GMR Solutions (GMRS) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Krister Sorensen
• Board Chair and Chief Executive Officer - Nicola Loporcaro
• President and Chief Operating Officer - Edward Van Horne
• Executive Vice President and Chief Financial Officer - Brian Tierney

TAKEAWAYS

• Revenue -- $1,595.6 million, up 5.9% driven by increased demand for core emergent services and contributions from new market entries.
• Net Income -- $135.6 million, an 81.7% increase from $74.6 million in the prior year quarter due to improved operating income and reduced interest expenses.
• Adjusted EBITDA -- $356.6 million, up 4.2% year over year reflecting disciplined cost management and favorable service mix.
• Adjusted EBITDA Margin -- 22.3%, supported by the redirection of clinical resources toward higher acuity responses.
• Patient Encounters -- 1.4 million, including 1.04 million ground transports and 37,739 air medical services.
• Nurse Navigation Volume -- 32,180 calls, representing a 51% increase as the company expanded the program to cover 19 million lives.
• Net Transport Revenue Per Ambulance Transport -- $1,426, up 3% due to a positive mix shift toward emergent transports and underlying pricing improvements.
• Same Market Revenue Growth -- 6%, providing an additional $88.7 million in revenue compared to the third quarter of 2025.
• Emergent Ground Transports -- 874,239, an increase of 3.4% as the company focused on higher priority medical responses.
• Nonemergent Ground Transports -- 203,894, a decrease of 1% reflecting a strategic shift of resources away from lower acuity services.
• Air Medical Services -- 37,739 patients, representing flat transport volume despite a 2.8% increase in demand due to lower weather-related capture rates.
• Weather Cancellation Rate -- 15.7% for emergent air transports, up from 14.8% due to unseasonal storms and Western state weather patterns.
• Payer Mix Impact -- $16 million, representing a headwind from the expiration of Affordable Care Act exchange subsidies that shifted patients to self-pay.
• Fuel and Maintenance Expenses -- $150 million, up 25.1% due to $11 million in higher fuel unit costs from the Iran conflict and the timing of aircraft maintenance events.
• Full Year Revenue Guidance -- $5.9 billion to $6.05 billion, narrowing the range to reflect less favorable flying conditions and minimal hurricane deployment revenue.
• Full Year Adjusted EBITDA Guidance -- $1.135 billion to $1.195 billion, maintained by offsetting inflationary pressures with improved service mix and operational efficiencies.
• Free Cash Flow -- $110 million, up from $79 million in the prior year quarter due to solid operating performance.
• Term Loan Repayment -- $200 million, used in September to reduce the outstanding term loan principal to approximately $2.7 billion.
• Annual Interest Expense Savings -- $28 million, expected from the combined impact of the term loan principal repayment and a 50 basis point facility repricing.
• Net Leverage -- 3.4x, down from 4.3x at the end of the third quarter last year.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Tierney stated, "Maintenance, fuel and other direct expenses increased by 25.1% to $150 million," noting the impact of aircraft maintenance timing and fuel unit costs related to the Iran conflict.
• Loporcaro warned that elevated fuel and other inflationary pressures will remain important considerations as the company enters 2027.
• Tierney noted that "less favorable flying conditions in the third quarter and quarter-to-date" contributed to the downward revision of the top end of the annual revenue guidance.

SUMMARY

GMR Solutions Inc. (NYSE:GMRS) reported increased revenue and net income for the third quarter, driven by higher demand for core emergent services. Management highlighted the expansion of the 911 Nurse Navigation platform and new market entries as contributors to operational momentum. The company focused on debt reduction and term loan repricing to lower interest expenses while navigating external pressures from elevated fuel costs and adverse weather. Management revised the full-year revenue outlook to reflect less favorable flying conditions and the absence of significant hurricane-related deployment revenue.

• The company expanded its Nurse Navigation solution to 30 communities, which Loporcaro stated helps avoid "some of the dry runs and dispatching the wrong teams."
• Management expressed confidence in achieving a net leverage ratio of approximately 3.0x before the end of 2027.
• GMR provided medical services for the 2026 FIFA World Cup at seven U.S. locations, treating more than 3,100 patients.
• The company is transitioning its fleet toward twin-engine, IFR-capable aircraft to mitigate weather impacts, with Tierney stating, "all aircraft as we go forward from Bell that will come in will come in with the IFR aircraft."
• Management is actively pursuing in-network agreements with large payers while utilizing the Federal No Surprises Act arbitration process to seek fair payment for out-of-network emergency services.

