DocGo Inc. Q1 FY2024 Earnings Call

Greetings, and welcome to the DocGo First Quarter 2024 Earnings Conference Call. As a reminder, this conference call is being recorded.

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements made in this conference call, other than statements of historical fact, are forward-looking statements. The words may, will, plan, potential, could, goal, outlook, design, anticipate, aim, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions may be used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance, and we cannot assure you that we will achieve or realize our plans, intentions, outcomes, results or expectations. Forward-looking statements are inherently subject to substantial risks, uncertainties and assumptions, many of which are beyond our control and which may cause our actual results or outcomes or the timing of results or outcomes to differ materially from those contained in our forward-looking statements. These risks, uncertainties and assumptions include, but are not limited to, those discussed in our Risk Factors and elsewhere in DocGo's annual report on Form 10-K, quarterly reports on Form 10-Q and other reports and statements filed by DocGo with the SEC to which your attention is directed. Actual outcomes and results or the timing of results or outcomes may differ materially from what is expressed or implied by these forward-looking statements. In addition, today's call contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided directly as part of this call or included in our earnings release, which is posted on our website, docgo.com, as well as filed with the Securities and Exchange Commission. The information contained in this call is accurate as of only the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events except as to the extent required by law. At this time, it is now my pleasure to turn the call over to Mr. Lee Bienstock, CEO of DocGo. Lee, please go ahead.

