Providence Service Corporation Reports Third Quarter 2017 Results
Highlights for the Third Quarter of 2017:
| • | Revenue from continuing operations of $409.5 million |
| • | Income from continuing operations, net of tax, of $15.0 million, or $0.88 per diluted common share, includes gain on sale of Mission Providence of $12.6 million |
| • | Adjusted Net Income of $6.2 million; Adjusted EPS of $0.32 |
| • | Segment-level Adjusted EBITDA of $24.3 million |
| • | Completed the sale of Mission Providence JV |
STAMFORD, CT – November 7, 2017 – The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), today reported financial results for the three and nine months ended September 30, 2017.
“During the third quarter we continued to enhance the intrinsic value of our U.S. Healthcare Services businesses, which encompasses our NET services segment and investment in Matrix, through both capital allocation and organic growth strategies.” stated James Lindstrom, Chief Executive Officer. “LogistiCare’s value enhancement activities are on track to deliver both improved financial and service delivery benefits in 2017 and beyond. Within WD Services, our initiatives were largely completed during the second quarter of 2017 and position the segment well for the near future." He continued, "Largely based upon our value enhancement initiatives, we expect improved profitability in 2018 and are currently investing in growth initiatives to improve our multi-year prospects in businesses which provide critical, yet often overlooked, healthcare services in the home or community."
David Shackelton, Chief Financial Officer, commented, "Consistent with our increased focus on our U.S. Healthcare Services businesses, we sold our stake in Mission Providence and continued to enhance the strategic value of this portfolio with an investment in Circulation through our NET Services segment and the announced acquisition of LP Health by Matrix. Our conviction in our ability to increase intrinsic value through a focused U.S. healthcare services strategy is reflected by these investments and divestitures and the extension of our share repurchase program through the end of next year."
Third Quarter 2017 Results
For the third quarter of 2017, the Company reported revenue from continuing operations of $409.5 million, a decrease of 0.7% from $412.3 million in the third quarter of 2016.
Income from continuing operations, net of tax, in the third quarter of 2017 was $15.0 million and $0.88 per diluted common share, compared to $3.7 million and $0.14 per diluted common share in the third quarter of 2016. Income from continuing operations, net of tax, in the third quarters of 2017 and 2016 includes restructuring and related charges of $2.7 million and $1.4 million, respectively. Income from continuing operations, net of tax, in the third quarter of 2017 also includes a gain on the sale of Mission Providence of $12.6 million. Adjusted Net Income in the third quarter of 2017 was $6.2 million and $0.32 per diluted common share, compared to $8.0 million and $0.41 per diluted common share in the third quarter of 2016.
Segment-level Adjusted EBITDA was $24.3 million in the third quarter of 2017, compared to $26.0 million in the third quarter of 2016. Adjusted EBITDA was $15.6 million in the third quarter of 2017, compared to $18.7 million in the third quarter of 2016.
Year to Date 2017 Results
For the first nine months of 2017, the Company reported revenue from continuing operations of $1,217.0 million, an increase of 2.1% from $1,192.4 million in the comparable period of 2016. Excluding the effects of changes in currency exchange rates, revenue from continuing operations increased 3.1%.
Income from continuing operations, net of tax, in the first nine months of 2017 was $20.7 million and $1.09 per diluted common share, compared to income of $6.7 million and $0.23 per diluted common share in the first nine months of 2016. Income from continuing operations, net of tax, for the first nine months of 2017 and 2016 includes restructuring and related charges of $7.0 million and $7.0 million, respectively. Income from continuing operations, net of tax, in the first nine months of 2017 also includes a gain on the sale of Mission Providence of $12.6 million. Adjusted Net Income in the first nine months of 2017 was $18.9 million and $0.99 per diluted common share, compared to $23.4 million and $1.19 per diluted common share in the first nine months of 2016.
Segment-level Adjusted EBITDA was $67.4 million in the first nine months of 2017, compared to $73.6 million in the comparable period of 2016. Adjusted EBITDA was $46.1 million in the first nine months of 2017, compared to $52.9 million in the first nine months of 2016.
Segment Results
For analysis purposes, the Company provides revenue, expenses, operating income (loss), income (loss) from continuing operations, net of taxes, and Adjusted EBITDA on a segment basis. Segment results include revenue and expenses incurred by each segment, as well as an allocation of certain direct expenses incurred by Corporate on behalf of the segment. No direct expenses were incurred by Corporate on behalf of the Matrix Investment segment. Indirect expenses, including unallocated corporate functions and expenses, such as executive, accounting, audit, process improvement, finance, human resources, information technology, M&A and legal, as well as the results of our captive insurance company and elimination entries recorded in consolidation, are reflected in Corporate and Other.
NET Services
NET Services revenue was $324.8 million for the third quarter of 2017, an increase of 2.4% from $317.3 million in the third quarter of 2016. Operating income was $14.2 million, or 4.4% of revenue, in the third quarter of 2017, compared to $17.5 million, or 5.5% of revenue, in the third quarter of 2016. Included in NET Services operating income in the third quarters of 2017 and 2016 was $2.2 million and $0.7 million, respectively, of restructuring and related charges. NET Services Adjusted EBITDA was $19.7 million, or 6.1% of revenue, in the third quarter of 2017, compared to $21.2 million, or 6.7% of revenue, in the third quarter of 2016.
NET Services revenue was $987.7 million for the first nine months of 2017, an increase of 7.7% from $917.2 million for the first nine months of 2016. Operating income was $41.9 million, or 4.2% of revenue, in the first nine months of 2017, compared to $53.5 million, or 5.8% of revenue, in the comparable period of 2016. Included in NET Services operating income in the first nine months of 2017 and 2016 was $4.9 million and $1.2 million, respectively, of restructuring and related charges. NET Services Adjusted EBITDA was $56.6 million, or 5.7% of revenue, in the first nine months of 2017, compared to $63.6 million, or 6.9% of revenue, in the comparable period of 2016.
The year-over-year increase in NET Services revenue in the third quarter of 2017 was primarily due to increased revenue from existing contracts, including the impact of a final agreement on a rate adjustment and the release of a previously accrued revenue hold-back, and the impact of new contracts, partially offset by reductions in revenue from contracts we no longer serve, including a contract with the state of New York. The year-over-year decline in Adjusted EBITDA as a percentage of revenue in the third quarter of 2017 was primarily due to the loss of a contract with the state of New York, the impact of new managed care organization ("MCO") contracts in certain markets being at lower margins than previous contracts and higher utilization across certain contracts, including multiple MCO contracts in California. This margin pressure was partially offset by benefits derived from value enhancement initiatives aimed at improving operating efficiencies and moderately reduced utilization levels in certain markets impacted by Hurricane Irma.
