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The Providence Service Corporation Reports Second Quarter 2019 Results

Highlights for the Second Quarter of 2019:

  • Revenue from continuing operations of $363.9 million, an increase of 5.9% from the second quarter of 2018
  • Loss from continuing operations, net of tax, of $3.4 million, or loss of $0.35 per diluted common share
  • Adjusted EBITDA of $5.8 million, Adjusted Net Income of $2.2 million and Adjusted EPS of $0.07
  • Matrix, on a standalone basis, recorded a loss of $3.6 million and Adjusted EBITDA of $13.7 million or 19.0% of revenue, Home solution continues to outperform
  • Authorization of new $100.0 million share repurchase program
  • Extended the $200.0 million Credit Agreement
  • Completed the organizational consolidation

ATLANTA, Aug. 07, 2019 (GLOBE NEWSWIRE) -- The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), today reported financial results for the three and six months ended June 30, 2019.

"In the second quarter of 2019, we continued to see strong revenue growth of 5.9% compared to the second quarter of 2018" stated Carter Pate, Interim Chief Executive Officer.  "Despite our top-line momentum, a confluence of industry headwinds pressured profitability during the quarter.  Most notably, we continued to experience historically high utilization due to an overall shift in our membership base and greater trip frequencies driven by behavioral health and substance abuse populations. While the causes of increased utilization have evolved over time, our company has a long history of working productively with customers to realign margins when utilization diverges meaningfully from expectations.  We have successfully renegotiated a number of our mid-sized contracts and continue to negotiate with our larger states and payors.  Based upon the strength of our client partnerships, we are optimistic that we will address the unexpected and unusual circumstances.

Additionally, our transportation costs with our national transportation carriers increased.  To address this, we have renegotiated our national carrier contracts to reduce certain transaction fees.  We have also realigned our transportation operations to reinstate market-level oversight of transportation expenses which were challenged by a confluence of the Company’s transition to a centralized operating model and market-wide factors.

We continue to transform our technology platform as we have successfully converted two contracts onto the Circulation platform and are on schedule to launch additional larger contracts by year end.  In conclusion, in light of the short-term challenges and headwinds in the first half, management has taken aggressive action and remains confident in our long-term prospects to grow and create profitable value for our shareholders.”

Organizational Consolidation

During the second quarter of 2019, the Company completed the organizational consolidation and remains on track to realize run-rate cost savings of $10.0 million by the end of this year.  As previously disclosed, our former Corporate and Other segment was combined with the NET Services segment.

Share Repurchase Authorization

On August 6, 2019, the Providence Board of Directors approved a new share repurchase program under which the Company may purchase up to $100.0 million of its outstanding common stock.  The new share repurchase program, unless terminated earlier, expires on December 31, 2019.

Extension of Credit Agreement

On July 12, 2019, the Company entered into the Sixth Amendment to its Credit Agreement, which, among other things, extended the maturity date of the Company's $200.0 million revolving credit facility to August 2, 2020.

Second Quarter 2019 Results

For the second quarter of 2019, the Company reported revenue of $363.9 million, an increase of 5.9% from $343.7 million in the second quarter of 2018.

Operating loss was $3.3 million, or 0.9% of revenue, in the second quarter of 2019, compared to operating income of $3.4 million, or 1.0% of revenue, in the second quarter of 2018.  Loss from continuing operations, net of tax, in the second quarter of 2019 was $3.4 million, or $0.35 loss per diluted common share, compared to income from continuing operations, net of tax, of $2.0 million, or $0.08 earnings per diluted common share, in the second quarter of 2018.

Adjusted EBITDA was $5.8 million, or 1.6% of revenue, in the second quarter of 2019, compared to $10.6 million, or 3.1% of revenue, in the second quarter of 2018.

Adjusted Net Income in the second quarter of 2019 was $2.2 million, or $0.07 earnings per diluted common share, compared to $6.1 million, or $0.33 earnings per diluted common share, in the second quarter of 2018.

The quarter-over-quarter increase in revenue was primarily due to a new state contract in West Virginia and new managed care organization ("MCO") contracts in Minnesota and Louisiana, higher utilization across multiple not at-risk and reconciliation contracts and the addition of Circulation, which contributed $11.3 million of revenue.  These increases were partially offset by the impact of contracts we no longer serve, including a state contract in Rhode Island and an MCO contract in California.

