Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

FORM 8-K 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 7, 2018

The Providence Service Corporation
(Exact name of registrant as specified in its charter)
 

 
Delaware
 
001-34221
 
86-0845127
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
 
 
700 Canal Street, Third Floor
Stamford, Connecticut
 
06902
 
 
 
 
 
 
 
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (203) 307-2800

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨

 






Item 2.02 Results of Operations and Financial Condition.

On August 7, 2018, The Providence Service Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2018. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
 
On August 7, 2018, the Company posted an investor presentation to the Investor Relations section of its website www.prscholdings.com, in connection with the earnings call for the quarter ended June 30, 2018. A copy of the investor presentation is being furnished as Exhibit 99.2 to this Current Report on Form 8-K.  
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number
Description
 
 
99.1



99.2
 





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
THE PROVIDENCE SERVICE CORPORATION
 
 
 
Date: August 7, 2018
 
By:
 
/s/ William Severance
 
 
Name:
 
William Severance
 
 
Title:
 
Interim Chief Financial Officer

Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12395386&doc=4
Providence Service Corporation Reports Second Quarter 2018 Results

Highlights for the Second Quarter of 2018:

Revenue from continuing operations of $411.8 million, a 0.9% increase from the second quarter of 2017
Loss from continuing operations, net of tax, of $11.4 million, or $0.94 per diluted common share, includes impairment charges of $9.9 million, or $0.75 per diluted common share
Adjusted Net Income of $3.1 million; Adjusted EPS of $0.13
Segment level Adjusted EBITDA of $18.0 million
Repurchased 256 thousand shares during the second quarter of 2018


STAMFORD, CT August 7, 2018 – The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), today reported financial results for the three and six months ended June 30, 2018.

“Our year over year revenue grew in the second quarter although we gave back a little of the positive earnings momentum we had been building over the last several quarters,” stated Carter Pate, Interim Chief Executive Officer. He continued, “NET Services was impacted by higher transportation costs as we witnessed a shift in mix to some of our higher cost service offerings and an increase in distance traveled per trip. Historically, the nature of the NEMT transport business can lead to periods of higher costs, as public policy decisions and other influences can drive a change in member behavior. Our network is uniquely qualified to quickly respond to these changes, and to provide the critical transportation benefit to help improve member quality of life outcomes. While these higher costs adversely impact profitability in the short-term, once a trend fully emerges we generally are able to bring our contractual rates back in line with costs. This adjustment may take a number of quarters, which is why we feel that the business should be measured over the long-term, and we still feel both confident and positive in our long-term view of NET Services. During the second quarter we laid the groundwork for our organizational consolidation and feel confident in our ability to execute this plan and achieve the savings. In addition, we are pleased with the close of the sale of the Ingeus French operations. As part of the overall review of the strategic options for WD Services, this was an important first step to provide flexibility in our options to achieve the best outcome for our shareholders. In addition, we were very encouraged by the recent announcements from the UK Ministry of Justice on our probation services contract, as we now feel we have a clear line of sight and a viable path forward on this contract."

Second Quarter 2018 Results

For the second quarter of 2018, the Company reported revenue of $411.8 million, an increase of 0.9% from $408.0 million in the second quarter of 2017. The new revenue standard that the company adopted in the first quarter of 2018 resulted in a negative impact to revenue of $4.3 million in the second quarter of 2018 versus the prior standard. In addition, WD Services benefited from favorable exchange rates, which provided a positive revenue impact of $2.8 million.

Loss from continuing operations, net of tax, in the second quarter of 2018 was $11.4 million, or $0.94 per diluted common share, compared to income from continuing operations net of tax of $3.9 million, or $0.19 per diluted common share, in the second quarter of 2017. Loss from continuing operations, net of tax, in the second quarter of 2018 includes impairment charges of $9.9 million. The loss and income from continuing operations, net of tax, in the second quarters of 2018 and 2017 include restructuring and related charges of $3.9 million and $1.9 million, respectively. The loss from continuing operations, net of tax, in the second quarter of 2018 also includes $0.3 million of transaction costs related to the sale of Ingeus France. Adjusted Net Income in the second quarter of 2018 was $3.1 million, or $0.13 per diluted common share, compared to $6.1 million, or $0.32 per diluted common share, in the second quarter of 2017.

Segment-level Adjusted EBITDA was $18.0 million in the second quarter of 2018, compared to $20.6 million in the second quarter of 2017. Adjusted EBITDA was $11.5 million in the second quarter of 2018, compared to $14.9 million in the second quarter of 2017.

In the three months ended June 30, 2018 the new revenue recognition standard resulted in a negative impact to operating income and Adjusted EBITDA of $0.1 million versus the prior standard.






Year to Date 2018 Results

For the first six months of 2018, the Company reported revenue of $817.8 million, an increase of 1.3% from $807.5 million in the comparable period of 2017. Excluding the effects of changes in currency exchange rates, revenue from continuing operations increased 0.1%. The new revenue recognition standard resulted in a negative impact to revenue of $13.6 million versus the prior standard.

