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): May 8, 2019

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.)
 
 
 
 
 
 
 
1275 Peachtree Street, Sixth Floor
Atlanta, Georgia
 
30309
 
 
 
 
 
 
 
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (404) 888-5800

700 Canal Street, Third Floor
Stamford, Connecticut
06902

(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.
¨


Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
Common Stock, $0.001 par value per share
PRSC
The NASDAQ Global Select Market





Item 2.02 Results of Operations and Financial Condition.

On May 8, 2019, The Providence Service Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2019. 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 May 8, 2019, 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 March 31, 2019. 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
 






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: May 8, 2019
 
 
 
By:
 
/s/ Kevin M. Dotts
 
 
 
 
Name:
 
Kevin M. Dotts
 
 
 
 
Title:
 
Chief Financial Officer




Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12890210&doc=4
The Providence Service Corporation Reports First Quarter 2019

Highlights for the First Quarter of 2019:

Revenue from continuing operations of $367.8 million, a 9.2% increase from the first quarter of 2018
Income from continuing operations, net of tax, of $1.3 million, or $0.02 per diluted common share
Adjusted Net Income of $6.6 million and Adjusted EPS of $0.37
Adjusted EBITDA of $12.2 million
Change in segments as a result of the substantially complete organization consolidation

ATLANTA, GA – May 8, 2019 – The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), today reported financial results for the three months ended March 31, 2019.

"The first quarter saw strong revenue growth of 9.2% compared to the first quarter of 2018," stated Carter Pate, Interim Chief Executive Officer. He continued, "During the quarter, the LogistiCare team has been focused on execution. Not only is the Company undergoing a transformation with the substantially completed organization consolidation, the team has also been busy with the integration of Circulation. We are already starting to see early success with several key operational milestones and have received strong customer interest not only within our core Medicaid market where several large payors recently awarded us national contracts, but we are also making headway into adjacent markets including the Medicare Advantage and Healthcare Facilities markets. On the margin side, as is the case usually with the beginning of the year, utilization can be unpredictable driven by a number of seasonal factors. While we saw less inclement weather benefit compared to prior years, we also saw shifts in membership behavior as payors updated their membership lists and covered benefits for the year. These changes can have impacts on overall contract profitability in the short-term. However, once a trend fully emerges we are generally able to bring contractual rates in line with costs.  We remind investors that these contract adjustments may take a number of quarters to secure, which is why we believe that the business should be measured over a full year. Related to our minority investment in Matrix, the core in-home assessment business delivered strong results compared to our internal expectations as the Matrix team has been able to drive new logo revenue growth. Overall, we believe Providence is still on target for the year. In terms of our long-term outlook, we remain confident in the value generated from the Circulation acquisition and still expect to achieve run-rate savings of $25 million by the end of next year."

Organizational Consolidation and Change in Segments

Beginning January 1, 2019, as the organizational consolidation was substantially complete, our former Corporate and Other segment was combined with the NET Services segment.

First Quarter 2019 Results

For the first quarter of 2019, the Company reported revenue of $367.8 million, an increase of 9.2% from $336.7 million in the first quarter of 2018.

Operating income was $3.4 million, or 0.9% of revenue, in the first quarter of 2019, compared to $12.1 million, or 3.6% of revenue, in the first quarter of 2018. Income from continuing operations, net of tax, in the first quarter of 2019 was $1.3 million, or $0.02 per diluted common share, compared to income from continuing operations net of tax of $7.4 million, or $0.42 per diluted common share, in the first quarter of 2018. Income from continuing operations, net of tax, in the first quarters of 2019 and 2018 include restructuring and related charges of $2.8 million and $1.3 million, respectively, and transactions costs of $1.4 million and less than $0.1 million, respectively.

Adjusted EBITDA was $12.2 million, or 3.3% of revenue, in the first quarter of 2019, compared to $17.0 million, or 5.0% of revenue, in the first quarter of 2018.

Adjusted Net Income in the first quarter of 2019 was $6.6 million, or $0.37 per diluted common share, compared to $10.9 million, or $0.64 per diluted common share, in the first 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 Illinois, higher utilization across multiple not at-risk and reconciliation contracts and the addition of Circulation which contributed $9.4 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 certain MCO contracts in Louisiana. 