Adjusted EBITDA decreased in the second quarter of 2019 due to the impact of increased transportation costs, as well as increased utilization across multiple contracts.  In addition, savings generated as part of the Organizational Consolidation were partially offset by higher operational expenses related to Circulation which was acquired in the third quarter of 2018.

Matrix - Equity Investment

During the quarter, Matrix completed its integration of HealthFair and rolled out a new organizational structure.  Operations were reorganized from a segment-based business to an integrated product-based platform consisting of Home, Mobile, Quality, and Innovation solutions.

Matrix continues to exceed its internal expectations, despite a volume churn setback at the onset of the year.  Matrix had incremental Home solution volume driven by a combination of higher organic membership growth and new logo sales momentum.  As expected, Matrix is managing through a challenging year for its Mobile solution; however, there are indications of a potentially stronger second half of 2019.  For the second quarter of 2019, Matrix’s revenue was $72.2 million, a decrease of 8.0% from $78.4 million in the second quarter of 2018.  Matrix had operating income of $1.5 million for the second quarter of 2019, compared to operating income of $4.6 million for the second quarter of 2018.

Matrix recorded Adjusted EBITDA of $13.7 million, or 19.0% of revenue, for the second quarter of 2019, compared to $16.4 million, or 20.9% of revenue, in the second quarter of 2018.

For the second quarter of 2019, Providence recorded a loss in equity earnings of $1.3 million related to its Matrix equity investment compared to a loss of $0.2 million for the second quarter of 2018.

As of June 30, 2019, Providence's ownership interest and equity investment in Matrix was 43.6% and $157.9 million, respectively.

Investor Presentation and Conference Call

Providence will hold a conference call to discuss its financial results on Thursday, August 8, 2019 at 8:00 a.m. ET.  An investor presentation has been prepared to accompany the conference call and can be found on the Company’s website (investor.prscholdings.com).  To access the call, please dial:

US toll-free: 1 (844) 244 3865
International: 1 (518) 444 0681
Passcode: 7653996

Replay (available until August 15, 2019):
US toll-free: 1 (855) 859 2056
International: 1 (404) 537 3406
Passcode: 7653996

You may also access the conference call via webcast at investor.prscholdings.com, where the call also will be archived.

About Providence

The Providence Service Corporation, through its fully-owned subsidiary LogistiCare Solutions, LLC, is the nation's largest manager of non-emergency medical transportation programs for state governments and managed care organizations. Its range of services includes call center management, network credentialing, vendor payment management and non-emergency medical transport management.  The Company also holds a minority interest in Matrix Medical Network which provides a broad array of assessment and care management services to individuals that improve health outcomes and health plan financial performance.  For more information, please visit prscholdings.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial results prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes EBITDA and Adjusted EBITDA for the Company and its segments, and Adjusted Net Income and Adjusted EPS for the Company, which are performance measures that are not recognized under GAAP.  EBITDA is defined as income (loss) from continuing operations, net of taxes, before: (1) interest expense, net, (2) provision (benefit) for income taxes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before certain items, including (as applicable): (1) restructuring and related charges, including costs related to our corporate reorganization, (2) equity in net loss of investee, (3) certain litigation related expenses, settlement income or other negotiated settlements relating to certain matters from prior periods, (4) certain transaction and related costs and (5) asset impairment charges. Adjusted Net Income is defined as income (loss) from continuing operations, net of tax, before certain items, including (1) restructuring and related charges, (2) equity in net loss of investee, (3) certain litigation related expenses, settlement income or other negotiated settlements relating to certain matters from prior periods, (4) gain or loss on sale of equity investments, (5) excess tax charges associated with long-term incentive plans, (6) certain transaction and related costs, (7) the income tax impact of such adjustments and (8) asset impairment charges.  Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock and (2) income allocated to participating stockholders, divided by the diluted weighted-average number of common shares outstanding.  We utilize these non-GAAP performance measures, which exclude certain expenses and amounts, because we believe the timing of such expenses is unpredictable and not driven by our core operating results, and therefore render comparisons with prior periods as well as with other companies in our industry less meaningful.  We believe such measures allow investors to gain a better understanding of the factors and trends affecting the ongoing operations of our business.  We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities.  In addition, our net loss in equity investee is excluded from these measures, as we do not have the ability to manage these ventures, allocate resources within the ventures, or directly control their operations or performance.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation from or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.  We urge you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “anticipate,” “should” and “likely” and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, our continuing relationship with government entities and our ability to procure business from them, our ability to manage growing and changing operations, the implementation of healthcare reform law, government budget changes and legislation related to the services that we provide, our ability to renew or replace existing contracts that have expired or are scheduled to expire with significant clients, and other risks detailed in Providence’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018.  Providence is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

