Q1 2024 DocGo Inc Earnings Call

Participants

Mike Cole; Dirctor of Investor Relations; DocGo Inc

Lee Bienstock; Chief Executive Officer; DocGo Inc

Norman Rosenberg; Treasurer and Chief Financial Officer; DocGo Inc

Stephen Sugrue; Chief Compliance Officer; DocGo Inc

Ryan MacDonald; Analyst; Needham & Co

Richard Close; Analyst; Canaccord Genuity

David Lawson; Analyst; BTIG

Kieran Ryan; Analyst; Deutsche Bank

Sarah James; Analyst; Cantor Fitzgerald

Auguste Richard; Analyst; Northland Securities

David Grossman; Analyst; Stifel

Presentation

Operator

Greetings and welcome to the DocGo first-quarter 2024 earnings conference call. (Operator Instructions)
As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mike Cole, Director of Investor Relations. Please go ahead, sir.

Mike Cole

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, and 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.

Lee Bienstock

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 continue 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 micro 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 micro 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 micro 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 to break down as follows roughly $175 million in non 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 micro related projects could carry over into 2025, any micro 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'd 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 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 for those lacking access to 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. Bill was recovering from a stroke at home and lack the 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 the 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.
Give a sense and an example of how we scale this business last year, a 3 million member health plan contracted with Taco 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 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 helps improve quality metrics by closing over 3,500 heated iStar's related care gaps based on these results, the health plan is expanding the number of patients. It's signing DocGo by 50% in 2024. Our goal to scale our insurance and patient monitoring business for 2025. It's a 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 US and the UK 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 least our program with main line health in Pennsylvania.
We've been awarded a least our nine one one contract in Dover Delaware and have launched medical transportation and leading hospital in Manhattan we continue to grow our that medical services, including a new contract with ballpark comments 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, with our act 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 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 market 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.

Norman Rosenberg

Thank you, Lee, and good afternoon.
Total revenue for the first quarter of 2024 was $182.1 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 HVD. 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 subpar 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 2020 for 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 and 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% 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 an 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 continue to benefit from increased scale, improved utilization and easing of fuel price pressures and a higher value mix of trips, along with the continued shift toward higher margin leased our programs 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 ENTs 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 increase over the second half of 2023.
And on 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 continue 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, HVD. As of today, we have collected nearly 65% of the year end 2023 accounts receivable for this to get a 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 migraine programs, representing about 75% of our total company accounts receivable. While the wind down of major related programs will have an impact on revenues, our balance sheet is expected to benefit substantially in 2024 as we collect as they are 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 margins related revenue this year due to the anticipated accelerated wind-down of certain modern 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 decreased in line with lower margin 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.

Question and Answer Session

Operator

(Operator Instructions)
Ryan MacDonald, Needham.

Ryan MacDonald

So thanks for taking my questions and congrats on a nice quarter and great to see sort of clearing the decks here. As we think about the core business moving forward relative to migrate contracts. But maybe just to start the clock, 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 was $50 million of EBITDA. And are you expecting any migrant contract or related revenue at all? It sounded like that would be in addition to it. But are you still expecting any major contracts at all in your initial 25 expectations? Thanks.

Lee Bienstock

Well, thanks, Ryan. Thanks. I 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 dialed right off its normal I'll just add to that, we want to make sure that we're clear about 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 into what actually might be added to that, the micro related revenue and that that would constitute our actual guidance for the period.

Ryan MacDonald

That's super helpful clarification. And then as we think about the core business and sort of the breakdown of the 2025 numbers, you said $250 million from hospital systems, $100 million from municipal, $50 million from from payer and provider programs. Can you give us a sense of are there a lot of great initiatives you are talking about within there, but give us a sense of what, you know, the respective growth rates and sort of those end markets are as you're thinking about this year into next year? Thanks.

