prsc-20200806
0001220754FALSE00012207542020-08-062020-08-06

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 6, 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 August 6, 2020, The Providence Service Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2020. 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 6, 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 ended June 30, 2020. 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: August 6, 2020  By: /s/ Kevin M. Dotts
  Name: Kevin M. Dotts
  Title: Chief Financial Officer



Document

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The Providence Service Corporation Reports
Second Quarter 2020 Financial Results

ATLANTA, GA – August 6, 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 three months ended June 30, 2020.

Second Quarter 2020 Highlights:
Revenue from continuing operations of $282.3 million
Income from continuing operations, net of tax, of $37.3 million, and loss of $0.96 per diluted common share
Adjusted EBITDA of $56.4 million, Adjusted Net Income of $38.0 million and Adjusted EPS of $2.53
Net cash provided by operating activities during the quarter of $108.4 million
At June 30, 2020, cash of $41.8 million, with no debt outstanding
Matrix, on a standalone basis, achieved net income of $8.9 million and Adjusted EBITDA of $32.6 million; launched new Employee Health & Wellness and telehealth products

Daniel E. Greenleaf, President and Chief Executive Officer, said, “Providence’s second quarter Adjusted EBITDA of $56.4 million exceeded the prior year comparable figure primarily due to lower operating expenses driven by our six-pillar growth strategy, incremental contribution from National MedTrans and lower utilization under our capitated contracts. We were pleased to end the quarter with $41.8 million in cash with no debt, despite deploying capital on two highly strategic, accretive transactions: the purchase of National MedTrans in May 2020 and the conversion of the majority of the Company’s Series A convertible preferred stock in June 2020.”

Mr. Greenleaf continued, “From a position of strength, and as the clear leader in our industry, we remain dedicated to providing safe and reliable non-emergency medical transportation services during the ongoing COVID-19 pandemic, while delivering food to a growing number of food-insecure members and offering financial support to our transportation partners. Moreover, we continue to invest in key areas of our growth strategy, such as the digitization of our transportation network and technology enhancements in our contact centers. We believe these kinds of investments will help meaningfully streamline our operations, reduce costs and enhance service quality. We are rapidly transforming our organization through new technology, talent and culture. With the benefit of our strong operating platform and balance sheet, we are actively evaluating new service lines to further support our members and payors. During this process, we intend to build substantial long-term value for our customers and shareholders alike.”

Second Quarter 2020 Results

For the second quarter of 2020, the Company reported revenue of $282.3 million, a decrease of 22.4% from $363.9 million in the second quarter of 2019.

Operating income was $48.8 million, or 17.3% of revenue, in the second quarter of 2020, compared to operating loss of $(3.3) million, or (0.9)% of revenue, in the second quarter of 2019. Income from continuing operations, net of tax, in the second quarter of 2020 was $37.3 million, or $0.96 loss per diluted common share, compared to loss from continuing operations, net of tax, of $(3.4) million, or $0.35 loss per diluted common share, in the second quarter of 2019. Loss per diluted common share in the second quarter of 2020 included $49.0 million related to the Company's conversion of the majority of the Company's Series A convertible stock on June 8, 2020.

Adjusted EBITDA was $56.4 million, or 20.0% of revenue, in the second quarter of 2020, compared to $5.8 million, or 1.6% of revenue, in the second quarter of 2019.

Adjusted Net Income in the second quarter of 2020 was $38.0 million, or $2.53 earnings per diluted common share, compared to $2.2 million, or $0.07 earnings per diluted common share, in the second quarter of 2019.




The quarter-over-quarter decrease in revenue was primarily due to lower trip volume associated with certain profit corridor and reconciliation contracts due to the COVID-19 pandemic. This was partially offset by $8.4 million of revenue as a result of the National MedTrans acquisition.

Adjusted EBITDA increased in the second quarter of 2020 due to cost savings and productivity initiatives associated with the Company's six-pillar growth strategy in addition to incremental margin from the National MedTrans acquisition and lower utilization and contact center activity due to COVID-19. This was partially offset by higher corporate general and administrative cost as the Company made investments in its employees and technology.

