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, 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))

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






¨


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 August 7, 2019, The Providence Service Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 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 August 7, 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 June 30, 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: August 7, 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=13048207&doc=4
The Providence Service Corporation Reports Second Quarter 2019 Results

Highlights for the Second Quarter of 2019:

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

ATLANTA, GA – August 7, 2019 – The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), today reported financial results for the three and six months ended June 30, 2019.

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

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

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

Organizational Consolidation

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

Share Repurchase Authorization

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

Extension of Credit Agreement

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







Second Quarter 2019 Results

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

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

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

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

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

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

Matrix - Equity Investment

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

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

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

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

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






Investor Presentation and Conference Call

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

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

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

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

About Providence

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

Non-GAAP Financial Measures and Adjustments

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

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






Forward-Looking Statements

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

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



--financial tables to follow--





Providence Service Corporation
Page 5

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Service revenue, net
 
$
363,911

 
$
343,736

 
$
731,726

 
$
680,432

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
    Service expense
 
345,948

 
317,741

 
686,446

 
620,856

    General and administrative expense
 
16,860

 
18,139

 
36,262

 
36,037

    Asset impairment charge
 

 
678

 

 
678

    Depreciation and amortization
 
4,353

 
3,747

 
8,827

 
7,327

Total operating expenses
 
367,161

 
340,305

 
731,535

 
664,898

Operating (loss) income
 
(3,250
)
 
3,431

 
191

 
15,534

 
 
 
 
 
 
 
 
 
Other expenses (income):
 
 
 
 
 
 
 
 
    Interest expense, net
 
301

 
232

 
604

 
558

    Other income
 
(66
)
 

 
(132
)
 

    Equity in net loss of investee
 
1,315

 
174

 
2,971

 
2,519

(Loss) income from continuing operations before income taxes
 
(4,800
)
 
3,025

 
(3,252
)
 
12,457

(Benefit) provision for income taxes
 
(1,391
)
 
1,062

 
(1,157
)
 
3,071

(Loss) income from continuing operations, net of tax
 
(3,409
)
 
1,963

 
(2,095
)
 
9,386

Loss from discontinued operations, net of tax
 
1,697

 
(13,366
)
 
966

 
(15,063
)
Net loss
 
(1,712
)
 
(11,403
)
 
(1,129
)
 
(5,677
)
Net income (loss) from discontinued operations attributable to noncontrolling interest
 

 
188

 

 
(108
)
Net loss attributable to Providence
 
$
(1,712
)
 
$
(11,215
)
 
$
(1,129
)
 
$
(5,785
)
 
 
 
 
 
 
 
 
 
Net loss attributable to common stockholders
 
$
(2,810
)
 
$
(12,321
)
 
$
(3,314
)
 
$
(7,980
)
 
 
 
 
 
 
 
 
 
Basic (loss) earnings per common share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.35
)
 
$
0.08

 
$
(0.33
)
 
$
0.54

Discontinued operations
 
0.13

 
(1.03
)
 
0.07

 
(1.15
)
Basic loss per common share
 
$
(0.22
)
 
$
(0.95
)
 
$
(0.26
)
 
$
(0.61
)
 
 
 
 
 
 
 
 
 
Diluted (loss) earnings per common share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.35
)
 
$
0.08

 
$
(0.33
)
 
$
0.54

Discontinued operations
 
0.13

 
(1.02
)
 
0.07

 
(1.15
)
Diluted loss per common share
 
$
(0.22
)
 
$
(0.94
)
 
$
(0.26
)
 
$
(0.61
)
 
 
 
 
 
 
 
 
 
Weighted-average number of common
 
 
 
 
 
 
 
 
  shares outstanding:
 
 
 
 
 
 
 
 
    Basic
 
12,973,496

 
13,008,106

 
12,937,054

 
13,056,765

    Diluted
 
12,973,496

 
13,088,182

 
12,937,054

 
13,141,198



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Providence Service Corporation
Page 6

The Providence Service Corporation
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
 
 
 
 
 
 
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
    Cash and cash equivalents
 
