prsc-20200227
0001220754FALSE00012207542020-02-272020-02-27

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): February 27, 2020
The Providence Service Corporation
(Exact name of registrant as specified in its charter)
 
 
Delaware001-3422186-0845127
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)(I.R.S. Employer
Identification No.)


1275 Peachtree StreetSixth FloorAtlantaGeorgia30309
(Address of principal executive offices)(Zip Code)

(404888-5800
Registrant’s telephone number, including area code:

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 classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.001 par value per sharePRSCThe 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.
¨




Item 2.02 Results of Operations and Financial Condition.

On February 27, 2020, The Providence Service Corporation (the “Company”) issued a press release announcing its financial results for the quarter and fiscal year ended December 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 February 27, 2020, 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 and fiscal year ended December 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
101Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
104The cover page from this Current Report on Form 8-K, formatted as Inline XBRL.   
 




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: February 27, 2020  By: /s/ Kevin M. Dotts
  Name: Kevin M. Dotts
  Title: Chief Financial Officer


Document

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The Providence Service Corporation Reports Fourth Quarter and Full Year 2019 Results


ATLANTA, GA – February 27, 2020 – The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), the nation's largest provider of non-emergency medical transportation ("NEMT") programs and holder of a minority interest in Matrix Medical Network, today reported financial results for the quarter and year ended December 31, 2019.

Daniel E. Greenleaf, President and Chief Executive Officer, commented, “In the fourth quarter of 2019, Providence delivered strong revenue growth of 6.7%, net loss from continuing operations of $11.4 million and Adjusted EBITDA of $10.2 million. During the quarter, in response to higher transportation cost experienced throughout the year, the team remained focused on operational execution. This included a focus on network development to drive a more robust and competitive transportation network. On revenue, we were able to successfully renegotiate several contracts which contributed $4.0 million of in-quarter benefit.”

He continued, “For the year, our revenue grew by $125.0 million, or 9.0%, reflecting the mission-critical nature of our services to payors and members. Since joining the Company in December, I have been impressed by our team's unwavering commitment to serving our members. Looking ahead, I see compelling opportunities to leverage our leadership position in NEMT to drive continued revenue growth, sustainable margin expansion, value to our shareholders, and improved quality of life and better health outcomes for our members.”

Fourth Quarter 2019 Highlights

Revenue from continuing operations of $384.8 million, an increase of 6.7% from the fourth quarter of 2018
Loss from continuing operations, net of tax, of $11.4 million, or loss of $0.97 per diluted common share
Adjusted EBITDA of $10.2 million, Adjusted Net Income of $7.9 million and Adjusted EPS of $0.45
Matrix, on a standalone basis, recorded a net loss of $54.3 million, which included a pre-tax asset impairment charge of $55.1 million, and Adjusted EBITDA of $6.3 million

2019 Highlights

Revenue from continuing operations of $1.51 billion, an increase of 9.0% from 2018
Loss from continuing operations, net of tax, of $5.0 million, or loss of $0.72 per diluted common share
Adjusted EBITDA of $51.2 million, Adjusted Net Income of $29.2 million and Adjusted EPS of $1.65
Net cash provided by operating activities of $60.9 million
Unrestricted Cash of $61.4 million in 2019 compared to $5.7 million in 2018
Matrix, on a standalone basis, recorded a net loss of $69.4 million, which included a pre-tax asset impairment charge of $55.1 million, and Adjusted EBITDA of $44.0 million

Fourth Quarter 2019 Results

For the fourth quarter of 2019, the Company reported revenue of $384.8 million, an increase of 6.7% from $360.8 million in the fourth quarter of 2018.

Operating income was $7.6 million, or 2.0% of revenue, in the fourth quarter of 2019, compared to operating loss of $0.7 million, or negative 0.2% of revenue, in the fourth quarter of 2018. Loss from continuing operations, net of tax, in the fourth quarter of 2019 was $11.4 million, or $0.97 loss per diluted common share, compared to loss from continuing operations, net of tax, of $1.5 million, or $0.20 loss per diluted common share, in the fourth quarter of 2018.

Adjusted EBITDA was $10.2 million, or 2.6% of revenue, in the fourth quarter of 2019, compared to $27.3 million, or 7.6% of revenue, in the fourth quarter of 2018.




