TABLE OF CONTENTS



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PART I—FINANCIAL INFORMATION

Item 1.			Financial Statements		4

			Unaudited Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2017 (unaudited)~~2023 and December 31, ~~2016~~2022		4

			Unaudited Condensed Consolidated Statements of ~~Income~~Operations – Three and ~~nine~~six months ended ~~September 30, 2017~~June 3 0 , 2023 and ~~2016~~2022		5

			~~Unaudited Condensed Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2017 and 2016~~	6

	Unaudited Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six months ended ~~September 30, 2017~~June 3 0 , 2023 and ~~2016~~2022	76

			Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Six months ended June 30, 2023 and 2022		8

			Notes to the Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~June 3 0 , 2023		89

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2426

Item 3.			Quantitative and Qualitative Disclosures About Market Risk		3943

Item 4.			Controls and Procedures		4043

PART II—OTHER INFORMATION

Item 1.			Legal Proceedings		4145

Item 1A.			Risk Factors		4145

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4246

Item 3.			Defaults Upon Senior Securities		4346

Item 4.			Mine Safety Disclosures		4346

Item 5.5 .			Other Information		4346

Item 6.			Exhibits		4347

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

~~The Providence Service Corporation~~ModivCare Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	6,898	$	14,451
Accounts receivable, net of allowance of $1,993 and $2,078, respectively	224,013		223,210
Contract receivables	119,763		71,131
Other receivables	2,295		2,506
Prepaid expenses and other current assets	39,412		34,332
Restricted cash	568		524
Total current assets	392,949		346,154
Property and equipment, net	78,922		69,138
Goodwill	785,554		968,654
Payor network, net	361,454		391,980
Other intangible assets, net	38,833		47,429
Equity investment	45,114		41,303
Operating lease right-of-use assets	39,301		39,405
Other assets	42,893		40,209
Total assets	$	1,785,020	$	1,944,272
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	56,047	$	54,959
Accrued contract payables	109,094		194,287
Accrued transportation costs	94,118		96,851
Accrued expenses and other current liabilities	138,178		135,860
Current portion of operating lease liabilities	9,298		9,640
Short-term borrowings	126,500		—
Total current liabilities	533,235		491,597
Long-term debt, net of deferred financing costs of $18,474 and $20,639, respectively	981,526		979,361
Deferred tax liabilities	46,972		57,236

Operating lease liabilities, less current portion	32,396		32,088
Other long-term liabilities	29,450		29,434
Total liabilities	1,623,579		1,589,716
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 19,767,368 and 19,729,923, respectively, issued and outstanding (including treasury shares)	20		20
Additional paid-in capital	446,694		444,255
Retained earnings (accumulated deficit)	(14,883)		180,023
Treasury shares, at cost, 5,574,793 and 5,573,529 shares, respectively	(270,390)		(269,742)
Total stockholders’ equity	161,441		354,556
Total liabilities and stockholders’ equity	$	1,785,020	$	1,944,272

See accompanying notes to the unaudited condensed consolidated financial statements.

September 30,
2017 December 31,
2016
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 92,178
$ 72,262
Accounts receivable, net of allowance of $5,765 in 2017 and $5,901 in 2016 175,162
162,115
Other receivables 5,555
12,639
Prepaid expenses and other 39,083
37,895
Restricted cash 1,198
3,192
Total current assets 313,176
288,103
Property and equipment, net 48,191
46,220
Goodwill 121,555
119,624
Intangible assets, net 45,750
49,124
Equity investments 157,067
161,363
Other assets 12,911
8,397
Restricted cash, less current portion 5,902
10,938
Deferred tax asset 4,436
1,510
Total assets $ 708,988
$ 685,279
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
Current portion of long-term obligations $ 1,528
$ 1,721
Accounts payable 19,921
22,177
Accrued expenses 103,397
102,381
Accrued transportation costs 101,195
72,356
Deferred revenue 17,421
20,522
Reinsurance and related liability reserves 4,881
8,639
Total current liabilities 248,343
227,796
Long-term obligations, less current portion 566
1,890
Other long-term liabilities 23,968
22,380
Deferred tax liabilities 54,363
57,973
Total liabilities 327,240
310,039
Commitments and contingencies (Note 11)

Redeemable convertible preferred stock
Convertible preferred stock, net: Authorized 10,000,000 shares; $0.001 par value; 803,232 and 803,398 issued and outstanding; 5.5%/8.5% dividend rate 77,549
77,565
Stockholders' equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 17,446,673 and 17,315,661 issued and outstanding (including treasury shares) 17
17
Additional paid-in capital 310,017
302,010
Retained earnings 167,004
156,718
Accumulated other comprehensive loss, net of tax (26,331 ) (33,449 )
Treasury shares, at cost, 3,944,171 and 3,478,676 shares (144,201 ) (125,201 )
Total Providence stockholders' equity 306,506
300,095
Noncontrolling interest (2,307 ) (2,420 )
Total stockholders' equity 304,199
297,675
Total liabilities, redeemable convertible preferred stock and stockholders' equity $ 708,988
$ 685,279

ModivCare Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Service revenue, net	$	699,107	$	628,215	$	1,361,413	$	1,202,690
Grant income (Note 2)	2,634		3,330		4,098		3,798

Operating expenses:
Service expense	589,255		504,230		1,139,521		963,545
General and administrative expense	79,240		79,411		158,953		156,219
Depreciation and amortization	25,909		24,758		51,602		48,704
Impairment of goodwill	183,100		—		183,100		—
Total operating expenses	877,504		608,399		1,533,176		1,168,468

Operating income (loss)	(175,763)		23,146		(167,665)		38,020

Interest expense, net	16,967		15,472		32,925		30,872
Income (loss) before income taxes and equity method investment	(192,730)		7,674		(200,590)		7,148
Income tax (provision) benefit	830		(2,291)		2,703		(1,930)
Equity in net income (loss) of investee, net of tax	956		(2,055)		2,981		(1,572)
Net income (loss)	$	(190,944)	$	3,328	$	(194,906)	$	3,646

Earnings (loss) per common share:
Basic	$	(13.47)	$	0.24	$	(13.76)	$	0.26
Diluted	$	(13.47)	$	0.24	$	(13.76)	$	0.26

Weighted-average number of common shares outstanding:
Basic	14,170,617		14,047,459		14,162,776		14,035,588
Diluted	14,170,617		14,115,471		14,162,776		14,122,730

See accompanying notes to the unaudited condensed consolidated financial ~~statements~~

~~The Providence Service Corporation~~

~~Unaudited Condensed Consolidated Statements of Income~~

~~(in thousands except share and per share data)~~statements.

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Service revenue, net $ 409,517
$ 412,271
$ 1,216,994
$ 1,192,426

Operating expenses:
Service expense 378,032
378,488
1,124,478
1,095,011
General and administrative expense 18,629
17,320
53,705
52,548
Depreciation and amortization 6,547
6,670
19,716
20,058
Total operating expenses 403,208
402,478
1,197,899
1,167,617

Operating income 6,309
9,793
19,095
24,809

Other expenses:
Interest expense, net 302
338
983
1,239
Equity in net (gain) loss of investees 460
1,517
991
5,693
Gain on sale of equity investment (12,606 ) —
(12,606 ) —
Loss (gain) on foreign currency transactions 200
(482 ) 600
(1,332 )
Income from continuing operations before income taxes 17,953
8,420
29,127
19,209
Provision for income taxes 2,989
4,678
8,391
12,466
Income from continuing operations, net of tax 14,964
3,742
20,736
6,743
Discontinued operations, net of tax (16 ) (2,791 ) (6,000 ) 332
Net income 14,948
951
14,736
7,075
Net loss (income) attributable to noncontrolling interests (95 ) (301 ) (295 ) 433
Net income attributable to Providence $ 14,853
$ 650
$ 14,441
$ 7,508

Net income (loss) available to common stockholders (Note 9) $ 11,962
$ (745 ) $ 8,927
$ 3,697

Basic earnings (loss) per common share:
Continuing operations $ 0.88
$ 0.14
$ 1.10
$ 0.23
Discontinued operations —
(0.19 ) (0.44 ) 0.02
Basic earnings (loss) per common share $ 0.88
$ (0.05 ) $ 0.66
$ 0.25

Diluted earnings (loss) per common share:
Continuing operations $ 0.88
$ 0.14
$ 1.09
$ 0.23
Discontinued operations —
(0.19 ) (0.44 ) 0.02
Diluted earnings (loss) per common share $ 0.88
$ (0.05 ) $ 0.65
$ 0.25

Weighted-average number of common shares outstanding:
Basic 13,581,662
14,523,408
13,612,764
14,823,757
Diluted 13,655,554
14,634,483
13,676,468
14,943,024

~~See accompanying notes to the unaudited condensed consolidated financial statements~~

~~The Providence Service Corporation~~

~~Unaudited Condensed Consolidated Statements of Comprehensive Income~~

~~(in thousands)~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Net income $ 14,948
$ 951
$ 14,736
$ 7,075
Net loss (income) attributable to noncontrolling interest (95 ) (301 ) (295 ) 433
Net income attributable to Providence 14,853
650
14,441
7,508
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax 2,165
(2,808 ) 6,591
(11,140 )
Reclassification of translation loss realized upon sale of equity investment 527
—
527
—
Other comprehensive income (loss): 2,692
(2,808 ) 7,118
(11,140 )
Comprehensive income (loss) 17,640
(1,857 ) 21,854
(4,065 )
Comprehensive loss (income) attributable to noncontrolling interest (26 ) (266 ) (113 ) 378
Comprehensive income (loss) attributable to Providence $ 17,614
$ (2,123 ) $ 21,741
$ (3,687 )

~~See accompanying notes to the unaudited condensed consolidated financial statements~~

~~The Providence Service Corporation~~ModivCare Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine months ended September 30,
2017 2016
Operating activities
Net (loss) income $ 14,736
$ 7,075
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 13,802
17,039
Amortization 5,914
24,140
Provision for doubtful accounts 1,258
2,196
Stock-based compensation 4,586
3,204
Deferred income taxes (7,062 ) (15,446 )
Amortization of deferred financing costs and debt discount 516
1,573
Equity in net loss of investees 991
5,693
Gain on sale of equity investment (12,606 ) —
Other non-cash charges (credits) 555
(1,279 )
Changes in operating assets and liabilities:
Accounts receivable (10,647 ) (22,116 )
Prepaid expenses and other 7,517
(9,900 )
Reinsurance and related liability reserve (4,924 ) 984
Accounts payable and accrued expenses (3,407 ) 32,530
Income taxes payable on sale of business —
(30,153 )
Accrued transportation costs 28,839
31,935
Deferred revenue (4,537 ) (7,460 )
Other long-term liabilities 1,399
5,242
Net cash provided by operating activities 36,930
45,257
Investing activities
Purchase of property and equipment (15,293 ) (33,928 )
Net increase from short-term investments 300
242
Equity investments —
(6,381 )
Cost method investments (3,000 ) —
Loan to joint venture (566 ) —
Repayment of loan from joint venture 576
—
Proceeds from sale of equity investment 15,823
—
Restricted cash for reinsured claims losses and other 7,029
4,917
Net cash provided by (used in) investing activities 4,869
(35,150 )
Financing activities
Preferred stock dividends (3,305 ) (3,309 )
Repurchase of common stock, for treasury (18,763 ) (53,214 )
Proceeds from common stock issued pursuant to stock option exercise 1,528
4,099
Performance restricted stock surrendered for employee tax payment (96 ) —
Repayment of long-term debt —
(23,250 )
Proceeds from long-term debt —
43,500
Capital lease payments and other (1,711 ) (47 )
Net cash used in financing activities (22,347 ) (32,221 )
Effect of exchange rate changes on cash 464
(39 )
Net change in cash and cash equivalents 19,916
(22,153 )
Cash and cash equivalents at beginning of period 72,262
84,770
Cash and cash equivalents at end of period $ 92,178
$ 62,617

Supplemental cash flow information:
Cash paid for interest $ 776
$ 8,873
Cash paid for income taxes $ 14,804
$ 50,037
Prepaid financing and subsidiary stock issuance costs $ —
$ 1,049
Accrued unfunded future equity investment capital contributions $ —
$ 1,590
Purchase of equipment through capital lease obligation $ —
$ 809


	Six months ended June 30,
	2023		2022
Operating activities
Net income (loss)	$	(194,906)	$	3,646
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	11,893		9,453
Amortization	39,709		39,251
Stock-based compensation	2,286		4,496
Deferred income taxes	(10,264)		(14,493)
Impairment of goodwill	183,100		—
Amortization of deferred financing costs and debt discount	2,576		2,651
Other assets	(2,684)		(9,146)
Equity in net (income) loss of investee	(4,137)		2,358
Reduction of right-of-use assets	6,951		5,757
Changes in operating assets and liabilities:
Accounts receivable and other receivables	(268)		(15,869)
Contract receivables	(48,631)		(22,018)
Prepaid expenses and other current assets	(5,116)		12,392
Accrued contract payables	(85,193)		152
Accounts payable and accrued expenses	3,406		785
Accrued transportation costs	(2,733)		27,988
Other long-term liabilities	(6,863)		3,803
Net cash provided by (used in) operating activities	(110,874)		51,206
Investing activities
Purchase of property and equipment	(22,265)		(15,899)
Acquisition, net of cash acquired	—		(78,861)
Net cash used in investing activities	(22,265)		(94,760)
Financing activities
Proceeds from short-term borrowings	126,500		—
Payment of debt issuance costs	(376)		(2,415)
Proceeds from common stock issued pursuant to stock option exercise	31		1,138
Restricted stock surrendered for employee tax payment	(840)		(607)
Other financing activities	315		—
Net cash provided by (used in) financing activities	125,630		(1,884)
Net change in cash, cash equivalents and restricted cash	(7,509)		(45,438)
Cash, cash equivalents and restricted cash at beginning of period	14,975		133,422
Cash, cash equivalents and restricted cash at end of period	$	7,466	$	87,984

See accompanying notes to the unaudited condensed consolidated financial ~~statements~~

statements.

~~The Providence Service Corporation~~

ModivCare Inc.

Unaudited Supplemental Cash Flow Information

(in thousands)


	Six months ended June 30,
Supplemental cash flow information	2023		2022
Cash paid for interest	$	30,430	$	30,840
Cash paid for income taxes	$	3,135	$	2,017
Assets acquired under operating leases	$	6,847	$	2,333
Acquisition:
Purchase price	$	—	$	79,188
Less:
Cash acquired	—		327
Acquisition, net of cash acquired	$	—	$	78,861

See accompanying notes to the unaudited condensed consolidated financial statements.

ModivCare Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)


	Six months ended June 30, 2023

	Common Stock			Additional		Retained Earnings		Treasury Stock
	Shares	Amount		Paid-In Capital		(Accumulated Deficit)		Shares	Amount		Total
Balance at December 31, 2022	19,729,923	$	20	$	444,255	$	180,023	5,573,529	$	(269,742)	$	354,556
Net loss	—	—		—		(3,962)		—	—		(3,962)
Stock-based compensation	—	—		1,039		—		—	—		1,039

Restricted stock issued	24,903	—		—		—		—	—		—
Restricted stock surrendered for employee tax payment	—	—		—		—		6,000	(620)		(620)
Shares issued for bonus settlement and director stipends	1,006	—		85		—		—	—		85
Balance at March 31, 2023	19,755,832	$	20	$	445,379	$	176,061	5,579,529	$	(270,362)	$	351,098
Net loss	—	—		—		(190,944)		—	—		(190,944)
Stock-based compensation	—	—		1,021		—		—	—		1,021
Exercise of employee stock options	549	—		31		—		—	—		31
Restricted stock issued	9,116	—		—		—		—	—		—
Restricted stock surrendered for employee tax payment	—	—		—		—		3,138	(221)		(221)
Shares issued for bonus settlement and director stipends	1,871	—		85		—		—	—		85
Shares issued for ESPP	—	—		178		—		(7,874)	193		371
Balance at June 30, 2023	19,767,368	$	20	$	446,694	$	(14,883)	5,574,793	$	(270,390)	$	161,441


	Six months ended June 30, 2022

	Common Stock			Additional		Retained		Treasury Stock
	Shares	Amount		Paid-In Capital		Earnings		Shares	Amount		Total
Balance at December 31, 2021	19,589,422	$	20	$	430,449	$	211,829	5,568,983	$	(269,031)	$	373,267
Net income	—	—		—		318		—	—		318
Stock-based compensation	—	—		1,963		—		—	—		1,963
Exercise of employee stock options	20,683	—		1,138		—		—	—		1,138
Restricted stock issued	16,306	—		—		—		—	—		—
Restricted stock surrendered for employee tax payment	—	—		—		—		5,179	(572)		(572)
Shares issued for bonus settlement and director stipends	732	—		86		—		—	—		86
Balance at March 31, 2022	19,627,143	$	20	$	433,636	$	212,147	5,574,162	$	(269,603)	$	376,200
Net income	—	—		—		3,328		—	—		3,328
Stock-based compensation	—	—		2,363		—		—	—		2,363
Exercise of employee stock options	16	—		—		—		—	—		—
Restricted stock forfeited	(551)	—		—		—		—	—		—
Restricted stock surrendered for employee tax payment	—	—		—		—		322	(36)		(36)
Shares issued for bonus settlement and director stipends	1,000	—		85		—		—	—		85
Balance at June 30, 2022	19,627,608	$	20	$	436,084	$	215,475	5,574,484	$	(269,639)	$	381,940

See accompanying notes to the unaudited condensed consolidated financial statements.

ModivCare Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

~~September~~June 30, ~~2017~~

~~(in thousands except years, share and per share data)~~2023

1. Organization and Basis of Presentation

Description of Business

~~The Providence Service Corporation (“we”,~~ModivCare Inc. ("ModivCare" or the ~~“Company” or “Providence”~~"Company")~~, through its subsidiaries and other companies in which it owns interests,~~ is ~~primarily engaged in the provision~~a technology-enabled healthcare services company that provides a suite of ~~healthcare and workforce development services~~integrated supportive care solutions for public and private ~~sector entities seeking~~payors and their members. Its value-based solutions address the social determinants of health, or SDoH, connect members to ~~control~~care, help health plans manage risks, reduce costs, and ~~promote positive~~improve outcomes. ~~The subsidiaries and other companies in which the Company holds interests comprise the following segments:~~

~~Non-Emergency Transportation Services (“NET Services”) – Nationwide~~ModivCare is a provider of non-emergency medical transportation, ~~programs for state governments~~or NEMT, personal care, and ~~managed~~remote patient monitoring, or RPM, solutions, which serve similar, highly vulnerable patient populations. The technology-enabled operating model in its NEMT segment includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transportation management. Additionally, its personal care ~~organizations.~~services include placements of non-medical personal care assistants, home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting. ModivCare’s remote patient monitoring services include personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. ModivCare is further expanding its offerings to include meal delivery and working with communities to provide meals to food-insecure individuals.

Workforce Development Services (“WD Services”) – Global provider of employment preparation and placement and legal offender rehabilitation services to eligible participants of government sponsored programs.

~~Matrix Investment – Minority~~ModivCare also holds a 43.6% minority interest in ~~nationwide provider~~CCHN Group Holdings, Inc. and its subsidiaries, which operates under the Matrix Medical Network brand (“Matrix”). Matrix, which is included in our Corporate and Other segment, maintains a national network of community-based clinicians who deliver in-home and on-site services, and a fleet of mobile health clinics that provide community-based care ~~optimization~~with advanced diagnostic capabilities and ~~management solutions, including comprehensive health assessments, to members of managed~~enhanced care ~~organizations, accounted for as an equity method investment.~~options.

Basis of Presentation

The Company follows accounting standards ~~set~~established by the Financial Accounting Standards Board (“FASB”). The FASB establishes accounting principles generally accepted in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. References to GAAP issued by ~~the~~ FASB in these ~~footnotes~~notes are to the FASB Accounting Standards Codification (“ASC”), which serves as the single source of authoritative ~~non-SEC~~ accounting and applicable reporting standards to be applied byfor non-governmental entities. All amounts are presented in ~~United States (“~~U.S.”) dollars unless otherwise noted.

The ~~Company’s~~accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for the fair presentation of the results of the interim periods have been included.

The Company has made estimates relating to the reporting of assets and liabilities, revenues and expenses, and certain disclosures ~~to prepare~~in the preparation of these unaudited condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017.~~2023. Management has evaluated events and transactions that occurred after the balance sheet date and through the date these unaudited condensed consolidated financial statements were filed with the SEC and considered the effect of such events in the preparation of these unaudited condensed consolidated financial statements.

The unaudited condensed consolidated balance sheet at December 31, ~~2016~~2022 included in this Form 10-Q has been derived from ~~the~~ audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements contained herein should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

~~The Company holds investments that are accounted~~Reclassifications: Certain prior year amounts have been reclassified to conform to current year presentation.

Impact of the COVID-19 Pandemic

On May 11, 2023, the Department of Health and Human Services ("HHS") declared the end of the public health emergency ("PHE") for ~~using~~ the ~~equity method. The Company does not control the decision-making process or business management practices of these affiliates.~~COVID-19 pandemic. While the Company has ~~access~~continued to ~~certain information~~experience increased trip volume,

service hours, and ~~performs certain procedures~~patient visits each year following the pandemic, structural changes in the industry as a result of the pandemic, predominantly related to ~~review~~an increase in the ~~reasonableness~~utilization of ~~information,~~telehealth and virtual care, as well as ongoing constraints on the labor market, specifically related to the strain on healthcare professionals, could continue to have an adverse impact on the Company's financial statements. The Company continues to actively monitor the structural changes to the industry and the impact these have on our business and results of operations with emphasis on protecting the health and safety of its employees, maximizing the availability of its services and products to support SDoH, and supporting the operational and financial stability of its business.

Federal, state, and local authorities have taken several actions designed to assist healthcare providers in providing care to COVID-19 and other patients and to mitigate the adverse economic impact of the COVID-19 pandemic. Legislative actions taken by the federal government include the CARES Act and the American Rescue Plan Act of 2021 ("ARPA"). Through the CARES Act, the federal government has authorized payments to be distributed to healthcare providers through the Public Health and Social Services Emergency Fund ("Provider Relief Fund" or "PRF"). Through ARPA the Coronavirus State and Local Fiscal Recovery Fund ("SLFRF") was established to send relief payments to state and local governments impacted by the pandemic to assist with responding to the PHE including the economic hardships that continue to impact communities and to respond to workers performing essential work during the COVID-19 PHE, including providers. These funds are not subject to repayment, provided we are able to attest to and comply with any terms and conditions of such funding, as applicable. As a result of the end of the PHE, the Company ~~relies on management~~expects funding related to these acts to decrease in future periods. See discussion of these affiliates to provide accurate financial information prepared in accordance with GAAP. The Company receives audit reports relating to such financial information from the affiliates’ independent auditors on an annual basis. The Company is not aware of any errors in or possible misstatements of the financial information provided by its equity affiliates that would have a material effect on the Company’s condensed consolidated financial statements.

~~Reclassifications~~

We have reclassified certain amounts relating to our prior period results to conform to our current period presentation. On October 19, 2016, affiliates of Frazier Healthcare Partners purchased a 53.2% equity interest in CCHN Group Holdings, Inc. and its subsidiaries (“Matrix”) with Providence retaining a 46.8% equity interest (the “Matrix Transaction”). Prior to the closing of the Matrix Transaction, the financial results of Matrix were included in the Company’s Health Assessment Services (“HA Services”) segment. Operating results for this segment are reported as discontinued operations, net of tax in the condensed consolidated statements ofgrant income ~~for the three and nine months ended September 30, 2016. See Note 13,~~ ~~Discontinued Operations,~~ ~~for further information~~. ~~See~~at Note 2, Significant Accounting Policies and Recent Accounting Pronouncements~~, for additional information on other reclassifications.~~.

2. Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

The ~~Company adopted~~preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the ~~following accounting pronouncements during the nine months ended September 30, 2017:~~

~~In November 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-17,~~ ~~Income Taxes (Topic 740): Balance Sheet Classification~~reported amounts of ~~Deferred Taxes~~ (“ASU 2015-17”), which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities, ~~as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies,~~including disclosure of contingencies, at the ~~amendments are effective for~~date of the financial statements ~~issued for annual periods beginning after December 16, 2016,~~ and ~~interim periods within~~the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those ~~annual periods.~~ estimates.

Fair Value Measurements

The Company ~~adopted ASU 2015-17 retrospectively~~follows FASB ASC Topic 820, Fair Value Measurement (“ASC 820”) which establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on ~~January 1, 2017, which resulted~~the observability of the inputs employed in the ~~reclassification~~measurement. The three levels based on the observability of ~~the December 31, 2016 deferred tax assets-current balance of $6,825 and non-current deferred tax assets of $2,493 to long-term deferred tax liabilities~~inputs are defined as follows:

–Level 1: Quoted Prices in ~~the amount of $9,318.~~

~~In March 2016, the FASB issued ASU No. 2016-07,~~ ~~Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition~~Active Markets for Identical Assets – inputs to the ~~Equity Method of Accounting~~ ~~(“ASU 2016-07”). ASU 2016-07 eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase~~valuation methodology are quoted prices in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 instead specifies that the investor should add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and apply the equity method of accountingactive markets as of the measurement date for identical assets or liabilities.

–Level 2: Significant Other Observable Inputs – inputs to the ~~investment became qualified~~valuation methodology are based upon quoted prices for ~~equity method accounting. ASU 2016-07~~similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

–Level 3: Significant Unobservable Inputs – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is ~~effective~~based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. As of June 30, 2023 and December 31, 2022, the carrying amount for ~~all entities~~cash and cash equivalents, accounts receivable (net of allowance for ~~fiscal years,~~credit losses) and interim periods within those fiscal years, beginning after December 15, 2016 and should be applied prospectively. The Company adopted ASU 2016-07 on January 1, 2017. The adoption of ASU 2016-07 had no impact on the Company’s financial statementscurrent liabilities was equal to or ~~disclosures.~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ ~~(“ASU 2016-09”). ASU 2016-09 is intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards~~approximated fair value due to their ~~employees. Several aspects of the accounting~~short-term nature or proximity to current market rates. Fair values for ~~share-based payment award transactions~~our publicly traded debt securities are simplified, including income tax consequences, classification of awards as either equity or liabilities and classification in the statement of cash flows. For public companies, the amendments are effectivebased on quoted market prices, when available. See Note 9, Debt, for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2016-09 on January 1, 2017, and elected to recognize forfeitures as they occur. As a result, the Company recorded a cumulative effect adjustment of $850 to retained earnings as of January 1, 2017. Upon adoption, all excess tax benefits and tax deficiencies related to employee share-based payments are recognized through income tax expense prospectively. For the three and nine months ended September 30, 2017, the Company recorded excess tax deficiencies of $261 and $148, respectively, as an increase to the provision for income taxes. The Company excluded the related tax benefits when applying the treasury stock method for computing diluted shares outstanding on a prospective basis resulting in a decrease in diluted weighted average shares outstanding of 4,779 and 7,451 shares, respectively, for the three and nine months ended September 30, 2017.

Goodwill and Intangible Assets

In accordance with ASC 350, Intangibles-Goodwill and Other, the ~~award at~~Company reviews goodwill for impairment annually, and more frequently if events and circumstances indicate that an asset may be impaired. Such circumstances could include, but are not limited to: (1) the ~~grant date. For example, no shares will be distributed under~~loss or modification of significant contracts, (2) a significant adverse change in legal

factors or in business climate, (3) unanticipated competition, (4) an adverse action or assessment by a regulator, or (5) a significant decline in the Company’s ~~2015 Holding Company LTI Program (the “HoldCo LTIP”) unless the volume weighted average of Providence’s~~ stock price over a 90-day period ending on December 31, 2017 exceeds $56.79. If this market condition is not satisfied, a significant tax shortfall will result, causing an adverse impact on our tax provision.price.

The Company elected to apply the change in classification of cash flows resulting from excess tax benefits or deficiencies on a retrospective basis. This resulted in an increase in cash flows provided by operating activities of $276 and an increase of $276 in cash flows used in financing activities in the condensed consolidated statement of cash flowsWhen evaluating goodwill for the nine months ended September 30, 2016. Additionally, ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows, which is howimpairment, the Company ~~has historically classified these amounts.~~

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805):Clarifying the Definition of a Business~~ ~~(“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance~~first performs qualitative assessments for each reporting unit to ~~assist entities with evaluating~~determine whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01it is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted ASU 2017-01 on April 1, 2017. The adoption of ASU 2017-01 had no impact on the Company’s financial statements or disclosures.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment~~ ~~(“ASU 2017-04”)~~. ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparingmore likely than not that the fair value of a reporting unit ~~with~~is less than its carrying ~~amount~~value. If the qualitative assessment suggests that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative assessment and ~~should recognize~~compares the fair value of the reporting unit to its carrying value and to the extent the carrying value is greater than the fair value, the difference is recorded as an impairment ~~charge~~in the consolidated statements of operations.

