Highlights for the First Quarter of 2018:
The Providence Service Corporation (the “Company” or “Providence”)
(Nasdaq:PRSC), today reported financial results for the three
months ended March 31, 2018.
“The first quarter saw us continue with our
positive earnings momentum and has given us a strong start to
2018,” stated Carter Pate, Interim Chief Executive Officer.
He continued, “We produced another quarter of excellent financial
results while also announcing an organizational consolidation plan
to better focus our capital deployment and strategic resources on
our core asset, LogistiCare. During the quarter, NET Services
was focused on multiple new contract implementations and continued
to progress its critical value enhancement initiatives aimed at
decreasing transportation and call center costs while also
improving the quality of its service offerings. Within WD Services,
we successfully launched each of our Work and Health Program
contracts and our underlying profitability was solid despite seeing
a negative impact from adoption of the new revenue recognition
standard. Lastly our Matrix Investment experienced strong
year-over-year revenue growth while also beginning the process of
integrating HealthFair. This great start to the year across all of
our businesses gives us greater confidence in achieving our full
year goals."
First Quarter 2018 Results
For the first quarter of 2018, the Company
reported revenue from continuing operations of $406.0 million, an
increase of 1.6% from $399.5 million in the first quarter of
2017. As previously disclosed, the Company adopted the new
revenue recognition standard in the first quarter of 2018,
resulting in a negative impact to revenue of $9.3 million versus
the prior standard. In addition, WD Services benefited from
favorable exchange rates, which provided a positive revenue impact
of $6.4 million.
Income from continuing operations, net of tax,
in the first quarter of 2018 was $5.7 million, or $0.29 per diluted
common share, compared to $1.9 million, or $0.03 per diluted common
share, in the first quarter of 2017. Income from continuing
operations, net of tax, in the first quarters of 2018 and 2017
includes restructuring and related charges of $2.9 million and $2.4
million, respectively. Adjusted Net Income in the first
quarter of 2018 was $10.7 million, or $0.63 per diluted common
share, compared to $6.6 million, or $0.35 per diluted common share,
in the first quarter of 2017.
Segment-level Adjusted EBITDA was $26.7 million
in the first quarter of 2018, compared to $22.5 million in the
first quarter of 2017. Adjusted EBITDA was $19.3 million in
the first quarter of 2018, compared to $15.6 million in the first
quarter of 2017.
In the first quarter 2018 the new revenue recognition standard
resulted in a negative impact to operating income and Adjusted
EBITDA of $3.5 million versus the prior standard. Income from
continuing operations, net of tax, earnings per share, and Adjusted
EPS were also negatively impacted by the adoption.
Share Repurchases
From January 1 2018, through May 7, 2018, the Company
repurchased 589,000 shares of common stock for $37.4 million, or
for an average price of $63.46 per share.
As previously announced, on April 3, 2018, the
Company's Board of Directors amended the Company's ongoing stock
repurchase program to add an additional $78 million of capacity and
extend the expiration date of the program from December 31, 2018 to
June 30, 2019. As of May 7, 2018, the Company has approximately
$99.5 million of share repurchase availability under its share
repurchase program.
Since beginning to repurchase shares in the
fourth quarter of 2015 through May 7, 2018, the Company has
repurchased 3.6 million shares of common stock, or approximately
22% of the Company’s common stock outstanding at the beginning of
the fourth quarter of 2015, for $170.2 million, or for an average
price of $47.18 per share.
Organizational
Consolidation
As previously announced on April 11, 2018, we
are currently in the process of an organizational consolidation to
integrate substantially all activities and functions performed at
the corporate holding company level into LogistiCare. We anticipate
the organizational consolidation will result in a more streamlined
company structure with greater operational and strategic alignment
and better able to pursue both organic and inorganic growth
initiatives. This strategic process is expected to take
approximately 12 months to complete, over which time implementation
costs will negatively impact earnings but once complete is expected
to generate annual savings of at least $10 million. In furtherance
of our efforts to create this more streamlined organizational
structure and allow us to more effectively deploy capital and focus
strategic resources towards the significant growth opportunities
available to LogistiCare, we are also exploring strategic
alternatives in regards to our WD Services segment, which may
involve a sale transaction of the segment.
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 and Other on behalf of the
segment. No direct cash expenses were incurred by Corporate
on behalf of the Matrix Investment segment. The activities
reflected in Corporate and Other include executive, accounting,
finance, internal audit, tax, legal, public reporting, certain
strategic and corporate development functions and the results of
the Company’s captive insurance company.
