ModivCare Inc (MODV) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter two 2013 Providence Service Corporation earnings conference call. My name is Patrick, and I will be your coordinator for today.

At this time, all participants are in listen-only mode. We will facilitate a question and answer session toward the end of the conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Ms. Alison Ziegler from Cameron Associates. Please proceed.

Thanks, Patrick. Good morning, everyone, and thank you for joining us this morning for Providence's conference call and webcast to discuss financial results for the second quarter ended June 30, 2013. The press release was issued yesterday after the market closed.

Before we begin, please note that we have arranged for a replay of this call. This replay will be available approximately one hour after the call's conclusion and will remain available until August 15. The replay number is 888-286-8010 with the passcode 57517132. This call is also being webcast live with the replay available. To access the webcast, go to www.provcorp.com and look under the Event Calendar on the IR page.

Before we get started, I'd like to remind everyone of the Safe Harbor statement included in the press release and that the cautionary statements apply to today's conference call as well. During the course of this call, the Company may make projections or other forward-looking statements regarding future events or the Company's beliefs about its financial results for 2013 and beyond. We wish to caution you that such statements are just predictions and involve risks and uncertainties. Actual results may differ materially. Factors which may affect actual results are detailed in the Company's filings with the SEC, including the Company's 10-K for the year ended December 31, 2012.

The Company's forward-looking statements are dynamic and subject to change; therefore, these statements speak only as of the date of this webcast, August 8, 2013. The Company may choose from time to time to provide updates, and if they do, we will disseminate the updates to the investing public.

In addition to the financial results prepared in accordance with Generally Accepted Accounting Principles, stated in the press release and provided throughout our call today, the Company has also provided EBITDA and Adjusted EBITDA non-GAAP measurements, which presented the earnings on a pro forma basis. Providence's management utilizes these non-GAAP measurements as a means to measure overall operating performance and to better compare current operating results with other companies within this industry. Both EBITDA and Adjusted EBITDA are measurements not determined in accordance with, or an alternative for, Generally Accepted Accounting Principles, and may be different from pro forma measures used by some companies. A definition, calculation, and reconciliation to the financial statements of each can be found in our press release. The items excluded in the non-GAAP measure pertain to certain items that are considered to be material so that exclusion of the items would in management's belief enhance a reader's ability to compare the results of the Company's business after excluding these items.

I'd now like to turn the call over to Warren Rustand, Chief Executive Officer. Go ahead, Warren.

Thank you, Alison, and good morning, everyone. With us today on the call, we have Bob Wilson, our CFO; Herman Schwartz, CEO of LogistiCare; and Craig Norris, CEO of Social Services. We will be available to take your questions following our scripted remarks.

We are pleased with our second-quarter and first-half results. Our revenues increased to nearly $288 million in the quarter and $569 million in the first half of the year. As Herman will discuss in more detail, NET revenue benefited from new contracts and program expansions in markets including New York and year-over-year gains in Georgia and Texas, as well as negotiated rate adjustments in selected programs, including New Jersey.

In our Social Services segment, while revenue declined slightly year over year in the quarter, it was mostly the result of changes to the Workforce Development business in Canada and the expiration of contracts related to our educational tutoring business, due to changes in the No Child Left Behind Act. Both of these factors have been discussed in prior quarters.

Overall, our Social Services contract base is solid. We continue to be successful in extending our contracts as they come up for renewal, and we have recently started up several new contracts, including contracts in Texas and Wisconsin. While I will let Bob provide a more detailed review of our financials, this helped drive the strong gains in net income and EBITDA. We saw continued improvements in our margins in the quarter due to the full implication of NET contracts that were in startup mode in last year's second quarter, as well as recent expansion of business in existing markets and negotiated rate adjustments in select programs of both the NET and Social Services segment.

As we announced earlier this week, we closed on a restructuring and extension of our senior credit facility that enables us to strengthen our capital structure by providing for a lower-cost borrowing, increased capacity and provides added flexibility for future growth. As stated on this call three months ago, our management team remains committed to improving operational efficiencies, growing organically, pursuing tuck-in acquisitions, investing in technology and implementing a corporate-wide performance-driven management system. I am happy to report that we are making progress on each of these important initiatives.

Starting in 2014, we continue to expect to see increases in Medicaid population as states opt into the expanded Medicaid benefit as a result of the Affordable Care Act. To date, 28 states, plus the District of Columbia, are moving toward expansion with 16 states currently anticipated to sit it out. Another six states are in the process of negotiation on various issues with the federal government.