In connection with the 2023 annual assessment of goodwill, the Company changed the date of its annual assessment from October 1 to July 1. During the second quarter of 2023, the Company recorded a $183.1 million impairment of goodwill within its Personal Care and Remote Patient Monitoring reporting units. The Company determined that based on its qualitative assessment for each reporting unit, factors existed which required the Company to test its goodwill and indefinite-lived intangible assets for impairment. These factors included a decline in the market price of the Company's common stock, industry specific regulatory pressures such as Medicaid redetermination and the Centers for Medicare and Medicaid Services ("CMS") proposed ruling on Ensuring Access to Medicaid Services, and general economic and market volatility. As a result, the Company performed a quantitative assessment and determined that the goodwill at its Personal Care and RPM reporting units was impaired. See Note 7, Goodwill and Intangible Assets, for additional details.

Internal-use Software and Cloud Computing Arrangements

The Company develops and implements software for internal use to enhance the performance and capabilities of the technology infrastructure. The costs incurred for the development of the internal-use software are capitalized when they meet the internal-use software capitalization criteria outlined in ASC 350-40. The capitalized costs are amortized using the straight-line method over the estimated useful lives of the software, ranging from 3 to 10 years.

In addition to acquired software, the Company capitalizes costs associated with cloud computing arrangements (“CCA”) that are service contracts. The CCA includes services which are used to support certain internal corporate functions as well as technology associated with revenue-generating activities. The capitalized costs are amortized using the straight-line method over the term of the related CCA. As of June 30, 2023 and December 31, 2022, capitalized costs associated with CCA, net of accumulated amortization were $13.2 million and $11.9 million, respectively. The value of accumulated amortization as of June 30, 2023 and December 31, 2022 was $3.5 million and $2.2 million, respectively. Amortization expense during the three months ended June 30, 2023 and 2022, totaled $0.7 million and $0.2 million, respectively, and during the six months ended June 30, 2023 and 2022, totaled $1.2 million and $0.5 million, respectively.

Revenue Recognition

Under ASC 606, the Company recognizes revenue as it transfers promised services to its customers and generates all of its revenue from contracts with customers. The amount byof revenue recognized reflects the consideration to which the ~~carrying~~Company expects to be entitled in exchange for these services. The Company satisfies substantially all of its performance obligations over time and recognizes revenue over time instead of at points in time and applies the "as-invoiced" practical expedient which aligns the pattern of transfer of promised services with the value received by the customer for the performance completed to date. In the NEMT segment, the Company's performance obligation is to stand ready to perform transportation-related activities, including the management, fulfillment, and recordkeeping activities associated with such services. In the Personal Care segment, the Company's performance obligation is to deliver patient care services in accordance with the nature of services and hours worked per each contract. In the RPM segment, the Company's performance obligation is to stand ready to perform monitoring services in the form of personal emergency response system ("PERS") monitoring, vitals monitoring, and medication management, as contractually agreed upon.

The Company holds different contract types under its different segments of business. In the NEMT segment, there are both capitated contracts, under which payors pay a fixed amount ~~exceeds~~monthly per eligible member, and fee-for-service ("FFS") contracts, under which the Company bills and collects a specified amount for each service that is provided. Personal Care contracts are also FFS, and service revenue is reported at the estimated net realizable amount from clients, patients and third-party payors for services rendered. RPM service revenue consists of revenue from monitoring services provided to the customer. Under RPM contracts, payors pay per-enrolled-member-per-month, based on enrolled membership. For each contract type, the Company determines the transaction price based on the gross charges for services provided, reduced by estimates for contractual adjustments due to settlements of audits and payment reviews from third-party payors. The Company determines the estimated revenue adjustments at each segment based on our historical experience with various third-party payors and previous results from the claims and adjudication process. The Personal Care segment uses the portfolio approach to determine the estimated revenue adjustments. See further information in Note 4, Revenue Recognition.

Government Grants

The Company has received government grants primarily under the CARES Act PRF and the ARPA SLFRF to provide economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. The Company received distributions from government grants of approximately $12.9 million and $6.2 million during the three months ended June 30, 2023 and 2022, respectively, of which $2.6 million and $3.3 million were recognized as grant income during the three months ended June 30, 2023 and 2022, respectively, with the remaining balance recorded in accrued expenses and other current liabilities. During the six months ended June 30, 2023 and 2022, the Company received distributions of approximately $14.5 million and $9.0 million, respectively, of which $4.1 million and $3.8 million were recognized as grant income during the six months ended June 30, 2023 and 2022, respectively, with the remaining balance recorded in accrued expenses and other current liabilities. Distributions received under these acts are targeted to assist with incremental health care related expenses or lost revenue attributable to the COVID-19 pandemic as well as provide stimulus to support long-term growth and recovery.

The payments from these acts are subject to certain restrictions and possible recoupment if not used for designated purposes. As a condition to receiving PRF distributions, providers must agree to certain terms and conditions, including, among other things, that the funds are being used for healthcare related expenses and lost revenues attributable to COVID-19, as defined by HHS. All recipients of PRF payments are required to comply with the reporting ~~unit’s fair value; however,~~requirements described in the ~~impairment~~terms and conditions and as determined by HHS. The Company has submitted the required documents to meet reporting requirements for the applicable reporting periods. The Company received an audit inquiry letter from HHS related to one of the business units that received PRF payments, to which the Company has responded and submitted all requested information and believes that the payments received are substantiated and within the terms and conditions defined by HHS and continues to include these amounts as grant income. At this time, the Company is unaware of any other pending or upcoming audits or inquiries related to amounts received under PRF.

As a condition to receiving SLFRF distributions, providers must agree to use the funds to respond to the PHE or its negative economic impacts, to respond to workers performing essential work by providing premium pay to eligible workers and to offset reduction in revenue due to the COVID-19 PHE as stipulated by the states in which the funds were received. All recipients of SLFRF payments are required to comply with the reporting requirements that the state in which the funds originated has requested in order for the states to meet the requirements as described in the terms and conditions as determined by the Department of the Treasury. The Company has complied with all known reporting requirements to date.

The Company recognizes distributions from government grants as grant income or accrued expenses and other current liabilities in line with the loss ~~recognized should not exceed~~of revenues or expenses for which the ~~total amount~~grants are intended to compensate when there is reasonable assurance that it has complied with the conditions associated with the grant.

Recent Accounting Pronouncements

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance ("ASU 2021-10"). This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. These disclosures include information about the nature of ~~goodwill allocated~~the transactions and the related accounting policy used to account for the transactions, the line items on the balance sheet and income statement that ~~reporting unit. This guidance~~are affected by the transactions, the amounts applicable to each financial statement line item, and the significant terms and conditions of the transactions, including commitments and contingencies. ASU 2021-10 is effective ~~prospectively~~for public business entities for fiscal years beginning after December 15, ~~2019. Early~~2021, with early adoption ~~is permitted for interim or annual goodwill impairment tests performed after January 1, 2017.~~permitted. The Company adopted ~~ASU 2017-04~~this accounting standard on ~~April~~January 1, ~~2017.~~ 2022 and will apply it to any government assistance received thereafter.

3. Segments

The ~~adoption~~Company’s reportable segments are identified based on a number of ~~ASU 2017-04 had no impact on~~factors related to how its chief operating decision maker ("CODM") determines the allocation of resources and assesses the performance of the Company’s ~~financial statements~~operations. The CODM uses service revenue, net and operating income as the measures of profit or ~~disclosures.~~

~~Updates~~loss to assess segment performance and allocate resources, and uses total assets as the measure of assets attributable to each segment. The Company's operating income for the reportable segments includes an allocated portion of corporate expenses to the ~~recent accounting pronouncements as disclosed~~respective segments and includes revenues and all other costs directly attributable to the specific segment. The Company’s reportable segments are strategic units that offer different services under different financial and operating models to the Company’s customers. The Company's CODM manages the Company under four reportable segments.

•NEMT - The Company's NEMT segment is the largest manager of non-emergency medical transportation programs for state governments and managed care organizations, or MCOs, in the U.S. This segment also holds the results of the Company's captive insurance program;

•Personal Care - The Company's Personal Care segment provides in home personal care services to State and Managed Medicaid, Medicare, and Private Pay patient populations in need of care monitoring and assistance performing activities of daily living;

•RPM - The Company's RPM segment is a provider of remote patient monitoring solutions, including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions;

•Corporate and Other - The Company's Corporate and Other segment includes the costs associated with the Company's corporate operations. The operating results of the Corporate and Other segment include activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of the Company's Matrix investment.

The following table sets forth certain financial information from operations attributable to the Company’s ~~Form 10-K~~business segments for the ~~year~~three and six months ended ~~December 31, 2016 are~~June 30, 2023 and 2022 (in thousands):


	Three months ended June 30, 2023
	NEMT		Personal Care		RPM		Corporate and Other		Total
Service revenue, net	$	496,975	$	180,325	$	19,211	$	2,596	$	699,107
Grant income(1)	—		2,634		—		—		2,634

Service expense	441,897		138,468		6,705		2,185		589,255
General and administrative expense	28,337		20,565		5,327		25,011		79,240
Depreciation and amortization	6,739		12,872		6,059		239		25,909
Impairment of goodwill	—		137,331		45,769		—		183,100
Operating income (loss)	$	20,002	$	(126,277)	$	(44,649)	$	(24,839)	$	(175,763)

Equity in net income of investee, net of tax	$	189	$	—	$	—	$	767	$	956
Equity investment	$	1,356	$	—	$	—	$	43,758	$	45,114
Goodwill	$	135,186	$	415,444	$	234,894	$	30	$	785,554
Total assets	$	536,749	$	778,791	$	347,125	$	122,355	$	1,785,020


	Six months ended June 30, 2023
	NEMT		Personal Care		RPM		Corporate and Other		Total
Service revenue, net	$	966,438	$	354,456	$	37,923	$	2,596	$	1,361,413
Grant income(1)	—		4,098		—		—		4,098

Service expense	849,583		274,558		13,195		2,185		1,139,521
General and administrative expense	62,212		43,228		11,096		42,417		158,953
Depreciation and amortization	13,505		25,740		11,913		444		51,602
Impairment of goodwill	—		137,331		45,769		—		183,100
Operating income (loss)	$	41,138	$	(122,303)	$	(44,050)	$	(42,450)	$	(167,665)

Equity in net income of investee, net of tax	$	842	$	—	$	—	$	2,139	$	2,981
Equity investment	$	1,356	$	—	$	—	$	43,758	$	45,114
Goodwill	$	135,186	$	415,444	$	234,894	$	30	$	785,554
Total assets	$	536,749	$	778,791	$	347,125	$	122,355	$	1,785,020


	Three months ended June 30, 2022
	NEMT		Personal Care		RPM		Corporate and Other		Total
Service revenue, net	$	448,733	$	162,737	$	16,745	$	—	$	628,215
Grant income(1)	—		3,330		—		—		3,330

Service expense	373,724		124,445		6,061		—		504,230
General and administrative expense	33,588		23,346		6,742		15,735		79,411
Depreciation and amortization	7,392		12,552		4,606		208		24,758
Operating income (loss)	$	34,029	$	5,724	$	(664)	$	(15,943)	$	23,146

Equity in net loss of investee, net of tax	$	—	$	—	$	—	$	(2,055)	$	(2,055)
Equity investment	$	—	$	—	$	—	$	80,364	$	80,364
Goodwill	$	135,186	$	552,834	$	280,426	$	30	$	968,476
Total assets	$	544,198	$	985,827	$	404,949	$	124,589	$	2,059,563


	Six months ended June 30, 2022
	NEMT		Personal Care		RPM		Corporate and Other		Total
Service revenue, net	$	849,653	$	322,435	$	30,602	$	—	$	1,202,690
Grant income(1)	—		3,798		—		—		3,798

Service expense	705,820		246,677		11,048		—		963,545
General and administrative expense	70,921		46,479		11,704		27,115		156,219
Depreciation and amortization	14,497		25,057		8,734		416		48,704
Operating income (loss)	$	58,415	$	8,020	$	(884)	$	(27,531)	$	38,020

Equity in net loss of investee, net of tax	$	(65)	$	—	$	—	$	(1,507)	$	(1,572)
Equity investment	$	—	$	—	$	—	$	80,364	$	80,364
Goodwill	$	135,186	$	552,834	$	280,426	$	30	$	968,476
Total assets	$	544,198	$	985,827	$	404,949	$	124,589	$	2,059,563

(1) Grant income for the Personal Care segment includes funding received on a periodic basis from the PRF in relation to relief under the CARES Act and funding received from the SLFRF under ARPA in relation to economic recovery to combat health and economic impacts of the COVID-19 pandemic. See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements.

4. Revenue Recognition

Under ASC 606, the Company recognizes revenue as ~~follows:~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ ~~(“ASU 2014-09”)~~. ~~ASU 2014-09 introduced FASB Accounting Standards Codification Topic 606 (“ASC 606”), which will replace most currently applicable existing revenue recognition guidance~~it transfers promised services to its customers and ~~is intended to improve and converge with international standards the financial reporting requirements for~~generates all of its revenue from contracts with customers. The ~~core principle~~amount of ~~ASU 2014-09 is that an entity should recognize~~ revenue ~~for~~recognized reflects the ~~transfer of goods or services equal~~consideration to which the ~~amount that it~~Company expects to be entitled in exchange for these services. The Company satisfies substantially all of its performance obligations over time and recognizes revenue over time instead of at points in time.

Revenue Contract Structure

NEMT Capitated Contracts (per-member-per-month)

Under capitated contracts, payors pay a fixed amount per eligible member per month. Capitation rates are generally based on expected costs and volume of services. We assume the responsibility of meeting the covered healthcare related transportation requirements based on per-member, per-month fees for the number of eligible members in the payor’s program. Revenue is recognized based on the population served during the period. Certain capitated contracts have provisions for reconciliations, risk corridors or profit rebates. For contracts with reconciliation provisions, capitation payment is received as a prepayment during the month service is provided. These prepayments are reconciled based on actual cost and/or trip volume and may result in refunds to ~~receive~~the payor, or additional payments due from the payor. Contracts with risk corridor or profit rebate provisions allow for ~~those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing~~profit within a certain corridor and ~~uncertainty of~~once we reach profit level maximums, we discontinue recognizing revenue and ~~cash flows arising from customer contracts, including significant judgments and changes~~instead record a liability within the accrued contract payable account. This liability may be reduced through future increases in ~~judgments. ASU 2014-09 allows for adoption either on a full retrospective basis to each prior reporting period presented~~trip volume or ~~on a modified retrospective basis~~periodic settlements with the ~~cumulative effect~~payor. While a profit rebate provision could only result in a liability from this profit threshold, a risk corridor provision could potentially result in receivables if the Company does not reach certain profit minimums, which would be recorded in the reconciliation contract receivables account.

NEMT Fee-for-service Contracts

Fee-for-service ("FFS") revenue represents revenue earned under non-capitated contracts in which we bill and collect a specified amount for each service that we provide. FFS revenue is recognized in the period in which the services are rendered and is reduced by the estimated impact of ~~initially applying the new guidance recognized~~contractual allowances.

Personal Care Fee-for-service Contracts

Personal Care FFS revenue is reported at the ~~date of initial application, which will be effective~~estimated net realizable amount from clients, patients and third-party payors for ~~the Company beginning January 1, 2018.~~services rendered based on actual personal care hours provided. Payment for services received from third-party payors includes, but is not limited to, insurance companies, hospitals, governmental agencies and other home health care

~~The Company has developed an adoption plan, assembled a cross-functional project team and is in the process of assessing the impacts of applying ASC 606~~

providers who subcontract work to the ~~Company’s financial statements, information systems~~Company. Certain contracts are subject to retroactive review and internal controls. The Company has elected to adopt ASU 2014-09 using the modified retrospective method. Additionally, the Company has performed detailed reviews of a significant number of its existing contracts with customers. These reviews have focusedpossible adjustment by those payors based on ~~several key considerations which could impact the Company's accounting and reporting under the new standard:~~

~~the effect of specified clauses on the term of many of the Company’s contracts with customers;~~

the nature of the ~~promises~~contract or costs incurred. The Company makes estimates of retroactive adjustments and considers these in ~~many~~the recognition of revenue in the ~~Company’s~~period in which the related services are rendered. The difference between estimated settlement and actual settlement is reported in net service revenues as adjustments become known or as years are no longer subject to such audits, reviews, or investigations.

RPM per-member-per-month Contracts

RPM per-member-per-month ("PMPM") revenue consists of revenue from monitoring services provided to the customer. Under RPM contracts, payors pay per-enrolled-member-per-month based on enrolled membership. Consideration is generally fixed for each type of monitoring service and the contracts do not typically contain variable components of consideration. As such, the RPM segment recognizes revenue based on the monthly fee paid by customers.

Disaggregation of Revenue by Contract Type

The following table summarizes disaggregated revenue from contracts with customers by contract type for the three and six months ended June 30, 2023 and June 30, 2022 (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
NEMT capitated contracts	$	422,506	$	375,350	$	827,195	$	711,068
NEMT FFS contracts	74,469		73,383		139,243		138,585
Total NEMT service revenue, net	496,975		448,733		966,438		849,653

Personal Care FFS contracts	180,325		162,737		354,456		322,435
RPM PMPM contracts	19,211		16,745		37,923		30,602
Other service revenue	2,596		—		2,596		—
Total service revenue, net	$	699,107	$	628,215	$	1,361,413	$	1,202,690

Payor Information

Service revenue, net, is derived from state and managed Medicaid contracts, managed Medicare contracts, as well as a small amount from private pay and other contracts. Of the NEMT segment’s revenue, 11.2% and 12.1% were derived from one payor for the three months ended June 30, 2023 and 2022, respectively, and 11.1% and 11.3% were derived from one payor for the six months ended June 30, 2023 and 2022, respectively. Of the Personal Care segment's revenue, 11.6% and 9.5% were derived from one payor for the three months ended June 30, 2023 and 2022, respectively, and 11.2% and 9.3% were derived from one payor for the six months ended June 30, 2023 and 2022, respectively. Of the RPM segment's revenue, 17.6% and 18.9% were derived from one payor for the three months ended June 30, 2023 and 2022, respectively, and 16.4% and 20.4% were derived from one payor for the six months ended June 30, 2023 and 2022, respectively.

Revenue Adjustments

During the three months ended June 30, 2023 and 2022, the Company recognized a reduction of $3.5 million and an increase of $3.6 million in service revenue, respectively, from contractual adjustments relating to ~~perform integrated services over a period of time;~~

~~whether and how much variable consideration~~performance obligations satisfied in previous periods to ~~include when determining the transaction prices for its contracts with customers;~~

~~whether any of the Company’s customer contracts require performance over a series of distinct service periods and the impact on determining and allocating the transaction price; and~~

~~the manner in~~ which the payor agreed. During the six months ended June 30, 2023 and 2022, the Company ~~will measure its progress towards fully satisfying its~~recognized a reduction of $3.1 million and an increase of $4.1 million in service revenue, respectively, from contractual adjustments relating to performance obligations ~~including a determination of whether~~satisfied in previous periods to which the ~~Company~~payor agreed.

Related Balance Sheet Accounts

The following table provides information about accounts receivable, net (in thousands):


	June 30, 2023		December 31, 2022
Accounts receivable	$	226,006	$	225,288
Allowance for doubtful accounts	(1,993)		(2,078)
Accounts receivable, net	$	224,013	$	223,210

The following table provides information about other revenue related accounts included on the accompanying unaudited condensed consolidated balance sheets (in thousands):


	June 30, 2023		December 31, 2022
Accrued contract payables(1)	$	109,094	$	194,287
Contract receivables(2)	$	119,763	$	71,131
Long-term contract receivables(3)	$	—	$	427
Deferred revenue, current	$	2,355	$	2,202

(1) Accrued contract payables primarily represent overpayments and liability reserves on certain risk corridor, profit rebate and reconciliation contracts. See the contract payables and receivables activity below.

(2) Contract receivables primarily represent underpayments and receivables on certain risk corridor, profit rebate, and reconciliation contracts. See the contract payables and receivables activity below.

(3) Long-term contract receivables primarily represent future receivable balances on certain risk corridor, profit rebate and reconciliation contracts that may be ~~able to use certain practical expedients.~~received in greater than 12 months.

The following table provides the summary activity of total contract payables and receivables as reported within the unaudited condensed consolidated balance sheets (in thousands):

~~These reviews are substantially complete for NET Services~~


	December 31, 2022		Additional Amounts Recorded		Amounts Paid or Settled		March 31, 2023
Reconciliation contract payables	$	25,853	$	1,811	$	(18,110)	$	9,554
Profit rebate/corridor contract payables	155,161		22,316		(10,873)		166,604
Overpayments and other cash items	13,273		799		(2,610)		11,462
Total contract payables	$	194,287	$	24,926	$	(31,593)	$	187,620

Reconciliation contract receivables	$	48,153	$	22,204	$	(5,922)	$	64,435
Corridor contract receivables	23,405		14,508		—		37,913
Total contract receivables	$	71,558	$	36,712	$	(5,922)	$	102,348


	March 31, 2023		Additional Amounts Recorded		Amounts Paid or Settled		June 30, 2023
Reconciliation contract payables	$	9,554	$	6,687	$	(2,749)	$	13,492
Profit rebate/corridor contract payables	166,604		17,447		(98,683)		85,368
Overpayments and other cash items	11,462		2,707		(3,935)		10,234
Total contract payables	$	187,620	$	26,841	$	(105,367)	$	109,094

Reconciliation contract receivables	$	64,435	$	16,686	$	(15,105)	$	66,016
Corridor contract receivables	37,913		16,290		(456)		53,747
Total contract receivables	$	102,348	$	32,976	$	(15,561)	$	119,763

5. Equity Investment

As of June 30, 2023 and are ongoing for WD Services. The Company expects little to no impact within NET Services from the adoption of ASU 2014-09, and is implementing controls and process changes needed to apply ASC 606. Within WD Services, the Company expects certain amounts of variable consideration related to contingent revenue will be accelerated. Such amounts were previously deferred until the final resolution of the contingency. Management’s assessment is ongoing; however, management does not believe the impact of ASC 606 on its financial statements will be significant based on the procedures performed to date.

~~In January 2017, the FASB issued ASU No. 2017-03,~~ ~~Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic323)~~ (“ASU 2017-03”). ASU 2017-03 expands required qualitative disclosures when registrants cannot reasonably estimate the impact that adoption of an ASU will have on the financial statements. Such qualitative disclosures would include a comparison of the registrant’s new accounting policies, if determined, to current accounting policies, a description of the status of the registrant’s process to implement the new standard and a description of the significant implementation matters yet to be addressed by the registrant. Other than enhancements to the qualitative disclosures regarding future adoption of new ASUs, adoption of the provisions of this standard is not expected to have any impact on the Company’s consolidated financial statements.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation–Stock Compensation (Topic 718):Scope of Modification Accounting~~ (“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms of a share-based payment award should be accounted for as a modification. A change to an award should be accounted for as a modification unless the fair value of the modified award is the same as the original award, the vesting conditions do not change, and the classification as an equity or liability instrument does not change. This guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. The adoption of ASU 2017-09 is not expected to have a material impact on the Company’s consolidated financial statements.

~~There were no other significant updates to the new accounting guidance not yet adopted by the Company as disclosed in its Form 10-K for the year ended~~ December 31, ~~2016.~~

~~3. Equity Investment~~

~~Matrix~~

Prior to the closing of the Matrix Transaction on October 19, 2016, the financial results of Matrix were included in the Company’s HA Services segment. Subsequent to the closing of the Matrix Transaction,2022, the Company owned a ~~46.8% noncontrolling interest in Matrix. As of September 30, 2017, the Company owned a 46.6% noncontrolling~~43.6% non-controlling interest in Matrix. Pursuant to a Shareholder’s Agreement, affiliates of Frazier Healthcare Partners hold rights necessary to control the fundamental operations of Matrix. The Company accounts for ~~this~~its investment in Matrix under the equity method of accounting and the Company’s share of Matrix’s income or losses are recorded as “Equity in net ~~(gain) loss~~income (loss) of ~~investees”~~investee” in the accompanying unaudited condensed consolidated statements of ~~income.~~operations. During the year ended December 31, 2022, Matrix recorded asset impairment charges of $82.2 million. No asset impairment charges were recorded for the three or six months ended June 30, 2023 or 2022.

The Company's gross share of its Matrix's operations for the three months ended June 30, 2023 and June 30, 2022 was income of $1.3 million and a loss of $2.8 million, respectively, which is presented net of tax on the unaudited condensed consolidated statements of operations for income of $1.0 million and a loss of $2.1 million, respectively. The Company's gross share of its Matrix's operations for the six months ended June 30, 2023 and June 30, 2022 was income of $4.1 million and a loss of $2.4 million, respectively, which is presented net of tax on the unaudited condensed consolidated statements of operations for income of $3.0 million and a loss of $1.6 million, respectively.

The carrying amount of the assets included in the Company’s unaudited condensed consolidated balance ~~sheet~~sheets and the maximum loss exposure related to the Company’s interest in Matrix as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 totaled ~~$156,883~~$45.1 million and ~~$157,202,~~$41.3 million, respectively.

Summary financial information for Matrix on a standalone basis is as ~~follows:~~follows (in thousands):


	June 30, 2023		December 31, 2022
Current assets	$	121,000	$	97,750
Long-term assets	$	361,209	$	373,297
Current liabilities	$	46,399	$	36,913
Long-term liabilities	$	320,781	$	325,613


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Revenue	$	87,262	$	73,368	$	168,578	$	159,121
Operating income (loss)	$	11,196	$	(4,257)	$	24,603	$	(1,612)
Net income (loss)	$	2,645	$	(6,813)	$	7,215	$	(8,130)

September 30, 2017 December 31, 2016
Current assets $ 50,015
$ 28,589
Long-term assets 598,842
614,841
Current liabilities 39,273
25,791
Long-term liabilities 270,816
281,348

Three months ended
September 30, 2017
Revenue $ 58,639
Operating income 3,159
Net loss (537 )

Nine months ended
September 30, 2017
Revenue $ 175,346
Operating income 10,109
Net loss (775 )

~~See Note 13,~~ ~~Discontinued Operations, for Matrix’s 2016 results of operations.~~

~~Mission Providence~~

The Company entered into a joint venture agreement in November 2014 with Mission Australia ACN ("Mission Australia") to form Mission Providence Pty Ltd (“Mission Providence”). Mission Providence delivers employment preparation and placement services in Australia. The Company had a 60% ownership interest in Mission Providence, and had rights to 75% of Mission Providence’s distributions of cash or profit surplus twice per calendar year. The Company accounted for this investment under the equity method of accounting and the Company’s share of Mission Providence’s income or losses was recorded as ��Equity in net (gain) loss of investees” in the accompanying condensed consolidated statements of income. Cash contributions made to Mission Providence in exchange for its equity interests are included in the condensed consolidated statements of cash flows as “Equity investments.”

On September 29, 2017, the Company and Mission Australia completed the sale of 100% of the stock of Mission Providence pursuant to a share sale agreement. Upon the sale of Mission Providence, the Company received AUD 20,184, or $15,823 of proceeds, for its equity interest, net of transaction fees. The related gain on sale of Mission Providence totaling $12,606 is recorded as “Gain on sale of equity investment” in the accompanying condensed consolidated statements of income. The carrying amount of the assets included in the Company’s condensed consolidated balance sheet related to the Company’s interest in Mission Providence was $4,021 at December 31, 2016.

