Greetings and welcome to DocGo first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Steven Halper of LifeSci Advisors. Please go ahead, sir.
Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call, other than historical facts, are indeed forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect DocGo's business, financial condition and other operating results. These include, but are not limited to, the risk factors and other qualifications contained in DocGo's annual report on Form 10-K, quarterly reports filed on Forms 10-Q, and other reports and statements filed by DocGo with the SEC to which your attention is directed.
Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. DocGo expressly disclaims any intent or obligation to update these forward-looking statements. At this time, it is now my pleasure to turn the call over to Stan Vashovsky, CEO and Co-Founder of DocGo. Stan?
Thank you, Steven, and thank you to everyone for joining our first quarter 2022 results conference call. As is our practice, I'll make a few remarks about our business and then turn the call over to Andre to review the financials. We will then take your questions. During the first quarter of fiscal 2022, we were able to sustain the momentum with which we exited 2021. For the quarter, we generated total revenue of $118 million, representing growth of 137% over the first quarter a year ago. Approximately $38 million of our Q1 2022 revenue was related to COVID testing, which is down from approximately $50.1 million in Q4 of 2021.
Revenue growth was again driven by our mobile health division, which generated revenue of $90.1 million, an increase of 193% over $30.7 million in the first quarter of 2021. Of this $90 million of mobile health revenue, more than 90% came from customers with whom DocGo is operating under the terms of extended or expanded contracts. We have worked hard to cultivate our customer base to build broader, long-lasting relationships. Our first quarter of 2022 transport revenue was $27.8 million, an increase of 46% over $19 million in the first quarter of 2021. We generated Adjusted EBITDA of $13.9 million in Q1, representing solid profitability and a substantial improvement over Adjusted EBITDA of $0.4 million that we generated in the first quarter of last year.
Adjusted EBITDA margin was 11.8%, a significant improvement over a year-ago period. We continue to expect our Adjusted EBITDA margins to expand towards 20% over the next three- five years. Finally, net income for the first quarter was $9.4 million, also a significant improvement as compared to a net loss of $2 million in the first quarter of last year. DocGo continues to retain a leadership position as a provider of mobile medical services. During the first quarter, we began the transition of some COVID-related services to longer-term non-COVID-related work with new and existing customers. Our goal is to make this transition as seamless as possible. While there are challenges, we are making great progress.
Our robust growth in revenue was again driven by the extension of existing contracts and signing of new contracts, and the expansion of our services into new markets throughout 2022 that are now fully implemented and contributing revenue. As of March 31, 2022, we acquired licenses and assets to offer medical transportation services in Maryland and Delaware. Our clinicians interacted with 1.1 million patients in Q1, representing an 80% increase over the same period in 2021. Today, between our two business divisions, we have provided services in 29 states and the United Kingdom. We have significant opportunity in front of us to both further expand in existing states while entering new ones. Taken together, we estimate that our markets are less than 1% penetrated today.
Since this is only our second conference call as a public company, we thought it would be beneficial to take a few minutes and review the DocGo story for the benefit of anyone listening who may be new to the story. We are a leading provider of last mile healthcare delivery services, meaning that we deliver high quality, highly affordable healthcare services to patients where they are when they need it most. We operate in two distinct divisions, mobile health and medical transportation. Mobile health, the most significant driver of our growth, brings in-person healthcare to patients where a visit to a doctor's office or hospital may not be necessary. Many companies provide patient care in non-traditional settings. What differentiates our mobile health business is DocGo's use of highly trained licensed practical nurses and paramedics who work under physicians' license in our network of medical practices across the United States.
This allows our clinicians to perform a much broader scope of service at a lower cost to the overall healthcare system. This innovative model has enabled us to build a large, cost-efficient labor workforce to facilitate a host of medical treatments that are traditionally provided by more expensive nurses, physician assistants, and medical doctors. This approach has enabled us to significantly scale up our medical workforce to facilitate a wide range of high-quality medical treatments and interventions to patients at lower costs than the traditional model. In addition to our LPNs and paramedics, DocGo also employs hundreds of registered nurses, nurse practitioners, physician assistants, and medical doctors to provide a range of higher acuity services and procedures to our patients.