Adjusted EBITDA decreased in the first quarter of 2019 due to the impact of increased transportation costs as well as increased utilization across multiple contracts. In addition, the Company benefited from favorable adjustments in the first quarter of 2018, whereas the first quarter of 2019 included fewer favorable one-time negotiated contract adjustments somewhat offsetting higher operational expenses due to inclusion of our Circulation acquisition.

Matrix Investment (Equity Investment)

For the first quarter of 2019, Providence recorded a loss in equity earnings of $1.7 million related to its Matrix Investment compared to a loss of $2.3 million for the first quarter of 2018.

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 first quarter of 2019, Matrix’s revenue was $67.0 million, a decrease of 0.7% from $67.4 million in the first quarter of 2018. Matrix’s operating income was $0.6 million for the first quarter of 2019, compared to an operating loss of $0.8 million, for the first quarter of 2018.

Matrix's net loss was $4.5 million for the first quarter of 2019, compared to net loss of $8.5 million for the first quarter of 2018. Matrix’s Adjusted EBITDA was $14.0 million, or 20.8% of revenue, for the first quarter of 2019, compared to $14.2 million, or 21.1% of revenue, in the first quarter of 2018.

The year-over-year revenue decline for the first quarter of 2019 was related to lower HealthFair mobile visit volume, partially offset by growth in volumes in Matrix's core in-home assessment business. Adjusted EBITDA decreased year-over-year primarily due to lower HealthFair revenue, partially offset by the reduction of HealthFair direct costs and higher volume related to Matrix's core in-home assessment business.

As of March 31, 2019 and March 31, 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 Thursday, May 9, 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: 6448159

Replay (available until May 16, 2019):
US toll-free: 1 (855) 859 2056
International: 1 (404) 537 3406
Passcode: 6448159

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 U.S. generally accepted accounting principles (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 and (4) certain transaction and related costs. 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--





Providence Service Corporation
Page 4

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands except share and per share data)
 
 
 
 
 
 
 
Three months ended March 31,
 
 
2019
 
2018
 
 
 
 
 
Service revenue, net
 
$
367,815

 
$
336,696

 
 
 
 
 
Operating expenses:
 
 
 
 
    Service expense
 
340,498

 
303,115

    General and administrative expense
 
19,401

 
17,898

    Depreciation and amortization
 
4,475

 
3,580

Total operating expenses
 
364,374

 
324,593

Operating income
 
3,441

 
12,103

 
 
 
 
 
Other expenses (income):
 
 
 
 
    Interest expense, net
 
303

 
326

    Other income
 
(66
)
 

    Equity in net loss of investee
 
1,656

 
2,344

Income from continuing operations before income taxes
 
1,548

 
9,433

Provision for income taxes
 
234

 
2,010

Income from continuing operations, net of tax
 
1,314

 
7,423

Loss from discontinued operations, net of tax
 
(732
)
 
(1,697
)
Net income
 
582

 
5,726

Net income from discontinued operations attributable to noncontrolling interest
 

 
(296
)
Net income attributable to Providence
 
$
582

 
$
5,430

 
 
 
 
 
Net (loss) income attributable to common stockholders
 
$
(535
)
 
$
3,497

 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
Continuing operations
 
$
0.02

 
$
0.42

Discontinued operations
 
(0.06
)
 
(0.15
)
Basic earnings (loss) per common share
 
$
(0.04
)
 
$
0.27

 
 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
 
Continuing operations
 
$
0.02

 
$
0.42

Discontinued operations
 
(0.06
)
 
(0.15
)
Diluted earnings (loss) per common share
 
$
(0.04
)
 
$
0.27

 
 
 
 
 
Weighted-average number of common
 
 
 
 
  shares outstanding:
 
 
 
 
    Basic
 
12,899,714

 
13,105,965

    Diluted
 
12,953,328

 
13,199,440



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Providence Service Corporation
Page 5

The Providence Service Corporation
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
 
 
 
 
 
 
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
    Cash and cash equivalents
 
$
42,418

 
$
5,678

    Accounts receivable, net of allowance
 
150,353

 
147,756

    Other current assets (1)
 
42,682

 
50,495

    Current assets of discontinued operations (2)
 
