Ladies and gentlemen, thank you for standing by. Greetings, and welcome to the Providence Service Corporation's Second Quarter 2020 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded..

It is now my pleasure to introduce your host, Suzanne Smith, Chief Accounting Officer. Thank you. You may begin. .

Thank you, operator. Good morning, everyone, and thank you for joining the Providence Second Quarter 2020 Conference Call and Webcast. With me today from the company are Dan Greenleaf, President and Chief Executive Officer; and Kevin Dotts, our Chief Financial Officer..

During this call, members of the management team will be referencing the presentation that can be found on our investor website under the Event Calendar and in the current Form 8-K, which was furnished to the Securities and Exchange Commission this morning..

Before we get started, I would like to remind everyone that during the course of today's call, the company's management will make certain statements characterized as forward-looking statements under the Private Securities Litigation Reform Act.

Those statements involve risks, uncertainties and other factors, which may cause actual results or events to differ materially. Information regarding these factors is contained in today's press release and in the company's filings with the SEC..

We will also discuss certain non-GAAP financial measures in an effort to provide additional information to investors. A definition of these non-GAAP measures and reconciliation to the most comparable GAAP measures is included in our press release, investor presentation and our Form 8-K..

Finally, we have arranged for a replay of this call, which will be available approximately 1 hour after today's call on our website which is www.prscholdings.com..

This morning, Dan Greenleaf, our Chief Executive Officer, will begin with some opening remarks, after which Kevin Dotts, our Chief Financial Officer, will provide a more detailed discussion of our financial results. Then we will open the call for questions..

With that, I will turn the call over to Dan Greenleaf.

Dan?.

Thank you, Suzanne, and good morning, everyone, and thank you for joining us today..

This quarter, we made outstanding progress in our core initiatives to transform LogistiCare while continuing to prioritize the health, safety and well-being of our teammates, members and transportation partners during the ongoing COVID-19 pandemic..

Our second quarter EBITDA of $56.4 million exceeded the prior year comparable figure of $5.8 million, driven by operational improvements under our 6-pillar strategy, incremental contribution from the National MedTrans acquisition and lower utilization under our capitated contracts..

act on the voice of the customer, place the right people in the right seats, implement strategic technology enhancements, optimize our contact centers, rebrand and drive cultural change and accelerate transformational growth..

Regarding the voice of the customer. We've listened closely to members' needs during the pandemic. We are utilizing our network to help deliver food and necessities to food-insecure members, many of whom can't rely on public transportation due to restrictions and safety concerns surrounding COVID-19.

We are expanding our partnerships with a growing number of schools, food banks, faith-based organizations, municipalities and government entities..

For example, we recently collaborated with Philabundance and the Liberty Church Network to deliver more than 1,200 meals to residents in need in Philadelphia during the first 2 weeks of the partnership. We also joined forces with Miami-Dade County Public Schools, delivered more than 5,600 meals to date to vulnerable families in South Florida.

And we united with Friends in Action community -- and Community FoodBank of New Jersey, the latest of multiple partnerships in New Jersey, delivered more than 11,700 meals since mid-March.

The increase in ship volume for food delivery combined with the financial systems that we are providing transportation providers has helped sustain a healthy transportation network during COVID-19. .

In our core nonemergency medical transportation business, we also are paying careful attention to enacting on customer feedback and metrics, such as Net Promoter Scores, to improve the quality of our services.

For example, we use Net Promoter scores to evaluate our transportation providers and place those with inadequate marks on corrective action plans. And listening to our payers, we are hearing they want more information on social determinants of health and quality of life.

These are all areas we're working on, and we'll have more to share in future quarters..

Moving to the second pillar. We have made excellent headway placing the right people in the right seats.

Since Kathryn Stalmack, our General Counsel, and I joined LogistiCare in the latter part of 2019, the company has appointed Kenny Wilson as our Chief Operating Officer, Walt Meffert as our Chief Information Officer, Laurel Emory as our Senior VP of Human Resources and Jody Kepler as Chief Compliance Officer.

We have all worked together in some shape or form over the past decade. As a result, we have high level of trust, and that has increased the speed of our cultural and business transformation..

