10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2017

OR

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

For the transition period from to

Commission file number: 001-36623

CIVITAS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	65-1309110
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
313 Congress Street, 6th Floor Boston, Massachusetts 02210	(617) 790-4800
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o  (Do not check if smaller reporting company)	Smaller reporting company	o
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

As of July 31, 2017, there were 37,362,925 shares outstanding of the registrant’s common stock, $0.01 par value.

TABLE OF CONTENTS

Civitas Solutions, Inc.

		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2017 and September 30, 2016	3
	Condensed Consolidated Statements of Income for the three and nine months ended June 30, 2017 and 2016	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2017 and 2016	5
	Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended June 30, 2017	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2017 and 2016	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	43
PART II. OTHER INFORMATION		44
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	46
Signatures		47

2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Civitas Solutions, Inc.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

(Unaudited)

	June 30, 2017			September 30, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	26,103		$	50,683
Restricted cash	295			1,046
Accounts receivable, net of allowances of $14,794 and $11,863 at June 30, 2017 and September 30, 2016	159,154			155,767
Deferred tax assets, net	15,956			18,013
Prepaid expenses and other current assets	26,166			20,841
Total current assets	227,674			246,350
Property and equipment, net	179,717			175,008
Intangible assets, net	300,415			302,229
Goodwill	288,590			273,660
Restricted cash	50,000			50,000
Other assets	34,709			38,911
Total assets	$	1,081,105		$	1,086,158
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	30,387		$	32,131
Accrued payroll and related costs	72,880			78,082
Other accrued liabilities	43,142			51,680
Obligations under capital lease, current	592			549
Current portion of long-term debt	6,554			6,554
Total current liabilities	153,555			168,996
Other long-term liabilities	78,284			81,466
Deferred tax liabilities, net	51,836			59,686
Obligations under capital lease, less current portion	4,562			5,012
Long-term debt, less current portion	621,024			625,408
Commitments and Contingencies (Note 13)
Stockholders’ equity
Common stock, $0.01 par value; 350,000,000 shares authorized; and 37,331,714 and 37,214,758 shares issued and outstanding at June 30, 2017 and September 30, 2016, respectively	373			372
Additional paid-in capital	300,474			294,295
Accumulated loss on derivatives, net of taxes of $344 and $2,418 at June 30, 2017 and September 30, 2016, respectively	(506		)	(3,561		)
Accumulated deficit	(128,497		)	(145,516		)
Total stockholders’ equity	171,844			145,590
Total liabilities and stockholders’ equity	$	1,081,105		$	1,086,158

See accompanying notes to these condensed consolidated financial statements.

3

Civitas Solutions, Inc.

Condensed Consolidated Statements of Income

(Amounts in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Net revenue	$	372,345		$	353,963		$	1,094,138		$	1,045,393
Cost of revenue	292,498			274,569			861,992			811,385
Operating expenses:
General and administrative	40,413			42,988			123,992			132,614
Depreciation and amortization	19,161			18,634			56,146			54,952
Total operating expenses	59,574			61,622			180,138			187,566
Income from operations	20,273			17,772			52,008			46,442
Other income (expense):
Other income (expense), net	(149		)	(140		)	762			(1,098		)
Interest expense	(8,339		)	(8,493		)	(25,117		)	(25,530		)
Income from continuing operations before income taxes	11,785			9,139			27,653			19,814
Provision for income taxes	4,424			4,296			10,634			13,032
Income from continuing operations	7,361			4,843			17,019			6,782
Loss from discontinued operations, net of tax	—			(27		)	—			(255		)
Net income	$	7,361		$	4,816		$	17,019		$	6,527
Income per common share, basic
Income from continuing operations	$	0.20		$	0.13		$	0.46		$	0.18
Loss from discontinued operations, net of tax	$	—		$	—		$	—		$	—
Net income	$	0.20		$	0.13		$	0.46		$	0.18
Income per common share, diluted
Income from continuing operations	$	0.20		$	0.13		$	0.45		$	0.18
Loss from discontinued operations, net of tax	$	—		$	—		$	—		$	—
Net income	$	0.20		$	0.13		$	0.45		$	0.18
Weighted average number of common shares outstanding, basic	37,323,458			37,108,486			37,278,760			37,101,968
Weighted average number of common shares outstanding, diluted	37,495,488			37,252,344			37,413,264			37,247,784

See accompanying notes to these condensed consolidated financial statements.