Adjusted Net Income in the fourth quarter of 2019 was $7.9 million, or $0.45 earnings per diluted common share, compared to $17.2 million, or $1.08 earnings per diluted common share, in the fourth quarter of 2018.

The quarter-over-quarter increase in revenue was a result of increased volume within existing contracts as well as rate changes and a new managed care organization ("MCO") contract in Minnesota. These increases were partially offset by the impact of contracts the Company no longer serves, including a state contract in Rhode Island and MCO contracts in California, Florida and New Mexico.

Adjusted EBITDA decreased in the fourth quarter of 2019 versus the fourth quarter of 2018 primarily due to increased transportation costs on a per trip basis in addition to higher utilization across multiple at-risk contracts.

Matrix - Equity Investment

For the fourth quarter of 2019, Matrix recorded revenue of $64.6 million, a decrease of 1.8% from $65.7 million in the fourth quarter of 2018. Matrix had an operating loss of $60.5 million for the fourth quarter of 2019, primarily as a result of asset impairment charges of $55.1 million compared to an operating loss of $6.5 million in the fourth quarter of 2018. Providence recorded a loss in equity earnings of $23.5 million related to its Matrix equity investment for the fourth quarter of 2019 compared to a loss of $2.1 million for the fourth quarter of 2018.

In the fourth quarter of 2019, Matrix had Adjusted EBITDA of $6.3 million or 9.8% of revenue, compared to $12.5 million, or 18.9% of revenue, in the fourth quarter of 2018.

Adjusted EBITDA was impacted by higher direct and indirect costs, compared to the fourth quarter of 2018.

As of December 31, 2019, Providence's ownership interest and equity investment in Matrix was 43.6% and $130.9 million, respectively.












Investor Presentation and Conference Call

Providence will hold a conference call to discuss its financial results on February 27, 2020 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: 5959714

Replay (available until March 5, 2020):
US toll-free: 1 (855) 859 2056
International: 1 (404) 537 3406
Passcode: 5959714

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 subsidiaries LogistiCare Solutions, LLC and Circulation, Inc., 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, (5) asset impairment charges, and (6) gain on remeasurement of cost investment. Adjusted Net Income is defined as income (loss) from continuing operations, net of taxes, 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) intangible asset amortization, (5) certain transaction and related costs, (6) asset impairment charges, (7) gain on remeasurement of cost investment, and (8) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock and (2) adjusted net income allocated to participating stockholders, divided by the diluted weighted-average number of common shares outstanding as calculated for Adjusted Net Income. 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

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature and are frequently identified by the use of terms such as "may," "will," "should," "expect," "believe," "estimate," "intend," and similar words indicating possible future expectations, events or actions. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, which may cause actual events to be materially different from those expressed or implied herein, including but not limited to: the early termination for non-renewal of contracts; our ability to successfully respond to governmental requests for proposal; our ability to fulfill our contractual obligations; our ability to identify and successfully complete and integrate acquisitions; our ability to identify and realize the benefits of strategic initiatives; the loss of any of the significant payors from whom we generate a significant amount of our revenue; our ability to accurately estimate the cost of performing under certain capitated contracts; our ability to match the timing of the costs of new contracts with its related revenue; the outcome of pending or future litigation; our ability to attract and retain senior management and other qualified employees; our ability to successfully complete recent divestitures or business termination; the accuracy of representations and warranties and strength of related indemnities provided to us in acquisitions or claims made against us for representations and warranties and related indemnities in our dispositions; our ability to effectively compete in the marketplace; inadequacies in or security breaches of our information technology systems, including our ability to protect private data; seasonal fluctuations in our operations; impairment of long-lived assets; the adequacy of our insurance coverage for automobile, general liability, professional liability and workers’ compensation; damage to our reputation by inaccurate, misleading or negative media coverage; our ability to comply with government healthcare and other regulations; changes in budgetary priorities of government entities that fund our services; failure to adequately comply with patient and service user information regulations; possible actions under Medicare and Medicaid programs for false claims or recoupment of funds for noncompliance; changes in the regulatory landscape applicable to Matrix; changes to our estimated income tax liability from audits or otherwise; our ability to meet restrictive covenants in our credit agreement; restrictions in the terms of our preferred stock; the costs of complying with public company reporting obligations; and the accuracy of our accounting estimates and assumptions.

The Company has provided additional information in our annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to update or revise any forward- looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law.

