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Providence Service Corporation Reports Second Quarter 2016 Results

STAMFORD, CT -- (Marketwired) -- 08/01/16 --

  • Revenue of $450.6 million
  • Income from continuing operations, net of tax, of $4.0 million; diluted EPS of $0.21
  • Adjusted Net Income (non-GAAP) of $13.1 million; Adjusted EPS (non-GAAP) of $0.70
  • Adjusted EBITDA (non-GAAP) of $30.7 million

The Providence Service Corporation (the "Company") (NASDAQ: PRSC), a holding company whose subsidiaries provide critical healthcare and workforce development services, today reported financial results for the second quarter and six months ended June 30, 2016.

"I am pleased to announce another quarter of solid performance, particularly within US Healthcare Services where both transportation revenue and assessment margins exceeded our expectations," said James Lindstrom, President and Chief Executive Officer. "Providence's underlying fundamentals remain strong, supplemented by our holding company approach and multiple value enhancement initiatives."

Second Quarter 2016 Results

For the second quarter of 2016, the Company reported consolidated revenue of $450.6 million, an increase of 7.7% from $418.2 million in the second quarter of 2015.

Income from continuing operations, net of tax, in the second quarter of 2016 was $4.0 million, or $0.21 per diluted common share, compared to $4.8 million, or $0.16 per diluted common share, in the second quarter of 2015. Adjusted Net Income (non-GAAP) in the second quarter of 2016 was $13.1 million, or $0.70 per diluted common share, compared to $14.2 million, or $0.67 per diluted common share, in the second quarter of 2015.

Adjusted EBITDA (non-GAAP) in the second quarter of 2016 was $30.7 million, compared to $31.6 million in the second quarter of 2015.

During the second quarter of 2016, the Company repurchased 273,169 common shares under its share repurchase program for $12.9 million, or for an average price of $47.36 per share.

Year to Date 2016 Results

For the first six months of 2016, the Company reported consolidated revenue of $883.3 million, an increase of 5.4% from $838.1 million in the comparable period of 2015.

Income from continuing operations, net of tax, for the first six months of 2016 was $6.1 million, or $0.27 per diluted common share, compared to $10.7 million, or $0.45 per diluted common share, in the comparable period of 2015. Adjusted Net Income (non-GAAP) for the first half of 2016 was $22.5 million, or $1.19 per diluted common share, compared to $29.0 million, or $1.48 per diluted common share, in the same period last year.

Adjusted EBITDA (non-GAAP) for the first half of 2016 was $56.0 million, compared to $64.6 million for the first half of 2015.

During the first half of 2016, the Company repurchased 708,904 common shares for $32.4 million, or for an average price of $45.73 per share.

A reconciliation of Adjusted EBITDA and Adjusted Net Income to income from continuing operations, net of tax, and the calculation of Adjusted EPS are presented below.

Segment Results

For analysis purposes, we provide revenue, expenses, operating income (loss), income (loss) from continuing operations, net of taxes, and Adjusted EBITDA (non-GAAP) on a segment basis. Segment results include revenue and expenses incurred by the segment, as well as an allocation of direct expenses incurred by Corporate on behalf of the segment. Indirect expenses, including unallocated corporate functions and expenses, such as executive, accounting, finance, human resources, information technology and legal, as well as the results of our captive insurance company and elimination entries recorded in consolidation are reflected in Corporate and Other.

US Healthcare Services

NET Services

NET Services revenue was $309.2 million for the second quarter of 2016, an increase of 14.2% from $270.7 million in the second quarter of 2015. Operating income was $17.8 million, or 5.7% of revenue, in the second quarter of 2016, compared to $18.9 million, or 7.0% of revenue, in the second quarter of 2015. Adjusted EBITDA (non-GAAP) was $20.7 million, or 6.7% of revenue, in the second quarter of 2016, compared to $21.2 million, or 7.8% of revenue, in the second quarter of 2015.