The loss from continuing operations, net of tax, for the first six months of 2018 was $5.6 million, or $0.61 per diluted common share, compared to income from continuing operations, net of tax, of $5.8 million, or $0.22 per diluted common share, in the first six months of 2017. Loss from continuing operations, net of tax, for the six months of 2018 includes impairment charges of $9.9 million. The loss and income from continuing operations, net of tax, for the first six months of 2018 and 2017 include restructuring and related charges of $6.8 million and $4.3 million, respectively. The loss from continuing operations, net of tax, in the first six months of 2018 also includes $0.7 million of transaction costs related to the sale of Ingeus France. Adjusted Net Income in the first six months of 2018 was $14.1 million, or $0.78 per diluted common share, compared to $12.7 million, or $0.67 per diluted common share, in the first six months of 2017.

Segment-level Adjusted EBITDA was $44.8 million in the first six months of 2018, compared to $43.1 million in the comparable period of 2017. Adjusted EBITDA was $31.1 million in the first six months of 2018, compared to $30.5 million in the first six months of 2017.

In the Six Months Ended June 30, 2018 the new revenue recognition standard resulted in a negative impact to operating income and Adjusted EBITDA of $3.6 million versus the prior standard.


Organizational consolidation

On April 11, 2018, the Company's Board of Directors approved an organizational consolidation plan to integrate substantially all activities and functions performed at the corporate holding company level into LogistiCare to create an organizational structure with strategic, operational and cultural alignment and with a single executive leadership team. During the quarter we have progressed our transition plans and anticipate achieving $10 million of annualized cost reduction by the second quarter of 2019.

Extension of Credit Agreement

On June 7, 2018, the Company entered into the Fifth Amendment to its Credit Agreement, which extended the maturity date of the Company's revolving credit facility to August 2, 2019. The size of the revolving credit facility remains unchanged at $200 million; however, certain covenants under the Credit Agreement were amended to provide for greater operational, financial and strategic flexibility, including the implementation of the Company’s previously announced organizational consolidation plan.

Sale of Ingeus France

On June 11, 2018, the Company entered into a Share Purchase Agreement to sell its WD Services' operations in France. The sale subsequently closed on July 17, 2018. The assets and liabilities of the operations in France have been presented as held for sale at June 30, 2018. In connection with classifying these assets and liabilities as held for sale, the carrying value of the assets and liabilities was reduced to its estimated fair value less selling costs, as determined based on the purchase price. As a result, an impairment charge of $9.2 million was recorded during the second quarter and is included in "Asset impairment charge" in our financial statements.

Share Repurchases

From April 1, 2018, through August 6, 2018, the Company repurchased 256,000 shares of common stock for $18.8 million, or an average price of $73.61 per share. As of August 6, 2018, the Company has approximately $81 million of share repurchase availability under its current share repurchase program.

Since beginning to repurchase shares in the fourth quarter of 2015 through August 6, 2018, the Company has repurchased 3.86 million shares of common stock, or approximately 24% of the Company’s common stock outstanding at the beginning of the fourth quarter of 2015, for $188.6 million, or for an average price of $48.89 per share.







Segment Results

For analysis purposes, the Company provides revenue, expenses, operating income (loss), income (loss) from continuing operations, net of taxes, and Adjusted EBITDA on a segment basis. Segment results include revenue and expenses incurred by each segment, as well as an allocation of certain direct expenses incurred by Corporate and Other on behalf of the segment. No direct cash expenses were incurred by Corporate on behalf of the Matrix Investment segment. The activities reflected in Corporate and Other include executive, accounting, finance, internal audit, tax, legal, public reporting, certain strategic and corporate development functions and the results of the Company’s captive insurance company.


NET Services

NET Services revenue was $343.7 million for the second quarter of 2018, an increase of 1.5% from $338.8 million in the second quarter of 2017. Operating income was $12.0 million, or 3.5% of revenue, in the second quarter of 2018, compared to $16.0 million, or 4.7% of revenue, in the second quarter of 2017. Included in NET Services operating income in the second quarters of 2018 and 2017 were $0.3 million and $1.4 million, respectively, of restructuring and related charges and impairment charges of $0.7 million in the second quarter of 2018. NET Services Adjusted EBITDA was $16.6 million, or 4.8% of revenue, in the second quarter of 2018, compared to $20.7 million, or 6.1% of revenue, in the second quarter of 2017. Second quarter 2018 revenue includes a negative impact of $3.5 million from the adoption of the new revenue recognition standard, as the accounting for one contract changed from a gross basis to net basis. This change had no impact on operating income or Adjusted EBITDA.

NET Services revenue was $680.4 million for the first six months of 2018, an increase of 2.7% from $662.8 million for the first six months of 2017. Operating income was $31.6 million, or 4.6% of revenue, in the first six months of 2018, compared to $27.8 million, or 4.2% of revenue, in the comparable period of 2017. Included in NET Services operating income in the first six months of 2018 and 2017 were $1.2 million and $2.7 million, respectively, of restructuring and related charges and impairment charges of $0.7 million in the first six months of 2018. NET Services Adjusted EBITDA was $40.5 million, or 5.9% of revenue, in the first six months of 2018, compared to $36.9 million, or 5.6% of revenue, in the comparable period of 2017. YTD revenue includes a negative impact of $7.4 million from the adoption of the new revenue recognition standard, but this change had no impact on operating income or Adjusted EBITDA.