Investor Relations Contact   
Kalle Ahl, The Equity Group
(212) 836-9614
kahl@equityny.com







The Providence Service Corporation
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The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands except share and per share data)
Quarter ended December 31,Year ended December 31,
2019201820192018
Service revenue, net$384,833  $360,762  $1,509,944  $1,384,965  
Operating expenses: 
    Service expense358,436  319,241  1,401,152  1,253,608  
    General and administrative expense15,003  24,011  67,244  77,093  
    Asset impairment charge—  13,497  —  14,175  
    Depreciation and amortization3,840  4,706  16,816  15,813  
Total operating expenses377,279  361,455  1,485,212  1,360,689  
Operating income (loss)7,554  (693) 24,732  24,276  
Other expenses (income):
    Interest expense, net57  976  850  1,783  
    Other income(78) —  (277) —  
    Equity in net loss of investee23,526  2,052  29,685  6,158  
    Gain on remeasurement of cost method investment—  —  —  (6,577) 
(Loss) income from continuing operations before income taxes
(15,951) (3,721) (5,526) 22,912  
(Benefit) provision for income taxes(4,513) (2,267) (573) 4,684  
(Loss) income from continuing operations, net of tax(11,438) (1,454) (4,953) 18,228  
Income (loss) from discontinued operations, net of tax5,380  (19,026) 5,919  (37,053) 
Net (loss) income(6,058) (20,480) 966  (18,825) 
Net income (loss) from discontinued operations attributable to noncontrolling interest
—  130  —  (156) 
Net (loss) income attributable to Providence$(6,058) $(20,350) $966  $(18,981) 
Net loss attributable to common stockholders
$(7,167) $(21,462) $(3,437) $(25,257) 
Basic (loss) earnings per common share:
Continuing operations$(0.97) $(0.20) $(0.72) $0.92  
Discontinued operations0.42  (1.47) 0.46  (2.87) 
Basic loss per common share$(0.55) $(1.67) $(0.26) $(1.95) 
Diluted (loss) earnings per common share:
Continuing operations$(0.97) (0.20) $(0.72) $0.92  
Discontinued operations0.42  (1.47) 0.46  (2.86) 
Diluted loss per common share$(0.55) $(1.67) $(0.26) $(1.94) 
Weighted-average number of common
  shares outstanding:
    Basic12,982,731  12,867,169  12,958,713  12,960,837  
    Diluted12,982,731  12,867,169  12,958,713  13,033,247  





The Providence Service Corporation
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The Providence Service Corporation
Condensed Consolidated Balance Sheets
(in thousands)
December 31, 2019December 31, 2018
Assets
Current assets:
    Cash and cash equivalents$61,365  $5,678  
    Accounts receivable, net of allowance180,416  147,756  
    Other current assets (1)14,491  50,495  
    Current assets of discontinued operations (2)155  7,051  
Total current assets256,427  210,980  
Operating lease right-of-use assets20,095  —  
Property and equipment, net23,243  22,965  
Goodwill and intangible assets, net155,127  161,362  
Equity investment130,869  161,503  
Other long-term assets (3)11,620  12,835  
Total assets$597,381  $569,645  
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
    Current portion of long-term obligations$308  $718  
    Current portion of operating lease liabilities6,730  —  
    Other current liabilities (4)141,718  138,908  
    Current liabilities of discontinued operations (2)1,430  3,257  
Total current liabilities150,186  142,883  
Long-term obligations, less current portion45  353  
Operating lease liabilities, less current portion14,502  —  
Other long-term liabilities (5)37,936  38,019  
Total liabilities202,669  181,255  
Mezzanine and stockholders' equity
Convertible preferred stock, net77,120  77,392  
Stockholders' equity317,592  310,998  
Total liabilities, redeemable convertible preferred stock and stockholders' equity
$597,381  $569,645  

(1) Includes other receivables, prepaid expenses and other, 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 self-funded insurance programs.
(5) Includes other long-term liabilities and deferred tax liabilities.