NET Services revenue was $600.1 million for the first half of 2016, an increase of 14.2% from $525.5 million in the first half of 2015. Operating income was $36.1 million, or 6.0% of revenue, for the first half of 2016, compared to $39.6 million, or 7.5% of revenue, for the first half of 2015. Adjusted EBITDA (non-GAAP) was $41.9 million, or 7.0% of revenue, for the first half of 2016, compared to $44.2 million, or 8.4% of revenue, for the first half of 2015.

The year-over-year increase in NET Services revenue in the second quarter of 2016 was primarily due to new state and managed care organization contracts in multiple geographies as well as increased membership under certain existing contracts. Adjusted EBITDA (non-GAAP) as a percentage of revenue declined as a result of increased member utilization and additional compensation expense related to long-term incentive plans tied to value creation.

HA Services

HA Services revenue was $52.3 million in the second quarter of 2016, a decrease of 5.7% compared to the second quarter of 2015. Operating income was $6.7 million, or 12.8% of revenue, in the second quarter of 2016, compared to $6.3 million, or 11.3% of revenue, in the second quarter of 2015. Adjusted EBITDA (non-GAAP) was $14.6 million, or 28.0% of revenue, in the second quarter of 2016, compared to $13.5 million, or 24.3% of revenue, in the second quarter of 2015.

HA Services revenue was $102.9 million for the first half of 2016, a decrease of 8.8% compared to the first half of 2015. Operating income was $11.0 million, or 10.7% of revenue, for the first half of 2016, compared to $12.8 million, or 11.3% of revenue, for the first half of 2015. Adjusted EBITDA (non-GAAP) was $26.8 million, or 26.0% of revenue, for the first half of 2016, compared to $27.1 million, or 24.1% of revenue, for the first half of 2015.

The decline in HA Services revenue in the second quarter of 2016 compared to the prior year period was due to a decline in the average price per assessment, which was largely the result of a change in customer mix in the second quarter of 2016 compared to the second quarter of 2015. In 2015, pricing was highest in the second quarter, which will not be the case in 2016. Adjusted EBITDA (non-GAAP) as a percentage of revenue increased due to management's continued success in driving efficiencies as well as a reduction in expense due to forfeited long-term awards, which have been reallocated to current employees.

Global Workforce Development

WD Services

WD Services revenue for the second quarter of 2016 was $89.3 million, a decrease of 3.1% compared to the second quarter of 2015. Excluding the effects of changes in currency exchange rates, revenue increased 1.6% in the second quarter of 2016 versus the second quarter of 2015. WD Services incurred an operating loss of $5.2 million in the second quarter of 2016, compared to an operating loss of $2.4 million in the second quarter of 2015. The operating loss in the second quarter of 2016 includes $3.7 million of redundancy costs related to continued service delivery redesigns, primarily related to the segment's offender rehabilitation program.

Prior to the impact of the Mission Providence joint venture, WD Services Adjusted EBITDA (non-GAAP) was $2.3 million, or 2.6% of revenue, in the second quarter of 2016 compared to $4.7 million, or 5.1% of revenue, in the second quarter of 2015. The Adjusted EBITDA (non-GAAP) associated with Mission Providence was negative $1.2 million in the second quarter of 2016 and negative $1.3 million in the second quarter of 2015.

Revenue for the first half of 2016 was $180.3 million, a decrease of 9.7% compared to the first half of 2015. Excluding the effects of changes in currency exchange rates, revenue declined 5.2% in the first half of 2016 versus the first half of 2015. WD Services incurred an operating loss of $7.3 million for the first half of 2016, compared to operating income of $0.4 million for the first half of 2015. The operating loss for the first half of 2016 included $5.1 million of redundancy costs related to continued service delivery redesigns and the anticipated closure of the segment's operations in Poland.

Prior to the impact of the Mission Providence joint venture, WD Services Adjusted EBITDA (non-GAAP) was $5.2 million, or 2.9% of revenue, for the first half of 2016 compared to $13.6 million, or 6.8% of revenue, for the first half of 2015. The Adjusted EBITDA (non-GAAP) associated with Mission Providence was negative $4.3 million for the first half of 2016 and negative $4.9 million for the first half of 2015.