NET Services
NET Services revenue was $336.7 million for the
first quarter of 2018, an increase of 3.9% from $324.0 million in
the first quarter of 2017. Operating income was $19.6
million, or 5.8% of revenue, in the first quarter of 2018, compared
to $11.8 million, or 3.6% of revenue, in the first quarter of
2017. Included in NET Services operating income in the first
quarters of 2018 and 2017 were $0.8 million and $1.3 million,
respectively, of restructuring and related charges. NET
Services Adjusted EBITDA was $23.9 million, or 7.1% of revenue, in
the first quarter of 2018, compared to $16.3 million, or 5.0% of
revenue, in the first quarter of 2017. First quarter 2018
revenue includes a negative impact of $3.9 million from the
adoption of the new revenue recognition standard, as the
accounting for one contract changed from a gross basis to net
basis. This change had no impact to NET Services operating
income or Adjusted EBITDA.
The year-over-year increase in NET Services
revenue was primarily due to the impact of numerous new contracts,
including new managed care organization ("MCO") contracts in
Indiana and New York and new state contracts in Texas. Increased
membership and rates across various existing contracts also
positively impacted revenue in the first quarter of 2018. These
increases to revenue were partially offset by the ending of state
contracts in New York and Connecticut and certain of our MCO
contracts in Florida as well as reduced membership under our
renewed state contract in Virginia. NET Services Adjusted EBITDA
margins in the first quarter of 2018 benefited from the favorable
resolution of contractual adjustments and retrospective rate
adjustments as well as lower transportation costs on a per trip
basis due to our value enhancement activities, partially offset by
higher utilization across certain contracts and the ending of our
state contract in New York.
WD Services
WD Services revenue was $69.4 million for the
first quarter of 2018, a decrease of 8.1% from $75.5 million in the
first quarter of 2017. Operating loss was $2.0 million
in the first quarter of 2018 compared to income of $2.2 million in
the first quarter of 2017. Included within WD Services operating
income (loss) in the first quarters of 2018 and 2017 were
restructuring and related costs of $1.6 million and $1.1 million,
respectively. WD Services Adjusted EBITDA was $2.8 million,
or 4.1% of revenue, in the first quarter of 2018 compared to
Adjusted EBITDA of $6.3 million, or 8.3% of revenue, in the first
quarter of 2017. First quarter 2018 revenue reflects a $5.4
million negative impact on revenue and a $3.5 million negative
impact on operating income and Adjusted EBITDA as a result of the
adoption of the new revenue recognition standard. WD Services
benefited from favorable exchange rates in the first quarter of
2018, which provided a positive revenue impact of $6.4 million,
although only a small impact on Adjusted EBITDA. Excluding
the impact of currency exchange rates, revenue declined 16.7% in
the first quarter of 2018 versus the first quarter of 2017.
The year-over-year decrease in WD Services
revenue in the first quarter of 2018, on a constant currency basis
and excluding the negative impact of the adoption of the new
revenue recognition standard, was primarily due to the anticipated
decline in Work Program revenues, partially offset by the launch of
the Work and Health Program and growth in health services revenue
in the UK. Excluding the negative impact of the adoption of the new
revenue recognition standard, WD Services first quarter 2018
Adjusted EBITDA as a percentage of revenue was in line with the
first quarter of 2017. The first quarter of 2017 included a
favorable Adjusted EBITDA impact of $5.2 million related to the
finalization of a contractual adjustment, whereas the first quarter
of 2018 included a favorable impact of only $1.1 million related to
contractual adjustments. This net reduction in income was offset
by payroll savings generated by our Ingeus Futures
restructuring programs.
Corporate and Other
Corporate and Other incurred a $7.9 million
operating loss in the first quarter of 2018 compared to an
operating loss of $7.2 million in the first quarter of 2017.
Included within Corporate and Other operating loss in the first
quarter of 2018 were restructuring and related costs of $0.4
million related to the consolidation of the holding
company structure into LogistiCare. Corporate and Other Adjusted
EBITDA was negative $7.4 million in the first quarter of 2018
compared to negative $7.0 million in the first quarter of 2017.
This increase in Corporate and Other's Adjusted
EBITDA loss was primarily due to an increase in cash settled
stock-based compensation expense of $1.1 million, as a result of a
more significant increase in the Company’s stock price in the first
quarter of 2018 as compared to the first quarter of 2017.
Matrix Investment (Equity Investment)
For the three months ended March 31, 2018,
Providence recorded a loss in equity earnings of $2.3 million
related to its Matrix Investment compared to a loss of $0.7 million
for the first quarter of 2017.