Matrix - Equity Investment

For the second quarter of 2020, Matrix’s revenue was $90.7 million, an increase of 25.6% from $72.2 million in the second quarter of 2019. Matrix had an operating income of $15.3 million for the second quarter of 2020, compared to operating income of $1.5 million for the second quarter of 2019.

Providence recorded a gain of $4.4 million related to its Matrix equity investment compared to a loss of $1.3 million for the second quarter of 2019. For the second quarter of 2020, Matrix recorded Adjusted EBITDA of $32.6 million, or 36.0% of revenue, compared to $13.7 million, or 19.0% of revenue, for the second quarter of 2019.

Matrix’s Adjusted EBITDA for the quarter was positively impacted by its launch of a new Employee Health and Wellness product developed for companies maintaining critical operations during COVID-19. Matrix quickly rolled out this new offering by leveraging its national clinical staff and fleet of mobile units. Due to the pandemic, Matrix’s payor customers paused in-home visits for a period during the quarter that adversely affected Home product volume. In an effort to mitigate, Matrix implemented a new telehealth alternative, partially offsetting the pause. At the end of the quarter, several of Matrix’s payor customers began resuming in-home visits.

As of June 30, 2020, Matrix had $285.2 million in net debt and Providence's ownership interest was 43.6%.

Investor Presentation and Conference Call

Providence will hold a conference call to discuss its financial results on Thursday, August 6, 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 (877) 423 9820
International: 1 (201) 493 6749

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, as well as Adjusted Net Income and Adjusted EPS, 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 (gain) 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) COVID-19 related costs. Adjusted Net Income is defined as income from continuing operations, net of taxes, before



certain items, including (1) restructuring and related charges, (2) equity in net (gain) 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) COVID-19 related costs, (7) tax impacts from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") 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. Our non-GAAP performance measures exclude certain expenses and amounts that are not driven by our core operating results and may be one time in nature. Excluding these expenses makes comparisons with prior periods as well as to other companies in our industry more 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 gain or loss in equity investee is excluded from these measures, as we do not have the ability to manage the venture, allocate resources within the venture, or directly control its 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 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; the impact of COVID-19 on us (including: the duration and scope of the pandemic; governmental, business and individuals’ actions taken in response to the pandemic; economic activity and actions taken in response; the effect on our clients and client demand for our services; and the ability of our clients to pay for our services); 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



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The 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,
2020201920202019
Service revenue, net$282,256  $363,911  $649,547  $731,726  
Operating expenses:    
    Service expense196,106  345,948  528,767  686,446  
    General and administrative expense31,199  16,860  51,994  36,262  
    Depreciation and amortization6,108  4,353  9,898  8,827  
Total operating expenses233,413  367,161  590,659  731,535  
Operating income (loss)48,843  (3,250) 58,888  191  
Other expenses (income):
    Interest expense, net1,498  301  1,739  604  
    Other income—  (66) —  (132) 
    Equity in net (gain) loss of investee(4,425) 1,315  (1,875) 2,971  
Income (loss) from continuing operations before income taxes
51,770  (4,800) 59,024  (3,252) 
Provision (benefit) for income taxes14,471  (1,391) 5,425  (1,157) 
Income (loss) from continuing operations, net of tax37,299  (3,409) 53,599  (2,095) 
(Loss) income from discontinued operations, net of tax(301) 1,697  (503) 966  
Net income (loss)$36,998  $(1,712) $53,096  $(1,129) 
Net (loss) income attributable to common stockholders
$(12,819) $(2,810) $1,920  $(3,314) 
Basic (loss) earnings per common share:
Continuing operations$(0.96) $(0.35) $0.19  $(0.33) 
Discontinued operations(0.02) 0.13  (0.04) 0.07  
Basic (loss) earnings per common share$(0.98) $(0.22) $0.15  $(0.26) 
Diluted (loss) earnings per common share:
Continuing operations$(0.96) $(0.35) $0.19  $(0.33) 
Discontinued operations(0.02) 0.13  (0.04) 0.07  
Diluted (loss) earnings per common share$(0.98) $(0.22) $0.15  $(0.26) 
Weighted-average number of common
  shares outstanding:
    Basic13,077,596  12,973,496  13,032,931  12,937,054  
    Diluted13,077,596  12,973,496  13,059,699  12,937,054  