The quarter-over-quarter increase in NET Services revenue was primarily due to the impact of new contracts, including managed care organization (“MCO”) contracts in Indiana and Illinois and new state contracts in Texas. This increase was partially offset by the impact of contracts we no longer serve, including state contracts in New York and Connecticut, certain MCO contracts in Florida and Louisiana, and decreased membership in Virginia as well as net decreased revenue from existing contracts due to the net impact of membership and rate changes, including the impact of a retrospective rate adjustment recorded in the second quarter of 2017 for a significant contract, due to a review of utilization. NET Services Adjusted EBITDA margin in the second quarter of 2018 was negatively impacted by higher transportation costs on a per trip basis as we saw a shift in service mix to higher cost modes of transportation and higher average mileage per trip, which muted the benefits of our value enhancement efforts. Additionally, the second quarter of 2017 benefited from the retrospective rate adjustment, described above. While there were no major contract adjustments in the second quarter of 2018, this year-over-year reduction in income was partially offset by rate increases that were secured at the end of 2017 in several markets, including California and Florida, as rates were aligned to the higher costs experienced throughout 2017.


WD Services

WD Services revenue was $68.1 million for the second quarter of 2018, a decrease of 1.6% from $69.2 million in the second quarter of 2017. Excluding the impact of currency exchange rates, revenue declined 5.7% in the second quarter of 2018 versus the second quarter of 2017. Operating loss was $12.4 million in the second quarter of 2018 compared to a loss of $4.1 million in the second quarter of 2017. Included within WD Services operating loss in the second quarter of 2018 was an impairment loss of $9.2 million related to the sale of the French operations and included in both the second quarters of 2018 and 2017 were restructuring and related costs of $1.1 million and $0.5 million, respectively. WD Services Adjusted EBITDA was $1.4 million, or 2.0% of revenue, in the second quarter of 2018 compared to Adjusted EBITDA of negative $0.1 million, or negative 0.2% of revenue, in the second quarter of 2017. Second quarter 2018 revenue reflects a $0.8 million negative impact on revenue and a $0.1 million negative impact on operating income and Adjusted EBITDA as a result of the adoption of the new revenue recognition standard. WD Services benefited from favorable exchange rates in the second quarter of 2018, which provided a positive revenue impact of $2.8 million, but an immaterial impact on Adjusted EBITDA.






WD Services revenue was $137.4 million for the first six months of 2018, a decrease of 5.0% from $144.6 million in the first six months of 2017. Excluding the effects of changes in currency exchange rates, revenue declined 11.4% in the first six months of 2018 versus the first six months of 2017. Operating loss was $14.4 million in the first six months of 2018, compared to an operating loss of $1.9 million in the comparable period of 2017. Included within WD Services operating loss in the first six months of 2018 was an impairment charge of $9.2 million related to the sale of the French operations and for the first six months of both 2018 and 2017, restructuring and related costs of $2.7 million and $1.5 million, respectively. WD Services Adjusted EBITDA was $4.3 million, or 3.2% of revenue, in the first six months of 2018 compared to $6.1 million, or 4.2% of revenue, in the comparable period of 2017. For the first six months of 2018, the application of the new revenue standard had a negative impact of $6.2 million and $3.6 million on revenue and operating income respectively.

The quarter-over-quarter decrease in WD Services revenue was primarily attributable to the ongoing wind-down of the segment’s legacy UK employability program and the impact of the adoption of the new revenue standard of $0.8 million. The UK Ministry of Justice recently announced changes to WD Services probation services contracts. While the changes will have a very positive financial impact to our offender rehabilitation contract, they did result in recording a reduction of revenue of $1.9 million in the second quarter of 2018, to recognize a contractual penalty based on recidivism rates. These decreases were partially offset by increased revenue under the segment's health (Diabetes) program, as well as the segment's operations in the U.S. and certain other international operations. WD Services second quarter 2018 Adjusted EBITDA improved compared to the same period last year primarily due to growth of the health program discussed above together with the savings related to our Ingeus Futures and RRP Delivery First programs.


Corporate and Other

Corporate and Other incurred a $8.9 million operating loss in the second quarter of 2018 compared to an operating loss of $5.8 million in the second quarter of 2017. Included within Corporate and Other operating loss in the second quarter of 2018 were restructuring and related costs of $2.5 million, excluding accelerated depreciation, related to the consolidation of the holding company structure into LogistiCare. Corporate and Other Adjusted EBITDA was negative $6.5 million in the second quarter of 2018 compared to negative $5.6 million in the second quarter of 2017.

Corporate and Other incurred a $16.9 million operating loss in the first six months of 2018, compared to a $13.0 million operating loss in the first six months of 2017. Included within Corporate and Other operating loss in the first six months of 2018 were restructuring and related costs of $2.9 million, excluding accelerated depreciation related to the consolidation of the holding company structure into LogistiCare. Corporate and Other Adjusted EBITDA was negative $13.7 million in the six months of 2018 compared to negative $12.6 million in the comparable period of 2017.

This increase in Corporate and Other's Adjusted EBITDA loss was primarily due to an increase in cash settled stock-based compensation expense of $1.2 million, as a result of a more significant increase in the Company’s stock price in the second quarter of 2018 as compared to the second quarter of 2017 partially offset by reductions in legal and consulting costs. The second quarter of 2017 also included a more significant reduction in insurance loss reserves due to favorable claims history of our Captive reinsurance program, as compared to the second quarter of 2018.


Matrix Investment (Equity Investment)

For the second quarter of 2018, Providence recorded a loss in equity earnings of $0.2 million related to its Matrix Investment compared to a gain of $1.1 million for the second quarter of 2017.

