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8-K - FORM 8-K - ModivCare Incprsc20141104_8k.htm

Exhibit 99.1

 

 

 

 

AT THE COMPANY

AT CAMERON ASSOCIATES

Robert Wilson – Chief Financial Officer

Alison Ziegler 212/554-5469

520/747-6600

 

 

FOR IMMEDIATE RELEASE

 

Providence Service Corporation Reports Q3 2014 Results

 

Third Quarter Highlights:

 

Revenue increased 42.5% to $394.2 million

 

Adjusted EBITDA increased 15.9% to $13.6 million

 

Entered into agreement to acquire Matrix Medical Network

 

TUCSON, ARIZONA November 5, 2014 -- The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the third quarter ended September 30, 2014.

 

Third Quarter 2014 Results

For the third quarter of 2014, the Company reported consolidated revenue of $394.2 million, an increase of 42.5% from $276.7 million in the third quarter of 2013. Non-emergency transportation services (NET) revenue grew 17.7% to $226.1 million in the third quarter of 2014, from $192.0 million in the third quarter of 2013. Human services revenue increased 8.6% to $92.0 million, from $84.7 million in the third quarter of 2013. Revenues for workforce development services, relating to the operations of Ingeus Limited (“Ingeus”) which the Company acquired on May 30, 2014, were $76.2 million for the third quarter of 2014.

 

Net income was approximately $266,000, or $0.02 per diluted share, in the third quarter of 2014 compared to net income of $3.5 million, or $0.25 per diluted share, in the third quarter of 2013. Net income in the third quarter of 2014 included approximately $3.7 million in acquisition related costs primarily associated with the acquisition of CCHN Group Holdings, Inc., the parent company of Community Care Health Network, Inc. (d/b/a Matrix Medical Network) (“Matrix”), which closed on October 23, 2014, as well as approximately $3.3 million of compensation expense related to the immediate vesting of certain equity based compensation awards granted in the third quarter of 2014 and approximately $0.5 million of integration costs related primarily to Ingeus. EBITDA (non-GAAP) for the third quarter of 2014 was $9.9 million compared to $11.2 million in the third quarter of 2013. Adjusted EBITDA (non-GAAP) for the third quarter of 2014 increased 15.9% to $13.6 million compared to $11.7 million in the third quarter of 2013. A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below.

 

The Company had approximately 20.7 million individuals eligible to receive services under its NET Services contracts at September 30, 2014, an increase of 29.3% from approximately 16.0 million at September 30, 2013. Providence’s direct Human Services client census at September 30, 2014 was approximately 57,400, up 3.0% from 55,700 at September 30, 2013. Workforce Development client census at September 30, 2014 was approximately 232,000.

 

Year to Date 2014 Results

For the first nine months of 2014, the Company reported consolidated revenue of $1.0 billion, an increase of 21.5%, compared to $845.8 million in the first nine months of 2013. NET services revenue grew 9.8% to $640.4 million in the first nine months of 2014 from $583.0 million in the prior year period. Human services revenue increased 7.4% to $282.1 million, up from $262.8 million in the first nine months of 2013. Workforce development services revenue was $105.0 million, which related entirely to the inclusion of the Ingeus business.

 

--more—

 

 

 

64 E. Broadway Blvd. ● Tucson, Arizona 85701 ●Tel 520/747-6600 ●Fax 520/747-6605 ●www.provcorp.com

 

 
 

 

 

Providence Service Corporation

Page 2

 

Net income was $13.2 million, or $0.90 per diluted share, in the first nine months of 2014. This compares to net income of $16.1 million, or $1.17 per diluted share, in the first nine months of 2013. Net income in the first nine months of 2014 included approximately $8.0 million in acquisition related costs, primarily associated with the Ingeus and Matrix transactions, as well as approximately $3.3 million of compensation expense related to the immediate vesting of certain equity based compensation awards granted in the third quarter of 2014 and approximately $0.6 million of integration costs primarily related to Ingeus. EBITDA (non-GAAP) for the first nine months of 2014 was $44.3 million compared to $43.2 million in in the same period last year. Adjusted EBITDA (non-GAAP) for the first nine months of 2014 was $52.8 million, representing an increase of 19.4% from $44.2 million in the same period last year. A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below.