We will remain cautious in our projections about the impact of this population on our business until all states have made their final decisions to opt in or out and the extent to which our services will be a part of their expanded Medicaid benefit. As we have stated before, to the extent this new Medicaid population is eligible for our services, we anticipate the benefit more rapidly on the NET side and more gradually on the Social Services side.

Integrated care is also moving forward in multiple states as we see accountable care organizations, health homes, and service for dual eligibles becoming more pronounced. We are involved in a variety of discussions with several parties to expand our opportunities as we pursue strategic relationships in new markets. We currently have nine pilot programs operating in four states -- California, Maine, North Carolina and Oklahoma. The pilots address unique populations and are showing very real promise by improving health outcomes and bending the cost curve for these clients.

The favorable trends we see in healthcare today continue to be opportunities for Providence, and we remain focused on positioning the Company for the future for the benefit of our clients, as well as our shareholders.

Let me turn the call over to Bob Wilson, who will provide more detail on the second-quarter results reported in our press release. Bob?

Thanks, Warren. As was just mentioned, revenue for the second quarter of 2013 was $287.6 million. That represents an increase of 3% from $278.9 million in the comparable period in 2012. Craig and Herman will provide more detail about these results in a few moments.

We had net income for the quarter of $5.9 million or $0.43 per diluted share compared to net income of $1.4 million or $0.11 per diluted share in the comparable period of 2012. Both business units had strong operating margins.

Adjusted EBITDA for the second quarter of 2013 was $15.7 million, up 85% from $8.5 million in the same period last year. Adjusted EBITDA for the six months of -- first six months of 2013 was $32.5 million compared to $18.8 million for the first half of 2012. That representing a year-over-year increase of 73%.

Our effective tax rate for both the second quarter and the first half of the year, year to date, are approximately 40% compared to our previously communicated expectation of an effective tax rate between 42% and 44%. We are revising our tax rate outlook for the full-year 2013 to 40% to 42%.

At the end of June, we had unrestricted cash and cash equivalents of $74 million, with additional cash flow going into restricted cash in the quarter for reinsurance reserve purposes. Total long-term obligations were $123.5 million at the end of the quarter compared to $130 million at December 31, 2012.

As you know from our press release issued this past Friday -- excuse me, this past Monday -- last Friday we closed on a refinancing of our existing senior secured credit facility in the aggregate principal amount of $225 million. The new facility is comprised of a $60 million five-year term loan and $165 million five-year revolving credit facility, both at rates significantly below the current interest rate on our current outstanding senior debt at that time. This increased senior debt capacity will give us the flexibility to repay our $47.5 million principal of 6.5% convertible senior subordinated notes that are due in May of 2014 and upwards of $100 million of an additional financial capacity to finance capital expenditures, as well as other growth-oriented activities.

I will now turn it over to Craig Norris to discuss the performance of the Social Services business for the quarter.

Thank you, Bob. For the second quarter, our client census on the Social Services side was approximately 53,000 clients. This is mostly unchanged from the prior year quarter, actually just up slightly. Segment revenue for the quarter was mostly unchanged from the prior quarter -- prior-year quarter, excuse me -- at approximately $90 million. But we did see margin improvement over the prior year quarter.

At the same time, however, we did experience areas of softness in the quarter, mostly related to underperformance and a few managed care markets, as well as the ongoing transition in the Canadian operation. All direct clients are being served from 351 local offices and 27 states, the District of Columbia, and Canada. There are approximately [5200] employees serving 502 contracts. Contract count for the segment was down year over year for the quarter, primarily driven by the reduction in the tutoring business, which I had previously referenced.

While we have started to see certain business units perform ahead of plan, as a result of improved operating environments within these states and we did see margin improvement for the quarter, we are certainly still working to stabilize other operations in which we operate, especially no states that are still evolving their managed care systems.

As I've said previously, I see us continuing to stabilize these markets over the remainder of the year, heading into 2014, at which time many state Medicaid and delivery systems will need to be stable and prepared for healthcare reform-related enrollment expansion. It is incumbent upon us to continue to adapt our business to the various external shifts and payer expectations, as well as position ourselves with these payers to meet their future needs. I believe we are focused on the right objectives to align ourselves with current and future payer environments.

