Market Overview

The Providence Service Corporation Reports Third Quarter 2020 Financial Results

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The Providence Service Corporation (the "Company" or "Providence") (NASDAQ:PRSC), the nation's largest provider of non-emergency medical transportation ("NEMT") programs and holder of a minority interest in Matrix Medical Network, today reported financial results for the three months ended September 30, 2020.

Third Quarter 2020 Highlights:

  • Revenue of $320.6 million
  • Income from continuing operations, net of tax, of $38.9 million or $2.51 per diluted common share
  • Adjusted EBITDA of $55.3 million, Adjusted Net Income of $38.2 million and Adjusted EPS of $2.69
  • Net cash provided by operating activities during the quarter of $140.0 million
  • Cash and cash equivalents of $183.3 million at September 30, with no debt outstanding
  • Matrix, on a standalone basis, achieved net income of $21.4 million and Adjusted EBITDA of $54.3 million
  • On September 28, 2020, Providence entered into a definitive agreement to acquire Simplura Health Group, a leading provider of non-medical home care services, in an all-cash deal for $575 million

Daniel E. Greenleaf, President and Chief Executive Officer, said, "Providence's third quarter Adjusted EBITDA of $55.3 million exceeded the prior year comparable figure primarily due to lower operating expenses driven by our six-pillar growth strategy, meaningful contribution from National MedTrans and lower utilization under our capitated contracts. During the quarter we continued to make excellent operational and strategic progress in our transformation of the business. Of note, we advanced key technology and contact center optimization initiatives that will enhance the member experience and streamline operations. And, in September 2020, we took a major step to drive transformational growth by entering into a definitive agreement to acquire Simplura Health Group, a leader in non-medical personal care in the home. With financing in place, this acquisition remains on target to close in the fourth quarter of 2020."

Mr. Greenleaf continued, "Simplura participates in an estimated $55 billion market that is highly fragmented and rapidly expanding, providing us a complementary growth platform that dovetails well with non-emergency medical transportation. We both are focused on social determinants of health, providing value-based care and solutions to similar vulnerable patient populations while partnering with many of the same payor groups. We believe that Simplura stands at the forefront of an exciting long-tailed growth opportunity, particularly as networks continue to narrow and the industry consolidates. Going forward, through a combination of smart capital allocation and operational excellence, we aim to build substantial long-term value for our customers and shareholders."

Mr. Greenleaf concluded, "Finally, we commend the team at Matrix for their success turning around their business. For the third quarter of 2020, Matrix's revenue was $140.7 million compared to $71.7 million in the third quarter of 2019, operating income was $35.5 million compared to an operating loss of $2.6 million and Adjusted EBITDA was $54.3 million compared to $10.0 million. During the first nine months of 2020 Matrix generated revenue of $292.7 million, up from $210.8 million in the same period last year, operating income of $49.1 million, up from an operating loss of $0.5 million, and Adjusted EBITDA of $97.0 million, up from $37.7 million. In addition, Matrix announced the acquisition of Biocerna, a certified and accredited laboratory that will provide a meaningful opportunity for continued growth."

Third Quarter 2020 Results

For the third quarter of 2020, the Company reported revenue of $320.6 million, a decrease of 18.5% from $393.4 million in the third quarter of 2019.

Operating income was $43.3 million, or 13.5% of revenue, in the third quarter of 2020, compared to operating income of $17.0 million, or 4.3% of revenue, in the third quarter of 2019. Income from continuing operations, net of tax, in the third quarter of 2020 was $38.9 million, or $2.51 per diluted common share, compared to income from continuing operations, net of tax, of $8.6 million, or $0.50 per diluted common share, in the third quarter of 2019.

Adjusted EBITDA was $55.3 million, or 17.2% of revenue, in the third quarter of 2020, compared to $23.1 million, or 5.9% of revenue, in the third quarter of 2019.

Adjusted Net Income in the third quarter of 2020 was $38.2 million, or $2.69 per diluted common share, compared to $13.3 million, or $0.81 per diluted common share, in the third quarter of 2019.