By leveraging this workforce to provide care to patients in their homes, their offices, and in other non-traditional settings, we help avoid costly and unnecessary visits to hospitals or emergency rooms. Our services include bedside procedures, preventative care, medicine administration, monitoring, and various vaccinations, EKGs, ultrasounds, and much more. We contract directly with government agencies, corporations, insurers, and hospitals and then provide services directly to their constituents. We rarely do fee-for-service. Most of our mobile health work is paid for on a clinician basis. This model gives us more opportunity to align our revenues with our costs, helps us mitigate volume risks, and better allows us to pass along cost increases to our customers. It is worth reiterating that we employ the majority of our practitioners. They are not contractors. We believe this leads to more satisfied customers and loyal employees, and ultimately better care for our patients.
A key metric that demonstrates our employee satisfaction is DocGo's stellar rating on leading internet employment portals. Hundreds of our employees have left ratings of their experience working for our company, and we enjoy a 4.2 rating on Glassdoor and 4.1 on Indeed, impressive scores for our industry. One of the new services we're most excited about is our DocGo On-Demand direct-to-consumer offering. As medical co-pays and deductibles continue to increase, we see an opportunity to provide cost-effective treatment alternatives directly to patients and employees who are seeking medical treatment for non-emergency conditions. We are in the early stages of piloting this B2C offering and have plans to take the learnings from this pilot and expand these services to a number of markets in the future.
The backbone of our mobile health service is our purpose-built technology platform that plugs seamlessly into the existing healthcare EMRs and other IT systems that provide better coordination of care. Designed to be used by patients and their families, care providers, and facilities, among its many core functions and benefits, it integrates into electronic health records from well-known leaders in the field, ensuring that all patient information is in a single repository. The ability to interface with these complex EMR systems provides DocGo with a significant, and we believe, a sustainable competitive advantage. Our other offering is medical transportation, which basically refers to providing Uber-like pre-scheduled, on-demand ambulance patient transfer solutions between clinical settings. While we have a small number of wheelchair vans and medical sedans, over 99% of our transportation revenue comes from high-margin ambulance transports.
We've developed a CapEx-like model for our ambulances, where we lease vehicles through GE Capital for five-year terms with no money down. We maintain long-term multi-year partnerships with some of the largest and highly regarded healthcare providers in the industry, including Fresenius, Jefferson, UCHealth, as well as Northwell and HCA. Our customers are increasingly moving towards a leased hour model where we provide vehicles, equipment, and staff for a daily fee away from the traditional fee-for-service model. Not only does this provide our customers with dedicated resources, but it creates recurring, predictable revenue and strong gross margin performance to our company. This is just one example how we think outside the box to develop solutions that are in the best interest of our customers and their patients while still creating value for DocGo. We currently provide medical transportation services in 11 states with additional licenses pending.
As with mobile health, we have significant untapped greenfield opportunity in front of us to further grow this business. At this point, I'd like to hit on a few key operational highlights from the quarter. We touched upon this last quarter, but it is worth recapping. In January, we announced a multi-year contract to provide mobile at-home healthcare services to Aetna, commercial, and Medicare Advantage members across New York and New Jersey. This gives us the opportunity to provide a range of at-home healthcare services to 2.5 million lives, including episodic and emergency care. We bolstered our senior management ranks by hiring Lee Bienstock as DocGo's chief operating officer.
Lee has spent the last 10 years at various business units at Google and has a proven track record of scaling businesses for profitable growth. His experience and unique perspectives will help increase our market footprint, expand our mobile health initiatives, and introduce new technologies. We expanded our presence in the United Kingdom with three new contracts. These contracts enable us to introduce our services into new territories, including the East of England and Central England, while expanding our footprint in Greater Manchester. Additional international expansion will remain a key growth driver for our company this year and beyond, even while we pursue what is largely an untapped U.S. market. We unveiled the first zero-emissions all-electric ambulance in the United States, debuted at the New York International Auto Show, and completed our first patient transport in partnership with Jefferson Health in Pennsylvania.