4,561

 
7,051

Total current assets
 
240,014

 
210,980

Operating lease right-of-use assets
 
21,076

 

Property and equipment, net
 
21,809

 
22,965

Goodwill and intangible assets, net
 
159,803

 
161,362

Equity investments
 
159,546

 
161,503

Other long-term assets (3)
 
11,140

 
12,835

Total assets
 
$
613,388

 
$
569,645

 
 
 
 
 
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
 
 
 
 
    Current portion of operating lease liabilities
 
$
7,763

 
$

    Current portion of long-term obligations
 
650

 
718

    Other current liabilities (4)
 
161,435

 
138,908

    Current liabilities of discontinued operations (2)
 
1,621

 
3,257

Total current liabilities
 
171,469

 
142,883

Long-term obligations, less current portion
 
276

 
353

Operating lease liabilities, less current portion
 
14,603

 

Other long-term liabilities (5)
 
34,712

 
38,019

Total liabilities
 
221,060

 
181,255

 
 
 
 
 
Mezzanine and stockholders' equity
 
 
 
 
Convertible preferred stock, net
 
77,392

 
77,392

Stockholders' equity
 
314,936

 
310,998

Total liabilities, redeemable convertible preferred stock and stockholders' equity
 
$
613,388

 
$
569,645


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


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Providence Service Corporation
Page 6

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
 
 
 
 
 
 
 
Three months ended March 31,
 
 
2019
 
2018
Operating activities
 
 
 
 
Net income
 
$
582

 
$
5,726

  Depreciation and amortization
 
4,475

 
6,798

  Stock-based compensation
 
2,103

 
933

  Equity in net loss of investee
 
1,656

 
2,321

  Other non-cash items
 
(580
)
 
(876
)
  Changes in working capital
 
30,595

 
10,716

Net cash provided by operating activities
 
38,831

 
25,618

Investing activities
 
 
 
 
Purchase of property and equipment
 
(1,682
)
 
(4,987
)
Net cash used in investing activities
 
(1,682
)
 
(4,987
)
Financing activities
 
 
 
 
Preferred stock dividends
 
(1,087
)
 
(1,089
)
Repurchase of common stock, for treasury
 
(217
)
 
(37,167
)
Proceeds from common stock issued pursuant to stock option exercise
 
2,557

 
9,301

Other financing activities
 
(145
)
 
(1,304
)
Net cash provided by (used in) financing activities
 
1,108

 
(30,259
)
Effect of exchange rate changes on cash
 

 
115

Net change in cash and cash equivalents
 
38,257

 
(9,513
)
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)
 
$
50,624

 
$
92,093

(1) Includes both continuing and discontinued operations.
(2) Includes restricted cash of $3.9 million at March 31, 2019 and restricted cash of $5.9 million at March 31, 2018.



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Providence Service Corporation
Page 7

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
 
 
Three months ended March 31, 2019
 
 
NET Services
 
Matrix Investment
 
Total Continuing Operations
 
 
 
 
 
 
 
Service revenue, net
$
367,815

 
$

 
$
367,815

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
  Service expense
340,498

 

 
340,498

  General and administrative expense
19,401

 

 
19,401

  Depreciation and amortization
4,475

 

 
4,475

Total operating expenses
364,374

 

 
364,374

 
 
 
 
 
 
 
Operating income
3,441

 

 
3,441

 
 
 
 
 
 
 
Other expenses (income):
 
 
 
 
 
  Interest expense, net
303

 

 
303

  Other income
(66
)
 

 
(66
)
  Equity in net loss of investee

 
1,656

 
1,656

Income (loss) from continuing
 
 
 
 
 
     operations, before income tax
3,204

 
(1,656
)
 
1,548

Provision (benefit) for income taxes
572

 
(338
)
 
234

Income (loss) from continuing operations, net of taxes
2,632

 
(1,318
)
 
1,314

 
 
 
 
 
 
 
Interest expense, net
303

 

 
303

Provision (benefit) for income taxes
572

 
(338
)
 
234

Depreciation and amortization
4,475

 

 
4,475

 
 
 
 
 
 
 
EBITDA
7,982

 
(1,656
)
 
6,326

 
 
 
 
 
 
 
Restructuring and related charges (1)
2,812

 

 
2,812

Transaction costs (2)
1,388

 

 
1,388

Equity in net loss of investee

 
1,656

 
1,656

Litigation expense
9

 

 
9

 
 
 
 
 
 
 
Adjusted EBITDA
$
12,191

 
$

 
$
12,191

(1) Restructuring and related charges include severance costs of $1,026 and organizational consolidation costs of $1,786.
(2) Transaction costs related to the integration of Circulation and certain transaction-related expenses.