The Providence Service Corporation
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The Providence Service Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
Year ended December 31,
20192018
Operating activities
Net income (loss)$966  $(18,825) 
  Depreciation and amortization16,816  27,677  
  Stock-based compensation5,414  8,993  
  Asset impairment charge—  23,378  
  Equity in net loss of investee29,685  6,072  
  Gain on remeasurement of cost method investment—  (6,577) 
  Other non-cash items4,442  5,676  
  Loss on sale of business, net of tax—  1,831  
  Changes in working capital 3,617  (40,326) 
Net cash provided by operating activities60,940  7,899  
Investing activities
Purchase of property and equipment(10,858) (17,521) 
Acquisition, net of cash acquired—  (43,711) 
Dispositions, net of cash sold—  12,780  
Proceeds from note receivable—  3,130  
Net cash used in investing activities(10,858) (45,322) 
Financing activities
Preferred stock dividends(4,403) (4,413) 
Repurchase of common stock, for treasury(6,797) (56,088) 
Proceeds from common stock issued pursuant to stock option exercise
11,142  12,413  
Capital lease payments and other(718) (3,467) 
Net cash used in financing activities(776) (51,555) 
Effect of exchange rate changes on cash—  (261) 
Net change in cash and cash equivalents49,306  (89,239) 
Cash, cash equivalents and restricted cash at beginning of period12,367  101,606  
Cash, cash equivalents and restricted cash at end of period$61,673  $12,367  

(1) Includes both continuing and discontinued operations.






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

Quarter ended December 31, 2019
NET ServicesMatrix InvestmentTotal Continuing Operations
Service revenue, net$384,833  $—  $384,833  
Operating expenses:
  Service expense358,436  —  358,436  
  General and administrative expense15,003  —  15,003  
  Depreciation and amortization3,840  —  3,840  
Total operating expenses377,279  —  377,279  
Operating income7,554  —  7,554  
Other expenses (income):
  Interest expense, net57  —  57  
  Other income(78) —  (78) 
  Equity in net loss of investee—  23,526  23,526  
Income (loss) from continuing
     operations before income taxes7,575  (23,526) (15,951) 
Provision (benefit) for income taxes1,392  (5,905) (4,513) 
Income (loss) from continuing operations, net of taxes6,183  (17,621) (11,438) 
Interest expense, net57  —  57  
Provision (benefit) for income taxes1,392  (5,905) (4,513) 
Depreciation and amortization3,840  —  3,840  
EBITDA11,472  (23,526) (12,054) 
Restructuring and related charges (1)1,321  —  1,321  
Transaction cost benefits (2)(2,595) —  (2,595) 
Equity in net loss of investee—  23,526  23,526  
Adjusted EBITDA$10,198  $—  $10,198  

(1) Restructuring and related charges include professional services costs of $853, organizational consolidation costs of $312 and severance costs of $156.
(2) Transaction cost benefits related to a positive adjustment from the amendment of the Circulation management incentive plan ("MIP").










The Providence Service Corporation
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The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
Quarter ended December 31, 2018
NET Services Matrix
Investment
Total Continuing Operations
Service revenue, net$360,762  $—  $360,762  
Operating expenses:
  Service expense319,241  —  319,241  
  General and administrative expense24,011  —  24,011  
  Asset impairment charge13,497  —  13,497  
  Depreciation and amortization4,706  —  4,706  
Total operating expenses361,455  —  361,455  
Operating loss(693) —  (693) 
Other expenses:
  Interest expense, net976  —  976  
  Equity in net loss of investee—  2,052  2,052  
Loss from continuing
     operations, before income tax(1,669) (2,052) (3,721) 
Benefit for income taxes(1,487) (780) (2,267) 
Loss from continuing operations, net of taxes(182) (1,272) (1,454) 
Interest expense, net976  —  976  
Benefit for income taxes(1,487) (780) (2,267) 
Depreciation and amortization4,706  —  4,706  
EBITDA4,013  (2,052) 1,961  
Asset impairment charge13,497  —  13,497  
Restructuring and related charges (1)4,424  —  4,424  
Transaction costs (2)5,417  —  5,417  
Equity in net loss of investee—  2,052  2,052  
Other(8) —  (8) 
Adjusted EBITDA$27,343  $—  $27,343  

(1) Restructuring and related charges include organizational consolidation costs of $3,489, value enhancement initiative implementation costs of $587 and severance costs of $348.
(2) Transaction costs include deal costs and MIP related to the acquisition of Circulation and certain other transaction related expenses.