As Providence’s interest in Matrix is accounted for as an equity method investment, the following numbers are not included within the Company’s consolidated results of operations. For the second quarter of 2018, Matrix’s revenue was $78.4 million, an increase of 28.9% from $60.9 million in the second quarter of 2017. Matrix’s operating income was $4.6 million, for the second quarter of 2018, compared to $5.9 million, for the second quarter of 2017. Included within Matrix’s operating income in the second quarter of 2018 was $0.7 million of management fees paid to Matrix shareholders and integration costs of $1.1 million and transaction costs of $0.1 million related to the acquisition of HealthFair. Included within Matrix's operating income in the second quarter of 2017 was $0.5 million of expense related to transaction bonuses paid to the Matrix management team and $0.7 million of management fees paid to Matrix shareholders.

Matrix's net loss was $0.9 million for the second quarter of 2018, compared to net income of $1.6 million for the second quarter of 2017. Matrix’s Adjusted EBITDA was $15.9 million, or 20.2% of revenue, for the second quarter of 2018, compared to $15.3 million, or 25.2% of revenue, in the second quarter of 2017.






For the first six months of 2018, Matrix’s revenue was $145.8 million, an increase of 25.0% from $116.7 million in the first six months of 2017. Matrix’s operating income was $3.8 million, or 2.6% of revenue, for the first six months of 2018, compared to $7.0 million, or 6.0% of revenue, for the comparable period of 2017. Included within Matrix’s operating income in the first six months of 2018 was $3.8 million of management fees paid to Matrix’s shareholders, and integration costs of $1.5 million and transaction costs of $2.2 million related to the acquisition of HealthFair. For the comparable period in 2017 Matrix’s operating income included management transaction bonuses of $2.7 million, $1.2 million of management fees paid to Matrix’s shareholders, and $0.9 million of other transaction related expenses. Matrix’s Adjusted EBITDA was $29.8 million, or 20.4% of revenue, for the first six months of 2018, compared to $27.9 million, or 23.9% of revenue, in the first six months of 2017.

The positive year-over-year revenue growth for the second quarter of 2018 was related to increased volumes in Matrix's core in-home assessment business and the addition of mobile visits due to the acquisition of HealthFair in the first quarter of 2018, although mobile visits are below expectations due to the slower ramp up of contracts, leading to a delay in the receipt of membership lists and thus the delivery of mobile assessments. The year-over-year decline in Adjusted EBITDA as a percentage of revenue was due to the unfavorable variance in mobile visit volume as compared to expectations, as the direct cost structure was sized to meet the anticipated demand of higher volumes.

As of June 30, 2018, Matrix had cash of $22.8 million and $330.0 million of term loan debt outstanding under its credit facility, which was entered into in February 2018 in conjunction with the HealthFair acquisition. As of June 30. 2018, Providence's ownership interest in Matrix was 43.6%.


Investor Presentation and Conference Call

Providence will hold a conference call to discuss its financial results on Wednesday, August 8, 2018 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: 2493718


Replay (available until August 15, 2018):
US toll-free: 1 (855) 859 2056
International: 1 (404) 537 3406
Passcode: 2493718
 

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 owns subsidiaries and investments primarily engaged in the provision of healthcare services in the United States and workforce development services internationally. For more information, please visit prscholdings.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release includes EBITDA, Adjusted EBITDA and Segment-level Adjusted EBITDA for the Company and its operating 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) foreign currency transactions, (3) equity in net earnings or losses of investees, (4) certain litigation related expenses or settlement income, (5) gain or loss on sale of equity investments, (6) management fees,(7) certain transaction and related costs and (8) impairments. Segment-level Adjusted EBITDA is calculated as Adjusted EBITDA for the company excluding the Adjusted EBITDA associated with corporate and holding company costs reported as our Corporate and Other Segment. Adjusted Net Income is defined as income (loss) from continuing operations, net of tax, before certain items, including (1) restructuring and related charges, (2) foreign currency transactions, (3) equity in net





earnings or losses of investees, (4) certain litigation related expenses or settlement income, (5) intangible amortization expense, (6) gain or loss on sale of equity investments, (7) the non-recurring impact of the Tax Cuts and Jobs Act, (8) excess tax charges associated with long term incentive plans, (9) the impact of adjustments on noncontrolling interests, (10) transaction and related costs, (11) the income tax impact of such adjustments and (12) impairments. Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock, (2) accretion of convertible preferred stock discount, and (3) 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 earnings in equity investees are 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. 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            
Laurence Orton – Interim CAO & SVP Finance         
(203) 307-2800
--financial tables to follow--







Providence Service Corporation
Page 7

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Income
(in thousands except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Service revenue, net
 
$
411,794

 
$
407,983

 
$
817,840

 
$
807,477

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
    Service expense
 
385,071

 
377,036

 
756,306

 
746,446

    General and administrative expense
 
19,278

 
18,048

 
37,691

 
35,076

    Asset impairment charge
 
9,881

 

 
9,881

 

    Depreciation and amortization
 
6,878

 
6,900

 
13,677

 
13,169

Total operating expenses
 
421,108

 
401,984

 
817,555

 
794,691

Operating income (loss)
 
(9,314
)
 