Investor Relations Contact                                                                                                                              
Bryan Wong – Investor Relations                                            
(404) 888-5902

--financial tables to follow--

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands except share and per share data)
                 
    Three months ended June 30,   Six months ended June 30,
      2019       2018       2019       2018  
Service revenue, net   $ 363,911     $ 343,736     $ 731,726     $ 680,432  
                 
Operating expenses:                
Service expense   345,948     317,741     686,446     620,856  
General and administrative expense   16,860     18,139     36,262     36,037  
Asset impairment charge       678         678  
Depreciation and amortization   4,353     3,747     8,827     7,327  
Total operating expenses   367,161     340,305     731,535     664,898  
Operating (loss) income   (3,250 )   3,431     191     15,534  
                 
Other expenses (income):                
Interest expense, net   301     232     604     558  
Other income   (66 )       (132 )    
Equity in net loss of investee   1,315     174     2,971     2,519  
(Loss) income from continuing operations before income taxes   (4,800 )   3,025     (3,252 )   12,457  
(Benefit) provision for income taxes   (1,391 )   1,062     (1,157 )   3,071  
(Loss) income from continuing operations, net of tax   (3,409 )   1,963     (2,095 )   9,386  
Loss from discontinued operations, net of tax   1,697     (13,366 )   966     (15,063 )
Net loss   (1,712 )   (11,403 )   (1,129 )   (5,677 )
Net income (loss) from discontinued operations attributable to noncontrolling interest       188         (108 )
Net loss attributable to Providence   $ (1,712 )   $ (11,215 )   $ (1,129 )   $ (5,785 )
                 
Net loss attributable to common stockholders   $ (2,810 )   $ (12,321 )   $ (3,314 )   $ (7,980 )
                 
Basic (loss) earnings per common share:                
Continuing operations   $ (0.35 )   $ 0.08     $ (0.33 )   $ 0.54  
Discontinued operations   0.13     (1.03 )   0.07     (1.15 )
Basic loss per common share   $ (0.22 )   $ (0.95 )   $ (0.26 )   $ (0.61 )
                 
Diluted (loss) earnings per common share:                
Continuing operations   $ (0.35 )   $ 0.08     $ (0.33 )   $ 0.54  
Discontinued operations   0.13     (1.02 )   0.07     (1.15 )
Diluted loss per common share   $ (0.22 )   $ (0.94 )   $ (0.26 )   $ (0.61 )
                 
Weighted-average number of common                
shares outstanding:                
Basic   12,973,496     13,008,106     12,937,054     13,056,765  
Diluted   12,973,496     13,088,182     12,937,054     13,141,198  


The Providence Service Corporation
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
         
    June 30, 2019   December 31, 2018
Assets        
Current assets:        
Cash and cash equivalents   $ 29,804     $ 5,678  
Accounts receivable, net of allowance   154,864     147,756  
Other current assets (1)   47,765     50,495  
Current assets of discontinued operations (2)   4,181     7,051  
Total current assets   236,614     210,980  
Operating lease right-of-use assets   19,354      
Property and equipment, net   21,548     22,965  
Goodwill and intangible assets, net   158,244     161,362  
Equity investment   157,948     161,503  
Other long-term assets (3)   12,124     12,835  
Total assets   $ 605,832     $ 569,645  
         
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:        
Current portion of operating lease liabilities   $ 6,892     $  
Current portion of long-term obligations   308     718  
Other current liabilities (4)   152,168     138,908  
Current liabilities of discontinued operations (2)   1,280     3,257  
Total current liabilities   160,648     142,883  
Long-term obligations, less current portion   199     353  
Operating lease liabilities, less current portion   13,810      
Other long-term liabilities (5)   36,698     38,019  
Total liabilities   211,355     181,255  
         
Mezzanine and stockholders' equity        
Convertible preferred stock, net   77,234     77,392  
Stockholders' equity   317,243     310,998  
Total liabilities, redeemable convertible preferred stock and stockholders' equity   $ 605,832     $ 569,645  
                 

(1) Includes other receivables, prepaid expenses and short-term restricted cash.
(2) Includes assets or liabilities primarily related to WD Services' former Saudi Arabian operation.
(3) Includes other assets and long-term restricted cash.
(4) Includes accounts payable, accrued expenses, accrued transportation costs, deferred revenue and reinsurance and related liability reserves.
(5) Includes long-term liabilities of discontinued operations, other long-term liabilities,  and deferred tax liabilities.