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The Providence Service Corporation
Page 6

The Providence Service Corporation
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
June 30, 2020December 31, 2019
Assets
Current assets:
    Cash and cash equivalents$41,786  $61,365  
    Accounts receivable, net of allowance170,063  180,416  
    Other current assets (1)33,942  14,491  
    Current assets of discontinued operations (2)89  155  
Total current assets245,880  256,427  
Operating lease right-of-use assets19,864  20,095  
Property and equipment, net20,793  23,243  
Goodwill and intangible assets, net227,458  155,127  
Equity investment131,974  130,869  
Other long-term assets 8,365  11,620  
Total assets$654,334  $597,381  
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
Current portion of finance lease liabilities$199  $308  
    Current portion of operating lease liabilities7,016  6,730  
    Other current liabilities (3)192,595  141,718  
    Current liabilities of discontinued operations (2)1,504  1,430  
Total current liabilities201,314  150,186  
Finance lease liabilities, less current portion—  45  
Operating lease liabilities, less current portion13,886  14,502  
Long-term contracts payable26,079  —  
Other long-term liabilities (4)47,298  37,936  
Total liabilities288,577  202,669  
Mezzanine and stockholders' equity
Convertible preferred stock, net5,299  77,120  
Stockholders' equity360,458  317,592  
Total liabilities, redeemable convertible preferred stock and stockholders' equity
$654,334  $597,381  

(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 accounts payable, accrued expenses, accrued transportation costs, deferred revenue and self-funded insurance programs.
(4) Includes other long-term liabilities and deferred tax liabilities.


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The Providence Service Corporation
Page 7

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
Six months ended June 30,
20202019
Operating activities
Net income (loss)$53,096  $(1,129) 
  Depreciation and amortization9,898  8,827  
  Stock-based compensation1,772  3,392  
  Equity in net (gain) loss of investee(1,875) 2,971  
  Other non-cash items18,395  4,229  
  Changes in working capital 65,902  4,781  
Net cash provided by operating activities147,188  23,071  
Investing activities
Purchase of property and equipment(2,330) (4,277) 
Acquisition, net of cash acquired(77,665) —  
Net cash used in investing activities(79,995) (4,277) 
Financing activities
Proceeds from debt162,000  12,000  
Repayment of debt(162,000) (12,000) 
Preferred stock conversion payment(82,769) —  
Preferred stock dividends(1,961) (2,185) 
Repurchase of common stock, for treasury(10,186) (372) 
Proceeds from common stock issued pursuant to stock option exercise
11,329  6,383  
Restricted stock surrendered for employee tax payment(37) —  
Other financing activities(154) (566) 
Net cash (used in) provided by financing activities(83,778) 3,260  
Net change in cash and cash equivalents(16,585) 22,054  
Cash, cash equivalents and restricted cash at beginning of period61,673  12,367  
Cash, cash equivalents and restricted cash at end of period$45,088  $34,421  

(1) Includes both continuing and discontinued operations.


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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)

Three months ended June 30, 2020
NET ServicesMatrix InvestmentTotal Continuing Operations
Service revenue, net$282,256  $—  $282,256  
Operating expenses:
  Service expense196,106  —  196,106  
  General and administrative expense31,199  —  31,199  
  Depreciation and amortization6,108  —  6,108  
Total operating expenses233,413  —  233,413  
Operating income48,843  —  48,843  
Other expenses (income):
  Interest expense, net1,498  —  1,498  
  Equity in net gain of investee—  (4,425) (4,425) 
Income from continuing
     operations before income taxes47,345  4,425  51,770  
Provision for income taxes13,363  1,108  14,471  
Income from continuing operations, net of taxes33,982  3,317  37,299  
Interest expense, net1,498  —  1,498  
Provision for income taxes13,363  1,108  14,471  
Depreciation and amortization6,108  —  6,108  
EBITDA54,951  4,425  59,376  
Restructuring and related charges (1)986  —  986  
Transaction costs (2)266  —  266  
COVID-19 related costs209  —  209  
Equity in net gain of investee—  (4,425) (4,425) 
Adjusted EBITDA$56,412  $—  $56,412  

(1) Restructuring and related charges include severance and office closure costs of $506 and professional services costs of $480.
(2) Transaction costs include Circulation management incentive plan ("MIP") costs and certain transaction-related expenses.