This vehicle marks the first step in our zero-emission initiative as we work to convert to an all-electric fleet by 2032. We expanded our relationship with Carnival Corporation, adding 15 additional ships and launching services in Mobile, Alabama. This makes DocGo one of the largest providers of healthcare at sea. We acquired new medical transportation licenses in Delaware and Maryland to service both B2C medical patients and additional hospital customers in those areas. With this acquisition, we have expanded our U.S. transportation footprint to 11 states. We saw sizable growth in the new market of patients we treated across our mobile health and medical transportation businesses. In Q1 2022, we had a total of 1.1 million patient interactions, which represents an 88% increase over the same period in 2021. Now turning to the market opportunity.
As we indicated last quarter, the US addressable market for our services is significant and largely untapped. A February 2022 report by McKinsey & Company concludes that up to $265 billion in medical care currently delivered in healthcare facilities will shift to home-based care by 2025. I believe companies like DocGo are able to provide care in the home and other non-traditional settings stand to be among the biggest beneficiaries of this shift. Clearly, we have barely scratched the surface. With the investments that we have made, particularly in our technology and people, we believe we have created a significant competitive advantage. At this point, I'd like to turn the call over to our CFO, Andre Oberholzer, to review our financials. Andre.
Thank you, Stan. Good morning. Total revenue for the first quarter of 2022 amounted to $117.9 million, representing growth of 137% as compared to the $49.7 million reported for the first quarter of 2021. The year-over-year growth was driven mainly by the contribution of revenue from several new and extended key mobile health contracts. Mobile health revenue for the first quarter of 2022 amounted to $90.1 million as compared to $30.7 million in Q1 of 2021, up approximately 193%. Medical transportation revenue amounted to $27.8 million, up 46% from $19.1 million in Q1 of 2021.
It is important to note that excluding COVID testing-related revenue from Q1 of both years, total Q1 revenue still increased approximately 2.7 times year over year, increasing from approximately $29 million in Q1 2021 to approximately $80 million in Q1 2022. This reflects strong momentum in our core mobile health business and consistent growth in our transportation segment. Mobile health revenue, which includes COVID testing, amounted to 70% of total revenue during Q1 this year, versus 62% in the prior year, with transportation as the remainder. Revenue generated by the UK market grew by 40% to $2.8 million during Q1 of this year, representing approximately 2% of total revenue.
Net income amounted to $9.4 million in the first quarter of 2022, which represents a substantial improvement over the net loss of $2 million recorded in the first quarter of the prior year. The net income improvement resulted from a strong increase in revenues during the quarter, while certain overhead costs related to infrastructure provided leverage as it did not increase in the same proportion as the revenue growth. Adjusted EBITDA grew to $13.6 million in the first quarter of 2022, even with additional investments made in regional expansion and infrastructure, versus adjusted EBITDA of $0.4 million in the prior year period. As a reminder, adjusted EBITDA is a non-GAAP measure representing earnings before interest, taxes, depreciation, amortization, stock compensation, warrant liability valuation, and non-recurring expenses incurred in connection with our public listing.
Please refer to our earnings release for a reconciliation of adjusted EBITDA to net income. Total gross margin percentage during Q1 2021 amounted to 33.8% as compared to 28.2% during the prior year. The 5.7% increase in the total gross margin was driven by the mobile health segment, where gross margins increased from 30.9% during Q1 last year to 37.3% during our first quarter this year. The mobile health gross margin improvement was driven by a combination of factors, including an increased number of higher margin hourly based contracts and a reduction in our average per test lab fees. These positive improvements were reduced somewhat by higher subcontracted labor costs and certain medical supplies. Margins from the transportation segment were constant at 22.7% during both quarters.
Transportation gross margin improvements generated by increases in the number of hourly or daily based contracts and higher per trip prices were offset by the impact of higher hourly wages in certain markets, increased overtime, and increased cost of fuel. It is important to note that DocGo was able to drive year-over-year gross margin improvements despite the negative impact of inflation on the cost of labor and other cost of sales items. As of March 31, 2022, our cash and cash equivalents totaled $188.4 million, as compared to $175.5 million as of December 31, 2021. It is important to note that during the first quarter of 2022, positive net cash provided by operational activities amounted to $18.3 million versus a $1.4 million use of cash for operations in the prior period.