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
         
    Six months ended June 30
      2019       2018  
Operating activities                
Net loss   $ (1,129 )   $ (5,677 )
Depreciation and amortization   8,827     13,677  
Stock-based compensation   3,392     4,278  
Asset impairment charge       9,881  
Equity in net loss of investee   2,971     2,468  
Other non-cash items   (864 )   (2,765 )
Changes in working capital   9,874     (29,778 )
Net cash provided by (used in) operating activities   23,071     (7,916 )
Investing activities        
Purchase of property and equipment   (4,277 )   (8,792 )
Proceeds from note receivable       3,130  
Net cash used in investing activities   (4,277 )   (5,662 )
Financing activities        
Preferred stock dividends   (2,185 )   (2,190 )
Repurchase of common stock, for treasury   (372 )   (56,428 )
Proceeds from common stock issued pursuant to stock option exercise   6,383     12,405  
Repayment of debt   (12,000 )    
Proceeds from debt   12,000      
Capital lease payments and other   (566 )   (1,793 )
Net cash provided by (used in) financing activities   3,260     (48,006 )
Effect of exchange rate changes on cash       (53 )
Net change in cash and cash equivalents   22,054     (61,637 )
Cash, cash equivalents and restricted cash at beginning of period   12,367     101,606  
Cash, cash equivalents and restricted cash at end of period (2)   $ 34,421     $ 39,969  
                 

(1) Includes both continuing and discontinued operations.
(2) Includes restricted cash of $3,728 at June 30, 2019 and restricted cash of $5,128 at June 30, 2018.


The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
    Three months ended June 30, 2019
   
NET
Services
 
Matrix
Investment
  Total
Continuing
Operations
             
Service revenue, net $ 363,911     $     $ 363,911  
             
Operating expenses:          
Service expense 345,948         345,948  
General and administrative expense 16,860         16,860  
Depreciation and amortization 4,353         4,353  
Total operating expenses 367,161         367,161  
             
Operating loss (3,250 )       (3,250 )
             
Other expenses (income):          
Interest expense, net 301         301  
Other income (66 )       (66 )
Equity in net loss of investee     1,315     1,315  
Loss from continuing          
operations before income taxes (3,485 )   (1,315 )   (4,800 )
Benefit for income taxes (1,251 )   (140 )   (1,391 )
Loss from continuing operations, net of taxes (2,234 )   (1,175 )   (3,409 )
             
Interest expense, net 301         301  
Benefit for income taxes (1,251 )   (140 )   (1,391 )
Depreciation and amortization 4,353         4,353  
             
EBITDA 1,169     (1,315 )   (146 )
             
Restructuring and related charges (1) 1,658         1,658  
Transaction costs (2) 2,950         2,950  
Equity in net loss of investee     1,315     1,315  
             
Adjusted EBITDA $ 5,777     $     $ 5,777  
                         
(1) Restructuring and related charges include severance costs of $342 and organizational consolidation costs of $1,316.
(2) Transaction costs related to the integration of Circulation and certain transaction-related expenses.


The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
 (in thousands) (Unaudited)
    Three months ended June 30, 2018
   
NET
Services 
 
Matrix
Investment
  Total
Continuing
Operations 
             
Service revenue, net $ 343,736     $     $ 343,736  
             
Operating expenses:          
Service expense 317,741         317,741  
General and administrative expense 18,139         18,139  
Asset impairment charge 678         678  
Depreciation and amortization 3,747         3,747  
Total operating expenses 340,305         340,305  
             
Operating income 3,431         3,431  
             
Other expenses:          
Interest expense, net 232         232  
Equity in net loss of investee     174     174  
Income (loss) from continuing          
operations, before income tax 3,199     (174 )   3,025  
Provision (benefit) for income taxes 1,082     (20 )   1,062  
Income (loss) from continuing operations, net of taxes 2,117     (154 )   1,963  
             