                
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Providence Service Corporation
Page 8

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
 
 
Three months ended March 31, 2018
 
 
NET Services
 
Matrix
Investment
 
Total Continuing Operations
 
 
 
 
 
 
 
Service revenue, net
$
336,696

 
$

 
$
336,696

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
  Service expense
303,115

 

 
303,115

  General and administrative expense
17,898

 

 
17,898

  Depreciation and amortization
3,580

 

 
3,580

Total operating expenses
324,593

 

 
324,593

 
 
 
 
 
 
 
Operating income
12,103

 

 
12,103

 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
  Interest expense, net
326

 

 
326

  Equity in net loss of investee

 
2,344

 
2,344

Income (loss) from continuing
 
 
 
 
 
     operations, before income tax
11,777

 
(2,344
)
 
9,433

Provision (benefit) for income taxes
2,528

 
(518
)
 
2,010

Income (loss) from continuing operations, net of taxes
9,249

 
(1,826
)
 
7,423

 
 
 
 
 
 
 
Interest expense, net
326

 

 
326

Provision (benefit) for income taxes
2,528

 
(518
)
 
2,010

Depreciation and amortization
3,580

 

 
3,580

 
 
 
 
 
 
 
EBITDA
15,683

 
(2,344
)
 
13,339

 
 
 
 
 
 
 
Restructuring and related charges (1)
1,271

 

 
1,271

Transaction costs
35

 

 
35

Equity in net loss of investee

 
2,344

 
2,344

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
16,989

 
$

 
$
16,989


(1) Restructuring and related charges include value enhancement implementation initiative costs of $823 for NET Services and organizational consolidation costs of $448.
        

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Providence Service Corporation
Page 9


The Providence Service Corporation
Summary Financial Information of Equity Investment in Matrix Medical Network (1)
(in thousands)
(Unaudited)
 
Three months ended March 31,
 
 
2019
 
2018
 
Revenue
$
66,983

 
$
67,429

 
Operating expense (2)
55,220

 
59,166

 
Depreciation and amortization
11,208

 
9,052

 
Operating income (loss)
555

 
(789
)
 
 
 
 
 
 
Interest expense
6,392

 
10,343

 
Benefit for income taxes
(1,351
)
 
(2,614
)
 
Net loss
(4,486
)
 
(8,518
)
 
 
 
 
 
 
Interest
43.6
%
 
43.6
%
 
Net loss - Equity Investment
(1,952
)
 
(3,716
)
 
Management fee and other
296

(3)
1,372

(4)
Equity in net loss of investee
$
(1,656
)
 
$
(2,344
)
 
 
 
 
 
 
Net Debt (5)
$
297,046

 
 
 
 
 
 
 
 
(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 of $296.
(4)
Includes amounts relating to management fees due from Matrix to Providence of $1,432 less Providence share-based compensation expense of $60.
(5)
Represents cash of $30,479 and debt of $327,525 on Matrix's standalone balance sheet as of March 31, 2019.


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Providence Service Corporation
Page 10

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA: Matrix Medical Network (1)(2)(5)
(in thousands) (Unaudited)
 
Three months ended March 31,
 
2019
 
2018
Revenue
$
66,983

 
$
67,429

Operating expense (3)
55,220

 
59,166

Depreciation and amortization
11,208

 
9,052

Operating income (loss)
555

 
(789
)
 
 
 
 
Interest expense
6,392

 
10,343

Benefit for income taxes
(1,351
)
 
(2,614
)
Net loss
(4,486
)
 
(8,518
)
 
 
 
 
Depreciation and amortization
11,208

 
9,052

Interest expense
6,392

 
10,343

Benefit for income taxes
(1,351
)
 
(2,614
)
EBITDA
11,763

 
8,263

Management fees (4)
660

 
3,057

Acquisition costs

 
2,169

Integration costs
1,483

 
727

Transaction costs
45

 
6

Adjusted EBITDA
$
13,951

 
$
14,222

 
 
 
 

(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) Management fees in the first three months of 2018 include fees earned in association with the acquisition of HealthFair.
(5) 2018 includes the results of HealthFair since the date of acquisition on February 16, 2018.