WD Services
WD Services revenue was $84.7 million for the third quarter of 2017, a decrease of 10.8% from $95.0 million in the third quarter of 2016. Operating income was $1.0 million in the third quarter of 2017, compared to $0.6 million in the third quarter of 2016. Included within WD Services operating income in the third quarters of 2017 and 2016 were restructuring and related costs of $0.5 million and $0.7 million, respectively. WD Services Adjusted EBITDA was $4.6 million, or 5.5% of revenue, in the third quarter of 2017 compared to $4.8 million, or 5.1% of revenue, in the third quarter of 2016.
WD Services revenue was $229.3 million for the first nine months of 2017, a decrease of 16.7% from $275.3 million in the first nine months of 2016. Excluding the effects of changes in currency exchange rates, revenue declined 12.3% in the first nine months of 2017 versus the first nine months of 2016. Operating loss was $1.0 million in the first nine months of 2017,
compared to an operating loss of $6.7 million in the comparable period of 2016. Included within WD Services operating loss in the first nine months of 2017 and 2016 were restructuring and related costs of $2.0 million and $5.8 million, respectively. WD Services Adjusted EBITDA was $10.8 million, or 4.7% of revenue, in the first nine months of 2017 compared to $10.0 million, or 3.6% of revenue, in the comparable period of 2016.
The year-over-year decrease in WD Services revenue in the third quarter of 2017 was primarily related to the anticipated ending of referrals under the segment’s primary employability program in the UK, partially offset by increased revenue from health services offerings in the UK and from various employability programs outside of the UK, including in Australia, France and Germany. Year-over-year revenue in the third quarter of 2017 also declined in part as a result of the non-recurrence of a $5.4 million contractual adjustment received in the third quarter of 2016 under our offender rehabilitation program. Adjusted EBITDA declined slightly in the third quarter of 2017; however, excluding this contractual adjustment, WD Services profitability improved significantly as a result of its value enhancement initiatives which have better aligned headcount with service delivery volumes, improved profitability in France, and improved key operating metrics.
Corporate and Other
Corporate and Other incurred a $8.8 million operating loss in the third quarter of 2017 compared to an operating loss of $8.3 million in the third quarter of 2016. Corporate and Other Adjusted EBITDA was negative $8.7 million in the third quarter of 2017 compared to negative $7.3 million in the third quarter of 2016.
Corporate and Other incurred a $21.9 million operating loss in the first nine months of 2017, compared to a $22.0 million operating loss in the first nine months of 2016. Corporate and Other Adjusted EBITDA was negative $21.3 million in the first nine months of 2017 compared to negative $20.7 million in the comparable period of 2016.
The year-over-year increase in corporate costs in the third quarter of 2017 was primarily due to a $2.0 million increase in professional costs due to activities associated with focused strategic initiatives and a $0.6 million increase in compensation expense due to the timing of incentive accruals, partially offset by lower legal and accounting fees and lower costs in the Company's captive insurance program. Included within Corporate and Other Adjusted EBITDA for the third quarter of 2017 and the third quarter of 2016 is $1.0 million and $0.9 million, respectively, of expense related to a share-based long-term incentive plan, under which no shares will be awarded unless the Company’s 90-day volume weighted average share price as of December 31, 2017, exceeds $56.79.
Equity Investments
Matrix Investment
As previously reported, on October 19, 2016, Frazier Healthcare Partners subscribed for a 53.2% equity interest in Matrix Medical Network (“Matrix” and the “Matrix Transaction”). For all periods prior to the Matrix Transaction, Matrix’s results are reported in Discontinued Operations under the HA Services segment. For all periods subsequent to the Matrix Transaction, Providence’s retained equity interest is accounted for as an equity method investment within the Matrix Investment segment within continuing operations. As of September 30th, 2017, Providence holds a 46.6% equity interest in Matrix.
For the three and nine months ended September 30, 2017, Providence recorded a loss in equity earnings of $1.0 thousand and gain of $0.4 million, respectively, related to its Matrix Investment.
As Providence’s interest in Matrix is accounted for as an equity method investment, the following numbers are not included within the Company’s consolidated results of operations. For the third quarter of 2017, Matrix’s revenue was $58.6 million, an increase of 11.6% from $52.6 million in the third quarter of 2016. Matrix’s operating income was $3.2 million, or 5.4% of revenue, for the third quarter of 2017, compared to $7.0 million, or 13.3% of revenue, for the third quarter of 2016. Included within Matrix’s operating income in the third quarter of 2017 were $0.6 million of management fees paid to Matrix shareholders. Matrix’s Adjusted EBITDA was $12.2 million, or 20.8% of revenue, for the third quarter of 2017, compared to $13.2 million, or 25.1% of revenue, in the third quarter of 2016.
For the first nine months of 2017, Matrix’s revenue was $175.3 million, an increase of 12.8% from $155.4 million in the first nine months of 2016. Matrix’s operating income was $10.1 million, or 5.8% of revenue, for the first nine months of 2017, compared to $18.0 million, or 11.6% of revenue, for the comparable period of 2016. Included within Matrix’s operating income in the first nine months of 2017 was $2.7 million of transaction bonuses paid to the Matrix management team, $1.8 million of management fees paid to Matrix’s shareholders and $0.9 million of other transaction related expenses. Matrix’s Adjusted
EBITDA was $40.1 million, or 22.8% of revenue, for the first nine months of 2017, compared to $40.0 million, or 25.7% of revenue, in the first nine months of 2016.
The year-over-year increase in Matrix’s revenue for both the third quarter and the first nine months of 2017 was the result of increased assessment volumes and new product launches. Adjusted EBITDA as a percentage of revenue declined in the third quarter as a result of decreased pricing and impacts from Hurricane Irma in certain markets.
As of September 30, 2017, Matrix had cash of $18.0 million and $194.3 million of term loan debt outstanding under its credit facility.
Mission Providence
On September 29, 2017, Providence completed the sale of its ownership interest in Mission Providence. For the third quarter of 2017, Providence recorded a gain on the transaction of $12.6 million.