We are seeing increasing consolidation in our markets, and Providence is in a good position to grow our market through tuck-in acquisitions. The pipeline of tuck-in acquisitions has been increasing in the number of markets. and we have several targets we are presently pursuing.

At the same time, we are actively working hard on several initiatives to grow our business organically from our current 27-state operations.

As always, our direct care staff is working extremely hard, focusing on the quality of care to those whom we serve. We continue to be very grateful for all their hard work.

With that, I will turn it over to Herman for more details on LogistiCare. Herman?

Thank you, Craig. Good morning, everyone. Revenues in the NET segment grew to $197.9 million in the second quarter, a 4.8% increase compared to the same period last year. This positive trend was posted in spite of the $11 million year-over-year reduction of revenue as a function of the Connecticut contract transitioning to the ASO model in the first quarter of this year, as well as the loss of the Arkansas contract that contributed $2.5 million to last year's second-quarter revenue.

A combination of factors was responsible for more than offsetting the impact of these two states and generating positive net revenue growth. We finally implemented all phases of the New York City contract at the beginning of 2013, and we will continue for the remainder of the year to show favorable year-over-year comparisons. Similarly, we are also benefiting from the contracts in Texas and Georgia that were implemented in the second quarter of 2012 and, therefore, were not fully captured in last year's quarter.

We added business in Kansas and California in early 2013, plus enjoyed the benefit of higher rates that were negotiated in late 2012 with a few key states.

Our margins in the quarter were greatly improved due to the rate increases, as well as our efforts to drive efficiency in our transportation spend. Transportation expense ran at 77.5% of revenue in the quarter versus 82.1% last year and 76.0% last quarter. The slight increase from Q1 is to be expected, given the seasonal increase in utilization we experienced with warmer weather and the school term ending.

Non-transportation expenses as a percent of revenue increased due to the shift of Connecticut to the ASO structure, but remained consistent with expectations.

We manage transportation in 43 states and have a census of 17.2 million eligible members, up from 13.7 million eligibles a year ago.

As of July 31, our contract in Wisconsin ended, and we have fully transitioned the program to the new broker. Our new contract with Missouri took effect July 1, and the call center we opened in the state is functioning at 100%.

The transfer of service from our Arizona call center to Missouri went relatively smoothly and with little impact on members.

The RFP decisions in Rhode Island and North Carolina continue to be delayed. In upstate New York, the award was made to a local provider that serves in that region and also holds the state contract in Hudson Valley. The award to this vendor was not a surprise to us as there is heavy emphasis on local presence and familiarity in that region.

As of last Friday, the rebid RFP in Mississippi was released, and the RFP activity will heat up in the coming months as several new states are expected to hit the market, as well as other rebid processes in Michigan, South Carolina and New Jersey.

I will now turn the call back over to Warren.

Thank you, Herman. As you can see, we have made some good progress, improving our NET operations. And with the anticipated improvement we see on the Social Services side, we continue to expect year-over-year adjusted EBITDA gains in the second half of the year. We remain focused on operational excellence and preparing the Company for 2014 and beyond. The entire management team remains cautiously optimistic about the opportunity we see today on both sides of our business.

We believe that our strong cash position, coupled with the increased financial capacity provided by our recent refinancing, will enable us to pursue growth-oriented initiatives and investments to help further position our business for the changing healthcare trends we see.

With that, I'd like to open up the call to your questions, and we appreciate you being with us today.

(Operator Instructions). Bob Labick, CJS Securities.

Good morning. Congratulations on a nice quarter. Just wanted to start off with LogistiCare on the NET side. Last quarter on the call, I believe you indicated you expected roughly a 2 million-person boost if the ACA had kicked in and started at that point. Where is that looking now? And is there any indication on the rate that the newly eligible population may come in, or how should we start thinking about that as we approach 2014?

Bob, as you and I have discussed and as we mentioned on the call, everything right now is still in flux, to be honest with you. We have said consistently that it would be mid-September to early October before we felt comfortable putting any real estimates out there or believing that we would get any indication where those things might shake out.

I can tell you that, for instance, Iowa has just recently indicated that they are going to go back to CMS and look for a potential waiver of the wraparound benefits, which would include NET, in order to expand.

So there is still so much flux going on out there that, right now, I really don't have the ability to offer you any real guidance in terms of either the population that is going to come in or at what rate. We haven't even had conversations about rate with folks, because they don't know yet what population they are going to be serving. I can tell you that Mississippi just came out with their RFP and doesn't even discuss that element in terms of a population growth.