--more--





Providence Service Corporation
Page 11
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 March 31,
 
 
2019
 
2018
 
 
 
 
 
Income from continuing operations, net of tax
$
1,314

 
$
7,423

 
 
 
 
Restructuring and related charges (1)
3,030

 
1,271

Transaction costs (2)
1,388

 
35

Equity in net loss of investee
1,656

 
2,344

Intangible amortization expense
1,559

 
730

Litigation expense
9

 

Tax effected impact of adjustments
(2,352
)
 
(932
)
 
 
 
 
 
Adjusted Net Income
6,604

 
10,871

 
 
 
 
 
Dividends on convertible preferred stock
(1,087
)
 
(1,089
)
Income allocated to participating securities
(744
)
 
(1,303
)
 
 
 
 
 
Adjusted Net Income available to common stockholders
$
4,773

 
$
8,479

 
 
 
 
 
Adjusted EPS
$
0.37

 
$
0.64

 
 
 
 
 
Diluted weighted-average number of common shares outstanding
12,953,328

 
13,199,440


(1) Restructuring and related charges are related to severance costs, as well as costs related to the organizational consolidation. 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.


    

###


q12019earningscallpresen
PROVIDENCE Q1:2019 EARNINGS CALL PRESENTATION May 9, 2019


 
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL INFORMATION Forward-looking Statements This presentation 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 presentation if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise. Non-GAAP Financial Information In addition to the financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), this presentation includes EBITDA and Adjusted EBITDA for the Company and its operating segments, Adjusted EBITDA for the NET Services segment, excluding certain corporate costs, 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 earnings or losses of investees, (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 earnings or losses of investees, (3) certain litigation related expenses, settlement income or other negotiated settlements relating to certain matters from prior periods, (4) intangible amortization expense, (5) gain or loss on sale of equity investments, (6) the non- recurring impact of the Tax Cuts and Jobs Act, (7) excess tax charges associated with long-term incentive plans, (8) the impact of adjustments on noncontrolling interests, (9) certain transaction and related costs, (10) the income tax impact of such adjustments and (11) asset impairment charges. Adjusted EBTIDA for the NET Services segment, excluding certain corporate costs, is calculated as NET Services Adjusted EBITDA, less certain continuing corporate and other overhead expenses, including those previously included in our Corporate and Other segment. 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 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. 2


 
Q1:2019 HIGHLIGHTS • Q1:2019 Revenue up 9.2% compared to Q1:2018 • NET Services: New State Contract in WV and MCO contracts in Indiana and Revenue Minnesota, higher utilization on non full-risk contracts, and growth outside of core Growth Medicaid market • Matrix(1) : Matrix’s core in-home assessment business exceeding internal expectations • Adjusted EBITDA(2) of $12.2mm; NET Services Adjusted EBITDA excluding certain corporate costs(2) of $16.9mm • Year-over-year margin reduction driven by higher transportation cost and utilization as a result of less inclement weather benefit and changes in Profitability membership behavior compared to previous years. Management to work with payors to re-align rates with transportation costs • Matrix(1) : margin down versus prior year driven by lower HealthFair volumes. Core in- home assessment business margins as % of revenue up 446 bps versus prior year • Adjusted EPS(2) of $0.37 • Key activities • Substantially complete organization consolidation. On target to achieve at least $10mm of run-rate savings Capital • Public Company costs (formerly Holding Company costs) $4.7mm versus Allocation $6.9mm in prior year period • Investments in Circulation platform – management focused on operational rollout of Circulation technology platform across LogistiCare’s legacy contracts (1) Providence’s interest in Matrix is accounted for as an equity method investment. Matrix’s results are not included within Providence’s consolidated results. (2) See appendix for a reconciliation of non-GAAP financial measures. 3