The quarter-over-quarter decrease in revenue was primarily due to lower trip volume caused by the impact of COVID-19. This lower volume resulted in a reduction of revenue in the current quarter in line with margin limitations that govern some of our profit corridor and reconciliation payor contracts. Additionally, revenue was negatively impacted by our exit from certain contracts for which we no longer provide services. The decreases were partially offset by $27.7 million of incremental revenue from National MedTrans.

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

Matrix - Equity Investment

For the third quarter of 2020, Matrix's revenue was $140.7 million, an increase of 96.4% from $71.7 million in the third quarter of 2019. Matrix had operating income of $35.5 million for the third quarter of 2020, compared to an operating loss of $2.6 million for the third quarter of 2019.

Providence recorded income of $10.3 million related to its Matrix equity investment compared to a loss of $3.2 million for the third quarter of 2019. For the third quarter of 2020, Matrix recorded Adjusted EBITDA of $54.3 million, or 38.6% of revenue, compared to $10.0 million, or 14.0% of revenue, for the third quarter of 2019.

Matrix's Adjusted EBITDA for the quarter was positively impacted by its continued success with its new Employee Health and Wellness solution, signing several new contracts with well-known employers and organizations. Matrix's in-home and telehealth comprehensive health assessments continued to ramp during the quarter.

On October 2, 2020, Matrix announced the acquisition of Biocerna, a CLIA-certified and CAP-accredited laboratory dedicated to delivering clinical diagnostics tests to improve patients' safety and quality of care. Biocerna has developed innovative assays, including for COVID-19 testing, that will allow Matrix to provide safe and expedient testing services to Matrix's clients. Biocerna is located in Fulton, Maryland and has significant clinical diagnostics and testing support for clinical trials.

As of September 30, 2020, Matrix had $255.0 million in net debt and Providence's ownership interest was 43.6%.

Investor Presentation and Conference Call

Providence will hold a conference call to discuss its financial results on Friday, November 6, 2020 at 8:00 a.m. ET. An investor presentation has been prepared to accompany the conference call and can be found on the Company's website (investor.prscholdings.com). To access the call, please dial:

US toll-free: 1 (877) 423 9820

International: 1 (201) 493 6749

You may also access the conference call via webcast at investor.prscholdings.com, where the call also will be archived.