Lee Bienstock

Sure. So I think the growth of these of those three segments really going to be driven by where we're the pipeline of those businesses are you alluded to the hospital business, that business is the medical transportation business that we have today.
And that business is expected to grow in the 15% range on into 23 and 20, up from 24 to 25 in addition to that, we're going to add more mobile health programs with our health system partners, which is where you see the growth also coming from in '25.
And that will come from hospital systems that are already partnered with us as well as a pipeline of hospital systems that are new potential partners for us that we are working with every single day on the on the municipal business, I shared a bit, but we're going to be growing that business through what we call population health, long term sustainable RFPs and opportunities with municipalities.
And really the the characteristics we're going to look for there are really that they're long term in nature. They're long-term programs in nature versus less crisis response. They incorporate our core services, our core medical services such as vaccination deployment, behavioral health care services and other infectious disease services that are in our core competencies and also incorporate aspects of our technology and our innovative delivery model.
And so that we're going to be evaluating RFPs going forward under those three criterias. And again, we have our pipeline of RFPs, which we shared on previous calls that we're going to continue to pursue, and we're going to look for RFP opportunities that embody those characteristics.
And then on the insurance side with our payers and our provider partners and the monitoring business. That business, as we shared is the smallest business of ours today. It's the fastest growing business in our in our portfolio, and that's going to grow based on expanding the current our payer relationships that we have as well into new geographies and then expanding via new payer partnerships that we have in our pipeline. And I would say that has the highest growth rate, but still off a small base, a lot of great opportunities we have.
And again, really appreciate all the additional color on the call today.

Ryan MacDonald

Thanks.

Lee Bienstock

Thanks, Ryan.

Operator

Richard Close, Canaccord Genuity.

Richard Close

Yes, thanks and congratulations on the quarter. Just with respect to the migraine just to clarify your I appreciate the details in terms of the expected revenue contribution. What I'm curious on is NYC Health and 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.

Norman Rosenberg

Sure. Sure, Richard.
Let me let me walk through that with you just to just start at a high level, essentially, we're taking down the estimate around the migraine related revenues by about $100 million or so give or take when you compare our last guidance to the current guidance, just about every dollar of that relates to HBD. And that's because of two different factors.
Number one, you have the transition away from some of the sites here in New York City, the so-called downstate sites, and then the anticipated now anticipated wind down of the upstate sites as well which granted is a projection. There's not a calendar yet for that, but we're projecting that as for the H&H part of the business, when I look at the the old out of what I'll call the old projection versus the current projection is pretty much flat.
The H&H related migrant work is obviously they're going to be some sites have closed other sites that are a little bit longer. But with the ins and outs, essentially, that number doesn't doesn't move very much. And I can I can break it out for you. I mean we assume that the H&H will be roughly $180 million. And for the full year, while the HPD. related items will be about $150 million, and that's down from a previous expectation of about $250 million. So the entire delta really is explained by the various HPD. various elements of the HPD. programs and contracts.

Richard Close

Okay. But is there a end date on eight H. in nature? I apologize. I just missed that.

Lee Bienstock

Sure. So there isn't currently an update on the on the H & H work. We'll continue to support Health and Hospitals. They're one of our long-standing partners. We're working with them for years on a myriad of different healthcare deployments and needs.
So there's no update on that. Obviously, as we know more and more in terms of how those project shape up, we're going to update and right now, there's no end date on that. We did those all of those agencies projects to go out for bid.
We were originally providing services under an emergency procurement and then those services went out to bid and we did initiate new contracts there. And those will run for a year roughly from from now or the past few months. But depending on the need. We'll continue to provide those services, but no end date scheduled right now. But as we know more and more heading into 2025, of course, we'll update you okay.

Richard Close

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 a business that's already under contract you're currently executing and some, you know, expected growth there ramp up of certain contracts like the managed care contracts, for example, is that correct? Or is there Excuse me? Sorry to go get in that $400 million.

Norman Rosenberg

Yes. Well, I think that anytime that you're talking about revenues that are anywhere from six to 18 months out there is going to be some go get in there and a lot of it has to do with the goals that have already been disseminated here internally. But essentially, what that breaks down to and we talk about $20 million to $25 million of that would be transport.
And so if you compare that to maybe one 95 or 200 this year, you get that growth, that double-digit growth, low double-digit growth on the payer programs and things in that category. We're probably trending to 25 or 30 million this year as you're talking about nearly doubling that to about $50 million. That's based on a couple of factors. It's based on targets and goals.
As far as the number of patients, we would expect to have a number of agreements that we would expect to have. And then in a hospital system because we look at that as not a burden as a vertical as opposed to the segment.
We're assuming, as we mentioned, maybe 10% of that number are the two 50 we said from hospitals are not transport, but our mobile health and those are those are based on some deals that are in the some of them are in the signing phase and some of them are a little bit further up the funnel, but a lot of that is spoken for, but sure, there's definitely some go get in there. But every every dollar of go-get revenue that's in there is applied against something in the funnel.