 
Q1:2019 HIGHLIGHTS % FYE FYE LTM $Millions Q1:19 Q1:18 Growth 2018 2017 Q1:19 Revenue $ 367.8 $ 336.7 9.2% $ 1,385.0 $ 1,318.2 $ 1,416.1 Transportation Expense $ 288.7 $ 253.1 $ 1,055.3 $ 1,009.5 $ 1,090.9 % of Rev 78.5% 75.2% 76.2% 76.6% 77.0% Key Financial Other Costs $ 62.2 $ 59.8 $ 237.2 $ 223.4 $ 239.6 % of Rev 16.9% 17.7% 17.1% 16.9% 16.9% Metrics NET Services Adj. EBITDA (Exc. Certain Corp Costs) (1) $ 16.9 $ 23.9 $ 92.5 $ 85.3 $ 85.6 (1) % Margin 4.6% 7.1% 6.7% 6.5% 6.0% Certain Corporate Costs (2) 4.7 6.9 19.7 25.8 17.5 Adjusted EBITDA (1) $ 12.2 $ 17.0 $ 72.8 $ 59.5 $ 68.0 (2) % Margin 3.3% 5.0% 5.3% 4.5% 4.8% • Working with payors to bring contractual rates in line with costs 2019 • Continue integration and rollout of the Circulation platform across call centers Focus • Roll out is on plan and targeting substantially all sites operational by the end of 2021 (1) See appendix for a reconciliation of non-GAAP financial measures. (2) Costs represents the continuing corporate and other overhead expenses previously included in our Corporate and Other segment. See appendix for further explanation and a reconciliation to the most comparable GAAP financial measures. 4


 
MATRIX INVESTMENT • Core in-home assessments 9.1% revenue growth versus the prior year period, exceeding internal expectations Q1:2019 • In-home assessments margin growth of 446 bps driven by higher revenue and higher Highlights pricing • Mobile assessment (HealthFair) volumes slow to begin the year, as expected • Management focus on integration of the mobile assessment business % FYE FYE LTM $Millions Q1:19 Q1:18 Growth 2018 2017 Q1:19 Revenue $ 67.0 $ 67.4 -0.7% $ 282.1 $ 227.9 $ 281.7 Key Financial Adjusted EBITDA (2) $ 14.0 $ 14.2 $ 56.7 $ 51.7 $ 56.5 (1) (2) Metrics % Margin 20.8% 21.1% 20.1% 22.7% 20.1% Capex $ 2.3 $ 2.3 $ 10.3 $ 11.0 $ 10.3 Net Debt $ 297.0 $ 310.4 • Continued integration of HealthFair acquisition and focus on driving mobile assessments sales pipeline 2019 • Integration of in-home and mobile assessment businesses onto unified technology Focus platform expected in Q2:2019 • Achieve profitability in mobile assessment business by the second half of 2019 (1) Providence’s interest in Matrix is accounted for as an equity method investment. Matrix’s results are not included within Providence’s consolidated financials. (2) See appendix for a reconciliation of non-GAAP financial measures. 5


 
CASH FLOW UPDATE FYE FYE LTM $Millions Q1:19 Q1:18 2018 2017 Q1:19 Cash Flow $ 8.2 $ 14.9 $ 48.2 $ 42.8 $ 41.5 Working Capital Changes 30.6 10.7 (40.3) 12.2 (20.4) Cash Provided By Operations $ 38.8 $ 25.6 $ 7.9 $ 55.0 $ 21.1 Capex (Continuing Operations) $ 1.7 $ 2.6 $ 10.8 $ 15.4 $ 9.9 Cash flow • Q1:19 cashflow generated by working capital timing. Expect to unwind some of the working capital benefit in Q2 as the Company has a three provider payment run in May 6


 
BALANCE SHEET UPDATE $Millions Q1:19 Q4:18 Q4:17 Q4:16 Cash $ 46.7 $ 8.0 $ 95.3 $ 72.3 Matrix Carrying Value $ 159.5 $ 161.5 $ 169.7 $ 157.2 Shares Outstanding (mm) 14.9 14.8 15.4 15.9 As of 3/31/2019, the Company had $46.7mm of cash with no debt Shares outstanding equals common shares outstanding plus total preferred shares on an as-converted basis. As of 5/6/19 shares outstanding equaled 14.9mm. 7