We have certainly been quick to tackle technology enhancements and contact center optimization, our third and fourth pillars. On August 1, we launched our front-end member technology platform in targeted markets. Its interface enables riders to track their rides via mobile app.

In addition, the enhancement has text messages and voicemail alerts to provide real-time status updates. Given approximately 30% of our calls are related to where is my ride, we anticipate that this platform will enhance the member experience..

In conjunction with our technology enhancements, we are laser focused on expanding our network digitization as part of our overall digital transformation strategy. Network digitization connects our transportation providers to our technology platforms in real time.

It is designed to limit the number of calls needed to transport a member to and from a medical appointment..

We're also in the process of implementing new and improved interactive voice response, workflow management and automated call distribution systems at all our contact centers, which we expect to be fully deployed in the fourth quarter. We believe this will optimize how our members and customers interact with our call centers.

In addition, we are driving a single repeatable model which minimizes waste and reduces variation while optimizing our transportation provider network..

Given the COVID-19 pandemic and to support our acquisition of National MedTrans, we have partnered with a business process outsourcing vendor that affords us additional flexibility of -- levels of flexibility and scale. This initiative, along with IVR, automated call distribution and workflow management, will enhance the overall member experience..

We are moving swiftly in the rebranding of our company as well, and I believe we will be in a position to announce a new name for our organization in the next 6 to 9 months. Again, we are propelling real change to our cultural -- culture, mission and vision and values, not just words on a wall and not just a new company name.

It's a good time to reset the organization with a single line culture and brand which will replace Providence, LogistiCare, Circulation and National MedTrans..

Regarding our 6 pillar, accelerating transformational growth, we are focused on improving quality of service and generating a stronger bond with our existing customers. We spent a lot of time in the last 3 or 4 months strengthening our customer partnerships.

We are also entering or exploring a variety of new areas that could meaningfully expand our service offerings while strengthening our payer partnerships..

In addition to the 6 pillars, we have demonstrated effective capital allocation highlighted recently by 2 accretive, highly strategic transactions in the second quarter. In May, we acquired National MedTrans for approximately $80 million.

Given our views that the acquired business generates gross margins in line with our current business, this deal is considerably attractive clearly on an economic basis. We believe the intrinsic value of National MedTrans could be even more important to us in the long run as we partner and work closely with UnitedHealthcare.

The migration of National MedTrans onto our platform has been seamless and on plan, and we expect to migrate all of the contracts over by the end of October..

In June, we announced and completed the initial conversion of 700,000 -- 700,384,240 shares (sic) [ 738,240 shares ] of Providence A convertible stock into cash totaling approximately $80.7 million plus an approximately 925,600 shares of Providence common stock.

The conversion of our preferred stock simplifies our capital structure and creates alignment among our shareholders..

Returning to the industry backdrop. While we can't predict with precision or certainty the near-term impact of COVID-19 on our business, Medicaid rolls appear to be growing 7% to 10%.

Longer term, we expect to benefit from an expanding Medicare Advantage market and increasing shift in health care wave from high-cost institutional settings, and aging population and a greater emphasis on preventative care..

Transportation to medical appointments and pharmacies is one of the fastest growing supplemental benefits within Medicare Advantage. According to MedPAC, the total number of Medicare-eligible beneficiaries is expected to increase from roughly 59 million in 2018 to over 80 million by 2030.

The National MedTrans acquisition brought us approximately $50 million of Medicare Advantage revenue. And through our partnership with payers, we believe we can capitalize on an overall market that is poised to grow from an estimated $400 million today to as much as $4 billion in the future..

Given all the internal and external opportunities we are executing upon, we are fortunate to have an asset-light business model with robust cash flow and a strong balance sheet, which enables us to invest in, lead and pioneer the industry. Our balance sheet also enables us to pursue opportunistic acquisitions that can create additional value..

In closing, an exceptional amount of positive change has taken place during my first 2 quarters with LogistiCare, and I expect much more to come. Given the uncertainties surrounding COVID-19, we will not be providing formal guidance this quarter.

Directionally, as I mentioned at the start of the call, we anticipate an increase in utilization during the second half, which has been echoed by some of the leading payers in the industry..