The Providence Service Corporation
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The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)
Year ended December 31, 2019
NET ServicesMatrix InvestmentTotal Continuing Operations
Service revenue, net$1,509,944  $—  $1,509,944  
Operating expenses:
  Service expense1,401,152  —  1,401,152  
  General and administrative expense67,244  —  67,244  
  Depreciation and amortization16,816  —  16,816  
Total operating expenses1,485,212  —  1,485,212  
Operating income24,732  —  24,732  
Other expenses (income):
  Interest expense, net850  —  850  
  Other income(277) —  (277) 
  Equity in net loss of investee—  29,685  29,685  
Income (loss) from continuing
     operations before income tax24,159  (29,685) (5,526) 
Provision (benefit) for income taxes6,877  (7,450) (573) 
Income (loss) from continuing operations, net of taxes17,282  (22,235) (4,953) 
Interest expense, net850  —  850  
Provision (benefit) for income taxes6,877  (7,450) (573) 
Depreciation and amortization16,816  —  16,816  
EBITDA41,825  (29,685) 12,140  
Restructuring and related charges (1)6,691  —  6,691  
Transaction costs (2)2,693  —  2,693  
Equity in net loss of investee—  29,685  29,685  
Litigation expense —   
Adjusted EBITDA$51,218  $—  $51,218  

(1) Restructuring and related charges include organizational consolidation costs of $4,027, severance costs of $1,673, and professional services of $991.
(2) Transaction costs include certain transaction-related expenses and Circulation MIP.










The Providence Service Corporation
Page 11
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands) (Unaudited)

Year ended December 31, 2018
NET ServicesMatrix
Investment
Total Continuing Operations
Service revenue, net$1,384,965  $—  $1,384,965  
Operating expenses:
  Service expense1,253,608  —  1,253,608  
  General and administrative expense77,093  —  77,093  
  Asset impairment charge14,175  —  14,175  
  Depreciation and amortization15,813  —  15,813  
Total operating expenses1,360,689  —  1,360,689  
Operating income24,276  —  24,276  
Other expenses:
  Interest expense, net1,783  —  1,783  
  Equity in net loss of investee—  6,158  6,158  
  Gain on remeasurement of cost
method investment
(6,577) —  (6,577) 
Income (loss) from continuing
     operations, before income tax29,070  (6,158) 22,912  
Provision (benefit) for income taxes6,248  (1,564) 4,684  
Income (loss) from continuing operations, net of taxes22,822  (4,594) 18,228  
Interest expense, net1,783  —  1,783  
Provision (benefit) for income taxes6,248  (1,564) 4,684  
Depreciation and amortization15,813  —  15,813  
EBITDA46,666  (6,158) 40,508  
Asset impairment charge14,175  —  14,175  
Restructuring and related charges (1)11,546  —  11,546  
Transaction costs (2)7,231  —  7,231  
Equity in net loss of investee—  6,158  6,158  
Gain on remeasurement of cost investment(6,577) —  (6,577) 
Litigation income (3)(226) —  (226) 
Adjusted EBITDA$72,815  $—  $72,815  

(1) Restructuring and related charges include organizational consolidation costs of $8,361, value enhancement initiative implementation costs of $2,837 and severance costs of $348.
(2) Transaction costs include deal costs and MIP related to the acquisition of Circulation and certain other transaction related expenses.
(3) Resolution of accruals related to defense cost for a putative stockholder class action derivative complaint.



The Providence Corporation
Page 12

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

Quarter ended December 31,Year ended December 31,
2019201820192018
Revenue$64,584  $65,746  $275,391  $282,067  
Operating expense115,122  57,073  292,725  240,134  
Depreciation and amortization9,920  15,150  43,666  43,119  
Operating loss (60,458) (6,477) (61,000) (1,186) 
Interest expense 5,889  3,506  24,902  25,942  
Benefit for income taxes(12,048) (3,758) (16,549) (7,166) 
Net loss(54,299) (6,225) (69,353) (19,962) 
Interest43.6 %43.6 %43.6 %43.6 %
Net loss - Equity Investment$(23,665) $(2,714) $(30,226) $(8,703) 
Management fee and other139  662  541  2,545  
Equity in net loss of investee$(23,526) $(2,052) $(29,685) $(6,158) 
Net Debt (2)$294,167  $304,425  
(1)The results of our equity method investment are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.
(2)Net debt represents long-term debt, excluding deferred financing costs, less cash.