Interest expense, net 232         232  
Provision (benefit) for income taxes 1,082     (20 )   1,062  
Depreciation and amortization 3,747         3,747  
             
EBITDA 7,178     (174 )   7,004  
             
Asset impairment charge 678         678  
Restructuring and related charges (1) 2,823         2,823  
Transaction costs 83         83  
Equity in net loss of investee     174     174  
Litigation income (2) (201 )       (201 )
             
             
Adjusted EBITDA $ 10,561     $     $ 10,561  
                         
(1) Restructuring and related charges include value enhancement implementation initiative costs of $336 and organizational consolidation costs of $2,487.
(2) Resolution of accruals, resulting in current period income, related to defense cost for a putative stockholder class action derivative complaint.


The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
    Six months ended June 30, 2019
   
NET
Services
 
Matrix
Investment
  Total
Continuing
Operations
             
Service revenue, net $ 731,726     $     $ 731,726  
             
Operating expenses:          
Service expense 686,446         686,446  
General and administrative expense 36,262         36,262  
Depreciation and amortization 8,827         8,827  
Total operating expenses 731,535         731,535  
             
Operating income 191         191  
             
Other expenses (income):          
Interest expense, net 604         604  
Other income (132 )       (132 )
Equity in net loss of investee     2,971     2,971  
Loss from continuing          
operations before income tax (281 )   (2,971 )   (3,252 )
Benefit for income taxes (680 )   (477 )   (1,157 )
Income (loss) from continuing operations, net of taxes 399     (2,494 )   (2,095 )
             
Interest expense, net 604         604  
Benefit for income taxes (680 )   (477 )   (1,157 )
Depreciation and amortization 8,827         8,827  
             
EBITDA 9,150     (2,971 )   6,179  
             
Restructuring and related charges (1) 4,470         4,470  
Transaction costs (2) 4,339         4,339  
Equity in net loss of investee     2,971     2,971  
Litigation expense 9         9  
             
Adjusted EBITDA $ 17,968     $     $ 17,968  
                         
(1) Restructuring and related charges include severance costs of $1,368 and organizational consolidation costs of $3,102.
(2) Transaction costs related to the integration of Circulation and certain transaction-related expenses.
                         


The Providence Service Corporation 
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
    Six months ended June 30, 2018
   
NET 
Services 
 
Matrix
Investment
  Total
Continuing
Operations 
             
Service revenue, net $ 680,432     $     $ 680,432  
             
Operating expenses:          
Service expense 620,856         620,856  
General and administrative expense 36,037         36,037  
Asset impairment charge 678         678  
Depreciation and amortization 7,327         7,327  
Total operating expenses 664,898         664,898  
             
Operating income 15,534         15,534  
             
Other expenses:          
Interest expense, net 558         558  
Other gain          
Equity in net loss of investee     2,519     2,519  
Income (loss) from continuing          
operations, before income tax 14,976     (2,519 )   12,457  
Provision (benefit) for income taxes 3,610     (539 )   3,071  
Income (loss) from continuing operations, net of taxes 11,366     (1,980 )   9,386  
             
Interest expense, net 558         558  
Provision (benefit) for income taxes 3,610     (539 )   3,071  
Depreciation and amortization 7,327         7,327  
             
EBITDA 22,861     (2,519 )   20,342  
             
Asset impairment charge 678         678  
Restructuring and related charges (1) 4,094         4,094  
Transaction costs 118         118  
Equity in net loss of investee     2,519     2,519  
Litigation income (2) (201 )       (201 )
             
             
Adjusted EBITDA $ 27,550     $     $ 27,550  
                         
(1) Restructuring and related charges include value enhancement implementation initiative costs of $1,159 and organizational consolidation costs of $2,935.
(2) Resolution of accruals, resulting in current period income, related to defense cost for a putative stockholder class action derivative complaint.