About Providence

The Providence Service Corporation, through its fully-owned subsidiary LogistiCare Solutions, LLC, is the nation's largest manager of non-emergency medical transportation programs for state governments and managed care organizations. Its range of services includes call center management, network credentialing, vendor payment management and non-emergency medical transport management. The Company also holds a minority interest in Matrix Medical Network which provides a broad array of assessment and care management services to individuals that improve health outcomes and health plan financial performance. For more information, please visit prscholdings.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial results prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), this press release includes EBITDA and Adjusted EBITDA for the Company and its segments, as well as Adjusted Net Income and Adjusted EPS, which are performance measures that are not recognized under GAAP. EBITDA is defined as income (loss) from continuing operations, net of taxes, before: (1) interest expense, net, (2) provision (benefit) for income taxes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before certain items, including (as applicable): (1) restructuring and related charges, including costs related to our corporate reorganization, (2) equity in net (income) loss of investee, (3) certain litigation related expenses, settlement income or other negotiated settlements relating to certain matters from prior periods, (4) certain transaction and related costs, and (5) COVID-19 related costs. Adjusted Net Income is defined as income from continuing operations, net of taxes, before certain items, including (1) restructuring and related charges, (2) equity in net (income) loss of investee, (3) certain litigation related expenses, settlement income or other negotiated settlements relating to certain matters from prior periods, (4) intangible asset amortization, (5) certain transaction and related costs, (6) COVID-19 related costs, (7) tax impacts from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and (8) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock and (2) adjusted net income allocated to participating stockholders, divided by the diluted weighted-average number of common shares outstanding as calculated for Adjusted Net Income. Our non-GAAP performance measures exclude certain expenses and amounts that are not driven by our core operating results and may be one time in nature. Excluding these expenses makes comparisons with prior periods as well as to other companies in our industry more meaningful. We believe such measures allow investors to gain a better understanding of the factors and trends affecting the ongoing operations of our business. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. In addition, our net gain or loss in equity investee is excluded from these measures, as we do not have the ability to manage the venture, allocate resources within the venture, or directly control its operations or performance.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation from or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature and are frequently identified by the use of terms such as "may," "will," "should," "expect," "believe," "estimate," "intend," and similar words indicating possible future expectations, events or actions. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, which may cause actual events to be materially different from those expressed or implied herein, including but not limited to: the early termination or non-renewal of contracts; our ability to successfully respond to governmental requests for proposal; our ability to fulfill our contractual obligations; our ability to identify and successfully complete and integrate acquisitions; our ability to identify and realize the benefits of strategic initiatives; the loss of any of the significant payors from whom we generate a significant amount of our revenue; our ability to accurately estimate the cost of performing under certain capitated contracts; our ability to match the timing of the costs of new contracts with its related revenue; the outcome of pending or future litigation; our ability to attract and retain senior management and other qualified employees; our ability to successfully complete recent divestitures or business termination; the accuracy of representations and warranties and strength of related indemnities provided to us in acquisitions or claims made against us for representations and warranties and related indemnities in our dispositions; our ability to effectively compete in the marketplace; inadequacies in or security breaches of our information technology systems, including our ability to protect private data; the impact of COVID-19 on us (including: the duration and scope of the pandemic; governmental, business and individuals' actions taken in response to the pandemic; economic activity and actions taken in response; the effect on our clients and client demand for our services; and the ability of our clients to pay for our services); seasonal fluctuations in our operations; impairment of long-lived assets; the adequacy of our insurance coverage for automobile, general liability, professional liability and workers' compensation; damage to our reputation by inaccurate, misleading or negative media coverage; our ability to comply with government healthcare and other regulations; changes in budgetary priorities of government entities that fund our services; failure to adequately comply with patient and service user information regulations; possible actions under Medicare and Medicaid programs for false claims or recoupment of funds for noncompliance; changes in the regulatory landscape applicable to Matrix; changes to our estimated income tax liability from audits or otherwise; our ability to meet restrictive covenants in our credit agreement; the costs of complying with public company reporting obligations; and the accuracy of our accounting estimates and assumptions.

The Company has provided additional information in our annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to update or revise any forward- looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law.

--financial tables to follow--

The Providence Service Corporation

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Service revenue, net

 

$

320,619

 

 

$

393,385

 

 

$

970,166

 

 

$

1,125,111

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Service expense

 

235,543

 

 

356,271

 

 

764,310

 

 

1,042,717

 

General and administrative expense

 

34,441

 

 

15,979

 

 

86,435

 

 

52,241

 

Depreciation and amortization

 

7,301

 

 

4,148

 

 

17,199

 

 

12,976

 

Total operating expenses

 

277,285

 

 

376,398

 

 

867,944

 

 

1,107,934

 

 

 

 

 

 

 

 

 

 

Operating income

 

43,334

 

 

16,987

 

 

102,222

 

 

17,177

 

 

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

 

 

 

Interest expense, net

 

379

 

 

188

 

 

2,118

 

 

793

 

Other income

 

 

 

(66)

 

 

 

 

(199)

 

Equity in net (income) loss of investee

 

(10,325)

 

 

3,188

 

 

(12,200)

 

 

6,159

 

Income from continuing operations before income taxes

 

53,280

 

 

13,677

 

 

112,304

 

 

10,424

 

Provision for income taxes

 

14,360

 

 

5,097

 

 

19,785

 

 

3,940

 

Income from continuing operations, net of tax

 

38,920

 

 

8,580

 

 

92,519

 

 