In terms of the impact of inflation, we have two major expense categories where inflation may significantly impact our results. Our guidance provided at the beginning of this year included certain assumptions regarding the impact of inflation on labor and the cost of fuel. During the first quarter of 2022, the actual increase in average hourly labor rate was below our guidance assumptions. While the average fuel cost per gallon was approximately at our forecasted rates. During the fiscal year 2021 earnings call, we discussed the impact of the warrant revaluation, which resulted in the $5 million gain during the fourth quarter of 2021. The revaluation of these outstanding warrants amounted to a loss of approximately $60,000 during Q1 of this year. Now turning to our 2022 outlook.
Consistent with the guidance that we introduced during our fourth quarter 2021 conference call, we anticipate strong demand from our customers for both mobile health and transportation services. We confirm the guidance we provided and anticipate 2022 revenue to be approximately $400 million-$420 million, representing growth of 27%-32% over 2021. Adjusted EBITDA is anticipated to be approximately $35 million-$41 million or 9.2% of revenues at the midpoint. As discussed in the past, we are only providing annual guidance and not providing quarterly guidance. Although we are comfortable with our annual guidance, it is difficult to predict with accuracy the quarterly new contract wins and the related operational execution of new contracts.
In addition, the first half of this year is a transition period as we wind down revenue from COVID testing activities and transition to new other mobile health services. At the midpoint of the annual revenue guidance range, that is $410 million, the average quarterly revenue calculates at $102.5 million. We expected that Q1 would be above this average, which was the case with actual Q1 revenue of $117.9 million. It should be evident that there is an expectation that there would be a quarter when revenue will track below the above-mentioned average of $102.5 million. As previously discussed, we expect Q2 COVID testing revenues to continue to decline to approximately $20 million compared to the $38 million generated in Q1.
As a result, Q2 is expected to be a transition quarter to replace the declining testing-related contracts with new mobile health contracts or expansion of existing mobile health contracts. After Q2, the company will no longer track COVID testing revenue as a separate number, since it is becoming a much smaller percentage of revenues and COVID testing services are embedded within mobile health contracts as just another service. In terms of segment revenues, we expect that the mobile health segment will continue to contribute approximately 70%-75% of revenues, with medical transportation as the remainder. That concludes our prepared remarks. At this point, we will ask the operator to open the call to questions. Back to the operator.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from line of Rich Close with Canaccord. Please go ahead.
Great. Thank you. Congratulations on the continued success. Andre, I was wondering if we could just go over the COVID testing, just so, from a housekeeping perspective, our models are correct for 2021. I guess first, is $110 million still the COVID testing revenue for 2021?
Yes, that's the number that we disclosed. It's $110 million. It's an estimate. You know, I think we discussed in the past that, you know, there's a lot of comingling of our contracts. That was the estimate we came up with, $110 million.
Well.
Okay.
You know, just let me clarify. The $110 million was for 2021, and we anticipate $55 million in 2022 between the first and second quarter. Just for clarification.
Yeah. Yeah.
Now that we have the first quarter and the fourth quarter for 2021, can you just give us the breakout in terms of what second and third quarter is just so, you know, we're on an apples to apples basis?
For COVID testing, we estimated that Q2 should be around $20 million. Then, you know, the guidance that we've given, we said starting July 1, we assume COVID testing will be $0.
Yeah. No, I'm talking.
There will probably be some. I'm sorry.
Yeah, second quarter and third quarter of 2021, what is the breakdown of COVID testing?
We have not provided that in the past. You know, the second quarter last year and third quarter last year basically are no longer relevant. The guidance we've given for Q2 is $20 million. Starting July, we assume, you know, zero COVID testing in the guidance.
Okay, I just wanted to make sure I had the ex-COVID mobile health growth correct, so I'll move on. Can you guys talk a little bit about the conversion of the COVID contracts to long-term work? Stan, you know, mentioned, you know, you guys are definitely having some progress there, but then you also said that, you know, it does present some challenges. I'm just curious, you know, with respect to that COVID book, you know, maybe how much you still have to convert and any type of success metrics, like a percentage of the book that has been converted, if you could provide anything like that. And just then talk about, you know, the discussions and the challenges?