~~Summary financial information for Mission Providence on a standalone basis is as follows:~~

December 31, 2016
Current assets $ 4,640
Long-term assets 10,473
Current liabilities 12,844
Long-term liabilities 1,655

Three months ended September 30,
2017 2016
Revenue $ 10,244
$ 9,349
Operating loss (599 ) (2,903 )
Net loss (651 ) (2,059 )

Nine months ended September 30,
2017 2016
Revenue $ 30,125
$ 26,475
Operating loss (1,765 ) (10,697 )
Net loss (1,934 ) (7,627 )

4.6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets were comprised of the ~~following:~~following (in thousands):


	June 30, 2023		December 31, 2022
Prepaid insurance	$	11,426	$	6,334
Deferred ERP implementation costs	3,794		5,817
Deferred financing costs on credit facility	3,090		3,061
Prepaid income taxes	3,042		7,186
Inventory	1,449		2,041
Prepaid rent	994		278
Other prepaid expenses	15,617		9,615
Total prepaid expenses and other current assets	$	39,412	$	34,332

September 30,
2017 December 31,
2016
Prepaid income taxes $ 3,819
$ 1,467
Escrow funds 10,000
10,000
Prepaid insurance 2,778
3,153
Prepaid taxes and licenses 2,526
3,570
Note receivable 3,201
3,130
Prepaid rent 2,727
2,013
Deposits held for leased premises and bonds 2,744
2,609
Other 11,288
11,953
Total prepaid expenses and other $ 39,083
$ 37,895

~~Escrow funds represent amounts related~~7. Goodwill and Intangible Assets

The Company tests goodwill for impairment for its reporting units annually as of July 1 or more frequently when events or changes in circumstances indicate that impairment may have occurred. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable.

Goodwill

During the second quarter of 2023, the Company recorded a $183.1 million impairment of goodwill within its Personal Care and Remote Patient Monitoring reporting units. This impairment was driven primarily by macroeconomic factors, including a decline in the market value of the Company's common stock. After recording these impairments, the associated reporting units have $650.3 million of goodwill remaining. If, among other factors, (i) the Company's equity values were to ~~potential indemnification claims~~decline significantly, (ii) the Company experienced additional adverse impacts associated with macroeconomic factors, including increases in our estimated weighted average cost of capital, or (iii) the adverse impacts stemming from competition, economic, regulatory or other factors were to cause the Company's results of operations or cash flows to be worse than currently anticipated, the Company could conclude in future periods that additional impairment charges of certain reporting units are required in order to reduce the carrying values of goodwill. Any such impairment charges could be significant.

The Company performed a quantitative test comparing the carrying value of the Company's reporting units with their respective fair value. The fair value of the Company's reporting units was estimated using both the income approach and the market valuation approach. The income approach produces an estimated fair value of a reporting unit based on the present value of the cash flows the Company expects the reporting unit to generate in the future. Estimates included in the discounted cash flow model are primarily Level 3 inputs and include the discount rate, which the Company determines based on adjusting an industry-wide weighted-average cost of capital for size, geography, and company specific risk factors, long-term rates of growth and profitability of the Company’s business, working capital effects and planned capital expenditures. The market approach produces an estimated fair value of a reporting unit based on a comparison of the reporting unit to comparable publicly traded entities in similar lines of business. The Company’s significant estimates in the market approach include the selected similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and the multiples the Company applies to earnings before interest, taxes, depreciation and amortization (“EBITDA”) to estimate the fair value of the reporting unit.

Changes in key assumptions from the ~~sale~~prior year annual goodwill assessment and the resulting reduction in projected future cash flows included in the current year goodwill test resulted in a decrease in the fair values of the ~~Human Services~~Company's Personal Care and RPM reporting units such that the fair value of each respective reporting unit was less than its respective carrying value. As a result, the Company recorded a non-cash goodwill impairment charge of $137.3 million in the Personal Care reporting unit and $45.8 million in the RPM reporting unit, which is recorded in “Impairment of goodwill” on the Company’s unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2023. There was no such goodwill impairment charge in the three and six months ended June 30, 2022.

Changes in the carrying value of goodwill by reportable segment are presented in the following table (in thousands):


	NEMT		Personal Care		RPM		Corporate and Other		Total
Balance at December 31, 2022	$	135,186	$	552,775	$	280,663	$	30	$	968,654
Impairment of goodwill	—		(137,331)		(45,769)		—		(183,100)
Balance at June 30, 2023	$	135,186	$	415,444	$	234,894	$	30	$	785,554

The accumulated impairment losses on goodwill totaled $279.1 million as of June 30, 2023 and $96.0 million as of December 31, 2022.

Intangible Assets

Intangible assets are comprised of acquired payor networks, trademarks and trade names, developed technology, non-compete agreements, licenses, and an assembled workforce. Finite-lived intangible assets are amortized using the straight-line method over the estimated economic lives of the assets. These finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Indefinite-lived intangible assets are not amortized, but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired. Based on the continued value of the definite-lived and indefinite-lived intangible assets acquired, the Company did not identify any circumstances during the three and six months ended June 30, 2023 that would require an impairment test for our intangible assets.

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised of the following (in thousands):


	June 30, 2023		December 31, 2022
Accrued compensation and related liabilities	$	43,010	$	47,947
Insurance reserves	29,146		17,836
Accrued operating expenses	11,930		18,432
Accrued government grants(1)	11,431		7,367
Accrued legal fees	10,967		15,574
Accrued interest	10,655		10,643
Union pension obligation	3,173		3,665
Deferred revenue	2,355		2,202
Other	15,511		12,194
Total accrued expenses and other current liabilities	$	138,178	$	135,860

(1) Accrued government grants include payments received from government entities, primarily in relation to the PRF and SLFRF, to offset lost revenue or increased expenditures for which ~~was completed on November 1, 2015.~~ the related expenditure has not yet been incurred and thus the related payments are deferred as of June 30, 2023 and December 31, 2022.

9. Debt

Senior Unsecured Notes

Senior unsecured notes as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands):


Senior Unsecured Note	Date of Issuance	June 30, 2023		December 31, 2022
$500.0 million 5.875% due November 15, 2025 (effective interest rate 6.532%)	11/4/2020	$	492,531	$	491,098
$500.0 million 5.000% due October 1, 2029 (effective interest rate 5.406%)	8/24/2021	488,995		488,263
Total		$	981,526	$	979,361

The Company ~~has accrued $15,000 as a contingent liability for~~pays interest on the ~~settlement~~Senior Unsecured Notes semi-annually in arrears. Principal payments are not required until the maturity date. Debt issuance costs of ~~potential indemnification claims, which is included~~$14.5 million in ~~“Accrued expenses”~~relation to the issuance of the Senior Notes due 2025 were incurred and these costs were deferred and are amortized to interest cost over the term of the Notes. Debt issuance costs of $13.5 millionwere incurred in relation to the issuance of the Senior Notes due 2029 and these costs were deferred and are amortized to interest cost over the term of the Notes. As of June 30, 2023, $18.5 million of unamortized deferred issuance costs was netted against the long-term debt balance on the unaudited condensed consolidated balance ~~sheet~~sheets. The fair value of the Notes as of June 30, 2023 and December 31, 2022 was $833.1 million and $896.6 million, respectively, which was determined

based on quoted prices in active markets, and therefore designated as Level 1 within the fair value hierarchy. The Company was in compliance with all covenants as of June 30, 2023.

Credit Facility

The Company is a party to the amended and restated credit agreement, dated as of February 3, 2022, (as amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, swing line lender and an issuing bank, Wells Fargo Bank, National Association, as an issuing bank, Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents, Deutsche Bank AG New York Branch, Bank of America, N.A., Regions Bank, Bank of Montreal and Capital One, National Association, as co-documentation agents, and JPMorgan Chase Bank, N.A., Truist Securities, Inc. and Wells Fargo Securities, LLC, as joint bookrunners and joint lead arrangers, and the other lenders party thereto. The Credit Agreement provides the Company with a senior secured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $325.0 million and sublimits for swingline loans, letters of credit and alternative currency loans in amounts of up to $25.0 million, $60.0 million and $75.0 million, respectively. The Credit Facility matures on February 3, 2027 and the proceeds may be used (i) to finance working capital needs of the Company and its subsidiaries and (ii) for general corporate purposes of the Company and its subsidiaries (including to finance capital expenditures, permitted acquisitions and investments).

On June 26, 2023, the Company entered into an Amendment No. 1 (the "First Amendment") to the Credit Agreement which amended and restated the maximum permitted Total Net Leverage Ratio under the Credit Agreement as follows: for the fiscal quarters ending June 30, 2023 through September 30, ~~2017. While~~2023, 5.25:1.00; for the ~~matter is not resolved, it is highly likely~~fiscal quarters ending December 31, 2023 through March 31, 2024, 5.00:1.00; for the ~~escrow funds will be used to satisfy a portion~~fiscal quarter ending June 30, 2024, 4.75:1.00; and for the fiscal quarters ending September 30, 2024 and for the fiscal quarters ending thereafter, 4.50:1.00.

As of ~~this settlement. See Note 11,~~ ~~Commitments~~June 30, 2023, the Company had $126.5 million of short-term borrowings outstanding on the Credit Facility and ~~Contingencies, for further information.~~

~~5. Accrued Expenses~~

~~Accrued expenses consisted~~had $39.1 million of ~~the following:~~

September 30,
2017 December 31, 2016
Accrued compensation $ 24,058
$ 23,050
NET Services accrued contract payments 26,504
32,836
Accrued settlement 15,000
6,000
Income taxes payable —
372
Other 37,835
40,123
Total accrued expenses $ 103,397
$ 102,381

~~6. Restructuring and Related Reorganization Costs~~

~~WD Services has three redundancy programs. Two redundancy plans were approved in 2015 and have been substantially completed; a plan related to the termination~~outstanding letters of ~~employees delivering services under an offender rehabilitation program (“Offender Rehabilitation Program”) and a plan related to the termination of employees delivering services~~credit under the ~~Company’s employability~~Credit Facility. The interest rate for borrowings outstanding as of June 30, 2023 was 9.1% per annum. As of December 31, 2022, the Company did not have any borrowings outstanding on the Credit Facility and ~~skills training programs and certain other employees in~~had $38.1 million of outstanding letters of credit under the ~~United Kingdom (“UK Restructuring Program”). In addition, a redundancy plan related~~Credit Facility.

Under the Credit Facility, the Company has an option to the termination of employees as part of a value enhancement project ("Ingeus Futures Program") to better align costs at Ingeus with revenue and to improve overall operating performance was approved in 2016. The Company recorded severance and related charges of $1,117 and $4,741 during the nine months ended September 30, 2017 and 2016, respectively, relating to the termination benefits for employee groups and specifically identified employees impacted by these plans. The severance charges incurred are recorded as “Service expense” in the accompanying condensed consolidated statements of income.

The initial estimate of severance and related charges for the plans was based upon the employee groups impacted, average salary and benefits, and redundancy benefits pursuant to the existing policies. Additional charges above the initial estimates were incurred for the redundancy plans during the nine months ended September 30, 2017 and 2016 related to the actualization of termination benefits for specifically identified employees impacted under these plans, as well asrequest an increase in the ~~number of individuals impacted by these plans. The final identification~~amount of the ~~employees impacted~~Credit Facility or obtain incremental term loans from time to time (on substantially the same terms as apply to the existing facilities) by ~~each program is~~an aggregate amount of up to $175.0 million, so long as, after giving effect to the relevant incremental facility, the pro forma secured net leverage ratio does not exceed 3.50:1.00, provided that the lenders agree to increase their existing commitments or to participate in such incremental term loans. The Company may prepay the Credit Facility in whole or in part, at any time without premium or penalty, subject to ~~customary consultation procedures.~~reimbursement of the lenders’ breakage and redeployment costs in connection with prepayments of Term Benchmark loans or RFR loans, each as defined in the Credit Agreement. The unutilized portion of the commitments under the Credit Facility may be irrevocably reduced or terminated by the Company at any time without penalty.

Interest on the outstanding principal amount of the loans accrues at a per annum rate equal to the Alternate Base Rate, the Adjusted Term SOFR Rate, the Adjusted Daily Simple SOFR Rate, the Adjusted EURIBOR Rate or the Adjusted Daily Simple SONIA Rate, as applicable and each as defined in the Credit Agreement, in each case, plus an applicable margin. The applicable margin ranges from 1.75% to 3.50% in the case of Term Benchmark loans or RFR loans, each as defined in the Credit Agreement, and 0.75% to 2.50% in the case of the Alternate Base Rate loans, as defined in the Credit Agreement, in each case, based on the Company’s total net leverage ratio as defined in the Credit Agreement. Interest on the loans is payable quarterly in arrears in the case of Alternate Base Rate loans, on the last day of the relevant interest period in the case of Term Benchmark loans, and monthly in arrears in the case of RFR loans. In addition, the Company is obligated to pay a quarterly commitment fee based on a percentage of the unused portion of the revolving credit facility and quarterly letter of credit fees based on a percentage of the maximum amount available to be drawn under each outstanding letter of credit. The commitment fee and letter of credit fee range from 0.30% to 0.50% and 1.75% to 3.50%, respectively, in each case, based on the Company’s total net leverage ratio.

~~Summary of Severance and Related Charges~~

January 1,
2017
Costs
Incurred
Cash Payments
Foreign Exchange
Rate Adjustments
September 30, 2017

Ingeus Futures' Program $ 2,486
$ 1,186
$ (3,086 ) $ 158
$ 744
Offender Rehabilitation Program 1,380
(40 ) (1,357 ) 17
—
UK Restructuring Program 50
(29 ) —
3
24
Total $ 3,916
$ 1,117
$ (4,443 ) $ 178
$ 768

January 1,
2016
Costs
Incurred
Cash Payments
Foreign Exchange
Rate Adjustments
September 30, 2016

Offender Rehabilitation Program $ 6,538
$ 4,204
$ (6,075 ) $ (906 ) $ 3,761
UK Restructuring Program 2,059
537
(2,379 ) (103 ) 114
Total $ 8,597
$ 4,741
$ (8,454 ) $ (1,009 ) $ 3,875

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The negative covenants include restrictions on the Company’s ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets and merge and consolidate. The Company's borrowing capacity under the Credit Facility is currently limited by, among other covenants, compliance with the total ~~of accrued severance and related costs of $768 is reflected in “Accrued expenses”~~net leverage ratio covenant for each fiscal period as amended in the ~~condensed consolidated balance sheet at September 30, 2017.~~ First Amendment to the Credit Agreement.

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s present and future material domestic subsidiaries, excluding certain material domestic subsidiaries that are excluded from being guarantors pursuant to the terms of the Credit Agreement. The Company’s obligations under, and each guarantor’s obligations under its guaranty of, the Credit Facility are secured by a first priority lien on substantially all of the Company’s or such guarantor’s

respective assets. If an event of default occurs, the required lenders may cause the administrative agent to declare all unpaid principal and any accrued and unpaid interest and all fees and expenses under the Credit Facility to be immediately due and payable. All amounts outstanding under the Credit Facility will automatically become due and payable upon the commencement of any bankruptcy, insolvency or similar proceedings. The Credit Agreement also contains a cross default to any of the Company’s indebtedness having a principal amount ~~accrued~~in excess of $40.0 million. The Company was in compliance with all covenants under the Credit Agreement as of ~~September~~June 30, ~~2017 is expected to be settled principally by the end of 2017.~~2023.

~~7. Stockholders’ Equity~~

The following table reflects changes in common stock, additional paid-in capital, retained earnings, accumulated other comprehensive loss, treasury stock and noncontrolling interest for the nine months ended September 30, 2017:

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Non-controlling Interest Total
Shares Amount Shares Amount
Balance at December 31, 2016 17,315,661
$ 17
$ 302,010
$ 156,718
$ (33,449 ) 3,478,676
$ (125,201 ) $ (2,420 ) $ 297,675
Stock-based compensation —
—
4,636
—
—
—
—
—
4,636
Exercise of employee stock options 70,283
—
1,468
—
—
5,665
(238 ) —
1,230
Restricted stock issued 31,316
—
—
—
—
17,865
(779 ) —
(779 )
Performance restricted stock issued 3,773
—
(96 ) —
—
—
—
—
(96 )
Shares issued for bonus settlement and director stipend 25,225

1,107

—
—
—
—
1,107
Stock repurchase plan —
—
—
—
—
441,965
(17,983 ) —
(17,983 )
Conversion of convertible preferred stock to common stock 415
—
17
—
—
—
—
—
17
Foreign currency translation adjustments, net of tax —
—
—
—
6,591
—
—
(182 ) 6,409
Reclassification of translation loss realized upon sale of equity investment —
—
—
—
527
—
—
—
527
Convertible preferred stock dividends —
—
—
(3,305 ) —
—
—
—
(3,305 )
Noncontrolling interests —
—
—
—
—
—
—
295
295
Other —
—
25
—
—
—
—
—
25
Net income attributable to Providence —
—
—
14,441
—
—
—
—
14,441
Cumulative effect adjustment from change in accounting principle —
—
850
(850 ) ��
—
—
—
—
Balance at September 30, 2017 17,446,673
$ 17
$ 310,017
$ 167,004
$ (26,331 ) 3,944,171
$ (144,201 ) $ (2,307 ) $ 304,199

8.10. Stock-Based Compensation and Similar Arrangements

The Company provides stock-based compensation to employees, ~~and~~ non-employee directors, consultants and advisors under the Company’s 2006 Long-Term Incentive Plan (“2006 Plan”). ~~Typical awards issued under this plan include~~The 2006 Plan allows the flexibility to grant or award stock ~~option awards,~~options, stock appreciation rights, restricted stock, ~~awards (“RSAs”) and performance based~~unrestricted stock, stock units including restricted stock units ~~(“PRSUs”). In addition, the Company has a long-term incentive plan designed to provide long-term~~and performance ~~based~~ awards to ~~certain executive officers of the~~eligible persons.

Stock options. The Company ~~which also falls under the 2006 Plan.~~

~~The following table reflects the amount of~~recognized stock-based compensation expense for ~~share settled awards, recorded in each financial statement line item~~non-qualified stock options (“NQs”) of $0.2 million and $0.7 million for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2023 and ~~2016:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Service expense $ 131
$ 100
$ 365
$ 280
General and administrative expense 1,434
1,135
4,221
2,858
Equity in net loss of investees 10
—
50
—
Discontinued operations, net of tax —
22
—
66
Total stock-based compensation $ 1,575
$ 1,257
$ 4,636
$ 3,204

~~Stock-based compensation, for share settled awards, includes $1,014~~2022, respectively, and ~~$3,098~~$0.4 million and $1.3 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017,~~2023 and 2022, respectively, ~~related to the HoldCo LTIP. Stock-based compensation, for share settled awards, includes $921~~in general and ~~$2,383 for the three and nine months ended September~~administrative expense. At June 30, 2016, respectively, related to the HoldCo LTIP. No shares will be distributed under the HoldCo LTIP unless the volume weighted average of Providence’s stock price over a 90-day period ending on December 31, 2017 is greater than $56.79.

~~At September 30, 2017,~~2023, the Company had ~~300,831~~96,687 stock options outstanding with a weighted-average exercise price of ~~$37.97.~~$107.90.

Restricted stock awards and restricted stock units. The Company ~~also~~recognized stock-based compensation expense for restricted stock awards ("RSAs") and restricted stock units ("RSUs") of $0.9 million and $1.2 million for the three months ended June 30, 2023 and 2022, respectively, and $1.8 million and $2.2 million for the six months ended June 30, 2023 and 2022, respectively, in general and administrative expense. The Company had ~~71,193 shares of~~13,389 unvested RSAs and 65,764 unvested RSUs outstanding at ~~September~~June 30, ~~2017~~2023 with a weighted-average grant date fair value of ~~$44.33~~$90.28 and ~~18,298 unvested PRSUs outstanding.~~$91.62, respectively.

Performance-based share awards. The Company ~~also~~ grants performance-based restricted stock ~~equivalent unit awards (“SEUs”~~units ("PRSUs") to align management’s compensation with the Company's financial performance and ~~stock option equivalent units that~~other operational objectives and to retain key employees. Awards granted under this category are ~~cash settled awards~~based on the achievement of various targeted metrics as approved by the Compensation Committee and ~~are not included as part of~~defined in the ~~2006 Plan. During~~related PRSU Agreement. Stock-based compensation expense for PRSUs is recognized over the ~~three and nine months ended September 30, 2017, respectively,~~3-year vesting period under the straight-line attribution method. The Company recorded ~~$380 and $1,611 of~~ stock-based compensation expense ~~for cash settled awards. During the three~~of $0.1 million and ~~nine months ended September 30, 2016, respectively, the Company recorded $422 and $305 of stock-based compensation expense~~$0.5 million for cash settled awards. The expense and benefit for cash settled awards is included as “General and administrative expense” in the accompanying condensed consolidated statements of income. As the awards are cash settled, a significant amount of the expense recorded for the three and nine months ended September 30, 2017 and 2016 is attributable to the Company’s increase or decrease in stock price from the previous reporting period. The liability for unexercised cash settled share-based payment awards of $3,168 and $1,764 at September 30, 2017 and December 31, 2016, respectively, are reflected in “Accrued expenses” in the condensed consolidated balance sheets. At September 30, 2017, the Company had 6,671 SEUs and 200,000 stock option equivalent units outstanding.

~~The Company also provides cash settled long-term incentive plans for executive management and key employees of its operating segments. During~~ the three months ended June 30, ~~2017,~~2023 and 2022, respectively. Due to the impact of the reversal of previously recognized stock-based compensation expense during the period from forfeitures, the Company ~~revised~~also recorded $0.1 million of stock-based compensation expense for the ~~structure of~~six months ended June 30, 2023. During the ~~NET Services long-term incentive plan. As a result,~~six months ended June 30, 2022, the Company ~~finalized the amount payable under the plan at $2,956.~~recorded $0.8 million of stock-based compensation expense. The ~~total value will be paid to the awarded participants per the terms of the original agreement and thus the~~ remaining ~~unamortized~~ expense ~~relating to this plan continues~~is expected to be recognized over the ~~remaining~~remainder of the 3-year requisite service period. The Company had 43,421 unvested PRSUs outstanding at June 30, 2023 with a weighted-average grant date fair value of $91.46.

Employee Stock Purchase Plan

During the fourth quarter of 2022, the Company began offering an Employee Stock Purchase Plan ("ESPP") with 1,000,000 shares of Common Stock reserved for purchase pursuant to the Plan for eligible employees. The shares of Common Stock may be newly issued shares, treasury shares or shares acquired on the open market. Under the terms of the ESPP, eligible employees may designate a dollar value or percentage of their compensation to be withheld through payroll deductions, up to a maximum of $25,000 in each plan year, for the purchase of common stock at a discounted rate of 85% of the lower of the market price on the first or last trading day of the offering period. As of ~~September~~June 30, ~~2017, unamortized compensation expense is $696. For~~2023, 989,186 shares remain available for future issuance under the three and nine months ended September 30, 2017, expenses of $274 and $419, respectively, are included as “Service expense” in the condensed consolidated statements of income related to these plans. For the three and nine months ended September 30, 2016, $1,157 and $3,151, respectively, of expense are included as “Service expense” in the condensed consolidated statements of income related to these plans. At September 30, 2017, the liability for long-term incentive plans of the Company’s operating segments of $2,260 is reflected in “Accrued expenses” and “Other long-term liabilities” in the condensed consolidated balance sheet. At December 31, 2016, the liability for long-term incentive plans of the Company’s operating segments of $1,841 is reflected in “Other long-term liabilities” in the condensed consolidated balance sheet.ESPP.

11. Earnings (Loss) Per Share

The following table details the computation of basic and diluted earnings (loss) per ~~share:~~ share (in thousands, except share and per share data):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Numerator:
Net income (loss)	$	(190,944)	$	3,328	$	(194,906)	$	3,646

Denominator:
Denominator for basic earnings per share -- weighted-average shares	14,170,617		14,047,459		14,162,776		14,035,588
Effect of dilutive securities:
Common stock options	—		55,110		—		64,951
Restricted stock	—		12,902		—		22,191
Denominator for diluted earnings per share -- adjusted weighted-average shares assumed conversion	14,170,617		14,115,471		14,162,776		14,122,730

Earnings (loss) per share:
Basic earnings (loss) per share	$	(13.47)	$	0.24	$	(13.76)	$	0.26
Diluted earnings (loss) per share	$	(13.47)	$	0.24	$	(13.76)	$	0.26

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Numerator:
Net income attributable to Providence $ 14,853
$ 650
$ 14,441
$ 7,508
Less dividends on convertible preferred stock (1,114 ) (1,111 ) (3,305 ) (3,309 )
Less income allocated to participating securities (1,777 ) (284 ) (2,209 ) (502 )
Net income (loss) available to common stockholders $ 11,962
$ (745 ) $ 8,927
$ 3,697

Continuing operations $ 11,978
$ 2,046
$ 14,927
$ 3,405
Discontinued operations (16 ) (2,791 ) (6,000 ) 292
$ 11,962
$ (745 ) $ 8,927
$ 3,697

Denominator:
Denominator for basic earnings per share -- weighted-average shares 13,581,662
14,523,408
13,612,764
14,823,757
Effect of dilutive securities:
Common stock options 68,856
111,075
58,668
119,267
Performance-based restricted stock units 5,036
—
5,036

Denominator for diluted earnings per share -- adjusted weighted-average shares assumed conversion 13,655,554
14,634,483
13,676,468
14,943,024

Basic earnings (loss) per share:
Continuing operations $ 0.88
$ 0.14
$ 1.10
$ 0.23
Discontinued operations —
(0.19 ) (0.44 ) 0.02
$ 0.88
$ (0.05 ) $ 0.66
$ 0.25
Diluted earnings (loss) per share:
Continuing operations $ 0.88
$ 0.14
$ 1.09
$ 0.23
Discontinued operations —
(0.19 ) (0.44 ) 0.02
$ 0.88
$ (0.05 ) $ 0.65
$ 0.25

Income allocated to participating securities is calculated by allocating a portion of net income attributable to Providence, less dividends on convertible stock, to the convertible preferred stockholders on a pro-rata as converted basis; however, the convertible preferred stockholders are not allocated losses.

The following ~~weighted average~~weighted-average shares were not included in the computation of diluted earnings per share as the effect of their inclusion would have been anti-dilutive:


	Three months ended June 30,		Six months ended June 30,
	2023	2022	2023	2022
Stock options to purchase common stock	94,104	146,186	91,757	127,524
Restricted stock awards and restricted stock units	108,999	130,530	73,469	113,856

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Stock options to purchase common stock 33,890
33,957
56,528
33,957
Convertible preferred stock 803,285
803,398
803,360
803,457

~~10.~~12. Income Taxes

The Company’s effective tax rate ~~from continuing operations~~ for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2023 and 2022 was ~~16.7%~~a tax benefit of 0.4% and ~~28.8%~~a tax provision of 29.9%, respectively, and for the six months ended June 30, 2023 and 2022 was a tax benefit of 1.3% and a tax provision of 27.0%, respectively. ~~The Company’s effective tax rate from continuing operations for~~

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 was 55.6% and 64.9%, respectively. The~~2023, the effective tax rates for the ~~three and nine months ended September 30, 2016 exceeded~~benefits were significantly lower than the U.S. federal statutory rate of ~~35%~~21.0% primarily due to ~~foreign net operating losses (including equity investment losses in certain of~~ the ~~periods) for which~~nondeductible goodwill impairment. For the ~~future income tax benefit currently cannot be recognized, losses in foreign jurisdictions with~~three and six months ended June 30, 2022, the effective tax rates ~~lower~~for the provisions were higher than the U.S. federal statutory rate of ~~35%,~~21.0% primarily due to state income taxes and ~~certain non-deductible~~nondeductible expenses. Foreign net operating losses for which no tax benefit can be provided were higher in 2016 versus 2017 resulting in a decrease in the effective tax rate from 2016 to 2017. Additionally, for the three and nine months ended September 30, 2017, there was no provision for income taxes related to the gain on sale of equity investment of $12,606 due to the substantial difference in tax basis versus book basis in the investment.

The Company recorded excess tax deficiencies for the three and nine months ended September 30, 2017 of $261 and $148, respectively, which increased the provision for income taxes. These excess tax deficiencies were a result of applying the guidance in ASU 2016-09 as further discussed in Note 2, ~~Significant Accounting Policies and Recent Accounting Pronouncements.~~

The adoption of ASU 2016-09 subjects our tax rate to quarterly volatility from the effects of stock award exercises and vesting activities, including the adverse impact on our income tax provision for awards which result in a tax deduction less than the amount recorded for financial reporting purposes based upon the fair value of the award at the grant date. For example, no shares will be distributed under the HoldCo LTIP unless the volume weighted average of Providence’s stock price over a 90-day period ending on December 31, 2017 exceeds $56.79. If this market condition is not satisfied, a significant tax shortfall will result, causing an adverse impact on our tax provision.

~~11.~~13. Commitments and Contingencies

~~Legal proceedings~~Surveys, audits and governmental investigations

On June 15, 2015, a putative stockholder class action derivative complaint was filed in the Court of Chancery of the State of Delaware (the “Court”), captioned Haverhill Retirement System v. Kerley et al., C.A. No. 11149-VCL (“Haverhill Litigation”).