6,484

 

(Loss) income from discontinued operations, net of tax

 

(115)

 

 

(426)

 

 

(618)

 

 

540

 

Net income

 

$

38,805

 

 

$

8,154

 

 

$

91,901

 

 

$

7,024

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

 

$

35,346

 

 

$

6,104

 

 

$

34,563

 

 

$

3,230

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

Continuing operations

 

$

2.53

 

 

$

0.50

 

 

$

2.63

 

 

$

0.21

 

Discontinued operations

 

(0.01)

 

 

(0.03)

 

 

(0.05)

 

 

0.04

 

Basic earnings per common share

 

$

2.52

 

 

$

0.47

 

 

$

2.58

 

 

$

0.25

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

Continuing operations

 

$

2.51

 

 

$

0.50

 

 

$

2.62

 

 

$

0.21

 

Discontinued operations

 

(0.01)

 

 

(0.03)

 

 

(0.05)

 

 

0.04

 

Diluted earnings per common share

 

$

2.50

 

 

$

0.47

 

 

$

2.57

 

 

$

0.25

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common

 

 

 

 

 

 

 

 

shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

14,026,039

 

 

12,993,934

 

 

13,367,605

 

 

12,956,222

 

Diluted

 

14,133,904

 

 

13,004,449

 

 

13,415,344

 

 

12,977,598

 

The Providence Service Corporation

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

 

 

 

 

September 30, 2020

 

December 31, 2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

183,277

 

 

$

61,365

 

Accounts receivable, net of allowance

 

164,944

 

 

180,416

 

Other current assets (1)

 

30,758

 

 

14,491

 

Current assets of discontinued operations (2)

 

357

 

 

155

 

Total current assets

 

379,336

 

 

256,427

 

Operating lease right-of-use assets

 

18,814

 

 

20,095

 

Property and equipment, net

 

21,048

 

 

23,243

 

Goodwill and intangible assets, net

 

222,574

 

 

155,127

 

Equity investment

 

141,292

 

 

130,869

 

Other assets

 

8,571

 

 

11,620

 

Total assets

 

$

791,635

 

 

$

597,381

 

 

 

 

 

 

Liabilities, redeemable convertible preferred stock and stockholders' equity

Current liabilities:

 

 

 

 

Current portion of finance lease liabilities

 

$

148

 

 

$

308

 

Current portion of operating lease liabilities

 

6,680

 

 

6,730

 

Other current liabilities (3)

 

262,032

 

 

141,718

 

Current liabilities of discontinued operations (2)

 

1,734

 

 

1,430

 

Total current liabilities

 

270,594

 

 

150,186

 

Finance lease liabilities, less current portion

 

 

 

45

 

Operating lease liabilities, less current portion

 

13,015

 

 

14,502

 

Long-term contracts payable

 

50,244

 

 

 

Other long-term liabilities (4)

 

47,715

 

 

37,936

 

Total liabilities

 

381,568

 

 

202,669

 

 

 

 

 

 

Mezzanine and stockholders' equity

 

 

 

 

Convertible preferred stock, net

 

 

 

77,120

 

Stockholders' equity

 

410,067

 

 

317,592

 

Total liabilities, redeemable convertible preferred stock and

stockholders' equity

 

$

791,635

 

 

$

597,381

 

(1)

Includes other receivables, prepaid expenses and short-term restricted cash.

(2)

Includes assets or liabilities primarily related to WD Services' former Saudi Arabian operation.

(3)

Includes accounts payable, accrued expenses, accrued transportation costs, deferred revenue and self-funded insurance programs.

(4)

Includes other long-term liabilities and deferred tax liabilities.