5,999

 
285

 
12,786

 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
    Interest expense, net
 
245

 
329

 
570

 
681

    Equity in net (gain) loss of investees
 
147

 
(1,530
)
 
2,468

 
530

    Loss (gain) on foreign currency transactions
 
(6
)
 
463

 
(629
)
 
400

Income (loss) from continuing operations before income taxes
 
(9,700
)
 
6,737

 
(2,124
)
 
11,175

Provision for income taxes
 
1,654

 
2,879

 
3,496

 
5,402

Income (loss) from continuing operations, net of tax
 
(11,354
)
 
3,858

 
(5,620
)
 
5,773

Discontinued operations, net of tax
 
(49
)
 
(117
)
 
(57
)
 
(5,984
)
Net income (loss)
 
(11,403
)
 
3,741

 
(5,677
)
 
(211
)
Net loss (income) attributable to noncontrolling interests
 
188

 
174

 
(108
)
 
(200
)
Net income (loss) attributable to Providence
 
$
(11,215
)
 
$
3,915

 
$
(5,785
)
 
$
(411
)
 
 
 
 
 
 
 
 
 
Net income (loss) available to common
 
 
 
 
 
 
 
 
  stockholders
 
$
(12,321
)
 
$
2,434

 
$
(7,980
)
 
$
(3,037
)
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.94
)
 
$
0.19

 
$
(0.61
)
 
$
0.22

Discontinued operations
 
(0.01
)
 
(0.01
)
 

 
(0.44
)
Basic earnings (loss) per common share
 
$
(0.95
)
 
$
0.18

 
$
(0.61
)
 
$
(0.22
)
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.94
)
 
$
0.19

 
$
(0.61
)
 
$
0.22

Discontinued operations
 
(0.01
)
 
(0.01
)
 

 
(0.44
)
Diluted earnings (loss) per common share
 
$
(0.95
)
 
$
0.18

 
$
(0.61
)
 
$
(0.22
)
 
 
 
 
 
 
 
 
 
Weighted-average number of common
 
 
 
 
 
 
 
 
  shares outstanding:
 
 
 
 
 
 
 
 
    Basic
 
13,008,106

 
13,553,704

 
13,056,765

 
13,628,572

    Diluted
 
13,008,106

 
13,607,576

 
13,056,765

 
13,687,183




--more--






Providence Service Corporation
Page 8

The Providence Service Corporation
Condensed Consolidated Balance Sheets
(in thousands)
 
 
 
 
 
 
 
June 30, 2018
 
December 31, 2017
 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
    Cash and cash equivalents
 
$
29,700

 
$
95,310

    Accounts receivable, net of allowance
 
184,313

 
158,926

    Other current assets (1)
 
60,195

 
42,093

    Current assets held for sale (5)
 
14,872

 

Total current assets
 
289,080

 
296,329

Property and equipment, net
 
47,450

 
50,377

Goodwill and intangible assets, net
 
160,441

 
165,607

Equity investments
 
165,988

 
169,912

Other long-term assets (2)
 
17,276

 
21,865

Total assets
 
$
680,235

 
$
704,090

 
 
 
 
 
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
 
 
 
 
    Current portion of long-term obligations
 
$
1,714

 
$
2,400

    Other current liabilities (3)
 
238,975

 
224,530

    Current liabilities held for sale (5)
 
14,872

 

Total current liabilities
 
255,561

 
226,930

Long-term obligations, less current portion
 
507

 
584

Other long-term liabilities (4)
 
54,807

 
63,013

Total liabilities
 
310,875

 
290,527

 
 
 
 
 
Mezzanine and stockholder's equity
 
 
 
 
Convertible preferred stock, net
 
77,445

 
77,546

Stockholders' equity
 
291,915

 
336,017

Total liabilities, redeemable convertible preferred stock and stockholders' equity
 
$
680,235

 
$
704,090


(1) Comprised of other receivables, restricted cash and prepaid expenses and other.
(2) Comprised of restricted cash, less current portion, deferred tax assets and other assets.
(3) Comprised of accounts payable, accrued expenses, accrued transportation costs, deferred revenue and reinsurance and related liability reserves.
(4) Includes deferred tax liabilities and other long-term liabilities.
(5) Comprises the assets and liabilities of Ingeus France which was held for sale at June 30, 2018

--more--





Providence Service Corporation
Page 9

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
 
 
 
 
 
 
 
Six months ended June 30,
 
 
2018
 
2017
Operating activities
 
 
 
 
Net income
 
$
(5,677
)
 
$
(211
)
  Depreciation and amortization
 
13,677

 
13,169

  Stock-based compensation
 
4,278

 
3,021

  Asset impairment charge
 
9,881

 

  Equity in net (gain) loss of investees
 
2,468

 
530

  Other non-cash items
 
(2,765
)
 
(4,899
)
  Changes in working capital
 
(29,778
)
 
(2,347
)
Net cash (used in) provided by operating activities
 
(7,916
)
 
9,263

Investing activities
 
 
 
 
Purchase of property and equipment
 
(8,792
)
 
(10,745
)
Proceeds from note receivable
 
3,130

 

Loan to joint venture
 

 
(566
)
Other investing activities
 

 
300

Net cash used in investing activities
 
(5,662
)
 
(11,011
)
Financing activities
 
 
 
 
Preferred stock dividends
 
(2,190
)
 
(2,191
)
Repurchase of common stock, for treasury
 
(55,999
)
 
(18,754
)
Other financing activities
 
10,183

 
194

Net cash used in financing activities
 
(48,006
)
 
(20,751
)
Effect of exchange rate changes on cash
 
(53
)
 
606

Net change in cash and cash equivalents
 
(61,637
)
 
(21,893
)
Cash, cash equivalents and restricted cash at beginning of period
 
101,606

 
86,392

Cash, cash equivalents and restricted cash at end of period (2)
 
$
39,969

 
$
64,499

(1) Includes both continuing and discontinued operations.
(2) Includes restricted cash of $5,128 and cash classified as asset held for sale of $5,141 at June 30, 2018 and restricted cash of $7,916 at June 30, 2017.