So we are really no closer now than we were last quarter, and we are still kind of sticking to that September/October timeframe.

Okay. Great. That's helpful. And hopefully by then, you will learn more.

And then, you touched on some of the current bidding and the renewals for next year. Could you just talk about the competitive environment and expectations for renewals in some of your major contracts next year?

Well, I mean, obviously, as I mentioned, Mississippi is out. Mississippi has historically been fairly competitive. There is a local competitor in Mississippi that always makes a run at the contract. And there is a local allegiance down there. So we anticipate that Mississippi will be competitive. And South Carolina and New Jersey are two other very large contracts that expire during 2014.

South Carolina, as we have talked about previously, has had the experience and the history of going with a low bidder and having that backfire on them. So I would hope that, at this point, they would be looking at the technical strength and how we have done in terms of service, and that will carry the day.

But people will certainly go after it. I mean, there is no lack of competitors that are trying to get these contracts. What we are hoping for is just that we are in a good place and don't have to fight completely on price.

New Jersey is obviously -- the way it is differentiated from New York in that New York is the ASO, so that makes New Jersey actually the largest NET broker contract in the country. That, in and of itself, is going to attract probably every competitor. And we do have indications that some of our competitors plan to be very aggressive in going after that.

So we do anticipate it being a fight out there. And we have confidence, but we are going to have to do a good job in our response and continue to provide the level of service we have been providing.

Okay. Thank you for that color. And then, just jumping over to the Social Services side, you have talked about, in the past and on this call a little bit as well, the technology investment to be ready for increased population. Can you just give us some examples of what that technology investment might entail? And does that give you a competitive advantage, once you are done, on bidding new projects? Or will that be standard across the board?

Yes, thanks, Bob. I think on our side of the business, really the technology priority is really electronic health records. It is something that every state is moving toward mandating. The Accountable Care Act ratchets up that mandate. And, as I said before, this is an industry that has been somewhat immature in their technology use. It has evolved over the last few years, but it is still relatively immature. And I think we are evaluating which of those are our best options to prepare us for the future. That's mostly where our investment on my side will end up being.

And, yes, I think once we have a comprehensive Electronic Health Records system that allows us to be not only effective but efficient and allows our direct care workers to be more efficient in the field -- remember, my biggest expense will always be direct care staff payroll. Much like Herman's will always be utilization, mine is always going to be direct care staff payroll. The more we can be efficient in the field with handheld devices, for example, the more we can be efficient on the payroll side, as well as be effective on the back-office side -- billing, collections, and integrating into the larger healthcare systems that are going to be evolving.

So this is really the scope of where we see needing to go with our technology. And we are kind of right in the middle of trying to evaluate which is the best way to go to really put us at a very competitive advantage. I think a lot of providers, as I think I have mentioned before, I think are going to have a hard time competing, investing in these large technology systems. It is unfortunate, to some degree, perhaps, but I think that is going to drive consolidation in the industry, and that we are seeing that already.

Bob, this is Warren. A little color on that. As you know, Social Services side has grown by some 20-plus acquisitions over the years. And, with those acquisitions, we inherited a variety of technology platforms. And we have been in the process of consolidating those for several years.

Just to give you a sense of timing, we are in the final stages of making choices now about which technology platform we are going to be using. And that recommendation we made to the Board of Directors at their quarterly meeting in September. And so we are in the throes of the final stages right now of making choices around that, which we believe ultimately, on the EHR side and the handheld side, will give us competitive advantage as we move forward in the marketplace.

Great. Thank you very much, and keep up the good work, everyone. Thanks.

(Operator Instructions). Mitra Ramgopal, Sidoti.

Good morning. I just wanted to follow up on that. It seems like the investment spending as it relates to the technology platform will be a significant undertaking. Do you expect any disruption to normal course of the business as it relates to maybe holding off on acquisitions, et cetera, until you sort of get that in place?

This is Warren. Thank you for your question. We will have to see as we move forward what kind of disruption it will cause. However, in the process of planning for this, we would hope that we can mitigate and minimize that disruption as we move forward.

It is going to be a significant spend for us. We think it's important, but that spend also will be programmed over three to five years. It won't be all in one year, obviously. But we do have to make some commitments on the technology side, as Craig stated, in order to comply on the regulatory side.

So it's an important decision for us, and we are taking it very seriously, and we are spending a lot of time on it. We think we can mitigate the disruption.