 

During the first nine months of 2014, the Company generated a total of $34.4 million in cash from operations.  At September 30, 2014, the Company had unrestricted cash and cash equivalents of $136.9 million as well as approximately $102.3 million available for borrowing under the amended and restated senior secured credit facility.  Long-term obligations at September 30, 2014 were $191.6 million.

 

“We are pleased to report our first complete quarter that includes the results of Ingeus, which comprises our new Workforce Development Services segment,” said Warren Rustand, Chief Executive Officer. “The integration of Ingeus is proceeding as planned and we continue to pursue new opportunities for international expansion.”

 

“In our legacy operations, our NET Services segment continues to produce increases in revenue while preserving favorable margins. In our Human Services segment, we are focusing on increasing our margins in certain markets. This initiative has resulted in our exit from the Texas foster care contract during the third quarter. We intend to continue to make additional progress in the quarters ahead.”

 

“In addition, during the third quarter of 2014 we entered into an agreement to acquire Matrix, a leading provider of health risk assessments, which we closed on October 23, 2014. We are excited to enter the Medicare Advantage market and believe our combined scale and collective capabilities will allow us to deliver even greater value to our patients, payers, and providers.”

 

Conference Call

Providence will hold a conference call at 11:00 a.m. EST (9:00 a.m. MST) Thursday, November 6, 2014 to discuss its financial results and corporate developments. Interested parties are invited to listen to the call live over the Internet at http://investor.provcorp.com. The call is also available by dialing (866) 510-0712, or for international callers (617) 597-5380, and by using the passcode 95294887. A replay of the teleconference will be available on http://investor.provcorp.com. A replay will also be available until November 13, 2014 by dialing (888) 286-8010 or (617) 801-6888 and using passcode 31893926.

 

About Providence

Providence is a Tucson, Arizona-based company that provides and manages government sponsored human services, innovative global employment services and non-emergency transportation services. It offers: (1) non-emergency transportation management services to state Medicaid programs, local government agencies, hospital systems, health maintenance organizations, private managed care organizations and commercial insurers, as well as to individuals with limited mobility, people with limited means of transportation, people with disabilities and Medicaid members (2) home- and community-based counseling services, which include home-based and intensive home-based counseling, workforce development, substance abuse treatment services, school support services and correctional services; (3) foster care and therapeutic foster care services; (4) case management, referral and monitoring services; and (5) social improvement, employment and welfare services to various international government bodies and corporations. Providence is unique in that it provides and manages its human services primarily in the client’s own home or in community based settings, rather than in hospitals or treatment facilities and provides its non-emergency transportation services through local transportation providers rather than an owned fleet of vehicles. The Company provides a range of services through its direct entities to approximately 57,400 and 232,000 human services and workforce development services clients, respectively, with approximately 20.7 million individuals eligible to receive the Company's non-emergency transportation services. Its workforce development services include nearly 180 delivery sites spanning 10 countries.

 

--more—

 

 
 

 

 

Providence Service Corporation

Page 3

 

 

Non-GAAP Presentation

In addition to the financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP) provided throughout this press release, the Company has provided EBITDA and Adjusted EBITDA, non-GAAP measurements. Providence’s management utilizes these non-GAAP measurements as a means to measure overall operating performance and to better compare current operating results with other companies within its industry. Details of the excluded items and a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measure are presented in the table below. The non-GAAP measures do not replace the presentation of our GAAP financial results. The Company has provided this supplemental non-GAAP information because the Company believes it provides meaningful comparisons of the results of Providence’s operations for the periods presented in this press release. The non-GAAP measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP measures used by some other companies.

 

 

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, the global credit crisis, capital market conditions, the implementation of the healthcare reform law, state budget changes and legislation and other risks detailed in Providence’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2014. 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.