Investor Presentation and Conference Call
Providence will hold a conference call to discuss its financial results on Wednesday, November 8, 2017 at 8:00 a.m. ET. An investor presentation has been prepared to accompany the conference call and can be found on the Company’s website (investor.prscholdings.com.). To access the call, please dial:
US toll-free: 1 (844) 244 3865
International: 1 (518) 444 0681
Passcode: 2984418
Replay (available until November 22, 2017):
US toll-free: 1 (855) 859 2056
International: 1 (404) 537 3406
Passcode: 2984418.
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 is a company which owns interests in subsidiaries and other companies that are primarily engaged in the provision of healthcare and workforce development services for public and private sector entities seeking to control costs and promote positive outcomes. For more information, please visit prscholdings.com.
Non-GAAP Financial Measures and Adjustments
In addition to the financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release includes EBITDA, Adjusted EBITDA and Segment-level Adjusted EBITDA for the Company and its operating segments, and Adjusted Net Income and Adjusted EPS for the Company, which are performance measures that are not recognized under GAAP. EBITDA is defined as income (loss) from continuing operations, net of taxes, before: (1) interest expense, net, (2) provision (benefit) for income taxes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before certain items, including: (1) restructuring and related charges, (2) foreign currency transactions, (3) equity in net earnings or losses of investees, (4) certain litigation related expenses, (5) management fees, and (6) transaction costs. Segment-level Adjusted EBITDA is calculated as Adjusted EBITDA for the company excluding the Adjusted EBITDA associated with corporate and holding company costs reported as our Corporate and Other Segment. Adjusted Net Income is defined as income (loss) from continuing operations, net of tax, before certain items, including (1) restructuring and related charges, (2) foreign currency transactions, (3) equity in net earnings or losses of investees, (4) certain litigation related expenses, (5) intangible amortization expense, (6) the impact of adjustments on non-controlling interests, and (7) 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 performance measures, which exclude certain expenses and amounts, because we believe the timing of such expenses is unpredictable and not driven by our core operating results, and therefore render comparisons with prior periods as well as with other companies in our industry less meaningful. We believe such measures allow investors to gain a better understanding
of the factors and trends affecting the ongoing operations of our business. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. In addition, our net earnings in equity investees are excluded from these measures, as we do not have the ability to manage these ventures, allocate resources within the ventures, or directly control their operations or performance.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation from or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.
Forward-Looking Statements
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 healthcare reform law, government budget changes and legislation related to the services that we provide, our ability to renew or replace existing contracts that have expired or are scheduled to expire with significant clients, and other risks detailed in Providence’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K. 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.
Investor Relations Contact
Laurence Orton – VP Finance & Corporate Controller
(203) 307-2800
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Providence Service Corporation
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| The Providence Service Corporation | ||||||||||||||||
| Unaudited Condensed Consolidated Statements of Income | ||||||||||||||||
| (in thousands except share and per share data) | ||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Service revenue, net | $ | 409,517 | $ | 412,271 | $ | 1,216,994 | $ | 1,192,426 | ||||||||
| Operating expenses: | ||||||||||||||||
| Service expense | 378,032 | 378,488 | 1,124,478 | 1,095,011 | ||||||||||||
| General and administrative expense | 18,629 | 17,320 | 53,705 | 52,548 | ||||||||||||
| Depreciation and amortization | 6,547 | 6,670 | 19,716 | 20,058 | ||||||||||||
| Total operating expenses | 403,208 | 402,478 | 1,197,899 | 1,167,617 | ||||||||||||
| Operating income | 6,309 | 9,793 | 19,095 | 24,809 | ||||||||||||
| Other expenses: | ||||||||||||||||
| Interest expense, net | 302 | 338 | 983 | 1,239 | ||||||||||||
| Equity in net (gain) loss of investees | 460 | 1,517 | 991 | 5,693 | ||||||||||||
| Gain on sale of equity investment | (12,606 | ) | — | (12,606 | ) | — | ||||||||||
| Loss (gain) on foreign currency transactions | 200 | (482 | ) | 600 | (1,332 | ) | ||||||||||
| Income from continuing operations before income taxes | 17,953 | 8,420 | 29,127 | 19,209 | ||||||||||||
| Provision for income taxes | 2,989 | 4,678 | 8,391 | 12,466 | ||||||||||||
| Income from continuing operations, net of tax | 14,964 | 3,742 | 20,736 | 6,743 | ||||||||||||
| Discontinued operations, net of tax | (16 | ) | (2,791 | ) | (6,000 | ) | 332 | |||||||||
| Net income (loss) | 14,948 | 951 | 14,736 | 7,075 | ||||||||||||
| Net loss (income) attributable to noncontrolling interests | (95 | ) | (301 | ) | (295 | ) | 433 | |||||||||
| Net income (loss) attributable to Providence | $ | 14,853 | $ | 650 | $ | 14,441 | $ | 7,508 | ||||||||
| Net income (loss) available to common | ||||||||||||||||
| stockholders | $ | 11,962 | $ | (745 | ) | $ | 8,927 | $ | 3,697 | |||||||
| Basic earnings (loss) per common share: | ||||||||||||||||
| Continuing operations | $ | 0.88 | $ | 0.14 | $ | 1.10 | $ | 0.23 | ||||||||
| Discontinued operations | — | (0.19 | ) | (0.44 | ) | 0.02 | ||||||||||
| Basic earnings (loss) per common share | $ | 0.88 | $ | (0.05 | ) | $ | 0.66 | $ | 0.25 | |||||||
| Diluted earnings (loss) per common share: | ||||||||||||||||
| Continuing operations | $ | 0.88 | $ | 0.14 | $ | 1.09 | $ | 0.23 | ||||||||
| Discontinued operations | — | (0.19 | ) | (0.44 | ) | 0.02 | ||||||||||
| Diluted earnings (loss) per common share | $ | 0.88 | $ | (0.05 | ) | $ | 0.65 | $ | 0.25 | |||||||
| Weighted-average number of common | ||||||||||||||||
| shares outstanding: | ||||||||||||||||
| Basic | 13,581,662 | 14,523,408 | 13,612,764 | 14,823,757 | ||||||||||||
| Diluted | 13,655,554 | 14,634,483 | 13,676,468 | 14,943,024 | ||||||||||||
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| The Providence Service Corporation | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands) | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 92,178 | $ | 72,262 | ||||
| Accounts receivable, net of allowance | 175,162 | 162,115 | ||||||
| Other current assets (1) | 45,836 | 53,726 | ||||||
| Total current assets | 313,176 | 288,103 | ||||||
| Property and equipment, net | 48,191 | 46,220 | ||||||
| Goodwill and intangible assets, net | 167,305 | 168,748 | ||||||
| Equity investments | 157,067 | 161,363 | ||||||
| Other long-term assets (2) | 23,249 | 20,845 | ||||||
| Total assets | $ | 708,988 | $ | 685,279 | ||||
| Liabilities, redeemable convertible preferred stock and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term obligations | $ | 1,528 | $ | 1,721 | ||||
| Other current liabilities (3) | 246,815 | 226,075 | ||||||
| Total current liabilities | 248,343 | 227,796 | ||||||
| Long-term obligations, less current portion | 566 | 1,890 | ||||||
| Other long-term liabilities (4) | 78,331 | 80,353 | ||||||
| Total liabilities | 327,240 | 310,039 | ||||||
| Mezzanine and stockholder's equity | ||||||||
| Convertible preferred stock, net | 77,549 | 77,565 | ||||||
| Stockholders' equity | 304,199 | 297,675 | ||||||
| Total liabilities, redeemable convertible preferred stock and stockholders' equity | $ | 708,988 | $ | 685,279 | ||||
(1) Comprised of other receivables, restricted cash 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 and related liability reserves.