--more--





Providence Service Corporation
Page 10

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
 
WD Services
 
Total Segment-Level
 
Matrix Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
343,737

 
$
68,057

 
$
411,794

 
$

 
$

 
$
411,794

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
324,398

 
60,945

 
385,343

 

 
(272
)
 
385,071

  General and administrative expense
3,104

 
7,190

 
10,294

 

 
8,984

 
19,278

  Asset impairment charge
679

 
9,202

 
9,881

 

 

 
9,881

  Depreciation and amortization
3,511

 
3,131

 
6,642

 

 
236

 
6,878

Total operating expenses
331,692

 
80,468

 
412,160

 

 
8,948

 
421,108

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
12,045

 
(12,411
)
 
(366
)
 

 
(8,948
)
 
(9,314
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
 
 
 
  Interest expense, net
14

 
422

 
436

 

 
(191
)
 
245

  Equity in net (gain) loss of investees

 
(27
)
 
(27
)
 
174

 

 
147

  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
(6
)
 
(6
)
 

 

 
(6
)
Income (loss) from continuing
 
 
 
 
 
 
 
 
 
 
 
     operations, before income tax
12,031

 
(12,800
)
 
(769
)
 
(174
)
 
(8,757
)
 
(9,700
)
Provision (benefit) for income taxes
3,102

 
574

 
3,676

 
(21
)
 
(2,001
)
 
1,654

Income (loss) from continuing operations, net of taxes
8,929

 
(13,374
)
 
(4,445
)
 
(153
)
 
(6,756
)
 
(11,354
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
14

 
422

 
436

 

 
(191
)
 
245

Provision (benefit) for income taxes
3,102

 
574

 
3,676

 
(21
)
 
(2,001
)
 
1,654

Depreciation and amortization
3,511

 
3,131

 
6,642

 

 
236

 
6,878

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
15,556

 
(9,247
)
 
6,309

 
(174
)
 
(8,712
)
 
(2,577
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset impairment charge
679

 
9,202

 
9,881

 

 

 
9,881

Restructuring and related charges (1)
336

 
1,077

 
1,413

 

 
2,487

 
3,900

Transaction costs (2)

 
387

 
387

 

 
(57
)
 
330

Equity in net (gain) loss of investees

 
(27
)
 
(27
)
 
174

 

 
147

Loss (gain) on foreign currency transactions

 
(6
)
 
(6
)
 

 

 
(6
)
Litigation income (3)

 

 

 

 
(201
)
 
(201
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
16,571

 
$
1,386

 
$
17,957

 
$

 
$
(6,483
)
 
$
11,474

(1) Restructuring and related charges include redundancy program costs of $1,039 and property related costs of $38 for WD Services, value enhancement initiative implementation costs of $336 for NET Services and organizational consolidation costs of $2,487 within Corporate and Other.
(2) Transaction costs relate to the agreement to sell Ingeus French operations.
(3) Resolution of accruals related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.



--more—





Providence Service Corporation
Page 11

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
 
 
Three months ended June 30, 2017
 
 
NET Services
 
WD Services
 
Total Segment-Level
 
Matrix
Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
338,805

 
$
69,178

 
$
407,983

 
$

 
$

 
$
407,983

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
316,435

 
62,882

 
379,317

 

 
(2,281
)
 
377,036

  General and administrative expense
3,089

 
6,919

 
10,008

 

 
8,040

 
18,048

  Depreciation and amortization
3,326

 
3,489

 
6,815

 

 
85

 
6,900

Total operating expenses
322,850

 
73,290

 
396,140

 

 
5,844

 
401,984

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
15,955

 
(4,112
)
 
11,843

 

 
(5,844
)
 
5,999

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
 
 
 
  Interest expense, net
20

 
336

 
356

 

 
(27
)
 
329

  Equity in net (gain) loss of investees

 
(440
)
 
(440
)
 
(1,090
)
 

 
(1,530
)
  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
463

 
463

 

 

 
463

Income (loss) from continuing
 
 
 
 
 
 
 
 
 
 
 
     operations, before income tax
15,935

 
(4,471
)
 
11,464

 
1,090

 
(5,817
)
 
6,737

Provision (benefit) for income taxes
6,095

 
(1,238
)
 
4,857

 
410

 
(2,388
)
 
2,879

Income (loss) from continuing operations, net of taxes
9,840

 
(3,233
)
 
6,607

 
680

 
(3,429
)
 
3,858

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
20

 
336

 
356

 

 
(27
)
 
329

Provision (benefit) for income taxes
6,095

 
(1,238
)
 
4,857

 
410

 
(2,388
)
 