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 first quarter of 2018, Matrix’s revenue was $67.4 million,
an increase of 20.7% from $55.9 million in the first quarter of
2017. Matrix’s operating loss was $0.8 million, for the first
quarter of 2018, compared to income of $1.0 million, for the first
quarter of 2017. Included within Matrix’s operating loss in
the first quarter of 2018 were $3.1 million of management fees paid
to Matrix shareholders and transaction costs of $2.2 million
related to the acquisition of HealthFair. Included within Matrix's
operating income in the first quarter of 2017 was $2.2 million of
expense related to transaction bonuses paid to the Matrix
management team, $0.8 million of other transaction related
expenses, and $0.5 million of management fees paid to Matrix
shareholders.
Matrix net loss was $8.5 million for the first quarter of 2018,
compared to $1.9 million for the first quarter of 2017. Matrix's
net loss in the first quarter of 2018 includes $6.0 million of
interest expense related to the acceleration of deferred financing
fees triggered by the refinancing of Matrix's debt in relation to
the HealthFair acquisition. Matrix’s Adjusted EBITDA was $13.5
million, or 20.0% of revenue, for the first quarter of 2018,
compared to $12.5 million, or 22.4% of revenue, in the first
quarter of 2017.
The positive year-over-year revenue growth for
the first quarter of 2018 was related to the acquisition of
HealthFair, which contributed approximately 50% of the increase in
revenue as well as increased in-home visit volumes within Matrix’s
legacy operations, partially offset by lower pricing. The
year-over-year decline in Adjusted EBITDA as a percentage of
revenue was primarily due to the timing of new contract startup
costs at HealthFair and lower pricing.
As of March 31, 2018, Matrix had cash of
$19.6 million and $330.0 million of term loan debt outstanding
under its credit facility, which was entered into in February 2018
in conjunction with the HealthFair acquisition. At the end of the
quarter, Providence's ownership interest in Matrix was 43.6%.
Investor Presentation and Conference Call
Providence will hold a conference call to
discuss its financial results on Thursday, May 10, 2018 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
3865International: 1 (518) 444
0681Passcode: 6043738
Replay (available until May 17, 2018):US
toll-free: 1 (855) 859 2056International:
1 (404) 537 3406Passcode: 6043738
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 owns
subsidiaries and investments primarily engaged in the provision of
healthcare services in the United States and workforce development
services internationally. 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 (as applicable): (1) restructuring and
related charges, including costs related to our corporate
reorganization, (2) foreign currency transactions, (3) equity in
net earnings or losses of investees, (4) certain litigation related
expenses or settlement income, (5) gain or loss on sale of equity
investments, (6) management fees and (7) certain transaction and
related 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 or settlement
income, (5) intangible amortization expense, (6) gain or loss on
sale of equity investments, (7) the non-recurring impact of the Tax
Cuts and Jobs Act, (8) excess tax charges associated with long term
incentive plans, (9) the impact of adjustments on noncontrolling
interests, (10) transaction and related costs and (11) 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 – Interim CAO & SVP Finance
(203) 307-2800
--financial tables to follow--
|
The Providence Service Corporation |
Unaudited Condensed Consolidated Statements of
Income |
(in thousands except share and per share data) |
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2018 |
|
2017 |
|
|
|
|
|
Service revenue,
net |
|
$ |
406,046 |
|
|
$ |
399,494 |
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
Service
expense |
|
371,235 |
|
|
369,410 |
|
General
and administrative expense |
|
18,413 |
|
|
17,027 |
|
Depreciation and amortization |
|
6,798 |
|
|
6,269 |
|
Total operating
expenses |
|
396,446 |
|
|
392,706 |
|
Operating income
(loss) |
|
9,600 |
|
|
6,788 |
|
|
|
|
|
|
Other expenses: |
|
|
|
|
Interest
expense, net |
|
326 |
|
|
352 |
|
Equity in
net (gain) loss of investees |
|
2,321 |
|
|
2,060 |
|
Loss
(gain) on foreign currency transactions |
|
(623 |
) |
|
(62 |
) |
Income (loss) from
continuing operations before income taxes |