Well, the challenges is really just about timing. We have people that are working on COVID contracts. We are a people business. We wanna make sure we time it well, where COVID contracts end, people come back into a classroom, get the additional training they need, and then get assigned to new contracts. I mean, that's the challenge. We're fortunate we have a good, healthy book of business. We have customers that have already executed agreements. We have new customers that we're working towards executing agreements. It's really just about the timing. It's about timing of, you know, making sure that we take a group of people that are finishing one project and getting them ready for the next project.
What we don't wanna do, what we wanna avoid is starting new contracts, hiring new people, training new people, and then while COVID contracts end, having to lay off that group of personnel. We've done a great job in the first quarter. We know how to do it. We've demonstrated that, you know, in the first quarter, and we're gonna follow those exact same processes in the second quarter. In addition to that, a lot of our contracts actually are for the same municipalities or same customers that we did COVID testing for. As COVID testing winds down, we have new programs that are with the same customers that start up.
It's just a matter of wrapping up one project, getting the people back into a classroom, five, 10, 15 days in a classroom, and then getting them assigned to a new project.
Thank you. Our next question is from Mike Latimore with Northland Capital Markets. Please go ahead.
Great. Thanks. Yeah. Nice quarter there. What was the final provider headcount at quarter end?
Hey, Mike. Good to hear from you again. We're somewhere over 4,000 full-time personnel. I mean, the overwhelming majority are clinical providers. These are our employees. We still use the help of agencies, you know, and probably a couple hundred more from agencies that are in the process of being converted to employees. I anticipate, you know, somewhere total headcount of about 5,000 by end of the year.
Okay. Got it. You talk about, you know, transitioning customers from COVID testing to new mobile health services. What's been the initial kind of revenue transition? Is it, you know, as you transition to a new service, is the total amount contracted about the same? Does it shrink? Does it grow?
You know, I'd like to say we run a fairly simple business model. Depending on the clinical professional that you need, we have a daily rate, plus a nominal per procedure or per test fee above that. You really don't see much variation between, call it COVID testing as they transition out of testing, and they get involved in doing other services. The fees are very similar. You know, you may have small variations depending on supplies. It's very insignificant for the most part. If it's the same practitioner and that practitioner on Monday was doing COVID testing, but on Friday, they're now doing vital signs and maybe blood work or EKGs, the revenue model pretty much is, I would say 95% identical.
In terms of the absolute dollar amount that the customer is contracting for, does it shrink, or does it expand relative to the COVID testing, what you've seen so far?
You know, for the most part, pretty consistent, pretty flat, you know, almost the same. I mean, it's a daily amount to a clinician. So if they have an RN doing COVID testing, that same RN doing other clinical services, the model doesn't change much.
Yeah. Just last on medical transport, medical mobility. You know, nice sequential growth in the quarter there. Should we think of that as sort of a new baseline upon which you can build going forward?
You know, I
On that one. Sorry, Stan.
No, you go ahead.
I was just gonna say it's not totally sequential. You know, we had some special projects in upstate New York. We launched some new markets like Delaware. Also in upstate New York, we added some additional services, 9-1-1 as an example. It's not basically indicative of a new run rate. It was some extra revenue from those special projects in Q4. In the past, you know, the average payer for transportation was around 35%. Guidance, you know, that's still more or less the same payer that we assume on an annual basis.
Thank you. Our next question is from the line of Sarah James with Barclays. Please go ahead. Go ahead.
Thank you, and congrats on another great quarter.
Thank you, Sarah. Good morning.
Good morning. EBITDA and revenue for the first quarter came in a good amount above consensus. I'm wondering, how it compared to your internal expectations and how we should think about seasonality playing out for the rest of the year.
Well, I mean, as you can expect, Sarah, we were happy internally. Team worked really hard to make sure the timing is, you know, proper when we make conversions and as we implement new accounts. Yes, it was a good quarter. You know, can't say we're shocked. We have a good, strong record of beating expectations, and I'd like to hope that we can maintain that going forward. Especially on EBITDA, where our operations team is doing a wonderful job getting things fine-tuned and making sure our profitability is maximized. In terms of seasonality, it's a little bit hard to say right now.