Lee Bienstock

But only thing I'd add, Richard, is really it's a 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 and all the stages of that pipeline that we have for this year and next year.
Yes.
But here's an important thing for everyone really to note, we certainly talk about it internally. The people who are going to be out there going and getting that revenue and developing that pipeline are the same people who, over the last two years or the better part of the last few years have been focused on some of this margin revenue. So there's definitely while there was definitely an opportunity cost over the last couple of years. There's I'll call it an opportunity benefit as we go forward as we focus on building out that base. So we're not turning down migrate work, but in terms of business development activity in terms of other operational activity, the focus will clearly be on the base.

Richard Close

Okay. Thank you very much.

Operator

(Operator Instructions)
David Lawson, BTIG.

David Lawson

Hi.
Can you talk about the payer facing business and maybe talk about the demand that you're seeing for care gap closures? And who is your competition in this space?
It sounds like you have a very unique I'm 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 NAM Star's ratings, which is IV are obviously very important to health plans. So any more color there would be very helpful. Thank you.

Lee Bienstock

Of course. Thanks, David. Great to hear from you. I appreciate the question. So absolutely, as you described, we're absolutely seeing demand and for care gap is really being driven by the health plans, really investing deeply on improving their quality scores, improving their hottest stars measures and really making sure that they're investing in impacting their member and their patient, their member base of their health outcomes.
And we see it a tremendous opportunity for us, engage these health plans, many of which have millions of members to reach those members that have gaps in care and have accessibility issues I think are competition primarily are sort of your brick and mortar clinics where the health plans traditionally have tried to funnel.
We're trying to direct patients into those clinics to be able to close those gaps in care. Obviously, we take a very different approach instead of calling a patient and saying we need you to come into our clinic for bone density scanner.
We need you to come into the office for a diabetic eye exams. We call the patients that, hey, we're in your neighborhood. We understand you need from a care gap closed. You need a colon cancer screening where your neighborhood will come to your home.
How does tomorrow sound, how does the next weeks? And we feel like we have a really differentiated patient experience that I think is proving successful and very valuable. And patients love it. So that's really where we see the demand.
That's kind of the competition set, of course or other mobile providers out there. But we have a really unique, really unique service delivery model that that combines our tech platform. We're able to efficiently optimize the field clinicians that we have.
We provide them the technology they need, and then we marry them up with a we partner them with a advanced practice provider that's directing the clinical encounter remotely.
So really unique model and obviously bringing care to patients and meeting. We're meeting them where they are is way more likely to be and helpful in improving health outcomes in terms of the virtual care.
In terms of the primary care practice business, PCP business that you mentioned, we really feel there as well that we have a differentiated model. So you can imagine when we go and close gaps in care, when we engage patients in their home and we form that relationship.
There's an opportunity for us to become their primary care provider, and there's an opportunity for us to help quarterback their care to help coordinate their care and impact their care in a much more profound, deeper way.
And so we feel like we have opportunity there. And so as we engage patients, close care gaps is going to be opportunity for us to become their primary care provider because perhaps they don't have access to one where they haven't seen one in over a year. They have a hard time getting to their PCP or they have a hard time getting at a point with the PCP.
We have our unique model where we essentially bring the PCP to them. And so as we go and close care gaps, there's going to be sort of a natural funnel where we can then become the PCP as well.
And then as we're helping coordinate care as we're closing gaps in care, you can imagine will be successful in impacting the STARS ratings. Here's a quality score metrics. And obviously, that better is the patient that betters the plans and ultimately helps lower cost for the overall system, and we will participate in that.
So we're excited about that funnel. We think the value prop is certainly there. The patient experience is certainly there is a really differentiated offering from what's out there today, and we're excited to scale it and invest in it.