 

 

 

 

--financial tables to follow--

 

 
 

 

 

Providence Service Corporation

Page 4

 

The Providence Service Corporation

Consolidated Statements of Income

(in thousands except share and per share data)

(UNAUDITED)

 

   

Three months ended

   

Nine months ended

 
   

September 30,

   

September 30,

 
   

2014

   

2013

   

2014

   

2013

 

Revenues:

                               

Non-emergency transportation services

  $ 226,055     $ 192,011     $ 640,428     $ 583,028  

Human services

    91,987       84,702       282,135       262,809  

Workforce development services

    76,176       -       105,012       -  

Total revenues

    394,218       276,713       1,027,575       845,837  
                                 

Operating expenses:

                               

Cost of non-emergency transportation services

    206,247       177,049       577,874       536,664  

Client service expense

    86,293       76,881       259,405       228,695  

Workforce development service expense

    66,707       -       91,130       -  

General and administrative expense

    25,100       11,082       54,881       36,265  

Depreciation and amortization

    8,034       3,725       16,906       11,188  

Asset impairment charge

    -       -       -       492  
                                 

Total operating expenses

    392,381       268,737       1,000,196       813,304  
                                 

Operating income

    1,837       7,976       27,379       32,533  
                                 

Other expense:

                               

Interest expense, net

    1,373       1,876       4,219       5,315  

Loss on extinguishment of debt

    -       525       -       525  
                                 

Income before income taxes

    464       5,575       23,160       26,693  
                                 

Provision for income taxes

    198       2,048       9,936       10,612  
                                 

Net income

  $ 266     $ 3,527     $ 13,224     $ 16,081  
                                 

Earnings per share:

                               

Basic

  $ 0.02     $ 0.26     $ 0.92     $ 1.20  

Diluted

  $ 0.02     $ 0.25     $ 0.90     $ 1.17  
                                 

Weighted-average number of common shares outstanding:

                               

Basic

    14,955,773       13,674,467       14,450,248       13,411,204  

Diluted

    15,176,105       14,049,329       14,723,360       13,711,124  

 

--more--

 

 
 

 

 

Providence Service Corporation

Page 5

 

The Providence Service Corporation

Consolidated Balance Sheets

(in thousands except share and per share data)

(UNAUDITED)

 

   

September 30,

   

December 31,

 
   

2014

   

2013

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 136,898     $ 98,995  

Accounts receivable, net of allowance of $5.5 million in 2014 and $4.2 million in 2013

    126,916       88,315  

Other receivables

    5,138       6,607  

Prepaid expenses and other

    25,073       11,831  

Restricted cash

    4,424       3,772  

Deferred tax assets

    3,228       2,152  

Total current assets

    301,677       211,672  

Property and equipment, net

    44,496       32,709  

Goodwill

    162,561       113,263  

Intangible assets, net

    118,753       43,476  

Other assets

    15,332       11,681  

Restricted cash, less current portion

    14,948       11,957  

Total assets

  $ 657,767     $ 424,758  

Liabilities and stockholders' equity

               

Current liabilities:

               

Current portion of long-term obligations

  $ 3,000     $ 48,250  

Accounts payable

    32,164       3,904  

Accrued expenses

    98,904       52,484  

Accrued transportation costs

    61,290       54,962  

Deferred revenue

    14,338       3,687  

Reinsurance liability reserve

    12,634       10,778  

Total current liabilities

    222,330       174,065  

Long-term obligations, less current portion

    188,600       75,250  

Other long-term liabilities

    59,338       15,359  

Deferred tax liabilities

    11,765       9,447  

Total liabilities

    482,033       274,121  

Commitments and contingencies

               

Stockholders' equity

               

Common stock: authorized 40,000,000 shares; $0.001 par value; 15,915,200 and 14,477,312 issued and outstanding (including treasury shares)

    16       14  

Additional paid-in capital

    220,388       194,363  

Accumulated deficit

    (20,417 )     (33,641 )