4

Civitas Solutions, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Amounts in thousands)

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017		2016
Net income	$	7,361		$	4,816		$	17,019	$	6,527
Other comprehensive income (loss), net of tax:
Gain (loss) on derivative instrument classified as cash flow hedge, including a tax effect of ($339) and $2,074 for the three and nine months ended June 30, 2017, respectively, and ($595) and ($1,699) for the three and nine months ended June 30, 2016	(499		)	(877		)	3,055		(2,503		)
Comprehensive income	$	6,862		$	3,939		$	20,074	$	4,024

See accompanying notes to these condensed consolidated financial statements.

5

Civitas Solutions, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Amounts in thousands, except share amounts)

(Unaudited)

	Common Stock			Additional Paid-in Capital			Accumulated Income (Loss) on Derivatives			Accumulated Deficit			Total Stockholders' Equity
	Shares	Amount
Balance at September 30, 2016	37,214,758	$	372	$	294,295		$	(3,561	)	$	(145,516	)	$	145,590
Issuance of common stock under employee incentive plans, net of shares surrendered	116,956	1		(79		)	—			—			(78		)
Stock-based compensation	—	—		6,596			—			—			6,596
Tax shortfall from stock-based compensation awards	—	—		(338		)	—			—			(338		)
Other comprehensive income, net of tax	—	—		—			3,055			—			3,055
Net income	—	—		—			—			17,019			17,019
Balance at June 30, 2017	37,331,714	$	373	$	300,474		$	(506	)	$	(128,497	)	$	171,844

See accompanying notes to these condensed consolidated financial statements.

6

Civitas Solutions, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

	Nine Months Ended June 30,
	2017			2016
Operating activities:
Net income	$	17,019		$	6,527
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for accounts receivable allowances	13,940			10,834
Depreciation and amortization	56,146			54,985
Amortization original issue discount and financing costs	1,407			1,379
Stock-based compensation	6,596			15,200
Deferred income taxes	(8,205		)	2,476
Loss on disposal of assets	327			722
Gain from company owned life insurance policy	(501		)	—
Change in fair value of contingent consideration	194			(556		)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(17,327		)	(27,356		)
Other assets	8,280			(7,393		)
Accounts payable	(1,896		)	3,881
Accrued payroll and related costs	(5,202		)	(4,156		)
Other accrued liabilities	2,424			7,462
Other long-term liabilities	(3,182		)	(3,364		)
Net cash provided by operating activities	70,020			60,641
Investing activities:
Acquisition of businesses, net of cash acquired	(42,432		)	(44,481		)
Purchases of property and equipment	(32,981		)	(31,655		)
Deposit on acquisition	(9,451		)	—
Change in restricted cash	751			(121		)
Proceeds from company owned life insurance policy	738			—
Proceeds from sale of assets	1,164			1,219
Net cash used in investing activities	(82,211		)	(75,038		)
Financing activities:
Repayments of long-term debt	(4,916		)	(4,916		)
Proceeds from borrowings under senior revolver	4,100			45,900
Repayments of borrowings under senior revolver	(4,100		)	(45,900		)
Repayments of capital lease obligations	(407		)	(371		)
Cash paid for earn-out obligations	(6,109		)	(3,565		)
Payments of deferred financing costs	(878		)	—
Issuance of common stock under employee equity incentive plans	357			142
Tax windfall from stock-based compensation	—			745
Taxes paid related to net share settlements of equity awards	(436		)	(82		)
Net cash used in financing activities	(12,389		)	(8,047		)
Net decrease in cash and cash equivalents	(24,580		)	(22,444		)
Cash and cash equivalents at beginning of period	50,683			41,690
Cash and cash equivalents at end of period	$	26,103		$	19,246
Supplemental disclosure of cash flow information
Cash paid for interest	$	23,261		$	23,664
Cash paid for income taxes	$	13,493		$	11,993
Supplemental disclosure of non-cash activities:
Accrued property and equipment	$	946		$	1,166
Tenant reimbursements for leasehold improvements	$	—		$	2,130

See accompanying notes to these condensed consolidated financial statements.