On September 28, 2017, the Court approved a proposed settlement agreement among the parties that provides for a settlement amount of $10,000 less plaintiff’s legal fees and expenses (the “Settlement Amount”), with 75% of the Settlement Amount to be paid to the Company and 25% of the Settlement Amount to be paid to holders of the Company’s common stock other than certain excluded parties. The Company expects to receive a payment of approximately $5,000. As this amount is considered a gain contingency, the Company has not recorded a receivable for this amount as of September 30, 2017.

~~For further information regarding this legal proceeding please see Note 19,~~ ~~Commitments and Contingencies, in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and Note 11,~~ ~~Commitments and Contingencies, in the unaudited condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2017 and June 30, 2017.~~

In ~~addition to the matter described above, in~~ the ordinary course of business, the Company ~~is a party~~may from time to time be or become subject to surveys, audits and governmental investigations under or with respect to various ~~lawsuits.~~governmental programs and state and federal laws. Agencies associated with the programs and other third-party commercial payors periodically conduct extensive pre-payment or post-payment medical reviews or other audits of claims data to identify possiblepayments made or authorized other than in compliance with the requirements of Medicare or Medicaid. In order to conduct these reviews, documentation is requested from us and then that documentation is reviewed to determine compliance with applicable rules and regulations, including the eligibility of clients to receive benefits, the appropriateness of the care provided to those clients, and the documentation of that

care. Similarly, other state and federal governmental agencies conduct reviews and investigations to confirm our compliance with applicable laws where we operate, including regarding employment and wage related regulations and matters. We cannot predict the ultimate outcome of any regulatory reviews or other governmental surveys, audits or investigations, but management does not expect any ongoing surveys, audits or investigations involving the Company to have a material adverse effect on the business, liquidity, financial condition, or results of operations of the Company.Regardless of our expectations, however, surveys, audits or investigations are subject to inherent uncertainties and can have a material adverse impact on our Company due to, among other reasons, potential regulatory orders that inhibit our ability to operate our business, amounts paid as reimbursement or in settlement of any such matter, diversion of management resources and investigative costs.

Legal proceedings

In the ordinary course of business, the Company may from time to time be or become involved in various lawsuits, some of which may seek monetary damages, including claims for punitive damages. Management does not expect ~~these~~any ongoing lawsuits involving the Company to have a material impact on the business, liquidity, financial condition, or results of operations of the Company. Legal proceedings are subject to inherent uncertainties, however, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, liquidity, financial ~~condition~~position, or results of ~~Providence.~~operations.

~~Indemnifications related to Haverhill Litigation~~

The Company ~~completed~~records accruals for loss contingencies related to legal matters when it is probable that a ~~rights offering on February 5, 2015 (the “Rights Offering”) providing all~~liability will be incurred and the amount of the ~~Company’s existing common stockholders~~loss can be reasonably estimated. If the ~~non-transferable right to purchase their pro rata share~~Company determines that a range of ~~$65,500 of convertible preferred stock at a price equal to $100.00 per share (“Preferred Stock”). Stockholders exercised subscription rights to purchase 130,884 shares of~~reasonably possible losses can be estimated, the ~~Company's Preferred Stock. Pursuant~~Company records an accrual for the most probable amount in the range. Due to the ~~terms~~inherent difficulty in predicting the outcome of any legal proceeding, it may not be reasonably possible to estimate a range of potential liability until the matter is close to resolution. Legal fees related to all legal matters are expensed as incurred.

On September 27, 2022, Daniel Greenleaf, the Company’s former Chief Executive Officer, asserted claims in an arbitration against the Company. His claims allege that the Company breached Mr. Greenleaf’s employment agreement and ~~conditions of~~included a tort claim against the ~~Standby Purchase Agreement (the “Standby Purchase Agreement”) between Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P.~~Company. Mr. Greenleaf’s arbitration complaint sought contractual, extra-contractual, and ~~Blackwell Partners, LLC (collectively, the “Standby Purchasers”)~~statutory damages. In May 2023, Mr. Greenleaf and the Company the remaining 524,116 shares of the Company’s Preferred Stock were purchased by the Standby Purchasers at the $100.00 per share subscription price. The Company has indemnified the Standby Purchasers from and against any and all losses, claims, damages, expenses and liabilities relating to or arising out of (i) any breach of any representation, warranty, covenant or undertaking made by or on behalf of the Company in the Standby Purchase Agreement and (ii) the transactions contemplated by the Standby Purchase Agreement and the 14.0% Unsecured Subordinated Note in aggregate principal amount of $65,500, except to the extent that any such losses, claims, damages, expenses and liabilities are attributable to the gross negligence, willful misconduct or fraud of such Standby Purchaser.

The Company has also indemnified other third parties from and against any and all losses, claims, damages, expenses and liabilities arising out of or in connection with the Company’s acquisition of CCHN Group Holdings, Inc. (operating under the tradename Matrix, and formerly included in our HA Services segment) in October 2014 and related financing commitments, except to the extent that any such losses, claims, damages, expenses and liabilities are found inexecuted a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such third parties, or a material breach of such third parties’ obligations under the related agreements.

~~The Company recorded $21 and $296 of such indemnified legal expenses~~settlement agreement related to ~~the Haverhill Litigation during the three~~both sides' claims in arbitration and ~~nine months ended September 30, 2017, respectively, and $791 and $935~~a general release of such indemnified legal expenses during the three and nine months ended September 30, 2016, respectively, which is included in “General and administrative expenses” in the condensed consolidated statements of income. Of these amounts, $23 and $231 for the three and nine months ended September 30, 2017, respectively, and $360 and $504 for the three and nine months ended September 30, 2016, respectively, were indemnified legal expenses of related parties. Other legal expenses of the Company related to the Haverhill Litigation are covered under the Company’s insurance policies, subject to applicable deductibles and customary review of the expenses by the carrier. The Company recognized related benefit of $3 and expense of $8 for the three and nine months ended September 30, 2017, respectively, and related expense of $107 for the three and nine months ended September 30, 2016. While the carrier typically remits payment directly to the respective law firm, the Company accrues for the cost and records a corresponding receivable for the amount to be paid by the carrier. The Company has recognized an insurance receivable of $903 and $1,645 in “Other receivables” in the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively, with a corresponding liability amount recorded to “Accrued expenses”.

~~Other Indemnifications~~

The Company has provided certain standard indemnifications in connection with the sale of the Human Services segment to Molina Healthcare Inc. (“Molina”) effective November 1, 2015. All representations and warranties made by the Company in the Membership Interest Purchase Agreement (the “Purchase Agreement”) to sell the Human Services segment ended on February 1, 2017. However,all claims made prior to February 1, 2017 by the purchaser of the Human Services segment against these representations and warranties may survive until the claims are settled. In addition, certain representations, including tax representations, survive until the expiration of applicable statutes of limitation, and healthcare representations survive until the third anniversary of the closing date. The Company received indications from the purchaser of the Human Services segment prior to the February 1, 2017 deadline regarding potential indemnification claims. One such potential indemnification claim relates to ~~Rodriguez v. Providence Community Corrections~~ ~~(the “Rodriguez Litigation”)~~, a complaint filed in the District Court for the Middle District of Tennessee, Nashville Division (the “Rodriguez Court”), against Providence Community Corrections, Inc. (“PCC”), an entity sold under the Purchase Agreement. In September 2017, the parties to the Rodriguez Litigation submitted a proposed settlement to the Rodriguez Court for approval pursuant to which PCC would pay the plaintiffs approximately $14,000. In October 2017, the Rodriguez Court denied preliminary approval of the settlement agreement and requested that the parties provide additional information. In October 2017, the parties submitted an amended motion for the Rodriguez Court to approve the proposed settlement.

~~Molina~~ and the Company agreed to pay Mr. Greenleaf $9.6 million.

On August 6, 2020, the Company’s subsidiary, ModivCare Solutions, LLC (“ModivCare Solutions”), was served with a putative class action lawsuit filed against it by Mohamed Farah, the owner of transportation provider Dalmar Transportation, in the Western District of Missouri, seeking to represent all non-employee transportation providers contracted with ModivCare Solutions. The lawsuit alleges claims under the Fair Labor Standards Act of 1938, as amended (the “FLSA”), and the Missouri Minimum Wage Act, and asserts that all transportation providers to ModivCare Solutions in the putative class should be considered ModivCare Solutions’ employees rather than independent contractors. On June 6, 2021, the Court conditionally certified as the putative class all current and former In Network Transportation Providers who, individually or through their companies, were issued 1099 payments from ModivCare Solutions for providing non-emergency medical transportation services for ModivCare Solutions for the previous three years. Notice of the proposed collective class was issued on October 5, 2021, and potential members of the class had until January 3, 2022 to opt-in. Plaintiff moved for class certification on August 15, 2022, and ModivCare Solutions filed an opposition to class certification on September 6, 2022. On January 13, 2023, the matter was transferred with the consent of the parties and the court to binding arbitration. The parties have ~~entered into a memorandum of understanding regarding~~agreed on a settlement and are awaiting the arbitrator's approval. ModivCare Solutions believes that it is and has been in compliance in all material respects with the laws and regulations regarding the characterization of the transportation providers as independent contractors, and does not believe that the settlement arrangement, if approved by the arbitrator, or the ultimate outcome of this arbitration, if the settlement is not approved (which is not expected), will have a material adverse effect on the Company’s business, liquidity, financial condition or results of operations.

In 2017, one of our Personal Care segment subsidiaries, All Metro Home Care Services of New York, Inc. d/b/a All Metro Health Care (“All Metro”), received a class action lawsuit in state court claiming that, among other things, it failed to properly pay live-in caregivers who stay in patients’ homes for 24 hours per day (“live-ins”). The Company currently pays live-ins for 13 hours per day as supported through a written opinion letter from the New York State Department of Labor (“NYSDOL”). A similar case involving this issue has been heard by the New York Court of Appeals (New York’s highest court), which on March 26, 2019, issued a ruling reversing earlier lower courts’ decisions that an ~~indemnification claim by Molina~~employer must pay live-ins for 24 hours. The Court of Appeals agreed with the NYSDOL’s interpretation to pay live-ins 13 hours instead of 24 hours if certain conditions were being met. If the class action lawsuit on this matter is allowed to proceed, and is successful, All Metro may be liable for back wages and litigated damages going back to November 2011. All Metro filed its motion to oppose class certification of this matter and the matter was heard on June 23, 2022. The state court issued an order certifying the class on December 12, 2022. The parties attempted to mediate their dispute in June 2023, but were unable to reach agreement on a

settlement. All Metro intends to defend itself vigorously with respect to ~~the Rodriguez Litigation~~this matter, believes that it is and other matters. As of September 30, 2017, the accrual is $15,000 with respect to an estimate of loss for potential indemnification claims. The Company expects to recover a substantial portion of the settlement through insurance coverage, although this cannot be assured.

~~The Company~~ has ~~provided certain standard indemnifications~~been in connection with its Matrix stock subscription transaction whereby Mercury Fortuna Buyer, LLC (“Subscriber”), Providence and Matrix entered into a stock subscription agreement (the “Subscription Agreement”), dated August 28, 2016. The representations and warranties made by the Companycompliance in the Subscription Agreement survive through the 15th month following the closing date; however, certain fundamental representations survive through the 36th month following the closing date. The covenants and agreements of the parties to be performed prior to the closing survive through the 15th month following the closing date, and all ~~other covenants and agreements survive until the expiration of the applicable statute of limitations in the event of a breach, or for such lesser periods specified therein.~~ ~~The Company is not aware of any indemnification liabilities with respect to Matrix that require accrual at September 30, 2017.~~

~~Other Contingencies~~

On October 26, 2017, the UK Ministry of Justice (the “MOJ”) released a report on reoffending statistics for certain offenders who entered probation services during the period October 2015 to December 2015. The report provides statistics for all providers of probation services, including the Company’s subsidiary Reducing Reoffending Partnership (“RRP”). This information is the first data set that is utilized to determine performance payments under the various providers’ transforming rehabilitation contractsmaterial respects with the ~~MOJ, as~~laws and regulations covering pay for live-in caregivers, and does not believe in any event that the ~~actual rates~~ultimate outcome of recidivism are compared to benchmark rates established by the MOJ. Across the industry, including for RRP, while certain rates of recidivism were less than the applicable benchmarks, other rates exceeded the benchmarks established by the MOJ. If such rates of recidivism were to continue to exceed the benchmark rates established by the MOJ, RRP could be required to make payments to the MOJ, which amounts could be material. The amount of potential payments to the MOJ, if any, under RRP’s contracts with the MOJ is not estimable at this ~~time, as the MOJ is reviewing the data to understand the underlying reasons for the increase in certain rates of recidivism and other factors that could impact the contractual measure.~~

~~Loss Reserves for Certain Reinsurance Programs~~

~~The Company historically reinsured~~matter will have a substantial portion of its automobile, general and professional liability and workers’ compensation costs under reinsurance programs through the Company’s wholly-owned subsidiary, Social Services Providers Captive Insurance Company (“SPCIC”), a licensed captive insurance company domiciled in the State of Arizona. As of May 16, 2017, SPCIC did not renew the expiring reinsurance policies. SPCIC will continue to resolve claims under the historical policy years.

The Company utilizes a report prepared by an independent actuary to estimate the gross expected losses related to historical automobile, general and professional and workers’ compensation liability reinsurance policies, including the estimated losses in excess of SPCIC’s insurance limits, which would be reimbursed to SPCIC to the extent such losses were incurred. As of September 30, 2017 and December 31, 2016, the Company had reserves of $8,309 and $11,195, respectively, for the automobile, general and professional liability and workers’ compensation reinsurance policies, net of expected receivables for losses in excess of SPCIC’s historical insurance limits. The gross reserve as of September 30, 2017 and December 31, 2016 of $14,407 and $16,460, respectively, is classified as “Reinsurance liability reserves” and “Other long-term liabilities” in the condensed consolidated balance sheets. The estimated amount to be reimbursed to SPCIC as of September 30, 2017 and December 31, 2016 was $6,098 and $5,265, respectively, and is classified as “Other receivables" and “Other assets” in the condensed consolidated balance sheets.

~~Deferred Compensation Plan~~

The Company has one deferred compensation plan for highly compensated employees of NET Services as of September 30, 2017. The deferred compensation plan is unfunded, and benefits are paid from the general assets of the Company. The total of participant deferrals, which is reflected in “Other long-term liabilities” in the condensed consolidated balance sheets, was $1,718 and $1,430 at September 30, 2017 and December 31, 2016, respectively.

~~12. Transactions with Related Parties~~

~~The Company incurred legal expenses under an indemnification agreement with the Standby Purchasers as further discussed in Note 11,~~ ~~Commitments and Contingencies~~. Convertible preferred stock dividends earned by the Standby Purchasers during the three and nine months ended September 30, 2017 totaled $1,062 and $3,151, respectively. Convertible preferred stock dividends earned by the Standby Purchasers during the three and nine months ended September 30, 2016 totaled $1,059 and $3,154, respectively.

~~During the three months ended March 31, 2017, the Company made a $566 loan to Mission Providence. The loan was repaid during the three months ended September 30, 2017.~~

~~13. Discontinued Operations~~

On November 1, 2015, the Company completed the sale of the Human Services segment. During the three and nine months ended September 30, 2017, the Company recorded additional expenses related to the Human Services segment, principally related to legal proceedings as described in Note 11, ~~Commitments and Contingencies, related to an indemnified legal matter.~~

Effective October 19, 2016, the Company completed the Matrix Transaction. Prior to the closing of the Matrix Transaction, the financial results of Matrix were included in the Company’s HA Services segment, which has been reflected as a discontinued operation for the three and nine months ended September 30, 2016. Following the Matrix Transaction, the Company has a continuing involvement with Matrix through its ownership interest in Matrix, which is accounted for as an equity method investment. As of September 30, 2017, the Company holds a 46.6% ownership interest in Matrix. Matrix’s pretax loss for the three and nine months ended September 30, 2017 totaled $582 and $896, respectively. There have been no cash inflows or outflows from or to Matrix subsequent to the closing of the Matrix Transaction, other than the payment of working capital adjustments and management fees associated with its ongoing relationship with Matrix, of which $841 was received during the nine months ended September 30, 2017. $259 and $185 are included in “Other receivables” in the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively, related to management fees receivable.

~~Results of Operations~~

~~The following tables summarize the results of operations classified as discontinued operations, net of tax, for the three and nine months ended September 30, 2017 and 2016.~~

Three months ended September 30, 2017 Nine months ended September 30, 2017

Human
Services
Segment

HA Services
Segment

Total
Discontinued
Operations

Human
Services
Segment

HA Services
Segment

Total
Discontinued
Operations

Operating expenses:
General and administrative expense $ 26
$ —
$ 26
$ 9,622
$ —
$ 9,622
Total operating expenses 26
—
26
9,622
—
9,622
Loss from discontinued operations before income taxes (26 ) —
(26 ) (9,622 ) —
(9,622 )
Income tax benefit 10
—
10
3,622
—
3,622
Discontinued operations, net of tax $ (16 ) $ —
$ (16 ) $ (6,000 ) $ —
$ (6,000 )

General and administrative expenses for the three months ended September 30, 2017 includes legal expenses of $26. General and administrative expenses for the nine months ended September 30, 2017 includes an accrual of $9,000 for an estimated settlement of indemnified claims related to the sale of the Human Services segment, as well as related legal expenses of $622. See Note 11, ~~Commitments and Contingencies, for additional information.~~

Three months ended September 30, 2016 Nine months ended September 30, 2016

Human
Services
Segment

HA Services
Segment

Total
Discontinued
Operations

Human
Services
Segment

HA Services
Segment

Total
Discontinued
Operations

Service revenue, net $ —
$ 52,557
$ 52,557
$ —
$ 155,421
$ 155,421

Operating expenses:
Service expense —
38,703
38,703
—
113,455
113,455
General and administrative expense 7,463
1,505
8,968
7,463
2,823
10,286
Depreciation and amortization —
5,359
5,359
—
21,121
21,121
Total operating expenses 7,463
45,567
53,030
7,463
137,399
144,862
Operating income (loss) (7,463 ) 6,990
(473 ) (7,463 ) 18,022
10,559

Other expenses:
Interest expense, net —
3,134
3,134
—
9,304
9,304
Income (loss) from discontinued operations before income taxes (7,463 ) 3,856
(3,607 ) (7,463 ) 8,718
1,255
Income tax benefit (provision) 2,428
(1,612 ) 816
2,428
(3,351 ) (923 )
Discontinued operations, net of tax $ (5,035 ) $ 2,244
$ (2,791 ) $ (5,035 ) $ 5,367
$ 332

~~Interest expense, net~~

~~The Company allocated interest expense, including amortization of deferred financing fees, to discontinued operations based~~material adverse effect on the portion of debt that was required to be repaid with the proceeds from the Matrix Transaction. The total allocated interest expense was $3,136 and $9,310 for the three and nine months ended September 30, 2016 respectively, and is included in “Interest expense, net” in the table above.

~~Cash Flow Information~~

~~The following table presents depreciation, amortization and capital expenditures of the discontinued operations for the nine months ended September 30, 2016:~~

Nine months ended September 30, 2016

Cash flows from discontinued operating activities:
Depreciation $ 3,661
Amortization $ 17,460

Cash flows from discontinued investing activities:
Purchase of property and equipment $ 8,020

~~14. Segments~~

Providence, through its subsidiaries and other companies in which it holds interests, is primarily engaged in the provision of healthcare and workforce development services. The subsidiaries and other companies in which the Company holds interests comprise the following segments:

~~NET Services – Nationwide provider of non-emergency medical transportation programs for state governments and managed care organizations.~~

~~WD Services – Global provider of employment preparation and placement and legal offender rehabilitation services to eligible participants of government sponsored programs.~~

Matrix Investment – Minority interest in nationwide provider of in-home care optimization and management solutions, including comprehensive health assessments, to members of managed care organizations, accounted for as an equity method investment.

Effective October 19, 2016, pursuant to the Matrix Transaction, the Company no longer owns a controlling interest in Matrix, which historically constituted the HA Services segment as further discussed in Note 13, ~~Discontinued Operations~~. As the HA Services segment, through October 19, 2016, is presented as a discontinued operation, it is not reflected in the Company’s segment disclosures. However, the Company accounts for its noncontrolling interest in Matrix from October 19, 2016 through present as an equity method investment, which solely comprises the Matrix Investment in the table below.

~~The following tables set forth certain financial information from continuing operations attributable to~~ the Company’s business, ~~segments for the three and nine months ended September 30, 2017 and 2016:~~liquidity, financial condition or results of operations.

Three months ended September 30, 2017
NET Services WD Services
Matrix
Investment

Corporate and
Other
Total
Service revenue, net $ 324,824
$ 84,693
$ —
$ —
$ 409,517
Service expense 304,454
73,581
—
(3 ) 378,032
General and administrative expense 2,899
6,980
—
8,750
18,629
Depreciation and amortization 3,286
3,166
—
95
6,547
Operating income (loss) $ 14,185
$ 966
$ —
$ (8,842 ) $ 6,309

Equity in net gain (loss) of investee $ —
$ (459 ) $ (1 ) $ —
$ (460 )

Three months ended September 30, 2016
NET Services WD Services
Matrix
Investment

Corporate and
Other
Total
Service revenue, net $ 317,280
$ 94,960
$ —
$ 31
$ 412,271
Service expense 293,919
84,051
—
518
378,488
General and administrative expense 2,860
6,780
—
7,680
17,320
Depreciation and amortization 3,051
3,497
—
122
6,670
Operating income (loss) $ 17,450
$ 632
$ —
$ (8,289 ) $ 9,793

Equity in net gain (loss) of investee $ —
$ (1,517 ) $ —
$ —
$ (1,517 )

Nine months ended September 30, 2017
NET Services WD Services
Matrix
Investment

Corporate and
Other
Total
Service revenue, net $ 987,662
$ 229,332
$ —
$ —
$ 1,216,994
Service expense 927,082
199,665
—
(2,269 ) 1,124,478
General and administrative expense 8,879
20,944
—
23,882
53,705
Depreciation and amortization 9,763
9,695
—
258
19,716
Operating income (loss) $ 41,938
$ (972 ) $ —
$ (21,871 ) $ 19,095

Equity in net gain (loss) of investee $ —
$ (1,419 ) $ 428
$ —
$ (991 )

Nine months ended September 30, 2016
NET Services WD Services
Matrix
Investment

Corporate and
Other
Total
Service revenue, net $ 917,157
$ 275,293
$ —
$ (24 ) $ 1,192,426
Service expense 846,311
247,797
—
903
1,095,011
General and administrative expense 8,483
23,236
—
20,829
52,548
Depreciation and amortization 8,858
10,912
—
288
20,058
Operating income (loss) $ 53,505
$ (6,652 ) $ —
$ (22,044 ) $ 24,809

Equity in net gain (loss) of investee $ —
$ (5,693 ) $ —
$ —
$ (5,693 )

~~Geographic Information~~

Domestic service revenue, net, totaled 82.1% and 78.0% of service revenue, net for the nine months ended September 30, 2017 and 2016, respectively. Foreign service revenue, net, totaled 17.9% and 22.0% of service revenue, net for the nine months ended September 30, 2017 and 2016, respectively.

At September 30, 2017 and December 31, 2016, $99,352, or 26.0%, and $76,579, or 20.4%, respectively, of the Company’s net assets were located in countries outside of the U.S., including $15,823 of proceeds realized on the sale of the equity investment in Mission Providence.

~~15. Subsequent Events~~

On November 2, 2017, the Company’s Board of Directors approved the extension of the Company’s existing stock repurchase program, authorizing the Company to engage in a common stock repurchase program to repurchase up to $69,624 (the amount remaining from the $100,000 repurchase amount authorized in 2016) in aggregate value of the Company’s common stock through December 31, 2018. Purchases under the common stock repurchase program may be made from time-to-time through a combination of open market repurchases (including Rule 10b5-1 plans), privately negotiated transactions, and accelerated share repurchase transactions, at the discretion of the Company’s officers, and as permitted by securities laws, covenants under existing bank agreements, and other legal requirements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022 included herein, as well as our audited consolidated financial statements and accompanying notes and management’s discussion and analysis of financial condition and results of operations included in our Form 10-K for the year ended December 31, ~~2016.~~2022. For purposes of “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” references to ~~Q3 2017~~"Q2 2023" and ~~Q3 2016~~"Q2 2022" mean the three months ended ~~September~~June 30, ~~2017~~2023 and the three months ended ~~September~~June 30, ~~2016, respectively,~~2022, respectively.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and ~~references~~Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 3b-6 promulgated thereunder, including statements related to ~~YTD 2017~~the Company’s strategies or expectations about revenues, liabilities, results of operations, cash flows, ability to fund operations, profitability, ability to meet financial covenants, contracts or market opportunities. These statements are predictive in nature and ~~YTD 2016 mean~~are frequently identified by the ~~nine months~~use of terms such as “may,” “will,” “should,” “expect,” “believe,” “estimate,” “intend,” and similar words indicating possible future expectations, events or actions. In addition, statements that are not historical statements of fact should also be considered forward-looking statements. 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, that may cause actual events to be materially different from those expressed or implied herein. Among such risks, uncertainties and other factors are those summarized under the caption “Summary Risk Factors” in Part I, and described in further detail under the caption “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, for the fiscal year ended ~~September 30, 2017~~December 31, 2022. Hyperlinks to such sections of our Annual Report are contained in the text included within the quotation marks.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made and are expressly qualified in their entirety by the ~~nine months ended September 30, 2016, respectively.~~cautionary statements set forth herein and in our other filings with the SEC, which you should read in their entirety before making an investment decision with respect to our securities. 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.

Overview of ~~our business~~Our Business

~~Providence, through its subsidiaries~~ModivCare Inc. ("ModivCare" or the "Company") is a technology-enabled healthcare services company that provides a suite of integrated supportive care solutions for payors and ~~other companies in which it holds interests,~~their members. Its value-based solutions address the social determinants of health, or SDoH, connect members to care, help health plans manage risks, reduce costs, and improve health outcomes. ModivCare is ~~primarily engaged in the provision of healthcare and workforce development services. The subsidiaries and other companies in which we hold interests comprise the following segments:~~

~~Non-Emergency Transportation Services (“NET Services”) – Nationwide~~a provider of non-emergency medical transportation, ~~programs for state governments~~or NEMT, personal care, and ~~managed~~remote patient monitoring, or RPM, solutions, which serve similar, highly vulnerable patient populations. The technology-enabled operating model in its NEMT segment includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transportation management. Additionally, its personal care ~~organizations.~~services include placements of non-medical personal care assistants, home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting, including senior citizens and disabled adults. ModivCare’s remote patient monitoring services include personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. ModivCare is further expanding its offerings to include meal delivery and working with communities to provide meals to food-insecure individuals.

Business Outlook and Trends

Our performance is affected by a number of trends that drive the demand for our services. In particular, the markets in which we operate are exposed to various trends, such as healthcare industry and demographic ~~dynamics in the United States (“U.S.”) and international government outsourcing and employment~~ dynamics. Over the long term, we believe there are numerous factors that could affect growth within the industries in which we operate, including:

•an aging population, which ~~will~~is expected to increase demand for healthcare services including required transportation to such healthcare services and in-home personal care and remote patient monitoring services;

•increasing prevalence of chronic illnesses that require active and ongoing monitoring of health data which can be accomplished at a lower cost and result in better health outcomes through remote patient monitoring services;

•a movement towards value-based care versus ~~fee for service,~~fee-for-service and cost plus care and budget pressure on governments, both of which may increase the use of private corporations to provide necessary and innovative services;

•increasing demand for in-home care provision, driven by cost pressures on traditional reimbursement models and technological advances enabling remote ~~engagement;~~engagement, including remote monitoring and similar internet-based health related services;

•a shift in membership dynamics as a result of Medicaid redetermination efforts, which may decrease membership levels at our NEMT segment;

•advancement of regulatory priorities, which include the Centers for Medicare and Medicaid Services ("CMS") proposed rule, Ensuring Access to Medicaid Services, which may lower profit margins at our Personal Care segment;

•technological advancements, which may be utilized by us to improve ~~service~~services and lower costs, ~~and~~but may also be utilized by others, which may increase industry competitiveness; and

•MCO, Medicaid and Medicare plans increasing coverage of NEMT services for a variety of reasons, including increased access to care, improved patient compliance with treatment plans, social trends, and to promote SDoH, and this trend may be accelerated or reinforced by The Consolidated Appropriations Act of 2021 ("H.R.133"), a component of which mandates that state Medicaid programs ensure that Medicaid beneficiaries have necessary transportation to and from health care providers.