Thank you, Mike, and thank you all for joining today. I'm extremely pleased with our Q1 performance and our operational execution on all fronts. We are making considerable progress expanding our care gap closure programs with major insurance companies. We're proud of the diverse set of population health services we're providing underserved communities. And our medical transportation business with hospital systems remains strong and is growing nicely. We recorded $192.1 million in revenue, had record adjusted EBITDA of $24.1 million. We served a record number of medical transportation patients, launched our primary care offering, introduced a new mobile X-ray program and continued to hire top talent for our leadership team in Q1. To start, I would like to discuss our updated guidance for 2024. On our last earnings call, we provided guidance for 2024 with expected annual revenues in a range of $720 million to $750 million and adjusted EBITDA of $80 million to $85 million. Given the accelerated timing of the wind-down of migrant-related projects and associated revenues, we are updating our revenue and adjusted EBITDA guidance. We now anticipate full year 2024 revenues of $600 million to $650 million. This includes migrant-related revenues of approximately $320 million to $350 million and revenues from our base business lines going forward, our medical transportation business and our non-migrant Mobile Health business of $280 million to $300 million. This reduction in guidance comes solely from the accelerated wind-down of certain migrant services projects. The base business performed at expected levels in Q1 and should track in line with original guidance throughout the year. Breaking this base revenue down further, we expect non-migrant Mobile Health revenues of approximately $105 million and Transportation revenues of $195 million at the high end of the range. We now see adjusted EBITDA for the full year in a range of $65 million to $75 million, representing an 11% adjusted EBITDA margin. We have embarked upon a program to optimize our operating expenses so that we can maintain adjusted EBITDA margins as the migrant-related revenues wind down. I would also like to provide some color beyond 2024. Looking ahead to 2025, we plan to grow our base revenue from $280 million to $300 million to $400 million and expect $50 million in adjusted EBITDA. We anticipate that $400 million in revenue will break down as follows: roughly $175 million in non-migrant Mobile Health and $225 million in Transportation. Breaking it down by customer vertical, we expect $250 million from hospital system customers, $100 million from municipal customers and $50 million from payer and provider programs. While it is possible that some of the current migrant-related projects could carry over into 2025, any migrant revenues in 2025 would be incremental to this base amount. Our 2025 base revenue goal would represent an increase of over 30% from 2024. And as usual, I would love to share some drivers from our three customer verticals that are helping support this growth. First, our work with insurance companies continues to accelerate, and we now have care gap closure-focused contracts with two out of the five largest health insurance companies in the country. We are actively planning expansions with payers in California and New York with more in the pipeline. We have an innovative model that engages health plan members to address gaps in care with convenient home visits and provide ongoing care to those lacking access to a traditional primary care provider. In fact, we're excited to announce that this past quarter, DocGo has launched its mobile and virtual PCP offering to better meet the needs of the patients we see every day, and we are working to bring this new offering to more patients through our health plan partnerships. We believe that by serving as the patient's PCP with our unique in-home and virtual model, we can help better coordinate their care and improve health outcomes. We're excited about what our innovative approach to primary care can do for our patients. For example, one of our first PCP patients was discharged from a rehab center in December and needed cataract surgery, but was recovering from a stroke at home and lacked a relationship with a PCP who could provide a clearance exam for her surgery. We deployed our combined virtual and in-home PCP offering to provide her with a full exam, including labs and an EKG. After we completed all the necessary testing, we followed up in her home again and cleared her for her overdue eye surgery. This was a procedure she desperately needed to improve her quality of life, and it wouldn't have been possible without our visits. We now have a total of eight different payer contracts in place, allowing us to leverage our mobile capabilities to provide greater access to health care for traditionally hard-to-reach populations and providing a platform for future revenue growth. We also continue to make progress with our remote monitoring and virtual care management offerings. We have signed new patient monitoring contracts with two large cardiology practices in Ohio and Delaware and launched two new virtual care programs in New Jersey and Pennsylvania. To give a sense and an example of how we scale this business. Last year, a three-million-member health plan contracted with DocGo to see members across multiple states and lines of business, including their Medicare, Medicaid and commercial exchange health plans. They assigned DocGo around 25,000 members with known gaps in care, including those with no recent hemoglobin A1C or blood pressure test, overdue diabetic eye exams, kidney health evaluations and bone density screenings. In less than five months, we saw over 1,400 members with in-home and virtual visits and helped improve quality metrics by closing over 3,500 HEDIS, Stars-related care gaps. Based on these results, the health plan is expanding the number of patients assigned to DocGo by 50% in 2024. Our goal to scale our insurance and patient monitoring business for 2025 is to complete over 65,000 care gap closures, to enroll 10,000 PCP patients and monitor over 70,000 patients. These metrics are all in line with our current partnerships and pipeline of future partners. Second, our Transportation service vertical saw record trip volumes in Q1, in part due to our large health system partners in the U.S. and the U.K. experiencing higher patient volumes. We pride ourselves on being able to support capacity management efforts by collaborating closely with our hospital partners. Concurrently, we have fully deployed our leased hour program with Main Line Health in Pennsylvania. We've been awarded a leased hour 911 contract in Dover, Delaware and have launched medical transportation at Lenox Hill Hospital in Manhattan. We continue to grow our event medical services, including a new contract with Ballpark Commons in Wisconsin and our work with New York City Football Club. In addition, we are increasingly expanding our Mobile Health footprint within this customer base. While Mobile Health services are still a relatively small component of the equation today, they have the potential to grow substantially over time given our ability to help our customers keep lower acuity patients out of the emergency room, which is exactly what our health system customers want. And third, within our municipal population health business, we debuted an exciting new mobile X-ray program, which we expect will initially be used to help diagnose tuberculosis in underserved populations, but we believe has much broader utility beyond that. We introduced our first mobile X-ray unit at the National Tuberculosis Coalition of America's Annual TB Conference in Baltimore, Maryland and believe this program has considerable growth potential in the near term as many geographies across the country are experiencing a sharp increase in cases of TB. We're already seeing strong municipal interest in this offering and look forward to sharing additional updates as this program expands. Going forward, our growth will be driven by our pipeline of municipal RFPs for larger, more sustainable behavioral health and population health programs. The noise surrounding our migrant-related work wound up clouding the core story of DocGo. My job is to remind everybody what that story is: we have built our proprietary technology platform to efficiently and profitably deploy thousands of clinicians and hundreds of mobile units daily to bring care to patients wherever they may be. In a post-pandemic world that is coming to the realization that telehealth alone is insufficient to truly impact patient outcomes, our combination of technology and caring hands on clinical services allows us to do what telehealth alone cannot. We're able to meet patients on their terms, in person, expanding access and helping keep people out of the hospital, which at the end of the day is what everyone wants. We've created a differentiated model, a differentiated product and a differentiated patient experience. There is a tremendous market, a world of partners and millions of patients that need us. With that, I'll hand it over to Norm to cover the financials.