The Providence Service Corporation
Summary Financial Information of Equity Investment in Matrix Medical Network (1)
(in thousands)
(Unaudited)

  Three months ended June 30,   Six months ended June 30, 2018  
  2019   2018   2019   2018  
Revenue $ 72,161     $ 78,409     $ 139,144     $ 145,839    
Operating expense (2) 59,362     64,423     114,581     123,590    
Depreciation and amortization 11,256     9,359     22,465     18,411    
Operating income 1,543     4,627     2,098     3,838    
                 
Interest expense 6,384     5,940     12,777     16,283    
Benefit for income taxes (1,180 )   (444 )   (2,531 )   (3,058 )  
Net loss (3,661 )   (869 )   (8,148 )   (9,387 )  
                 
Interest 43.6 %   43.6 %   43.6 %   43.6 %  
Net loss - Equity Investment (1,597 )   (379 )   (3,555 )   (4,095 )  
Management fee and other 282   (3)   205   (4)   584   (3)   1,576   (5)  
Equity in net loss of investee $ (1,315 )   $ (174 )   $ (2,971 )   $ (2,519 )  
                 
Net Debt (6) $ 294,453                
                 

(1) The results of our equity method investment are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.
(2) Excludes depreciation and amortization.
(3) Includes amounts relating to management fees due from Matrix to Providence.
(4) Includes amounts related to management fees due from Matrix to Providence of $307 less Providence share-based stock compensation expense of $102.
(5) Includes amounts related to management fees due from Matrix to Providence of $1,739 less Providence share-based stock compensation expense of $163.
(6) Represents cash of $32,247 and debt of $326,700 on Matrix's standalone balance sheet as of June 30, 2019.


The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA: Matrix Medical Network (1)(2)(4)
(in thousands) (Unaudited)

  Three months ended June 30,   Six months ended June 30, 2018
  2019   2018   2019   2018
Revenue $ 72,161     $ 78,409     $ 139,144     $ 145,839  
Operating expense (3) 59,362     64,423     114,581     123,590  
Depreciation and amortization 11,256     9,359     22,465     18,411  
Operating income 1,543     4,627     2,098     3,838  
               
Interest expense 6,384     5,940     12,777     16,283  
Benefit for income taxes (1,180 )   (444 )   (2,531 )   (3,058 )
Net loss (3,661 )   (869 )   (8,148 )   (9,387 )
               
Depreciation and amortization 11,256     9,359     22,465     18,411  
Interest expense 6,384     5,940     12,777     16,283  
Benefit for income taxes (1,180 )   (444 )   (2,531 )   (3,058 )
EBITDA 12,799     13,986     24,563     22,249  
Management fees 637     696     1,297     3,754  
Acquisition costs     77         2,246  
Integration costs 5     1,636     1,488     2,362  
Transaction costs 286         330     6  
Adjusted EBITDA $ 13,727     $ 16,395     $ 27,678     $ 30,617  
               

(1) Matrix's Adjusted EBITDA is not included within Providence's Adjusted EBITDA in any period presented.
(2) Providence accounts for its proportionate share of Matrix's results using the equity method.
(3) Excludes depreciation and amortization.
(4) 2018 includes the results of HealthFair since the date of acquisition on February 16, 2018.


The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Net Income per Common Share:
(in thousands, except share and per share data)
(Unaudited)

    Three months ended June 30,   Six months ended June 30,
    2019       2018       2019       2018  
(Loss) income from continuing operations, net of tax $ (3,409 )   $ 1,963     $ (2,095 )   $ 9,386  
               
Asset impairment charge     678         678  
Restructuring and related charges, including accelerated depreciation related to the Organizational Consolidation  (1) 1,755     2,969     4,785     4,241  
Transaction costs (2) 2,950     83     4,339     118  
Equity in net loss of investee 1,315     174     2,971     2,519  
Intangible amortization expense 1,559     730     3,117     1,460  
Litigation income     (201 )   9     (201 )
Tax effected impact of adjustments (1,986 )   (335 )   (5,121 )   (1,267 )
                 
Adjusted Net Income 2,184     6,061     8,005     16,934  
                 
Dividends on convertible preferred stock (1,098 )   (1,106 )   (2,185 )   (2,195 )
Income allocated to participating securities (146 )   (662 )   (782 )   (1,973 )
                 
Adjusted Net Income available to common stockholders $ 940     $ 4,293     $ 5,038     $ 12,766  
                 
Adjusted EPS $ 0.07     $ 0.33     $ 0.39     $ 0.97  
                 
Diluted weighted-average number of common shares outstanding 13,011,033     13,088,182     12,982,630     13,141,198  

(1) See the above Adjusted EBITDA tables for details of these charges for each period presented.
(2) Transaction costs relate to the integration of Circulation and certain transaction-related expenses.

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Source: Providence Service Corporation