On May 11, 2023, the Department of Health and Human Services ("HHS") declared the end of the public health emergency ("PHE") for the COVID-19 pandemic. While the Company has continued to experience increased trip volume, service hours, and patient visits each year following the pandemic, structural changes in ~~UK government policy, such~~the industry as ~~decreased volumes in future welfare-to-work programs, specifically through the UK’s Work and Health Programme, which will have~~ a ~~reduced scope and reduced funding compared with the prior programs;~~

~~the results~~result of the ~~referendum on the UK’s exit from the European Union and~~pandemic, predominantly related ~~political and economic uncertainty~~to an increase in the ~~UK;~~utilization of telehealth and

the U.S. federal government's expressed intent to repeal the Patient Protection and Affordable Care Act and replace such law with an alternative proposal. The details of both the extent of the provisions that may be repealed virtual care, as well as ongoing constraints on the ~~details~~labor market, specifically related to the strain on healthcare professionals, have continued to impact the volume of services we are able to provide. For the NEMT segment, any ~~potential replacement legislation are uncertain~~ongoing impact to trip volume as a result of this structural change in the industry may have a negative financial impact on our transportation providers and may result in lower revenues as the Company adapts to this change in demand for transportation services and adapts to availability of transportation providers should any capacity constraints within our network of transportation providers arise. For the Personal Care segment, the shortage of caregivers will continue to impact the volume of service hours that can be provided while also driving increased wage rates, which limits the Company's ability to be profitable in contracts with set rates for various care services. Additionally, changes in membership dynamics at ~~this time. Enactment~~the NEMT segment as a result of Medicaid redetermination efforts and reduction in payor reimbursement rates at the Personal Care segment in an attempt to contain costs could limit the ability for the Company to generate revenue despite the Company's shift toward emphasizing the importance of value-based care. Any of these circumstances and factors could have a material adverse ~~legislation, regulation~~effect on our reputation and business and any long-term macroeconomic impacts that have arisen as a result of the pandemic could continue to change trends in the market.

Our business environment is competitive, the structural changes in our industry related to the COVID-19 pandemic have been lasting, the labor market for healthcare professionals remains constrained, and the market price for our common stock on the Nasdaq Stock Market continues to be volatile; the continuing effect of all or ~~agency guidance,~~any of the foregoing could result in, in future periods, an impairment to the estimated fair value of the goodwill that has been established for our reporting units. As discussed elsewhere herein and under the caption “Risk Factors” in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2022, impairment tests may be required in addition to the annual impairment testing as of July 1, 2023, if circumstances change that would, more likely than not, reduce the ~~demand~~fair value of goodwill of a reporting unit below such reporting unit’s carrying value. The Company monitors the performance of the business and the value of its stock price and estimated fair values of its reporting units, among other relevant considerations, to determine if any impairments to goodwill could exist at any particular time. During our July 1 annual assessment of goodwill, we determined that based on our qualitative assessment for each reporting unit, factors existed which required us to test our ~~services, our ability~~goodwill for impairment. These factors included a decline in the market price of the Company's common stock, industry specific regulatory pressures such as Medicaid redetermination and the Centers for Medicare and Medicaid Services ("CMS") proposed ruling on Ensuring Access to ~~conduct some or all~~Medicaid Services, and general economic and market volatility. As a result of our ~~business and/or reimbursement rates~~quantitative assessment, we determined that the goodwill at our Personal Care and RPM reporting units was impaired. See Note 7, Goodwill and Intangible Assets, for ~~services performed within~~additional details.

Critical Accounting Estimates and Policies

Other than our ~~segments.~~

~~Historically, our segments have grown through organic expansion into new markets and service lines, organic expansion within existing markets and service lines, increases~~change in accounting policy related to the change in the ~~number~~date of ~~members served under contracts we~~our annual goodwill test from October 1 to July 1, included in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, there have been ~~awarded, the securing of new contracts, and acquisitions. As we continue~~no significant changes to focus our attention and capital on our domestic, healthcare services operations ("U.S. Healthcare Services"), we may pursue the acquisition of attractive businesses that are complementary to our U.S. Healthcare Services. In addition, as evidenced by the 2016 Matrix Transaction (as defined below), we may also enter into strategic partnerships if we feel this provides the best opportunity to maximize shareholder value. The pursuit of our strategy may also result in the disposition of current or future investments, as demonstrated in 2017 with our sale of our equity investment in Mission Providence and in 2015 with the sale of our Human Services segment. In coming to these determinations, we base our decisions on a variety of factors, including the availability of alternative opportunities to deploy capital, maximize shareholder value or other strategic considerations. Furthermore, the Company typically incurs costs related to merger and acquisition activities, including third-party costs, whether the transaction is completed or not.

~~Critical accounting estimates and policies~~

~~As of September 30, 2017, there has been no change in~~ our critical accounting policies ~~other than~~in our unaudited condensed consolidated financial statements from our Form 10-K for ~~stock-based compensation and recoverability of goodwill, as discussed below.~~the year ended December 31, 2022. For further discussion of our critical accounting policies, see management’s discussion and analysis of financial condition and results of operations contained in our Form 10-K for the year ended December 31, ~~2016.~~2022.

~~Stock-Based Compensation~~Results of Operations

~~Our primary forms~~The following results of ~~employee stock-based compensation~~operations include the accounts of ModivCare Inc. and our subsidiaries for the three and six months ended June 30, 2023.

Revenues

Service revenue, net. Service revenue for our NEMT segment includes the revenue generated by providing non-emergency transportation services directly to our customers. These services are ~~stock option awards and restricted stock awards, including certain awards~~provided on either a capitated basis, which ~~vest~~means we are paid on a per-member, per-month ("PMPM") basis for each eligible member, or on a fee-for-service ("FFS") basis, which means we are paid based ~~upon performance conditions. We measure the value of stock option awards~~ on the ~~date~~volume of ~~grant at fair value using~~trips or services performed. We receive payments for our services from third-party payors, predominately made up of state Medicaid agencies and MCOs.

Under capitated contracts, payors pay a fixed amount per eligible member per month and we assume the ~~appropriate valuation techniques, including~~responsibility of meeting the ~~Black-Scholes~~covered healthcare related transportation requirements for the number of eligible members in the payor's program. Revenue is recognized based on the number of members served during the period. For certain capitated contracts, we have provisions for reconciliations, risk corridors, and/or profit rebates. These contracts allow for periodic reconciliations based on actual cost and ~~Monte Carlo option-pricing models. We recognize~~or/trip volume and may result in refunds to the ~~fair value as stock-based compensation expense~~payor, or additional payments due from the payor.

Under fee-for-service ("FFS") contracts, payors pay a specified amount for each service that we provide based on costs incurred plus an agreed-upon margin. FFS revenue is recognized in the period in which the services are rendered and is reduced by the estimated impact of contractual allowances.

Service revenue for our Personal Care segment includes the revenue generated based on the hours incurred by our in-home caregivers to provide services to our customers, primarily on a ~~straight-line~~FFS basis ~~over~~in which we earn a specified amount for each service that we provide. Payment for our Personal Care services is billed to third-party payors which include, but are not limited to, MCOs, hospitals, Medicaid agencies and programs and other home health care providers who subcontract the ~~requisite~~services to our caregivers.

Service revenue for our RPM segment includes the sale of monitoring equipment to our third-party distributors as well as revenue generated from the hours incurred by our Clinical Team for providing monitoring services to our customers, primarily on a PMPM basis for each eligible member. Payment for our monitoring services is billed to third-party payors which include, but are not limited to, national and regional health plans, government-funded benefit programs, healthcare provider organizations, and individuals.

Grant Income

Grant income. The Company has received distributions under the CARES Act Provider Relief Fund ("PRF") and the ARPA Coronavirus State and Local Fiscal Relief Fund ("SLFRF") targeted to providing economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic.

Operating Expenses

Service expense. Service Expense for our NEMT segment includes purchased transportation, operational payroll and other operational related costs. Purchased transportation includes the amounts we pay to third-party service ~~period, which~~providers and is typically dependent upon service volume. Operational payroll predominately includes our contact center operations, customer advocacy and transportation network team. Other operating expenses primarily include operational overhead costs, and operating facilities and related charges. Service expense for our Personal Care segment includes payroll and other operational related costs for our caregivers to provide in-home care. Service expense for our RPM segment primarily consists of salaries of employees in our contact centers, connectivity costs and occupancy costs.

General and administrative expense. General and administrative expense for all segments consists principally of salaries for administrative employees that support the ~~vesting period. The pricing models require various highly judgmental assumptions including volatility~~operations, occupancy costs, marketing expenditures, insurance, and ~~expected option term. If any~~professional fees.

Impairment of ~~the assumptions used in the models change significantly, stock-based compensation expense may differ materially in the future from~~goodwill. We determined that ~~recorded in the current period.~~

based on our qualitative assessment for each reporting unit, qualitative factors existed which required us to test our goodwill for impairment. As a result of the ~~adoption~~impairment evaluation, we determined that the goodwill within our Personal Care and RPM reporting units was impaired.

Depreciation and amortization expense. Depreciation within this caption includes infrastructure items such as computer hardware and software, office equipment, monitoring and vitals equipment, buildings, and leasehold improvements. Amortization expense is generated primarily from amortization of ~~Accounting Standards Update (“ASU”) No. 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718): Improvements~~our intangible assets, including payor networks, trade names, developed technology, a non-compete agreement, an assembled workforce, and a New York LHCSA permit.

Other Expenses (Income)

Interest expense, net. Interest expense consists principally of interest accrued during the period ended June 30, 2023 on the Company’s borrowings outstanding under the Credit Facility and Senior Unsecured Notes, and amortization of deferred financing fees. Refer to ~~Employee Share-Based Payment Accounting~~ ~~(“ASU 2016-09”), effective January 1, 2017, we no longer record stock-based compensation expense~~the “Liquidity and Capital Resources” section below for further discussion of these borrowings.

Equity in net income (loss) of investee, net of ~~estimated forfeitures and the~~tax. Equity in earnings of equity method investee consists of our proportionate share of equity earnings or losses from our Matrix equity investment, presented net of related taxes.

Income tax ~~effects of awards are treated as discrete items~~(provision) benefit. The Company is subject to federal taxation in the ~~period~~United States and state taxation in the various jurisdictions in which ~~tax windfalls or shortfalls occur. The adoption also impacted~~we operate.

Segment Reporting

Our segments reflect the ~~presentation of cash flows and the computation of earnings per share.~~

~~The adoption of ASU 2016-09 will subject~~manner in which our tax rate to quarterly volatility from the effects of stock award exercises and vesting activities, including the adverse impact on our income tax provision for awards which result in a tax deduction less than the amount recorded for financial reporting purposes based upon the fair value of the award at the grant date. For example, no shares will be distributed under the Company’s 2015 Holding Company LTI Program (the “HoldCo LTIP”) unless the volume weighted average of Providence’s stock price over a 90-day period ending on December 31, 2017 exceeds $56.79. If this market condition is not satisfied, a significant tax shortfall will result, causing an adverse impact on our tax provision.

~~Recoverability of Goodwill~~

~~Goodwill. In accordance with ASC 350,~~ ~~Intangibles-Goodwill and Other~~, we review goodwill for impairment annually, or more frequently, if events and circumstances indicate that an asset may be impaired. Such circumstances could include, but are not limited to: (1) the loss or modification of significant contracts, (2) a significant adverse change in legal factors or in business climate, (3) unanticipated competition, (4) an adverse action or assessment by a regulator, or (5) a significant decline in the Company’s stock price. We perform the annual goodwill impairment test for all reporting units as of October 1.

First, we perform qualitative assessments for each reporting unit to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment suggests that it is more likely than not that the fair value of a reporting unit is less than its carrying value amount, we then perform a quantitative assessment and compare the fair value of the reporting unit to its carrying value.

~~We adopted ASU No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment~~ ~~(“ASU 2017-04”) effective April 1, 2017~~. ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. Instead, if we deem it necessary to perform the quantitative goodwill impairment test in an annual or interim period, we recognize an impairment charge equal to the excess, if any, of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

~~Results of operations~~

~~Segment reporting.~~ ~~Our~~ operations are organized and reviewed by management along our segment lines. We operate in two principal business segments: NET Services and WD Services. Our investment in CCHN Group Holdings, Inc. and its subsidiaries (“Matrix”) is also a reportable segment referred to as the “Matrix Investment”.

On October 19, 2016, affiliates of Frazier Healthcare Partners purchased a 53.2% equity interest in Matrix, with Providence retaining a 46.8% equity interest (the “Matrix Transaction”), resulting in our ownership of a noncontrolling interest (46.6% as of September 30, 2017) in our historical Health Assessment Services (“HA Services”) segment. The HA Services segment results of operations for the periods through October 19, 2016 are separately discussed in the “Discontinued operations, net of tax” section set forth below. The results of operations for periods subsequent to October 19, 2016 are separately discussed in the “Equity in net loss of investees” section set forth below. Additionally, effective November 1, 2015, we completed the sale of our Human Services segment. The Human Services segment results of operations are separately discussed in the “Discontinued operations, net of tax” section set forth below. Subsequent to the sale of our Human Services segment, we have incurred additional expenses in certain periods related to the settlement of indemnification claims and associated legal costs, which are recorded to “Discontinued operations, net of tax”.

management. Segment results are based on how our ~~chief operating decision maker~~CODM manages our business, makes operating decisions and evaluates operating performance.

We operate four reportable business segments: NEMT, Personal Care, RPM, and Corporate and Other. The NEMT segment provides non-emergency medical transportation services throughout the country. The Personal Care segment provides non-medical personal care and home health services. The RPM segment provides remote patient monitoring solutions. The operating results of the ~~two principal business segments~~Corporate and Other segment include revenue and expenses incurred by the segment, as well as an allocation of certain direct expenses incurred by our corporate division on behalf of the segment. Indirect expenses, including unallocated corporate functions and expenses, such asactivities related to executive, ~~finance,~~ accounting, ~~human resources, insurance administration,~~finance, internal audit, ~~process improvement, information technology~~tax, legal and ~~legal,~~certain strategic and corporate development functions for each segment, as well as the results of the Matrix investment. The operating results of the NEMT, Personal Care and RPM segments include revenue and expenses generated and incurred by the segment, and the Corporate and Other segment includes expenses incurred in relation to the Corporate operations of the Company

See Note 3, Segments, in our ~~captive insurance company (the “Captive”) and elimination entries recorded in consolidation are reflected in “Corporate and Other”.~~accompanying unaudited condensed consolidated financial statements for further information on our segments.

~~Q3 2017~~

Q2 2023 compared to ~~Q3 2016~~Q2 2022

Consolidated Results. The following table sets forth results of operations and the percentage of ~~consolidated total revenues~~Service revenue, net represented by items in our unaudited condensed consolidated statements of ~~income~~operations for ~~Q3 2017~~Q2 2023 and ~~Q3 2016~~Q2 2022 (in thousands):

Three months ended September 30,
2017 2016
$
Percentage
of Revenue
$
Percentage
of Revenue
Service revenue, net 409,517
100.0 % 412,271
100.0 %

Operating expenses:
Service expense 378,032
92.3 % 378,488
91.8 %
General and administrative expense 18,629
4.5 % 17,320
4.2 %
Depreciation and amortization 6,547
1.6 % 6,670
1.6 %
Total operating expenses 403,208
98.5 % 402,478
97.6 %

Operating income 6,309
1.5 % 9,793
2.4 %

Non-operating expense:
Interest expense, net 302
0.1 % 338
0.1 %
Equity in net (gain) loss of investees 460
0.1 % 1,517
0.4 %
Gain on sale of equity investment (12,606 ) 3.1 % —
— %
Loss (gain) on foreign currency transactions 200
— % (482 ) 0.1 %
Income from continuing operations before income taxes 17,953
4.4 % 8,420
2.0 %
Provision for income taxes 2,989
0.7 % 4,678
1.1 %
Income from continuing operations, net of tax 14,964
3.7 % 3,742
0.9 %
Discontinued operations, net of tax (16 ) — % (2,791 ) 0.7 %
Net income 14,948
3.7 % 951
0.2 %
Net loss attributable to noncontrolling interest (95 ) — % (301 ) 0.1 %
Net income attributable to Providence 14,853
3.6 % 650
0.2 %


	Three months ended June 30,
	2023				2022
	Amount		% of Service Revenue		Amount		% of Service Revenue
Service revenue, net	$	699,107	100.0	%	$	628,215	100.0	%
Grant income	2,634		0.4	%	3,330		0.5	%

Operating expenses:
Service expense	589,255		84.3	%	504,230		80.3	%
General and administrative expense	79,240		11.3	%	79,411		12.6	%
Depreciation and amortization	25,909		3.7	%	24,758		3.9	%
Impairment of goodwill	183,100		26.2	%	—		—	%
Total operating expenses	877,504		125.5	%	608,399		96.8	%

Operating income (loss)	(175,763)		(25.1)	%	23,146		3.7	%


Interest expense, net	16,967		2.4	%	15,472		2.5	%
Income (loss) before income taxes and equity method investment	(192,730)		(27.6)	%	7,674		1.2	%
Income tax (provision) benefit	830		0.1	%	(2,291)		(0.4)	%
Equity in net income (loss) of investee, net of tax	956		0.1	%	(2,055)		(0.3)	%
Net income (loss)	$	(190,944)	(27.3)	%	$	3,328	0.5	%

Service revenue, ~~net.~~net. Consolidated service revenue, net, for ~~Q3 2017 decreased $2.8~~Q2 2023 increased $70.9 million, or ~~0.7%~~11.3%, compared to ~~Q3 2016. Revenue~~Q2 2022. Service revenue, net, for ~~Q3 2017~~our NEMT segment increased by $48.2 million, primarily due to higher membership and monthly rate per member when compared to ~~Q3 2016 included a decrease~~Q2 2022. Service revenue, net, further increased by $17.6 million for our Personal Care segment, primarily due to higher hours worked by our caregivers in Q2 2023 as compared to Q2 2022. Service revenue, ~~attributable~~net, increased by $2.5 million for our RPM segment, due to ~~WD Services of $10.3 million. This decrease in revenue was partially offset by~~ an increase in ~~revenue~~average monthly members as compared to Q2 2022. See our Results of Operations - Segments, for further discussion.

Grant income. The Company recognized income of approximately $2.6 million during the three months ended June 30, 2023 and $3.3 million during the three months ended June 30, 2022 related to government grant distributions received, primarily under the CARES Act PRF and the ARPA SLFRF. These government grants are targeted to provide economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. These funds were received by our Personal Care segment and are available to eligible providers who have healthcare-related expenses and lost revenues attributable to ~~NET Services of $7.5 million. Excluding the favorable effects of changes in currency exchange rates, consolidated service revenue decreased 0.8%~~COVID-19.

Service expense. Service expense components are shown below (in thousands):


	Three months ended June 30,
	2023				2022
	Amount		% of Service Revenue		Amount		% of Service Revenue
Purchased services	$	377,192	54.0	%	$	317,213	50.5	%
Payroll and related costs	192,917		27.6	%	171,144		27.2	%
Other service expenses	19,146		2.7	%	15,873		2.5	%
Total service expense	$	589,255	84.3	%	$	504,230	80.3	%

Service expense for ~~Q3 2017~~Q2 2023 increased $85.0 million, or 16.9%, compared to ~~Q3 2016.~~Q2 2022 primarily due to higher purchased services costs in the NEMT segment of $60.0 million driven by higher third-party transportation costs due to persistent wage pressure and an increased number of trips. Transportation and payroll costs increased primarily as a result of higher trip volume across multiple contracts and higher wage rates at our contact and operations centers. This increase was also driven by higher service expense of $14.0 million in our Personal Care segment, primarily related to an increase in hours worked and higher wage rates paid for our caregivers.

~~Total operating expenses.~~ ~~Consolidated operating expenses~~General and administrative expense. General and administrative expense for ~~Q3 2017 increased $0.7~~Q2 2023 decreased $0.2 million, or 0.2%, compared to ~~Q3 2016. Operating expenses~~Q2 2022. General and administrative expense, expressed as a percentage of service revenue, net decreased to 11.3% for ~~Q3 2017~~Q2 2023 compared to ~~Q3 2016~~12.6% for Q2 2022.

Depreciation and amortization. Depreciation and amortization for Q2 2023 increased $1.2 million or 4.6% compared to Q2 2022 primarily as a result of $0.9 million of additional depreciation and amortization expense at the RPM segment related to the assets acquired in May 2022 in the acquisition of Guardian Medical Monitoring ("GMM"). For details on the acquisition, see Note 3 of the Notes to the consolidated financial statements included ~~an increase~~ in ~~expenses attributable to NET Services~~Part II, Item 8, “Financial Statements and Supplementary Data” of ~~$10.8~~our Form 10-K for the year ended December 31, 2022 filed on March 7, 2023.

Impairment of goodwill. Impairment of goodwill for Q2 2023 was $183.1 million and ~~an increase~~was driven by goodwill impairments recorded at our Personal Care and RPM reporting units. See Note 7, Goodwill and Intangible Assets.

Interest expense, net. Interest expense, net, for Q2 2023 and Q2 2022 was $17.0 million and $15.5 million, respectively. During Q2 2023, we incurred $8.1 million and $6.6 million of interest expense related to the Senior Notes due 2025 and 2029, respectively. The remainder of the interest expense in ~~expenses attributable~~Q2 2023 is related to interest and fees on the credit facility. Interest expense is recorded at our Corporate and Other ~~of $0.5 million. This increase in operating expenses was partially offset by a decrease in operating expenses attributable to WD Services of $10.6 million.~~segment.

~~Operating income.~~ Consolidated operating income for Q3 2017 decreased $3.5 million, or 35.6%, compared to Q3 2016. The decrease was primarily attributable to a decrease in operating income in Q3 2017 as compared to Q3 2016 at NET Services of $3.3 million and an increase in Corporate and Other operating loss of $0.6 million. This decrease in operating income was partially offset by an increase in WD Services operating income of $0.3 million.

~~Interest expense, net.~~ ~~Consolidated interest expense, net for Q3 2017 and Q3 2016 remained relatively consistent.~~

Equity in net ~~(gain) loss~~income (loss) of ~~investees.~~ ~~Equity in~~investee, net ~~(gain) loss~~ of investees primarily relates to our investments in Mission Providence and Matrix. Mission Providence, which was sold effective September 29, 2017, was part of WD Services, and began providing services in July 2015. We recorded 75% of Mission Providence’s profit or loss intax. Our equity in net ~~(gain) loss~~income of ~~investees. We began reporting Matrix as an equity investment effective October 19, 2016, upon the completion~~investee, net of ~~the Matrix Transaction,~~tax, for Q2 2023 of $1.0 million and ~~record~~ our ~~share of Matrix’s profit or loss in net (gain) loss of investees. Our~~ equity in net loss of ~~investees~~investee, net of tax, of $2.1 million for ~~Q3 2017~~Q2 2022 was a result of ~~$0.5 million primarily related to~~ our ~~equity in net loss for Mission Providence~~proportional share of ~~$0.5 million. Matrix was close to break-even on a~~the net income ~~basis in Q3 2017. Included in Matrix’s results are depreciation~~or loss of Matrix and amortization of $8.5 million, interest expense of $3.7 million, equity compensation of $0.6 million, management fees paid to certain of Matrix’s shareholders of $0.6 million and merger and acquisition related diligence costs of $0.3 million.

~~Gain on sale of equity investment.~~ ~~The gain on sale of equity investment of $12.6 million relates to the sale of the Company's equity interest in Mission Providence effective September 29, 2017. The~~our investment in ~~Mission Providence was part of the WD Services segment.~~a captive insurance program.

~~Loss (gain) on foreign currency transactions.~~ ~~The foreign currency loss of $0.2 million and foreign currency gain of $0.5 million for Q3 2017 and Q3 2016, respectively, were primarily due to translation adjustments of our foreign subsidiaries.~~

~~Provision for income taxes.~~Income tax (provision) benefit. Our effective tax ~~rate~~rates from ~~continuing~~ operations for ~~Q3 2017~~Q2 2023 and ~~Q3 2016 was 16.7%~~Q2 2022 were a tax benefit of 0.4% and ~~55.6%~~a tax provision of 29.9%, respectively. ~~The~~For Q2 2023, the effective tax rate ~~exceeded~~for the benefit was significantly lower than the U.S. federal statutory rate of ~~35% for Q3 2016~~21.0% primarily due to ~~foreign net operating losses (including equity investment losses)~~the nondeductible goodwill impairment. For Q2 2022, the effective rate for ~~which~~ the ~~future income tax benefit currently cannot be recognized, losses in foreign jurisdictions with tax rates lower~~provision was higher than the U.S. federal statutory rate of ~~35%,~~21.0% primarily due to state income taxes and ~~certain non-deductible~~nondeductible expenses. Foreign net operating losses for which no tax benefit can be provided were higher in Q3 2016 versus Q3 2017 resulting in a decrease in the effective tax rate from Q3 2016 to Q3 2017. Additionally, there is no provision for income taxes related to the gain on sale of equity investment of $12.6 million due to the substantial difference in tax basis versus book basis in the investment.

~~The Company recorded excess tax deficiencies related to stock-based compensation for the three~~

Six months ended ~~September~~June 30, 2017 of $0.3 million which increased the provision for income taxes. The adoption of ASU 2016-09 subjects our tax rate to quarterly volatility from the effects of stock award exercises and vesting activities, including the adverse impact on our income tax provision for awards which result in a tax deduction less than the amount recorded for financial reporting purposes based upon fair value of the award at the grant date.

~~Discontinued operations, net of tax.~~ Discontinued operations, net of tax, includes the activity of our former Human Services segment and our former HA Services segment, composed entirely of our 100% equity interest in Matrix until the completion of the Matrix Transaction on October 19, 2016. For Q3 2017, discontinued operations, net of tax for our Human Services segment was break-even. For Q3 2016, discontinued operations, net of tax for our Human Services segment was a loss of $5.0 million, and discontinued operations, net of tax for our HA Services segment was net income of $2.2 million. See Note 13, ~~Discontinued Operations,~~ ~~to our condensed consolidated financial statements for additional information.~~

~~Net loss attributable to noncontrolling interests.~~ Net loss attributable to noncontrolling interests primarily relates to a minority interest held by a third-party operating partner in our company servicing the offender rehabilitation contract in our WD Services segment.

~~YTD 2017~~2023 compared to ~~YTD 2016~~six months ended June 30, 2022

The following table sets forth results of operations and the percentage of consolidated total revenues represented by items in our ~~unaudited~~ condensed consolidated statements of ~~income~~operations for ~~YTD 2017~~the six months ended June 30, 2023, which we refer to as “YTD 2023”, and ~~YTD 2016~~for the six months ended June 30, 2022, which we refer to as “YTD 2022” (in thousands):

Nine months ended September 30,
2017 2016
$ Percentage of Revenue $ Percentage of Revenue
Service revenue, net 1,216,994
100.0 % 1,192,426
100.0 %

Operating expenses:
Service expense 1,124,478
92.4 % 1,095,011
91.8 %
General and administrative expense 53,705
4.4 % 52,548
4.4 %
Depreciation and amortization 19,716
1.6 % 20,058
1.7 %
Total operating expenses 1,197,899
98.4 % 1,167,617
97.9 %

Operating income 19,095
1.6 % 24,809
2.1 %

Non-operating expense:
Interest expense, net 983
0.1 % 1,239
0.1 %
Equity in net loss of investees 991
0.1 % 5,693
0.5 %
Gain on sale of equity investment (12,606 ) 1.0 % —
— %
Loss (gain) on foreign currency transactions 600
— % (1,332 ) 0.1 %
Income from continuing operations before income taxes 29,127
2.4 % 19,209
1.6 %
Provision for income taxes 8,391
0.7 % 12,466
1.0 %
Income from continuing operations, net of tax 20,736
1.7 % 6,743
0.6 %
Discontinued operations, net of tax (6,000 ) 0.5 % 332
— %
Net income 14,736
1.2 % 7,075
0.6 %
Net (income) loss attributable to noncontrolling interest (295 ) — % 433
— %
Net income attributable to Providence 14,441
1.2 % 7,508
0.6 %


	Six months ended June 30,
	2023				2022
	Amount		% of Revenue		Amount		% of Revenue
Service revenue, net	$	1,361,413	100.0	%	$	1,202,690	100.0	%
Grant income	4,098		0.3	%	3,798		0.3	%

Operating expenses:
Service expense	1,139,521		83.7	%	963,545		80.1	%
General and administrative expense	158,953		11.7	%	156,219		13.0	%
Depreciation and amortization	51,602		3.8	%	48,704		4.0	%
Impairment of goodwill	183,100		13.4	%	—		—	%
Total operating expenses	1,533,176		112.6	%	1,168,468		97.2	%

Operating income (loss)	(167,665)		(12.3)	%	38,020		3.2	%

Interest expense, net	32,925		2.4	%	30,872		2.6	%

Income (loss) before income taxes and equity method investment	(200,590)		(14.7)	%	7,148		0.6	%
Income tax (provision) benefit	2,703		0.2	%	(1,930)		(0.2)	%
Equity in net income (loss) of investee, net of tax	2,981		0.2	%	(1,572)		(0.1)	%
Net income (loss)	$	(194,906)	(14.3)	%	$	3,646	0.3	%

Service revenue, net. Consolidated service revenue, net, for YTD ~~2017~~2023 increased ~~$24.6~~$158.7 million, or ~~2.1%~~13.2%, compared to YTD ~~2016. Revenue~~2022. Service revenue, net, for ~~YTD 2017~~the NEMT segment increased by $116.8 million, primarily due to higher membership and monthly rate per member when compared to YTD ~~2016 included an increase in~~2022. Service revenue, ~~attributable~~net, further increased by $32.0 million for our Personal Care segment, primarily related to ~~NET Services of $70.5 million. This increase in revenue was partially offset~~additional hours worked by ~~a decrease in revenue attributable to WD Services of $46.0 million. Excluding the effects of changes in currency exchange rates, consolidated service revenue increased 3.1% for~~our care providers during YTD ~~2017~~2023 when compared to YTD ~~2016.~~2022. Service revenue, net also increased due to the inclusion of $7.3 million for our RPM segment, of which $7.0 million is the result of the operating results of GMM which was acquired in May 2022. See our Results of Operations - Segments, for further discussion.