$
29,804

 
$
5,678

    Accounts receivable, net of allowance
 
154,864

 
147,756

    Other current assets (1)
 
47,765

 
50,495

    Current assets of discontinued operations (2)
 
4,181

 
7,051

Total current assets
 
236,614

 
210,980

Operating lease right-of-use assets
 
19,354

 

Property and equipment, net
 
21,548

 
22,965

Goodwill and intangible assets, net
 
158,244

 
161,362

Equity investment
 
157,948

 
161,503

Other long-term assets (3)
 
12,124

 
12,835

Total assets
 
$
605,832

 
$
569,645

 
 
 
 
 
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
 
 
 
 
    Current portion of operating lease liabilities
 
$
6,892

 
$

    Current portion of long-term obligations
 
308

 
718

    Other current liabilities (4)
 
152,168

 
138,908

    Current liabilities of discontinued operations (2)
 
1,280

 
3,257

Total current liabilities
 
160,648

 
142,883

Long-term obligations, less current portion
 
199

 
353

Operating lease liabilities, less current portion
 
13,810

 

Other long-term liabilities (5)
 
36,698

 
38,019

Total liabilities
 
211,355

 
181,255

 
 
 
 
 
Mezzanine and stockholders' equity
 
 
 
 
Convertible preferred stock, net
 
77,234

 
77,392

Stockholders' equity
 
317,243

 
310,998

Total liabilities, redeemable convertible preferred stock and stockholders' equity
 
$
605,832

 
$
569,645


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


--more--





Providence Service Corporation
Page 7

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
 
 
 
 
 
 
 
Six months ended June 30,
 
 
2019
 
2018
Operating activities
 
 
 
 
Net loss
 
$
(1,129
)
 
$
(5,677
)
  Depreciation and amortization
 
8,827

 
13,677

  Stock-based compensation
 
3,392

 
4,278

  Asset impairment charge
 

 
9,881

  Equity in net loss of investee
 
2,971

 
2,468

  Other non-cash items
 
(864
)
 
(2,765
)
  Changes in working capital
 
9,874

 
(29,778
)
Net cash provided by (used in) operating activities
 
23,071

 
(7,916
)
Investing activities
 
 
 
 
Purchase of property and equipment
 
(4,277
)
 
(8,792
)
Proceeds from note receivable
 

 
3,130

Net cash used in investing activities
 
(4,277
)
 
(5,662
)
Financing activities
 
 
 
 
Preferred stock dividends
 
(2,185
)
 
(2,190
)
Repurchase of common stock, for treasury
 
(372
)
 
(56,428
)
Proceeds from common stock issued pursuant to stock option exercise
 
6,383

 
12,405

Repayment of debt
 
(12,000
)
 

Proceeds from debt
 
12,000

 

Capital lease payments and other
 
(566
)
 
(1,793
)
Net cash provided by (used in) financing activities
 
3,260

 
(48,006
)
Effect of exchange rate changes on cash
 

 
(53
)
Net change in cash and cash equivalents
 
22,054

 
(61,637
)
Cash, cash equivalents and restricted cash at beginning of period
 
12,367

 
101,606

Cash, cash equivalents and restricted cash at end of period (2)
 
$
34,421

 
$
39,969

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



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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 June 30, 2019
 
 
NET Services
 
Matrix Investment
 
Total Continuing Operations
 
 
 
 
 
 
 
Service revenue, net
$
363,911

 
$

 
$
363,911

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
  Service expense
345,948

 

 
345,948

  General and administrative expense
16,860

 

 
16,860

  Depreciation and amortization
4,353

 

 
4,353

Total operating expenses
367,161

 

 
367,161

 
 
 
 
 
 
 
Operating loss
(3,250
)
 

 
(3,250
)
 
 
 
 
 
 
 
Other expenses (income):
 
 
 
 
 
  Interest expense, net
301

 

 
301

  Other income
(66
)
 

 
(66
)
  Equity in net loss of investee

 
1,315

 
1,315

Loss from continuing
 
 
 