Thank you, Lee, and good afternoon. Total revenue for the first quarter of 2024 was $192.1 million, a 70% increase from the first quarter of 2023. Mobile Health revenue for the first quarter of 2024 was $143.9 million, nearly double the levels of the first quarter of 2023. We experienced growth across several projects, business lines and geographies. However, the bulk of the year-over-year revenue gains related to the migrant-related projects we operated in New York, both HPD and H&H. Transportation services revenue increased to $48.2 million in Q1 of 2024, 20% higher than the transport revenues we recorded in the first quarter of 2023. Nearly every transportation market witnessed year-over-year revenue growth, continuing the momentum that began back in the second half of 2022. In the first quarter, Mobile Health revenues accounted for about 75% of total revenues and Transport for 25%. Net income was $10.6 million in Q1 of 2024 compared with a net loss of $3.9 million in the first quarter of 2023, reflecting higher revenues and wider gross margins. Our effective tax rate for the first quarter was approximately 33%, which we believe is a good assumption for future periods. Adjusted EBITDA for the first quarter of 2024 was $24.1 million, the highest quarterly adjusted EBITDA figure we've ever recorded and more than four times the $5.6 million in last year's first quarter. The adjusted EBITDA margin was 12.6% in Q1, up from 5% in the first quarter of 2023. Total gross margin percentage during the first quarter of 2024 was 35%, up significantly from 28.1% in the first quarter of 2023. Gross margin in the first quarter of 2024 represented a continued rebound from the sub-par levels of the first and third quarters of last year, which had been negatively impacted by the increased costs that resulted from the launch and ramp-up of new projects. During the first quarter, while we were able to largely maintain fourth quarter 2023 revenue levels, we were able to improve margins further by bringing overtime costs and subcontracted labor expenses more closely in line with the targets we have communicated in our recent earnings calls. We saw solid sequential improvements in both of these key metrics. During the first quarter of 2024, subcontracted labor accounted for 31% of total hours worked as compared to 41% in the fourth quarter of 2023. Overtime accounted for 7% of total hours worked in the first quarter of 2024 compared to 9% in the fourth quarter of 2023 and down from our peak of 16% back in the third quarter of 2022. Both of these metrics have continued to trend lower in the second quarter to date, which bodes well for Q2 margins. During the first quarter of 2024, gross margin for the Mobile Health segment was 35.5% and compared to 27.7% in the first quarter of 2023, which had been impacted by those project launch and ramp-up-related costs. While there were some new project ramp-ups in Q1 2024, these impacts were outweighed by the ongoing margin improvement on some of our more mature projects. We aim to generate a blended gross margin of 40% or better in our Mobile Health segment, so we still have some more work to do, but the improvements we've seen in the past six months have been very encouraging. In the Transportation segment, gross margins were 33.7% in Q1 of 2024, up from 28.9% in the first quarter of 2023. Transportation gross margins continued to benefit from increased scale, improved utilization and easing of fuel price pressures and a higher value mix of trips along with a continued shift toward higher-margin leased hour programs. The first quarter of 2024 marked the fourth consecutive quarter of Transportation gross margins in excess of 30%. We expect that Transportation gross margins will stay right around the current level despite some anticipated wage pressures in certain geographies as the market for EMTs remains tight. Now looking at operating costs. SG&A as a percentage of total revenues was 26.7% in the first quarter of 2024, much lower than the 34.2% in the first quarter of 2023. As revenues increased over the second half of 2023 and into 2024, we saw SG&A decline as a percentage of total revenues, leading to operating margin expansion. We also executed a targeted reduction in force during Q1, which resulted in some cost savings that will be realized as we move into Q2 and beyond. Turning to the balance sheet. As of March 31, 2024, our total cash and cash equivalents, including restricted cash, was $58.9 million as compared to $72.2 million as of the end of 2023. Our accounts receivable continued to increase, reflecting the spike in revenues that we witnessed over the second half of 2023 and in early 2024. While we collected significant amounts during Q1, particularly in late February, we saw a slowdown in collections over the final three weeks of the quarter before payments started to flow again early in Q2. Looking at our project with New York City's Department of Housing Preservation Development, HPD. As of today, we have collected nearly 65% of the year-end 2023 accounts receivable for this particular project. Offsetting these collections, though, are the large amounts that we have invoiced for 2024 to date, the bulk of which has not yet been collected. At quarter end, we had approximately $210 million in accounts receivable from the various migrant programs, representing about 75% of our total company accounts receivable. While the wind-down of migrant-related programs will have an impact on revenues, our balance sheet is expected to benefit substantially in 2024 as we collect this AR leading to an improvement in cash flow from operations. In addition to working capital uses, during Q1, we used our cash balances to execute our stock buyback program. During the quarter, we repurchased about 1.3 million shares via open market purchases for an aggregate amount of approximately $4.9 million. To this point, in Q2, in accordance with the terms of our automated 10b5-1 trading plan, we have repurchased an additional 1.4 million shares for an additional $4.9 million. Having spent approximately $10 million on our repurchase so far this year, we still have another $26 million remaining under that program. As we mentioned, we now expect lower migrant-related revenue this year due to the anticipated accelerated wind-down of certain migrant projects. However, the collection of receivables mentioned above will lead to an improvement in our working capital situation. As we collect older, larger invoices and as our cash outflows decrease in line with lower migrant project expenditures, we would expect to see an increase in our cash balance. We, therefore, now expect to generate cash flow from operations of $70 million to $80 million in 2024, which is higher than the range that we originally guided to when we reported our 2023 results at the end of February. At this point, I'd like to turn the call back to the operator for Q&A. Operator, please go ahead.