~~Total operating expenses.~~ ~~Consolidated operating expenses~~Grant income. The Company recognized income of approximately $4.1 million for YTD ~~2017~~2023 compared to $3.8 million during YTD 2022 related to government grant distributions received, primarily under the CARES Act PRF and the ARPA SLFRF. These government grants are targeted to provide economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. These funds were received by our Personal Care segment and are available to eligible providers who have healthcare-related expenses and lost revenues attributable to COVID-19.

Service expense. Service expense components are shown below (in thousands):


	Six months ended June 30,
	2023				2022
	Amount		% of Revenue		Amount		% of Revenue
Purchased services	$	721,612	53.0	%	$	595,160	49.5	%
Payroll and related costs	382,562		28.1	%	338,591		28.2	%
Other service expenses	35,347		2.6	%	29,794		2.5	%
Total service expense	$	1,139,521	83.7	%	$	963,545	80.1	%

Service expense for YTD 2023 increased ~~$30.3~~$176.0 million, or ~~2.6%~~18.3%, compared to YTD ~~2016. Operating expenses for YTD 2017 compared~~2022 due to ~~YTD 2016 included~~higher purchased services of $126.5 million related to an increase in ~~expenses attributable~~transportation costs for the NEMT segment. Payroll and related costs increased by $44.0 million, primarily related to ~~NET Services~~increased labor costs across all of ~~$82.1 million. This increase~~our segments, as well as the increased wages associated with the acquisition of GMM in ~~operating expenses was partially offset by a decrease in operating expenses attributable to WD Services of $51.6 million~~May 2022.

General and ~~a decrease in operating expenses attributable to Corporate~~administrative expense. General and ~~Other of $0.1 million.~~

~~Operating income.~~ ~~Consolidated operating income~~administrative expense for YTD ~~2017 decreased $5.7~~2023 increased $2.7 million, or ~~23.0%~~1.8%, compared to YTD ~~2016.~~2022. The ~~decrease~~increase was primarily attributable to an increase of personnel related expenses and integration activities. General and administrative expense, expressed as a ~~decrease in operating income attributable~~percentage of service revenue, net decreased to ~~NET Services of $11.6~~11.7% for YTD 2023 compared to 13.0% for YTD 2022.

Depreciation and amortization. Depreciation and amortization for YTD 2023 increased $2.9 million, asor 6.0%, compared to YTD ~~2016. This decrease~~2022, primarily as a result of intangible assets brought on under the acquisition of GMM in ~~operating income~~May 2022.

Impairment of goodwill. Impairment of goodwill for YTD 2023 was ~~partially offset by a decrease in WD Services operating loss of $5.7~~$183.1 million and ~~a decrease in Corporate~~was driven by goodwill impairments that were recorded at our Personal Care and ~~Other operating loss of $0.2 million.~~RPM reporting units. See Note 7, Goodwill and Intangible Assets.

Interest expense, net. ~~Consolidated interest~~ Interest expense, net for YTD ~~2017 decreased $0.3~~2023 was $32.9 million ~~or 20.7%,~~and for YTD 2022 was $30.9 million. During YTD 2023, we incurred $16.1 million and $13.2 million of interest expense related to the Senior Notes due 2025 and 2029, respectively. The remainder of the interest expense during YTD 2023 is related to interest and fees on the credit facility. Interest expense is recorded at our Corporate and Other segment.

Equity in net income (loss) of investee, net of tax. For YTD 2023, our equity in net income of investee, net of tax is $3.0 million, compared to ~~YTD 2016.~~

~~Equity in netlossof investees.~~ ~~Our~~our equity in net loss of ~~investees~~investee, net of tax for YTD ~~2017~~2022 of ~~$1.0~~$1.6 million ~~includes an equity in~~was a result of our proportional share of the net income or loss ~~for Mission Providence of $1.4 million, partially offset by equity in net gain~~ of Matrix ~~of $0.4 million. Included in Matrix’s results are depreciation~~ and amortization of $24.6 million, interest expense of $11.0 million, transaction bonuses and other transaction related costs of $3.5 million, equity compensation of $1.9 million, management fees paid to Matrix’s shareholders of $1.8 million, merger and acquisition diligence related costs of $0.3 million and income tax benefit of $0.1 million.

~~Loss (gain) on foreign currency transactions.~~ ~~The foreign currency loss of $0.6 million and foreign currency gain of $1.3 million for YTD 2017 and YTD 2016, respectively, were primarily due to translation adjustments of our foreign subsidiaries.~~

~~Provision for income taxes.~~Income tax (provision) benefit. Our effective tax rates from ~~continuing~~ operations for YTD ~~2017~~2023 and YTD ~~2016 was 28.8%~~2022 were a tax benefit of 1.3% and ~~64.9%~~a tax provision of 27.0%, respectively. The YTD 2023 effective tax rate ~~exceeded~~for the benefit was significantly lower than the U.S. federal statutory rate of ~~35% for YTD 2016~~21.0% primarily due to ~~foreign net operating losses (including equity investment losses)~~the nondeductible goodwill impairment. The YTD 2022 effective tax rate for ~~which~~ the ~~future income tax benefit currently cannot be recognized, losses in foreign jurisdictions with tax rates lower~~provision was higher than the U.S. federal statutory rate of ~~35%,~~21.0% primarily due to state income taxes and nondeductible expenses.

Results of Operations - Segments

The following tables set forth certain ~~non-deductible expenses. Foreign net operating losses~~financial information attributable to the Company’s business segments:

NEMT Segment

(in thousands, except for ~~which no tax benefit~~Revenue per member per month, Revenue per trip, and Service expense per trip)


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
	Amount			% of Segment Revenue	Amount			% of Segment Revenue	Amount			% of Segment Revenue	Amount			% of Segment Revenue
Operating Results
Service revenue, net	$	496,975		100.0%	$	448,733		100.0%	$	966,438		100.0%	$	849,653		100.0%

Service expense	441,897			88.9%	373,724			83.3%	849,583			87.9%	705,820			83.1%
General and administrative expense	28,337			5.7%	33,588			7.5%	62,212			6.4%	70,921			8.3%
Depreciation and amortization	6,739			1.4%	7,392			1.6%	13,505			1.4%	14,497			1.7%
Operating income	$	20,002		4.0%	$	34,029		7.6%	$	41,138		4.3%	$	58,415		6.9%

Business Metrics(1)
Total paid trips	8,735				7,831				16,937				14,942
Average monthly members	34,312				33,792				34,008				32,984

Revenue per member per month	$	4.83			$	4.43			$	4.74			$	4.29
Revenue per trip	$	56.89			$	57.30			$	57.06			$	56.86
Service expense per trip	$	50.59			$	47.72			$	50.16			$	47.24
Monthly utilization	8.5		%		7.7		%		8.3		%		7.6		%

(1) These metrics are key performance indicators that Management uses to evaluate our performance. Trends established in these metrics can be ~~provided were~~used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and understand the underlying drivers of costs and revenue for our business. We believe these metrics are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole.

Our NEMT segment is the largest manager of NEMT programs for state governments and MCOs in the U.S.

Service revenue, net. Service revenue, net, increased by $48.2 million, or 10.8%, during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This increase is primarily attributable to a 9.0% increase in revenue per member per month due to contract repricing and the partial pass-through of costs associated with higher trip utilization in ~~YTD 2016 versus YTD 2017~~our shared risk contracts, along with a 1.5% increase in average monthly members. Service revenue, net, increased by $116.8 million, or 13.7%, during the six months ended June 30, 2023, primarily attributable to a 10.5% increase in revenue per member per month driven by the same reason as above, including a 3.1% increase in average monthly membership.

The increase in average monthly members drove higher revenue because a majority of our contracts are capitated, and we receive monthly payments on a per member per month basis in return for full or shared risk of transportation volumes. Member growth was anticipated under existing contracts, but it was partially offset by delayed contract wins, certain contract losses, and the impacts of Medicaid redetermination. Most capitated contracts have been restructured to shared risk, resulting in increased rate per member with higher trip volume but not fully offsetting the rise in service expense, leading to a decrease in ~~the effective tax~~overall margin. Furthermore, higher trip volume in full risk contracts does not result in corresponding rate ~~from YTD 2016~~increases, and thus, does not contribute to ~~YTD 2017. Additionally, there was no provision~~increases in revenue. Trip volume increases also positively affected revenue for ~~income taxes related to the gain on sale of equity investment of $12.6 million~~fee-for-service contracts due to ~~the substantial difference in tax basis versus book basis in the investment.~~a larger number of services performed.

~~The Company recorded excess tax deficiencies related to stock-based compensation~~

Service expense. Service expense components for the nine months ended September 30, 2017 of $0.1 million which increased the provision for income taxes. The adoption of ASU 2016-09 subjects our tax rate to quarterly volatility from the effects of stock award exercises and vesting activities, including the adverse impact on our income tax provision for awards which result in a tax deduction less than the amount recorded for financial reporting purposes based upon fair value of the award at the grant date.

~~Discontinued operations, net of tax.~~ ~~Discontinued operations, net of tax, includes the activity of our former Human Services~~NEMT segment and our former HA Services segment, composed entirely of our 100% equity interest in Matrix until the completion of the Matrix Transaction on October 19, 2016. For YTD 2017, discontinued operations, net of tax for our Human Services segment was a loss of $6.0 million, which primarily related to the accrual of a contingent liability of $9.0 million related to the settlement of indemnification claims and associated legal costs of $0.6 million, partially offset by a related tax benefit. For YTD 2016, discontinued operations, net of tax for our Human Services segment was a net loss of $5.0 million, and discontinued operations, net of tax for our HA Services segment was net income of $5.4 million. See Note 13, ~~Discontinued Operations,~~ ~~to our condensed consolidated financial statements for additional information.~~

~~Net (income) loss attributable to noncontrolling interests.~~ Net (income) loss attributable to noncontrolling interests primarily relates to a minority interest held by a third-party operating partner in our company servicing the offender rehabilitation contract in our WD Services segment.

~~Segment Results.~~ ~~The following analysis includes discussion of each of our segments.~~

~~NET Services~~

~~NET Services segment financial results~~ are ~~as follows for Q3 2017 and Q3 2016~~shown below (in thousands):

Three Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Service revenue, net 324,824
100.0 % 317,280
100.0 %

Service expense 304,454
93.7 % 293,919
92.6 %
General and administrative expense 2,899
0.9 % 2,860
0.9 %
Depreciation and amortization 3,286
1.0 % 3,051
1.0 %
Operating income 14,185
4.4 % 17,450
5.5 %


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
	Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue
Purchased services	$	377,192	75.9	%	$	317,213	70.7	%	$	721,612	74.7	%	$	595,160	70.0	%
Payroll and related costs	51,697		10.4	%	45,795		10.2	%	103,733		10.7	%	90,756		10.7	%
Other service expenses	13,008		2.6	%	10,716		2.4	%	24,238		2.5	%	19,904		2.3	%
Total service expense	$	441,897	88.9	%	$	373,724	83.3	%	$	849,583	87.9	%	$	705,820	83.1	%

~~Service revenue, net.~~ Service revenue, net for NET Services for Q3 2017 increased $7.5 million, or 2.4%, compared to Q3 2016. The increase was primarily related to net increased revenue from existing contracts of $19.2 million, due to the net impact of membership and rate changes, including final agreement on a rate adjustment related to increased utilization and the release of previously accrued revenue hold-backs based on certain contract performance requirements on a significant contract, in addition to the impact of new contracts which contributed $18.8 million of revenue for Q3 2017. These increases were partially offset by the impact of contracts we no longer serve, including a contract with the state of New York, which resulted in a decrease in revenue of $30.5 million.

~~Service expense, net.~~Service expense for our ~~NET Services~~NEMT segment ~~included the following for Q3 2017~~primarily consists of transportation costs paid to third party service providers, salaries of employees within our contact centers and ~~Q3 2016 (in thousands):~~

Three Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Purchased services 250,282
77.1 % 241,884
76.2 %
Payroll and related costs 40,753
12.5 % 41,832
13.2 %
Other operating expenses 13,299
4.1 % 10,130
3.2 %
Stock-based compensation 120
0.0 % 73
0.0 %
Total service expense 304,454
93.7 % 293,919
92.6 %

operations centers, and occupancy costs. Service expense ~~for Q3 2017~~ increased ~~$10.5~~by $68.2 million, or ~~3.6%~~18.2%, for the three months ended June 30, 2023, as compared to ~~Q3 2016 due~~the three months ended June 30, 2022, primarily related to higher purchased services of $60.0 million. Service expense increased by $143.8 million and ~~other operating costs, partially offset by decreased payroll and related costs.~~

~~Purchased services~~20.4% for the six months ended June 30, 2023 as ~~a percentage of revenue increased from 76.2% in Q3 2016~~compared to ~~77.1% in Q3 2017~~the six months ended June 30, 2022, primarily ~~attributable~~due to an increase in ~~utilization across certain contracts, including multiple managed care contracts~~purchased services of $126.5 million. The increase in ~~California,~~purchased services is related to increases in transportation costs driven by higher trip volume and rate pressures, leading to higher cost per trip in the ~~impact of new managed care organization contracts in certain markets being at a lower margin than previous contracts. These increases were partially offset~~current year. Trip volume for the three-months and six-months ended June 30, 2023 increased by ~~initiatives aimed at better aligning the rates we pay to our transportation provider partners with local market conditions~~11.5% and ~~the fees paid to us by our customers. In addition, the impact of Hurricane Irma resulted in decreased utilization for certain contracts.~~

Payroll and related costs as a percentage of revenue decreased from 13.2% in Q3 2016 to 12.5% in Q3 2017 due to efficiencies gained from multiple process improvement initiatives, including those aimed at lowering payroll expense across our reservation and operation center networks, as well as a decrease in incentive compensation. Other operating expenses increased for Q3 2017 as13.4% when compared to ~~Q3 2016 primarily attributable to an incremental $1.5 million of value enhancement and related costs incurred for external resources used~~the same period in the ~~design~~prior year, and ~~implementation of NET Services member experience~~cost per trip increased by 6.0% and ~~value enhancement initiatives, as well as increased software and hardware maintenance costs associated with new technology initiatives.~~6.2% over the same time periods.

General and administrative expense. General and administrative expense ~~in Q3 2017 remained constant as compared to Q3 2016. As a percentage~~primarily consists of ~~revenue, general and~~salaries for administrative ~~expense remained constant at 0.9%.~~

~~Depreciation and amortization.~~ ~~Depreciation and amortization increased $0.2 million primarily due to~~employees that support the ~~addition of long-lived assets relating to information technology projects. As a percentage of revenue, depreciation and amortization remained constant at 1.0% for Q3 2016 and Q3 2017.~~

~~NET Services segment financial results are as follows for YTD 2017 and YTD 2016 (in thousands):~~

Nine Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Service revenue, net 987,662
100.0 % 917,157
100.0 %

Service expense 927,082
93.9 % 846,311
92.3 %
General and administrative expense 8,879
0.9 % 8,483
0.9 %
Depreciation and amortization 9,763
1.0 % 8,858
1.0 %
Operating income 41,938
4.2 % 53,505
5.8 %

~~Service revenue, net.~~ Service revenue, net for NET Services for YTD 2017 increased $70.5 million, or 7.7%, compared to YTD 2016. The increase was primarily related to net increased revenue from existing contracts of $68.3 million, due to the net impact of membership and rate changes, including final agreement on a rate adjustment related to increased utilization and the release of previously accrued revenue hold-backs based on certain contract performance requirements on a significant contract, in addition to the impact of new contracts, including new managed care organization contracts in Florida and New York, which contributed $70.5 million of revenue for YTD 2017. These increases were partially offset by the impact of contracts we no longer serve, including a contract with the state of New York, which resulted in a decrease in revenue of $68.3 million.

~~Service expense, net.~~ ~~Service expense for our NET Services segment included the following for YTD 2017 and YTD 2016 (in thousands):~~

Nine Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Purchased services 766,303
77.6 % 694,934
75.8 %
Payroll and related costs 122,784
12.4 % 122,117
13.3 %
Other operating expenses 37,584
3.8 % 29,032
3.2 %
Stock-based compensation 411
0.0 % 228
0.0 %
Total service expense 927,082
93.9 % 846,311
92.3 %

Service expense for YTD 2017 increased $80.8 million, or 9.5%, compared to YTD 2016 due primarily to higher purchased services and other operating costs, with a slight increase in payroll and related costs.

The increase in service expense was primarily attributable to the impact of new managed care organization contracts in California, Florida and New York. Purchased services as a percentage of revenue increased from 75.8% in YTD 2016 to 77.6% in YTD 2017 primarily attributable to an increase in utilization across multiple contracts. The higher utilization was in part driven by increased Medicaid reimbursement in New Jersey for certain medical services, which in turn increased demand for transportation services; increased utilization across multiple managed care contracts in California; and lower cancellation rates across multiple contracts, which we believe was primarily due to milder winter weather conditions during the first quarter of 2017, although we did experience lower utilization for contracts in Q3 2017 due in part to the impactoperations of the ~~Hurricane Irma.~~

~~Payroll~~NEMT segment, occupancy costs, marketing expenditures, insurance, and related costs as a percentage of revenue decreased from 13.3% in YTD 2016 to 12.4% in YTD 2017 due to efficiencies gained from multiple process improvement initiatives, including those aimed at lowering payroll expense across our reservation and operation center networks, as well as a decrease in incentive compensation. Other operating expenses increased for YTD 2017 as compared to YTD 2016 primarily attributable to an incremental $3.5 million of value enhancement and related costs incurred for external resources used in the design and implementation of NET Services member experience and value enhancement initiatives in YTD 2017.

~~General and administrative expense.~~professional fees. General and administrative expense ~~in YTD 2017 increased $0.4~~decreased by $5.3 million, or ~~4.7%~~15.6%, for the three months ended June 30, 2023, as compared to ~~YTD 2016, due to increased facility costs resulting from~~ the ~~overall growth of our operations. As a percentage of revenue, general and administrative expense remained constant at 0.9%.~~

~~Depreciation and amortization.~~ Depreciation and amortization increased $0.9 million primarily due to the addition of long-lived assets relating to information technology projects. As a percentage of revenue, depreciation and amortization remained constant at 1.0%.

~~WD Services~~

~~WD Services segment financial results are as follows for Q3 2017 and Q3 2016 (in thousands):~~

Three Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Service revenue, net 84,693
100.0 % 94,960
100.0 %

Service expense 73,581
86.9 % 84,051
88.5 %
General and administrative expense 6,980
8.2 % 6,780
7.1 %
Depreciation and amortization 3,166
3.7 % 3,497
3.7 %
Operating income 966
1.1 % 632
0.7 %

~~Service revenue, net.~~ Service revenue, net for Q3 2017 decreased $10.3 million, or 10.8%, compared to Q3 2016. Excluding the favorable effects of changes in currency exchange rates, service revenue decreased 11.2% in Q3 2017 compared to Q3 2016. This decrease was primarily related to the anticipated ending of referrals under the segment’s primary employability program in the UK, as well as decreased revenue under our offender rehabilitation program due to $5.4 million of revenue recognized in Q3 2016 related to the finalization of a contractual adjustment for the prior contract yearsthree months ended ~~March 31, 2015 and 2016.~~

~~These revenue decreases were partially offset by increases in health services in the UK and various employability contracts outside the UK, including France, Australia and Germany.~~

~~Service expense.~~ ~~Service expense for our WD Services segment included the following for Q3 2017 and Q3 2016 (in thousands):~~

Three Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Payroll and related costs 41,575
49.1 % 47,854
50.4 %
Purchased services 21,946
25.9 % 26,004
27.4 %
Other operating expenses 10,046
11.9 % 10,166
10.7 %
Stock-based compensation 14
0.0 % 27
0.0 %
Total service expense 73,581
86.9 % 84,051
88.5 %

~~Service expense in Q3 2017 decreased $10.5 million, or 12.5%, compared to Q3 2016. Payroll and related costs decreased~~June 30, 2022, primarily as a result of lower professional service costs. General and administrative expense decreased by $8.7 million, or 12.3%, for the ~~ending of referrals under the segment’s primary employability program in the UK~~six months ended June 30, 2023, as well as redundancy plans across the WD Services operations that have better aligned headcount with service delivery volumes, resulting in a decrease of payroll and related costs as a percentage of revenue. Payroll and related costs include $0.3 million and $0.1 million in Q3 2017 and Q3 2016, respectively, of termination benefits related to redundancy plans. Purchased services decreased in Q3 2017 compared to ~~Q3 2016~~the six months ended June 30, 2022, primarily as a result of ~~the ending of client referrals under our primary employability program in the UK, which resulted in a decline in the use of outsourced services.~~ lower professional service costs.

~~General and administrative expense.~~ ~~General and administrative expense in Q3 2017 increased $0.2 million compared to Q3 2016 due primarily due to increased rent related to facilities used in our offender rehabilitation program.~~

~~Depreciation and amortization.~~Depreciation and amortization expense. Depreciation and amortization expense decreased by $0.7 million, or 8.8%, for ~~Q3 2017 decreased $0.3 million~~the three months ended June 30, 2023, as compared to ~~Q3 2016, primarily due~~the three months ended June 30, 2022, and decreased by $1.0 million, or 6.8%, for the six months ended June 30, 2023, as compared to the ~~asset impairment charges incurred during the fourth quarter of 2016, which decreased the value of our intangible assets and certain property and equipment.~~

~~WD Services segment financial results are as follows for YTD 2017 and YTD 2016 (in thousands):~~

Nine Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Service revenue, net 229,332
100.0 % 275,293
100.0 %

Service expense 199,665
87.1 % 247,797
90.0 %
General and administrative expense 20,944
9.1 % 23,236
8.4 %
Depreciation and amortization 9,695
4.2 % 10,912
4.0 %
Operating loss (972 ) -0.4 % (6,652 ) -2.4 %

~~Service revenue, net.~~ Service revenue, net for YTD 2017 decreased $46.0 million, or 16.7%, compared to YTD 2016. Excluding the effects of changes in currency exchange rates, service revenue decreased 12.3% in YTD 2017 compared to YTD 2016. This decrease was primarily related to the anticipated decline of referrals under the segment’s primary employability program in the UK, as well as decreased revenue under our offender rehabilitation program. These decreases were partially offset by increases across various employability contracts outside the UK, including in Australia, Saudi Arabia, France and Germany, as well as increased revenue from our health services contract in the UK. YTD 2017 includes the impact of $5.2 million of revenue recognized under the offender rehabilitation program related to the finalization of a contractual adjustment for the contract yearsix months ended March 31, 2017, whereas YTD 2016 includes $5.4 million of revenue recognized under the offender rehabilitation program related to the finalization of a contractual adjustment for the prior contract years ended March 31, 2015 and 2016.

~~Service expense.~~ ~~Service expense for our WD Services segment included the following for YTD 2017 and YTD 2016 (in thousands):~~

Nine Months Ended September 30,
2017 2016
$
Percentage of
Revenue
$
Percentage of
Revenue
Payroll and related costs 130,538
56.9 % 162,542
59.0 %
Purchased services 39,949
17.4 % 53,210
19.3 %
Other operating expenses 29,136
12.7 % 31,993
11.6 %
Stock-based compensation 42
0.0 % 52
0.0 %
Total service expense 199,665
87.1 % 247,797
90.0 %

~~Service expense in YTD 2017 decreased $48.1 million, or 19.4%, compared to YTD 2016. Payroll and related costs decreased~~June 30, 2022, primarily as a result of ~~declining referrals under~~certain intangible assets being fully amortized during the period.

Personal Care Segment

(in thousands, except Service revenue per hour and Service expense per hour)


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
	Amount		% of Segment Revenue	Amount		% of Segment Revenue	Amount		% of Segment Revenue	Amount		% of Segment Revenue
Operating Results
Service revenue, net	$	180,325	100.0%	$	162,737	100.0%	$	354,456	100.0%	$	322,435	100.0%
Grant income	2,634		1.5%	3,330		2.0%	4,098		1.2%	3,798		1.2%

Service expense	138,468		76.8%	124,445		76.5%	274,558		77.5%	246,677		76.5%
General and administrative expense	20,565		11.4%	23,346		14.3%	43,228		12.2%	46,479		14.4%
Depreciation and amortization	12,872		7.1%	12,552		7.7%	25,740		7.3%	25,057		7.8%
Impairment of goodwill	137,331		76.2%	—		—%	137,331		38.7%	—		—%
Operating income (loss)	$	(126,277)	(70.0)%	$	5,724	3.5%	$	(122,303)	(34.5)%	$	8,020	2.5%

Business Metrics(1)
Total hours	6,933			6,705			13,757			13,240
Service revenue per hour	$	26.01		$	24.27		$	25.77		$	24.35
Service expense per hour	$	19.97		$	18.56		$	19.96		$	18.63

(1) These metrics are key performance indicators that Management uses to evaluate our performance. Trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and understand the underlying drivers of costs and revenue for our business. We believe these metrics are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole.

Our Personal Care segment’s ~~primary employability program~~services include placements of non-medical personal care assistants and home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the UKhome setting, including senior citizens and disabled adults.

Service revenue, net. Personal care service contracts are generally structured as fee-for-service contracts, with revenue driven by hours worked by our personal care providers. Service revenue, net, increased by $17.6 million, or 10.8%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily due to 3.4% higher hours worked by personal care providers in Q2 2023 as compared to Q2 2022, as well as ~~redundancy plans that have better aligned headcount with service delivery volumes resulting in a decrease~~7.2% higher rates per member. Service revenue, net increased by $32.0 million, or 9.9%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to 3.9% higher hours worked by personal care providers during the six months ending June 30, 2023 as compared to the six months ending June 30, 2022, as well as 5.8% higher rates per member.

Grant Income. In the three months ended June 30, 2023 and 2022, the Company recognized income for government grant distributions received of ~~payroll and related costs as a percentage of revenue. Payroll and related costs include $1.1~~$2.6 million and ~~$5.2~~$3.3 million, ~~in YTD 2017~~respectively, primarily from the CARES Act PRF and ~~YTD 2016, respectively,~~the ARPA SLFRF. These government grants are targeted to provide economic relief and stimulus to combat health and economic impacts of ~~termination benefits related~~the COVID-19 pandemic. These funds were received by our Personal Care segment and are available to ~~redundancy plans. Purchased~~eligible providers who have healthcare-related expenses and lost revenues attributable to COVID-19. In the six months ended June 30, 2023 and 2022, the Company recognized income for government grant distributions received of $4.1 million and $3.8 million, respectively.