|
7,576 |
|
|
4,438 |
|
Provision (benefit) for
income taxes |
|
1,842 |
|
|
2,523 |
|
Income (loss) from
continuing operations, net of tax |
|
5,734 |
|
|
1,915 |
|
Discontinued
operations, net of tax |
|
(8 |
) |
|
(5,866 |
) |
Net income (loss) |
|
5,726 |
|
|
(3,951 |
) |
Net loss (income)
attributable to noncontrolling interests |
|
(296 |
) |
|
(374 |
) |
Net income (loss)
attributable to Providence |
|
$ |
5,430 |
|
|
$ |
(4,325 |
) |
|
|
|
|
|
Net income (loss)
available to common |
|
|
|
|
stockholders |
|
$ |
3,762 |
|
|
$ |
(5,473 |
) |
|
|
|
|
|
Basic earnings (loss)
per common share: |
|
|
|
|
Continuing
operations |
|
$ |
0.29 |
|
|
$ |
0.03 |
|
Discontinued
operations |
|
— |
|
|
(0.43 |
) |
Basic earnings (loss)
per common share |
|
$ |
0.29 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
Diluted earnings (loss)
per common share: |
|
|
|
|
Continuing
operations |
|
$ |
0.29 |
|
|
$ |
0.03 |
|
Discontinued
operations |
|
— |
|
|
(0.43 |
) |
Diluted earnings (loss)
per common share |
|
$ |
0.29 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
Weighted-average number
of common |
|
|
|
|
shares
outstanding: |
|
|
|
|
Basic |
|
13,105,965 |
|
|
13,704,272 |
|
Diluted |
|
13,199,440 |
|
|
13,768,524 |
|
|
|
|
|
|
|
|
|
The Providence Service Corporation |
Condensed Consolidated Balance Sheets |
(in thousands) |
|
|
|
|
|
|
|
March 31, 2018 |
|
December 31, 2017 |
|
|
(Unaudited) |
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
86,229 |
|
|
$ |
95,310 |
|
Accounts
receivable, net of allowance |
|
173,176 |
|
|
158,926 |
|
Other
current assets (1) |
|
58,785 |
|
|
42,093 |
|
Total current
assets |
|
318,190 |
|
|
296,329 |
|
Property and equipment,
net |
|
50,447 |
|
|
50,377 |
|
Goodwill and intangible
assets, net |
|
165,502 |
|
|
165,607 |
|
Equity investments |
|
166,276 |
|
|
169,912 |
|
Other long-term assets
(2) |
|
19,828 |
|
|
21,865 |
|
Total assets |
|
$ |
720,243 |
|
|
$ |
704,090 |
|
|
|
|
|
|
Liabilities, redeemable convertible preferred stock and
stockholders' equity |
Current
liabilities: |
|
|
|
|
Current
portion of long-term obligations |
|
$ |
1,712 |
|
|
$ |
2,400 |
|
Other
current liabilities (3) |
|
258,084 |
|
|
224,530 |
|
Total current
liabilities |
|
259,796 |
|
|
226,930 |
|
Long-term obligations,
less current portion |
|
644 |
|
|
584 |
|
Other long-term
liabilities (4) |
|
61,203 |
|
|
63,013 |
|
Total liabilities |
|
321,643 |
|
|
290,527 |
|
|
|
|
|
|
Mezzanine and
stockholder's equity |
|
|
|
|
Convertible preferred
stock, net |
|
77,546 |
|
|
77,546 |
|
Stockholders'
equity |
|
321,054 |
|
|
336,017 |
|
Total liabilities,
redeemable convertible preferred stock and stockholders'
equity |
|
$ |
720,243 |
|
|
$ |
704,090 |
|
|
|
|
|
|
|
|
|
|
(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.
|
The Providence Service Corporation |
Unaudited Condensed Consolidated Statements of Cash
Flows |
(in thousands) (1) |
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2018 |
|
2017 |
Operating
activities |
|
|
|
|
Net income |
|
$ |
5,726 |
|
|
$ |
(3,951 |
) |
Depreciation and amortization |
|
6,798 |
|
|
6,269 |
|
Stock-based compensation |
|
933 |
|
|
1,466 |
|
Equity in
net (gain) loss of investees |
|
2,321 |
|
|
2,060 |
|
Other
non-cash credits |
|
(876 |
) |
|
(2,483 |
) |
Changes
in working capital |
|
10,716 |
|
|
32,837 |
|
Net cash provided by
operating activities |
|
25,618 |
|
|
36,198 |
|
Investing
activities |
|
|
|
|
Purchase of property
and equipment |
|
(4,987 |
) |
|
(5,738 |
) |
Equity investments/loan
to joint venture |
|
— |
|
|
(566 |
) |
Other investing
activities |
|
— |
|
|
(3 |
) |
Net cash provided by
investing activities |
|
(4,987 |
) |
|
(6,307 |
) |
Financing
activities |
|
|
|
|
Preferred stock
dividends |
|
(1,089 |
) |
|
(1,090 |
) |
Repurchase of common
stock, for treasury |
|
(37,167 |
) |
|
(18,753 |
) |
Other financing
activities |
|
7,997 |
|
|
(571 |
) |
Net cash used in
financing activities |
|
(30,259 |
) |
|
(20,414 |
) |
Effect of exchange rate
changes on cash |
|
115 |
|
|
548 |
|
Net change in cash and
cash equivalents |
|
(9,513 |
) |
|
10,025 |
|
Cash, cash equivalents
and restricted cash at beginning of period |
|
101,606 |
|
|
86,392 |
|
Cash, cash equivalents
and restricted cash at end of period (2) |
|
$ |
92,093 |
|
|
$ |
96,417 |
|
|
|
|
|
|
|
|
|
|
(1) Includes both continuing and discontinued operations.(2)
Includes restricted cash of $5,864 at March 31, 2018 and $13,535 at
March 31, 2017.
