Providence Service Corporation Releases Second Quarter Results
For the second quarter of 2008, the Company reported revenue of$173 million, an increase of approximately 178% from $62.3 million for thecomparable period in 2007. Revenue from Providence's social services segmentgrew approximately 26% to $78.4 million in the second quarter from the prioryear period and the revenue from its non-emergency transportation (NET)services segment, which the Company acquired in December 2007, totaled$94.6 million. Operating income grew approximately 68% to $10.1 million inthe second quarter as compared to $6.0 million recorded in the year agoperiod. Net income was $3.4 million, or $0.27 per diluted share, in thequarter ended June 30, 2008, in line with the Company's recently revisedguidance. In the year ago quarter, net income was $3.6 million, or $0.30 perdiluted share. As stated in the Company's release on July 29, 2008, lowerthan expected revenue and earnings per diluted share was largely due to delaysrelated to payer concerns over their 2008-2009 fiscal budgets. Providence'sdirect client census was approximately 52,000 at June 30, 2008, up fromapproximately 46,000 at June 30, 2007, and the Company had over six millionindividuals eligible to receive services under its NET contracts atJune 30, 2008. The Company had 531 direct contracts at June 30, 2008 up from515 at June 30, 2007.
Managed entity revenue, which represents revenue of the not-for-profitsocial services organizations the Company provides management and/oradministrative services to in return for a negotiated management fee,increased 9.2% to $62.7 million for the quarter ended June 30, 2008 from$57.4 million for the prior year period. Managed entity revenue is presentedto provide investors with an additional measure of the size of the operationsunder Providence's management or administration and can help investorsunderstand trends in management fee revenue. Managed client census grew tonearly 26,000 at June 30, 2008 as compared to approximately 24,500 at June 30,2007. Contracts of managed entities grew from 323 to 344 year over year.
For the first six months of 2008, revenue increased approximately 182% to$346.7 million from $122.8 million for the year ago period. Providence'ssocial services segment grew 27% to $156.5 million with the NET servicerevenue comprising the remaining $190.2 million. Operating income increasedapproximately 85% to $21.1 million for the six month period compared to $11.4million in the first six months of 2007. Net income was $7.1 million, or$0.56 per diluted share, for the six month period ended June 30, 2008 comparedto net income of $6.9 million, or $0.58 per fully diluted share, for the sixmonths ended June 30, 2007. Managed entity revenue was $124.1 million and$110.7 million in the first six months of 2008 and 2007, respectively.
"In our history, we have never experienced the level of payer confusionand anxiety over annual budgets that we have seen in the last several weeks,"said Fletcher McCusker, CEO. "Even in certain states that are no longer insession debating budgets, funds for the agencies that pay for the Company'sservices have yet to be allocated and other states, such as North Carolina andPennsylvania, have implemented reductions of authorized services andutilization constraints and have sought outside consultants, chiefly MercerHealth and Benefits LLC ("Mercer"), to help make recommendations about theirservice and funding delivery system. While this affects a small number of our43 state markets, it is having a material impact on our business in the shortterm. However, we believe the long term prospects for our business remainstrong as evidenced by the renewal of substantially all of our existingservice contracts, pending new procurements, and more stat
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