The Providence Service Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands) (1)

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

2020

 

2019

Operating activities

 

 

 

 

Net income

 

$

91,901

 

 

$

7,024

 

Depreciation and amortization

 

17,199

 

 

12,976

 

Stock-based compensation

 

2,949

 

 

4,247

 

Equity in net (income) loss of investee

 

(12,200)

 

 

6,159

 

Other non-cash items

 

16,534

 

 

10,466

 

Changes in working capital

 

170,843

 

 

(803)

 

Net cash provided by operating activities

 

287,226

 

 

40,069

 

Investing activities

 

 

 

 

Purchase of property and equipment

 

(4,786)

 

 

(7,302)

 

Acquisition, net of cash acquired

 

(77,665)

 

 

 

Net cash used in investing activities

 

(82,451)

 

 

(7,302)

 

Financing activities

 

 

 

 

Proceeds from debt

 

162,000

 

 

12,000

 

Repayment of debt

 

(162,000)

 

 

(12,000)

 

Preferred stock redemption payment

 

(88,743)

 

 

 

Preferred stock dividends

 

(1,988)

 

 

(3,295)

 

Repurchase of common stock, for treasury

 

(10,186)

 

 

(6,363)

 

Proceeds from common stock issued pursuant to stock option exercise

 

21,581

 

 

6,885

 

Restricted stock surrendered for employee tax payment

 

(92)

 

 

 

Other financing activities

 

(204)

 

 

(641)

 

Net cash used in financing activities

 

(79,632)

 

 

(3,414)

 

Net change in cash and cash equivalents

 

125,143

 

 

29,353

 

Cash, cash equivalents and restricted cash at beginning of period

 

61,673

 

 

12,367

 

Cash, cash equivalents and restricted cash at end of period

 

$

186,816

 

 

$

41,720

 

(1)

Includes both continuing and discontinued operations.

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Segment Information and Adjusted EBITDA

(in thousands) (Unaudited)

 

 

 

Three months ended September 30, 2020

 

 

NET

Services

 

Matrix

Investment

 

Total

Continuing

Operations

 

 

 

 

 

 

 

Service revenue, net

$

320,619

 

 

$

 

 

$

320,619

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Service expense

235,543

 

 

 

 

235,543

 

General and administrative expense

34,441

 

 

 

 

34,441

 

Depreciation and amortization

7,301

 

 

 

 

7,301

 

Total operating expenses

277,285

 

 

 

 

277,285

 

 

 

 

 

 

 

 

Operating income

43,334

 

 

 

 

43,334

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

Interest expense, net

379

 

 

 

 

379

 

Equity in net income of investee

 

 

(10,325)

 

 

(10,325)

 

Income from continuing

 

 

 

 

 

operations before income taxes

42,955

 

 

10,325

 

 

53,280

 

Provision for income taxes

11,774

 

 

2,586

 

 

14,360

 

Income from continuing operations,

net of taxes

31,181

 

 

7,739

 

 

38,920

 

 

 

 

 

 

 

 

Interest expense, net

379

 

 

 

 

379

 

Provision for income taxes

11,774

 

 

2,586

 

 

14,360

 

Depreciation and amortization

7,301

 

 

 

 

7,301

 

 

 

 

 

 

 

 

EBITDA

50,635

 

 

10,325

 

 

60,960

 

 

 

 

 

 

 

 

Restructuring and related charges (1)

969

 

 

 

 

969

 

Transaction costs (2)

3,579

 

 

 

 

3,579

 

COVID-19 related costs

118

 

 

 

 

118

 

Equity in net income of investee

 

 

(10,325)

 

 

(10,325)

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

55,301

 

 

$

 

 

$

55,301

 

(1)

Restructuring and related charges include professional services costs of $0.6 million and severance and office closure costs of $0.4 million.

(2)

Transaction costs include Circulation management incentive plan ("MIP") costs and acquisition costs related to Simplura and National MedTrans.