Service expense. Service expense components for the Personal Care segment are shown below (in thousands):


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
	Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue
Payroll and related costs	$	137,681	76.4	%	$	122,375	75.2	%	$	272,074	76.8	%	$	242,512	75.2	%
Other service expenses	787		0.4	%	2,070		1.3	%	2,484		0.7	%	4,165		1.3	%
Total service expense	$	138,468	76.8	%	$	124,445	76.5	%	$	274,558	77.5	%	$	246,677	76.5	%

Service expense for our Personal Care segment primarily consists of salaries for our employees who provide personal care services ~~decreased in YTD 2017~~and it typically trends with the number of hours worked and cost per hour of service. Service expense for the three months ended June 30, 2023 increased by $14.0 million, or 11.3%, as compared to ~~YTD 2016~~the three months ended June 30, 2022, primarily as a result of a ~~decline in client referrals under our primary employability program in the UK, which resulted in a decline in the use of outsourced services.~~

~~General and administrative expense.~~ General and administrative expense in YTD 2017 decreased $2.3 million compared to YTD 2016 due to office closures associated with restructuring of the UK operations, as well as lower rent for certain offices.

~~Depreciation and amortization.~~ Depreciation and amortization for YTD 2017 decreased $1.2 million compared to YTD 2016, primarily due to the asset impairment charges incurred during the fourth quarter of 2016, which decreased the value of our intangible assets and certain property and equipment.

~~Corporate and Other~~

Corporate and Other includes the headcount and professional service costs incurred at the holding company level, at the Captive, and elimination entries to account for inter-segment transactions. Corporate and Other financial results are as follows for Q3 2017 and Q3 2016 (in thousands):

Three Months Ended September 30,
2017 2016
$ $
Service revenue, net —
31

Service expense (3 ) 518
General and administrative expense 8,750
7,680
Depreciation and amortization 95
122
Operating loss (8,842 ) (8,289 )

~~Operating loss.~~ ~~Corporate and Other operating loss in Q3 2017 increased by $0.6 million or 6.7% as compared to Q3 2016. This increase was primarily related to a $2.0 million~~7.6% increase in ~~professional costs due to activities associated with~~service expense per hour, driven primarily by increased wage rates for our ~~increased focus on strategic initiatives,~~caregivers, predominately from wage pressures in New York, as well as a ~~$0.6 million~~3.4% increase in ~~compensation, including the timing impact~~hours of accruals for incentive compensation. These increases were partially offset by decreases in legal and accounting fees and lower costs in the Company's captive insurance program due to the Company ceasing to write new policies under the captive inservice during Q2 ~~2017, which drove the decrease in “Service expense”.~~

~~General and administrative~~2023. Service expense ~~includes stock-based compensation~~ for the HoldCo LTIP of $1.0 million and $0.9 million for Q3 2017 and Q3 2016, respectively. No shares will be distributed under the HoldCo LTIP unless the volume weighted average of Providence’s stock price over a 90-day period ending on December 31, 2017 exceeds $56.79.

~~Corporate and Other financial results are as follows for YTD 2017 and YTD 2016 (in thousands):~~

Nine Months Ended September 30,
2017 2016
$ $
Service revenue, net —
(24 )

Service expense (2,269 ) 903
General and administrative expense 23,882
20,829
Depreciation and amortization 258
288
Operating loss (21,871 ) (22,044 )

~~Operating loss.~~ ~~Corporate and Other operating loss in YTD 2017 decreased~~six months ended June 30, 2023 increased by ~~$0.2~~$27.9 million or ~~0.8%~~11.3%, as compared to YTD 2016. This decrease was primarily related to a reduction in insurance loss reserves in 2017 due to favorable claims history of our Captive reinsurance programs, which is included in “Service expense” as well as decreased accounting, legal and professional fees included in “General and administrative expense”. This decrease was partially offset by an increase in cash settled stock-based compensation expense of $1.3 million,the six months ended June 30, 2022, primarily as a result of a ~~more significant~~7.1% increase in ~~the Company’s stock price in YTD 2017 as compared to YTD 2016, an~~service expense per hour and a 3.9% increase in ~~stock settled stock-based compensation expense~~hours of ~~$1.4 million, primarily related to an increase in expense for~~service during the ~~HoldCo LTIP~~six months ended June 30, 2023.

General and a benefit recorded in YTD 2016 for performance based units, with no corresponding benefit in YTD 2017, as well as an increase of $3.6 million of professional costs due to activities associated with our increased focus on strategic initiatives.

administrative expense.General and administrative expense ~~includes stock-based compensation~~primarily consists of salaries for administrative employees that support the operations of the Personal Care segment, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense decreased by $2.8 million, or 11.9%, for the ~~HoldCo LTIP~~three months ended June 30, 2023 as compared to the three months ended June 30, 2022 and decreased by $3.3 million or 7.0%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The decrease is primarily related to lower insurance-related expense and lower legal fees during the six months ended June 30, 2023.

Depreciation and amortization expense. Depreciation and amortization expense increased by $0.3 million, or 2.5%, for the three months ended June 30, 2023 as compared to 2022, primarily due to amortization expense on the intangible assets brought on under an asset acquisition completed in Q2 2022. Depreciation and amortization expense increased by $0.7 million or 2.7% for the six months ended June 30, 2023 as compared to 2022, primarily due to the reason discussed above.

Impairment of ~~$3.1~~goodwill. As a result of our annual goodwill assessment, we determined that the goodwill within our Personal Care reporting unit was impaired which resulted in an impairment of goodwill charge of $137.3 million during the three and six months ended June 30, 2023.

RPM Segment

(in thousands, except Revenue per member per month and Service expense per member per month)


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
	Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue
Operating Results
Service revenue, net	$	19,211	100.0	%	$	16,745	100.0	%	$	37,923	100.0	%	$	30,602	100.0	%

Service expense	6,705		34.9	%	6,061		36.2	%	13,195		34.8	%	11,048		36.1	%
General and administrative expense	5,327		27.7	%	6,742		40.3	%	11,096		29.3	%	11,704		38.2	%
Depreciation and amortization	6,059		31.5	%	4,606		27.5	%	11,913		31.4	%	8,734		28.5	%
Impairment of goodwill	45,769		238.2	%	—		—	%	45,769		120.7	%	—		—	%
Operating income (loss)	$	(44,649)	(232.4)	%	$	(664)	(4.0)	%	$	(44,050)	(116.2)	%	$	(884)	(2.9)	%

Business Metrics(1)
Average monthly members	240				203				237				186
Revenue per member per month	$	26.68			$	27.50			$	26.67			$	27.42
Service expense per member per month	$	9.31			$	9.95			$	9.28			$	9.90

Our Remote Patient Monitoring segment is a provider of remote patient monitoring solutions and manages a comprehensive suite of services, including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions.

Service revenue, net. RPM contracts are generally structured as a fixed fee per enrolled member per month, and therefore revenue is generally driven by number of enrolled members. Service revenue, net, increased by $2.5 million, or 14.7%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily related to incremental revenue of $2.3 million from the GMM acquisition that occurred in May 2022. Service revenue, net, increased by $7.3 million, or 23.9%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily related to incremental revenue of $7.0 million from the GMM acquisition discussed above.

Service expense. Service expense components for the RPM segment are shown below (in thousands):


	Three months ended June 30,								Six months ended June 30,
	2023				2022				2023				2022
	Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue		Amount		% of Segment Revenue

Payroll and related costs	$	3,311	17.2	%	$	2,974	17.8	%	$	6,527	17.2	%	$	5,323	17.4	%
Other service expenses	3,394		17.7	%	3,087		18.4	%	6,668		17.6	%	5,725		18.7	%
Total service expense	$	6,705	34.9	%	$	6,061	36.2	%	$	13,195	34.8	%	$	11,048	36.1	%

Service expense for our RPM segment primarily consists of salaries for the employees providing the remote monitoring services and it typically trends with the number of hours worked. Service expense for the three months ended June 30, 2023, increased $0.6 million, or 10.6%, as compared to the three months ended June 30, 2022, primarily as a result of an increase of $0.3 million in direct wages driven by the additional hours worked to service the 18.2% increase in average monthly members primarily attributable to the acquisition of GMM in May 2022. Service expense for the six months ended June 30, 2023 increased $2.1 million, or 19.4%, as compared to the six months ended June 30, 2022, primarily as a result of an increase of $1.2 million in direct wages driven by the additional hours worked to service the 27.4% increase in average monthly members.

General and administrative expense. General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense decreased by $1.4 million, or 21.0%, for the three months ended June 30, 2023 as compared to 2022, primarily related to a decrease of $0.9 million in legal costs associated with the acquisition of GMM in May 2022, and decreased by $0.6 million, or 5.2%, for the six months ended June 30, 2023 as compared to 2022.

Depreciation and amortization expense. Depreciation and amortization expense increased by $1.5 million, or 31.5%, for the three months ended June 30, 2023 as compared to June 30, 2022, primarily related to additional depreciation and amortization expense of $0.9 million related to the assets acquired in May 2022 from the acquisition of GMM. Depreciation and amortization expense increased by $3.2 million, or 36.4%,for the six months ended June 30, 2023 as compared to June 30, 2022, primarily related to additional depreciation and amortization expense of $2.0 million related to the assets acquired from the acquisition of GMM discussed above.

Impairment of goodwill. As a result of our annual goodwill assessment, we determined that the goodwill within our RPM reporting unit was impaired which resulted in an impairment of goodwill charge of $45.8 million during the three and six months ended June 30, 2023.

Corporate and Other Segment

(in thousands)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	Amount		Amount		Amount		Amount
Service revenue, net	$	2,596	$	—	$	2,596	$	—

Service expense	2,185		—		2,185		—
General and administrative expense	25,011		15,735		42,417		27,115
Depreciation and amortization	239		208		444		416
Operating income (loss)	$	(24,839)	$	(15,943)	$	(42,450)	$	(27,531)

Our Corporate and Other segment includes the Company's executive, accounting, finance, internal audit, tax, legal, public reporting, and corporate development functions. This segment also includes the results of our equity investment in Matrix and the operating results of investments in innovation related to data analytics products and solutions, which contributes to our strategic investment in growth.

Service revenue, net and Service expense: At the end of the first quarter of 2023, we made an investment in innovation related to our data analytics capabilities within our Corporate and Other segment, which contributes to service revenue and service expense.

General and administrative expense and Depreciation and amortization: Our Corporate and Other segment includes costs incurred related to strategy and stewardship of the other operating segments. These expenses are primarily general and administrative expenses, with a small amount related to depreciation. The general and administrative expense increased by $9.3 million and ~~$2.4~~$15.3 million for ~~YTD 2017~~the three and ~~YTD 2016, respectively. No shares will be distributed under~~six months ended June 30, 2023, respectively, as compared to 2022. This increase is primarily related to software implementation costs for ongoing system integration projects, including the ~~HoldCo LTIP unless the volume weighted average of Providence’s stock price over a 90-day period ending on December 31, 2017 exceeds $56.79.~~Personal Care and RPM general ledger and personnel management system integrations. This balance has also increased due to consulting costs and litigation costs related to executive turnover.

Seasonality

Our ~~quarterly~~NEMT segment's operating ~~results~~income and ~~operating~~ cash flows normally fluctuate as a result of seasonal variations in our business, principally due ~~in part~~ to ~~seasonal factors, uneven~~lower transportation demand ~~for services~~during the winter season and ~~the timing of new contracts, which impact the amount of revenues earned and expenses incurred. NET Services experiences fluctuations in~~higher demand during the summer season.

Our Personal Care segment’s operating income and ~~winter seasons. Due to historically higher demand~~cash flows also normally fluctuate as a result of seasonal variations in the ~~summer months,~~business, principally due to somewhat lower demand ~~during the winter, and a primarily fixed revenue stream based on a per-member, per-month payment structure, NET Services normally experiences lower operating margins~~for in-home services from caregivers during the summer ~~season~~ and ~~higher~~periods with major holidays, as patients may spend more time with family and less time alone needing outside care during those periods.

Our RPM segment’s operating margins during the winter. WD Services is impacted by both the timing of commencement and expiration of major contracts. Under many of WD Services’ contracts, we invest significant sums of money in personnel, leased office space, purchased or developed technology, and other costs, and generally incur these costs prior to commencing services and receiving payments. This results in significant variability in financial performanceincome and cash flows ~~between quarters and for comparative periods. It is expected that future contracts will be structured~~do not normally fluctuate as a result of seasonal variations in ~~a similar fashion. In addition, under~~ the majority of WD Services’ contracts, the Company relies on its customers, which include government agencies, to provide referrals, for whom the Company can provide services and earn revenue. The timing and magnitude of referrals can fluctuate significantly, leading to volatility in revenue.business.

Liquidity and capital resources

Short-term capital requirements consist primarily of recurring operating expenses, ~~and new~~ contract start-up costs ~~including workforce restructuring costs.~~on new revenue contracts and costs associated with our strategic initiatives. We expect to meet ~~any~~our cash requirements through available cash on hand, cash generated from ~~our operating segments,~~operations, net of capital expenditures, and ~~borrowing capacity~~occasional borrowings under our Credit ~~Facility (as defined below)~~Facility. For information regarding our long-term capital requirements, see below under the caption "Liquidity".

Cash flow ~~from~~used in operating activities during the three months ended June 30, 2023 was our primary source of cash during YTD 2017. Additionally, YTD 2017 included $15.8 million in proceeds from the sale of our equity investment in Mission Providence which is included in cash provided by investing activities.$110.9 million. Our balance of cash and cash equivalents, including restricted cash, was ~~$92.2~~$7.5 million and ~~$72.3~~$15.0 million at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016, respectively, including $33.8 million and $21.4 million held in foreign countries,~~2022, respectively. The September 30, 2017 foreign cash balance includes the proceeds from the sale of Mission Providence. Such cash held in foreign countries is generally used to fund foreign operations, although it may also be used to repay intercompany indebtedness existing between Providence and its foreign subsidiaries.

We had restricted cash of ~~$7.1~~$0.6 million and ~~$14.1~~$0.5 million at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016, respectively, primarily related to contractual obligations and activities of our captive insurance subsidiary. These restricted~~2022, respectively. Restricted cash amounts are not included in our balance of cash and cash ~~equivalents. At September 30, 2017~~equivalents in the unaudited condensed consolidated balance sheets, although they are included in the cash, cash equivalents and ~~December 31, 2016, we had no amounts outstanding under our Credit Facility.~~restricted cash balance on the accompanying unaudited condensed consolidated statements of cash flows.

We may, from time to time, access capital markets to raise equity or debt financing for various business reasons, including ~~acquisitions. We may also raise debt financing to fund future~~acquisitions, repurchases of common stock, investments in our ~~common stock.~~business and possible refinancing activity. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such ~~financing. On November 2, 2017,~~financing on terms acceptable to us at the Company’s Board of Directors approved the extension of the Company’s existing stock repurchase program, authorizing the Company to engage in a common stock repurchase program to repurchase up to $69.6 million (the amount remaining from the $100.0 million repurchase amount authorized in 2016) in aggregate value of the Company’s common stock through December 31, 2018.time or at all.

The cash flow statement for all periods presented includes both continuing and discontinued operations. Discontinued operations for YTD 2016 includes the activity of our Human Services and HA Services segments. Income from discontinued operations totaled $0.3 million for YTD 2016. Significant non-cash items of our discontinued operations in YTD 2016 included $3.7 million of depreciation expense and $17.5 million of amortization expense. Our discontinued operations also purchased property and equipment totaling $8.0 million during YTD 2016.

YTD ~~2017~~2023 cash flows compared to YTD ~~2016~~2022

Operating activities. Cash ~~provided by~~used in operating activities was ~~$36.9~~$110.9 million for YTD ~~2017, a decrease of $8.3 million~~2023 compared ~~with YTD 2016. YTD 2017 and YTD 2016 cash flow from operations was driven by net income of $14.7 million and $7.1 million, respectively, non-cash adjustments~~ to ~~reconcile net income to net~~ cash provided by operating activities of ~~$8.0~~$51.2 million ~~and $37.1~~for YTD 2022. The decrease of $162.1 million ~~respectively, and~~was primarily a result of a decrease in cash provided by changes in working capital of ~~$14.2 million and $1.1 million, respectively.~~$152.6 million. The working capital changes were related to a decrease in the change in ~~adjustments~~accrued contract payables of $85.3 million primarily related to ~~reconcile net income~~repayments on previously accrued contract payable amounts combined with lower liability reserves on certain risk corridor, profit rebate and reconciliation contracts due to ~~net cash provided by operating activities was due primarily~~higher trip volumes during YTD 2023. Also contributing to the impact of the disposition of HA Services, resulting in decreased depreciation, amortization and deferred taxes in YTD 2017 as compared to YTD 2016, as well as the gain on sale of Mission Providence of $12.6 million in YTD 2017. The changedecrease in working capital is ~~primarily driven by the following:~~

Accounts receivable generated a cash outflow for YTD 2017 of $10.6 million as compared to an outflow of $22.1 million for YTD 2016. The decrease in cash outflow of $11.5 million is primarily attributable to NET Services due to the timing of collections as well as an outflow of $1.4 million of HA Services in YTD 2016.

Prepaid expenses and other generated a cash inflow of $7.5 million in YTD 2017, as compared to a cash outflow of $9.9 million in YTD 2016. The increase in cash inflow of $17.4 million was primarily attributable to a decrease in prepayments in WD Services in relation to certain contracts and a decrease in the ~~prepayment~~change in accrued transportation costs of ~~insurance costs and income taxes.~~

~~Accounts payable and accrued expenses generated a cash outflow~~$30.7 million primarily related to timing of ~~$3.4 million in YTD 2017, as compared~~vendor payments to a cash inflow of $32.5 million in YTD 2016. The decrease in cash inflow of $35.9 million is due primarily to the impact of NET Services accrued contract payments of $10.1 million, reduced accruals at WD Services of $3.9 million in YTD 2017 as compared to YTD 2016, including the impact of redundancy plans, timing differences on tax payments, as well as the disposition of HA Services, which generated cash inflow of $5.8 million in YTD 2016. Partially offsetting these impacts is the impact of theour transportation providers, an increase in the ~~accrued settlement~~change in the contract receivables balance of $26.6 million primarily related to ~~our former Human Services segment~~a build of ~~$9.0 million during YTD 2017 as compared~~receivables related to certain risk corridor, profit rebate, and reconciliation contracts, and an increase ~~of $6.0 million in YTD 2016.~~

~~Accrued transportation costs of NET Services generated a cash inflow of $28.8 million in YTD 2017, as compared to a cash inflow of $31.9 million in YTD 2016. The decrease~~ in cash ~~inflow~~used for prepaid expenses and other assets of ~~$3.1 million is due primarily to the timing of payments.~~

~~Income taxes payable on sale of business for YTD 2016 includes a cash outflow of $30.2 million related to the sale of our Human Services segment.~~

~~Investing activities.~~ ~~Net cash provided by investing activities of $4.9 million in YTD 2017 increased by $40.0~~$17.5 million as compared to YTD ~~2016. The increase~~2022.

Investing activities. Net cash used in investing activities was ~~primarily attributable to $15.8~~$22.3 million in ~~proceeds from~~YTD 2023, which decreased by $72.5 million as compared to YTD 2022, primarily as a result of acquisition activity during YTD 2022 related to the ~~sale of our equity investment in Mission Providence, a decrease in funding of our equity investment in Mission Providence of $6.4~~GMM acquisition.

Financing activities. Net cash provided by financing activities was $125.6 million ~~and a decrease in the purchase of property and equipment of $18.6 million.~~for YTD ~~2016 included purchases of property and equipment of $8.0 million by our discontinued operations.~~

~~Financing activities.~~ ~~Net~~2023, compared to cash used in financing activities of ~~$22.3~~$1.9 million infor YTD ~~2017 decreased $9.9~~2022. The change of $127.5 million aswas primarily a result of proceeds from our short-term borrowing on our Credit Facility of $126.5 million during YTD 2023, compared to ~~YTD 2016. During YTD 2017, we repurchased $34.5 million less of our common stock than in YTD 2016. Partially offsetting this decrease in cash outflows was a decrease in net~~no proceeds from debt or other short-term borrowings during YTD ~~2017 as compared to YTD 2016 of $20.3 million as well as a decrease in proceeds from common stock issued pursuant to stock option exercises of $2.6 million.~~2022.

Obligations and commitments

Senior Unsecured Notes. On November 4, 2020, the Company issued $500.0 million in aggregate principal amount of 5.875% senior unsecured notes due on November 15, 2025 (the “Senior Notes due 2025”). Subsequently, on August 24, 2021, the Company issued an additional $500.0 million in aggregate principal amount of 5.000% senior unsecured notes due on October 1, 2029 (the “Senior Notes due 2029” and, together with the Senior Notes due 2025, the “Notes”). For information related to the Company's Senior Unsecured Notes, refer to Note 9 of the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, “Financial Statements”.

Credit ~~facility.~~ ~~We are~~Facility. The Company is a party to the amended and restated credit ~~and guaranty~~ agreement, dated as of ~~August 2, 2013~~February 3, 2022, (as amended, the “Credit Agreement”), with JPMorgan Chase Bank, ~~of America,~~ N.A., as administrative agent, swing line lender and ~~letter~~an issuing bank, Wells Fargo Bank, National Association, as an issuing bank, Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents, Deutsche Bank AG New York Branch, Bank of ~~credit issuer,~~America, N.A., Regions Bank, Bank of Montreal and Capital One, National Association, as co-documentation agents, and JPMorgan Chase Bank, N.A., Truist Securities, Inc. and Wells Fargo Securities, LLC, as joint bookrunners and joint lead arrangers, and the other lenders party thereto. The Credit Agreement provides usthe Company with a ~~$200.0 million~~senior secured revolving credit facility (the “Credit Facility”)~~, including a subfacility~~ in an aggregate principal amount of ~~$25.0 million~~$325.0 million. The Credit Facility includes sublimits for ~~letters of credit. As of September 30, 2017, we had no borrowings and seven~~swingline loans, letters of credit and alternative currency loans in amounts of up to $25.0 million, $60.0 million and $75.0 million, respectively. On June 26, 2023, the ~~amount of $11.0 million outstanding under the revolving credit facility. At September 30, 2017, our available credit under the revolving credit facility was $189.0 million. Under~~Company entered into an Amendment No. 1 (the "First Amendment") to the Credit Agreement which amended and restated the ~~Company has~~maximum permitted Total Net Leverage Ratio under the Credit Agreement. For information related to the Company's Credit Facility, refer to Note 9 of the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, “Financial Statements”.

Liquidity

Liquidity measures our ability to meet current and future cash flow needs on a timely basis and at a reasonable cost. We manage our liquidity position to meet our daily cash flow needs, while maintaining an ~~option~~appropriate balance between assets and liabilities to ~~request an increase~~meet the return on investment objectives of our shareholders. Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash of $6.9 million and accounts receivable, contract receivables, and other receivables of $346.1 million. Liquid liabilities which totaled $702.9 million at period end as detailed in the ~~amount~~table below, included $66.3 million in guarantees and letters of credit that are not expected to be paid in cash in the ~~revolving credit facility from time to time (on substantially the same terms as apply to the existing facilities) in an aggregate amount~~next 12 months. Other sources of liquidity include amounts currently available under our Credit Facility of up to ~~$75.0~~approximately $123.0 million ~~with either~~as of June 30, 2023 based on our total net debt leverage ratio covenant of 5.25:1.00, and expected future cash generated from operations.

In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Our short-term and long-term liquidity requirements are primarily to fund on-going operations. These liquidity requirements are met primarily through cash flow from operations, debt financing, and our Credit Facility. For additional ~~commitments from lenders under~~information regarding our operating, investing and financing cash flows, see “Condensed Consolidated Financial Statements— Condensed Consolidated Statements of Cash Flows,” included in Part I, Item I of this report.

The Company has cash requirements of $702.9 million due in one year or less in addition to $1,278.5 million due in more than one year as of June 30, 2023. The following is a summary of our future cash requirements for the ~~Credit Agreement at such time or new commitments from financial institutions acceptable~~next twelve months and the period extending beyond twelve months as of June 30, 2023 (in thousands):


	At June 30, 2023
			Less than		Greater than
	Total		1 Year		1 Year
Senior Unsecured Notes(1)	$	1,000,000	$	—	$	1,000,000
Interest(1)	226,854		56,111		170,743
Contracts payable(2)	109,094		109,094		—
Transportation costs(3)	94,118		94,118		—
Deferred tax liabilities(4)	46,972		—		46,972
Operating leases(5)	41,694		9,298		32,396
Guarantees(6)	30,815		27,212		3,603
Letters of credit(6)	39,074		39,074		—
Purchased service commitment(7)	72,000		47,250		24,750
Short-term borrowings(8)	126,500		126,500		—
Other current cash obligations(9)	194,225		194,225		—
Total	$	1,981,346	$	702,882	$	1,278,464

(1)See Note 9 of the Notes to the ~~administrative agent~~unaudited condensed consolidated financial statements included in ~~its reasonable discretion, so long as no default or event~~Part I, Item 1, “Financial Statements” for further detail of ~~default exists~~our Senior Unsecured Notes and the timing of expected future payments. Interest payments on our Senior Unsecured Notes are typically paid semi-annually in arrears and have been calculated at the ~~time~~rates fixed as of ~~any such increase. The Company may not be able to access additional funds under this increase option as no lender is obligated to participate in any such increase under~~June 30, 2023. Interest payments on our short-term borrowings have been calculated by taking the ~~Credit Facility. The Credit Facility matures~~expected borrowing on ~~August 2, 2018.~~

Interest on the outstanding principal amount of the loans accrues, at the Company’s election, at a per annum rate equal to LIBOR, plus an applicable margin, or the base rate as defined in the agreement plus an applicable margin. The applicable margin ranges from 2.25% to 3.25% in the case of LIBOR loans and 1.25% to 2.25% in the case of the base rate loans, in each case, based on the Company’s consolidated leverage ratio as defined in the Credit Agreement. Interest on the loans is payable quarterly in arrears. In addition, the Company is obligated to pay a quarterly commitment fee based on a percentage of the unused portion of each lender’s commitment under the Credit Facility ~~and quarterly letter~~for the next year at the interest rate of ~~credit fees based on a percentage~~9.1%.

(2)See Note 4 of the ~~maximum amount available~~Notes to ~~be drawn under each outstanding letter~~the unaudited condensed consolidated financial statements included in Part I, Item 1, “Financial Statements” for further detail of ~~credit. The commitment fee and letter of credit fee range from 0.25% to 0.50% and 2.25% to 3.25%, respectively, in each case, based on the Company’s consolidated leverage ratio.~~our contracts payable.

~~The Company’s obligations under the Credit Facility are guaranteed by all~~(3)See Note 1 of the Company’s present and future domestic subsidiaries, excluding certain domestic subsidiaries which include the Company’s insurance captives. The Company’s obligations under, and each guarantor’s obligations under its guaranty of, the Credit Facility are secured by a first priority lien on substantially all of the Company’s respective assets, including a pledge of 100% of the issued and outstanding stock of the Company’s domestic subsidiaries, excluding the Company’s insurance captives, and 65% of the issued and outstanding stock of the Company’s first tier foreign subsidiaries.

The Credit Agreement contains customary affirmative and negative covenants and events of default. The negative covenants include restrictions on the Company’s ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets, and merge and consolidate. The Company is subject to financial covenants, including consolidated net leverage and consolidated interest coverage covenants. The Company was in compliance with all covenants as of September 30, 2017.

~~Preferred Stock.~~ Following (i) the completion of a rights offering in February 2015, under which certain holders of our Common Stock exercised subscription rights to purchase Preferred Stock, and (ii) the purchase of Preferred Stock by certain of Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P. and Blackwell Partners, LLC (collectively, the “Standby Purchasers”), pursuantNotes to the ~~Standby Purchase Agreement between the Standby Purchasers~~consolidated financial statements included in Part II, Item 8, “Financial Statements and ~~the Company, the Company issued 805,000 shares~~Supplementary Data” of Preferred Stock, of which 803,232 shares are outstanding as of September 30, 2017. For further information regarding these transactions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and capital resources – Obligations and commitments – Rights Offering” in the Company’s Annual Report onour Form 10-K for the year ended December 31, ~~2016. We may pay a noncumulative cash dividend~~2022 filed on ~~each share of Preferred Stock, when, as and if declared by a committee~~March 7, 2023 for further detail of our ~~Board~~accrued transportation cost.

(4)Deferred income taxes reflect the net tax effects of ~~Directors (“Board”), at~~temporary differences between the ~~rate~~carrying amounts of ~~5.5% per annum on~~assets and liabilities for financial reporting purposes and the ~~liquidation preference then~~amounts used for income tax purposes.