INDUSTRY GLOSSARY

• NRT: Net transport revenue per ambulance transport, a measure of the average revenue collected for each patient transport.
• Nurse Navigation: A 911 triage solution that directs patients to appropriate care levels, including non-emergency options when an ambulance is not required.
• IFR: Instrument Flight Rules, which allow aircraft to fly using instruments and GPS in conditions where visual visibility is limited.
• No Surprises Act: Federal legislation that protects patients from unexpected medical bills and establishes an arbitration process for provider payment.
• UHU: Unit Hours Utilization, a metric measuring the efficiency of clinical staff and vehicle deployment relative to hours worked.
• IDR: Independent Dispute Resolution, the federal arbitration process used to settle payment disagreements between healthcare providers and insurers.
• CPI: Consumer Price Index, used as a basis for automatic rate increases in many of the company's service contracts.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the GMR Q3 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Krister Sorensen, Vice President of Investor Relations. Krister, please go ahead.

Krister Sorensen: Thank you. Good morning, and welcome to the GMR Solutions Q3 2026 earnings conference call. Joining me today are Nick Loporcaro, our Board Chair and CEO; Ted Van Horne, our President and COO; and Brian Tierney, our Executive Vice President and CFO. Before we begin, note that during this call, we may make forward-looking statements, and actual results may differ materially from those statements because of various risks and uncertainties, including those described in our most recent earnings report posted on our Investor Relations website and in the Risk Factors section of our IPO prospectus. Today's remarks also include certain non-GAAP financial measures, including adjusted EBITDA, adjusted diluted EPS and free cash flow.

You can find a reconciliation of these measures in our earnings release and earnings presentation that is available on our website at investors.globalmedicalresponse.com. Unless otherwise noted, references to the quarter will be for the third quarter of 2026. I will now turn the call over to Nick.

Nicola Loporcaro: Thanks, Krister, and thank you all for joining us today. We are pleased to be reporting continued solid results for the third quarter with revenue, adjusted EBITDA and free cash flow all increasing year-over-year. Core emergent demand remained healthy and disciplined execution helped us manage a more challenging fuel and inflation environment. That said, before we discuss our results, I want to take a moment to remember 2 of our team members and a patient that tragically lost their lives in a rotor accident off Catalina Island on September 30, along with one of our team members and the patient's attendant who survived the accident. We are cooperating fully with the FAA and NTSB as they investigate the cause.

Our thoughts and prayers remain with the families, our team members and everyone impacted by this tragedy. This is a somber reminder that the work our teams perform every day is mission-critical and by its nature, carries inherent risk. Safety remains fundamental to how we operate and we remain committed to identifying, managing and mitigating those risks. Now let me turn to our third quarter results. GMR completed 1.4 million patient encounters during the third quarter.

We provided ground medical services to over 1.35 million patients, which included more than 1 million transports along with 32,000 calls through our 911 nurse navigation offering and the remaining approximately 280,000 ground patient encounters consisting of interventions on scene that did not result in a transport. During the quarter, we provided Air Medical Services to nearly 38,000 patients. Q3 revenue increased 5.9% to $1.6 billion. Adjusted EBITDA increased 4.2% to $357 million with an adjusted EBITDA margin of 22.3%. As with last quarter, this quarter's prior year results benefited from favorable revenue estimate adjustments associated with No Surprises Act-related collections on claims from earlier dates of service.

Despite this comparability impact, the business delivered strong revenue growth and increased adjusted EBITDA. Favorable service mix and disciplined cost management helped mitigate fuel and other inflationary pressures. The quarter also highlighted the benefits of our national platform and integrated services. We operate across air and ground services, diverse geographies and a broad range of community and health system relationships. This breadth helps us manage variability in any individual service line or market while continuing to deploy our clinical capabilities where they create the greatest value. We remain focused on executing against our 4 strategic priorities: clinical excellence, growth, differentiation and sustainable margins.

Recall that we are the largest provider of emergency medical services in the country, serving approximately 5.5 million patients annually in markets representing more than 60% of the U.S. population. With more than 24,000 highly trained clinicians and a fleet of ambulances and aircraft, we have the scale and capabilities to deliver critical care to patients when and where they need it most. On the reimbursement front, we continue to make progress in pursuing in-network and preferred provider agreements with payers willing to engage at appropriate rates and terms. When payers do not engage, we assert our right to be paid appropriately for the out-of-network emergency services we deliver.

This includes working with state regulators when we see patterns of health plans inappropriately denying coverage of urgent and medically necessary care as well as filing claims under the Federal No Surprises Act whenever warranted. As Congress considers reforms to the No Surprises Act, we are confident that most policymakers understand the need to preserve an arbitration process for emergency services. We're also gratified by the growing consensus that any reforms need to include a strong and meaningful enforcement mechanism to ensure that health plans pay arbitration awards on a timely basis.