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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)
Three months ended June 30, 2019
NET Services Matrix
Investment
Total Continuing Operations
Service revenue, net$363,911  $—  $363,911  
Operating expenses:
  Service expense345,948  —  345,948  
  General and administrative expense16,860  —  16,860  
  Depreciation and amortization4,353  —  4,353  
Total operating expenses367,161  —  367,161  
Operating loss(3,250) —  (3,250) 
Other expenses (income):
  Interest expense, net301  —  301  
  Other income(66) —  (66) 
  Equity in net loss of investee—  1,315  1,315  
Loss from continuing
     operations, before income tax(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, net301  —  301  
Benefit for income taxes(1,251) (140) (1,391) 
Depreciation and amortization4,353  —  4,353  
EBITDA1,169  (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 organizational consolidation costs of $1,316 and severance costs of $342.
(2) Transaction costs include Circulation MIP and certain transaction-related expenses.

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The 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, 2020
NET ServicesMatrix InvestmentTotal Continuing Operations
Service revenue, net$649,547  $—  $649,547  
Operating expenses:
  Service expense528,767  —  528,767  
  General and administrative expense51,994  —  51,994  
  Depreciation and amortization9,898  —  9,898  
Total operating expenses590,659  —  590,659  
Operating income58,888  —  58,888  
Other expenses (income):
  Interest expense, net1,739  —  1,739  
  Equity in net gain of investee—  (1,875) (1,875) 
Income from continuing
     operations before income tax57,149  1,875  59,024  
Provision for income taxes4,955  470  5,425  
Income from continuing operations, net of taxes52,194  1,405  53,599  
Interest expense, net1,739  —  1,739  
Provision for income taxes4,955  470  5,425  
Depreciation and amortization9,898  —  9,898  
EBITDA68,786  1,875  70,661  
Restructuring and related charges (1)2,308  —  2,308  
Transaction costs (2)1,121  —  1,121  
COVID-19 related costs231  —  231  
Equity in net gain of investee—  (1,875) (1,875) 
Adjusted EBITDA$72,446  $—  $72,446  

(1) Restructuring and related charges include severance and office closure costs of $1,186 and professional services of $1,122.
(2) Transaction costs include Circulation MIP and certain transaction-related expenses.

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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, 2019
NET ServicesMatrix
Investment
Total Continuing Operations
Service revenue, net$731,726  $—  $731,726  
Operating expenses:
  Service expense686,446  —  686,446  
  General and administrative expense36,262  —  36,262  
  Depreciation and amortization8,827  —  8,827  
Total operating expenses731,535  —  731,535  
Operating income191  —  191  
Other expenses (income):
  Interest expense, net604  —  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 taxes399  (2,494) (2,095) 
Interest expense, net604  —  604  
Benefit for income taxes(680) (477) (1,157) 
Depreciation and amortization8,827  —  8,827  
EBITDA9,150  (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 —   
Adjusted EBITDA$17,968  $—  $17,968  

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


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The Providence Service 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,
2020201920202019
Revenue$90,667  $72,161  $151,971  $139,144  
Operating expense 65,661  59,362  118,710  114,581  
Depreciation and amortization9,748  11,256  19,676  22,465  
Operating income15,258  1,543  13,585  2,098  
Interest expense 4,989  6,384  10,719  12,777  
Provision (benefit) for income taxes1,377  (1,180) 331  (2,531) 
Net income (loss)8,892  (3,661) 2,535  (8,148) 
Interest43.6 %43.6 %43.6 %43.6 %
Net gain (loss) - Equity Investment3,876  (1,597) 1,105  (3,555) 
Management fee and other549  282  770  584  
Equity in net gain (loss) of investee$4,425  $(1,315) $1,875  $(2,971) 
Cash$39,006  $32,247  
Total Debt (2)$324,225  $326,700  

(1)The results of our equity method investment are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.
(2)Represents long-term debt, excluding deferred financing costs.