The decline in Adjusted EBITDA (non-GAAP) at WD Services was primarily due to start-up costs related to the segment's offender rehabilitation program in the United Kingdom and the operational underperformance of employability programs in France.

Corporate and Other

Corporate and Other incurred an operating loss of $5.8 million in the second quarter of 2016 compared to an operating loss of $7.6 million in the second quarter of 2015. Adjusted EBITDA (non-GAAP) was negative $5.8 million in the second quarter of 2016 compared to negative $6.5 million in the second quarter of 2015.

Corporate and Other incurred an operating loss of $13.8 million for the first half of 2016 compared to an operating loss of $16.9 million for the first half of 2015. Adjusted EBITDA (non-GAAP) was negative $13.6 million in the second quarter of 2016 compared to negative $15.6 million in the second quarter of 2015.

The improvement in Adjusted EBITDA (non-GAAP) in the second quarter of 2016 versus the prior year period was primarily due a reduction in professional fees and stock-based compensation expense.

Conference Call

Providence will hold a conference call at 8:00 a.m. EDT Tuesday, August 2, 2016 to discuss its financial results and corporate developments. Interested parties are invited to listen to the call live at http://investor.prscholdings.com or by dialing (844) 244-3865, or for international callers (518) 444-0681, and using the passcode 56389155. A replay of the teleconference will be available on http://investor.prscholdings.com. A replay will also be available until August 16, 2016 by dialing (855) 859-2056 or (404) 537-3406 and using passcode 56389155.

About Providence

The Providence Service Corporation is a holding company whose subsidiaries provide critical healthcare and workforce development services, comprised of non-emergency transportation services, workforce development services, legal offender rehabilitation services, health assessment services, and care management services in the United States and abroad. For more information, please visit prscholdings.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial results prepared in accordance with US generally accepted accounting principles (GAAP), this press release includes EBITDA and Adjusted EBITDA for the Company and our operating segments and Adjusted Net Income and Adjusted EPS for the Company, which are financial measures that are not recognized under GAAP. EBITDA is defined as income (loss) from continuing operations, 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 restructuring and termination costs and foreign currency adjustments. Adjusted Net Income is defined as income from continuing operations, net of tax plus net loss attributable to noncontrolling interest and before: (1) certain items, including restructuring and termination costs, and foreign currency adjustments, (2) intangible amortization expense and (3) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock, (2) accretion of convertible preferred stock discount and (3) income allocated to participating stockholders, divided by the diluted weighted-average number of common shares outstanding. We utilize these non-GAAP measurements, which exclude certain expenses, 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 cash earnings capabilities of our business, for which capital investments are made and debt is serviced.

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 the healthcare reform law, state budget changes and legislation and other risks detailed in Providence's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and subsequent filings. 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.

     
The Providence Service Corporation    
Unaudited Condensed Consolidated Statements of Income    
(in thousands except share and per share data)    
     
      Three months ended June 30,       Six months ended June 30,    
      2016       2015       2016       2015    
     
Service revenue, net   $ 450,632     $ 418,238     $ 883,282     $ 838,067    
     
Operating expenses:                                  
  Service expense     405,050       371,616       791,538       738,153    
  General and administrative expense     17,373       18,294       36,546       37,760    
  Depreciation and amortization     14,814       13,191       29,150       26,244    
Total operating expenses     437,237       403,101       857,234       802,157    
Operating income     13,395       15,137       26,048       35,910    
     
     
Other expenses:                                  
  Interest expense, net     3,436       3,722       7,071       8,917    
  Equity in net loss of investee     1,459       1,059       4,176       3,542    
  Gain on foreign currency transactions     (775 )     (714 )     (849 )     (395 )  
Income from continuing operations                                  
before income taxes     9,275       11,070       15,650       23,846    
Provision for income taxes     5,280       6,227       9,527       13,148    
Income from continuing operations, net of tax     3,995       4,843       6,123       10,698    
Discontinued operations, net of tax     -       1,732       -       2,126    
Net income     3,995       6,575       6,123       12,824    
Net loss attributable to noncontrolling interests     628       59       735       47    
Net income attributable to Providence   $ 4,623     $ 6,634     $ 6,858     $ 12,871    
     