I mean, mobile health, which is just such a fast and rapid growing part of our business, is quite new to us. I mean, we're only doing this for about three years now. It's growing, you know, at a very good, healthy pace. It's just a little bit early for us to predict seasonality. In addition to that, we are converting accounts from traditional, what I would call COVID testing to non-COVID testing. We're doing an excellent job at that right now, and it's working out really well. We expect that trend to continue into Q2 and for the rest of the year. But I don't think we have enough experience at the moment to really be definitive in our seasonality estimates.
Got it. On the Aetna contract, you guys have been live for a couple of months now. Can you talk about what engagement or uptake has been on those services and how you think about the adoption curve there?
Yeah. We've signed with Aetna, but we've also signed with several other companies. Those are ancillary agreements with healthcare providers to provide at home urgent care services. That is all towards what we call our B2C business offering. You know, the development of that program headed by Aaron Severs at our company is coming along really nicely. We still have tremendous amount to learn and perfect in that business model. As we mentioned last quarter, we do not have any direct to consumer revenue built into our models for 2022. Everything we're doing on that front is really in preparation for 2023. We do expect our direct to consumer offering to be really successful.
You know, preliminary testing of those services have been very positive, but we still have a long ways to go and a lot of learning to do.
Thank you. Our next question is from Pito Chickering with Deutsche Bank. Please go ahead.
Hi there, guys. This is Kieran Ryan on for Peter. Thanks for taking my question. First, I just wanted to ask about guidance. I see the $400-$420 was maintained, but it seemed like there was a slight change in the language and on the growth rates. I think the bottom end moved a little bit. I just wanted to make sure there was nothing to call out there, whether that's around the COVID.
Revenue estimates or something else?
The range is unchanged. It's still $400 million-$420 million.
Oh, yeah. I meant the growth range moves from 25%-32% or from 27%-32% to 25%-32%.
That's just the rounding when we did the calculation. We're still.
Okay.
at $400 million-$426 million for the year.
Got it. Thank you. I guess a couple of mine have already been hit on. Just to about your discussions with municipalities, I just wanted to see if you have any updated views on, you know, kind of replicating that success in New York City. You talked about a couple special projects on the transportation side this quarter that helped, but just any discussions you're having with any other municipalities and how that's continuing to play out would be helpful. Thank you.
Yeah. I mean, with without going into a lot of detail, we continue to have discussions with municipalities about specifically in areas of homelessness services, and medical services for public schools. We've gotten good engagement from several new markets. If all goes well and if we time it properly, we should be able to transition COVID testing work that we're doing in those municipalities to other municipal clinical services in that same market, as one goes off, the other one will come on. The two areas that we really have a good niche on is homeless services and the work that we're doing in public schools. I also should add, you know, another, you know, niche that we've really grown in is the healthcare at sea.
You know, we have really developed a wonderful program for Carnival Cruise Line, and that relationship continues to expand at a very, very rapid pace, and we're now in conversation with several other significant cruise providers to do a similar program. Good growth on multiple fronts and we've closed some deals. We've got to close additional deals and then it's all about execution for the rest of the year for us.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Ryan MacDonald with Needham. Please go ahead.
Thanks for taking my questions. Stan and Andre, congrats on a great quarter. Good morning.
Thank you, Ryan.
You know, I just want to start with a clarifying question on the COVID revenue. It sounds like that right now the balancing act is more of a maybe a supply issue, if you will, of making sure that you're not over-investing in headcount as you transition versus a more of a demand problem of finding ways to replace that COVID revenue from interested customers. Is that the right way to think about sort of what's kind of going on during this COVID transition?
Yeah, Ryan, I think you definitely articulate it correctly. Demand for services are very strong with existing and several new customers. Now it's just a matter of working out the timing of these new projects to make sure that as a group of medical personnel become available by concluding their COVID testing contract, we can quickly prepare them and then get them assigned to new work. It's a balancing act. We've gotten pretty good at it, as demonstrated in Q1, and it actually should be a little bit easier for us in Q2 because we're just dealing with a smaller bucket of business, COVID testing in Q2 kinda going from $37 million-$38 million down to about $20 million of conversion that we need to do.
We've got good customers that are patient. They're working with us on starting these new programs, and we feel confident we can make that transition pretty seamlessly.