The first question comes from Ryan MacDonald of Needham.

Congrats on a nice quarter, and great to see sort of a clearing of the decks here as we think about the core business moving forward relative to migrant contracts. Maybe just to start and just to clarify, so as you're thinking about going into 2025, your expectations are for sort of the core business to be around $400 million of revenue with $50 million of EBITDA. Are you expecting any migrant contract-related revenue at all? It sounded like that would be in addition to it, but are you still expecting any migrant contract at all in your initial '25 expectations?

Thanks, Ryan. Appreciate the question. So we really wanted to break out the base revenue and that's the $400 million that you're alluding to, which is going to grow into 2025. Any migrant-related revenues into 2025 would be incremental to that. So it's certainly possible depending on the nature of the crisis, depending on the nature of the deployment and the needs of the city, it's possible that it could continue on into 2025, but that would be incremental to the $400 million base business.

Ryan, it's Norm. I'll just add to that. We want to make sure that we're clear about it. The numbers that we're sharing for 2025 do not represent guidance, right? They just represent sort of a scaling for everybody so that they can do their modeling as to what we think our, so to speak, base revenues are. As we get closer to 2025, we'll have better visibility into what actually might be added to that via the migrant-related revenue and that would constitute our actual guidance for the period.

That's great clarification. As we consider the core business and the breakdown of the 2025 numbers, you mentioned $250 million from hospital systems, $100 million from municipal sources, and $50 million from payer and provider programs. Could you provide insight into the growth rates for those markets as you look from this year into next year?