The Providence Service
CorporationReconciliation of Non-GAAP Financial
MeasuresSegment Information and Adjusted
EBITDA(in thousands)(Unaudited)
|
|
|
Three months ended March 31,
2018 |
|
NET Services |
|
WD Services |
|
Total Segment-Level |
|
Matrix Investment |
|
Corporate and Other |
|
Total Continuing Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue,
net |
$ |
336,696 |
|
|
$ |
69,350 |
|
|
$ |
406,046 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
406,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Service
expense |
310,701 |
|
|
60,534 |
|
|
371,235 |
|
|
— |
|
|
— |
|
|
371,235 |
|
General
and administrative expense |
2,937 |
|
|
7,613 |
|
|
10,550 |
|
|
— |
|
|
7,863 |
|
|
18,413 |
|
Depreciation and amortization |
3,494 |
|
|
3,218 |
|
|
6,712 |
|
|
— |
|
|
86 |
|
|
6,798 |
|
Total operating
expenses |
317,132 |
|
|
71,365 |
|
|
388,497 |
|
|
— |
|
|
7,949 |
|
|
396,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
19,564 |
|
|
(2,015 |
) |
|
17,549 |
|
|
— |
|
|
(7,949 |
) |
|
9,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
18 |
|
|
369 |
|
|
387 |
|
|
— |
|
|
(61 |
) |
|
326 |
|
Equity in
net (gain) loss of investees |
— |
|
|
(23 |
) |
|
(23 |
) |
|
2,344 |
|
|
— |
|
|
2,321 |
|
Loss
(gain) on foreign currency |
|
|
|
|
|
|
|
|
|
|
|
transactions |
— |
|
|
(623 |
) |
|
(623 |
) |
|
— |
|
|
— |
|
|
(623 |
) |
Income (loss) from
continuing |
|
|
|
|
|
|
|
|
|
|
|
operations, before income tax |
19,546 |
|
|
(1,738 |
) |
|
17,808 |
|
|
(2,344 |
) |
|
(7,888 |
) |
|
7,576 |
|
Provision (benefit) for
income taxes |
5,020 |
|
|
(138 |
) |
|
4,882 |
|
|
(518 |
) |
|
(2,522 |
) |
|
1,842 |
|
Income (loss)
from continuing operations, net of taxes |
14,526 |
|
|
(1,600 |
) |
|
12,926 |
|
|
(1,826 |
) |
|
(5,366 |
) |
|
5,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net |
18 |
|
|
369 |
|
|
387 |
|
|
— |
|
|
(61 |
) |
|
326 |
|
Provision (benefit) for
income taxes |
5,020 |
|
|
(138 |
) |
|
4,882 |
|
|
(518 |
) |
|
(2,522 |
) |
|
1,842 |
|
Depreciation and
amortization |
3,494 |
|
|
3,218 |
|
|
6,712 |
|
|
— |
|
|
86 |
|
|
6,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
23,058 |
|
|
1,849 |
|
|
24,907 |
|
|
(2,344 |
) |
|
(7,863 |
) |
|
14,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
related charges (1) |
823 |
|
|
1,617 |
|
|
2,440 |
|
|
— |
|
|
448 |
|
|
2,888 |
|
Equity in net (gain)
loss of investees |
— |
|
|
(23 |
) |
|
(23 |
) |
|
2,344 |
|
|
— |
|
|
2,321 |
|
Loss (gain) on foreign
currency transactions |
— |
|
|
(623 |
) |
|
(623 |
) |
|
— |
|
|
— |
|
|
(623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
23,881 |
|
|
$ |
2,820 |
|
|
$ |
26,701 |
|
|
$ |
— |
|
|
$ |
(7,415 |
) |
|
$ |
19,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring and related charges include redundancy program
costs of $1,360 and property related costs of $257 for WD Services,
value enhancement initiative implementation costs of $823 for NET
Services and organizational consolidation costs of $448 within
Corporate and Other.