David Lawson

Okay. That's very helpful. And just one quick follow-up on the primary care business and like the virtual primary care businesses that I'm aware of are very like fast growth businesses, PlushCare within Aktilite, I think is the highest growth segment on life from the very high growth, would there be like what would the revenue model be?
Could it be like $100 a month direct to consumer and then I mean, I think that would be like $12 million a year in revenue, if you assume 10,000 patients? And then or would you potentially bear risk and collect a percentage of premium? Or is that sort of still in development and you'll sort of see where the need is in the market?

Lee Bienstock

Yes, I think it's important to know we really feel like our differentiation is the virtual when it's effective and then the ability to go in person when it's needed.
And in many cases, it just simply is needed. And I think a lot of healthcare companies are finding that out where they're doing telehealth only. They really are needing that in home a clinical care. So we really feel like that's our differentiation, not just on the virtual side, but we are adding to the equation the in-person.
And in some cases, we'll do virtual. But when it's needed, we're able to go in person. I think our monetization of this really is exactly as you described. I think initially we're going to be and we're going to be having a per member or per patient per month, essentially a fee that gets charged either to the health plan or commercial payer.
And then eventually, once we have the data, once we feel comfortable some of the contracts we're signing do have the ability for us to enter into risk sharing initially upside only and then eventually full risk when we feel comfortable when we feel like we are indeed impacting patient outcomes and lowering total cost of care. But we are structuring things in a way that it is a step function, not all at once.

David Lawson

Can you. Thank you very much. I'll hop back in the queue as well.

Lee Bienstock

Thanks. I appreciate it.

Operator

Pito Chickering, Deutsche Bank.

Kieran Ryan

You've got a Kieran Ryan on for Pito. Thanks for taking the question. I'm just wondering, is there any way you can anything you can say to maybe help us understand what the margins on your base revenues today or in 2024. Just as we think about kind of bridging to that 12.5% for 2025 on the 400 million in revs and 50 million in EBITDA? Thanks.

Norman Rosenberg

Sure. So on the storms on the gross margin side, the transport business, we break out pretty easily. So that's about 33 and change so that's where we're running. And obviously, the EBITDA margin on that, depending on how you allocate the overhead is a different number. But when you look at mobile health, it's there we'll start with the gross margin probably at 35% and change.
And actually, if you break out migrant, the number might be a little bit higher. Some of the migrant revenues, especially the programs that are going to be the first ones that go out the door, I happened to be lower margin.
So so I think the mobile health base margin base gross margin isn't is in the high 30s hub. The way we get there, though, is we talk about having a blended gross margin of, let's say, 35 points and then SG&A as a percentage of revenue is about 23 points and then you get to 12 or 22.5 points. The tricky thing is the tricky thing is that you've got three different categories of SG&A.
So we have the we have the mobile health SG&A, which is pretty variable, so that that should come down along with the when the when the revenues come out for the migrant piece, transport revenues are also up, would transport SCA is generally connected on a variable basis.
The issue for us is going to be part of the work that we have to do that is really it started, and it's really underway is making sure that we rightsize our corporate expenses.
So how do we manage our corporate expenses in such a way that we scale it for a company that's, let's say, 400 million or so in revenue or a little bit more than that as opposed to 600 or 700 million. But that is going to be the work that has to get done as we scale as we scale and rightsize the rest the rest of the business, but that's kind of how we get there.
35% gross margin on a blended basis, right about where we are now and by 23 points on the on the on the SG&A side, getting you to an adjusted EBITDA margin of about 1212 point.
So the GAAP margins have margin characteristics and forget it was very similar actually to what we have here in Q1.

Kieran Ryan

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?

Lee Bienstock

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, the year over year basis. But I can say I mean that that number is pretty it's 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 take your margins up or down?
There was very, very little. That was nonrecurring in nature. And that was pretty much a 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 in this general area for a 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 of ours or cost to where we want to look at it. We're also trending in a positive direction. So when we look at those KPI. and the signal is flashing green. So that's.

Kieran Ryan

Thanks.

Operator

Sarah James, Cantor Fitzgerald.

Sarah James

Thank you. And sir, 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, but those ratios would stay pretty consistent, right? All of zero on an overall basis?