The growth of the three segments will primarily depend on the pipeline for those businesses. The hospital business, which is the medical transportation segment, is expected to grow around 15% from 2023 to 2025. We plan to introduce more mobile health programs in collaboration with our health system partners, which will contribute to growth in 2025. This includes existing hospital systems that are already partnered with us as well as potential new partners we are engaging with daily. For the municipal business, we anticipate growth through what we term population health, focusing on long-term, sustainable opportunities with municipalities. We will prioritize long-term programs over crisis response initiatives, and our services will involve vaccinations, behavioral health care, and infectious disease services, which align with our core competencies and innovative delivery models. We will evaluate future RFPs based on these criteria, and we have a pipeline of RFPs to pursue that meet these specifications. On the insurance side, our payer and provider monitoring business is currently the smallest segment but is growing the fastest. Its growth will come from expanding existing payer relationships and entering new geographies, as well as developing new partnerships in our pipeline. While it has the highest growth potential, it still starts from a smaller base.

Congratulations on the quarter. Just with respect to the migrant, just to clarify, appreciate the details in terms of the expected revenue contribution. What I'm curious on is NYC Health + Hospitals, I believe that's a separate contract for migrant work. And are you saying you're expecting that to wind down or go away? Maybe some details with respect to that would be helpful.

Sure, Richard. Let me explain that to you. To begin with, we are reducing our estimate for migrant-related revenues by about $100 million when comparing our last guidance to the current one. Almost all of that reduction pertains to HPD, influenced by two main factors. Firstly, there is a transition away from some locations in New York City, particularly the downstate sites, and secondly, we expect the wind-down of the upstate sites, although that is still a projection without a specific timeline. Regarding the H&H segment of the business, the shift from the old projection to the current one is relatively stable. While some sites may close and others may last a bit longer, the overall impact on numbers is minimal. We estimate that H&H will generate approximately $180 million for the entire year, while HPD-related revenues are expected to be around $150 million, down from a previous expectation of about $250 million. The entire difference is mainly due to various elements of the HPD programs and contracts.

Okay. But is there an end date on H&H or I apologize if I just missed that.

There is currently no end date on the H&H work. We will continue to support H+H as they are one of our long-standing partners. We have collaborated with them for years on various health care projects and needs. As we gain more insights into how those projects develop, we will provide updates. At this time, none of the H&H projects have an end date. All of the projects went out for bid, and we initially provided services under an emergency procurement. We have initiated new contracts that will last approximately a year from now or the past few months. Depending on the needs, we will continue to offer those services, but there is no scheduled end date right now. We will keep you informed as we learn more moving into 2025.

Okay. That's helpful. And then maybe a follow-up to Ryan's question. With respect to 2025, just to be clear on this, Norm, the $400 million is sort of a target. And it sounds like that's like business that's already under contract you're currently executing and some expected growth or ramp-up of certain contracts like the managed care contracts, for example. Is that correct? Or is there some sort of go-get in that $400 million?

Yes. When discussing revenues that are projected six to eighteen months ahead, there is always an element of uncertainty involved, largely influenced by internal goals that have been shared. Essentially, we're focusing on $225 million attributed to Transport. Comparatively, last year's figure was around $195 million to $200 million, indicating growth, specifically low double-digit growth related to payer programs. This year, we're estimating $25 million to $30 million in that category, meaning we're looking at nearly doubling that to approximately $50 million. This estimation relies on expected patient numbers and agreements planned. In our hospital system, viewed as a vertical rather than just a segment, we're anticipating about 10% of the mentioned $250 million to originate from hospitals not related to Transport, but rather Mobile Health. These expectations are based on several deals that are currently in various stages of negotiation, with most already accounted for. However, there is still some uncertainty, and it’s important to note that any projected revenue expected from this uncertainty is tied to specific opportunities in our pipeline.

Yes. The only thing I'd add, Richard, is really, it's a combination of the base business, the contracts we have and all the partners we have right now to date as well as it's based off of the pipeline we have for this year and for next year. Pipeline of all the various different partners in all the stages of that pipeline that we have for this year and next year.