Net income available to common                                  
stockholders   $ 3,104     $ 4,181     $ 4,108     $ 9,243    
     
Basic earnings per common share:                                  
Continuing operations   $ 0.21     $ 0.16     $ 0.27     $ 0.46    
Discontinued operations     -       0.10       -       0.12    
Basic earnings per common share   $ 0.21     $ 0.26     $ 0.27     $ 0.58    
     
Diluted earnings per common share:                                  
Continuing operations   $ 0.21     $ 0.16     $ 0.27     $ 0.45    
Discontinued operations     -       0.10       -       0.12    
Diluted earnings per common share   $ 0.21     $ 0.26     $ 0.27     $ 0.57    
     
Weighted-average number of common                                  
shares outstanding:                                  
  Basic     14,893,595       16,097,198       14,975,582       16,036,959    
  Diluted     15,019,312       16,240,898       15,098,945       16,193,372    
   
   
The Providence Service Corporation  
Condensed Consolidated Balance Sheets  
(in thousands)  
(Unaudited)  
      June 30,   December 31,  
      2016     2015  
Assets              
Current assets:              
  Cash and cash equivalents   $ 68,824   $ 84,770  
  Accounts receivable, net of allowance     178,295     178,049  
  Other current assets (1)     78,260     56,905  
Total current assets     325,379     319,724  
Property and equipment, net     67,324     57,787  
Goodwill and intangible assets, net     601,076     625,980  
Other long-term assets (2)     42,486     46,711  
Total assets   $ 1,036,265   $ 1,050,202  
Liabilities and stockholders' equity              
Current liabilities:              
  Current portion of long-term obligations   $ 35,250   $ 31,375  
  Other current liabilities (3)     275,823     263,897  
Total current liabilities     311,073     295,272  
Long-term obligations, less current portion     272,828     268,696  
Other long-term liabilities (4)     118,716     118,526  
Total liabilities     702,617     682,494  
Mezzanine and stockholders' equity              
Convertible preferred stock, net     77,565     77,576  
Stockholders' equity     256,083     290,132  
Total liabilities and stockholders' equity   $ 1,036,265   $ 1,050,202  

(1) Comprised of other receivables, restricted cash, deferred tax assets and prepaid expenses and other.
(2) Comprised of restricted cash less current portion, deferred tax assets and other assets.
(3) Comprised of accounts payable, accrued expenses, accrued transportation costs, deferred revenue and reinsurance liability reserves.
(4) Includes deferred tax liabilities and other long-term liabilities.

             
The Providence Service Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
      Six months ended June 30,    
      2016       2015 (1)    
Operating activities                  
Net income   $ 6,123     $ 12,824    
  Depreciation and amortization     29,150       29,857    
  Stock based compensation     1,947       6,058    
  Equity in net loss of investee     4,176       3,542    
  Other non-cash charges     (8,167 )     (4,839 )  
  Changes in working capital (2)     32,605       (23,886 )  
  Income taxes payable on sale of business     (28,337 )     -    
Net cash provided by operating activities     37,497       23,556    
Investing activities                  
Purchase of property and equipment     (23,636 )     (13,122 )  
Acquisition, net of cash acquired     -       (1,665 )  
Equity investments     (6,381 )     (13,784 )  
Other investing activities     3,840       (422 )  
Net cash used in investing activities     (26,177 )     (28,993 )  
Financing activities                  
Proceeds from issuance of preferred stock, net of issuance costs     -       80,667    
Preferred stock dividends     (2,197 )     (1,698 )  
Repurchase of common stock, for treasury     (32,534 )     (734 )  
Net, proceeds (repayment) of long-term debt     7,000       (87,125 )  
Other financing activities     998       (2,909 )  
Net cash used in financing activities     (26,733 )     (11,799 )  
Effect of exchange rate changes on cash     (533 )     1,991    
Net change in cash     (15,946 )     (15,245 )  
Cash at beginning of period     84,770       160,406    
Cash at end of period   $ 68,824     $ 145,161    

(1) Includes both continuing and discontinued operations.
(2) Comprised of changes in accounts receivable, other receivables, restricted cash, prepaid expenses, accounts payable, accrued expenses, accrued transportation costs, deferred revenue and other liabilities.