We also see the potential for higher sequential unit costs in the third and fourth quarter given the changes we are making to transport patients safely to treatments in light of COVID-19. That said, a material component of our adjusted EBITDA improvement this quarter came from durable operational improvements and cost containment initiatives..

We continue to work diligently on our operational strategy while our teammates and transportation providers are working collaboratively to meet the nonemergency medical transportation needs of members during these unprecedented times.

While none of these could have anticipated -- while none of us could have anticipated COVID-19, I'm extremely proud of our teammates' dedication and commitment during the pandemic. In instances we detected positive COVID-19 cases at our contact centers, we have been able to quickly mobilize resources from one location to another.

This is another advantage of our scale..

Finally, before I turn it over to Kevin, I'd like to acknowledge 2 new analysts who've initiated coverage of Providence this quarter; Mike Petusky of Barrington Research and Brooks O'Neil of Lake Street capital. We truly appreciate their support as we continue on our voice to transform LogistiCare in the industry..

Now I will turn the call over to Kevin Dotts, our Chief Financial Officer. .

Thanks, Dan. Our second quarter revenue totaled $282.3 million compared to $363.9 million in the prior year period, primarily reflecting lower truck volume across our book of business due to the COVID-19 pandemic, partially offset by higher membership and incremental revenue from National MedTrans, which we acquired on May 7, 2020..

Moving to service expense. Our gross margin, defined as revenue less purchased services, was 46.3% of revenue in the second quarter of 2020 compared to 18.3% in the second quarter of 2019. The significant improvement reflects lower purchase transportation cost due to lower utilization across multiple contracts as a result of the COVID-19 endemic.

We anticipate that gross margin will decline in the second half of the year, commensurate with an expected increase in utilization..

Our adjusted operating expense, defined as all other expenses excluding purchased services and after adjusting for add-backs, was 26.3% of revenue in the second quarter of 2020 versus 16.7% in the second quarter of 2019.

The increase in spend was primarily attributable to investments in our team, processes and technology, cash settled equity awards of $6.3 million and National MedTrans transition cost of $3.8 million, offset by lower contact center and other operating expenses driven by our 6 pillar operational strategy..

In the second quarter of 2020, our adjusted EBITDA totaled $56.4 million and our adjusted net income equaled $38 million, or $2.53 per diluted share..

Moving to our cash flow statement. Cash flow provided by operations in the second quarter of 2020 was $108.4 million.

Our strong cash flow allowed us to pay off borrowings under our revolving credit facility and fund the convertible preferred transaction payment, which totaled approximately $82.8 million after transaction expenses, while cash used in investing activities totaled $78.4 million, primarily related to the net outlay for our acquisition of National MedTrans and approximately $800,000 of capital expenditures..

Our above-average variance this quarter between adjusted EBITDA and operating cash flow was driven by an increase in potential rebates related to profit corridor and reconciliation contracts..

I'd like to remind everyone that we expect to collect $27 million in the third quarter of 2020 related to the carryback of net operating losses. However, we will have higher taxes payable going forward due to the elimination of our ability to carry our NOLs forward, as reflected in our current tax rate this quarter in the high 20s..

Moving to Matrix. For the second quarter of 2020, Providence recorded a gain of $4.4 million related to the Matrix equity investment. On a stand-alone basis, Matrix generated revenue of $90.7 million and adjusted EBITDA of $32.6 million, both up from second quarter of 2019..

Matrix was positively impacted by its launch of a new Employee Health and Wellness product developed for companies maintaining critical operations during COVID-19. Matrix quickly rolled out this new offering by leveraging its national clinic staff and fleet of mobile units..

As for Matrix's home assessment business, due to the pandemic, Matrix's payer customers paused in-home visits for a period during the second quarter, which adversely impacted home product volume. In an effort to mitigate this impact, Matrix implemented a new telehealth alternative, partially offsetting this -- the pause.

At the end of the quarter, several of Matrix's payer customers began resuming in-home visits..

As a reminder, we record Matrix's value on a book basis, which may undervalue our investment in Matrix. As of June 30, Matrix had stand-alone net debt of $285.2 million and our ownership interest was 43.6%..

This concludes our prepared remarks. With that, operator, please open the call for questions. .