The Providence Service Corporation
Page 13

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

Quarter ended December 31,Year ended December 31,
2019201820192018
Revenue$64,584  $65,746  $275,391  $282,067  
Operating expense115,122  57,073  292,725  240,134  
Depreciation and amortization9,920  15,150  43,666  43,119  
Operating loss(60,458) (6,477) (61,000) (1,186) 
Interest expense5,889  3,506  24,902  25,942  
Benefit for income taxes(12,048) (3,758) (16,549) (7,166) 
Net loss(54,299) (6,225) (69,353) (19,962) 
Depreciation and amortization9,920  15,150  43,666  43,119  
Interest expense5,889  3,506  24,902  25,942  
Benefit for income taxes(12,048) (3,758) (16,549) (7,166) 
EBITDA(50,538) 8,673  (17,334) 41,933  
Asset impairment charge55,056  —  55,056  —  
Management fees 398  550  2,196  4,887  
Acquisition costs—  —  —  2,341  
Integration costs—  2,231  1,488  6,524  
Severance costs1,122  —  1,893  —  
Transaction costs302  1,004  721  1,010  
Adjusted EBITDA$6,340  $12,458  $44,020  $56,695  

(1) Providence accounts for its proportionate share of Matrix's results using the equity method. Matrix's Adjusted EBITDA is not included within Providence's Adjusted EBITDA in any period presented.









The 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)
Quarter ended December 31,Year ended December 31,
2019201820192018
Loss from continuing operations, net of tax$(11,438) $(1,454) $(4,953) $18,228  
Asset impairment charge—  13,497  —  14,175  
Restructuring and related charges, including accelerated depreciation related to the organizational consolidation (1)1,321  4,569  7,007  11,984  
Transaction costs (2)(2,595) 5,417  2,693  7,231  
Equity in net loss of investee23,526  2,052  29,685  6,158  
Gain on remeasurement of cost method investment—  —  —  (6,577) 
Intangible amortization expense 1,558  1,565  6,234  3,755  
Litigation (income) expense, net—  (8)  (226) 
Tax effected impact of adjustments(4,459) (8,438) (11,448) (9,849) 
Adjusted Net Income7,913  17,200  29,227  44,879  
.
Dividends on convertible preferred stock(1,108) (1,112) (4,403) (4,420) 
Income allocated to participating securities(910) (2,174) (3,324) (5,438) 
Adjusted Net Income available to common stockholders$5,895  $13,914  $21,500  $35,021  
Adjusted EPS$0.45  $1.08  $1.65  $2.69  
Diluted weighted-average number of common shares outstanding13,032,551  12,926,598  13,009,141  13,033,247  

(1) Restructuring and related charges include value enhancement implementation costs, severance, organization consolidation costs and professional fees.
(2) Transaction costs include deal costs and MIP related to Circulation acquisition and certain other transaction-related expenses.




###
investorpresentation-fou
PROVIDENCE SERVICE CORP Q4 2019 and Full Year 2019 Earnings Presentation FEBRUARY 27, 2020


 
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL INFORMATION Forward-looking Statements Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature and are frequently identified by the use of terms such as “may,” “will,” “should,” “expect,” “believe,” “estimate,” “intend,” and similar words indicating possible future expectations, events or actions. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, which may cause actual events to be materially different from those expressed or implied herein, including, but not limited to: the early termination or non-renewal of contracts; our ability to successfully respond to governmental requests for proposal; our ability to fulfill our contractual obligations; our ability to identify and successfully complete and integrate acquisitions; our ability to identify and realize the benefits of strategic initiatives; the loss of any of the significant payors from whom we generate a significant amount of our revenue; our ability to accurately estimate the cost of performing under certain capitated contracts; our ability to match the timing of the costs of new contracts with its related revenue; the outcome of pending or future litigation; our ability to attract and retain senior management and other qualified employees; our ability to successfully complete recent divestitures or business termination; the accuracy of representations and warranties and strength of related indemnities provided to us in acquisitions or claims made against us for representations and warranties and related indemnities in our dispositions; our ability to effectively compete in the marketplace; inadequacies in or security breaches of our information technology systems, including our ability to protect private data; seasonal fluctuations in our operations; impairment of long-lived assets; the adequacy of our insurance coverage for automobile, general liability, professional liability and workers’ compensation; damage to our reputation by inaccurate, misleading or negative media coverage; our ability to comply with government healthcare and other regulations; changes in budgetary priorities of government entities that fund our services; failure to adequately comply with patient and service user information regulations; possible actions under Medicare and Medicaid programs for false claims or recoupment of funds for noncompliance; changes in the regulatory landscape applicable to Matrix; changes to our estimated income tax liability from audits or otherwise; our ability to meet restrictive covenants in our credit agreement; restrictions in the terms of our preferred stock; the costs of complying with public company reporting obligations; and the accuracy of our accounting estimates and assumptions. The Company has provided additional information in our annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to update or revise any forward- looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law. Non-GAAP Financial Information 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, (5) asset impairment charges, and (6) gain on remeasurement of cost investment. Adjusted Net Income is defined as income (loss) from continuing operations, net of taxes, 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) intangible asset amortization, (5) certain transaction and related costs, (6) asset impairment charges, (7) gain on remeasurement of cost investment, and (8) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock and (2) adjusted net income allocated to participating stockholders, divided by the diluted weighted-average number of common shares outstanding as calculated for Adjusted Net Income. 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. 2


