the margin side for the Transport business is exceedingly healthy.
Richard Close: Okay, thank you very much.
Operator: Our next question comes from David Grossman of Stifel. Please go ahead.
David Grossman: Thank you. I just wanted to follow-up on a couple of questions that have been asked already. And the first was, as you think about the Mobile Health business, just back-of-the-envelope, it would appear at least, that if you back out the HPD contract that you’re assuming probably north of 30% growth for the residual. So first, does that math sound right? And then, secondly, when you look at that assumption of 30% growth, do you have decent visibility on that today? Maybe you could just give us some sense of where the visibility is on that kind of non-HPD Mobile growth outlook for ‘24.
Norman Rosenberg: Yes, so hey David, it’s Norm. I’ll jump in on that. I think the first thing is that, part of our guidance, I’m not sure we’re exactly at the same point in terms of our expectation for how the HPD revenues evolve. We do definitely as Lee pointed out, we definitely expect it to back up a little bit. But as the year goes on, as we get closer to the end of the contract, we feel that the drop off will not be as abrupt as maybe we might have thought in the past. So, having said that, I don’t know if that backs into a 30% growth on the Mobile Health side, but it’s obviously a pretty robust growth number. It’ll be higher than the growth rate of the overall revenues that we’re putting out here. So it’s going to become a higher proportion of the total.
We have pretty good visibility into it. I mean, there’s not a big go-get number that’s in there. It’s – anything we talk about in our number for 2024 is organic. So if we do any acquisitions, which is always a possibility, but that’s not part of how we get there, I think we have a reasonable amount of visibility into that. I’m looking at it from a pure numbers perspective. I know, Lee, if you want to offer anything from what’s going on on the ground.
Lee Bienstock: Yeah, I think, David, you’re in the ballpark in terms of the growth rate for the rest of the business. Different pieces are growing at different rates. But as Norm mentioned, we have models that have the migrant revenue declining in the back half of the year. And then other projects are coming in and increasing in growth as the year progresses. So the growth rate will continue to, I think, at the Q3 level we saw last year consistent with that. And then as migrant abates, other stuff are going to come in and that will obviously boost the growth rates of those other things that are coming in.
David Grossman: Right. And then maybe one way to think about it, Lee, is, maybe if you can give us a little more color on the nature of the deals, maybe that are in the Mobile pipeline but not in the guide in terms of the nature of the contracts, the timing, and if you can share magnitude just to give us a sense of what you’re seeing in the pipeline with some of these newer pieces of business?
Lee Bienstock: Yeah, so we have – we continue to have very similar deals and projects in the pipeline that we’ve always had. A lot of the Medical Transportation deals in the pipeline are very similar in nature. They’re identical to our leased hour arrangements that we have today. Then we’re just continuing to do more of those deals. We’re continuing to do more of those partnerships, with more hospital systems or expanding to additional hospitals that our current hospital systems have, additional locations. So those will continue. They look the same as they have for us. We’ve seen success with it. It’s working. And the contracts do really well with our partners. They align incentives really, really well. And on the municipal side, it’s going to continue to be – well we’re going to be more and more thoughtful on the municipal side, I should share that.
So our projects on the municipal side have historically been relating to access to vaccines, infectious disease management. We’re seeing more and more. We’re responding and having success in health coaching, bringing access to underserved populations, particularly Medicaid populations and other populations that don’t have access to care in municipalities, they have healthcare deserts. Municipalities have healthcare deserts that we’re helping to bring care to. We’ve always done really well there. The access that we bring has really helped those underserved communities, and we continue to see success with those projects, and they’ll continue. We’re getting more and more into behavioral healthcare. We’ve always done that. We’ve been doing that for years, but we’ve really expanded our capabilities there.
We now have hundreds of social workers and case workers that are providing wonderful services from depression screenings to other crisis response. And so we’re going to continue to scale that. We see a lot of RFP opportunities available in the behavioral health space. That’s a very growing field, and so I think you’ll see more growth in that area as well.
David Grossman: Okay, great. Thank you. And just one other question, if I may. Norm, looking at your cash flow guidance, and it looks like the cash flow from operations guidance is like $10 million to $15 million lower than adjusted EBITDA may just be a definition, but I was just trying to understand that dynamic, given what appears to be a fairly material working capital tailwind that you should get from the HPD contract this year.
Norman Rosenberg: Right. So let’s walk you through that. Obviously, the big gap there is taxes. We’re a taxpayer now. We’ve exhausted our federal NOLs. We have plenty of state NOLs, as we point out in the K that we filed today. But we have to take into account that we’re going to be a taxpayer going forward. So that’s the big part of the difference. Obviously, you would add back the – any non-cash stock comp or depreciation to your calculation. In terms of that estimate, though, that estimate assumes a somewhat neutral working capital environment. And to your point, David, maybe there’s a little bit of room there, because if we do see a, and we have seen it in Q1 to-date, if we do see a reversal of some of the working capital movements that we had at the end of last year, the second half of last year, then, in fact, it would be a tailwind.
But that assumption of, and again, I want to make sure that everybody’s got different definitions and different types of cash flow. I refer to the cash flow from operations, i.e., the number that you will see in our cash flow statements as we go throughout the year, our assumption is a neutral to slightly positive working capital movement as we go through the year. That’s what’s built –
Operator: Our next question – apologies, sir.