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Segment Information and Adjusted EBITDA

(in thousands) (Unaudited)

 

 

 

Three months ended September 30, 2019

 

 

NET

Services

 

Matrix

Investment

 

Total

Continuing

Operations

 

 

 

 

 

 

 

Service revenue, net

$

393,385

 

 

$

 

 

$

393,385

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Service expense

356,271

 

 

 

 

356,271

 

General and administrative expense

15,979

 

 

 

 

15,979

 

Depreciation and amortization

4,148

 

 

 

 

4,148

 

Total operating expenses

376,398

 

 

 

 

376,398

 

 

 

 

 

 

 

 

Operating income

16,987

 

 

 

 

16,987

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

Interest expense, net

188

 

 

 

 

188

 

Other income

(66)

 

 

 

 

(66)

 

Equity in net loss of investee

 

 

3,188

 

 

3,188

 

Income (loss) from continuing

 

 

 

 

 

operations, before income tax

16,865

 

 

(3,188)

 

 

13,677

 

Provision (benefit) for income taxes

5,694

 

 

(597)

 

 

5,097

 

Income (loss) from continuing operations,

net of taxes

11,171

 

 

(2,591)

 

 

8,580

 

 

 

 

 

 

 

 

Interest expense, net

188

 

 

 

 

188

 

Provision (benefit) for income taxes

5,694

 

 

(597)

 

 

5,097

 

Depreciation and amortization

4,148

 

 

 

 

4,148

 

 

 

 

 

 

 

 

EBITDA

21,201

 

 

(3,188)

 

 

18,013

 

 

 

 

 

 

 

 

Restructuring and related charges (1)

901

 

 

 

 

901

 

Transaction costs (2)

950

 

 

 

 

950

 

Equity in net loss of investee

 

 

3,188

 

 

3,188

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

23,052

 

 

$

 

 

$

23,052

 

(1)

Restructuring and related charges include organizational consolidation costs of $0.6 million, severance costs of $0.1 million and professional services costs of $0.1 million.

(2)

Transaction costs include Circulation MIP and certain transaction-related expenses.

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Segment Information and Adjusted EBITDA

(in thousands) (Unaudited)

 

 

 

Nine months ended September 30, 2020

 

 

NET

Services

 

Matrix

Investment

 

Total

Continuing

Operations

 

 

 

 

 

 

 

Service revenue, net

$

970,166

 

 

$

 

 

$

970,166

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Service expense

764,310

 

 

 

 

764,310

 

General and administrative expense

86,435

 

 

 

 

86,435

 

Depreciation and amortization

17,199

 

 

 

 

17,199

 

Total operating expenses

867,944

 

 

 

 

867,944

 

 

 

 

 

 

 

 

Operating income

102,222

 

 

 

 

102,222

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

Interest expense, net

2,118

 

 

 

 

2,118

 

Equity in net income of investee

 

 

(12,200)

 

 

(12,200)

 

Income from continuing

 

 

 

 

 

operations before income tax

100,104

 

 

12,200

 

 

112,304

 

Provision for income taxes

16,730

 

 

3,055

 

 

19,785

 

Income from continuing operations, net

of taxes

83,374

 

 

9,145

 

 

92,519

 

 

 

 

 

 

 

 

Interest expense, net

2,118

 

 

 

 

2,118

 

Provision for income taxes

16,730

 

 

3,055

 

 

19,785

 

Depreciation and amortization

17,199

 

 

 

 

17,199

 

 

 

 

 

 

 

 

EBITDA

119,421

 

 

12,200

 

 

131,621

 

 

 

 

 

 

 

 

Restructuring and related charges (1)

3,277

 

 

 

 

3,277

 

Transaction costs (2)

4,700

 

 

 

 

4,700

 

COVID-19 related costs

349

 

 

 

 

349

 

Equity in net income of investee

 

 

(12,200)

 

 

(12,200)

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

127,747

 

 

$

 

 

$

127,747

 

(1)

Restructuring and related charges include professional services of $1.7 million and severance and office closure costs of $1.6 million.

(2)

Transaction costs include Circulation management incentive plan ("MIP") costs, acquisition costs related to Simplura and National MedTrans, and certain transaction-related expenses.