Yes. It's important for everyone to understand that the individuals responsible for generating revenue and developing our pipeline are the same ones who have been focused on migrant revenue over the last couple of years. While there was an opportunity cost during that time, moving forward, we anticipate an opportunity benefit as we concentrate on expanding our base. We're not rejecting migrant work, but our business development and operational efforts will clearly prioritize our core activities.

The next question we have comes from David Larsen of BTIG.

Can you talk about the payer-facing business? Maybe talk about the demand that you're seeing for care gap closures. Who is your competition in the space? It sounds like you have a very unique solution that would be attractive to health plans. And then maybe can you talk a little bit about the virtual primary care business? It seems like plans could probably benefit from that as well. And I think all of this probably drives improvement in Stars ratings, which are obviously very important to health plans. So any more color there would be very helpful.

Thank you, David, for the question. We are definitely experiencing demand for care gap closures, largely due to health plans investing significantly in improving their quality scores and HEDIS and Stars measures to enhance member health outcomes. This creates a substantial opportunity for us to engage with health plans that serve millions of members who require care and face accessibility challenges. Our main competition consists of traditional brick-and-mortar clinics where health plans typically direct patients to address care gaps. Our approach is quite different; instead of asking patients to come into our clinic for services like bone density scans or diabetic eye exams, we reach out to them by saying we’re in their area and can provide the necessary screenings at their home. This patient experience is distinct and has proven to be both effective and appreciated by patients. We also acknowledge the presence of other mobile providers, but our service delivery model is unique. We utilize our technology platform to efficiently support field clinicians, equipping them with essential tools while pairing them with an advanced practice provider who oversees the clinical interaction remotely. This innovative model allows us to bring care directly to patients, maximizing the chance of improving health outcomes. In terms of our primary care practice business, we believe we have a differentiated model. When we close gaps in care and engage patients at home, we have the opportunity to become their primary care provider. We can help coordinate their care and make a significant impact on their health. Many patients may not have access to a primary care provider or may have difficulty getting an appointment, and our model brings the care to them. As we address care gaps, we naturally position ourselves as their primary care provider. Additionally, by coordinating care and closing these gaps, we expect to improve Stars ratings and HEDIS quality metrics, which benefits the patients, the plans, and ultimately lowers overall system costs. We are excited about this opportunity and confident in our value proposition and patient experience. Our offering is distinct from what's currently available, and we look forward to scaling and investing in it.

That's very helpful. Just a quick follow-up on the primary care business. The virtual primary care businesses I know of are experiencing rapid growth. For instance, care within Accolade is their fastest-growing segment, and LifeMD is also seeing significant growth. What would the revenue model look like? Could it be around $100 a month for direct consumer access? If that's the case, it could generate about $12 million a year assuming 10,000 patients. Alternatively, would there be a potential risk involved, collecting a percentage of premiums instead? Or is this still in development and you'll assess the market needs as they arise?

Yes. It's important to highlight that we believe our differentiation lies in providing virtual care effectively while also being able to offer in-person services when necessary. Many healthcare companies are realizing the need for in-home clinical care alongside telehealth services. We see this as our unique advantage; we provide both virtual and in-person options, utilizing virtual care when possible but ready to step in with in-person visits when required. Regarding our monetization strategy, as you mentioned, we plan to implement a fee structure based on a per member or per patient per month model. This fee will be charged to either the health plan or a commercial payer. Over time, as we gather data and gain confidence, some of our contracts will allow us to enter into risk-sharing agreements. We'll start with upside only and gradually move towards full risk as we demonstrate our impact on patient outcomes and the reduction of total care costs. We are designing our approach to be incremental rather than implemented all at once.

Next question we have comes from Pito Chickering of Deutsche Bank.

You've got Kieran Ryan for Pito. I was wondering if you could share any insights on what the margin is for your base revenues today or in 2024 as we consider how to reach the 12.5% target for 2025 with the anticipated $400 million in revenues and $50 million in EBITDA.

