NASDAQ: PRSC
November 2003
Exhibit 99.2
Cautionary Statement
Cautionary Note about Forward-Looking Statements
Certain statements herein, such as any statements about the Company’s confidence or
strategies or its expectations about revenues, results of operations, profitability, future
contracts or market opportunities, constitute “forward-looking statements” within the
meaning of the private Securities Litigation Reform Act of 1995. Such forward looking
statements involve a number of known and unknown risks, uncertainties and other
factors which may cause the Company’s actual results or achievements to be materially
different from those expressed or implied by such forward-looking statements. These
factors include, but are not limited to, reliance on government-funded contracts, risks
associated with government contracting, risks involved in managing government
business, legislative or policy changes, challenges resulting from growth or acquisitions,
adverse media attention and legal, economic and other risks detailed in the Company’s
other filings with the Securities and Exchange Commission. Words such as “believe”,
“demonstrate”, “intend”, “expect”, “estimate”, “anticipate”, “should” and “likely”, and
similar expressions, identify 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. The Company undertakes no obligation to update any
forward-looking statement contained herein.
We deliver home and community based
social services to government
beneficiaries.
Home and community-based alternatives to institutional care
We own no beds, facilities or group homes
Scalable, flexible, high return on capital business model
Low cost alternative for government sponsored social services
Reduced costs and improved quality through outsourcing
Multi-state provider in a multi billion dollar market
Funding reallocated from institutional to community-based care
Established national presence
$14.8M in owned and $15.5M (Q3) managed revenue (net of $ 1.5
M management fees) with 12,756 clients in 17 states as of
September 30, 2003
Providence Overview
Provider Network Management
Intake, Assessment and Referral
Monitoring Services
Case Management
Management Services
Foster Care Services
Traditional Foster Care
Therapeutic Foster Care
Home and Community
Based Services
Home Based Counseling
Substance Abuse Treatment
School Support Services
Service Offering Overview
Revenue Composition(1)
Managed revenue
net of management fee
Owned revenue
including management fee
Management fee represents 9% to
18% of managed entity revenue
$54.5 M
$58.0 M
(1) Last Twelve Months (LTM) as of 9/30/03.
Explosive Growth
Owned Revenue
Managed
Revenue (1)
Contracts
States Served
Clients
Trailing Revenue
12,756
3,069
1,333
1997
2000
9/30/03
192
50
4
1997
2000
9/30/03
17
6
1
1997
2000
9/30/03
$2.5
$17.6
$54.5
$1.4
1997
2000
9/30/03
(1) Managed rev. net of management fees.
$58.0
Significant National Footprint
Strong Potential for Geographic Growth
States of operation
Headquarters
Regional
Directors
Experienced Management
Name
Position
Experience
Fletcher J. McCusker
Chairman of the
Board and CEO
PRSC Chairman and CEO since 1996;
20+ years of healthcare services related
experience
William B. Dover
President
PRSC President since 1997; 20+ years of
healthcare services related experience
Michael N. Deitch
CFO, VP,
Secretary and
Treasurer
PRSC CFO since 1997, and Secretary and
Treasurer since 1998; CPA and served in
various finance and accounting capacities
for 19 years
Mary J. Shea
EVP of Program
Services
Current position since 2003; previously
president of Arizona operation since
1997; 13+ years of healthcare services
related experience
Craig A. Norris
President,
Eastern Division
Current position since 1998; 11+ years
of healthcare services related experience
Martin J. Favis
Fred D. Furman
Chief
Development
Officer
General Counsel
Current position since 2003; previously
COO of Camelot Care since 2000 and
with company since 1998
Joined PRSC in September 2003 following
IPO; 8+ years experience as president
and General Counsel of publicly traded
mental health company
Why Invest in Providence?