 
 
     operations before income taxes
(3,485
)
 
(1,315
)
 
(4,800
)
Benefit for income taxes
(1,251
)
 
(140
)
 
(1,391
)
Loss from continuing operations, net of taxes
(2,234
)
 
(1,175
)
 
(3,409
)
 
 
 
 
 
 
 
Interest expense, net
301

 

 
301

Benefit for income taxes
(1,251
)
 
(140
)
 
(1,391
)
Depreciation and amortization
4,353

 

 
4,353

 
 
 
 
 
 
 
EBITDA
1,169

 
(1,315
)
 
(146
)
 
 
 
 
 
 
 
Restructuring and related charges (1)
1,658

 

 
1,658

Transaction costs (2)
2,950

 

 
2,950

Equity in net loss of investee

 
1,315

 
1,315

 
 
 
 
 
 
 
Adjusted EBITDA
$
5,777

 
$

 
$
5,777

(1) Restructuring and related charges include severance costs of $342 and organizational consolidation costs of $1,316.
(2) Transaction costs related to the integration of Circulation and certain transaction-related expenses.



--more--











Providence Service Corporation
Page 9

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
 
 
Three months ended June 30, 2018
 
 
NET Services
 
Matrix
Investment
 
Total Continuing Operations
 
 
 
 
 
 
 
Service revenue, net
$
343,736

 
$

 
$
343,736

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
  Service expense
317,741

 

 
317,741

  General and administrative expense
18,139

 

 
18,139

  Asset impairment charge
678

 

 
678

  Depreciation and amortization
3,747

 

 
3,747

Total operating expenses
340,305

 

 
340,305

 
 
 
 
 
 
 
Operating income
3,431

 

 
3,431

 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
  Interest expense, net
232

 

 
232

  Equity in net loss of investee

 
174

 
174

Income (loss) from continuing
 
 
 
 
 
     operations, before income tax
3,199

 
(174
)
 
3,025

Provision (benefit) for income taxes
1,082

 
(20
)
 
1,062

Income (loss) from continuing operations, net of taxes
2,117

 
(154
)
 
1,963

 
 
 
 
 
 
 
Interest expense, net
232

 

 
232

Provision (benefit) for income taxes
1,082

 
(20
)
 
1,062

Depreciation and amortization
3,747

 

 
3,747

 
 
 
 
 
 
 
EBITDA
7,178

 
(174
)
 
7,004

 
 
 
 
 
 
 
Asset impairment charge
678

 

 
678

Restructuring and related charges (1)
2,823

 

 
2,823

Transaction costs
83

 

 
83

Equity in net loss of investee

 
174

 
174

Litigation income (2)
(201
)
 

 
(201
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
10,561

 
$

 
$
10,561


(1) Restructuring and related charges include value enhancement implementation initiative costs of $336 and organizational consolidation costs of $2,487.
(2) Resolution of accruals, resulting in current period income, related to defense cost for a putative stockholder class action derivative complaint.


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Providence Service Corporation
Page 10

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
 
 
Six months ended June 30, 2019
 
 
NET Services
 
Matrix Investment
 
Total Continuing Operations
 
 
 
 
 
 
 
Service revenue, net
$
731,726

 
$

 
$
731,726

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
  Service expense
686,446

 

 
686,446

  General and administrative expense
36,262

 

 
36,262

  Depreciation and amortization
8,827

 

 
8,827

Total operating expenses
731,535

 

 
731,535

 
 
 
 
 
 
 
Operating income
191

 

 
191

 
 
 
 
 
 
 
Other expenses (income):
 
 
 
 
 
  Interest expense, net
604

 

 
604

  Other income
(132
)
 

 
(132
)
  Equity in net loss of investee

 
2,971

 
2,971

Loss from continuing
 
 
 
 
 
     operations before income tax
(281
)
 
(2,971
)
 
(3,252
)
Benefit for income taxes
(680
)
 
(477
)
 
(1,157
)
Income (loss) from continuing operations, net of taxes
399

 
(2,494
)
 