 
APPENDIX


 
ADJUSTED EBITDA RECONCILIATION (Continuing Ops) FYE FYE LTM $Millions Q1:19 Q1:18 2018 2017 Q1:19 Revenue $ 367.8 $ 336.7 $ 1,385.0 $ 1,318.2 $ 1,416.1 Income/(Loss) from Cont Ops 1.3 7.4 18.2 51.1 12.1 Interest Expense, Net 0.3 0.3 1.8 1.2 1.8 Income Tax Provision/(Benefit) 0.2 2.0 4.7 4.0 2.9 Depreciation and Amortization 4.5 3.6 15.8 13.6 16.7 EBITDA $ 6.3 $ 13.3 $ 40.5 $ 69.9 $ 33.5 Asset Impairment - - 14.2 - 14.2 Transaction Expense 1.4 0.0 7.2 - 8.6 Restructuring and Related Expense 2.8 1.3 8.7 1.9 10.2 Value Enhancement Initiative Implementation - - 2.8 6.1 2.8 Equity in Net Loss/(Gain) of Investee 1.7 2.3 6.2 (13.4) 5.5 (Gain) on Remeasure of Cost Method Investme - - (6.6) - (6.6) Litigation Expense - - (0.2) (5.0) (0.2) Adjusted EBITDA $ 12.2 $ 17.0 $ 72.8 $ 59.5 $ 68.0 % Margin 3.3% 5.0% 5.3% 4.5% 4.8% 9


 
ADJUSTED EBITDA RECONCILIATION (MATRIX) (1) LTM $ Millions Q1:19 Q1:18 FYE 2018 FYE 2017 Q1:19 Revenue $ 67.0 $ 67.4 $ 282.1 $ 227.9 $ 281.7 Net income (loss) (4.5) (8.5) (20.0) 26.7 (16.0) Interest expense, net 6.4 10.3 26.0 14.8 22.1 Income tax benefit (1.4) (2.6) (7.1) (29.6) (5.9) Depreciation and amortization 11.2 9.1 43.1 33.5 45.2 EBITDA $ 11.7 $ 8.3 $ 42.0 $ 45.4 $ 45.4 Management fee 0.7 3.1 4.9 2.3 2.5 Transaction costs - 2.1 3.3 4.0 1.2 Integration expense 1.6 0.7 6.5 - 7.4 Adjusted EBITDA $ 14.0 $ 14.2 $ 56.7 $ 51.7 $ 56.5 % Margin 20.8% 21.1% 20.1% 22.7% 20.1% Reconciliation of (Loss)/Income from Investment to Matrix Net Income (2) Equity in net (loss) gain of investee $ (1.7) $ (2.3) (6.2) $ 13.4 $ (5.5) Management fee and other (0.3) (1.4) (2.5) (1.0) (1.4) Net (loss) gain - equity investment $ (2.0) $ (3.7) $ (8.7) $ 12.4 $ (6.9) Divided by Providence share (3) 43.6% 43.6% 43.6% 46.6% 43.6% Matrix Net Income standalone $ (4.5) $ (8.5) $ (20.0) $ 26.7 $ (16.0) (1) Represents 100% of Matrix’s results including the results of HealthFair since its acquisition of February 16, 2018. Providence’s retained equity interest is now accounted for as an equity method investment. Matrix’s results are not included within Providence’s consolidated results in any period presented. (2) A reconciliation has been provided to bridge from the income from Equity in net (loss)gain of investee to Matrix’s standalone Net Income. (3) For FYE 2017, % Equity Interest represents Providence’s equity interest in Matrix as of December 31, 2017. It should be noted that Providence’s equity interest in Matrix decreased from 46.8% to 46.6% primarily due to a rollover of management bonuses into equity during Q3:2017. In addition, Providence’s equity interest in Matrix decreased to 43.6% following the rollover of certain HealthFair equity interests related to the acquisition during Q1:2018. 10