Multiple Growth Opportunities
Strong Financial Performance
Large Market in Crisis
Attractive Business and Operating Model
Critical Issues Facing Social Services Delivery
High fixed costs; high depreciation
Excess bed capacity; low occupancy rates
High Cost of
Institutional Delivery
Increasing Number of
Eligible Beneficiaries
Over 33M living in poverty
Record numbers in child welfare
44M Medicaid Enrollees
Legally Mandated
Services
Billions spent annually on social services
Federally mandated for local delivery
$15.9B Medicaid, $23.3B State Mental Health
$20B Child Welfare, $29.7B TANF, $38.1B DOC
Crisis in Social
Services
Situation worsened by record state budget deficits
Many states closing institutions
Privatized social services funding increased 65% since 1996
49 states have Medicaid waivers to develop alternatives to
traditional institutional care, up from 13 in 1999
18 states have Medicaid Research Waivers for comprehensive
change to current delivery systems through pilots or tests
3 states have ongoing privatization initiatives for their child
welfare systems with more than 25 others under review
New Jersey child welfare system flaws exposed
Florida has stated plans to accelerate its privatization efforts
27 states have privatized portions of adult corrections service
The Market is Here
Why Invest in Providence?
Multiple Growth Opportunities
Strong Financial Performance
Large Market in Crisis
Attractive Business and Operating Model
Benefits of the PRSC Business Model
We do not own or lease any facilities
No costs associated with building, maintaining and financing
Highly variable cost structure
Revenue growth not constrained by number of beds
Nominal capital expenditures required to fund growth
High ROI; typically less than 1 year payback
Nominal investment to enter new markets
Predictable and recurring stream of revenue and earnings
High contract renewal and customer retention
History of Success Winning Contracts
4
25
41
50
61
155
192
1997
1998
1999
2000
2001
2002
9/30/03
Virginia
Leveraging Acquisitions
Leveraging the PRSC Model
Maine
De Novo Success
1997
$2.2M Revenue
$12K Loss
11 Contracts
138 Employees
341 Clients
LTM June 2003
$13.6M Revenue
$2.6M Profit
36 Contracts
342 Employees
1,149 Clients
Acquired in late 1997
2000
$89K Revenue
Breakeven
1 Contract
5 Employees
10 Clients
LTM June 2003
$3.8M Revenue
$868K Profit
7 Contracts
99 Employees
143 Clients
Start-up in 2000
Why Invest in Providence?
Strong Financial Performance
Large Market in Crisis
Multiple Growth Opportunities
Attractive Business and Operating Model
Key Drivers of Growth
Internal growth
Positive demographic/census trends as well as contract pricing
Cross-selling additional services to existing customers
Over the past 12 months, PRSC has added services to more than
50% of its existing contracts
New contract opportunities
RFPs in the US have increased 50% to 7,439 (’01-’02)
Negotiating an additional $12M of owned and $10M managed
revenue
Shift of funding from institutional to community-based services
Key Drivers of Growth
Geographic expansion
Clustering strategy – leverage existing infrastructure through
contiguous expansion
Expansion into new states and regions
Ft. Myers and Palm Beach, Florida and Washington, D.C. are
implementing privatization plans
Targeted acquisitions
Accelerates entry into new geography
Smaller social services providers have limited exit options
Track record of success
Why Invest in Providence?
Multiple Growth Opportunities
Large Market in Crisis
Strong Financial Performance
Attractive Business and Operating Model
Owned Revenue Mix
Home & Community
Foster Care
Management Services
$8.6
$12.7
$17.6
$24.7
$33.5
$54.5
1998
1999
2000
2001
2002
For the 12 Months Ended June 30,
in millions
9/30/03
Operating Statistics
Historical Client Growth
Historical Employee Growth
1,333
1,691
2,360
3,069
3,697
10,785
12,756
1997
1998
1999
2000
2001
2002
9/30/03
68
236
306
443
615
1,158
1,721
1997
1998
1999
2000
2001
2002
9/30/03
2003 GAAP Performance
(in thousands except per share numbers)
Q1
Q2
Q3
Q4
Year
Actual
Actual
Actual
Est.
Est.
Income
$631
$797
$(3,389)
$1,180
$(1,064)
Shares
5,407
5,499
4,856
8,857
4,432
EPS
$0.12
$0.14
$(0.70)
$0.13
$(0.24)
2003 Non GAAP Performance
(in thousands except per share numbers)
Q1
Q2
Q3
Q4
Year
Actual Actual
Actual
Est.
Est.