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Segment Information and Adjusted EBITDA

(in thousands) (Unaudited)

 

 

 

Nine months ended September 30, 2019

 

 

NET

Services

 

Matrix

Investment

 

Total

Continuing

Operations

 

 

 

 

 

 

 

Service revenue, net

$

1,125,111

 

 

$

 

 

$

1,125,111

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Service expense

1,042,717

 

 

 

 

1,042,717

 

General and administrative expense

52,241

 

 

 

 

52,241

 

Depreciation and amortization

12,976

 

 

 

 

12,976

 

Total operating expenses

1,107,934

 

 

 

 

1,107,934

 

 

 

 

 

 

 

 

Operating income

17,177

 

 

 

 

17,177

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

Interest expense, net

793

 

 

 

 

793

 

Other Income

(199)

 

 

 

 

(199)

 

Equity in net loss of investee

 

 

6,159

 

 

6,159

 

Income (loss) from continuing

 

 

 

 

 

operations, before income tax

16,583

 

 

(6,159)

 

 

10,424

 

Provision (benefit) for income taxes

5,014

 

 

(1,074)

 

 

3,940

 

Income (loss) from continuing

operations, net of taxes

11,569

 

 

(5,085)

 

 

6,484

 

 

 

 

 

 

 

 

Interest expense, net

793

 

 

 

 

793

 

Provision (benefit) for income taxes

5,014

 

 

(1,074)

 

 

3,940

 

Depreciation and amortization

12,976

 

 

 

 

12,976

 

 

 

 

 

 

 

 

EBITDA

30,352

 

 

(6,159)

 

 

24,193

 

 

 

 

 

 

 

 

Restructuring and related charges (1)

5,371

 

 

 

 

5,371

 

Transaction costs (2)

5,288

 

 

 

 

5,288

 

Equity in net loss of investee

 

 

6,159

 

 

6,159

 

Litigation expense

9

 

 

 

 

9

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

41,020

 

 

$

 

 

$

41,020

 

(1)

Restructuring and related charges include organizational consolidation costs of $3.7 million, severance costs of $1.5 million and professional services of $0.1 million.

(2)

Transaction costs include Circulation MIP and certain transaction-related expenses.

The Providence Service Corporation

Summary Financial Information of Equity Investment in Matrix Medical Network (1)

(in thousands)

(Unaudited)

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2020

 

2019

 

2020

 

2019

 

Revenue

$

140,728

 

 

$

71,663

 

 

$

292,699

 

 

$

210,807

 

 

Operating expense

94,509

 

 

63,021

 

 

213,219

 

 

177,603

 

 

Depreciation and amortization

10,730

 

 

11,282

 

 

30,406

 

 

33,746

 

 

Operating income (loss)

35,489

 

 

(2,640)

 

 

49,074

 

 

(542)

 

 

 

 

 

 

 

 

 

 

 

Interest expense

4,545

 

 

6,236

 

 

15,264

 

 

19,013

 

 

Provision (benefit) for income taxes

9,562

 

 

(1,970)

 

 

9,893

 

 

(4,501)

 

 

Net income (loss)

21,382

 

 

(6,906)

 

 

23,917

 

 

(15,054)

 

 

 

 

 

 

 

 

 

 

 

Interest

43.6

%

 

43.6

%

 

43.6

%

 

43.6

%

 

Net income (loss) - Equity Investment

9,318

 

 

(3,011)

 

 

10,423

 

 

(6,563)

 

 

Management fee and other

1,007

 

 

(177)

 

 

1,777

 

 

404

 

 

Equity in net income (loss) of investee

$

10,325

 

 

$

(3,188)

 

 

$

12,200

 

 

$

(6,159)

 

 

 

 

 

 

 

 

 

 

 

Cash

$

67,560

 

 

$

32,523

 

 

 

 

 

 

Total Debt (2)

$

322,575

 

 

$

325,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The results of our equity method investment are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.

(2)

Represents long-term debt, excluding deferred financing costs.