[Operator Instructions] Our first question comes from the line of Bob Labick with CJS Securities. .

Congratulations on some remarkable results in an obviously trying time. .

Thank you, Bob. Nice to hear from you. .

Yes. Okay. Yes. Absolutely, and I am super excited for you. I wanted to start -- you talked a little bit about the utilization, obviously, trending higher than the kind of the brunt of the pandemic and the shutdowns in Q2.

Can you give us a sense, though, as we look at the second half, do you expect -- where do you expect utilization versus pre-COVID levels? Are we all the way back to pre-COVID or is it somewhere in between, obviously, lows of this quarter and pre-COVID? How should we think about the normalization over the next few quarters or months?.

Yes. I think the normalization, Bob, is going to be hard to determine. I would say it will be incremental increases. That's kind of, I think, our -- where -- as we create our models, we are modeling for more incremental increases than necessarily back to normalized utilization or more historical utilization rates. .

Got it. Okay. That makes sense. And part of the improvements that you guys have had and even starting in Q1 pre-COVID but obviously still benefiting from is you worked really hard from the end of last year through now in improving your transportation network.

Given the upheaval and everything else, can you describe the health of the transportation network now versus maybe a year ago and how it's looking going forward?.

Yes. I think we've done a really good job of keeping our transportation network engaged. And I think, as I described, some of the initiatives we've been driving with food delivery is an example of that, Bob, and we'll look to continue to expand that. We've also done some things in the area of bridge loans.

We've also done some things in the areas of insurance that we -- I think we've really, I think, done a pretty remarkable job of putting our best foot forward because we understand how valuable that network is, particularly the local providers, because one thing I will say is they've gone above and beyond during the COVID crisis.

We hear about these national companies that are struggling during the COVID crisis, but our local transportation network people have -- again, I think, have gone beyond the call of duty. And obviously, this is a network that we've built up over 20 years, and I think there's a high degree of loyalty between both parties.

And I think when we do things like bridge loans, we do things like looking to -- for ways to expand our business so we can keep them working, as we look for ways that we can provide financial assistance to them, it only strengthens that relationship and only increases the health of the network..

The last thing I will say is we've spent a lot of time during the COVID crisis focusing on the quality of our network. And one of the underutilized assets we have is this -- these Net Promoter Scores, Bob.

And we've been -- this is something we've been tracking on our providers for years, but we haven't used them to the extent that we are using them now.

And so we are doing valuations of our network to see if they are matching the kind of quality that we need to be able to say that we have when we're working with payers and states and other people like that.

So this has also been an opportunity for us to evaluate our network, particularly in the area of quality, and I think that's been something that's come out of this, too, which, again, I think, only bodes well for our members. .

Got it. Okay. Great. And then you touched on briefly Medicaid -- potential Medicaid enrollment trends, I guess. And obviously, this isn't a normal recession given the speed in which it came about. I think you mentioned something along the lines of 7% to 10% expected Medicaid enrollment growth.

Just curious if that was seen in the current quarter, if that's what we should expect to see by the end of this year, kind of Q4 or whatever going into next year? How should we think about that growth? Has it already been here or... .

I think I'd look at it going forward -- I think -- sorry, Bob, I didn't mean to interrupt you. Yes, I'll let you finish. .

Oh, no, no.

That was -- it was just -- really just trying to understand, was that -- did you benefit from it this quarter? Or is that more kind of on the come, so to speak?.

That's going forward. .

Got it. .

We've seen an increase in our rolls of about 1 million already year-to-date, Bob, but we would expect that increase, 7% to 10%, to take place the latter part of this year. .

Wow. Okay. Great. And then last one for me, I promise, I'll get back in queue. But obviously, you had unbelievable cash flow. And as you said, you invested $160 million in accretive uses and you still have net cash with more coming.

So could you just maybe help us -- talk about your priorities for cash and free cash flow going forward?.

Yes. I mean I think -- and I'll turn it over to Kevin for the -- I mean we are in a very good position, no question, Bob, I mean, with no debt. We've already -- we've addressed the preferred. We've addressed a pretty important acquisition in the space where we've combined the #1 and #3 companies together.