(4) Includes deferred tax liabilities and other long-term liabilities.
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Providence Service Corporation
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| The Providence Service Corporation | ||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands) (1) | ||||||||
| Nine months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities | ||||||||
| Net (loss) income | $ | 14,736 | $ | 7,075 | ||||
| Depreciation and amortization | 19,716 | 41,179 | ||||||
| Stock-based compensation | 4,586 | 3,204 | ||||||
| Equity in net (gain) loss of investees | 991 | 5,693 | ||||||
| Gain on sale of equity investment | (12,606 | ) | — | |||||
| Other non-cash credits | (4,733 | ) | (12,956 | ) | ||||
| Changes in working capital | 14,240 | 1,062 | ||||||
| Net cash provided by operating activities | 36,930 | 45,257 | ||||||
| Investing activities | ||||||||
| Purchase of property and equipment | (15,293 | ) | (33,928 | ) | ||||
| Equity investments/loan to joint venture | 10 | (6,381 | ) | |||||
| Proceeds from sale of equity investment | 15,823 | — | ||||||
| Other investing activities | 4,329 | 5,159 | ||||||
| Net cash used in investing activities | 4,869 | (35,150 | ) | |||||
| Financing activities | ||||||||
| Preferred stock dividends | (3,305 | ) | (3,309 | ) | ||||
| Repurchase of common stock, for treasury | (18,763 | ) | (53,214 | ) | ||||
| Net proceeds of long-term debt | — | 20,250 | ||||||
| Other financing activities | (279 | ) | 4,052 | |||||
| Net cash used in financing activities | (22,347 | ) | (32,221 | ) | ||||
| Effect of exchange rate changes on cash | 464 | (39 | ) | |||||
| Net change in cash and cash equivalents | 19,916 | (22,153 | ) | |||||
| Cash and cash equivalents at beginning of period | 72,262 | 84,770 | ||||||
| Cash and cash equivalents at end of period | $ | 92,178 | $ | 62,617 | ||||
(1) Includes both continuing and discontinued operations.
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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 September 30, 2017 | ||||||||||||||||||||||||
| NET Services | WD Services | Total Segment-Level | Matrix Investment | Corporate and Other | Total Continuing Operations | |||||||||||||||||||
| Service revenue, net | $ | 324,824 | $ | 84,693 | $ | 409,517 | $ | — | $ | — | $ | 409,517 | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Service expense | 304,454 | 73,581 | 378,035 | — | (3 | ) | 378,032 | |||||||||||||||||
| General and administrative expense | 2,899 | 6,980 | 9,879 | — | 8,750 | 18,629 | ||||||||||||||||||
| Depreciation and amortization | 3,286 | 3,166 | 6,452 | — | 95 | 6,547 | ||||||||||||||||||
| Total operating expenses | 310,639 | 83,727 | 394,366 | — | 8,842 | 403,208 | ||||||||||||||||||
| Operating income (loss) | 14,185 | 966 | 15,151 | — | (8,842 | ) | 6,309 | |||||||||||||||||
| Other expenses: | ||||||||||||||||||||||||
| Interest expense, net | 18 | 355 | 373 | — | (71 | ) | 302 | |||||||||||||||||
| Equity in net (gain) loss of investees | — | 459 | 459 | 1 | — | 460 | ||||||||||||||||||
| Gain on sale of equity investment | — | (12,606 | ) | (12,606 | ) | (12,606 | ) | |||||||||||||||||
| Loss (gain) on foreign currency | ||||||||||||||||||||||||
| transactions | — | 200 | 200 | — | — | 200 | ||||||||||||||||||
| Income (loss) from continuing | ||||||||||||||||||||||||
| operations, before income tax | 14,167 | 12,558 | 26,725 | (1 | ) | (8,771 | ) | 17,953 | ||||||||||||||||
| Provision (benefit) for income taxes | 5,507 | (17 | ) | 5,490 | (1 | ) | (2,500 | ) | 2,989 | |||||||||||||||
| Income (loss) from continuing operations, net of taxes | 8,660 | 12,575 | 21,235 | — | (6,271 | ) | 14,964 | |||||||||||||||||
| Interest expense, net | 18 | 355 | 373 | — | (71 | ) | 302 | |||||||||||||||||
| Provision (benefit) for income taxes | 5,507 | (17 | ) | 5,490 | (1 | ) | (2,500 | ) | 2,989 | |||||||||||||||
| Depreciation and amortization | 3,286 | 3,166 | 6,452 | — | 95 | 6,547 | ||||||||||||||||||
| EBITDA | 17,471 | 16,079 | 33,550 | (1 | ) | (8,747 | ) | 24,802 | ||||||||||||||||
| Restructuring and related charges (1) | 2,205 | 501 | 2,706 | — | — | 2,706 | ||||||||||||||||||
| Equity in net (gain) loss of investees | — | 459 | 459 | 1 | — | 460 | ||||||||||||||||||
| Gain on sale of equity investment | — | (12,606 | ) | (12,606 | ) | — | — | (12,606 | ) | |||||||||||||||
| Foreign currency transactions | — | 200 | 200 | — | — | 200 | ||||||||||||||||||
| Litigation expense (2) | — | — | — | — | 18 | 18 | ||||||||||||||||||
| Adjusted EBITDA | $ | 19,676 | $ | 4,633 | $ | 24,309 | $ | — | $ | (8,729 | ) | $ | 15,580 | |||||||||||
(1) Restructuring and related charges are comprised of employee separation costs, which include redundancy program costs of $258 within WD Services, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $243 and NET Services' value enhancement initiative of $2,202.