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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)

Three months ended June 30,Six months ended June 30,
2020201920202019
Revenue$90,667  $72,161  $151,971  $139,144  
Operating expense 65,661  59,362  118,710  114,581  
Depreciation and amortization9,748  11,256  19,676  22,465  
Operating income15,258  1,543  13,585  2,098  
Interest expense4,989  6,384  10,719  12,777  
Provision (benefit) for income taxes1,377  (1,180) 331  (2,531) 
Net income (loss)8,892  (3,661) 2,535  (8,148) 
Depreciation and amortization9,748  11,256  19,676  22,465  
Interest expense4,989  6,384  10,719  12,777  
Provision (benefit) for income taxes1,377  (1,180) 331  (2,531) 
EBITDA25,006  12,799  33,261  24,563  
Management fees 1,176  637  1,669  1,297  
Integration costs—   —  1,488  
Severance costs138  —  937  —  
COVID-19 related costs4,935  —  5,092  —  
Transaction costs1,369  286  1,754  330  
Adjusted EBITDA$32,624  $13,727  $42,713  $27,678  


(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.





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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)
Three months
ended June 30,
Six months
ended June 30,
2020201920202019
Income (loss) from continuing operations, net of tax$37,299  $(3,409) $53,599  $(2,095) 
Restructuring and related charges (1)986  1,755  2,308  4,785  
Transaction costs (2)266  2,950  1,121  4,339  
Equity in net (gain) loss of investee(4,425) 1,315  (1,875) 2,971  
Intangible amortization expense3,775  1,559  5,334  3,117  
Litigation expense, net—  —  —   
COVID-19 related costs209  —  231  —  
Tax impact of the CARES Act76  —  (10,984) —  
Tax effected impact of adjustments(167) (1,986) (1,831) (5,121) 
Adjusted Net Income$38,019  $2,184  47,903  8,005  
Dividends on convertible preferred stock(866) (1,098) (1,961) (2,185) 
Income allocated to participating securities(4,024) (146) (5,560) (782) 
Adjusted Net Income available to common stockholders$33,129  $940  $40,382  $5,038  
Adjusted EPS$2.53  $0.07  $3.09  $0.39  
Diluted weighted-average number of common shares outstanding13,110,687  13,011,033  13,059,699  12,982,630  


(1) Restructuring and related charges include severance, organizational consolidation costs and professional fees.
(2) Transaction costs include the MIP related to the Circulation acquisition and certain other transaction-related expenses.


###




prsc-q22020investorprese
PROVIDENCE SERVICE CORP Q2 2020 Earnings Presentation August 6, 2020


