I still tear up a little by every time I think about the call order I didn't execute right before FY 13 earnings report.

(Still have received plentiful gifts from PRSC)

Jaysick, if it makes you feel any better, the spread was absolutely massive and the size very small. The specialists on this stock are terrified of selling options on it. You wouldn't have gotten much size.

Clearly a -EV trade if I would have made it.

Its quotes like this that make me just never want to sell the stock as long as Coliseum is running the show. When you invest in return focused capital allocators, you just get to sit back and enjoy the show:

CEO
While longer term we will look to opportunistically acquire additional companies, we are currently seeing higher returns deploying cash within our existing businesses on new contracts, new service lines and IT investments aimed at improving productivity. Ultimately, the decision to acquire versus invest in our current business is a capital allocation question and we will pursue the opportunities to generate the greatest returns for our shareholders.

New CFO:

One of the most important aspects, if not the most important aspect of my role, is the proper allocation of your capital across our portfolio and new potential verticals. So whether looking at IT CapEx at Matrix and LogistiCare, the underwriting of new contracts in Ingeus, bolt-on acquisitions at Human Services, or new potential verticals, proper capital allocation must be considered and our opportunities must be prioritized based upon return on capital thresholds, particularly with respect to the risk inherent in those new projects

Its that long term view and high return capital allocation focus that makes this a good long term hold, but may make things choppy in the short term. A few quick thoughts:

Said pro forma ebitda for 2014 would have been 159mm. Thats a nice sized number and makes sense given my initial 2015 ebitda target was around 170mm.

2015 ebitda may actually be down. It looks like revs should grow at around a blended 10% rate. However, part of that is Ingeous winning that department of Justice UK contract that they spoke about last call. Im sure thats a very profitable contract over its entire life, but short term it will mean a hit to ebitda of 15mm in 2015. Im assuming that comes back and drives profit in 2016. With their guidance for the rest of the divisions incorporated, im getting a small step down in ebitda in 2015 and then a big increase to 200mm in 2016. I think 2015 has to be a look through year for that reason.

Was nice to see strong NET business revs growth driven by increased obamacare enrollees. great year for that division, but margins that high wont repeat. Utilization was down (which is good for them) due to the newer people who are eligible not using the service as much. That changes over time.

Anyways, im getting something like $5 in eps in 2016 so easy to see this get to $70 in 1 year.

Though i think it goes without stating that the original thesis on PRSC has changed, Shackleton recently said it in the CFO hiring press release:

Chris Shackelton, Chairman of the Board, added, "On behalf of the board of directors, I am delighted to welcome Jim to Providence. His financial and operational expertise was integral to the successful turnaround of IES. As Providence continues its transition to a holding company, Jim's broad range of strategic and investment experience will be highly beneficial to our team, as we work to build shareholder value."

Obviously the recent acquisitions have sent a similar message but good to hear it straight from Shackleton on how we should view the company going forward.

Haven't seen any news does anyone have any idea what it's gotten hammered past couple days.

PRSC earnings look fine to me. NET segment revenue up nearly 30% yoy, human services saw margin improvement as well. Looks like the NET + Human Services did 7.8% adjusted ebitda margin in the quarter, well above their 6.5% original target.

On track for my forecast of 155mm ebitda this year and 200mm next year. will obviously change that after the conference call tomorrow, because its really hard to know what sort of margins ingeous may do next year when they aren't launching programs and instead in the sweet spot of them. 2016 fcf looks like it could be 6.00 a share but again, very early forecast.

thanks for the comments...added more below 41

saw the CFO buying stock in the market recently ($100k). Always nice to see. I have a feeling he will become the permanent CEO, he was the CEO at IESC before joining Providence. I could also see Shackleton staying on as permanent CEO as it seems PRSC is already a very decentralized organization and Shackleton would just be the capital allocator for the company, though i think Lindstrom could do that as well.

id rather shackleton stay as chairman. I didnt like the pref raise, they gave themselves way too generous terms and charged the company for it. normally shareholders get the right to over subscribe. here they changed to backstop the raise.

Any idea why theres this huge drop today? Almost 12%

i couldnt find anything.

Didn't look very hard, it's on the front page of PRSC's google finance.

Downgraded by analysts at Sidoti.

well yeah i just found it hard to believe that one analyst downgrading them from Buy to Neutral would cause the stock to drop 12%.

Well now - http://www.benzinga.com/news/15/09/5...ce-community-s

This is the gift that keeps on giving

Providence intends to use 50% of the net cash proceeds from the transaction to prepay certain loans under its existing credit facility. Subject to additional management evaluation of market and business conditions, share price and other factors and evaluation and approval by Providence's Board of Directors, the remaining net proceeds of the transaction may be used for acquisitions, investments in the long-term development of the Company's other segments and the return of capital to stockholders through a share buyback program, among other uses.


capital allocators at work.

They also settled at least part of that lawsuit related to the conver pref offering. You can read the background on the transaction in their latest filing. As I long suspected, Shackleton is using his analysts at his hedge fund to help PRSC evaluate all of their M&A deals. These guys are providing a lot of benefit to the company, makes me feel much better about them backstopping that rights offering.

Their annual meeting is in NYC in two weeks for anyone that is going to be out there.

Seems like they are selling off the human services business. It wasn't disclosed but my guess is the assets they are selling did 25mm in ebitda. So an 8x multiple which seems right.

According to my estimates, the remaining business is trading at 5.5x next years ebitda. And the division the sold had the worst growth and upside. So I think its fair to say the rest of the business is worth at least 8x ebitda. Gets you some serious upsde to the stock price. Hard to understand why this is still in the 40's

seems pretty clear to me that if the stock stays where it is, the company will be using $100m to buyback stock here. love it.

my quick napkin math was getting somewhere around $93/share intrinsic value if they do $175m ebitda in 2016, get an 8x multiple, and buyback $100m in stock at $48/share.

BC that seems high. Are you taking the 2mm dilutive shares of the prefs into account? Using your numbers gets me closer to $75.

My math is pretty simple. 2016 ebitda post the sale 168mm. total debt would be 75mm if the proceeds are only used to repay debt and taking into account free cashflow. diluted for prefs 18.5mm shares outstanding. (168*8 - 75)/18.5 = $68 or 45% upside from today assuming they dont buy back stock or do other accretive things.

stock wont move until people start to see the numbers though. Should happen as UK justice contract and Australian workforce development contract move from the startup phase to the profit phase. Both should do that next year and may make the flip in Q4.

Sorry used the wrong share count

Ahnuld -- any new thoughts post conf call?

Is this a long term (2017+) hold for you?

ya nothing new, a lot of startup costs this year in the WD division which should flip next year from drag to boon. Rev growth is really nice across all divisions. They did a good job selling their least attractive division for 8x ebitda and recycling the cash into debt paydowns and buybacks.