Earnings
$631
$797
$1,075
$1,180
$3,683
Shares
5,407
5,499
6,889
8,857
6,673
EPS
$0.12
$0.14
$0.16
$0.13
$0.55
2003 Diluted EPS—GAAP
(in thousands except per numbers)
| Q1 Actual | Q2 Actual | Q3 Actual | Q4 Est. | Year Est. | |||||||||||||
Numerator: | |||||||||||||||||
Numerator for basic EPS—income (loss) avail. to common stockholders | $ | 490 | $ | 655 | $ | (3,389 | ) | $ | 1,180 | $ | (1,064 | ) | |||||
Effect of dilutive securities: | |||||||||||||||||
Preferred stock dividends and convertible notes | 141 | 142 | — | — | — | ||||||||||||
Numerator for diluted EPS—income (loss) avail. to common stockholders after assumed conversions | $ | 631 | $ | 797 | $ | (3,389 | ) | $ | 1,180 | $ | (1,064 | ) | |||||
Denominator: | |||||||||||||||||
Denominator for basic EPS—weighted avg. shares | 2,185 | 2,201 | 4,856 | 8,482 | 4,432 | ||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Preferred stock conversion | 1,783 | 1,783 | — | — | — | ||||||||||||
Warrants | 708 | 708 | — | — | — | ||||||||||||
Convertible debt | 545 | 544 | — | — | — | ||||||||||||
Common stock options | 186 | 263 | — | 375 | — | ||||||||||||
Dilutive potential common shares | 3,222 | 3,298 | — | 375 | — | ||||||||||||
Denominator for diluted EPS—adj. weighted-avg. shares and assumed conversion | 5,407 | 5,499 | 4,856 | 8,857 | 4,432 | ||||||||||||
Diluted EPS | $ | 0.12 | $ | 0.14 | $ | (0.70 | ) | $ | 0.13 | $ | (0.24 | ) | |||||
25
2003 Diluted EPS—Non-GAAP
(in thousands except per share numbers)
| Q1 Actual | Q2 Actual | Q3 Actual | Q4 Est. | Year Est. | |||||||||||||
Numerator: | |||||||||||||||||
Net income (loss) avail. to common stockholders | $ | 490 | $ | 655 | $ | (3,389 | ) | $ | 1,180 | $ | (1,064 | ) | |||||
Add: | |||||||||||||||||
IPO consent fee to preferred stockholders | — | — | 3,500 | — | 3,500 | ||||||||||||
Settlement of put warrant | — | — | 631 | — | 631 | ||||||||||||
Write-off of deferred financing charges (net of tax) | — | — | 251 | — | 251 | ||||||||||||
Numerator for basic EPS—income avail. to common stockholders excluding IPO related expenses | 490 | 655 | 993 | 1,180 | 3,318 | ||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Preferred stock dividends and convertible notes | 141 | 142 | 82 | — | 365 | ||||||||||||
Numerator for diluted EPS—income avail. to common stockholders excl. IPO related expenses and adjusted for assumed conversions | $ | 631 | $ | 797 | $ | 1,075 | $ | 1,180 | $ | 3,683 | |||||||
Denominator: | |||||||||||||||||
Denominator for basic EPS—weighted avg. shares | 2,185 | 2,201 | 4,856 | 8,482 | 4,432 | ||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Preferred stock conversion | 1,783 | 1,783 | 1,030 | — | 1,149 | ||||||||||||
Warrants | 708 | 708 | 411 | — | 459 | ||||||||||||
Convertible debt | 545 | 544 | 315 | — | 351 | ||||||||||||
Common stock options | 186 | 263 | 277 | 375 | 282 | ||||||||||||
Dilutive potential common shares | 3,222 | 3,298 | 2,033 | 375 | 2,241 | ||||||||||||
Denominator for diluted EPS, excl. IPO related expenses—adj. weighted-avg. shares and assumed conversion | 5,407 | 5,499 | 6,889 | 8,857 | 6,673 | ||||||||||||
Diluted EPS, excluding IPO related expenses | $ | 0.12 | $ | 0.14 | $ | 0.16 | $ | 0.13 | $ | 0.55 | |||||||
26
The President’s New Freedom Commission on Mental Health
July 22, 2003
“…the mental health delivery system is fragmented and is in
disarray…”
“In short, the Nation must replace unnecessary institutional care with
efficient, effective community services that people can count on.”
“…services will be delivered in the most integrated setting possible –
services in communities rather than in institutions.”
27
The Time is Now