2,879

Depreciation and amortization
3,326

 
3,489

 
6,815

 

 
85

 
6,900

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
19,281

 
(646
)
 
18,635

 
1,090

 
(5,759
)
 
13,966

 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related charges (1)
1,410

 
490

 
1,900

 

 

 
1,900

Equity in net (gain) loss of investees

 
(440
)
 
(440
)
 
(1,090
)
 

 
(1,530
)
Loss (gain) on foreign currency transactions

 
463

 
463

 

 

 
463

Litigation expense (2)

 

 

 

 
143

 
143

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
20,691

 
$
(133
)
 
$
20,558

 
$

 
$
(5,616
)
 
$
14,942


(1) Restructuring and related charges include redundancy program costs of $306 and value enhancement implementation costs of $184 within WD Services and $12 of former CEO departure costs and value enhancement implementation initiative costs of $1,398 for NET Services.
(2) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.        



--more--





Providence Service Corporation
Page 12
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
 
WD Services
 
Total Segment-Level
 
Matrix Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
680,433

 
$
137,407

 
$
817,840

 
$

 
$

 
$
817,840

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
635,099

 
121,479

 
756,578

 

 
(272
)
 
756,306

  General and administrative expense
6,040

 
14,803

 
20,843

 

 
16,848

 
37,691

  Asset impairment charge
679

 
9,202

 
9,881

 

 

 
9,881

  Depreciation and amortization
7,005

 
6,349

 
13,354

 

 
323

 
13,677

Total operating expenses
648,823

 
151,833

 
800,656

 

 
16,899

 
817,555

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
31,610

 
(14,426
)
 
17,184

 

 
(16,899
)
 
285

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 

 
 
 
 
 
 
  Interest expense, net
32

 
791

 
823

 

 
(253
)
 
570

  Equity in net (gain) loss of investees

 
(50
)
 
(50
)
 
2,518

 

 
2,468

  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
(629
)
 
(629
)
 

 

 
(629
)
Income (loss) from continuing operations,
 
 
 
 
 
 
 
 
 
 
 
     before income tax
31,578

 
(14,538
)
 
17,040

 
(2,518
)
 
(16,646
)
 
(2,124
)
Provision (benefit) for income taxes
8,122

 
436

 
8,558

 
(539
)
 
(4,523
)
 
3,496

Income (loss) from continuing operations, net of taxes
23,456

 
(14,974
)
 
8,482

 
(1,979
)
 
(12,123
)
 
(5,620
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
32

 
791

 
823

 

 
(253
)
 
570

Provision (benefit) for income taxes
8,122

 
436

 
8,558

 
(539
)
 
(4,523
)
 
3,496

Depreciation and amortization
7,005

 
6,349

 
13,354

 

 
323

 
13,677

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
38,615

 
(7,398
)
 
31,217

 
(2,518
)
 
(16,576
)
 
12,123

 
 
 
 
 
 
 
 
 
 
 
 
 
Asset impairment charge
679

 
9,202

 
9,881

 

 

 
9,881

Restructuring and related charges (1)
1,159

 
2,694

 
3,853

 

 
2,935

 
6,788

Transaction costs (2)

 
516

 
516

 

 
138

 
654

Equity in net (gain) loss of investees

 
(50
)
 
(50
)
 
2,518

 

 
2,468

Loss (gain) on foreign currency transactions

 
(629
)
 
(629
)
 

 

 
(629
)
Litigation income (3)

 

 

 

 
(201
)
 
(201
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
40,453

 
$
4,335

 
$
44,788

 
$

 
$
(13,704
)
 
$
31,084


(1) Restructuring and related charges include redundancy program costs of $2,399 and property related costs of $295 for WD Services, value enhancement initiative implementation costs of $1,159 for NET Services and organizational consolidation costs of $2,935 within Corporate and Other.
(2) Transaction costs relate to the agreement to sell Ingeus French operations.
(3) Resolution of accruals related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.             

--more--





Providence Service Corporation
Page 13
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)

 
 
Six months ended June 30, 2017
 
 
NET Services
 
WD Services
 
Total Segment-Level
 
Matrix
Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
662,839

 
$
144,638

 
$
807,477

 
$

 
$

 
$
807,477

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
622,627

 
126,084

 
748,711

 

 
(2,265
)
 
746,446

  General and administrative expense
5,980

 
13,964

 
19,944

 

 
15,132

 
35,076

  Asset impairment charge

 

 

 

 

 

  Depreciation and amortization
6,477

 
6,529

 
13,006

 

 
163

 
13,169

Total operating expenses
635,084

 
146,577

 
781,661

 

 
13,030

 
794,691

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
27,755

 
(1,939
)
 
25,816

 

 
(13,030
)
 
12,786

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
 
 
 
  Interest expense, net
31

 
603

 
634

 

 
47

 
681

  Equity in net (gain) loss of investees

 
960

 
960

 
(430
)
 

 
530

  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
400

 
400

 

 

 
400

Income (loss) from continuing
 
 
 
 
 
 
 
 
 
 
 
     operations, before income tax
27,724

 
(3,902
)
 
23,822

 
430

 
(13,077
)
 
11,175

Provision (benefit) for income taxes
10,715

 
(433
)
 
10,282

 
162

 
(5,042
)
 
5,402

Income (loss) from continuing operations, net of taxes
17,009

 
(3,469
)
 