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA: Matrix Medical Network (1)

(in thousands) (Unaudited)

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

2020

 

2019

 

2020

 

2019

Revenue

$

140,728

 

 

$

71,663

 

 

$

292,699

 

 

$

210,807

 

Operating expense

94,509

 

 

63,021

 

 

213,219

 

 

177,603

 

Depreciation and amortization

10,730

 

 

11,282

 

 

30,406

 

 

33,746

 

Operating income (loss)

35,489

 

 

(2,640)

 

 

49,074

 

 

(542)

 

 

 

 

 

 

 

 

 

Interest expense

4,545

 

 

6,236

 

 

15,264

 

 

19,013

 

Provision (benefit) for income taxes

9,562

 

 

(1,970)

 

 

9,893

 

 

(4,501)

 

Net income (loss)

21,382

 

 

(6,906)

 

 

23,917

 

 

(15,054)

 

 

 

 

 

 

 

 

 

Depreciation and amortization

10,730

 

 

11,282

 

 

30,406

 

 

33,746

 

Interest expense

4,545

 

 

6,236

 

 

15,264

 

 

19,013

 

Provision (benefit) for income taxes

9,562

 

 

(1,970)

 

 

9,893

 

 

(4,501)

 

EBITDA

46,219

 

 

8,642

 

 

79,480

 

 

33,204

 

Management fees

2,169

 

 

501

 

 

3,838

 

 

1,798

 

Integration costs

 

 

 

 

 

 

1,488

 

Severance costs

286

 

 

771

 

 

1,223

 

 

771

 

Restructuring expense

3,781

 

 

 

 

3,781

 

 

 

COVID-19 related costs

1,507

 

 

 

 

6,599

 

 

 

Transaction costs

297

 

 

88

 

 

2,051

 

 

418

 

Adjusted EBITDA

$

54,259

 

 

$

10,002

 

 

$

96,972

 

 

$

37,679

 

(1)

Providence accounts for its proportionate share of Matrix's results using the equity method. Matrix's Adjusted EBITDA is not included within Providence's Adjusted EBITDA in any period presented.

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,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Income from continuing operations, net of tax

$

38,920

 

 

$

8,580

 

 

$

92,519

 

 

$

6,484

 

 

 

 

 

 

 

 

 

Restructuring and related charges (1)

969

 

 

901

 

 

3,277

 

 

5,686

 

Transaction costs (2)

3,579

 

 

950

 

 

4,700

 

 

5,288

 

Equity in net (income) loss of investee

(10,325)

 

 

3,188

 

 

(12,200)

 

 

6,159

 

Intangible amortization expense

4,884

 

 

1,559

 

 

10,219

 

 

4,676

 

Litigation expense, net

 

 

 

 

 

 

9

 

COVID-19 related costs

118

 

 

 

 

349

 

 

 

Tax impact of the CARES Act

 

 

 

 

(10,984)

 

 

 

Tax effected impact of adjustments

98

 

 

(1,868)

 

 

(1,733)

 

 

(6,989)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income

38,243

 

 

13,310

 

 

86,147

 

 

21,313

 

 

 

 

 

 

 

 

 

 

Dividends on convertible preferred stock

(27)

 

 

(1,109)

 

 

(1,988)

 

 

(3,295)

 

Income allocated to participating securities

(264)

 

 

(1,642)

 

 

(7,052)

 

 

(2,529)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income available to common stockholders

$

37,952

 

 

$

10,559

 

 

$

77,107

 

 

$

15,489

 

 

 

 

 

 

 

 

 

 

Adjusted earnings per share

$

2.69

 

 

$

0.81

 

 

$

5.75

 

 

$

1.19

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average number of common shares outstanding

14,133,904

 

 

13,004,449

 

 

13,415,344

 

 

12,977,598

 

(1)

Restructuring and related charges include severance, organizational consolidation costs and professional fees.

(2)

Transaction costs include the MIP related to the Circulation acquisition, acquisition costs related to Simplura and National MedTrans, and certain other transaction-related expenses.

 

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