Thanks. And then just a quick question again. You mentioned in light of the amended credit agreement, et cetera, it has given you more flexibility. Should we expect you to, as a result, be a little more aggressive on the acquisition front, or is this a question of, again, just waiting for the right opportunities?

Well, we think there are several opportunities are provided to us. One is the investment in technology. Two, we have an opportunity to pursue tuck-in acquisitions, which will expand our existing base by adding new programs and new client populations.

Three, it allows us to look at opportunities from a strategic perspective for new platforms as we see healthcare changing and as these healthcare trends become more obvious. So we look forward to that as well.

And as Craig and Herman have suggested, there are certainly lots of competitors out there, and we are actively looking at every opportunity that we can possibly see that will expand our market footprint and allow us to serve more patients.

So aggressive may be too strong a word, but we are certainly going to be very thoughtful in pursuing that. And we hope that there will be some things that we can announce before the end of the year.

Okay. Thank you very much.

Mike Petusky, Noble Financial.

6Good morning. Congratulations. I didn't hear -- forgive if you mentioned it, but I think Utah on the NET side was under protest. Was there any ever resolution on that award?

Yes, there was. The protest was denied, and as of last week, we did receive communication from the agency in Utah that we would begin to proceed to contract negotiation. And the hope is to have something in place towards the latter half of the year, first of the year -- latter half of this year, first of next year, to be up and operating.

So I wouldn't capture any real revenue from Utah. And, again, it's not a real big one, but not to capture any real revenue until 2014 -- beginning of 2014.

Okay. And then I guess looking at 2014, Mississippi, South Carolina and New Jersey, what are the actual term dates on those? Are those like second -- would those things change hands, if they did change hands, in the second half of the year? What are the terms on those?

New Jersey and Mississippi are both second half of the year, July 1. And South Carolina is going to be probably second quarter.

And, Herman, one more. What are approximately the aggregate revenues associated with those three pieces of business?

$200 million.

I'm sorry, $200 million or $300 million?

$200 million. I already have a problem with $200 million; don't make it out to be $300 million, please.

I just wanted to clarify. Thanks.

All right.

And then, on the Social Services side, is it a fair expectation, now that you guys have -- you've got the refinancing and you see opportunities, I mean, is it a fair expectation that you would expect to do a deal or two before year end, or is it -- or do you think it's less than 50-50 that you get anything done before year end?

Let me think about that one, Mike. I think we -- I think it's 50-50. I think we certainly have some that are in the pipeline much further along than we probably have had in some time. Let me put it that way.

Okay. All right. And then I guess one for Bob real quick. Did you say that you have taken the effective tax rate guidance down from like -- was it 42.5% and now you are essentially saying the midpoint is 41%? Is that right?

Yes. And I think the last-quarter call, we gave guidance around that of between 42% and 44%. That's my recollection.

Okay.

And we are basically kind of taking the midpoint of between 40% and 42%. As I mentioned, our effective tax rate for the first half of the year is at 40%.

Okay. And then as we look at 2014, is that still the expectation, that it would be more 40%, 41%, 42% as opposed to 43%, 44%?

It's hard to predict. I can tell you what the main driver of our effective tax rate is, other than federal income taxes. It is really the state taxes -- not a state, but state taxes. And that really is largely a function of the states in which we source our taxable revenue. And that has been shifting more to states that their logistic there has a significant presence.

So it really is going to depend, I think, almost on the -- sort of the balancing, if you will, or the rebalancing of taxable income sourcing between the Social Services and LogistiCare business units.

Okay. All right. Well, very good. Again, guys, great job the first half.

Thank you.

(Operator Instructions). Rick D'Auteuil, Columbia Management.

Good morning, guys. First question is for Craig. So remind me of your acquisition criteria, since you are getting more active. And then what are you seeing out there on pricing? I would guess most of these guys are looking to sell defensively, and that could be very opportunistic for you guys. I'd love to hear your thoughts on that.

Yes, I mean, I think, as we have talked about before and, you know, I have certainly talked about this, Rick, I think there is this balance we are trying to strike between this whole concept of the industry consolidating, which I believe it is, like probably no other time in the existence of this benefit. At the same time, there's probably companies through the natural lifecycle are kind of going away, if you will. Some of those are probably better opportunities than others.

