Exhibit 99.1
PROVIDENCE SERVICE CORPORATION
AT THE COMPANY | AT CAMERON ASSOCIATES | |
Fletcher McCusker – Chairman and CEO | Alison Ziegler 212-554-5469 | |
Kate Blute – Director of Investor and Public Relations 520/747-6600 |
FOR IMMEDIATE RELEASE
Providence Service Corporation Announces 30% Revenue Growth
in its Second Quarter
Second Quarter Highlights:
• | Total revenue grew 30% to a record $45.8 million |
• | Organic growth in total revenue of 14% |
• | Managed entity revenue grew 30% to $48.7 million |
• | Diluted earnings per share of $0.28 including stock-based compensation and unbudgeted costs associated with a bid on a major new potential contract |
• | Total client census increased 36% to 43,425 from 31,961 |
• | Sequential growth in net income, total revenue and census was 27%, 6.5%, and 7.6% respectively |
• | 100% of July 1 contracts offered for renewal |
TUCSON, ARIZONA – August 9, 2006 —The Providence Service Corporation (Nasdaq: PRSC) today announced financial results for the second quarter ended June 30, 2006.
For the second quarter of 2006, the Company’s reported net income grew 40% to $3.3 million, or $0.28 per diluted share. This is inclusive of approximately $48,000 of stock-based compensation and approximately $74,000 of unbudgeted costs associated with a recent bid on a major new potential contract, equating to approximately $0.01 per diluted share. In the quarter ended June 30, 2005, net income was $2.4 million, or $0.24 per diluted share. Revenue in the second quarter of 2006 was $45.8 million, an increase of 30% from $35.2 million for the comparable period in 2005. Of the increase in revenue quarter over quarter, organic growth was approximately 14%. Providence’s direct client census was 20,077 at June 30, 2006, a 17% increase from 17,213 at June 30, 2005. The number of direct contracts was 338 at June 30, 2006, up 76% from 192 at June 30, 2005. The number of contracts at June 30 reflects the seasonal decline from March due to school related contracts that typically end in May and resume in September.
Managed entity revenue, which represents revenue of the not-for-profit social services organizations the Company provides management and/or administrative services to in return for a negotiated management fee, increased 30% to $48.7 million for the quarter
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5524 E. Fourth Street • Tucson, Arizona 85711 •Tel 520/747-6600 •Fax 520/747-6605 •www.provcorp.com
Providence Service Corporation Reports Second Quarter Financial Results
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ended June 30, 2006 from $37.4 million for the prior year period. Managed entity revenue is presented to provide investors with an additional measure of the size of the operations under Providence’s management or administration and can help investors understand trends in management fee revenue. Managed client census grew to 23,348 at June 30, 2006 as compared to 14,748 at June 30, 2005. Contracts of managed entities grew from 139 to 262 year over year.
“We had a solid quarter and are particularly pleased with our ability to add new contracts as part of California’s Mental Health Services Act, Proposition 63,” commented Fletcher McCusker, Chairman and CEO. “To date we have been awarded five contracts and have several bids still outstanding in San Diego and Los Angeles counties. Our ability to secure these contracts demonstrates the growing acceptance of our home and community based model and our experience and ability to deliver. These five contracts should add approximately $11 million to revenue in 2007. In addition, we have submitted our first bid under the Texas privatization legislation.”
Mr. McCusker added, “Our acquisition activity is also on track and today’s announcement that we are expanding further into workforce development is an excellent example of the opportunities that exist to further expand our continuum of services. We are excited to be able to expand this offering into our other geographies and further enhance our relationships with our clients and payers.”
Guidance
As a result of the acquisition of Innovative Employment Solutions and recently granted stock compensation awards, the Company is updating its 2006 guidance.
Revenue for 2006 is expected to be $184 million, an increase from earlier guidance of $180 million due to the Innovative Employment Solutions acquisition. The acquisition is expected to be accretive to earnings by approximately $0.02 per share to previously announced 2006 earnings guidance of $1.20. In addition, recently granted stock-based compensation awards are anticipated to reduce 2006 earnings guidance by approximately $0.03 per diluted share, including the previously noted stock-based compensation recorded in the recently completed second quarter. The Company now anticipates diluted earnings per share of $1.19 for 2006 based on an annual estimate of 11.7 million diluted shares. The quarterly share count for the third and fourth quarter of 2006 is anticipated to be 12.4 million, an increase from the previously anticipated 12.2 million.
