Providence Service Corporation Reports Q3 2013 Results

TUCSON, Ariz., Nov. 6, 2013 /PRNewswire/ -- The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the third quarter ended September 30, 2013.   

For the third quarter of 2013, the Company reported revenue of $276.7 million, a decrease of 1% from $280.3 million in the comparable period of 2012.  Revenue from Providence's Non-emergency Transportation (NET) services segment decreased 2% to $192.0 million in the third quarter from $196.3 million in the prior year period.  The decrease was due primarily to the transition of the Connecticut contract from "at risk" to "administrative services only", and the voluntary termination of the Wisconsin contracts effective July 31, 2013. This decrease was partially offset by increased revenue related to continued expansion in California, membership growth in the New York City administrative contracts, and favorable rate adjustments in other states. Revenue from the Human Services segment, formerly known as the Social Services segment, increased 1% to $84.7 million from $84.0 million in the third quarter of 2012, primarily related to the impact of a new workforce development contract in Wisconsin which began in 2013.

Net income was $3.5 million, or $0.25 per diluted share, in the third quarter of 2013 compared to net income of $1.2 million, or $0.09 per diluted share in the prior year period.  The increase in net income was due primarily to improved margins in the NET Services segment. In addition, the results for third quarter of 2012 included an asset impairment charge of approximately $2.5 million, before taxes, related to our Canadian operations.  EBITDA (non-GAAP) for the third quarter of 2013 was $11.2 million compared to $9.0 million in the same period last year.  Adjusted EBITDA (non-GAAP) for the third quarter of 2013 was $11.7 million compared to $11.5 million in the same period last year.  A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below. 

The Company had approximately 16.0 million individuals eligible to receive services under its NET contracts at September 30, 2013, an increase of 8% from approximately 14.8 million at September 30, 2012.  Providence's direct Human Service client census was approximately 55,700, up 9% from 50,900 at September 30, 2012. 

For the first nine months of 2013, the Company reported revenue of $845.8 million, an increase of 3% from $819.4 million in the first nine months of 2012.  Revenue from Providence's NET services segment grew 6% to $583.0 million in the first nine months of 2013 from $549.8 million in the prior year period.  Revenue from the Human Services segment decreased 2% to $262.8 million, down from $269.5 million in the first nine months of 2012.

Net income was $16.1 million, or $1.17 per diluted share, in the first nine months of 2013.  This is an increase from net income of $5.6 million, or $0.42 per diluted share, in the first nine months of 2012.  EBITDA (non-GAAP) for the first nine months of 2013 was $43.2 million, representing a 59% increase from $27.2 million in the same period last year.  Adjusted EBITDA (non-GAAP) for the first nine months of 2013 was $44.2 million, representing an increase of 46% from $30.3 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 2013, the Company generated a total of $45.7 million in cash from operations.  At September 30, 2013, the Company had unrestricted cash and cash equivalents of $91.1 million as well as approximately $142.3 million available for borrowing under the recently amended and restated senior secured credit facility. Long-term obligations at September 30, 2013 were $123.5 million.

"We continue to show solid financial results year to date in 2013," said Warren Rustand, Chief Executive Officer. "Growth and profitability were driven by our NET Services segment, which is benefitting from the full period impact of new contract awards that began during 2012, as well as the termination of, or changes to, contracts that were not meeting our financial expectations." 

"Our Human Services segment experienced modest revenue growth in the third quarter due to a new workforce development contract that started up in 2013, as well as stabilization of the business following contract terminations related to our Canadian and tutoring businesses.  We will continue to focus our attention on expanding and improving the performance of our Human Services segment through operating efficiencies and both organic and acquisitive growth." 

"Overall, we are pleased with the progress the Company has made in 2013 to date and remain committed to initiatives that we set forth at the beginning of the year, primarily related to improving efficiencies.  As we look toward 2014 and beyond, we continue to believe that the impact of Medicaid expansion under the Affordable Care Act will create opportunities for us to serve a substantially larger population of currently underserved citizens.  Beyond Medicaid expansion, we continue to believe that general health care market trends, which include growing awareness of the need to coordinate physical and behavioral health care services and the importance of facilitated non-emergency access to preventative services, will position Providence to benefit from systemic market changes in the future."

Conference Call
Providence will hold a conference call at 11:00 a.m. EST (9:00 a.m. Arizona and MST and 8:00 a.m. PST) Thursday November 7, 2013 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 (800) 510-0146 or for international callers (617) 614-3449 and by using the passcode 94634423. A replay of the teleconference will be available on http://investor.provcorp.com. A replay will also be available until November 14, 2013 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 49143112.

About Providence
The Providence Service Corporation provides or manages the delivery of home and community based human services and NET management services to primarily government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.  Providence is unique in that it provides or manages its human services primarily in the client's own home or in community based settings rather than in hospitals or other treatment facilities and provides its NET management 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 55,700 clients at September 30, 2013, with approximately 16.0 million individuals eligible to receive the Company's non-emergency transportation services.  The Company had over $1.1 billion in revenues in 2012.

Non-GAAP Presentation
In addition to the financial results prepared in accordance with US generally accepted accounting principles (GAAP) provided throughout this press release, the Company has provided EBITDA and Adjusted EBITDA, non-GAAP measurements, which present its earnings on a pro forma basis. 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, 2012. 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--

SOURCE The Providence Service Corporation