We've also, I think, did a very nice job, as you know, in the first quarter around our share buyback program, which, again, we bought most of those shares in the $40 to $50 range. So we think, again, that's another area, I think, we've done a really good job in..

I mean listen, we're going to get after this. I mean we are doubling down on our technology investments. I've already shared with you what we're doing in the area of digital transformation, IVR, workflow management, automatic call distribution, also with partners in the area of business process outsourcing.

And even with a partner like we have with United, who is also willing to make some level of investments, I -- again, I think we're in an incredibly unique position to truly transform this industry and to really transform, in many respects, the member experience..

And what I would also share with you is that I've got the team around me to do it. This transformation starts at the top in some shape or form. And the people that we put into these seats are the exact people who should be driving these transformations going forward. So I'll also say that..

Now the other thing I would also say, Bob, is, listen, we're opportunistic. The National MedTrans is an example of an opportunistic acquisition. And we're going to be looking for those types of things. And again, we're in a very -- I think we're in a very -- I think we're in a very strong position to do these types of things.

And again, we're thinking out of the box on this, too, Bob. I'm not going to disclose what that might look like, but I can tell you it might not be in the middle of the fairway, as you might think. But I think at the end of the day, we think that it will improve the member experience.

And we're spending a lot of time focusing on what that's going to be like in the future and what that should like in the future. And again, I think that we're in a very unique position to really set the bar in that area..

Kevin?.

Yes. Bob, the only thing I would add to the cash flow discussion is, as you'll see in the investor presentation we've put out there, obviously the $65 million of working capital change, and that was a big driver of what happened in the quarter, that $65 million is up from literally just under $700,000 in the first quarter..

So the $65 million really kind of relates to the idea that we have these risk corridor contracts that kind of toggle on basically our margin rates. And so we reduced revenue from an accounting perspective on those.

At some point, that cash, if we don't use it for other means such as food deliveries and things like that, may be paid back to the actual payers themselves..

The other part of it, it toggles on these recon contracts, which is really driven off of the number of trips, so -- and the cost of those trips. So what we are also talking about is a lot of that working capital will be paid back over time, but we'll -- as -- it is really volume dependent on a go-forward basis.

And from right now, we're seeing that go all the way from, let's say, third quarter paybacks all the way through out into 2022. .

Okay. Well, great. I appreciate that. And congratulations, obviously, on such a strong quarter and outlook. .

Yes. Thank you, Bob. .

Thanks. .

Appreciate all your support. .

Our next question comes from the line of Mike Petusky with Barrington Research. .

Remarkable quarter. I guess, Dan, I'd love for you to sort of -- and I understand every state entity and MCO is a little bit different.

But just how are you guys approaching sort of the management of those relationships given sort of the dramatic shift in utilization? I understand that it's likely to begin to return to more normalized levels but still probably going to be slow for a while. How are you -- obviously, what -- you talked about at the top food delivery, et cetera.

But can you just talk about how discussions with your customers are going along those lines?.

Yes. I think for the most part, Mike, they're positive. I mean they're seeing an uplift in their performance as well. So I saw the Anthem results. I saw the UnitedHealthcare results. I saw the Centene results and the CVS-Aetna results, and they're benefiting from this as well.

So -- and obviously, when they benefit from things, I think what they would share with you is they're making reinvestments back in the business, and that's exactly what we're doing.

And we're viewing them as a partner, whether it be in the areas as I discussed, in the areas of social determinants of health or quality of life or anything in the areas of member experience and how can we make that member experience more seamless, more fluid, more interactive. And those are all things that I know they value.

I think some of the other things that we're working hard on is making sure that the quality of reports, information that we're sharing with them is accurate and timely. And we've got a significant effort in that front. And in fact, we have assigned analysts to specific large payer accounts so that they have a go-to person on that front..

I will also share with you, this is one of the blessings of the people I get to work with here, is that most of us have a significant amount of experience in the payer marketplace. And we're actively involved. And it could be Kathryn or Kenny or myself or Walt or Jody.

I mean we are all actively involved in our payer relationships, and those go up and down the chain. And we're on the weekly calls and so I think -- I know because we're receiving these notes from a variety of payers that they have noticed a significant difference in how LogistiCare goes to market and how we handle things.