Sure. On the gross margin side for the Transport business, we're currently at around 33%. The EBITDA margin will vary based on overhead allocation. For Mobile Health, the gross margin is approximately 35%, and if we separate out migrant revenues, it could be slightly higher. Some of the initial migrant revenues tend to be lower margin, so the base gross margin for Mobile Health should be in the high 30s. We estimate a blended gross margin of about 35%, with SG&A as a percentage of revenue around 23%, leading to an adjusted EBITDA margin of about 12 to 12.5%. The challenge we face is managing our corporate expenses to align with a revenue level of approximately $400 million, rather than $600 million or $700 million. This adjustment is critical as we scale and optimize the business. The margin characteristics look quite similar to what we observed in Q1.

Right. So that would imply there's probably not much change to your expectation that quarterly gross margins this year stay relatively consistent with 4Q '23?

Yes. I mean, we're very encouraged because not only do we have a continued improvement in gross margin on the sequential, and of course, year-over-year basis, but I can say, I mean, that number is pretty neat and clean. There wasn't a lot of adjustments of expenses or anything like that. There wasn't any reversal of accruals or the typical accounting stuff that you could have in a quarter that takes your margins up or down. It was very, very little that was nonrecurring in nature. That was pretty much it, pure clean margin that we saw this quarter. Now obviously, there are always factors that will put some pressure on margins from time to time, but at the same time, there are factors that move in the other direction. So we think we ought to be in this general area for quite some time. As I pointed out during the call, things like overtime continue to trend in a positive direction, even better than they were in Q1. Things like the subcontracted labor as a percentage of hours or cost or however you want to look at it are also trending in a positive direction. So when we look at those KPIs, the signal is flashing green. So that's good.

So just to clarify on that last question, it sounds like as you step out of the HPD revenue that we shouldn't expect any mix shift in expenses between the buckets of cost of revenue and G&A, that you guys have a similar enough mix on that business to your core that those ratios would stay pretty consistent. Is that right?

Sarah, you're correct overall. Regarding timing, the initial projects or sites being transitioned are those with lower gross margins. This may lead to some technical improvement. However, we didn’t specifically select these sites; it just turned out that certain regions and sites are a bit less profitable. Overall, when considering the blended projects, their margin profile is not significantly different from the rest of the business.

Okay. Great. And is there anything that you can offer us to help on seasonality this year? Kind of as that contract winds down, but you're contrasting it with growth in some of your other units, how should we think about the contribution of first half versus second half?

I anticipate there will be fluctuations on a sequential basis, rather than true seasonality. Overall blended revenue is expected to trend lower. While core revenue should grow sequentially, which I'm optimistic about, if we compare Q1 to our full-year projections for the core business, we expect sequential growth throughout the year due to several upcoming projects on both the Transport side and non-migrant Mobile Health side. However, this growth won’t counterbalance the significant decline in HPD revenue. We expect HPD revenue to drop considerably in Q2 and potentially halve again in Q3. By Q4, the contribution from that contract will be minimal, leading to a delta large enough to surpass the increase in core revenue. Therefore, if we assess the overall revenue number sequentially, Q1 will likely serve as the peak for our quarterly revenues in 2024, with declines into Q2 and possibly further into Q3 and Q4, depending on when other revenue streams begin to pick up.

Great. Last question. Could you give us any details on the payable build in the quarter, accounts payable?

The accounts payable situation is interesting because we collected a significant amount of money during the quarter, yet we continue to face pressure on working capital. Looking at the balance sheet, which is included in our release and our 10-Q filed today, we see that our accounts receivable increased while certain payable levels decreased, such as prepaid expenses. I estimate that from various migrant and related programs, we've collected about $120 million this quarter. However, we also had substantial payroll expenses, with nearly $90 million paid out on these projects. Internally, we discussed the challenge that we can't directly align the timing of our payables with when we receive payments. To receive payment, we often need to provide receipts that confirm we’ve compensated our underlying providers. We can manage this somewhat, but we can't fully turn around the working capital cycle. We're currently in a negative working capital cycle regarding these migrant revenues, and that's likely to remain consistent. Additionally, many of our vendors are small businesses or private companies that cannot afford to wait several months for payment, even if we wanted to delay. As a result, there will always be considerable working capital pressure with these revenues, which reemerged during the first quarter.