 
TODAY’S AGENDA • Opening Remarks – Dan Greenleaf, Chief Executive Officer • Discussion of Financial Results – Kevin Dotts, Chief Financial Officer • Q&A • Closing Remarks – Dan Greenleaf 3


 
OPENING REMARKS What attracted me to the business:  Essential services in healthcare  Industry leader with differentiated operating model  Strong financial profile  Secular tailwinds Strategic priorities:  Voice of the customer  Right people in the right seats  Technology enhancements  Reduce operational variation  Accelerate profitable growth  Rebranding and unified message 4


 
Q4 2019 FINANCIAL SUMMARY REVENUE ($M) $384.8 • $360.8 Growth primarily driven by higher activity and successful rate increases throughout the year in addition to new MCO contract in MN • Partially offset by contracts losses including state contract in RI and managed care organization (“MCO”) Q4 2018 Q4 2019 contracts in CA, FL and NM ADJUSTED EBITDA ($M) (1) $27.3 • Adj. EBITDA continues to be impacted by higher transportation costs and utilization $10.2 • Successfully renegotiated 3 contracts for $4M of in-quarter benefit; actively pursuing 11 repricing efforts headed into 2020 Q4 2018 Q4 2019 (1) See appendix for a reconciliation of non-GAAP financial measures. 5


 
FYE 2019 FINANCIAL SUMMARY REVENUE ($M) • Growth primarily driven by higher $1,509.9 activity and successful rate increases in $1,385.0 addition to new MCO contract in MN and LA and state contract in WV • Partially offset by contracts losses including state contract in RI and MCO contracts in CA, FL, NM, NY and LA FYE 2018 FYE 2019 ADJUSTED EBITDA ($M) (1) $72.8 • Adj. EBITDA impacted by higher $51.2 transportation costs and utilization • Partially offset by 11 contracts renegotiated during the year FYE 2018 FYE 2019 (1) See appendix for a reconciliation of non-GAAP financial measures. 6


 
MATRIX INVESTMENT REVENUE ($M) (1) ADJUSTED EBITDA ($M) (1),(2) $65.7 $64.6 $12.5 $6.3 Q4 2018 Q4 2019 Q4 2018 Q4 2019 • Matrix revenue impacted by Mobile underperformance, partially offset by higher Home volume and yield • Adj. EBITDA impacted by Mobile, higher direct and indirect costs • Goodwill and intangible asset impairment of $55.1M, gross of tax; no impact to Adj. EBITDA (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. 7


 
CASH FLOW UPDATE FYE FYE $Millions Q4:18 Q4:19 2018 2019 Cash Flow Before Working Capital $ 11.3 $ 24.1 $ 48.2 $ 57.3 Working Capital Changes (25.8) (3.2) (40.3) 3.6 Cash Provided By Operations $ (14.5) $ 20.9 $ 7.9 $ 60.9 Capex (Continuing Operations) $ 4.4 $ 3.6 $ 10.8 $ 10.9 Cash flow • Q4:19 cashflow benefited from A/R collections (related to collections of retroactive adjustments recorded in Q3:19) • FYE 2019 operating cashflow benefitted from tax refund from sale of WD Services 8


 
BALANCE SHEET UPDATE $Millions Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 Cash $ 8.0 $ 46.7 $ 29.8 $ 40.6 $ 61.4 Debt $ - $ - $ - $ - $ - Matrix Carrying Value $ 161.5 $ 159.5 $ 157.9 $ 154.5 $ 130.9 Shares Outstanding (M) 14.8 14.9 15.0 14.9 15.0 Shares outstanding equals common shares outstanding plus total preferred shares on an as-converted basis. 9