 
NET SERVICES ADJUSTED EBITDA RECONCILIATION Q1:2019 Q1:2018 Less: NET Services Less: NET Services Certain Corp Exc. Certain Certain Corp Exc. Certain (1) (1) $Millions NET Services Costs Corp Costs NET Services Costs Corp Costs Revenue $ 367.8 $ - $ 367.8 $ 336.7 $ - $ 336.7 Income from Cont Ops after Income Taxe 2.6 (7.2) 9.8 9.2 (7.5) 16.7 Interest Expense, Net 0.3 - 0.3 0.3 - 0.3 Provision For Income Taxes 0.6 - 0.6 2.5 - 2.5 Depreciation and Amortization 4.5 0.2 4.3 3.6 0.1 3.5 EBITDA $ 8.0 $ (7.0) $ 15.0 $ 15.7 $ (7.4) $ 23.1 Restructuring and Related Expense 2.8 1.8 1.0 1.3 0.4 0.8 Transaction Expense 1.4 0.5 0.9 0.0 0.0 - Adjusted EBITDA $ 12.2 $ (4.7) $ 16.9 $ 17.0 $ (6.9) $ 23.9 % Margin 3.3% 4.6% 5.0% 7.1% FYE 2018 FYE 2017 LTM Q1:2019 Less: NET Services Less: NET Services Less: NET Services Certain Corp Exc. Certain Certain Corp Exc. Certain Certain Corp Exc. Certain (1) (1) (1) $Millions NET Services Costs Corp Costs NET Services Costs Corp Costs NET Services Costs Corp Costs Revenue $ 1,385.0 $ - $ 1,385.0 $ 1,318.2 $ - $ 1,318.2 $ 1,416.1 $ - $ 1,416.1 Income from Cont Ops after Income Taxe 22.8 (19.5) 42.3 41.1 (0.5) 41.7 16.2 (19.3) 35.5 Interest Expense, Net 1.8 1.7 0.0 1.2 1.1 0.1 1.8 1.7 0.0 Provision For Income Taxes 6.2 (7.8) 14.1 0.5 (23.5) 24.0 4.3 (7.8) 12.1 Depreciation and Amortization 15.8 0.8 15.0 13.6 0.3 13.3 16.7 0.9 15.8 EBITDA $ 46.7 $ (24.8) $ 71.5 $ 56.5 $ (22.6) $ 79.0 $ 39.0 $ (24.5) $ 63.4 Asset Impairment 14.2 - 14.2 - - - 14.2 - 14.2 Gain on Reimeaurement (6.6) (6.6) - - - - (6.6) (6.6) - Restructuring and Related Expense 11.5 8.4 3.2 8.0 1.7 6.3 13.1 9.7 3.4 Litigation income (0.2) (0.2) - (5.0) (5.0) - (0.2) (0.2) - Transaction Expense 7.2 3.6 3.6 - - - 8.6 4.1 4.5 Adjusted EBITDA $ 72.8 $ (19.7) $ 92.5 $ 59.5 $ (25.8) $ 85.3 $ 68.0 $ (17.5) $ 85.6 % Margin 5.3% 6.7% 4.5% 6.5% 4.8% 6.0% Certain corporate costs are comprised of certain continuing corporate and other overhead expenses, including those previously included in our Corporate and Other segment. In April 2018, the Company announced plans of an organizational consolidation to integrate substantially all activities and functions performed at the holding company into NET Services. As a result of the organizational consolidation, effective January 1, 2019, the Company’s Corporate and Other segment was combined with the NETet Services segment. These costs in Q1:2019 after adjusting for ‘Restructuring and Related Expense’ represent the on-going costs to maintain certain executive, accounting, finance, internal audit, tax, legal, strategic and development functions and the Company’s Captive Insurance Company. 11


 
ADJUSTED NET INCOME / EPS $Millions, Except Per Share Amounts Q1:19 Income from Continuing Operations, Net of Tax $ 1.3 Restructuring and Related Expense 3.0 Transaction Expenses 1.4 Equity in Net Loss of Investee 1.7 Amortization 1.6 Tax Impact of Adjustments (2.4) Adjusted Net Income $ 6.6 Dividends on Convertible Preferred Stock (1.1) Income Allocated to Participating Securities (0.7) Adjusted Net Income to Common Stockholders $ 4.8 Adjusted EPS $ 0.37 Diluted Weighted-Average Common Shares Outstanding (mm) 13.0 12