(2) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.
--more—
Providence Service Corporation
Page 10
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
| Three months ended September 30, 2016 | ||||||||||||||||||||||||
| NET Services (1) | WD Services | Total Segment-Level | Matrix Investment | Corporate and Other | Total Continuing Operations | |||||||||||||||||||
| Service revenue, net | $ | 317,280 | $ | 94,960 | $ | 412,240 | $ | — | $ | 31 | $ | 412,271 | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Service expense | 293,919 | 84,051 | 377,970 | — | 518 | 378,488 | ||||||||||||||||||
| General and administrative expense | 2,860 | 6,780 | 9,640 | — | 7,680 | 17,320 | ||||||||||||||||||
| Depreciation and amortization | 3,051 | 3,497 | 6,548 | — | 122 | 6,670 | ||||||||||||||||||
| Total operating expenses | 299,830 | 94,328 | 394,158 | — | 8,320 | 402,478 | ||||||||||||||||||
| Operating income (loss) | 17,450 | 632 | 18,082 | — | (8,289 | ) | 9,793 | |||||||||||||||||
| Other expenses: | ||||||||||||||||||||||||
| Interest expense, net | (1 | ) | 479 | 478 | — | (140 | ) | 338 | ||||||||||||||||
| Equity in net (gain) loss of investees | — | 1,517 | 1,517 | — | — | 1,517 | ||||||||||||||||||
| Loss (gain) on foreign currency | ||||||||||||||||||||||||
| transactions | — | (484 | ) | (484 | ) | — | 2 | (482 | ) | |||||||||||||||
| Income (loss) from continuing | ||||||||||||||||||||||||
| operations, before income tax | 17,451 | (880 | ) | 16,571 | — | (8,151 | ) | 8,420 | ||||||||||||||||
| Provision (benefit) for income taxes | 7,304 | 94 | 7,398 | — | (2,720 | ) | 4,678 | |||||||||||||||||
| Income (loss) from continuing operations, net of taxes | 10,147 | (974 | ) | 9,173 | — | (5,431 | ) | 3,742 | ||||||||||||||||
| Interest expense, net | (1 | ) | 479 | 478 | — | (140 | ) | 338 | ||||||||||||||||
| Provision (benefit) for income taxes | 7,304 | 94 | 7,398 | — | (2,720 | ) | 4,678 | |||||||||||||||||
| Depreciation and amortization | 3,051 | 3,497 | 6,548 | — | 122 | 6,670 | ||||||||||||||||||
| EBITDA | 20,501 | 3,096 | 23,597 | — | (8,169 | ) | 15,428 | |||||||||||||||||
| Restructuring and related charges (2) | 665 | 702 | 1,367 | — | — | 1,367 | ||||||||||||||||||
| Equity in net (gain) loss of investees | — | 1,517 | 1,517 | — | — | 1,517 | ||||||||||||||||||
| Foreign currency transactions | — | (484 | ) | (484 | ) | — | 2 | (482 | ) | |||||||||||||||
| Litigation expense (3) | — | — | — | — | 898 | 898 | ||||||||||||||||||
| Adjusted EBITDA | $ | 21,166 | $ | 4,831 | $ | 25,997 | $ | — | $ | (7,269 | ) | $ | 18,728 | |||||||||||
(1) We have reclassified certain amounts relating to our prior period results to conform to our current period presentation.
(2) Restructuring and related charges include employee separation costs related to redundancy programs within WD Services of $125, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $577 and NET Services' value enhancement initiative of $665.
(3) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.
--more--
Providence Service Corporation
Page 11
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
| Nine months ended September 30, 2017 | ||||||||||||||||||||||||
| NET Services | WD Services | Total Segment-Level | Matrix Investment | Corporate and Other | Total Continuing Operations | |||||||||||||||||||
| Service revenue, net | $ | 987,662 | $ | 229,332 | $ | 1,216,994 | $ | — | $ | — | $ | 1,216,994 | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Service expense | 927,082 | 199,665 | 1,126,747 | — | (2,269 | ) | 1,124,478 | |||||||||||||||||
| General and administrative expense | 8,879 | 20,944 | 29,823 | — | 23,882 | 53,705 | ||||||||||||||||||
| Depreciation and amortization | 9,763 | 9,695 | 19,458 | — | 258 | 19,716 | ||||||||||||||||||
| Total operating expenses | 945,724 | 230,304 | 1,176,028 | — | 21,871 | 1,197,899 | ||||||||||||||||||
| Operating income (loss) | 41,938 | (972 | ) | 40,966 | — | (21,871 | ) | 19,095 | ||||||||||||||||
| Other expenses: | — | |||||||||||||||||||||||
| Interest expense, net | 49 | 958 | 1,007 | — | (24 | ) | 983 | |||||||||||||||||
| Equity in net (gain) loss of investees | — | 1,419 | 1,419 | (428 | ) | — | 991 | |||||||||||||||||
| Gain on sale of equity investment | — | (12,606 | ) | (12,606 | ) | — | — | (12,606 | ) | |||||||||||||||
| Loss (gain) on foreign currency | ||||||||||||||||||||||||
| transactions | — | 600 | 600 | — | — | 600 | ||||||||||||||||||
| Income (loss) from continuing operations, | ||||||||||||||||||||||||
| before income tax | 41,889 | 8,657 | 50,546 | 428 | (21,847 | ) | 29,127 | |||||||||||||||||
| Provision (benefit) for income taxes | 16,222 | (450 | ) | 15,772 | 161 | (7,542 | ) | 8,391 | ||||||||||||||||
| Income (loss) from continuing operations, net of taxes | 25,667 | 9,107 | 34,774 | 267 | (14,305 | ) | 20,736 | |||||||||||||||||
| Interest expense, net | 49 | 958 | 1,007 | — | (24 | ) | 983 | |||||||||||||||||
| Provision (benefit) for income taxes | 16,222 | (450 | ) | 15,772 | 161 | (7,542 | ) | 8,391 | ||||||||||||||||
| Depreciation and amortization | 9,763 | 9,695 | 19,458 | — | 258 | 19,716 | ||||||||||||||||||
| EBITDA | 51,701 | 19,310 | 71,011 | 428 | (21,613 | ) | 49,826 | |||||||||||||||||
| Restructuring and related charges (1) | 4,914 | 2,047 | 6,961 | — | — | 6,961 | ||||||||||||||||||
| Equity in net (gain) loss of investees | — | 1,419 | 1,419 | (428 | ) | — | 991 | |||||||||||||||||
| Gain on sale of equity investment | — | (12,606 | ) | (12,606 | ) | — | — | (12,606 | ) | |||||||||||||||
| Foreign currency transactions | — | 600 | 600 | — | — | 600 | ||||||||||||||||||
| Litigation expense (2) | — | — | — | — | 304 | 304 | ||||||||||||||||||
| Adjusted EBITDA | $ | 56,615 | $ | 10,770 | $ | 67,385 | $ | — | $ | (21,309 | ) | $ | 46,076 | |||||||||||
(1) Restructuring and related charges are comprised of employee separation costs, which include redundancy program costs of $1,117 and other severance costs of $182 within WD Services and NET Services chief executive officer search fees of $214, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $748 and NET Services' value enhancement initiative of $4,700.