We will continue to educate federal and state policymakers, policy influencers and the media to make the case for reforms that protect patients while also ensuring fair payment for emergency services even when those services are out of network. We are pleased with the underlying demand and execution reflected in the quarter while recognizing that elevated fuel and other inflationary pressures will remain important considerations as we enter 2027. Our focus remains on disciplined execution, targeted growth and actions that support sustainable long-term value creation. I'll now turn it over to Ted to provide an operational update.

Edward Van Horne: Thanks, Nick. Our operational focus remains straightforward: grow our core emergent services, participate selectively in nonemergent services where they make strategic and economic sense and use innovation to deliver care more efficiently. The advantage of our integrated model is our ability to coordinate care across modalities and geographies rather than operating each service independently. That allows us to better match clinical resources to patient needs, improve efficiency and provide broader solutions to our community and health system partners. A great example of this is our 911 Nurse Navigation solution. During the quarter, Nurse Navigation supported over 32,000 calls across 30 communities, representing over 19 million covered lives. This represents a 51% increase in call volume over the prior year quarter.

We continue to see strong potential to expand Nurse Navigation within existing markets and to use it as a differentiator as we pursue new municipal and health system partnerships. Turning to growth. We continue to see opportunities across both existing and new markets. Same market revenue increased $88.7 million or 6% year-over-year, while new market revenue contributed $28.2 million during the quarter. We launched 3 new 911 systems, 2 new air bases and 1 new inter facility market in the quarter. We also executed new agreements totaling over $50 million in incremental annualized revenue. We continue to prioritize opportunities where our integrated capabilities provide an advantage and where the economics support sustainable long-term partnerships.

Beyond these near-term wins, our scale creates additional opportunities to deploy clinical resources where they are needed, respond quickly to surges in demand and support customers and communities in line with our core business. While we did not have a FEMA hurricane deployment this year, our teams remained highly active across a range of events and emergency response needs, demonstrating the breadth of our capabilities beyond any single type of deployment. At the 2026 FIFA World Cup, GMR provided medical services at 7 of the 11 U.S. Coast locations, caring for over 3,100 patients, including 200 who were transported to area hospitals.

During the 4th of July holiday week, we rapidly expanded capacity in New York City, deploying 50 additional ambulances and responding to over 2,000 911 calls amidst extreme heat and the 250th anniversary celebrations. And when 3 hurricanes impacted Hawaii, our local and regional teams surge additional personnel and support into the state. We partnered directly with county emergency operation centers and expanded our air and ground ambulance capacity into the 911 systems to handle the demand the storm caused on the island communities.

Similarly, subsequent to the quarter, in early October, we were deployed by the Florida Ambulance Association and HCA for Hurricane Isaias with 105 ambulances and over 250 personnel brought in to relocate patients to facilities out of the storm's path and provide 911 and rescue support through the storm. Total revenue for this deployment was approximately $4 million. These examples demonstrate operational capability, but they are not the foundation of our growth strategy. Our primary focus remains consistent execution in core markets, expansion of emergent services and development of scalable solutions that address longer-term gaps in access and capacity.

That includes working with states and communities to improve rural health care access through our 911 REACT solution and the rural health transformation program. Our scale, clinical resources and integrated model position us to help communities address EMS capacity constraints while creating attractive sustainable growth opportunities. Overall, we are encouraged by demand across the platform and the progress we are making in Nurse Navigation, core emergent services and new market development. At the same time, we remain disciplined about contract economics, resource deployment and the pace of expansion. With that, I'll turn it over to Brian to discuss our financial performance in more detail.

Brian Tierney: Thanks, Ted. In the third quarter of 2026, GMR delivered solid financial performance in a challenging operating environment. Net revenue increased 5.9% to $1.6 billion, supported by healthy demand in our core emergent services, continued improvement in net revenue per transport and contributions from new markets. Compared to the same quarter in 2025, emergent ground transports increased 3.4%, driven by strong same-store demand, while nonemergent ground transports decreased 1.0%, reflecting our deliberate strategy of redirecting our resources towards higher acuity responses. Air demand increased 2.8%. However, transports were essentially flat, driven by decreased capture rate primarily from worse weather compared to the prior year quarter.

As a result, during the quarter, total patient encounters associated with our focus areas of emergent transports and Nurse Navigation grew 4.4%, while lower reimbursement patient encounters associated with nonemergent wheelchair and non-transports decreased 4.2%. Net transport revenue per ambulance transport or NRT, increased 3.0% compared to the prior year quarter. Revenue performance was driven by a positive mix shift from nonemergent to emergent transports and strong underlying NRT improvements on a like-for-like basis.