7

Civitas Solutions, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2017

(Unaudited)

1. Business Overview

Civitas Solutions, Inc. ("Civitas"), through its wholly-owned subsidiaries (collectively, the "Company"), is the leading provider of home- and community-based health and human services to must-serve individuals with a range of intellectual, developmental, behavioral and/or medically complex disabilities and challenges. Since the Company’s founding in 1980, the Company has evolved into a diversified national network providing an array of high-quality services and care in large, growing and highly-fragmented markets. The Company currently provides services to individuals with intellectual and/or developmental disabilities (“I/DD”), individuals with catastrophic injuries and illnesses, particularly acquired brain injury (“ABI”), youth with emotional, behavioral and/or medically complex challenges, or at-risk youth (“ARY”), and elders in need of day health services to support their independence, or adult day health (“ADH”). Since the Company’s founding in 1980, the Company’s operations have grown to 36 states. The Company provides residential services to approximately 11,800 clients and more than 18,600 clients receive periodic services from the Company in non-residential settings.

The Company designs customized service plans to meet the individual needs of its clients, which it delivers in home- and community-based settings. Most of the Company’s service plans involve residential support, typically in small group homes, host home settings, or specialized community facilities, designed to improve an individual's quality of life and to promote independence and participation in community life. Other services offered include supported living, day and transitional programs, vocational services, case management, family-based and outpatient therapeutic services, post-acute treatment and neurorehabilitation, neurobehavioral rehabilitation and physical, occupational and speech therapies, among others. The Company’s customized service plans offer its clients as well as the payors of these services, an attractive, cost-effective alternative to health and human services provided in large, institutional settings.

Civitas is the parent of a consolidated group of subsidiaries that market their services under The MENTOR Network tradename. Prior to October 1, 2015, Civitas was a wholly-owned subsidiary of NMH Investment, LLC (“NMH Investment”), which was formed in connection with the acquisition of our business by affiliates of Vestar Capital Partners (“Vestar”) in 2006. The equity interests of NMH Investment were owned by Vestar and certain executive officers, directors and other members of management. On October 1, 2015, in connection with an underwritten secondary offering, NMH Investment distributed all of the 25,250,000 shares of common stock of Civitas it held to its existing members in accordance with their respective membership interests. NMH Holdings, LLC ("NMHH") is a wholly-owned subsidiary of Civitas and National Mentor Holdings, Inc. (“NMHI”) is a wholly-owned subsidiary of NMHH. The financial results of Civitas are primarily composed of the financial results of NMHI and its subsidiaries on a consolidated basis.

2. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, which is on file with the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring adjustments, necessary to present fairly the financial statements in accordance with GAAP. Intercompany balances and transactions between the Company and its subsidiaries have been eliminated in consolidation. Operating results for the three and nine months ended June 30, 2017 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

8

Effective October 1, 2016, the Company completed changes to its organizational structure that resulted from a change in how the Company manages its business, allocates resources and measures performance. As a result, the Company has revised its reportable segments to reflect how management currently reviews financial information and makes operating decisions. Refer to Note 10, “Segment Information” for additional information on the changes in reportable segments.  All prior period amounts have been adjusted to reflect the changes in reportable segments.

On October 1, 2016, the Company adopted ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs and ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. As a result of the retrospective adoption of this standard, the Company recast its balance sheet presentation to reflect $5.9 million of deferred financing costs as of September 30, 2016 as a direct deduction to the carrying amount of its long-term debt. Prior to the adoption these costs were included within Other Assets.

3. Recent Accounting Pronouncements

Revenue from Contracts with Customers— In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers Topic 606 (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

Subsequent to issuing ASU No. 2014-09, the FASB issued the following amendments concerning the adoption and clarification of ASU No. 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard for the Company from October 1, 2017 to October 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which further clarifies the implementation guidance on principal versus agent considerations. The new guidance requires either a retrospective or a modified retrospective approach to adoption. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the identification of the performance obligations and licensing implementation guidance, while retaining the related principals of those areas. In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. In December 2016, the FASB issued ASU 2016-20 Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements, which provides corrections or improvements to certain aspects of the guidance issued in Update 2014-09. The Company is evaluating the method of adoption and the potential impact that these ASUs will have on our financial position, results of operations, cash flows, and liquidity.

Income Taxes— In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new standard requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The amendments in this update apply to all entities that present a classified statement of financial position. The Company is planning to adopt this standard as of July 1, 2017. As of June 30, 2017 and September 30, 2016, the Company had current deferred tax assets, net of current deferred tax liabilities, of $16.0 million and $18.0 million, respectively.