The Company’s guidance also assumes continued growth in census based upon current contract commitments and includes the recently announced contract wins in California. This guidance does not include any projections for acquisition activity, any unannounced material contracts or sole source agreements potentially available.
Providence will hold a conference call at 11:00 a.m. EDT (9:00 a.m. MDT, 8:00 a.m. Arizona and PDT) on Thursday, August 10, 2006 to discuss its financial results and
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Providence Service Corporation Reports Second Quarter Financial Results
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corporate developments. Interested parties are invited to listen to the call live over the Internet at http://investor.provcorp.com or http://www.earnings.com. The call is also available by dialing (866) 510-0710, or for international callers (617) 597-5378 and by using the passcode 56932676. A replay of the teleconference will be available on http://investor.provcorp.com and http://www.earnings.com. A replay will also be available until August 17, 2006, by dialing (888) 286-8010 or (617) 801-6888, and using passcode 32826789.
Providence Service Corporation, through its owned and managed entities, provides home and community based social services to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence operates no beds, treatment facilities, hospitals, or group homes preferring to provide services in the client’s own home or other community setting. Through its owned and managed entities, Providence maintains 600 government contracts in 33 states and the District of Columbia as of June 30, 2006.
Certain statements herein, such as any statements about Providence’s confidence or strategies or its expectations about revenues, results of operations, profitability, earnings per share, contracts, acquisitions and related growth, growth resulting from initiatives in certain states, effective tax rate 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 Providence’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 and legal, economic and other risks detailed in Providence’s filings with the Securities and Exchange Commission. Words such as “believe,” “demonstrate,” “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. Providence undertakes no obligation to update any forward-looking statement contained herein.
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Providence Service Corporation Reports Second Quarter Financial Results
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The Providence Service Corporation
Consolidated Statements of Income
(in thousands except share and per share data)
(UNAUDITED)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenues: | ||||||||||||||||
Home and community based services | $ | 35,448 | $ | 28,909 | $ | 69,520 | $ | 55,085 | ||||||||
Foster care services | 5,566 | 3,512 | 10,257 | 6,871 | ||||||||||||
Management fees | 4,826 | 2,798 | 9,090 | 5,297 | ||||||||||||
45,840 | 35,219 | 88,867 | 67,253 | |||||||||||||
Operating expenses: | ||||||||||||||||
Client service expense | 33,605 | 26,548 | 65,637 | 50,723 | ||||||||||||
General and administrative expense | 6,037 | 4,179 | 11,537 | 8,139 | ||||||||||||
Depreciation and amortization | 866 | 441 | 1,548 | 812 | ||||||||||||
Total operating expenses | 40,508 | 31,168 | 78,722 | 59,674 | ||||||||||||
Operating income | 5,332 | 4,051 | 10,145 | 7,579 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest expense | 154 | 135 | 618 | 221 | ||||||||||||
Interest income | (438 | ) | (60 | ) | (492 | ) | (108 | ) | ||||||||
Income before income taxes | 5,616 | 3,976 | 10,019 | 7,466 | ||||||||||||
Provision for income taxes | 2,278 | 1,598 | 4,054 | 2,994 | ||||||||||||
Net income | $ | 3,338 | $ | 2,378 | $ | 5,965 | $ | 4,472 | ||||||||
Earnings (loss) per common share: | ||||||||||||||||
Basic | $ | 0.28 | $ | 0.25 | $ | 0.55 | $ | 0.47 | ||||||||
Diluted | $ | 0.28 | $ | 0.24 | $ | 0.54 | $ | 0.46 | ||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||
Basic | 11,734,858 | 9,614,679 | 10,780,430 | 9,556,742 | ||||||||||||
Diluted | 11,968,538 | 9,827,205 | 11,061,054 | 9,743,384 |
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Providence Service Corporation Reports Second Quarter Financial Results
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The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