Lee Bienstock

That's correct. Realistically in terms of timing, it happens to be that the first projects are the first sites that are going to be transitions happened to be the ones that have the lower gross margin. So you'd see a little bit of an improvement technically. But again, we didn't we didn't choose it wasn't like we cherry-picked those sites or anything like that. It just happens to be that way in certain regions and certain sites tend to be a little bit less profitable. But on an overall basis, when you look at it sort of the blended projects, they don't have a dramatically different margin profile from the rest of the business.

Sarah James

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.

Lee Bienstock

How should we think about the contribution of first half versus second half so I would look at I mean, there will be a seasonality or least a fluctuation that really seasonality per se, but a fluctuation on a sequential basis.
And essentially what I would look at is that overall revenue is going to yield blended revenue would trend lower because while the core revenue is going to grow sequentially, I feel pretty good about that. And then if you look at what we did in Q1 with our full year projections that we've shared for the core business, they would they would pick up sequentially as we go throughout the year.
And that's based on certain projects that we have that are about to launch, both on the transport side and on the on the non-major mobile health side, but that's not going to outweigh that will be outweighed by the decline in HBT revenue.
So we're looking at HPD. revenue coming down by a pretty significant amount in Q2 and then maybe dropping by half again in Q3. And then by Q4, it you almost immaterial contribution from in our in our guidance in our guidance and our projection from that particular contract. So that's going to be a big enough delta that it will outweigh the increase in the in the core revenue.
So if I was looking at our overall revenue numbers sequentially, the way it lines up at the moment is that you'd have a Q1 will end up serving as a high watermark for revenues for us on a quarterly basis in 2024, and it will drop into Q2 dropped further into Q3, probably dropping further into Q4, depending on the timing of when some of that other revenue picks up.

Sarah James

Great. And last question, could you give us any details on the payables build in the quarter, accounts payable accounts payable?

Lee Bienstock

Sure. So interesting thing that we look at as we've mentioned that we collected actually collected quite a bit of money during that during the quarter yet, obviously, what you've seen is continued pressure on the working capital side.
We if you look at the balance sheet, which has included both in the release and in our 10 Q, which was filed today as well right after the close. So you'll notice that obviously not only did the AR go up, but certain payable levels went up, went down, i.e., the the prepaid expenses and things of that nature. So I would I would estimate just to walk everybody through it, I would estimate to be collected from the from the various migrant and related programs.
We probably collected about $120 million during the quarter. But at the same time, obviously, there's a lot of large payroll against that. And then we paid out payables to the extent of almost $80 million, $90 million or about almost $90 million on those projects.
And one thing we were discussing here internally is that we can't we're not in a position where we can just match up the payment of the payables with when we get the money we have to pay the in order to get paid.
In many cases, we have to have receipts that show that we paid the underlying the underlying providers. So we can we can stretch it a little bit, but we really don't have the luxury of turning that working capital cycle around the word a negative working capital cycle on these migrant revenues, and that's always going to be the case.
And the other thing is that a lot of these vendors are very important to us and they're very important vendors and they're not they're small companies, but already own companies. In some cases, private companies, they can't afford to wait four or five, six months before they get paid even if we were to choose to do that.
So when you're dealing with these kinds of revenues, there's always going to be a lot of working capital pressure.
And that's what came up during the during the first quarter, again fiasco.

Sarah James

Thanks.

Operator

Mike Latimore, Northland Capital.

Auguste Richard

Hi. This is Auguste, on behalf of Mike Latimore, could you give some color on the noise around the migrant care affecting your other deals in NYC?

Lee Bienstock

Steve?

Stephen Sugrue

Sure. I'm happy to answer that question. I think I heard it clearly. Could you repeat the last part of the question?

Auguste Richard

Whether the noise around your migrant? Yes, your other deals in New York City, Austin. Yes. So the noise.