And they understand because we're talking to them about our 6 pillars as well. And they're seeing the kind of commitment we're making to the member and the member experience..

And I think, obviously, ultimately, the proof is in the pudding. But I think they're really seeing that we're distinguishing ourselves from the competition that we're making the investments because we can just like they are. And we feel like together, we can create an extraordinary experience for our members. .

Perfect.

So speaking of investments, that sort of leads into my next question, can you talk specifically in terms of second half what you hope to sort of roll out to your end user customers and sort of the cadence of that, if you would?.

Yes. I mean we're going to -- the IVR, the workflow management, the automatic call distribution will all be fully implemented in our contact centers by the end of the fourth quarter.

Our BPO is already in place and operational right now, and so we'll continue to use them to help us in the area of flexibility and scale, particularly during the COVID-19 crisis.

And I can't emphasize enough, our scale and size has really, I think, separated us from much of our competition because, again, if you do a contract with a smaller company in a state and they have a COVID crisis in their one center, you're out of business. And this is real.

And for these smaller companies who don't have multi-sites or multi-states, I think they put the patient and member at significant risk.

And so that's something, again, that as we look to make our investments in contact centers, one of the things, along with the BPO, is we're looking to increase the flexibility as well as the scale as well as the member experience. So that's -- those are all in flight..

As we talked about, where is my ride app? With the texting, with the tracking of the automobile, those initiatives have been launched August 1. And that's all part of our broader strategy around network digitization. And we are going to lead the way in network digitization.

And we've already formed some fairly significant strategic partnerships that I'm not in a position to mention, but those are all well underway, Mike. And I feel really good about the progress we're making on that front..

And again, it all comes back to the member experience, is like how do we enhance the member experience? How do we make ourselves easier to do business with? And so those are the items that I think are going to make the biggest difference here..

And then ultimately, as we digitize the flow of information to and from our transportation providers as well as to our payers and to our referral partners, and again we think we will be very much in the center of that ecosystem given the changes that we're driving within the industry as well as within our organization. .

Okay. Great. Just one real quick one, a follow-up on the answer you just gave.

So if I'm an end user customer of yours, am I -- how did I become aware or have I become yet aware of the where is my app because I know -- where is my ride app because I know you guys get a lot of calls simply with end user customers saying, hey, where's the van, where's the car, et cetera.

I think how -- am I -- like is that something that all end user customers have become aware of within the past week or is that sort of a slower rollout? Can you just speak to that?.

Yes. So what we'll do is -- I mean we're going to run our proof of concept. So we've got 30% of our network digitized already. So we're going to -- we will launch these pilots. And once the pilots have been launched and they've demonstrated the proof of concept, then it's going to be -- we are going to roll this out as fast as we possibly can.

And I don't -- again, I don't think these pilots are going to take a long time to figure out the proof of concept, but there are some moving parts. And once the proof of concept is locked and loaded, it's all systems go. .

Our next question comes from Brooks O'Neil with Lake Street Capital Markets. .

It's nice to be onboard here, but it's been a long time since I whiffed so badly on my first quarter out of the chute. I guess the good news is you blew me away. So congratulations. .

Thank you, Brooks. .

Yes. So I have a sort of follow-up question for Kevin. He was talking about the contracts that adjust, and I'm just hoping he can help all of us understand a little bit more about the nature of those contracts, sort of maybe what percentage of contracts adjust.

And obviously, they're all different, but sort of broadly, what's the nature of the adjustment mechanism so we could try to think about it a little bit better going forward?.

So yes, it's a bit of an accounting thing, right, Brooks? So we have the great corridor contracts. Effectively, think of them as kind of looking at a margin as agreed to with the actual payer.

And so when we see that we are with the lower utilization, seeing that we have lower volume, then inherently we have to record effectively a, call it, a revenue rebate. So we accrue for that. And so that's why you see the reduction in revenues. And as we do that, that creates the working capital flow that I mentioned earlier, the $65 million.

And at some point, theoretically, that cash then gets paid back to the payers..

Now if volume comes back, utilization goes up, then it could flip the other way. Okay. From a recon contract, which is the other large grouping, you basically have contracts that are, call it -- think of it more on a cost-plus basis. So when you have higher volume, then you're going to actually have those -- again, those payments back.