     
The Providence Service Corporation    
Reconciliation of Non-GAAP Financial Measures    
Adjusted EBITDA and Segment Information    
(in thousands)    
(Unaudited)    
     
              Three Months Ended June 30, 2016            
     NET            Corporate       
     Services    WD Services    HA Services    and Other     Total   
     
Service revenue, net   $ 309,156     $ 89,289     $ 52,272     $ (85 )   $ 450,632    
Operating expenses:                                          
  Service expense     285,687       82,073       36,963       327       405,050    
  General and administrative expense     2,785       8,585       662       5,341       17,373    
  Depreciation and amortization     2,931       3,836       7,965       82       14,814    
Total operating expenses     291,403       94,494       45,590       5,750       437,237    
Operating income (loss)     17,753       (5,205 )     6,682       (5,835 )     13,395    
Other expenses:                                          
  Interest expense, net     (1 )     56       (2 )     3,383       3,436    
  Equity in net loss of investee     -       1,459       -       -       1,459    
  Gain on foreign currency transactions     -       (773 )     -       (2 )     (775 )  
Income (loss) from continuing operations,                                          
before income tax     17,754       (5,947 )     6,684       (9,216 )     9,275    
Provision (benefit) for income taxes     6,044       (797 )     2,466       (2,433 )     5,280    
Income (loss) from continuing operations, net of taxes     11,710       (5,150 )     4,218       (6,783 )     3,995    
Interest expense, net     (1 )     56       (2 )     3,383       3,436    
Provision (benefit) for income taxes     6,044       (797 )     2,466       (2,433 )     5,280    
Depreciation and amortization     2,931       3,836       7,965       82       14,814    
EBITDA     20,684       (2,055 )     14,647       (5,751 )     27,525    
     
Gain on foreign currency transactions     -       (773 )     -       (2 )     (775 )  
WD Services adjustments (1)     -       3,919       -       -       3,919    
Adjusted EBITDA   $ 20,684     $ 1,091     $ 14,647     $ (5,753 )   $ 30,669    

(1) Includes expense related to redundancy costs of $3,665 and income tax benefit and D&A included within equity in net loss of investee of $254.

     
The Providence Service Corporation    
Reconciliation of Non-GAAP Financial Measures    
Adjusted EBITDA and Segment Information    
(in thousands)    
(Unaudited)    
     
    Three Months Ended June 30, 2015 (1)    
   
 
NET
Services
 
 
 
WD Services
 
 
 
 
 
HA Services
 
 
 
 
Corporate
and Other
 
 
 
 
 
Total
 
 
 
 
 
     
Service revenue, net   $ 270,690   $ 92,175     $ 55,404     $ (31 )   $ 418,238    
Operating expenses:                                        
  Service expense     246,931     83,308       41,193       184       371,616    
  General and administrative expense     2,554     7,984       760       6,996       18,294    
  Depreciation and amortization     2,329     3,332       7,185       345       13,191    
Total operating expenses     251,814     94,624       49,138       7,525       403,101    
Operating income (loss)     18,876     (2,449 )     6,266       (7,556 )     15,137    
Other expenses:                                        
  Interest expense, net     -     (58 )     (5 )     3,785       3,722    
  Equity in net loss of investee     -     1,059       -       -       1,059    
  Gain on foreign currency transactions     -     (714 )     -       -       (714 )  
Income (loss) from continuing operations,                                        
before income tax     18,876     (2,736 )     6,271       (11,341 )     11,070    
Provision (benefit) for income taxes     7,183     (785 )     2,521       (2,692 )     6,227    
Income (loss) from continuing operations, net of taxes     11,693     (1,951 )     3,750       (8,649 )     4,843    
Interest expense, net     -     (58 )     (5 )     3,785       3,722    
Provision (benefit) for income taxes     7,183     (785 )     2,521       (2,692 )     6,227    
Depreciation and amortization     2,329     3,332       7,185       345       13,191    
EBITDA     21,205     538       13,451       (7,211 )     27,983    
     