Stephen Sugrue

I think that certainly has something we monitor and we are in close communication with all of our current partners and everybody in our some in our pipeline, whenever there is some noise or something misleading gets printed.
We're very proactive. We call all of our current partners and prospective partners. And we clarify and obviously the partners that are working with us today know the quality of our work and really value our partnership.
And so we're able to really address that noise. And that's one of the things, frankly, that we're looking forward to moving past, I think a lot of the migrant related revenues unfortunately became politicized and as a result created created some noise created some noise in the market with our investors and created noise potentially in the market with customers, which I think we've handled very, very well.
So it's something we're paying close attention to. We have had one partner that wanted to pause until the noise subsides. We're in close communication with that partner. But the rest of our partners are all on, and we are all working closely with us we continue to address any of the noise that it comes up and it has not been an issue.
And with our prospective pipeline, we update everybody as we go and we really feel like our value proposition for perspective partners and the quality of our work with all the partners we have today really speaks for itself and one of the great things we have the opportunity to do is any prospective partners we actually put in contact with our current customers as references, and we've done that very, very successfully.
Our current customers are great references for us, speak to the quality of our work and on what it's like to work with us and partner with us. And we've utilize that as well to help in the in the sales process.

Auguste Richard

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

Norman Rosenberg

Yes, sure. So as you as you heard or hopefully heard. But we actually even as we took the even as we took the assumption of EBITDA down by little that we're actually taking the cash flow from operations number.
And to be clear, when we talk about cash flow from operations, that's a GAAP line item that you have in your statement of cash flows and we're saying that now we expect that that number is going to be between $70 million and $80 million, actually a little bit higher, then the EBITDA that we have, no, typically we should be running at.
We are taxpayers. So that's part of the factor we should be running at a I don't know, all things being equal, maybe 80% or so of the of the adjusted EBITDA to operating cash flow. What we have built in is that if we are going to have a decline in this migrant revenue base, then obviously that's going to result in as we model it out, that's going to result in the collection of receivables that is going to be faster than what we pay out as we go through the year.
So we're going to be collecting on older invoices here over the next two, three months. But then at the same time, we're paying out less money and sort of reversal of some of the working capital issues that we've had, I mean in the last three to four quarters.
So for example, in Q1, if you look at that, if you look at our statement of cash flows, I think the number was a negative $10 million and change in the first quarter in the was about $10 million or so. That was used in operations. That number on a full year basis should be somewhere in the $70 million to $80 million range as compared to two adjusted EBITDA in the $65 million to $75 million range.
So for the year, we would expect it to be a little bit more than 100% acknowledging that a lot of that has to do with the fact that we're going to get some positive working capital changes here in Q2 three and four noted.

Auguste Richard

Fine. Thank you.

Operator

David Grossman, Stifel.

David Grossman

Thank you. I'm sorry, just two really quick ones. One is I'm on the road, so I'm not part of the screen here, but did you give the at the core growth rate that you're expecting for 24. So when you back out migrate work in '24 and '23 with the core growth rates is this what you've assumed there are three things that underlies the guidance.

Norman Rosenberg

And I'm sorry, you're asking about the nonmarket revenue for for 24, right, right.
Yes.
So the assumption on nonmarket revenue for 24 is roughly 300 million, which is right.

David Grossman

And what is which is what does that look like from a growth perspective year-over-year?

Norman Rosenberg

So year over year if I just look at those line items, it's pretty flat.
And the reason for that is that why you're going to have transport growing by from about 100 low one 80s to the mid to high 90s, so maybe by 10% or so on the transport side, on the non migrant mobile health, we had a couple of large municipal projects that were, I'll call them COVID adjacent. They weren't testing projects, but there were vaccination related projects that we had in the first 3.5 months of 2023. That was probably $25 million or so and maybe another five or 10 million of other projects that expired in the early part of 2023. So that when you when you look at that, then that number came down by a little bit. If you take that out then it's that it's our private. So on a blended basis, we did about 300 million of what you would consider those core revenues last year and would expect to do $300 million this year.

David Grossman

And thanks. And then just on the segment margins, did you provide that in the Q the segment EBITDA margin, any chance between transported by the same?

Norman Rosenberg

The same way we've broken it out because we have the corporate and I know that you guys apply you apply the breakout of the quarter. But yes, it's all in there.

David Grossman

Great than our guys sensor manufacturing and yes, yes, yes.

Operator

Thank you.
So 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.

Lee Bienstock

So thank you, and thank you all for joining today, and we're looking forward to speaking with you again soon on all our progress.

Operator

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