 
FORWARD-LOOKING STATEMENTS & NON-GAAP FINANCIAL INFORMATION Forward-looking Statements Certain statements contained in this presentation constitute “forward-looking statements” within the meaning ofthe Private Securities Litigation Reform Act of1995. These statements are predictive in nature and are frequently identified by the use ofterms su ch as “ may,” “will,” “should,” “expect,”“believe,” “estimate,” “intend,” a nd similar words indicating pos sible future expectations, events or a ctions. Such forward-looking statements are based on current expe ctations, assumptions, estimates and projections about our busines s 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 fa ctors, many of whi ch are beyond our ability to control or predi ct, which may cause actual events to be materially different from those e xpressed or implied herein, i ncluding 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 ofper forming under certain capitated contracts; our ability to match the timing ofthe costs of new contracts with its related revenue; the outcome ofpendi ng or future litigation; our ability to attract and retain senior management and other qualified employees; our ability to success fully co mplete rece nt divestitures or business termination; the accuracy ofrepresentations and warranties and strength of related inde mnities provided to us in a cquisitions or claims made against us for re presentations and warranties and related indemnities in our dispositions; our ability to effe ctively compete in the marketplace; inadequa cies in or security breaches ofour infor mation technology systems, including our ability to protect pr iv at e data; the impact of COVID-19 on us (including: the duration and scope of the pandemi c; governmental, business and individuals’ actions taken in response to the pandemi c; eco nomi c activity and actions taken in response; the effect on our clients and client deman d for our services; and the ability of our clients to pay for our services); seasonal fluctuations in our operations; i mpairment 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 governme nt entities that fund our services; failure to ade quately co mply with patient and service user information regulations; possible a ctions under Medicare and Medicaid programs for false claims or re coupment of funds for noncompliance; changes in the regulatory landscape applicable to Matrix; changes to our estimated inco me 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 a dditional infor mation in our a nnual report on For m 10-K and subsequent filings with the Securities and E xcha nge Co mmissio n. 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 presentation includes EBITDA and Adjusted EBITDA for the Company and its segme nts, as well as Adjusted Net I nco me and Adjusted EPS, which are perfor mance measures that are not recognized under GAAP. EBITDA is defi ned as income (loss ) fro m continuing operations, net of taxe s, before: (1) interest expense, net, (2) provision (be nefit) for income ta xes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before certain items, incl uding (as applicable): (1) restructuring and related charges, including costs related to our corporate reorganization, (2) equity in net (gain) loss of investee, (3) certain litigation related expenses, settlement income or other negotiated settlements relating to cer t ain matters from prior periods, (4) certain transaction and related costs, and (5) COVID-19 related costs. Adjusted Net Income is de fined as inco me from continuing operations, net of taxes, before certain items, including (1) restructuring and related charges, (2) e quity in net (gain) loss of investee, (3) certain litigation related expenses, settlement inco me or other negotiated settlements relating to certain matters from prior periods, (4) intangible asset amortization, (5) certain transaction and related costs, (6) COVID-19 related costs, (7) tax impacts fro m the Coronavirus Aid, Relief, and Economi c Security Act (the "CARES Act") and (8) the inco me tax impa ct of su ch 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. Our non-GAAP performance measures e xclu de certain expe nses and a mounts that are not driven by our core operating results and may be one time in nature. Excludi ng these expenses makes comparisons with prior periods as well as to other companies in our industry more 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 gain or loss in equity investee is excluded from thes e measures, as we donot have the ability to manage the venture, allocate resources within the venture, or directly control its operations or performance. Our non-GAAP financial measures may not provide information that is dir ect ly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differe ntly. In addition, there are limitations in using non-GAAP financial measures b ecause they are not pre pared in a ccordan ce with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expe nses that may have a material impact on our reported financial results. The presentation ofnon- GAAP financial information is not meant to be considered in isolation fro m or as a substitute for the directly comparable financial measures prepared inaccordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included bel ow, and not to rely on any single financial measure to evaluate our business. 2


 
TODAY’S AGENDA • Opening Remarks – Dan Greenleaf, President and Chief Executive Officer o Introduction – significant change underway at Providence / LogistiCare o Update on Six Pillar operational strategy  Voice of the customer  Right people in the right seats  Critical technology enhancements  Contact center optimization  Cultural transformation  Acceleration of profitable growth o Review of capital allocation success in Q2  National MedTrans acquisition  Strategic conversion agreement – convertible preferred o Recap of favorable long-term industry tailwinds • Discussion of Financial Results – Kevin Dotts, Chief Financial Officer • Q&A 3


 
Q2 2020 FINANCIAL SUMMARY REVENUE ($M) • Lower trip volume due to impact of $363.9 COVID-19 $282.3 • Partially offset by revenue from National MedTrans and higher membership Q2 2019 Q2 2020 ADJUSTED EBITDA ($M) (1) $56.4 • Adjusted EBITDA benefitted from: o operational improvement (Six Pillars) o contribution from National MedTrans $5.8 o lower utilization on full-risk capitated contracts due to COVID-19 partially offset by lower utilization on profit Q2 2019 Q2 2020 corridor and reconciliation contracts (1) See appendix for a reconciliation of non-GAAP financial measures. 4


 
MATRIX INVESTMENT REVENUE ($M) (1) ADJUSTED EBITDA ($M) (1),(2) $90.7 $32.6 $72.2 $13.7 Q2 2019 Q2 2020 Q2 2019 Q2 2020 • Matrix revenue and Adjusted EBITDA benefitted from the launch of a new Employee Health and Wellness product that helps companies maintain critical operations during COVID-19 • Given the reduction in in-home/in-facility assessments, Matrix continued to transition a portion of its volume to telehealth assessments • In-home / in-facility assessments started picking back up towards end of the quarter (1) Providence’s interest in Matrix is accounted for as an equity method investment. Matrix’s results are not included within Pro vidence’s consolidated financials. (2) See appendix for a reconciliation of non-GAAP financial measures. 5