(2,095
)
 
 
 
 
 
 
 
Interest expense, net
604

 

 
604

Benefit for income taxes
(680
)
 
(477
)
 
(1,157
)
Depreciation and amortization
8,827

 

 
8,827

 
 
 
 
 
 
 
EBITDA
9,150

 
(2,971
)
 
6,179

 
 
 
 
 
 
 
Restructuring and related charges (1)
4,470

 

 
4,470

Transaction costs (2)
4,339

 

 
4,339

Equity in net loss of investee

 
2,971

 
2,971

Litigation expense
9

 

 
9

 
 
 
 
 
 
 
Adjusted EBITDA
$
17,968

 
$

 
$
17,968


(1) Restructuring and related charges include severance costs of $1,368 and organizational consolidation costs of $3,102.
(2) Transaction costs related to the integration of Circulation and certain transaction-related expenses.













Providence Service Corporation
Page 11

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
 
 
Six months ended June 30, 2018
 
 
NET Services
 
Matrix
Investment
 
Total Continuing Operations
 
 
 
 
 
 
 
Service revenue, net
$
680,432

 
$

 
$
680,432

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
  Service expense
620,856

 

 
620,856

  General and administrative expense
36,037

 

 
36,037

  Asset impairment charge
678

 

 
678

  Depreciation and amortization
7,327

 

 
7,327

Total operating expenses
664,898

 

 
664,898

 
 
 
 
 
 
 
Operating income
15,534

 

 
15,534

 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
  Interest expense, net
558

 

 
558

  Other gain

 

 

  Equity in net loss of investee

 
2,519

 
2,519

Income (loss) from continuing
 
 
 
 
 
     operations, before income tax
14,976

 
(2,519
)
 
12,457

Provision (benefit) for income taxes
3,610

 
(539
)
 
3,071

Income (loss) from continuing operations, net of taxes
11,366

 
(1,980
)
 
9,386

 
 
 
 
 
 
 
Interest expense, net
558

 

 
558

Provision (benefit) for income taxes
3,610

 
(539
)
 
3,071

Depreciation and amortization
7,327

 

 
7,327

 
 
 
 
 
 
 
EBITDA
22,861

 
(2,519
)
 
20,342

 
 
 
 
 
 
 
Asset impairment charge
678

 

 
678

Restructuring and related charges (1)
4,094

 

 
4,094

Transaction costs
118

 

 
118

Equity in net loss of investee

 
2,519

 
2,519

Litigation income (2)
(201
)
 

 
(201
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
27,550

 
$

 
$
27,550


(1) Restructuring and related charges include value enhancement implementation initiative costs of $1,159 and organizational consolidation costs of $2,935.
(2) Resolution of accruals, resulting in current period income, related to defense cost for a putative stockholder class action derivative complaint.





Providence Corporation
Page 12

The Providence Service Corporation
Summary Financial Information of Equity Investment in Matrix Medical Network (1)
(in thousands)
(Unaudited)
 
Three months ended June 30,
 
Six months ended June 30, 2018
 
 
2019
 
2018
 
2019
 
2018
 
Revenue
$
72,161

 
$
78,409

 
$
139,144

 
$
145,839

 
Operating expense (2)
59,362

 
64,423

 
114,581

 
123,590

 
Depreciation and amortization
11,256

 
9,359

 
22,465

 
18,411

 
Operating income
1,543

 
4,627

 
2,098

 
3,838

 
 
 
 
 
 
 
 
 
 
Interest expense
6,384

 
5,940

 
12,777

 
16,283

 
Benefit for income taxes
(1,180
)
 
(444
)
 
(2,531
)
 
(3,058
)
 
Net loss
(3,661
)
 
(869
)
 
(8,148
)
 
(9,387
)
 
 
 
 
 
 
 
 
 
 
Interest
43.6
%
 
43.6
%
 
43.6
%
 
43.6
%
 
Net loss - Equity Investment
(1,597
)
 
(379
)
 
(3,555
)
 
(4,095
)
 