13,540

 
268

 
(8,035
)
 
5,773

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
31

 
603

 
634

 

 
47

 
681

Provision (benefit) for income taxes
10,715

 
(433
)
 
10,282

 
162

 
(5,042
)
 
5,402

Depreciation and amortization
6,477

 
6,529

 
13,006

 

 
163

 
13,169

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
34,232

 
3,230

 
37,462

 
430

 
(12,867
)
 
25,025

 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related charges (1)
2,709

 
1,546

 
4,255

 

 


 
4,255

Equity in net (gain) loss of investees

 
960

 
960

 
(430
)
 

 
530

Loss (gain) on foreign currency transactions

 
400

 
400

 

 

 
400

Litigation expense (2)

 

 

 

 
286

 
286

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
36,941

 
$
6,136

 
$
43,077

 
$

 
$
(12,581
)
 
$
30,496


(1) Restructuring and related charges include redundancy program costs of $859, other severance costs of $182 and value enhancement implementation costs of $505 within WD Services and $211 of former CEO departure costs and value enhancement implementation initiative costs of $2,498 for NET Services.
(2) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.



--more--





Providence Service Corporation
Page 14

The Providence Service Corporation
Summary Financial Information of Equity Investments (1)
(in thousands)
(Unaudited)
 
Three months ended June 30, 2018
 
Matrix Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
78,409

 
$

 
$
1,014

 
$
79,423

Operating expense (2)
64,423

 

 
944

 
65,367

Depreciation and amortization
9,359

 

 
9

 
9,368

Operating income (loss)
4,627

 

 
61

 
4,688

 
 
 
 
 
 
 
 
Other expense (income)

 

 
(12
)
 
(12
)
Interest expense
5,940

 

 

 
5,940

Provision (benefit) for income taxes
(444
)
 

 
18

 
(426
)
Net income (loss)
(869
)
 

 
55

 
(814
)
 
 
 
 
 
 
 
 
Interest
43.6
%
 
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
(379
)
 

 
27

 
(352
)
Management fee and other (3)
205

 

 

 
205

Equity in net gain (loss) of investee
$
(174
)
 
$

 
$
27

 
$
(147
)
 
 
 
 
 
 
 
 
Net Debt (4)
307,153

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2017
 
Matrix
Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
60,852

 
$
10,493

 
$
503

 
$
71,848

Operating expense (2)
46,783

 
8,809

 
489

 
56,081

Depreciation and amortization
8,127

 
1,045

 
7

 
9,179

Operating income (loss)
5,942

 
639

 
7

 
6,588

 
 
 
 
 
 
 
 
Other expense (income)

 
6

 
(11
)
 
(5
)
Interest expense
3,658

 
56

 

 
3,714

Provision (benefit) for income taxes
665

 

 
4

 
669

Net income (loss)
1,619

 
577

 
14

 
2,210

 
 
 
 
 
 
 
 
Interest
46.8
%
 
75.0
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
758

 
433

 
7

 
1,198

Management fee and other (5)
332

 

 

 
332

Equity in net gain (loss) of investee
$
1,090

 
$
433

 
$
7

 
$
1,530

(1) The results of equity method investments 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 of $307 less Providence share-based compensation expense of $102.
(4) Represents cash of $22,847 and debt of $330,000 on Matrix's standalone balance sheet as of June 30, 2018.
(5) Includes amounts relating to management fees due from Matrix to Providence of $345 less Providence share-based compensation expense of $13.


--more--





Providence Service Corporation
Page 15

The Providence Service Corporation
Summary Financial Information of Equity Investments (1)
(in thousands)
(Unaudited)

 
Six months ended June 30, 2018
 
Matrix Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
145,839

 
$

 
$
1,878

 
$
147,717

Operating expense (2)
123,590

 

 
1,748

 
125,338

Depreciation and amortization
18,411

 

 
18

 
18,429

Operating income (loss)
3,838

 

 
112

 
3,950

 
 
 
 
 
 
 
 
Other expense (income)

 

 
(23
)
 
(23
)
Interest expense (5)
16,283

 

 

 
16,283

Provision (benefit) for income taxes
(3,058
)
 

 
34

 
(3,024
)
Net income (loss)
(9,387
)
 

 
101

 
(9,286
)
 
 
 
 
 
 
 
 
Interest
43.6
%
 
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
(4,095
)
 

 
50

 
(4,045
)
Management fee and other (3)
1,577

 

 

 
1,577

Equity in net gain (loss) of investee
$
(2,518
)
 
$

 
$
50

 
$
(2,468
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2017
 
Matrix
Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
116,707

 
$
19,880

 
$
928

 
$
137,515

Operating expense (2)
93,597

 
18,998

 
934

 
113,529

Depreciation and amortization
16,160

 
2,048

 
9

 
18,217

Operating income (loss)
6,950

 
(1,166
)
 
(15
)
 
5,769

 
 
 
 
 
 
 
 
Other expense (income)

 
8

 
(22
)
 
(14
)
Interest expense
7,264

 
108

 

 
7,372

Provision (benefit) for income taxes
(76
)
 
1

 
1

 
(74
)
Net income (loss)
(238
)
 
(1,283
)
 
6

 
(1,515
)
 
 
 
 
 
 
 
 
Interest
46.8
%
 
75.0
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
(111
)
 
(963