(2) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.
--more--
Providence Service Corporation
Page 12
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
| Nine months ended September 30, 2016 | ||||||||||||||||||||||||
| NET Services (1) | WD Services | Total Segment-Level | Matrix Investment | Corporate and Other | Total Continuing Operations | |||||||||||||||||||
| Service revenue, net | $ | 917,157 | $ | 275,293 | $ | 1,192,450 | $ | — | $ | (24 | ) | $ | 1,192,426 | |||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Service expense | 846,311 | 247,797 | 1,094,108 | — | 903 | 1,095,011 | ||||||||||||||||||
| General and administrative expense | 8,483 | 23,236 | 31,719 | — | 20,829 | 52,548 | ||||||||||||||||||
| Depreciation and amortization | 8,858 | 10,912 | 19,770 | — | 288 | 20,058 | ||||||||||||||||||
| Total operating expenses | 863,652 | 281,945 | 1,145,597 | — | 22,020 | 1,167,617 | ||||||||||||||||||
| Operating income (loss) | 53,505 | (6,652 | ) | 46,853 | — | (22,044 | ) | 24,809 | ||||||||||||||||
| Other expenses: | ||||||||||||||||||||||||
| Interest expense, net | (3 | ) | 569 | 566 | — | 673 | 1,239 | |||||||||||||||||
| Equity in net (gain) loss of investees | — | 5,693 | 5,693 | — | — | 5,693 | ||||||||||||||||||
| Loss (gain) on foreign currency | ||||||||||||||||||||||||
| transactions | — | (1,332 | ) | (1,332 | ) | — | — | (1,332 | ) | |||||||||||||||
| Income (loss) from continuing | ||||||||||||||||||||||||
| operations, before income tax | 53,508 | (11,582 | ) | 41,926 | — | (22,717 | ) | 19,209 | ||||||||||||||||
| Provision (benefit) for income taxes | 20,497 | (885 | ) | 19,612 | — | (7,146 | ) | 12,466 | ||||||||||||||||
| Income (loss) from continuing operations, net of taxes | 33,011 | (10,697 | ) | 22,314 | — | (15,571 | ) | 6,743 | ||||||||||||||||
| Interest expense, net | (3 | ) | 569 | 566 | — | 673 | 1,239 | |||||||||||||||||
| Provision (benefit) for income taxes | 20,497 | (885 | ) | 19,612 | — | (7,146 | ) | 12,466 | ||||||||||||||||
| Depreciation and amortization | 8,858 | 10,912 | 19,770 | — | 288 | 20,058 | ||||||||||||||||||
| EBITDA | 62,363 | (101 | ) | 62,262 | — | (21,756 | ) | 40,506 | ||||||||||||||||
| Restructuring and related charges (2) | 1,230 | 5,758 | 6,988 | — | — | 6,988 | ||||||||||||||||||
| Equity in net (gain) loss of investees | — | 5,693 | 5,693 | — | — | 5,693 | ||||||||||||||||||
| Foreign currency transactions | — | (1,332 | ) | (1,332 | ) | — | — | (1,332 | ) | |||||||||||||||
| Litigation expense (3) | — | — | — | — | 1,082 | 1,082 | ||||||||||||||||||
| Adjusted EBITDA | $ | 63,593 | $ | 10,018 | $ | 73,611 | $ | — | $ | (20,674 | ) | $ | 52,937 | |||||||||||
(1) We have reclassified certain amounts relating to our prior period results to conform to our current period presentation.
(2) Restructuring and related charges include employee separation costs related to redundancy programs within WD Services of $5,181, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $577 and NET Services' value enhancement initiative of $1,230.
(3) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.
--more--
Providence Service Corporation
Page 13
The Providence Service Corporation
Summary Financial Information of Equity Investments (1)
(in thousands)
(Unaudited)
| Three months ended September 30, 2017 | |||||||||||||||
| Matrix Investment | Mission Providence | Other | Total | ||||||||||||
| Revenue | $ | 58,639 | $ | 10,244 | $ | 566 | $ | 69,449 | |||||||
| Operating expense (2) | 47,011 | 9,741 | 494 | 57,246 | |||||||||||
| Depreciation and amortization | 8,469 | 1,102 | 6 | 9,577 | |||||||||||
| Operating income (loss) | 3,159 | (599 | ) | 66 | 2,626 | ||||||||||
| Other expense (Income) | — | 10 | (12 | ) | (2 | ) | |||||||||
| Interest expense | 3,741 | 42 | — | 3,783 | |||||||||||
| Taxes | (45 | ) | — | 20 | (25 | ) | |||||||||
| Net income (loss) | (537 | ) | (651 | ) | 58 | (1,130 | ) | ||||||||
| Interest | 46.6 | % | 75.0 | % | 50.0 | % | N/A | ||||||||
| Net income (loss) - Equity Investment | (250 | ) | (488 | ) | 29 | (709 | ) | ||||||||
| Management fee and other (3) | 249 | — | — | 249 | |||||||||||
| Equity in net gain (loss) of investee | $ | (1 | ) | $ | (488 | ) | $ | 29 | $ | (460 | ) | ||||
| Net Debt (4) | 176,255 | ||||||||||||||
| Three months ended September 30, 2016 | |||||||||||||||
Matrix Investment | Mission Providence | Other | Total | ||||||||||||
| Revenue | $ | — | $ | 9,349 | $ | 280 | $ | 9,629 | |||||||
| Operating expense (2) | — | 11,342 | 221 | 11,563 | |||||||||||
| Depreciation and amortization | — | 910 | 1 | 911 | |||||||||||
| Operating income (loss) | — | (2,903 | ) | 58 | (2,845 | ) | |||||||||
| Other income | — | (257 | ) | (8 | ) | (265 | ) | ||||||||
| Interest expense | — | 6 | — | 6 | |||||||||||
| Taxes | — | (593 | ) | 12 | (581 | ) | |||||||||
| Net income (loss) | — | (2,059 | ) | 54 | (2,005 | ) | |||||||||
| Interest | N/A | 75.0 | % | 50.0 | % | N/A | |||||||||
| Net income (loss) - Equity Investment | — | (1,544 | ) | 27 | (1,517 | ) | |||||||||
| Management fee and other | — | — | — | — | |||||||||||
| Equity in net gain (loss) of investee | $ | — | $ | (1,544 | ) | $ | 27 | $ | (1,517 | ) | |||||
(1) The results of equity method investments are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.