Leases— In February 2016, the FASB issued ASU No. 2016-02—Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The standard is to be applied using a modified retrospective approach and will be effective for the Company on October 1, 2019. The adoption of this standard is expected to have a material impact on the Company's financial position. As of September 30, 2016, the Company had gross operating lease commitments of approximately $284.1 million. Upon adoption, a substantial portion of these lease commitments will be recorded at their net present value as a right of use asset and a lease obligation.

9

Stock Compensation— In March 2016, the FASB issued ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard will be effective for the Company on October 1, 2017. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

Statement of Cash Flows— In August 2016, the FASB issued ASU No. 2016-15—Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new standard will be effective for the Company on October 1, 2018. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Statement of Cash Flows— In November 2016, the FASB issued ASU No. 2016-18—Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard will be effective for the Company on October 1, 2018. As of June 30, 2017 and September 30, 2016, the Company had total restricted cash amounts of $50.3 million and $51.0 million, respectively. The Company is currently evaluating the method and timing of the adoption of this standard.

Business Combinations— In January 2017, the FASB issued ASU No. 2017-01—Business Combinations (Topic 805): Clarifying the Definition of a Business. The update provides guidance to determine when an integrated set of assets and activities is not a business. When substantially all of the fair value of the gross assets acquired, or disposed of, is concentrated in a single identifiable asset or a group of similar identifiable assets, then the acquisition, or disposition, is not a business. Under this update there will be fewer purchases that will be treated as business combinations. The new standard will be effective for the Company on October 1, 2018. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Intangibles—Goodwill and Other— In January 2017, the FASB issued ASU No. 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The new standard is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill tests performed on testing dates after January 1, 2017. The Company is planning to adopt this standard as of July 1, 2017 and currently evaluating the potential impact.

4. Long-Term Debt

As of June 30, 2017 and September 30, 2016, the Company’s long-term debt consisted of the following:

(in thousands)	June 30, 2017			September 30, 2016
Term loan principal; principal and interest are due in quarterly installments through January 31, 2021	$	634,115		$	639,030
Original issue discount on term loan, net of accumulated amortization	(970		)	(1,178		)
Deferred financing costs, net of accumulated amortization	(5,567		)	(5,890		)
	627,578			631,962
Less current portion	6,554			6,554
Long-term debt	$	621,024		$	625,408

10

Senior Secured Credit Facilities

NMHI's senior credit agreement (the “senior credit agreement”), as amended, governs a $655.0 million Tranche B term loan facility (the “term loan facility”), of which $50.0 million was deposited in a cash collateral account in support of the issuance of letters of credit under an institutional letter of credit facility (the “institutional letter of credit facility”), and a $120.0 million senior secured revolving credit facility (the “senior revolver”). The term loan facility has a 7 year maturity and the senior revolver has a 5 year maturity from the effective date, or January 31, 2014. All of the obligations under the senior secured credit facilities are guaranteed by NMHH and the subsidiary guarantors named therein. The senior credit agreement provides that NMHI may make one or more offers to the lenders, and consummate transactions with individual lenders that accept the terms contained in such offers, to extend the maturity date of the lender’s term loans and/or revolving commitments, subject to certain conditions, and any extended term loans or revolving commitments will constitute a separate class of term loans or revolving commitments.

On May 25, 2017, NMHI entered into Amendment No. 5 to its senior credit agreement (the "repricing amendment"). Under the terms of the repricing amendment, the applicable interest margin for the term loan facility under the senior credit agreement decreased by 25 basis points for both alternate base rate ("ABR") borrowings and Eurodollar borrowings, and reduced the Eurodollar floor by 25 basis points. The repricing amendment also reset the period during which a 1.0% prepayment premium may be repriced for a repricing transaction (as defined in the senior credit agreement) until one year after the effective date of the repricing amendment.

The senior revolver includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as the “swingline loans.” Any issuance of letters of credit or borrowing on a swingline loan will reduce the amount available under the senior revolver. As of June 30, 2017, NMHI had no loans under the senior revolver and $47.4 million of letters of credit issued under the institutional letter of credit facility and $2.9 million of letters of credit issued under the senior revolver.