The Providence Service
CorporationReconciliation of Non-GAAP Financial
MeasuresSegment Information and Adjusted
EBITDA (in thousands)
(Unaudited)
|
|
|
Three months ended March 31,
2017 |
|
NET Services |
|
WD Services |
|
Total Segment-Level |
|
MatrixInvestment |
|
Corporate and Other |
|
Total Continuing Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue,
net |
$ |
324,034 |
|
|
$ |
75,460 |
|
|
$ |
399,494 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
399,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Service
expense |
306,192 |
|
|
63,203 |
|
|
369,395 |
|
|
— |
|
|
15 |
|
|
369,410 |
|
General
and administrative expense |
2,891 |
|
|
7,044 |
|
|
9,935 |
|
|
— |
|
|
7,092 |
|
|
17,027 |
|
Depreciation and amortization |
3,151 |
|
|
3,040 |
|
|
6,191 |
|
|
— |
|
|
78 |
|
|
6,269 |
|
Total operating
expenses |
312,234 |
|
|
73,287 |
|
|
385,521 |
|
|
— |
|
|
7,185 |
|
|
392,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
11,800 |
|
|
2,173 |
|
|
13,973 |
|
|
— |
|
|
(7,185 |
) |
|
6,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
11 |
|
|
267 |
|
|
278 |
|
|
— |
|
|
74 |
|
|
352 |
|
Equity in
net (gain) loss of investees |
— |
|
|
1,400 |
|
|
1,400 |
|
|
660 |
|
|
— |
|
|
2,060 |
|
Loss
(gain) on foreign currency |
|
|
|
|
|
|
|
|
|
|
|
transactions |
— |
|
|
(62 |
) |
|
(62 |
) |
|
— |
|
|
— |
|
|
(62 |
) |
Income (loss) from
continuing |
|
|
|
|
|
|
|
|
|
|
|
operations, before income tax |
11,789 |
|
|
568 |
|
|
12,357 |
|
|
(660 |
) |
|
(7,259 |
) |
|
4,438 |
|
Provision (benefit)
for income taxes |
4,621 |
|
|
805 |
|
|
5,426 |
|
|
(249 |
) |
|
(2,654 |
) |
|
2,523 |
|
Income (loss)
from continuing operations, net of taxes |
7,168 |
|
|
(237 |
) |
|
6,931 |
|
|
(411 |
) |
|
(4,605 |
) |
|
1,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net |
11 |
|
|
267 |
|
|
278 |
|
|
— |
|
|
74 |
|
|
352 |
|
Provision (benefit) for
income taxes |
4,621 |
|
|
805 |
|
|
5,426 |
|
|
(249 |
) |
|
(2,654 |
) |
|
2,523 |
|
Depreciation and
amortization |
3,151 |
|
|
3,040 |
|
|
6,191 |
|
|
— |
|
|
78 |
|
|
6,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
14,951 |
|
|
3,875 |
|
|
18,826 |
|
|
(660 |
) |
|
(7,107 |
) |
|
11,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
related charges (1) |
1,299 |
|
|
1,056 |
|
|
2,355 |
|
|
— |
|
|
— |
|
|
2,355 |
|
Equity in net (gain)
loss of investees |
— |
|
|
1,400 |
|
|
1,400 |
|
|
660 |
|
|
— |
|
|
2,060 |
|
Loss (gain) on foreign
currency transactions |
— |
|
|
(62 |
) |
|
(62 |
) |
|
— |
|
|
— |
|
|
(62 |
) |
Litigation expense
(2) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
143 |
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
16,250 |
|
|
$ |
6,269 |
|
|
$ |
22,519 |
|
|
$ |
— |
|
|
$ |
(6,964 |
) |
|
$ |
15,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring and related charges include redundancy
program costs of $553, other severance costs of $182 and value
enhancement implementation costs of $321 within WD Services and
$199 of former CEO departure costs and value enhancement
implementation initiative costs of $1,100 for NET Services.(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-K.