And I think part of our criteria right now is to be able to evaluate, number one, the environment that we are in for some of these operations that look -- they may look defensive, but are they going out of business for reasons other than not wanting to make investments in the environment? Are they going to go away anyway? Is there a way to pick up market share through organic means? Or are we talking about operations that are very solid, good relationships with the state, have made a little bit of investment, they are not too far behind?

This is really our criteria right now in this environment, to make sure that we are picking the ones that have the best chance of success, and we are not just sort of picking the ones up that may be going out of business where have an organic opportunity anyway. Sounds kind of mean in this environment, but that is sort of our juggling act right now, which is partly why I think it has taken us some time to try to ferret through these individual markets -- these individual targets to make sure they are absolutely the right ones, they have potential, and they are not just sort of a fire sale because they are going out of business. And we have talked about that a little bit before.

Pricing-wise, I think pricing is -- I think it's pretty consistent with where we have been historically as far as multiples. I don't think we have seen anything too crazy above what we have historically been at this point, and hopefully lower than that, actually.

Just remind us, is that 5, 6 times EBITDA, or--?

Yes, I think we historically have been 5 to 6 multiple range for many of our deals we have done. Some of them have been at 4% -- or 4 times. So I think they are in those neighborhoods and potentially even less on some deals that we are looking at.

Okay. And then, size. I know you've said tuck-in. How big can something be and still be called a tuck-in?

I think it's $5 million to $10 million range. As I said on the last call, I consider a tuck-in something where we can create some efficiencies through our administrative infrastructure and we don't have to duplicate a structure within the acquisition. It's a relatively easy process to bring it in under the operations. But it can go from $5 million to $10 million, maybe a little bit more. (multiple speakers) to the left sometimes.

And that's revenues or purchase price?

Revenues.

Okay. Competition is -- I assume it isn't that deep for those size deals, right?

Not particularly. We have seen some private equity interest in some of these states recently, which is kind of interesting. That's the first time we have seen that. But I wouldn't call it substantial competition, though, at this point.

Okay. That's all I have on that side.

And then, Herman, so a couple of things. The wins from last year, are you seeing any issues or any significant issues in Texas, Georgia, New York City, as they have come up to speed? Or are they performing on plan?

No. We are very pleased with all of those contracts. Georgia is struck into different regions, and so some of the regions are a little more difficult, but we've made it up in the other regions. But New York and Texas are both good contracts. So we are pleased with the contracts we took on last year. And South Carolina has been a good contract as well.

You mentioned some of the rebids that are in your portfolio. Is there anything in the competitor universe that comes up for rebid next year?

Idaho, from what we hear, will be out to bid next year. And Iowa is a possibility. There are still some option years on Iowa. And, from what we hear, the state is trying to decide whether they are going to move forward on that or not.

I missed who you said was delaying decisions.

Rhode Island and North Carolina.

Okay.

That have been outstanding since the fall of 2012.

Okay. Any update -- I assume this quarter didn't capture the New Jersey makeup check. I think you, on last call, expected it in either Q2 or Q3. Is that still the case?

You assume wrong. We did collect it.

So it was in Q2?

It was in Q2.

Okay. I assume you are not willing to talk about its impact. And I guess it was all recognized, so that is all profit, right?

It was, but there were some one-time offsets, so it is not as big as you might expect in terms of the impact of the quarter. And, again, it was -- most of it was attributable to this year anyway, because it was payments for -- the retro payment for January, February, March, all the way through. So only a small part of it related to the prior year. And there were some offsets for some potential take-backs that we wanted to protect against. But it did hit in Q2, and we got all the cash.

Okay. Thank you. And then, New Jersey, on the rebid, is the expectation that comes out in one chunk, or -- I know you guys kind of won it in phases, starting with metro and then going more rural. Do you think it all gets bid as one package or is it likely to be multiple packages?

No. We expect it is going to come out as one. I mean, it has all been rolled into one contract now. Although we did pick up different populations in different elements of the state based on how we were performing and what we were doing over the years, it's now captured under one contract agreement. And we anticipate that they keep it that way as they will it out.

Okay. Thank you. Appreciate it. Bye.

Thank you, Rick.

Ladies and gentlemen, this concludes the question-and-answer session. I would now like to turn the call back over to Mr. Warren Rustand for closing remarks.

Thank you, again, for joining us on today's call. We continue to look forward to what we believe will be a good year for Providence. And we look forward to updating you after the third quarter. We have a strong management team that is highly focused, and we believe that will drive results as we go forward. Thank you again for your interest.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.