This was partially offset by an approximate $16 million payer mix shift impact from the expiration of the Affordable Care Act exchange subsidies as patients shifted out of commercial insurance and into self-pay, which was in line with our expectations and was included in our prior guidance. The year-over-year comparison also reflects a significant difference in favorable revenue estimate changes. In the third quarter, changes in estimates predominantly related to No Surprises Act claims were $18 million, approximately $37 million lower than in the prior year period. This comparison affects reported growth in NRT, total revenue and adjusted EBITDA, but does not change our view of the underlying operating momentum in the business. Turning to expenses.

Total operating expense increased 3.4% to $1.33 billion in the quarter compared to $1.29 billion for the same period in 2025. Employee wages, benefits and taxes increased by 3.6% to $802 million. The increase year-over-year was primarily driven by improved staffing and normal wage adjustments to attract and retain talent. Average base unit wages increased 3.1% during the quarter, remaining consistent with our disciplined approach to labor cost management. Maintenance, fuel and other direct expenses increased by 25.1% to $150 million. The increase was primarily driven by the timing of aircraft maintenance events and approximately $11 million of higher fuel unit costs associated with the Iran conflict.

Elevated fuel prices also affected supplier costs that are correlated with fuel, including travel and shipping. Other operating expenses were generally in line with expectations. We expect fuel and fuel-related supplier costs to remain elevated as we enter 2027. We will benefit from CPI-related rate increases inherent in most of our contracts in 2027. We are also actively managing these pressures through procurement initiatives, operating efficiencies, disciplined resource deployment and our continued focus on service mix. While these actions may not fully offset the near-term impact, they are important components of our plan to protect margins and sustain profitable growth.

Despite these pressures and the less favorable prior year comparison, adjusted EBITDA increased 4.2% to $357 million with an adjusted EBITDA margin of 22.3%. This performance reflects continued revenue growth, favorable service mix and disciplined cost management across the organization. As reported, we recognized a net income of $135.6 million in the quarter compared to a net income of $74.6 million in the prior year period. Beginning this quarter, our earnings presentation includes adjusted diluted earnings per share as an additional non-GAAP measure. We believe this per share measure complements our existing financial metrics, provides investors with another way to evaluate underlying earnings trends and performance across periods.

Adjusted diluted EPS was $0.64 on a diluted weighted average common shares outstanding of approximately 242.4 million shares. Turning to CapEx, cash flows and liquidity. Cash used for CapEx and aircraft financing was 5.2% of revenue for the third quarter of 2026 compared to 5.5% of revenue for the third quarter of 2025. We generated approximately $110 million of free cash flow, up from approximately $79 million in the prior year quarter. GMR finished the third quarter with $298 million in cash and cash equivalents and an undrawn ABL with $701 million of cash borrowing capacity after letters of credit.

In September, we used approximately $200 million of cash on hand to repay outstanding term loan borrowings, reducing the outstanding principal amount of the facility to approximately $2.7 billion. We also repriced the facility by 50 basis points with no additional indebtedness and expect the combined actions to generate approximately $28 million of annual cash interest expense savings. In addition, GMR used approximately $32 million of cash on hand to satisfy required payroll tax obligations arising in connection with the settlement of certain previously granted equity awards.

Net leverage finished the quarter at 3.4x, down from 4.3x at the end of 3Q last year, and we have line of sight to approximately 3.0x before the end of the year in 2027. Moving on to guidance. We are narrowing our revenue outlook for the year and now expect 2026 revenue to be in the range of $5.9 billion to $6.05 billion, lowering the top end and bringing the midpoint down to $5.975 billion. This revised outlook reflects less favorable flying conditions in the third quarter and quarter-to-date and minimal hurricane deployment activity.

We are maintaining our full year outlook for adjusted EBITDA in the range of $1.135 billion to $1.195 billion, which incorporates our revised revenue outlook and higher fuel and other inflationary costs, offset by margin expansion driven by mix shift to emergency transports and our ongoing focus on margin management. Total cash used for CapEx and aircraft financing is expected to be between 5.2% and 5.4% of total revenue. In summary, the quarter demonstrated healthy underlying demand, continued progress in our core emergent services, improved revenue per transport, strong free cash flow and further deleveraging.

We are managing a more challenging cost environment and several known revenue headwinds with discipline while continuing to invest in the capabilities and growth opportunities that support long-term value creation. And now I will turn it over to the operator to open for any questions. Thank you.