Right now because the volume is low, again, we record the fact that we're going to have a payback to the actual payer themselves. .

And could you say what percent of the contracts -- you can group them together if it is your -- go ahead. .

So Brooks, I mean we'll say -- we're 85% capitated. We're 15% transactional. And I think that's probably as far as we can go on that. And again, it's really contract by contract that we have this dynamic. .

Yes. Okay. I get all that. So let's move on. And obviously, a tremendous rebound at Matrix. I know it's the minority -- well, you don't have a controlled investment in that operation right now.

But can you say anything about what you see as the outlook from a Providence perspective for Matrix over the next year or 2?.

Well, I'll say this. I'm certainly happy with the improved performance. I mean I think that's something that I think the investors have been looking for, for some time here. And it's really good to see what they've done and how they pivoted and the improvements they made.

And our sense is that these improvements should be sustainable and that they're in a much better position than they were just a few quarters ago. So my hats off to what their management team has done and how they position the company. And I think that -- I think it remains an attractive part of our company overall. We own approximately 43% of it..

And again, I can't speak to what Frazier or the private equity firm will ultimately do with it. But obviously, as it becomes more valuable or as they continue to perform at a much higher level than they have historically, then obviously that's going to drive additional value for whatever transaction might occur down the road here. .

Sure. Okay. I got that. And then obviously, small contribution from MedTrans acquisition this quarter.

What -- how should we be thinking about the contribution in Q3 when they'll be in there for the whole quarter and beyond?.

Yes. So it was small. But right now, Brooks, as we -- and again, not to get off of the accounting leaf, right, we are doing this on a net revenue basis because effectively UnitedHealthcare is still -- has a direct line of relationship as those contracts poured over to us. So it will go to a direct revenue or a larger revenue basis.

That transition will finish kind of late October, early November. So it will still be, I would say, from a revenue perspective, somewhat muted for an annualized basis. But next year, you'll see a much larger, fulsome total revenue basis. .

And just, Brooks, I mean a couple of things about that contract worth highlighting. 85% capitated just like our businesses. So they're -- we're seeing some of the advantages of that. And then secondly, well, we picked up $50 million in Medicare Advantage. And again, I couldn't think of a better partner in the area of Medicare Advantage than United.

And we're going to work very closely with them in terms of expanding that business. And then there's a couple of other lines of business that we're actively involved with them in, too, that we think will obviously broaden our offering as well. And again, they've been an incredible partner for us so far. .

That's great. And just following up on that, Dan.

I assume you see opportunities with many payers for Medicare Advantage since it's pretty broadly utilized across the health insurance marketplace and growing fast?.

Yes, we do, Brooks. And again, I think we've been the leader in this space to date, and we think it's a significant opportunity for us. And again, I think we're very well positioned to advantage ourselves to the trends in this marketplace. .

Yes.

And just as you think about that business, the elderly population as opposed to the disadvantaged population that's in your core marketplace, are the contracts more advantageous to you guys in that Medicare Advantage market? Or is it more or less the same fundamental structure?.

It's in line with what we've seen or within range of what we see in our contracts with the Medicaid patients. .

Okay. Cool. Thanks a lot for the help here. .

Yes. Thank you, Brooks. Thanks for all your support to you and Mike. Really appreciate you guys coming on board and means a lot. And obviously, Bob has been a long-time supporter, but we appreciate all you guys. .

We have reached the end of our question-and-answer session, so I would like to turn the floor back over to Mr. Greenleaf for any additional closing comments. .

Yes. Thank you all for participating on our call this morning. Well, we won't be on the road for investor conferences in near term given COVID-19. We will be participating in the Barrington virtual conference on September 9, Lake Street Capital virtual annual best ideas conference on September 17, and we'll remain accessible for one-on-one calls.

Please reach out to our Investor Relations firm, The Equity Group, if you are interested in scheduling a follow-up call..

We look forward to reporting back to you in November when we release our third quarter 2020 financial results. Stay safe and have a wonderful day. .

Ladies and gentlemen, this does conclude today's teleconference. Once again, we thank you for your participation, and you may disconnect your lines at this time..