 
CASH FLOW UPDATE YTD YTD $Millions Q2 2019 Q2 2020 Q2 2019 Q2 2020 Cash Flow Before Working Capital $ 7.8 $ 43.2 $ 18.3 $ 81.3 Working Capital Changes (23.5) 65.2 4.8 65.9 Cash Provided By Operations $ (15.7) $ 108.4 $ 23.1 $ 147.2 Capex $ 2.6 $ 0.8 $ 4.3 $ 2.3 Cash flow • Q2 2020 working capital benefited from build in liability associated with profit corridor and reconciliation contracts • $27M receivable related to carry back losses associated with 2018 sale of WD Services segment expected to be received in 2H 2020 6


 
BALANCE SHEET UPDATE $Millions Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Cash $ 29.8 $ 40.6 $ 61.4 $ 254.4 $ 41.8 Debt - - - 162.0 - Net Cash $ 29.8 $ 40.6 $ 61.4 $ 92.4 $ 41.8 Matrix Carrying Value $ 157.9 $ 154.5 $ 130.9 $ 128.1 $ 132.0 Shares Outstanding (M) 15.0 14.9 15.0 15.0 14.1 Shares outstanding equals common shares outstanding plus total preferred shares on an as-converted basis. 7


 
APPENDIX


 
ADJUSTED EBITDA RECONCILIATION (Continuing Ops) YTD YTD $Millions Q2 20 Q2 19 Q2 20 Q2 19 Revenue $ 282.3 $ 363.9 $ 649.5 $ 731.7 Income (loss) from continuing operations, net of tax 37.3 (3.4) 53.6 (2.1) Interest expense, net 1.5 0.3 1.7 0.6 Provision (benefit) for income taxes 14.5 (1.4) 5.4 (1.2) Depreciation and amortization 6.1 4.4 10.0 8.9 EBITDA $ 59.4 $ (0.1) $ 70.7 $ 6.2 Restructuring and related charges 0.9 1.6 2.3 4.4 Transaction costs 0.3 3.0 1.1 4.4 COVID-19 related costs 0.2 - 0.2 - Equity in net (gain) loss of investee (4.4) 1.3 (1.9) 3.0 Adjusted EBITDA $ 56.4 $ 5.8 $ 72.4 $ 18.0 % Margin 20.0% 1.6% 11.1% 2.5% 9


 
ADJUSTED EBITDA RECONCILIATION (MATRIX) (1) YTD YTD $ Millions Q2 20 Q2 19 Q2 20 Q2 19 Revenue $ 90.7 $ 72.2 $ 152.0 $ 139.1 Net income (loss) 8.9 (3.7) 2.5 (8.1) Depreciation and amortization 9.7 11.3 19.7 22.5 Interest expense 5.0 6.4 10.7 12.8 Provision (benefit) for income taxes 1.4 (1.2) 0.4 (2.6) EBITDA $ 25.0 $ 12.8 $ 33.3 $ 24.6 Management fee 1.2 0.7 1.7 1.3 Integration expense - - - 1.5 Severance costs 0.1 - 0.9 - COVID-19 related costs 4.9 - 5.1 - Transaction costs 1.4 0.2 1.7 0.3 Adjusted EBITDA $ 32.6 $ 13.7 $ 42.7 $ 27.7 % Margin 35.9% 19.0% 28.1% 19.9% Reconciliation of Matrix Net Income to Equity (Gain) Loss of Investee (2) Matrix net (income) loss (standalone) $ 8.9 $ (3.7) $ 2.5 $ (8.1) Divided by Providence Share 43.6% 43.6% 43.6% 43.6% Equity in net gain (loss) of investee $ 3.9 $ (1.6) $ 1.1 $ (3.6) Management fee and other 0.5 0.3 0.8 0.6 Net gain (loss) - equity investment $ 4.4 $ (1.3) 1.9 $ (3.0) (1) The results of our equity method investment are excluded from the calculation of Providence's Ad jus ted EBITDA and Adjus ted Net Income. (2) A reconciliation has been provided to bridge from equity in net gain (loss) of investee to Matrix’s standalone net income (loss). 10