Accumulated other comprehensive income (loss), net of tax

    (6,601 )     (1,419 )

Treasury shares, at cost, 1,013,519 and 956,442 shares

    (17,663 )     (15,641 )

Total Providence stockholders' equity

    175,723       143,676  

Non-controlling interest

    11       6,961  

Total stockholders' equity

    175,734       150,637  

Total liabilities and stockholders' equity

  $ 657,767     $ 424,758  

 

--more--

 

 
 

 

 

Providence Service Corporation

Page 6

 

The Providence Service Corporation

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

   

Nine months ended

 
   

September 30,

 
   

2014

   

2013

 

Operating activities

               

Net income

  $ 13,224     $ 16,081  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation

    8,938       5,802  

Amortization

    7,968       5,386  

Provision for doubtful accounts

    1,770       2,570  

Stock based compensation

    5,375       2,402  

Deferred income taxes

    (3,814 )     1,395  

Amortization of deferred financing costs

    607       746  

Loss on extinguishment of debt

    -       525  

Excess tax benefit upon exercise of stock options

    (2,835 )     (999 )

Asset impairment charge

    -       492  

Other non-cash charges

    (465 )     352  

Changes in operating assets and liabilities, net of effects of acquisitions:

               

Accounts receivable

    (17,296 )     5,033  

Other receivables

    1,470       342  

Restricted cash

    168       (255 )

Prepaid expenses and other

    85       (6,031 )

Reinsurance liability reserve

    3,995       2,720  

Accounts payable and accrued expenses

    13,475       15,744  

Accrued transportation costs

    6,328       (4,906 )

Deferred revenue

    628       (1,792 )

Other long-term liabilities

    (5,249 )     52  

Net cash provided by operating activities

    34,372       45,659  

Investing activities

               

Acquisitions, net of cash acquired

    (59,666 )     -  

Purchase of property and equipment

    (11,623 )     (6,413 )

Net increase in short-term investments

    (14 )     (23 )

Restricted cash for reinsured claims losses

    (3,812 )     (5,040 )

Net cash used in investing activities

    (75,115 )     (11,476 )

Financing activities

               

Repurchase of common stock, for treasury

    (501 )     (454 )

Proceeds from common stock issued pursuant to stock option exercise

    10,880       9,244  

Excess tax benefit upon exercise of stock options

    2,835       999  

Proceeds from long-term debt

    115,000       76,000  

Repayment of long-term debt

    (47,500 )     (82,500 )

Debt financing costs

    (728 )     (2,083 )

Capital lease payments and other

    36       (8 )

Net cash provided by financing activities

    80,022       1,198  

Effect of exchange rate changes on cash

    (1,376 )     (141 )

Net change in cash

    37,903       35,240  

Cash at beginning of period

    98,995       55,863  

Cash at end of period

  $ 136,898     $ 91,103  

 

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Providence Service Corporation

Page 7                                                       

 

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA

(in thousands)

(Unaudited)

 

   

Three months ended

   

Nine months ended

 
   

September 30,

   

September 30,

 
   

2014

   

2013

   

2014

   

2013

 
                                 

Net income

  $ 266     $ 3,527     $ 13,224     $ 16,081  
                                 

Interest expense, net

    1,373       1,876       4,219       5,315  

Provision for income taxes

    198       2,048       9,936       10,612  

Depreciation and amortization

    8,034       3,725       16,906       11,188  
                                 

EBITDA

    9,871       11,176       44,285       43,196  
                                 

Acquisition related costs

    3,686       -       8,010       -  

Loss on extinguishment of debt

    -       525       -       525  

Asset impairment charge

    -       -       -       492  

Payments related to termination of executive officers, net (a)

    -       -       511       -  
                                 

Adjusted EBITDA

  $ 13,557     $ 11,701     $ 52,806     $ 44,213  

 

 

(a)

Net of benefit of forfeiture of stock based compensation.

 

 

 

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