Management fee and other
282

(3)
205

(4)
584

(3)
1,576

(5)
Equity in net loss of investee
$
(1,315
)
 
$
(174
)
 
$
(2,971
)
 
$
(2,519
)
 
 
 
 
 
 
 
 
 
 
Net Debt (6)
$
294,453

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



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Providence Service Corporation
Page 13

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA: Matrix Medical Network (1)(2)(4)
(in thousands) (Unaudited)
 
Three months ended June 30,
 
Six months ended June 30, 2018
 
2019
 
2018
 
2019
 
2018
Revenue
$
72,161

 
$
78,409

 
$
139,144

 
$
145,839

Operating expense (3)
59,362

 
64,423

 
114,581

 
123,590

Depreciation and amortization
11,256

 
9,359

 
22,465

 
18,411

Operating income
1,543

 
4,627

 
2,098

 
3,838

 
 
 
 
 
 
 
 
Interest expense
6,384

 
5,940

 
12,777

 
16,283

Benefit for income taxes
(1,180
)
 
(444
)
 
(2,531
)
 
(3,058
)
Net loss
(3,661
)
 
(869
)
 
(8,148
)
 
(9,387
)
 
 
 
 
 
 
 
 
Depreciation and amortization
11,256

 
9,359

 
22,465

 
18,411

Interest expense
6,384

 
5,940

 
12,777

 
16,283

Benefit for income taxes
(1,180
)
 
(444
)
 
(2,531
)
 
(3,058
)
EBITDA
12,799

 
13,986

 
24,563

 
22,249

Management fees
637

 
696

 
1,297

 
3,754

Acquisition costs

 
77

 

 
2,246

Integration costs
5

 
1,636

 
1,488

 
2,362

Transaction costs
286

 

 
330

 
6

Adjusted EBITDA
$
13,727

 
$
16,395

 
$
27,678

 
$
30,617

 
 
 
 
 
 
 
 

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



--more--





Providence Service Corporation
Page 14
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Net Income per Common Share:
(in thousands, except share and per share data)
(Unaudited)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations, net of tax
$
(3,409
)
 
$
1,963

 
$
(2,095
)
 
$
9,386

 
 
 
 
 
 
 
 
Asset impairment charge

 
678

 

 
678

Restructuring and related charges, including accelerated depreciation related to the Organizational Consolidation (1)
1,755

 
2,969

 
4,785

 
4,241

Transaction costs (2)
2,950

 
83

 
4,339

 
118

Equity in net loss of investee
1,315

 
174

 
2,971

 
2,519

Intangible amortization expense
1,559

 
730

 
3,117

 
1,460

Litigation income

 
(201
)
 
9

 
(201
)
Tax effected impact of adjustments
(1,986
)
 
(335
)
 
(5,121
)
 
(1,267
)
 
 
 
 
 
 
 
 
 
Adjusted Net Income
2,184

 
6,061

 
8,005

 
16,934

 
 
 
 
 
 
 
 
 
Dividends on convertible preferred stock
(1,098
)
 
(1,106
)
 
(2,185
)
 
(2,195
)
Income allocated to participating securities
(146
)
 
(662
)
 
(782
)
 
(1,973
)
 
 
 
 
 
 
 
 
 
Adjusted Net Income available to common stockholders
$
940

 
$
4,293

 
$
5,038

 
$
12,766

 
 
 
 
 
 
 
 
 
Adjusted EPS
$
0.07

 
$
0.33

 
$
0.39

 
$
0.97

 
 
 
 
 
 
 
 
 
Diluted weighted-average number of common shares outstanding
13,011,033

 
13,088,182

 
12,982,630

 
13,141,198


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




###


q22019earningscallpresen
PROVIDENCE SERVICE CORP Q2:2019 EARNINGS CALL PRESENTATION August 8, 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 non-controlling 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