Operator: [Operator Instructions] Your first question comes from the line of Elizabeth Anderson with Evercore ISI.

Elizabeth Anderson: I wanted to ask a follow-up question about the sort of implied 4Q guide. With the updated revenue range, if you -- like it seems like if you have sort of continued growth in the ground transport similar to what we've seen in the third quarter, it's almost like the low end of the revenue guidance is pricing in sort of maybe negative net transport revenue per transport growth. So like it's sort of -- it's definitely been positive and trending. So I just want to understand maybe what gets you to the low end of that versus the high end? And should we be expecting sort of positive net revenue per transport growth?

Brian Tierney: Thanks, Elizabeth. Yes, no, we are expecting kind of continued momentum out of NRTs. Again, we've seen good collection activity. We have the payer mix shift that we've talked about all year associated with the exchanges. We did have the benefit of the change in estimates there -- change in estimate that we talked about in the call, which we're -- that volume is decreasing quarter-over-quarter as we go into the fourth quarter. But no real change in our broader thinking long term.

Fourth quarter is always a little bit weaker from a seasonality perspective because of just the mix between commercial and some of the other payers during the fourth quarter and first quarter, but no real change from our underlying trends.

Elizabeth Anderson: Okay. Great. That's good to hear. And then I think a couple of times, you talked about, obviously, with the increase in fuel costs and things like that, some of these efficiency gains that you've been seeking out. Can you talk to us a little bit more about operationally what those are and sort of how you've been evaluating that as unfortunately, the oil cost trend seems to be less transitory than we had hoped.

Nicola Loporcaro: Elizabeth, this is Nick. Look, one of the things I think we've stated a few times is we've got a lot of dials we can turn and tighten up our -- we've used a measure internally, which is UHU and utilization, really tight on how we're deploying, how we're stationing folks. So operationally, we kind of turn those dials where we need them and tighten up. So it just goes back to our ability to manage fleet and demand. Also, as you know, we've said with some of the weather, you've seen some of our capture down. So the pluses and minuses have allowed us at least from an operational perspective to smooth out some of those.

Elizabeth Anderson: Okay. So it sounds like what you're saying is sort of just continued strong operational thing, but not necessarily like a shift versus things you were doing earlier in the year.

Nicola Loporcaro: No.

Elizabeth Anderson: Is that fair?

Nicola Loporcaro: Yes.

Operator: Your next question comes from the line of Scott Fidel with Goldman Sachs.

Scott Fidel: I was hoping maybe you could just give us an update on just the IDR revenue collections and sort of how those are trending. I did see the disclosures you provided in the 10-Q and appreciate that. But maybe just against the backdrop too of obviously, this has become a very sort of visible issue in the health care system as well. So just maybe walk us through sort of the revenue collections there and then sort of how you see that against the backdrop of the current sort of environment around the payers, in particular, contesting the sort of the structure of the IDR process.

Nicola Loporcaro: Scott, this is Nick. Thanks for the question. I'll start in reverse with the overview of how we're tackling some of the noise that you're all seeing and hearing in IDR and then I'll ask Brian to get to some of the more granular points at the beginning of your question. Look, we feel confident. I think we said it and we put it down in writing. With respect to emergency health, the EMS environment, and I think there was a Paragon report as well that went out probably a month or 2 ago that stated almost exactly what I had spoken to Dr. Oz about several months ago, where you've got to treat EMS, especially 911 response very differently.

Emergency versus elective, which is where I think most of the noise is. And when I spend my time on the Hill, which I spend a lot of time on the Hill with legislators, the lawmakers get it, the administration gets it. We remain highly confident that we have a lot of support there with the differentiation. And then even from a scale perspective and Brian can get into some of the numbers, you'll recall, this is a very small portion, one of our overall interventions and even from an air perspective, we continue to grow our in-network partnerships with payers. So look, we get it. We see the noise. We fight it.

Just recently have engaged with state lawmakers as well and even AGs on getting their attention with some of the behavior we're seeing out of the payers. So our bias is we're being thrown into a mix unfairly. We believe that what we've gone into the process with one are all not only eligible, but justifiable, and we'll continue to win at the rates we do and continue to demand and get justification for payment on all of these. I don't know, Brian, if you want to add a little bit more to Scott's question.

Brian Tierney: Yes. This is not a new topic. It's getting a little bit more volume. But we've had payers that have not paid for the No Surprises Act time lines really since the inception. We work with the industry, as Nick mentioned and lawmakers and other stuff to try to advance this. I'd rather have everybody in network. We renewed a couple of contracts with some very large multistate payers during the quarter. It shows that, again, we can get in network and stay in network with folks that are interested in being in network. And yes, it's -- this is not a new topic and we'll continue to fight.