The Providence Service
CorporationSummary Financial Information of Equity
Investments (1)(in thousands)(Unaudited)
|
|
|
Three months ended March 31,
2018 |
|
Matrix Investment |
|
Mission Providence |
|
Other |
|
Total |
Revenue |
$ |
67,429 |
|
|
$ |
— |
|
|
$ |
864 |
|
|
$ |
68,293 |
|
Operating expense
(2) |
59,166 |
|
|
— |
|
|
805 |
|
|
59,971 |
|
Depreciation and
amortization |
9,052 |
|
|
— |
|
|
8 |
|
|
9,060 |
|
Operating income
(loss) |
(789 |
) |
|
— |
|
|
51 |
|
|
(738 |
) |
|
|
|
|
|
|
|
|
Other expense
(income) |
— |
|
|
— |
|
|
(12 |
) |
|
(12 |
) |
Interest expense
(6) |
10,343 |
|
|
— |
|
|
— |
|
|
10,343 |
|
Provision (benefit) for
income taxes |
(2,614 |
) |
|
— |
|
|
16 |
|
|
(2,598 |
) |
Net income
(loss) |
(8,518 |
) |
|
— |
|
|
47 |
|
|
(8,471 |
) |
|
|
|
|
|
|
|
|
Interest |
43.6 |
% |
|
75.0 |
% |
|
50.0 |
% |
|
N/A |
|
Net income
(loss) - Equity Investment |
(3,716 |
) |
|
— |
|
|
23 |
|
|
(3,693 |
) |
Management fee and
other (3) |
1,372 |
|
|
— |
|
|
— |
|
|
1,372 |
|
Equity in net
gain (loss) of investee |
$ |
(2,344 |
) |
|
$ |
— |
|
|
$ |
23 |
|
|
$ |
(2,321 |
) |
|
|
|
|
|
|
|
|
Net Debt (4) |
310,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
2017 |
|
Matrix Investment |
|
Mission Providence |
|
Other |
|
Total |
Revenue |
$ |
55,855 |
|
|
$ |
9,388 |
|
|
$ |
425 |
|
|
$ |
65,668 |
|
Operating expense
(2) |
46,814 |
|
|
10,190 |
|
|
445 |
|
|
57,449 |
|
Depreciation and
amortization |
8,033 |
|
|
1,003 |
|
|
2 |
|
|
9,038 |
|
Operating income
(loss) |
1,008 |
|
|
(1,805 |
) |
|
(22 |
) |
|
(819 |
) |
|
|
|
|
|
|
|
|
Other expense
(income) |
— |
|
|
2 |
|
|
(11 |
) |
|
(9 |
) |
Interest expense |
3,607 |
|
|
53 |
|
|
— |
|
|
3,660 |
|
Provision (benefit) for
income taxes |
(742 |
) |
|
1 |
|
|
(3 |
) |
|
(744 |
) |
Net income
(loss) |
(1,857 |
) |
|
(1,861 |
) |
|
(8 |
) |
|
(3,726 |
) |
|
|
|
|
|
|
|
|
Interest |
46.8 |
% |
|
75.0 |
% |
|
50.0 |
% |
|
N/A |
|
Net income
(loss) - Equity Investment |
(869 |
) |
|
(1,396 |
) |
|
(4 |
) |
|
(2,269 |
) |
Management fee and
other (5) |
209 |
|
|
— |
|
|
— |
|
|
209 |
|
Equity in net
gain (loss) of investee |
$ |
(660 |
) |
|
$ |
(1,396 |
) |
|
$ |
(4 |
) |
|
$ |
(2,060 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $1,432 less Providence share-based compensation expense of
$60.(4) Represents cash of $19,616 and debt of $330,000 on Matrix's
standalone balance sheet as of March 31, 2018.(5) Includes
amounts relating to management fees due from Matrix to Providence
of $236 less Providence share-based compensation expense of $27.(6)
Includes $6.0 million of expense related to the acceleration of
deferred financing fees upon debt refinancing.
The Providence Service
CorporationReconciliation of Non-GAAP Financial
MeasuresAdjusted EBITDA: Matrix Medical Network
(1)(2)(5)(in thousands) (Unaudited)
|
|
|
Three months ended March 31, |
|
2018 |
|
2017 |
Revenue |
$ |
67,429 |
|
|
$ |
55,855 |
|
Operating expense
(3) |
59,166 |
|
|
46,814 |
|
Depreciation and
amortization |
9,052 |
|
|
8,033 |
|
Operating income
(loss) |
(789 |
) |
|
1,008 |
|
|
|
|
|
Interest expense |
10,343 |
|
|
3,607 |
|
Provision (benefit) for
income taxes |
(2,614 |
) |
|
(742 |
) |
Net
income |
(8,518 |
) |
|
(1,857 |
) |
|
|
|
|
Depreciation and
amortization |
9,052 |
|
|
8,033 |
|
Interest expense |
10,343 |
|
|
3,607 |
|
Provision (benefit) for
income taxes |
(2,614 |
) |
|
(742 |
) |
EBITDA |
8,263 |
|
|
9,041 |
|
Matrix management
transaction bonuses |
— |
|
|
2,163 |
|
Management fees
(4) |
3,057 |
|
|
503 |
|
Acquisition costs |
2,169 |
|
|
— |
|
Transaction costs |
6 |
|
|
831 |
|
Adjusted
EBITDA |
$ |
13,495 |
|
|
$ |
12,538 |
|
|
|
|
|
(1) Matrix's Adjusted EBITDA is not included
within Providence's Adjusted EBITDA in any period presented.(2)
Providence accounts for its proportionate share of Matrix's results
using the equity method.(3) Excludes depreciation and
amortization.(4) Management fees in Q1 2018 include fees earned in
association with the acquisition of HealthFair.(5) 2018 includes
the results of HealthFair since the date of acquisition.