 
Q2:2019 HIGHLIGHTS • Q2:2019 Revenue up 5.9% compared to Q2:2018 Revenue • NET Services: New State Contract in WV and MCO contracts in Indiana and Louisiana and higher utilization on non full-risk contracts Growth • Matrix(1) : Home solution continues to exceed internal expectations driven by strong membership growth and greater visit yields • Adjusted EBITDA(2) of $5.8mm; NET Services Adjusted EBITDA excluding certain corporate costs(2) of $7.3mm • Margins impacted by a confluence of higher utilization and industry headwinds • Management successfully secured $10mm of transportation cost savings and Profitability $12mm of pricing increases to benefit second half results • Re-aligned transportation operations to reinstate market-level oversight which were challenged by Company’s transition to a centralized operating model • Matrix(1) : Achieved Adj. EBITDA margin 19.0% versus 20.9% prior year due to lower Mobile visits, partially offset by reduced costs and higher Home visits • Adj. EPS(2) of $0.07 • Completed organizational consolidation, on target to achieve at least $10mm of run- rate savings Capital • Certain Corporate costs (formerly holding company costs)(2) in Q2:2019 of $1.5mm Allocation versus $6.0mm in prior year period • Authorization of new $100.0mm share repurchase program (expires on 12/31/19) • Extended $200.0mm credit facility to 8/2/2020 (1) Providence’s interest in Matrix is accounted for as an equity method investment. Matrix’s full financial results are not included within Providence’s consolidated results. (2) See appendix for a reconciliation of non-GAAP financial measures. 3


 
Q2:2019 HIGHLIGHTS % FYE FYE LTM $Millions Q2:19 Q2:18 Growth 2018 2017 Q2:19 Revenue $ 363.9 $ 343.7 5.9% $ 1,385.0 $ 1,318.2 $ 1,436.3 Transportation Expense (i.e. Purchased Services) $ 297.4 $ 269.8 $ 1,055.3 $ 1,009.5 $ 1,118.5 % of Rev 81.7% 78.5% 76.2% 76.6% 77.9% Key Financial Other Costs (Offset by Add-backs) $ 59.2 $ 57.3 $ 237.2 $ 223.4 $ 241.5 % of Rev 16.3% 16.7% 17.1% 16.9% 16.8% Metrics NET Services Adj. EBITDA (Exc. Certain Corp Costs) (1) $ 7.3 $ 16.6 $ 92.5 $ 85.3 $ 76.2 (1) % Margin 2.0% 4.8% 6.7% 6.5% 5.3% Certain Corporate Costs (2) (1.5) (6.0) (19.7) (25.8) (13.0) Adjusted EBITDA (1) $ 5.8 $ 10.6 $ 72.8 $ 59.5 $ 63.2 (1) % Margin 1.6% 3.1% 5.3% 4.5% 4.4% • Management focused on oversight of market-level transportation expense • Continue working with state & managed care organization (MCO) clients to true-up contractual rates with costs 2019 • Lay the groundwork on adjacent growth opportunities (Medicare, Commercial, VA, Focus etc.) • Continued rollout of the Circulation platform across call centers. Roll out is on target with 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 • For Q2:19, Matrix achieved Adjusted EBITDA of $13.7 million or 19.0% of revenue • Completed integration of HealthFair and rolled out a new organizational structure • Operations were reorganized from a segment-based business to an integrated product-based platform consisting of ‘Home’, ‘Mobile’ and ‘Innovation’ solutions Q2:2019 Highlights • Matrix continues to exceed its internal expectations, despite a volume churn setback at the onset of the year • Home outperformed with incremental volume driven by higher organic membership growth, higher yield and new logo sales momentum, Mobile saw indications of a potentially stronger second half % FYE FYE LTM $Millions Q2:19 Q2:18 Growth 2018 2017 Q2:19 Revenue $ 72.2 $ 78.4 -7.9% $ 282.1 $ 227.9 $ 275.4 Key Financial (2) (1) Adjusted EBITDA $ 13.7 $ 16.4 $ 56.7 $ 51.7 $ 53.8 Metrics (2) % Margin 19.0% 20.9% 20.1% 22.7% 19.5% Capex $ 2.7 $ 3.1 $ 10.3 $ 11.0 $ 9.8 Net Debt $ 294.5 $ 307.2 (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 Q2:19 Q2:18 2018 2017 Q2:19 Cash Flow Before Working Capital $ 4.9 $ 7.0 $ 48.2 $ 42.8 $ 39.9 Working Capital Changes (20.7) (40.5) (40.3) 12.2 (1.0) Cash Provided By Operations $ (15.8) $ (33.5) $ 7.9 $ 55.0 $ 38.9 Capex (Continuing Operations) $ 2.6 $ 3.0 $ 10.8 $ 15.4 $ 9.8 Cash flow • As expected, Q2:19 cashflow impacted by working capital timing. Due to bi-weekly transportation provider payment cycle, every year there is an additional transportation provider payment in Q2 and Q4 6