All right. That's a really helpful color. Thanks. You know, as a follow-up, you know, I wanted to touch more on the recent success you've had with payers. Obviously, you already talked about Aetna, but you also recently announced a win with Empire in New York, New York and New Jersey. Can you just give a-
Mm-hmm.
Provide a little more color on sort of how this deal is structured? Would we think of this as more of a traditional PMPM structure? And then, you know, how do you start to penetrate that 4.5 million member opportunity, you know, across the three groups, as we look throughout the remainder of 2022 and beyond? Thanks.
Yeah, Ryan. I mean, it's actually more than just Aetna and Empire. There are other companies that we've negotiated agreements with. Those are fee for service visits that we have a contract to perform. Just basically think of urgent care at home services. Reimbursement is very similar to what an urgent care center receives when someone walks into their building. We've negotiated very similar fee structures when we send someone to the home and conduct a similar medical test or medical procedure. The testing of those services, the technology, the processes are taking place as we speak. They will continue to get ramped up during the course of the year with the intent of 2023 of really making a strong marketing and operational push into that program.
Overall, we feel very bullish on a direct-to-consumer offering, side by side with our business-to-business offering that we currently conduct. There's just a lot of opportunity for us in the way we provide clinical services and, you know, we're off to a good start. We are signing these contracts now to have them in place so we can test the billing system integration, so we can test the EMR integration, you know, kinda going through all the operational flows and testing in 2022, so when 2023 arrives, we're off to the races in a very productive manner.
Helpful, Color. Thanks a lot for taking my questions.
Thank you Ryan.
Bye.
Thank you. Our next question is from Richard Close with Canaccord Genuity. Please go ahead.
Yeah, thanks for the follow-up. Andre, I was wondering if you could just go over the gross margins again in the quarter. On my side it broke up a little bit. Can you talk a little bit, just remind us, of the gross margin targets for both mobile health and transportation longer term?
Sure. Total gross margin during Q1 2021 was about 33.8%. Actually Q1 of this year was 33.8% versus last year at 28.2%. It was a 5.7% increase in our gross margin, and most of that was driven by the mobile health segment of the business. In the mobile health segment of the business, we were able to, you know, sign up, you know, more contracts at higher hourly base rates. Some of those improvements were offset by, you know, higher costs of labor, but we did plan on that, you know, in our guidance. Plus, we also had some savings in the average per case lab fees that we historically paid for. Q1 last year was fairly expensive.
In transportation, we did 22.7% last year as well as this year. We were able to drive some, you know, top-line improvement in transportation with increase in, hourly or daily base contracts as well as higher trip prices. Those improvements were offset by higher labor costs and the cost of fuel. Both those, obviously, we also plan on, you know, on inflation. Overall, you know, 5.7% improvement, you know, in the total business in terms of gross margin. In terms of 2022, we have not really given guidance on gross margins. We did, you know, revenue and EBITDA. Part of that is the same thing as with the quarterly the lack of quarterly guidance because, you know, 2022, there are a lot of moving parts, new contracts, transition.
We internally do track the gross margin by market and by segment, so we know exactly the margins, you know, in each one of our markets. It's, you know, kind of a moving target, the same as, you know, with the quarterly guidance that I said earlier. We are not planning on giving that at this point in time. There's a lot of transition this year. We feel comfortable with the EBITDA guidance. It's a combination obviously of gross margin that we manage as well as the SG&A cost that we manage.
Okay. On the mobile health, I think in the past you said something about a 50% gross margin. Is that still a long-term target?
Yeah. Sorry, I missed that one. In terms of future guidance, we have stated that, you know, the long-term margin is 50%-53% on mobile health. That's still our target margins. Then on transportation side, we also, you know, have guided that we are aiming for 40%-42% margins.
Thank you.
Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Stan Vashovsky for closing remarks.
Thank you. Well, that concludes our call this morning. Clearly, we started 2022 with significant momentum across our businesses. We expanded our direct-to-consumer testing. The lockup, the majority of the lockup has expired. We've executed new contracts. We've expanded into Canada. Overall, the business looks healthy, and we feel very confident about the guidance for the rest of the year. I'm optimistic that we have set the stage for a very successful year, and I look forward to our next quarterly update in August. Thank you, everybody, for joining.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.