Charges related to the separation of an executive officer, net     -     -       -       695       695    
WD Services adjustments (2)     -     2,895       -       -       2,895    
Adjusted EBITDA   $ 21,205   $ 3,433     $ 13,451     $ (6,516 )   $ 31,573    

(1) Beginning in the fourth quarter of 2015, the Company began including in the calculation of WD Services Adjusted EBITDA expenses related to restricted shares and cash placed into escrow accounts at the time of the Ingeus acquisition as well as redundancy costs associated with WD Services. The Company has updated the 2015 quarterly presentations of Adjusted EBITDA to be consistent with these changes.
(2) Includes expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition and other acquisition related costs of $1,980, redundancy costs of $1,882, income tax benefit and D&A included within equity in net loss of investee of ($253), and gain on foreign currency transactions of ($714).

     
The Providence Service Corporation    
Reconciliation of Non-GAAP Financial Measures    
Adjusted EBITDA and Segment Information    
(in thousands)    
(Unaudited)    
     
              Six Months Ended June 30, 2016            
    NET
Services
   
WD Services
     
HA Services
      Corporate
and Other
     
Total
   
 
     
Service revenue, net   $ 600,140     $ 180,332     $ 102,864     $ (54 )   $ 883,282    
Operating expenses:                                          
  Service expense     552,656       163,745       74,753       384       791,538    
  General and administrative expense     5,622       16,456       1,318       13,150       36,546    
  Depreciation and amortization     5,807       7,415       15,762       166       29,150    
Total operating expenses     564,085       187,616       91,833       13,700       857,234    
Operating income (loss)     36,055       (7,284 )     11,031       (13,754 )     26,048    
Other expenses:                                          
  Interest expense, net     (2 )     89       (4 )     6,988       7,071    
  Equity in net loss of investee     -       4,176       -       -       4,176    
  Gain on foreign currency transactions     -       (848 )     -       (1 )     (849 )  
Income (loss) from continuing operations,                                          
before income tax     36,057       (10,701 )     11,035       (20,741 )     15,650    
Provision (benefit) for income taxes     13,193       (979 )     4,150       (6,837 )     9,527    
Income (loss) from continuing operations, net of taxes     22,864       (9,722 )     6,885       (13,904 )     6,123    
Interest expense, net     (2 )     89       (4 )     6,988       7,071    
Provision (benefit) for income taxes     13,193       (979 )     4,150       (6,837 )     9,527    
Depreciation and amortization     5,807       7,415       15,762       166       29,150    
EBITDA     41,862       (3,197 )     26,793       (13,587 )     51,871    
     
Gain on foreign currency transactions     -       (848 )     -       (1 )     (849 )  
WD Services adjustments (1)     -       4,972       -       -       4,972    
Adjusted EBITDA   $ 41,862     $ 927     $ 26,793     $ (13,588 )   $ 55,994    

(1) Includes expense related to redundancy costs of $5,056 and income tax benefit and D&A included within equity in net loss of investee of ($84).

     
The Providence Service Corporation    
Reconciliation of Non-GAAP Financial Measures    
Adjusted EBITDA and Segment Information    
(in thousands)    
(Unaudited)    
     
  Six Months Ended June 30, 2015 (1)
 