(5)The operating leases are for office space. Certain leases contain periodic rent escalation adjustments and renewal options. See Note 17 of the Notes to the consolidated financial statements included in ~~effect. On or before the third business day immediately preceding each fiscal quarter, we determine our intention whether or not to pay a cash dividend with respect to that ensuing quarter~~Part II, Item 8, “Financial Statements and ~~give notice~~Supplementary Data” of our ~~intention~~Form 10-K for the year ended December 31, 2022 filed on March 7, 2023 for further detail of our operating leases.

(6)Letters of credit (“LOCs”) are guarantees of potential payments to ~~each holder~~third parties under certain conditions. Guarantees include surety bonds we provide to certain customers to protect against potential non-delivery of ~~Preferred Stock as soon as practicable thereafter.~~our non-emergency transportation services. Our LOCs shown in the table were provided by our Credit Facility and reduced our availability under the related Credit Agreement. The surety bonds and LOC amounts in the above table represent the amount of commitment expiration per period.

In(7)The purchased service commitment includes the ~~event~~maximum penalty we would incur if we do not ~~declare and pay a cash dividend,~~meet our minimum volume commitment over the ~~liquidation preference will be increased to an amount equal~~remaining term of the agreement under certain contracts. See Note 19 of the Notes to the ~~liquidation preference~~consolidated financial statements included in ~~effect at~~Part II, Item 8, “Financial Statements and Supplementary Data” of our Form 10-K for the ~~start~~year ended December 31, 2022 filed on March 7, 2023 for further detail of our purchased service commitment.

(8)Short-term borrowings shown in the table were provided by our Credit Facility and reduced our availability under the related Credit Agreement. See Note 9 of the applicable dividend period, plus an amount equal to such then applicable liquidation preference multiplied by 8.5% per annum, computed on the basis of a 365-day year and the actual number of days elapsed from the start of the applicable dividend periodNotes to the ~~applicable date of determination.~~

~~Cash dividends are payable quarterly~~unaudited condensed consolidated financial statements included in ~~arrears on January~~Part I, Item 1, April 1, July 1 and October 1 of each year, and, if declared, will begin to accrue on the first day of the applicable dividend period. Paid in kind (“PIK”) dividends, if applicable, will accrue and be cumulative on the same schedule as set forth above“Financial Statements” for cash dividends and will also be compounded at the applicable annual rate on each applicable subsequent dividend date. PIK dividends are paid upon the occurrence of a liquidation event, conversion or redemption in accordance with the terms of the Preferred Stock. Cash dividends were declared for the nine months ended September 30, 2017 and totaled $3.3 million.

~~Reinsurance and Self-Funded Insurance Programs~~

~~Reinsurance~~

~~We historically reinsured a substantial portion~~further detail of our ~~automobile, general and professional liability and workers’ compensation costs under reinsurance programs through~~Credit Facility.

(9)These include other current liabilities reflected in our wholly-owned captive insurance subsidiary, Social Services Providers Captive Insurance Company, or SPCIC. As of May 16, 2017, SPCIC did not renew the expiring reinsurance policies. SPCIC will continue to resolve claims under the historical policy years.

At September 30, 2017, the cumulative reserve for expected losses since inception of these historical automobile, general and professional liability and workers’ compensation reinsurance programs was $1.8 million, $0.8 million and $5.7 million, respectively. Based on an independent actuarial report, our expected losses related to workers’ compensation, automobile and general and professional liability in excess of our liability under our associated historical reinsurance programs at September 30, 2017 was $6.1 million. We recorded a corresponding receivable from third-party insurers and liability at September 30, 2017 for these expected losses, which would be paid by third-party insurers to the extent losses are incurred.

Further, SPCIC had restricted cash of $6.8 million and $13.8 million at September 30, 2017 and December 31, 2016, respectively, which was restricted to secure the reinsured claims losses of SPCIC under the historical automobile, general and professional liability and workers’ compensation reinsurance programs.

~~Health Insurance~~

We offer our NET Services’, certain WD Services’ and corporate employees an option to participate in a self-funded health insurance program. The liability for the self-funded health plan of $2.4 million and $3.0 million as of September 30, 2017 and December 31, 2016, respectively, was recorded in “Reinsurance liability and related reserve” in ourunaudited condensed consolidated balance ~~sheets.~~sheets as of June 30, 2023, including accounts payable and accrued expenses as detailed at Note 8 to the unaudited condensed consolidated financial statements included in Part I, Item 1, “Financial Statements”.

Our primary sources of funding include operating cash flows and access to capital markets. There are statutory, regulatory, and debt covenant limitations that affect our ability to access the capital market for funds. Management believes that such limitations will not impact our ability to meet our ongoing short-term cash obligations. Management continuously monitors our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources, or operations. In addition, our management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a material adverse effect on us.

Off-Balance Sheet Arrangements

There have been no material changes to the Off-Balance Sheet Arrangements discussion previously disclosed in our audited consolidated financial statements contained in ~~the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~Forward-Looking Statements~~

This Quarterly Report on Form 10-Q contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements related to the Company’s strategies or expectations about revenues, liabilities, results of operations, cash flows, ability to fund operations, profitability, ability to meet financial covenants, contracts or market opportunities. The Company may also make forward-looking statements in other reports filed with the Securities and Exchange Commission (the “SEC”), in materials delivered to stockholders and in press releases. In addition, the Company’s representatives may from time to time make oral forward-looking statements. In certain cases, you may identify forward looking-statements by words such as “may”, “will”, “should”, “could”, “expect”, “plan”, “project”, “intend”, “anticipate”, “believe”, “seek”, “estimate”, “predict”, “potential”, “target”, “forecast”, “likely”, the negative of such terms or comparable terminology. In addition, statements that are not historical statements of fact should also be considered forward-looking statements. These forward-looking statements are based on the Company’s current expectations, assumptions, estimates and projections about its business and industry, and involve risks, uncertainties and other factors that may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016 and our other filings with the SEC.~~2022.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company is under no obligation to (and expressly disclaims any such obligation to) update any of the information in any forward-looking statement if such forward-looking statement later turns out to be inaccurate, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Foreign currency~~We have exposure to interest rate risk

~~As of September 30, 2017, we conducted business in eleven countries outside the U.S. As a result,~~ mainly related to our ~~cash flows and earnings are subject to fluctuations due to changes in foreign currency exchange rates.~~Credit Facility, which has variable interest rates that may increase. We ~~do not currently hedge against the possible impact of currency fluctuations. During YTD 2017 we generated $217.4~~had $126.5 million of ~~our net operating revenues from operations outside~~short-term borrowings outstanding on the ~~U.S. As we expand further into international markets, we expect~~Credit Facility and $39.1 million of outstanding letters of credit under the ~~risk from foreign currency exchange~~Credit Facility at June 30, 2023. Interest rates on the outstanding principal amount of the Credit Facility vary and accrue at a per annum rate equal to ~~increase.~~

~~A 10% adverse change~~the Alternate Base Rate, the Adjusted Term SOFR Rate, the Adjusted Daily Simple SOFR Rate, the Adjusted EURIBOR Rate or the Adjusted Daily Simple SONIA Rate, as applicable and each as defined in the ~~foreign currency exchange~~Credit Agreement, in each case, plus an applicable margin. We completed an interest rate ~~from British Pounds to U.S. dollars~~risk sensitivity analysis with the assumption that the short-term borrowing amount that was outstanding as of June 30, 2023 was outstanding for the fiscal year with an assumed one-percentage point increase in interest rates. Based on this analysis, the one-percentage point increase would have ~~a $14.4~~an approximate $1.3 million negative impact on ~~consolidated revenue and a negligible impact on net income. A 10% adverse change in other foreign currency exchange rates would not have a significant impact on~~ our ~~financial results.~~pre-tax earnings.

~~We assess the significance of foreign currency risk on a periodic basis and may implement strategies to manage such risk as we deem appropriate.~~

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures

The ~~Company,~~Company's management, under the supervision and with the participation of its ~~management (including its~~ principal executive officer and principal financial ~~officer),~~officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act as of ~~September~~June 30, ~~2017.~~2023. Based upon this evaluation, the Company’s principal executive officer and principal financial ~~officers have~~officer concluded that, to the extent of the material weaknesses identified in internal control over financial reporting as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, such disclosure controls and procedures were not effective to provide reasonable assurance that ~~(i)~~ information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and ~~(ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is~~ accumulated and communicated to the Company’s management, including its principal executive and financial ~~officers,~~officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In light of the material weaknesses described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, management performed additional analysis and other procedures to ensure that our unaudited condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP.

(b) Changes in ~~internal controls~~

~~The principal executive and financial officers also conducted an evaluation of whether any changes in the Company’s~~ internal control over financial reporting ~~occurred during~~

We, with the ~~quarter~~oversight of the Audit Committee of the Board of Directors, are in the process of ongoing remediation efforts related to the material weaknesses previously reported in our Annual Report on Form 10-K for the year ended ~~September~~December 31, 2022.

During the six months ended June 30, ~~2017~~2023, our management continued updating certain internal controls and supporting processes to address the material weaknesses in our internal control over financial reporting described in our Annual Report on Form 10-K for the year ended December 31, 2022. The remediation plan put into place by management includes working with our third-party specialist to lead the remediation efforts as well as the addition of resources within the

organization to improve structure and help mitigate risks previously identified. Key focus areas have been identified as general information technology control (GITC) deficiencies, payroll controls, revenue process controls and risk assessment related to changes and business acquisitions.

To that ~~have materially affected or which~~effect, the Company has:

•Designed and implemented a new suite of internal controls with appropriate authorities around the payroll process at the NEMT and Corporate and Other segments.

•Continued to execute our enhanced risk assessment process to identify and assess changes in our internal control environment, specifically related to new information technology ("IT") systems and newly acquired companies.

•Continued to design, enhance and implement GITCs, including change management and logical access controls, to support process-level automated controls intended to ensure that information needed for the operation of manual process-level controls and financial reporting is accurate and complete.

The Company is focused on projects that address processes and technologies to integrate each of the business segments into One ModivCare and standardize our control environment. Given the nature and complexity of the integration, management expects that the test of operating effectiveness of remediation will extend into 2024 for the Personal Care segment. The material weakness will not be considered remediated until the remediation plan has been implemented and there has been appropriate time for us to conclude through testing that the controls are ~~reasonably likely~~designed and operating effectively. Management will continue to ~~materially affect such control. Such officers have concluded that no such changes have occurred.~~monitor the progress of these efforts to ensure remediation.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

~~On June 15, 2015, a putative stockholder class action derivative complaint was filed~~From time-to-time, we may become involved in legal proceedings arising in the ~~Court~~ordinary course of ~~Chancery~~our business. We record accruals for outstanding legal matters when it is believed to be probable that a loss will be incurred and the amount can be reasonably estimated. Management, following consultation with legal counsel, does not expect the ultimate disposition of any or a combination of any such ongoing or anticipated matters to have a material adverse effect on our business, financial condition or operating results. We cannot predict with certainty, however, the potential for or outcome of any litigation. Regardless of the ~~State~~outcome of ~~Delaware (the “Court”), captioned Haverhill Retirement System v. Kerley et al., C.A. No. 11149-VCL. For further information~~any particular litigation and the merits of any particular claim, litigation can have a material adverse impact on ~~this legal proceeding, please see Item 3,~~ ~~Legal Proceedings~~us due to, among other reasons, any injunctive relief granted which could inhibit our ability to operate our business, amounts paid as damages or in settlement of any such matter, diversion of management resources and defense costs. Interested parties should refer to Note 13, Commitments and Contingencies, in ~~the Company’s Annual Report on Form 10-K~~this report for ~~the year ended December 31, 2016, and Part II, Item 1,~~ ~~Legal Proceedings, in the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2017 and June 30, 2017.~~

~~On September 28, 2017, the Court approved a proposed settlement agreement among the parties~~information concerning other potential contingent liabilities matters that ~~provides for a settlement amount of $10.0 million less plaintiff’s legal fees and expenses (the “Settlement Amount”), with 75% of the Settlement Amount to be paid~~do not rise to the ~~Company and 25%~~level of ~~the Settlement Amount to be paid to holders~~materiality for purposes of the Company’s common stock other than certain excluded parties. The Company expects to receive a payment of approximately $5.0 million. As this amount is considered a gain contingency, the Company has not recorded a receivable for this amount as of September 30, 2017.disclosure hereunder.

Item 1A. Risk Factors.

~~There~~The risks described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”) could materially and adversely affect our business, financial condition, and results of operations, and could cause the trading price of our common stock to decline. The discussion of the risks included under that caption in our Annual Report remains current in all material respects, and there have been no material changes from the risk factors disclosed in the ~~Company’s~~ Annual ~~Report on Form 10-K for the year ended December 31, 2016.~~Report. The risk factors that we have discussed do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchasers” (as defined in Rule 10b-18(a)(3) of the Exchange Act) of our common stock ~~repurchased by us~~ during the three months ended ~~September~~June 30, ~~2017:~~2023:

Period
Total Number
of Shares of
Common Stock
Purchased (1)

Average Price
Paid per
Share

Total Number of
Shares of Common Stock
Purchased as Part of
Publicly Announced
Plans or Program

Maximum Dollar Value of
Shares of Common Stock
that May Yet Be Purchased
Under the Plans or Program (2)
Month 1:
July 1, 2017
to
July 31, 2017 47
$ 50
—
$ 69,624,167

Month 2:
August 1, 2017
to
August 31, 2017 115
$ 51.54
—
$ 69,624,167

Month 3:
September 1, 2017
to
September 30, 2017 —
$ —
—
$ 69,624,167

Total 162

—


Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) of Common Stock Purchased as Part of Publicly Announced Plans or Program	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (000’s)(1)
April 1, 2023 to April 30, 2023	3,028	(2)	$	70.94	—	$	—

May 1, 2023 to May 31, 2023	—		$	—	—	$	—

June 1, 2023 to June 30, 2023	110	(2)	$	47.95	—	$	—

Total	3,138				—	$	—

~~______________~~


~~(1)~~	~~Includes shares repurchased from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting of restricted stock grants.~~


~~(2)~~	On October 26, 2016, our Board authorized a new repurchase program, under which the Company may repurchase up to $100.0 million in aggregate value of the Company’s common stock during the twelve-month period following October 26, 2016. As of September 30, 2017, a total of 770,808 shares were purchased through this plan for $30.4 million, including commission payments.

~~On November 2, 2017, the Company’s Board of Directors approved the extension of the Company’s existing~~(1) No stock repurchase program ~~authorizing~~was authorized during the ~~Company to engage~~period ended June 30, 2023.

(2) Redeemed shares of Common Stock issuable in respect of vested restricted stock tendered in lieu of cash for payment of income tax withholding amounts by participants in the Company’s 2006 Plan (as defined below). These shares were not part of a ~~common stock repurchase~~publicly announced program to ~~repurchase up to $69.6 million (the amount remaining from the $100.0 million repurchase amount authorized in 2016) in aggregate value of the Company’s~~purchase common stock through December 31, 2018. Purchases under the common stock repurchase program may be made from time-to-time through a combination of open market repurchases (including Rule 10b5-1 plans), privately negotiated transactions, and accelerated share repurchase transactions, at the discretion of the Company’s officers, and as permitted by securities laws, covenants under existing bank agreements, and other legal requirements.stock.

~~Dividends~~

We have not paid any cash dividends on our common stock and currently do not expect to pay dividends on our common stock. In addition, our ability to pay dividends on our common stock is limited by the terms of our Credit Agreement and our preferred stock. The payment of future cash dividends, if any, will be reviewed periodically by the Board and will depend upon, among other things, our financial condition, funds from operations, the level of our capital and development expenditures, any restrictions imposed by present or future debt or equity instruments, and changes in federal tax policies, if any.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~During the three months ended June 30, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 6. Exhibits.

EXHIBIT INDEX


Exhibit Number						Description


~~Exhibit~~ ~~Number~~						~~Description~~
3.1						Second Amended and Restated Certificate of Incorporation of the registrant, as filed with the Secretary of State of Delaware on December 9, 2011 (Incorporated by reference to Exhibit 3.1 to the registrant's annual report on Form 10-K filed with the SEC on March 1, 2021).

3.2						~~31.1~~Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the registrant, dated as of May 6, 2015 (Incorporated by reference to Exhibit 3.1 to the registrant's current report on Form 8-K filed with the SEC on May 7, 2015).*

3.3						Second Amendment to the Second Amended and Restated Certificate of Incorporation of the registrant, effective January 6, 2021 (Incorporated by reference to Exhibit 3.1 to the registrant's current report on Form 8-K filed with the SEC on January 6, 2021).

3.4						Third Amendment to the Second Amended and Restated Certificate of Incorporation of the registrant, effective June 13, 2023 (Incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed with the SEC on June 15, 2023).

3.5						Amended and Restated Bylaws of the registrant, effective January 6, 2021 (Incorporated by reference to Exhibit 3.2 to the registrant’s current report on Form 8-K filed with the SEC on January 6, 2021).

3.6						Amendment to the Amended and Restated Bylaws of the registrant, effective June 13, 2023 (Incorporated by reference to Exhibit 3.2 to the registrant 's current report on Form 8-K filed with the SEC on June 15, 2023).

4.1						Indenture for 5.875% Senior Notes Due 2025 dated as of November 4, 2020, between the registrant and The Bank of New York Mellon Trust Company, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the registrant’s current report on Form 8-K filed with the SEC on November 12, 2020).

4.2						Indenture for 5.000% Senior Notes Due 2029 dated as of August 24, 2021, between ModivCare Escrow Issuer, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the registrant’s current report on Form 8-K filed with the SEC on August 24, 2021).

10.1						Amendment No. 1, dated as of June 26, 2023, to Credit Agreement, dated as of February 3, 2022, among ModivCare Inc., the co-syndication agents party thereto, the co-documentation agents party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed with the SEC on June 26, 2023).

31.1*						Certification pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer.

~~31.2~~* 31.2*						Certification pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer.

~~32.1~~32.1**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.

~~32.2~~32.2**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.

~~101. INS~~99.1						~~XBRL~~ Settlement Agreement and Release, dated May 18, 2023 (Incorporated by reference to Exhibit 99.1 to the registrant's current report on Form 8-K filed with the SEC on May 18, 2023).

101.INS*						Inline XBR Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH~~101.SCH*						Inline XBRL Schema Document

~~101.CAL~~101.CAL*						Inline XBRL Calculation Linkbase Document

~~101.LAB~~101.LAB*						Inline XBRL Label Linkbase Document

~~101.PRE~~101.PRE*						Inline XBRL Presentation Linkbase Document

~~101.DEF~~101.DEF*						Inline XBRL Definition Linkbase Document

104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*		Filed herewith.
**		Furnished herewith.


*	~~Filed herewith.~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ModivCare Inc.

Date: August 3, 2023			~~THE PROVIDENCE SERVICE CORPORATION~~By:	/s/ L. Heath Sampson

~~Date: November 8, 2017~~	~~By:~~	~~/s/ James M. Lindstrom~~
		~~James M. Lindstrom~~L. Heath Sampson Chief ExecutiveOfficer ~~and Director~~
				(~~Principal Executive~~Duly Authorized Officer)

Date: ~~November 8, 2017~~August 3, 2023			By:	/s/ ~~David C. Shackelton~~L. Heath Sampson
				~~David C. Shackelton~~ L. Heath Sampson Chief Financial Officer
				(Principal Financial Officer)

	~~86-0845127~~
Delaware		86-0845127
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



~~700 Canal Street, Third Floor~~ ~~Stamford, Connecticut~~		~~06902~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.001 par value per share	MODV	The NASDAQ Global Select Market


Large accelerated filer		☒	Accelerated filer	☐
Non-accelerated filer		☐	Smaller reporting company	☐

~~Large accelerated filer ☐~~		~~Accelerated filer ☒~~

~~Non-accelerated filer ☐ (Do not check if a smaller reporting company)~~	~~Smaller reporting company ☐~~

Emerging growth company ☐	☐



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2017			December 31, 2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	92,178		$	72,262
Accounts receivable, net of allowance of $5,765 in 2017 and $5,901 in 2016	175,162			162,115
Other receivables	5,555			12,639
Prepaid expenses and other	39,083			37,895
Restricted cash	1,198			3,192
Total current assets	313,176			288,103
Property and equipment, net	48,191			46,220
Goodwill	121,555			119,624
Intangible assets, net	45,750			49,124
Equity investments	157,067			161,363
Other assets	12,911			8,397
Restricted cash, less current portion	5,902			10,938
Deferred tax asset	4,436			1,510
Total assets	$	708,988		$	685,279
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
Current portion of long-term obligations	$	1,528		$	1,721
Accounts payable	19,921			22,177
Accrued expenses	103,397			102,381
Accrued transportation costs	101,195			72,356
Deferred revenue	17,421			20,522
Reinsurance and related liability reserves	4,881			8,639
Total current liabilities	248,343			227,796
Long-term obligations, less current portion	566			1,890
Other long-term liabilities	23,968			22,380
Deferred tax liabilities	54,363			57,973
Total liabilities	327,240			310,039
Commitments and contingencies (Note 11)
Redeemable convertible preferred stock
Convertible preferred stock, net: Authorized 10,000,000 shares; $0.001 par value; 803,232 and 803,398 issued and outstanding; 5.5%/8.5% dividend rate	77,549			77,565
Stockholders' equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 17,446,673 and 17,315,661 issued and outstanding (including treasury shares)	17			17
Additional paid-in capital	310,017			302,010
Retained earnings	167,004			156,718
Accumulated other comprehensive loss, net of tax	(26,331		)	(33,449		)
Treasury shares, at cost, 3,944,171 and 3,478,676 shares	(144,201		)	(125,201		)
Total Providence stockholders' equity	306,506			300,095
Noncontrolling interest	(2,307		)	(2,420		)
Total stockholders' equity	304,199			297,675
Total liabilities, redeemable convertible preferred stock and stockholders' equity	$	708,988		$	685,279



	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Service revenue, net	$	409,517		$	412,271		$	1,216,994		$	1,192,426

Operating expenses:
Service expense	378,032			378,488			1,124,478			1,095,011
General and administrative expense	18,629			17,320			53,705			52,548
Depreciation and amortization	6,547			6,670			19,716			20,058
Total operating expenses	403,208			402,478			1,197,899			1,167,617

Operating income	6,309			9,793			19,095			24,809

Other expenses:
Interest expense, net	302			338			983			1,239
Equity in net (gain) loss of investees	460			1,517			991			5,693
Gain on sale of equity investment	(12,606		)	—			(12,606		)	—
Loss (gain) on foreign currency transactions	200			(482		)	600			(1,332		)
Income from continuing operations before income taxes	17,953			8,420			29,127			19,209
Provision for income taxes	2,989			4,678			8,391			12,466
Income from continuing operations, net of tax	14,964			3,742			20,736			6,743
Discontinued operations, net of tax	(16		)	(2,791		)	(6,000		)	332
Net income	14,948			951			14,736			7,075
Net loss (income) attributable to noncontrolling interests	(95		)	(301		)	(295		)	433
Net income attributable to Providence	$	14,853		$	650		$	14,441		$	7,508

Net income (loss) available to common stockholders (Note 9)	$	11,962		$	(745	)	$	8,927		$	3,697

Basic earnings (loss) per common share:
Continuing operations	$	0.88		$	0.14		$	1.10		$	0.23
Discontinued operations	—			(0.19		)	(0.44		)	0.02
Basic earnings (loss) per common share	$	0.88		$	(0.05	)	$	0.66		$	0.25

Diluted earnings (loss) per common share:
Continuing operations	$	0.88		$	0.14		$	1.09		$	0.23
Discontinued operations	—			(0.19		)	(0.44		)	0.02
Diluted earnings (loss) per common share	$	0.88		$	(0.05	)	$	0.65		$	0.25

Weighted-average number of common shares outstanding:
Basic	13,581,662			14,523,408			13,612,764			14,823,757
Diluted	13,655,554			14,634,483			13,676,468			14,943,024



	September 30, 2017		December 31, 2016
Current assets	$	50,015	$	28,589
Long-term assets	598,842		614,841
Current liabilities	39,273		25,791
Long-term liabilities	270,816		281,348



	Three months ended September 30, 2017
Revenue	$	58,639
Operating income	3,159
Net loss	(537		)



	Nine months ended September 30, 2017
Revenue	$	175,346
Operating income	10,109
Net loss	(775		)



	December 31, 2016
Current assets	$	4,640
Long-term assets	10,473
Current liabilities	12,844
Long-term liabilities	1,655



	September 30, 2017		December 31, 2016
Accrued compensation	$	24,058	$	23,050
NET Services accrued contract payments	26,504		32,836
Accrued settlement	15,000		6,000
Income taxes payable	—		372
Other	37,835		40,123
Total accrued expenses	$	103,397	$	102,381



	January 1, 2017		Costs Incurred			Cash Payments			Foreign Exchange Rate Adjustments		September 30, 2017

Ingeus Futures' Program	$	2,486	$	1,186		$	(3,086	)	$	158	$	744
Offender Rehabilitation Program	1,380		(40		)	(1,357		)	17		—
UK Restructuring Program	50		(29		)	—			3		24
Total	$	3,916	$	1,117		$	(4,443	)	$	178	$	768



~~Delaware~~



	January 1, 2016		Costs Incurred		Cash Payments			Foreign Exchange Rate Adjustments			September 30, 2016

Offender Rehabilitation Program	$	6,538	$	4,204	$	(6,075	)	$	(906	)	$	3,761
UK Restructuring Program	2,059		537		(2,379		)	(103		)	114
Total	$	8,597	$	4,741	$	(8,454	)	$	(1,009	)	$	3,875



	Three months ended September 30, 2017								Nine months ended September 30, 2017
	Human Services Segment			HA Services Segment		Total Discontinued Operations			Human Services Segment			HA Services Segment		Total Discontinued Operations

Operating expenses:
General and administrative expense	$	26		$	—	$	26		$	9,622		$	—	$	9,622
Total operating expenses	26			—		26			9,622			—		9,622
Loss from discontinued operations before income taxes	(26		)	—		(26		)	(9,622		)	—		(9,622		)
Income tax benefit	10			—		10			3,622			—		3,622
Discontinued operations, net of tax	$	(16	)	$	—	$	(16	)	$	(6,000	)	$	—	$	(6,000	)



	Three months ended September 30, 2016									Nine months ended September 30, 2016
	Human Services Segment			HA Services Segment			Total Discontinued Operations			Human Services Segment			HA Services Segment			Total Discontinued Operations

Service revenue, net	$	—		$	52,557		$	52,557		$	—		$	155,421		$	155,421

Operating expenses:
Service expense	—			38,703			38,703			—			113,455			113,455
General and administrative expense	7,463			1,505			8,968			7,463			2,823			10,286
Depreciation and amortization	—			5,359			5,359			—			21,121			21,121
Total operating expenses	7,463			45,567			53,030			7,463			137,399			144,862
Operating income (loss)	(7,463		)	6,990			(473		)	(7,463		)	18,022			10,559

Other expenses:
Interest expense, net	—			3,134			3,134			—			9,304			9,304
Income (loss) from discontinued operations before income taxes	(7,463		)	3,856			(3,607		)	(7,463		)	8,718			1,255
Income tax benefit (provision)	2,428			(1,612		)	816			2,428			(3,351		)	(923		)
Discontinued operations, net of tax	$	(5,035	)	$	2,244		$	(2,791	)	$	(5,035	)	$	5,367		$	332



	Nine months ended September 30, 2016

Cash flows from discontinued operating activities:
Depreciation	$	3,661
Amortization	$	17,460

Cash flows from discontinued investing activities:
Purchase of property and equipment	$	8,020



	Three months ended September 30, 2017
	NET Services		WD Services			Matrix Investment			Corporate and Other			Total
Service revenue, net	$	324,824	$	84,693		$	—		$	—		$	409,517
Service expense	304,454		73,581			—			(3		)	378,032
General and administrative expense	2,899		6,980			—			8,750			18,629
Depreciation and amortization	3,286		3,166			—			95			6,547
Operating income (loss)	$	14,185	$	966		$	—		$	(8,842	)	$	6,309

Equity in net gain (loss) of investee	$	—	$	(459	)	$	(1	)	$	—		$	(460	)



Period	Total Number of Shares of Common Stock Purchased (1)	Average Price Paid per Share		Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Program	Maximum Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Plans or Program (2)
Month 1:
July 1, 2017
to
July 31, 2017	47	$	50	—	$	69,624,167

Month 2:
August 1, 2017
to
August 31, 2017	115	$	51.54	—	$	69,624,167

Month 3:
September 1, 2017
to
September 30, 2017	—	$	—	—	$	69,624,167

Total	162			—