The next question we have comes from Mike Latimore of Northland Capital.

This is Aditya on behalf of Mike Latimore. Could you give some color on if the noise around the migrant care affecting your other deals in NYC or state?

Sure. Happy to answer that question. I think I heard it clearly, but could you just repeat the last part of the question?

Whether the noise around your migrant care is affecting your other deals in New York City or state?

Yes. We are closely monitoring the situation and maintaining communication with all our current partners and those in our pipeline. When misleading information emerges, we proactively reach out to clarify with our partners. Our existing partners appreciate the quality of our work, allowing us to address any concerns effectively. We recognize that some of the issues surrounding migrant-related revenues have become politicized, leading to confusion among investors and potential customers, but we believe we have managed that well. Only one partner has expressed a desire to pause until the situation improves, while the others are actively collaborating with us. We continually keep everyone updated and feel confident that our value proposition and the quality of our work speak volumes. We also connect prospective partners with our current customers for references, which has proven to be very effective in the sales process, as our customers provide excellent testimonials about our partnership and work quality.

Got it. And could you also give some color on the ratio of operating cash flow to EBITDA you might expect this year?

Yes, certainly. Even though we've slightly adjusted our EBITDA forecast down, we now anticipate that the cash flow from operations will be between $70 million and $80 million, which is actually a bit higher than our EBITDA expectation. Typically, we would expect to run at about 80% of adjusted EBITDA in terms of operational cash flow. However, considering a possible decline in our migrant revenue base, we expect faster collection of receivables compared to our cash outflows this year. We will be collecting on older invoices in the coming months while simultaneously spending less. This is a reversal from some of the working capital challenges we faced in the past quarters. For instance, in the first quarter, we had approximately a negative $10 million cash flow from operations, but for the full year, we expect cash flow to be in the $70 million to $80 million range, while adjusted EBITDA is projected between $65 million to $75 million. Therefore, we anticipate cash flow exceeding 100% of adjusted EBITDA, especially with positive working capital improvements expected in the upcoming quarters.

The final question we have comes from David Grossman of Stifel.

Sorry, I have just two quick questions. One is that I am currently on the road and not in front of a screen, but did you provide the core growth rate you expect for 2024? When you exclude migrant work from 2024 and 2023, what growth rate are you assuming to support the guidance?

I'm sorry, you're asking about the non-migrant revenue for '24?

Right. Right.

Yes. So the assumption on non-migrant revenue for '24 is roughly $300 million, which is...

Right. And what does that look like from a growth perspective year-over-year?

So year-over-year, if I just look at those line items, it's pretty flat. The reason for that is that while Transport is expected to grow from the low 180s to the mid- to high 190s, which is around a 10% increase, on the non-migrant Mobile Health side, we had a couple of large municipal projects earlier in 2023 that were related to vaccinations rather than testing. That accounted for approximately $25 million, plus another $5 million to $10 million from other projects that expired in early 2023. When you consider that, that number went down a bit. If you exclude those projects, then it’s up slightly. Overall, we generated about $300 million in core revenues last year and are expecting to achieve the same this year.

Got it. Did you provide the segment EBITDA margins in the Q? Is there any difference between Transport and Mobile?

We have broken it out because we have the corporate aspect. I understand that you apply the breakdown of the corporate usage, and yes, that's included.

Ladies and gentlemen, we have reached the end of our question-and-answer session. And I would like to turn the call back over to Lee Bienstock for closing remarks. Please go ahead, sir.

Thank you, and thank you all for joining today. We're looking forward to speaking with you again soon on all our progress. Be well.

Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.