Norman Rosenberg: No, go ahead.
Operator: Thank you. Our next question comes from Pito Chickering of Deutsche Bank. Please go ahead.
Pito Chickering: Yeah, good afternoon or good evening. Thanks for taking my questions. To ask the last questions sort of a little bit differently. Like I said, if you stepped down for HPD, you would probably be less than feared. So from a pipeline perspective, do you think you can grow EBITDA in 2025 without HPD? And as you think about HPD, should we think about it as like a $250 million annualized contract and a 30% gross margin as a ballpark?
Norman Rosenberg: Yeah, I mean I would say – it’s Norm. I would say, maybe a little bit lower than that in terms of run rate, but that’s in the general ballpark. The margin is somewhat consistent with our overall margin on Mobile Health. Maybe a couple of points lower than some of our other projects, but not materially different one way or the other. But as far as 2025 is concerned, I can tell you that in terms of our internal planning, we are planning as though that contract or that program doesn’t exist. So whatever goals we put out there in terms of where we want to be in 2025 or an exit rate for 2025, those remain the internal goals. And the mandate that we’ve given to the folks in the organization here that are going to make that happen is that they have to come up with a model and plan that gets us there without assuming a big chunk of that from HPD.
Pito Chickering: Okay, so here just to ask it differently. If let’s say, this ballpark, I say $60 million of EBITDA. If we model ‘25 without that contract, I guess, should we still be using the guidance from today and think about growth on that? Or should we think about a step back before it normalizes in ‘25?
Norman Rosenberg: I think as we have it modeled out, we think it’s going to moderate at a pretty – nothing is ever linear, but we think it’s going to moderate at a pretty linear path. And the stuff that we have visibility into would help us sort of fill in those gaps as we get to the end of 2024, I don’t really see a big cliff, right. I think that’s the biggest thing here that as we went into the year, as we’re going into the second half of last year, there was always that potential. I don’t think we really see a cliff. I don’t think it’s going to happen that way. So I think it’ll be a little bit more gradual. But there does come a point where we have to make the assumption that it’s going to have to be entirely replaced.
Lee Bienstock: And just to add, Pito, I think we’re talking a lot about how we have in our models the migrant related revenues abating in the back half of the year, and we do, we have it there. But as Norm mentioned, we don’t foresee necessarily a cliff. We’re doing our best to help know our partners, New York City, which again, we’ve been working with for a number of years we’ve been running lots of different population health programs with them, including today, we operate programs for unsheltered homeless populations. And with regards to the migrant service, we don’t have it, where it just hits a cliff. Again, we are modeling that it’s abating, because we like to take a conservative approach to that. But I can tell you we’re really proud of the work that we’re doing at an enormous scale that we are able to provide it at.
And we’re doing everything we possibly can to help the city manage the crisis and ultimately help asylum seekers as they arrive, enter the system, and then ultimately exit the system. And we have programs designed to do that. And so we’re going to continue to help there. We did take a conservative approach towards the back half of the year, as we’ve been talking about, but there’s no indication right now at all that there’s some cliff or there’s a reason to think that everything is abating towards the back half of the year. Again, that’s the approach we’ve taken, and that’s what you hear us communicating to you on the call, but again, we feel like we’ve modeled that out towards the back half of the year. But again, no indication that necessarily there’s a cliff coming here, which I want to make sure that we’re communicating.
Pito Chickering: Perfect. Yeah on your [inaudible] has always been your ability to pivot and adapt your business model, which has been extraordinary. I guess the investor questions I keep getting is around sort of ‘25, worst case scenario, HPD is not there. So I guess let me sort of ask this one more time differently, and then I apologize. But, if I think about your ‘24 guidance, if there’s no HPD, we’re still thinking about EBITDA growth off of that base in 2025?
Lee Bienstock: Yeah, that’s absolutely what we’re modeling right now. And again, we’ll share a lot more about 2025 as we progress through this year. But I can tell you we are focused on executing operationally. We’re always looking for ways to optimize the business. From day one, we’ve operated these projects as profitable projects. We’ve operated the business so that we can expand the business and invest in different areas. And so I can tell you, we’re going to continue to be looking for efficiencies and continuing to expand both revenues, top line and bottom line.
Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now hand over to the CEO, Lee Bienstock for closing comments.
Lee Bienstock: Thank you. Thank you, everyone for joining us. We experienced another year of strong growth across each of our key customer verticals in 2023. Before we close, I just want to take this opportunity to thank our 8,000-plus dedicated staff members who helped us achieve this success. You continue to embody DocGo’s total commitment to democratizing healthcare by delivering high-quality, highly accessible care to all. I’ll continue to spend even more time in the field with you so that I can see you in action and it’s inspiring to witness the empathy, professionalism and expert care you provide to each of our patients. I’m endlessly grateful for your extraordinary efforts, and I’m proud, I’m proud to be leading a company that’s helping transform how healthcare is being delivered for the good. Thank you, all for joining us and I look forward to our next report in early May. Be well.
Operator: Thank you. Ladies and gentlemen, that concludes today’s event. Thank you for attending. And you may now disconnect your lines.