(2) Excludes depreciation and amortization.
(3) Includes amounts relating to management fees due from Matrix to Providence of $259 less Providence share-based compensation expense of $10.
(4) Represents cash of $18,032 and debt of $194,288 on Matrix's standalone balance sheet as of September 30, 2017.
--more--
Providence Service Corporation
Page 14
The Providence Service Corporation
Summary Financial Information of Equity Investments (1)
(in thousands)
(Unaudited)
| Nine months ended September 30, 2017 | |||||||||||||||
| Matrix Investment | Mission Providence | Other | Total | ||||||||||||
| Revenue | $ | 175,346 | $ | 30,125 | $ | 1,494 | $ | 206,965 | |||||||
| Operating expense (2) | 140,608 | 28,739 | 1,428 | 170,775 | |||||||||||
| Depreciation and amortization | 24,629 | 3,150 | 15 | 27,794 | |||||||||||
| Operating income (loss) | 10,109 | (1,764 | ) | 51 | 8,396 | ||||||||||
| Other expense (income) | — | 18 | (34 | ) | (16 | ) | |||||||||
| Interest expense | 11,005 | 150 | — | 11,155 | |||||||||||
| Taxes | (121 | ) | 1 | 21 | (99 | ) | |||||||||
| Net income (loss) | (775 | ) | (1,933 | ) | 64 | (2,644 | ) | ||||||||
| Interest | 46.6 | % | 75.0 | % | 50.0 | % | N/A | ||||||||
| Net income (loss) - Equity Investment | (362 | ) | (1,451 | ) | 32 | (1,781 | ) | ||||||||
| Management fee and other (3) | 790 | — | — | 790 | |||||||||||
| Equity in net gain (loss) of investee | $ | 428 | $ | (1,451 | ) | $ | 32 | $ | (991 | ) | |||||
| Nine months ended September 30, 2016 | |||||||||||||||
Matrix Investment | Mission Providence | Other | Total | ||||||||||||
| Revenue | $ | — | $ | 26,475 | $ | 280 | $ | 26,755 | |||||||
| Operating expense (2) | — | 34,516 | 221 | 34,737 | |||||||||||
| Depreciation and amortization | — | 2,656 | 1 | 2,657 | |||||||||||
| Operating income (loss) | — | (10,697 | ) | 58 | (10,639 | ) | |||||||||
| Other income | — | (658 | ) | (8 | ) | (666 | ) | ||||||||
| Interest expense | — | 18 | — | 18 | |||||||||||
| Taxes | — | (2,430 | ) | 12 | (2,418 | ) | |||||||||
| Net income (loss) | — | (7,627 | ) | 54 | (7,573 | ) | |||||||||
| Interest | N/A | 75.0 | % | 50.0 | % | N/A | |||||||||
| Net income (loss) - Equity Investment | — | (5,720 | ) | 27 | (5,693 | ) | |||||||||
| Management fee and other | — | — | — | — | |||||||||||
| Equity in net gain (loss) of investee | $ | — | $ | (5,720 | ) | $ | 27 | $ | (5,693 | ) | |||||
(1) The results of equity method investments are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.
(2) Excludes depreciation and amortization.
(3) Includes amounts relating to management fees due from Matrix to Providence of $840 less Providence share-based compensation expense of $50.
--more--
Providence Service Corporation
Page 15
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA: Matrix Medical Network (1)
(in thousands)
(Unaudited)
| Three months ended September 30, 2017 | |||||||||||
| HA Services Segment | Matrix Investment (2) | Total Matrix | |||||||||
| Revenue | $ | — | $ | 58,639 | $ | 58,639 | |||||
| Operating expense (3) | — | 47,011 | 47,011 | ||||||||
| Depreciation and amortization | — | 8,469 | 8,469 | ||||||||
| Operating income | — | 3,159 | 3,159 | ||||||||
| Other expense | — | — | — | ||||||||
| Interest expense | — | 3,741 | 3,741 | ||||||||
| Taxes | — | (45 | ) | (45 | ) | ||||||
| Net income (loss) | — | (537 | ) | (537 | ) | ||||||
| Depreciation and amortization | — | 8,469 | 8,469 | ||||||||
| Interest expense | — | 3,741 | 3,741 | ||||||||
| Taxes | — | (45 | ) | (45 | ) | ||||||
| EBITDA | — | 11,628 | 11,628 | ||||||||
| Matrix management transaction bonuses | — | — | — | ||||||||
| Management fees | — | 561 | 561 | ||||||||
| Transaction costs | — | 1 | 1 | ||||||||
| Adjusted EBITDA | $ | — | $ | 12,190 | $ | 12,190 | |||||
| Three months ended September 30, 2016 | |||||||||||
HA Services Segment (4) | Matrix Investment | Total Matrix | |||||||||
| Revenue | $ | 52,557 | $ | — | $ | 52,557 | |||||
| Operating expense (3) | 40,208 | — | 40,208 | ||||||||
| Depreciation and amortization | 5,359 | — | 5,359 | ||||||||
| Operating income | 6,990 | — | 6,990 | ||||||||
| Interest expense | 3,134 | — | 3,134 | ||||||||
| Taxes | 1,612 | — | 1,612 | ||||||||
| Net income | 2,244 | — | 2,244 | ||||||||
| Depreciation and amortization | 5,359 | — | 5,359 | ||||||||
| Interest expense | 3,134 | — | 3,134 | ||||||||
| Taxes | 1,612 | — | 1,612 | ||||||||
| EBITDA | 12,349 | — | 12,349 | ||||||||
| Transaction costs | 841 | — | 841 | ||||||||
| Adjusted EBITDA | $ | 13,190 | $ | — | $ | 13,190 | |||||
(1) Matrix's Adjusted EBITDA is not included within Providence's Adjusted EBITDA in any period presented.