Scott Fidel: Okay. Great. And then just as my follow-up question, could you maybe just unpack the labor costs seem to be -- the expense management around that seem to be quite strong in the quarter. I did see some of the commentary in the Q around some lower stock comp expense year-over-year. But even despite that, excluding that, the overall employee wages and benefits and just sort of cost control were better than we expected. Can you maybe just talk about that in terms of your underlying labor cost trends and then how you see that sort of progressing into the fourth quarter?

Edward Van Horne: This is Ted. The teams continue and it's kind of core to our culture and teams and how we operationalize every single business unit, how the local leaders actually manage their teams. So it is market by market and it's a very broad program that we have on the utilization of the assets and we use the right employees for the right types of calls and the labor rates. We've also seen quite a bit with Nurse Navigation, improving our operational efficiency in some of these really large markets. You see the growth we've had with Nurse Navigation and that makes the systems overall more efficient and the right email going to the right calls and the emergency side.

So it provides for quite a bit of efficiency throughout the operations where we have rolled out. And just fundamentally in how we operate on the air and ground side, that's a core piece of what we do is utilization management of our teams.

Nicola Loporcaro: Yes. And Scott, this is Nick. Just to add to that and probably segue from the question Elizabeth asked earlier in my alluding to the proverbial dials we talk about. And one of the things we continue to see as we deploy Nurse Navigation in our own markets is that efficiency that we've referred to in the past. So that helps us avoid some of the dry runs and dispatching the wrong teams. And so you continue to see that improvement inherent in the numbers that we're presenting.

Operator: Your next question comes from the line of Benjamin Rossi with JPMorgan.

Benjamin Rossi: So I know you aren't providing formal guidance for 2027, but in setting up puts and takes, can you remind us what's being incorporated into your revised guidance for fuel costs, IDR rollover from last year's trend and some of the payer mix impact related to the ACA exchanges? And then for next year's ACA exchange impact, any initial thoughts about trends and whether you think it's fair that you'll run rate, call it, the $15 million to $16 million impact into the first quarter of 2027, given some of the more minimal impact felt in the first quarter of this year?

Brian Tierney: Ben, this is Brian. Thank you. Yes, fuel costs will continue to use the fuel futures. I'm not going to guess what fuel prices are. So we just take the benefit of everybody else's knowledge. They've moved -- as you can imagine, they move all over the place. But so we're using the fuel futures really from the end of last week, so they have the benefit of the post midterm election change. But that's still higher than we'd like to see, but we'll continue to try to drive efficiencies, make sure we've got all of our fuel card program, bulk purchasing programs, other stuff to minimize the fuel cost as much as we can.

Related to IDR, again, the change of estimates, we continue to try -- believe that these will drive closer to 0. There's some very old stuff that's still out there. We'll continue to try to chase it. It's not on the books, which is why it's a change of estimate when we do collect it. Second quarter, I think, was about $5 million. Third quarter was in the $18 million range. So it's going to be low and we're going to continue to try to collect on that really old stuff. Related to the exchanges, $16 million run rate is, I think, the right number.

We saw a little bit of it in the first quarter last -- this year of '26. So there'll be a little bit of impact there. What we're watching right now for '27 is the work requirements for Medicaid. There's a number of different estimates out there. We're trying to refine as we think about '27. So that's the known headwind that we see from an NRT perspective.

Benjamin Rossi: Great. As a follow-up on IDR, for the $18 million in IDR claims received this quarter, can you just remind us what the breakdown is between claims that occurred during 3Q versus claims that came through from prior periods?

Brian Tierney: Yes. This is all related to claims for much older dates of service. Our revenue recognition process for both air and ground, although they have slightly different timing is to make an estimate at the time that we provide the service and then wait 6 months for the air, 12 months for the ground to update those. And then -- so these changes are older than 6 months on the air side. And frankly, most of them are in the 18 to 24-month range from a perspective. So this is not a change of estimate. Change of estimate by definition is an older date of service.

Operator: Your next question comes from the line of Craig Hettenbach with Morgan Stanley.

Craig Hettenbach: Can you just touch on capital allocation priorities and really the extent to which maybe it skews towards balance sheet deleveraging near term versus potential M&A opportunities that may arise on a longer-term basis?