The Providence Service
CorporationReconciliation of Non-GAAP Financial
MeasuresAdjusted Net Income and Adjusted Net
Income per Common Share:(in thousands, except share and
per share data)(Unaudited)
|
|
|
Three months ended March 31, |
|
2018 |
|
2017 |
|
|
|
|
Income from continuing
operations, net of tax |
$ |
5,734 |
|
|
$ |
1,915 |
|
Net loss (income)
attributable to noncontrolling interests |
(296 |
) |
|
(374 |
) |
|
|
|
|
Restructuring and
related charges (1) |
2,888 |
|
|
2,355 |
|
Equity in net (gain)
loss of investees |
2,321 |
|
|
2,060 |
|
Loss (gain) on foreign
currency transactions |
(623 |
) |
|
(62 |
) |
Intangible amortization
expense |
2,070 |
|
|
1,963 |
|
Litigation (income)
expense, net (2) |
— |
|
|
143 |
|
Impact of adjustments
on noncontrolling interests |
2 |
|
|
(18 |
) |
Tax effected impact of
adjustments |
(1,417 |
) |
|
(1,370 |
) |
|
|
|
|
Adjusted Net
Income |
10,679 |
|
|
6,612 |
|
|
|
|
|
Dividends on
convertible preferred stock |
(1,089 |
) |
|
(1,090 |
) |
Income allocated to
participating securities |
(1,278 |
) |
|
(708 |
) |
|
|
|
|
Adjusted Net Income
available to common stockholders |
$ |
8,312 |
|
|
$ |
4,814 |
|
|
|
|
|
Adjusted EPS |
$ |
0.63 |
|
|
$ |
0.35 |
|
|
|
|
|
Diluted
weighted-average number of common shares outstanding |
13,199,440 |
|
|
13,768,524 |
|
|
|
|
|
|
|
(1) Restructuring and related charges are
comprised of employee separation costs, severance and other costs
related to the former CEO of Providence, 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 and costs related to the consolidation of the holding
company activities into LogistiCare. 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) Income or expense related to defense cost and final
settlement for a putative stockholder class action derivative
complaint, which is more fully described in the Company's Form
10-K.
The Providence Service
CorporationSegment-Level Impact of ASC 606
Adoption(in thousand)(Unaudited)
The following table summarizes the impact that the adoption of
ASC 606, Revenue from Contracts with Customers, had on the
Company's Q1 2018 results.
|
|
|
|
Three Months Ended March 31, 2018 |
|
Three Months Ended March 31, 2017 (1) |
Segment |
|
Caption |
|
Historical US GAAP |
|
ASC 606 Adjustment |
|
As Reported |
|
As Reported |
NET Services (2) |
|
Revenue |
|
$ |
340,633 |
|
|
$ |
(3,937 |
) |
|
$ |
336,696 |
|
|
$ |
324,034 |
|
|
|
Adjusted EBITDA |
|
23,881 |
|
|
— |
|
|
23,881 |
|
|
16,250 |
|
|
|
|
|
|
|
|
|
|
|
|
WD Services (3) |
|
Revenue |
|
74,715 |
|
|
(5,365 |
) |
|
69,350 |
|
|
75,460 |
|
|
|
Adjusted EBITDA |
|
6,272 |
|
|
(3,452 |
) |
|
2,820 |
|
|
6,269 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
Other |
|
Revenue |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
Adjusted EBITDA |
|
(7,415 |
) |
|
— |
|
|
(7,415 |
) |
|
(6,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Continuing
Operations |
|
Revenue |
|
$ |
415,348 |
|
|
$ |
(9,302 |
) |
|
$ |
406,046 |
|
|
$ |
399,494 |
|
|
|
Adjusted EBITDA |
|
22,738 |
|
|
(3,452 |
) |
|
19,286 |
|
|
15,555 |
|
|
|
|
|
5.5 |
% |
|
|
|
|
4.7 |
% |
|
3.9 |
% |
(1) The company adopted ASC 606 using the modified retrospective
method, resulting in an opening retained earnings adjustment of
$5.7 million, primarily related to the acceleration of revenue for
the UK Work Program. Prior periods are not adjusted for
the new revenue standard. (2) NET Services Q1 2018 revenue was
impacted by a change to recognize revenue for one contract on a net
basis. There is no margin impact for this adjustment.(3) WD
Services Q1 2018 revenue was primarily impacted by the acceleration
of revenue under the UK Work Program, including the amount of
revenue captured in the opening balance sheet adjustment, as well
as the deferral of revenue for the Youth Services
program, which will be recognized as the courses are delivered
in the summer and fall of 2018. Adjustment is also made for direct
costs associated with the revenue adjustments.
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