 
  NET
Services
   
WD Services
   
HA Services
    Corporate
and Other
   
Total
   
     
Service revenue, net   $ 525,450     $ 199,792     $ 112,836     $ (11 )   $ 838,067    
Operating expenses:                                          
  Service expense     476,178       177,540       84,406       29       738,153    
  General and administrative expense     5,051       15,209       1,282       16,218       37,760    
  Depreciation and amortization     4,606       6,648       14,367       623       26,244    
Total operating expenses     485,835       199,397       100,055       16,870       802,157    
Operating income (loss)     39,615       395       12,781       (16,881 )     35,910    
Other expenses:                                          
  Interest expense, net     (1 )     (58 )     (9 )     8,985       8,917    
  Equity in net loss of investee     -       3,542       -       -       3,542    
  Gain on foreign currency transactions     -       (395 )     -       -       (395 )  
Income (loss) from continuing operations,                                          
before income tax     39,616       (2,694 )     12,790       (25,866 )     23,846    
Provision (benefit) for income taxes     15,312       1,640       5,194       (8,998 )     13,148    
Income (loss) from continuing operations, net of taxes     24,304       (4,334 )     7,596       (16,868 )     10,698    
Interest expense, net     (1 )     (58 )     (9 )     8,985       8,917    
Provision (benefit) for income taxes     15,312       1,640       5,194       (8,998 )     13,148    
Depreciation and amortization     4,606       6,648       14,367       623       26,244    
EBITDA     44,221       3,896       27,148       (16,258 )     59,007    
     
Charges related to the separation of an executive officer, net     -       -       -       695       695    
WD Services adjustments (2)     -       4,891       -       -       4,891    
Adjusted EBITDA   $ 44,221     $ 8,787     $ 27,148     $ (15,563 )   $ 64,593    

(1) Beginning in the fourth quarter of 2015, the Company began including in the calculation of WD Services Adjusted EBITDA expenses related to restricted shares and cash placed into escrow accounts at the time of the Ingeus acquisition as well as redundancy costs associated with WD Services. The Company has updated the 2015 quarterly presentations of Adjusted EBITDA to be consistent with these changes.
(2) Includes expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition and other acquisition related expenses of $3,970, redundancy costs of $2,631, income tax benefit and D&A included within equity in net loss of investee of ($1,315), and gain on foreign currency transactions of ($395).

     
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,    
    2016     2015     2016     2015    
                           
Income from continuing operations, net of tax   $ 3,995     $ 4,843     $ 6,123     $ 10,698    
Net loss attributable to noncontrolling interests     628       59       735       47    
WD Services adjustments     3,386   (1)
  3,004
  (2)
  5,169
  (3)
  6,062
  (4)
Gain on foreign currency transactions     (2 )     -       (1 )     -    
Payments related to separation arrangements with executive officer, net     -       695       -       695    
Intangible amortization expense     8,817       9,881       17,632       19,692    
Tax effected impact of adjustments     (3,729 )     (4,264 )     (7,141 )     (8,243 )  
Adjusted Net Income     13,095       14,218       22,517       28,951    
                                   
Dividends on convertible preferred stock     (1,099 )     (1,104 )     (2,197 )     (1,698 )  
Less: Accretion of convertible preferred stock discount     -       (826 )     -       (1,071 )  
Income allocated to participating securities     (1,429 )     (1,369 )     (2,409 )     (2,226 )  
Adjusted Net Income available to common stockholders   $ 10,567     $ 10,919     $ 17,911     $ 23,956    
                                   
Adjusted Net Income per common share   $ 0.70     $ 0.67     $ 1.19     $ 1.48    
                                   
Diluted weighted-average number of common shares outstanding     15,019,312       16,240,898       15,098,945       16,193,372    

(1) WD Services adjustments include redundancy costs of $3,665, amortization expense included within equity in net loss of investee of $494, and gain on foreign currency transactions of ($773).
(2) WD Services adjustments include expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition and other acquisition related costs of $1,980, redundancy costs of $1,882, gain on foreign currency transactions of ($714), and amortization expense included within equity in net loss of investee of ($144).
(3) WD Services adjustments include redundancy costs of $5,056, amortization expense included within equity in net loss of investee of $961, and gain on foreign currency transactions of ($848).
(4) WD Services adjustments include expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition of $3,970, redundancy costs of $2,631, gain on foreign currency transactions of ($395), and amortization expense included within equity in net loss of investee of ($144).

Investor Relations Contact
Chris Brigleb
VP of Finance
(203) 816-6589

Source: Providence Service Corporation