June 30, 2006 | December 31, 2005 | |||||
(Unaudited) | (Audited) | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 45,136 | $ | 8,994 | ||
Accounts receivable-billed, net of allowance of $714,000 and $523,000 | 27,552 | 19,972 | ||||
Accounts receivable - unbilled | 4,985 | 4,486 | ||||
Management fee receivable | 7,808 | 6,623 | ||||
Other receivables | 5,373 | 2,363 | ||||
Restricted cash | 5,340 | 1,950 | ||||
Prepaid expenses and other | 7,152 | 4,505 | ||||
Notes receivable | 66 | 288 | ||||
Deferred tax assets | 1,012 | 790 | ||||
Total current assets | 104,424 | 49,971 | ||||
Property and equipment, net | 2,618 | 2,385 | ||||
Notes receivable from unconsolidated affiates | 1,282 | 1,319 | ||||
Goodwill | 45,877 | 44,732 | ||||
Intangible assets, net | 25,904 | 19,496 | ||||
Other assets | 1,058 | 1,110 | ||||
Total assets | $ | 181,163 | $ | 119,013 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 1,577 | $ | 2,134 | ||
Accrued expenses | 14,302 | 11,283 | ||||
Deferred revenue | 189 | 183 | ||||
Reinsurance liability reserve | 4,028 | 1,859 | ||||
Current portion of long-term obligations | 499 | 4,083 | ||||
Total current liabilities | 20,595 | 19,542 | ||||
Deferred tax liability | 4,956 | 3,983 | ||||
Long-term obligations, less current portion | 627 | 14,241 | ||||
Stockholders’ equity: | ||||||
Common stock: Authorized 40,000,000 shares; $0.001 par value; 12,162,388 and 9,822,486 issued and outstanding (including treasury shares) | 12 | 10 | ||||
Additional paid-in capital | 140,726 | 72,955 | ||||
Retained earnings | 14,546 | 8,581 | ||||
155,284 | 81,546 | |||||
Less 146,905 treasury shares, at cost | 299 | 299 | ||||
Total stockholders’ equity | 154,985 | 81,247 | ||||
Total liabilities and stockholders’ equity | $ | 181,163 | $ | 119,013 | ||
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Providence Service Corporation Reports Second Quarter Financial Results
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The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(UNAUDITED)
Six months ended June 30, | ||||||||
2006 | 2005 | |||||||
Operating activities | ||||||||
Net income | $ | 5,965 | $ | 4,472 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 510 | 426 | ||||||
Amortization | 1,038 | 386 | ||||||
Amortization of deferred financing costs | 69 | 62 | ||||||
Deferred income taxes | 533 | — | ||||||
Tax benefit upon exercise of stock options | — | 382 | ||||||
Stock-based compensation | 49 | — | ||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Billed and unbilled accounts receivable, net | (7,648 | ) | (221 | ) | ||||
Management fee receivable | (1,072 | ) | (299 | ) | ||||
Other receivable | (3,001 | ) | — | |||||
Reinsurance liability reserve | 2,169 | 1,499 | ||||||
Prepaid expenses and other | (2,801 | ) | (3,367 | ) | ||||
Accounts payable and accrued expenses | (3,109 | ) | 1,885 | |||||
Deferred revenue | (9 | ) | (496 | ) | ||||
Net cash (used in) provided by operating activities | (7,307 | ) | 4,729 | |||||
Investing activities | ||||||||
Purchase of property and equipment | (525 | ) | (393 | ) | ||||
Purchase of intangibles | — | (1,835 | ) | |||||
Acquisition of businesses, net of cash acquired | (2,997 | ) | (10,221 | ) | ||||
Restricted cash for contract performance | (3,390 | ) | (775 | ) | ||||
Purchase of short-term investments | (25 | ) | — | |||||
Advances to unconsolidated affiliate | (100 | ) | — | |||||
Payment received on settlement note from former managed entity | 34 | — | ||||||
Net cash used in investing activities | (7,003 | ) | (13,224 | ) | ||||
Financing activities | ||||||||
Net borrowings on revolving line of credit | 17 | — | ||||||
Payments of capital leases | — | (52 | ) | |||||
Proceeds from common stock issued pursuant to stock option exercise | 6,350 | 1,301 | ||||||
Tax benefit upon exercise of stock options | 1,836 | — | ||||||
Income tax adjustment related to initial public offering | (10 | ) | — | |||||
Proceeds from common stock offering, net | 59,603 | — | ||||||
Net proceeds from (repayment of) of long-term debt | (17,276 | ) | 9,800 | |||||
Debt financing costs | (68 | ) | (15 | ) | ||||
Net cash provided by financing activities | 50,452 | 11,034 | ||||||
Net change in cash | 36,142 | 2,539 | ||||||
Cash at beginning of period | 8,994 | 10,657 | ||||||
Cash at end of period | $ | 45,136 | $ | 13,196 | ||||
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