Nicola Loporcaro: So Craig, this is Nick. Again, as usual, I'll give you a bit of high level and then Brian and Ted can chime in with a little bit more color. Delevering, I'll say, is priority one on the list. Then there's operating the business, if we can get some opportunities to bring some assets in to help us launch contracts sooner. I would tell you that's priority 2. M&A, as we've discussed, obviously, we do have some targets. The multiples expected out in the market are at times a little prohibitive. That said, we are engaged on a few smaller ones in adjacent markets that we think are very synergistic.

So we can make the case and have a high degree of conviction around the M&A and the ROI around it, we're going to move forward on it. But those 3 buckets, we will manage with a lot of scrutiny and a high level of discretion on which one makes more sense when on how we deploy our capital. I don't know, Brian or Ted, if you would add anything to that.

Edward Van Horne: We just recently saw the announcement on adding more PL aircraft into the fleet on purpose in the last couple of weeks here and those are ongoing over the course of the next year as they come in, but it's also gives us better efficiency, the types of airframes you bring in. It's very specific to instrument flight IFR aircraft that we're doing. I mean we have quite a few other aircraft coming in over the course of this year and next year to continue to meet the growth and the needs that our customers have.

So we're going to continue to reinvest in there on not only the technology that the new aircraft bring in, but then obviously the ability to grow further.

Brian Tierney: And as the business continues to generate cash, we're going to use some of that to delever like we did during the third quarter. We did reprice the term loan, bought down about $200 million worth of the term loan as well. We thought that was the right time we're generating plenty of cash to continue to operate and do the M&A when the time comes and to do the aircraft purchases when the time comes. And so I feel good about our position.

Craig Hettenbach: Helpful context. And Brian, just a follow-up for you on the back of solid EBITDA beat in Q2 and Q3. You guys talked about kind of the revenue range for Q4. Anything you're considering in terms of implied guide for Q4 in terms of any headwinds or tailwinds that you would call out specifically?

Brian Tierney: Just the inflationary environment continues to be more challenging than I think any of us would like. We've seen -- you've got the variability of fuel prices, but they're much higher than even earlier in the year. We've seen that continue to trickle through other lines in the P&L. Initially started with transport-related things like freight and travel. But we've seen it really start to pop it into all of the other lines as well. And we continue to work. We've got a very good purchasing team that manages all of our contracts. Our frontline staff do a great job making sure we're using only what we need. But we are seeing that inflation pop through into other lines.

And so we've incorporated that into our guidance.

Operator: Your next question comes from the line of Andrew Mok with Barclays.

Andrew Mok: Weather cancellations were up 100 basis points year-over-year and the highest 3Q cancellation rate we've seen in recent years. I know you were expecting moderating weather to be a tailwind this year. So can you help us understand what drove that increase in cancellations, including any impact of El Nino and how that impacts your view of like growth for 4Q?

Brian Tierney: Yes. I think you said the words there, El Nino. And what we saw, obviously, was certain pockets of the U.S. had very unseasonal weather issues in the summer months, heavily also in the West, Colorado. So those Western states got hit unusually hard this year. And then we had a couple of really bad storms as we know, not only the kind of hurricane came through, if remember the month or so prior to that hurricane in the Gulf, there was just quite a bit of Southeastern storms long lines.

And when those types of weather fronts come through, it does increase the weather cancellation rates even if we have the IFR aircraft, we're not flying in those kind of conditions. So we did see that unusually higher number that we -- in the summer months, it usually isn't that way. So that's what we saw the year-over-year increase in the cancellation rates due to the weather.

Nicola Loporcaro: Yes. And Andrew, Nick here. Look, as we continue to learn and look at the business, we also know we have opportunities at times as weather patterns are coming in. We've often stated our assets are mobile. We can move some of those rotor assets to other markets that are not having some of the weather issues and they're going to pick up some volume as well. So we continue to look at those patterns and how do we mitigate this. With your question on what does El Nino do next year, I can't tell you what those patterns are going to be, but we continue to look inward.

Ted mentioned earlier, continued investment in IFR, technologies, training on how we can mitigate some of these weather patterns as they move through the system.

Brian Tierney: Let me pile on to the IFR comment. The aircraft -- the Bell aircraft that we ordered during the quarter are instrument flight rules, IFR, which means that you can use GPS and other things to flying conditions that you can't do if you're flying visual flight rules or VFR. And so we continue to invest in that -- those types of aircraft. The order those aircraft will come in, in '27. So -- but that's our plan. It's all aircraft as we go forward from Bell that will come in will come in with the IFR aircraft. All twin engines will come in with IFR.

And so as we continue to change that mix, then hopefully, we will eventually decrease a little bit the weather impacts.

Andrew Mok: Great. And can you talk a little bit more about the pace of air bases we can expect over the next 5 quarters or so? Just remind us what the targets are and cadence.