 
APPENDIX


 
ADJUSTED EBITDA RECONCILIATION (Continuing Ops) FYE FYE $Millions Q4:19 Q4:18 2019 2018 Revenue $ 384.8 $ 360.8 $ 1,509.9 $ 1,385.0 (Loss) income from cont ops, net of tax (11.4) (1.5) (5.0) 18.2 Interest expense, net 0.1 1.0 0.9 1.8 (Benefit) provision for income taxes (4.5) (2.3) (0.6) 4.7 Depreciation and amortization 3.7 4.8 16.8 15.8 EBITDA $ (12.1) $ 2.0 $ 12.1 $ 40.5 Asset impairment charge - 13.5 - 14.2 Transaction costs (2.5) 5.4 2.7 7.2 Restructuring and related charges 1.3 4.3 6.7 11.5 Equity in net loss of investee 23.5 2.1 29.7 6.2 Gain on remeasurement of cost method investment - - - (6.6) Litigation (income) expense, net - - - (0.2) Adjusted EBITDA $ 10.2 $ 27.3 $ 51.2 $ 72.8 % Margin 2.6% 7.6% 3.4% 5.3% 11


 
NET SERVICES ADJUSTED EBITDA RECONCILIATION FYE 2019 FYE 2018 FYE 2017 Less: NET Services Less: NET Services Certain Corp Exc. Certain Certain Corp Exc. Certain (1) $Millions NET Services Costs Corp Costs NET Services Costs (1) Corp Costs Revenue $ 1,509.9 $ - $ 1,509.9 $ 1,385.0 $ - $ 1,385.0 Income (loss) from cont ops, net of taxes 17.3 (19.5) 36.8 22.8 (19.6) 42.4 Interest expense, net 0.9 - 0.9 1.8 1.7 0.1 Provision (benefit) for income taxes 6.8 - 6.8 6.3 (7.8) 14.1 Depreciation and amortization 16.8 0.3 16.5 15.8 0.8 15.0 EBITDA $ 41.8 $ (19.2) $ 61.0 $ 46.7 $ (24.9) $ 71.6 Asset impairment charge - - - 14.2 - 14.2 Gain on remeasurement of cost investment - - - (6.6) (6.6) - Restructuring and related charges 6.7 4.1 2.6 11.5 8.4 3.1 Litigation income - - - (0.2) (0.2) - Transaction costs 2.7 2.0 0.7 7.2 3.6 3.6 Adjusted EBITDA $ 51.2 $ (13.1) $ 64.3 $ 72.8 $ (19.7) $ 92.5 % Margin 3.4% 4.3% 5.3% 6.7% (1) 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. 12


 
ADJUSTED EBITDA RECONCILIATION (MATRIX) (1) $ Millions Q4:19 Q4:18 FYE 2019 FYE 2018 Revenue $ 64.6 $ 65.7 $ 275.4 $ 282.1 Net loss (54.3) (6.2) (69.4) (20.0) Interest expense, net 5.9 3.5 24.9 25.9 Income tax benefit (12.0) (3.8) (16.5) (7.1) Depreciation and amortization 9.9 15.2 43.7 43.1 EBITDA $ (50.5) $ 8.7 $ (17.3) $ 41.9 Management fee 0.3 0.6 2.1 4.9 Transaction costs 0.3 1.0 0.7 3.4 Severance expense 1.1 - 1.9 - Integration expense - 2.2 1.5 6.5 Asset Impairment 55.1 - 55.1 - Adjusted EBITDA $ 6.3 $ 12.5 $ 44.0 $ 56.7 % Margin 9.7% 19.0% 16.0% 20.1% Reconciliation of Matrix Net Income to Equity Loss of Investee (2) Matrix net loss (standalone) $ (54.3) $ (6.2) $ (69.4) $ (20.0) Divided by Providence Share 43.6% 43.6% 43.6% 43.6% Equity in net loss of investee $ (23.7) $ (2.7) $ (30.3) $ (8.7) Management fee and other 0.2 0.6 0.5 2.5 Net loss - equity investment $ (23.5) $ (2.1) (29.7) $ (6.2) (1) The results of our equity method investment are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income. (2) A reconciliation has been provided to bridge from equity in net (loss) gain of investee to Matrix’s standalone Net Income. 13