 
BALANCE SHEET UPDATE $Millions Q2:19 Q1:19 Q4:18 Q4:17 Q4:16 Cash $ 29.8 $ 46.7 $ 8.0 $ 95.3 $ 72.3 Debt $ - $ - $ - $ - $ - Matrix Carrying Value $ 157.9 $ 159.5 $ 161.5 $ 169.7 $ 157.2 Shares Outstanding (mm) 15.0 14.9 14.8 15.4 15.9 Shares outstanding equals common shares outstanding plus total preferred shares on an as-converted basis. As of 8/5/19 shares outstanding equaled 15.0mm. 7


 
APPENDIX


 
ADJUSTED EBITDA RECONCILIATION (Continuing Ops) FYE FYE LTM $Millions Q2:19 Q2:18 2018 2017 Q2:19 Revenue $ 363.9 $ 343.7 $ 1,385.0 $ 1,318.2 $ 1,436.3 Income/(Loss) from Cont Ops (3.4) 2.0 18.2 51.1 6.2 Interest Expense, Net 0.3 0.2 1.8 1.2 1.8 Income Tax Provision/(Benefit) (1.4) 1.1 4.7 4.0 1.0 Depreciation and Amortization 4.4 3.7 15.8 13.6 17.3 EBITDA (1) $ (0.1) $ 7.0 $ 40.5 $ 69.9 $ 26.3 Asset Impairment - 0.7 14.2 - 13.5 Transaction Expense 3.0 0.1 7.2 - 11.5 Restructuring and Related Expense 1.7 2.5 8.7 1.9 10.2 Value Enhancement Initiative Implementation - 0.3 2.8 6.1 1.7 Equity in Net Loss/(Gain) of Investee 1.3 0.2 6.2 (13.4) 6.6 (Gain) on Remeasure of Cost Method Investment - - (6.6) - (6.6) Litigation Expense - (0.2) (0.2) (5.0) (0.0) Adjusted EBITDA (2) $ 5.8 $ 10.6 $ 72.8 $ 59.5 $ 63.2 % Margin 1.6% 3.1% 5.3% 4.5% 4.4% (1) For Q2:2018, $334k of transaction costs related to sale of WD Services moved from Continuing Operations to Discontinued Operations. (2) For Q2:2018, $140k of Corporate transaction expense included as an additional add-back. 9