Brian Tierney: Yes. I don't have the numbers at hand, and we're still working with the suppliers on the delivery time line. I think we had mentioned we had -- on the previous call, we had seen some delays from one of the suppliers. We've worked through a lot of that. We don't have complete line of sight yet, but we do have a lot of aircraft coming, a couple at the very end of this year that will fund bases to start early next year and then a number throughout 2027. So as we get into doing the '27 guidance, we'll have a clearer picture and share that at that time.

Nicola Loporcaro: And Andrew, I want to come back to a point, this is Nick that we've realized as we've messaged out to all of you, we talk about bases, but I think one of the things we've not highlighted as well, I'll go back to a point I raised earlier is as we look at demand around our current bases, we have the ability, again, to move some of those assets in higher demand areas and pick up more volume. So we can still get the ultimate impact of increased volume without necessarily opening up new bases. I just want to highlight that point. And we'll continue to improve how we report against that as well.

Operator: Your next question comes from the line of Joanna Gajuk with Bank of America.

Joanna Gajuk: So when I look at the revenue per transport growth, right, and if we normalize for the year-over-year headwind, you talked about the $37 million from the lower NSA adjustment year-over-year, we come up with, call it, 5.5% or so of growth. So is that the right math? And also, is this the level of RPT growth we should be assuming into next year because it sounds like those adjustments will be close to 0, right? So is that the case, right, if your core pricing or revenue per transport is growing mid-single digits, I understand the fuel and other inflationary cost pressure.

But if that's what's happening with the pricing, at least, is it fair to assume that at this pace of revenue per transport growth, you can grow your EBITDA high single digits next year?

Brian Tierney: Elizabeth (sic) [ Joanna ], thanks for the question. Yes. On NRT, we've got a couple of different things that fit into that. One is the underlying just the NRTs of the business, some of it within the emergent and nonemergent service lines. And then we have the mix shift that sits on top, offset a little bit by the payer mix.

Our expectation for NRTs as we go into the fourth quarter and we'll provide guidance on '27 when we do our call at that time is still to be in that low to mid-single digits, just like we talked about ahead of the roadshows and the IPO in that 2%, 3%, 4%, and then we'll benefit from a little bit of mix shift as we continue to focus on the emergent business and then the nonemergent business that makes economic sense. Our goal in the long term, and we always view this from a long-term perspective is mid-single-digit plus revenue growth, high single-digit EBITDA growth, leveraging the size and scale of the business. That hasn't changed.

Joanna Gajuk: Great. If I may, I guess, as it relates to next year, another question around the Rural Health Transformation Fund. So I guess by now, all the states have received some approvals right for funding. So can you help us understand how material, if at all, could this be for the company? Maybe how many projects you involved in, when we should expect to see some revenue contribution flowing from that? Any color would be appreciated.

Nicola Loporcaro: Yes, Joanna, this is Nick. Look, I will be candid, this first year rollout, we saw a lot of confusion and a lot of the dollars just ultimately went back to the hospitals where we understood it was not the intention. We've worked hard with all of the states to come up with these innovative models. I think it's a little premature to give you an assessment of what the potential is. We know that they are looking at targeting and earmarking dollars for EMS. We also believe that we, GMR, can benefit from a few other categories. I know we mentioned Nurse Nav. We mentioned some of other innovations. And that's the REACT model that we went out.

We believe this year, we should start being able to see some of the contracts. We're engaged with some states and respective counties in those states to look at getting some traction with our models and benefiting from some of those dollars. Still a little bit of noise in how the government is allocating those funds and what they're awarding on the true innovative models aside from you'll recall, the first half the dollars were just prorated out to every state. Now they're getting a little more prescriptive around what programs and when innovative models will be awarded the dollars. So we remain optimistic about this.

We're still promoting and actually engaged with a few states and a few counties on getting to contracts.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Nick for closing remarks.

Nicola Loporcaro: Thank you, Tracy. Thank you all again for joining us today. As you see, the third quarter demonstrated continued momentum and resiliency across our business and continues to reinforce our confidence in GMR strategy. We continue to grow our core services, expand innovative solutions like Nurse Navigation, maintain discipline across our operations and strengthen our financial position. We believe our national scale, integrated model and clinical capabilities position GMR well to capture the opportunities ahead and create sustainable long-term value. Our exceptional clinicians, pilots, mechanics, dispatchers, support personnel and regional leaders are what makes this possible. And I want to thank them for their unwavering commitment to our patients, partners and communities.

Thank you for your continued support, and have a wonderful day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.