(2) Represents Matrix's results of operation from July 1, 2017 to September 30, 2017. Providence accounts for its proportionate share of Matrix's results during this time period using the equity method.
(3) Excludes depreciation and amortization.
(4) Represents Matrix's results of operations from July 1, 2016 to September 30, 2016. These results are included within Discontinued Operations on the Company's consolidated financial statements.
--more--
Providence Service Corporation
Page 16
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA: Matrix Medical Network (1)
(in thousands)
(Unaudited)
| Nine months ended September 30, 2017 | |||||||||||
| HA Services Segment | Matrix Investment (2) | Total Matrix | |||||||||
| Revenue | $ | — | $ | 175,346 | $ | 175,346 | |||||
| Operating expense (3) | — | 140,608 | 140,608 | ||||||||
| Depreciation and amortization | — | 24,629 | 24,629 | ||||||||
| Operating income | — | 10,109 | 10,109 | ||||||||
| Other expense | — | — | — | ||||||||
| Interest expense | — | 11,005 | 11,005 | ||||||||
| Taxes | — | (121 | ) | (121 | ) | ||||||
| Net loss | — | (775 | ) | (775 | ) | ||||||
| Depreciation and amortization | — | 24,629 | 24,629 | ||||||||
| Interest expense | — | 11,005 | 11,005 | ||||||||
| Taxes | — | (121 | ) | (121 | ) | ||||||
| EBITDA | — | 34,738 | 34,738 | ||||||||
| Matrix management transaction bonuses | — | 2,667 | 2,667 | ||||||||
| Management fees | — | 1,802 | 1,802 | ||||||||
| Transaction costs | — | 851 | 851 | ||||||||
| Adjusted EBITDA | $ | — | $ | 40,058 | $ | 40,058 | |||||
| Nine months ended September 30, 2016 | |||||||||||
HA Services Segment (4) | Matrix Investment | Total Matrix | |||||||||
| Revenue | $ | 155,421 | $ | — | $ | 155,421 | |||||
| Operating expense (3) | 116,278 | — | 116,278 | ||||||||
| Depreciation and amortization | 21,121 | — | 21,121 | ||||||||
| Operating income | 18,022 | — | 18,022 | ||||||||
| Interest expense | 9,304 | — | 9,304 | ||||||||
| Taxes | 3,351 | — | 3,351 | ||||||||
| Net income | 5,367 | — | 5,367 | ||||||||
| Depreciation and amortization | 21,121 | — | 21,121 | ||||||||
| Interest expense | 9,304 | — | 9,304 | ||||||||
| Taxes | 3,351 | — | 3,351 | ||||||||
| EBITDA | 39,143 | — | 39,143 | ||||||||
| Transaction costs | 841 | — | 841 | ||||||||
| Adjusted EBITDA | $ | 39,984 | $ | — | $ | 39,984 | |||||
(1) Matrix's Adjusted EBITDA is not included within Providence's Adjusted EBITDA in any period presented.
(2) Represents Matrix's results of operation from January 1, 2017 to September 30, 2017. Providence accounts for its proportionate share of Matrix's results during this time period using the equity method.
(3) Excludes depreciation and amortization.
(4) Represents Matrix's results of operations from January 1, 2016 to September 30, 2016. These results are included within Discontinued Operations on the Company's consolidated financial statements.
--more--
Providence Service Corporation
Page 17
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 September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Income from continuing operations, net of tax | $ | 14,964 | $ | 3,742 | $ | 20,736 | $ | 6,743 | ||||||||
| Net loss (income) attributable to noncontrolling interests | (95 | ) | (301 | ) | (295 | ) | 433 | |||||||||
| Restructuring and related charges (1) | 2,706 | 1,367 | 6,961 | 6,988 | ||||||||||||
| Equity in net (gain) loss of investees | 460 | 1,517 | 991 | 5,693 | ||||||||||||
| Gain on sale of equity investment | (12,606 | ) | — | (12,606 | ) | — | ||||||||||
| Foreign currency transactions | 200 | (482 | ) | 600 | (1,332 | ) | ||||||||||
| Intangible amortization expense | 1,990 | 2,143 | 5,914 | 6,680 | ||||||||||||
| Litigation expense (2) | 18 | 898 | 304 | 1,082 | ||||||||||||
| Impact of adjustments on noncontrolling interests | 9 | — | (14 | ) | (423 | ) | ||||||||||
| Tax effected impact of adjustments | (1,491 | ) | (893 | ) | (3,729 | ) | (2,420 | ) | ||||||||
| Adjusted Net Income | 6,155 | 7,991 | 18,862 | 23,444 | ||||||||||||
| Dividends on convertible preferred stock | (1,114 | ) | (1,111 | ) | (3,305 | ) | (3,309 | ) | ||||||||
| Income allocated to participating securities | (651 | ) | (838 | ) | (2,005 | ) | (2,410 | ) | ||||||||
Adjusted Net Income available to common stockholders | $ | 4,390 | $ | 6,042 | $ | 13,552 | $ | 17,725 | ||||||||
| Adjusted EPS | $ | 0.32 | $ | 0.41 | $ | 0.99 | $ | 1.19 | ||||||||
| Diluted weighted-average number of common shares outstanding | 13,655,554 | 14,634,483 | 13,676,468 | 14,943,024 | ||||||||||||
(1) Restructuring and related charges are comprised of employee separation costs, NET Services chief executive officer search fees, as well as third-party consulting and implementation costs related to WD Services' Ingeus Futures initiative and NET Services' LogistiCare Member Experience initiative. See the above Segment Information and Adjusted EBITDA tables for a detailed breakdown of the restructuring and related charges for each time period presented.
(2) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-Q.
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