 
ADJUSTED EBITDA RECONCILIATION (MATRIX) (1) LTM $ Millions Q2:19 Q2:18 FYE 2018 FYE 2017 Q2:19 Revenue $ 72.2 $ 78.4 $ 282.1 $ 227.9 $ 275.4 Net (loss)/income (3.7) (0.9) (20.0) 26.7 (18.8) Interest expense, net 6.4 5.9 26.0 14.8 22.5 Income tax benefit (1.2) (0.4) (7.1) (29.6) (6.6) Depreciation and amortization 11.3 9.4 43.1 33.5 47.2 EBITDA $ 12.8 $ 14.0 $ 42.0 $ 45.4 $ 44.3 Management fee 0.6 0.7 4.9 2.3 2.4 Transaction costs 0.3 0.1 3.3 4.0 1.4 Integration expense 0.0 1.6 6.5 - 5.7 Adjusted EBITDA $ 13.7 $ 16.4 $ 56.7 $ 51.7 $ 53.8 % Margin 19.0% 20.9% 20.1% 22.7% 19.5% Reconciliation of Matrix Net Income to Equity Income (Loss) of Investee (2) Matrix Net Income standalone $ (3.7) $ (0.9) $ (20.0) $ 26.7 $ (18.8) Divided by Providence share (3) 43.6% 43.6% 43.6% 46.6% 43.6% Equity in net (loss) gain of investee $ (1.6) $ (0.4) $ (8.7) $ 12.4 $ (8.2) Management fee and other 0.3 0.2 2.5 1.0 1.5 Net (loss) gain - equity investment $ (1.3) $ (0.2) (6.2) $ 13.4 $ (6.7) (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 Q2:2019 Q2:2018 Less: NET Services Less: NET Services Certain Corp Certain Corp Exc. Certain Exc. Certain (1) (1) $Millions NET Services Costs Corp Costs NET Services Costs Corp Costs Revenue $ 363.9 $ - $ 363.9 $ 343.7 $ - $ 343.7 Income from Cont Ops after Income Taxes (2.2) (4.4) 2.2 2.1 (8.6) 10.7 Interest Expense, Net 0.3 - 0.3 0.2 - 0.2 Provision For Income Taxes (1.3) - (1.3) 1.1 - 1.1 Depreciation and Amortization 4.4 0.1 4.3 3.7 0.2 3.5 EBITDA $ 1.2 $ (4.3) $ 5.5 $ 7.2 $ (8.4) $ 15.6 Restructuring and Related Expense 1.7 1.3 0.4 2.8 2.5 0.3 Transaction Expense 3.0 1.6 1.4 0.1 0.1 - Adjusted EBITDA $ 5.8 $ (1.5) $ 7.3 $ 10.6 $ (6.0) $ 16.6 % Margin 1.6% 2.0% 3.1% 4.8% FYE 2018 FYE 2017 LTM Q2:2019 Less: Less: Less: NET Services NET Services NET Services Certain Corp Certain Corp Certain Corp Exc. Certain Exc. Certain 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 $ 1,436.3 $ - $ 1,436.3 Income from Cont Ops after Income Taxes 22.8 (19.5) 42.3 41.1 (0.5) 41.7 11.3 (15.1) 26.4 Interest Expense, Net 1.8 1.7 0.0 1.2 1.1 0.1 1.8 1.7 0.1 Provision For Income Taxes 6.2 (7.8) 14.1 0.5 (23.5) 24.0 2.5 (7.8) 10.3 Depreciation and Amortization 15.8 0.8 15.0 13.6 0.3 13.3 17.3 0.8 16.6 EBITDA $ 46.7 $ (24.8) $ 71.5 $ 56.5 $ (22.6) $ 79.0 $ 33.0 $ (20.4) $ 53.4 Asset Impairment 14.2 - 14.2 - - - 13.5 - 13.5 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 11.9 8.5 3.4 Litigation income (0.2) (0.2) - (5.0) (5.0) - (0.0) (0.0) 0.0 Transaction Expense 7.2 3.6 3.6 - - - 11.5 5.6 5.9 Adjusted EBITDA $ 72.8 $ (19.7) $ 92.5 $ 59.5 $ (25.8) $ 85.3 $ 63.2 $ (13.0) $ 76.2 % Margin 5.3% 6.7% 4.5% 6.5% 4.4% 5.3% 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 NET Services segment. These costs 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 Q2:19 (Loss) from Continuing Operations, Net of Tax $ (3.4) Restructuring and Related Expense 1.7 Transaction Expenses 3.0 Equity in Net Loss of Investee 1.3 Amortization 1.6 Tax Impact of Adjustments (2.0) Adjusted Net Income $ 2.2 Dividends on Convertible Preferred Stock (1.1) Income Allocated to Participating Securities (0.2) Adjusted Net Income to Common Stockholders $ 0.9 Adjusted EPS $ 0.07 Diluted Weighted-Average Common Shares Outstanding (mm) 13.0 12