As a result of the repricing amendment, borrowings under the term loan facility bear interest, at our option, at: (i) an alternate base rate ("ABR") equal to the greater of (a) the prime rate of Barclays Bank PLC, (b) the federal funds rate plus 1/2 of 1.0%, and (c) the Eurodollar rate for an interest period of one-month plus 100 basis points (provided that the ABR rate applicable to the term loan facility will not be less than 2.00% per annum), plus 2.00%; or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the term loan facility will not be less than 0.75% per annum), plus 3.00%. Borrowings under the revolving and swingline loans bear interest at our option at (i) an alternate base rate ("ABR") equal to the greater of (a) the prime rate of Barclays Bank PLC, (b) the federal funds rate plus 1/2 of 1.0%, and (c) the Eurodollar rate for an interest period of one-month plus 100 basis points (provided that the ABR rate applicable to the term loan facility will not be less than 2.00% per annum), plus 2.25%; or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the term loan facility will not be less than 0.75% per annum), plus 3.25%. NMHI is also required to pay a commitment fee to the lenders under the senior revolver at an initial rate of 0.50% of the average daily unutilized commitments thereunder. NMHI must also pay customary letter of credit fees.

The senior credit agreement requires NMHI to make mandatory prepayments, subject to certain exceptions, on a percentage of NMHI's annual Excess Cash Flow, as defined in the senior credit agreement. NMHI determines whether or not a mandatory prepayment is required at the end of each fiscal year. NMHI was not required to make a prepayment for the fiscal year ended September 30, 2016.

Covenants

The senior credit agreement contains negative covenants, including, among other things, limitations on the Company’s ability to incur additional debt, create liens on assets, transfer or sell assets, pay dividends, redeem stock or make other distributions or investments, and engage in certain transactions with affiliates. The senior credit agreement contains a springing financial covenant. If, at the end of any fiscal quarter, the Company’s outstanding borrowings under the senior revolver exceeds 30% of the commitments thereunder, it is required to maintain at the end of each such fiscal quarter a consolidated first lien leverage ratio of not more than 5.50 to 1.00. This consolidated first lien leverage ratio stepped down to 5.00 to 1.00 during the fiscal quarter ending March 31, 2017. The springing financial covenant was not in effect as of June 30, 2017 or September 30, 2016 as NMHI’s outstanding borrowings on the senior revolver did not exceed the threshold.

Derivatives

On January 20, 2015, NMHI entered into two interest rate swap agreements in an aggregate notional amount of $375.0 million in order to reduce the variability of cash flows of our variable rate debt. NMHI entered into these interest rate swaps to hedge the risk of changes in the floating rate of interest on borrowings under the term loan. Under the terms of the swaps,

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NMHI will receive from the counterparty a quarterly payment based on a rate equal to the greater of 3-month LIBOR or 1.00% per annum, and NMHI will make payments to the counterparty based on a fixed rate of 1.795% per annum, in each case on the notional amount of $375.0 million, settled on a net payment basis. The swap agreements expire on March 31, 2020.

The fair value of the swap agreements, representing the price that would be received to transfer the liability in an orderly transaction between market participants, was $0.9 million and $6.0 million as of June 30, 2017 and September 30, 2016, respectively. The fair value was recorded in Other accrued liabilities and was determined based on pricing models and independent formulas using current assumptions. Hedge ineffectiveness, if any, associated with the swap will be reported by the Company in interest expense. There was no ineffectiveness associated with the swap during the nine months ended June 30, 2017, nor was any amount excluded from ineffectiveness testing for the period.

5. Stock-Based Compensation

2014 Plan

Civitas maintains a 2014 Omnibus Incentive Plan (“2014 Plan”). As of June 30, 2017, the 2014 Plan authorized the issuance of up to 6,663,240 shares of common stock as stock-based awards, including incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), restricted stock units (“RSUs”) and performance based restricted stock units ("PRSUs").

Stock Options

Stock option activity for the nine months ended June 30, 2017 is presented below:

(in thousands, except share and per share amounts)	Number of Shares	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2016	709,832	$	19.42
Granted	314,757	16.87
Exercised	35,196	17.00
Forfeited	72,400	19.19
Expired	2,864	25.41
Outstanding at June 30, 2017	914,129	$	18.64	8.1	$	408
Exercisable at June 30, 2017	352,597	$	18.49	7.0	$	154
Vested or expected to vest as of June 30, 2017	887,482	$	18.64	8.0	$	395

The Company utilizes the Black-Scholes valuation model for estimating the fair value of stock options. Options granted under the 2014 Plan during the nine months ended June 30, 2017 were valued using the following assumptions:

	2017
Risk-free interest rate	1.83% - 2.08%
Expected term	6 years
Expected volatility	36.16% - 36.21%
Expected dividend yield	—	%

The Company recognizes the fair value of the stock option awards as stock-based compensation expense over the requisite service period of the individual grantee, which equals the vesting period.

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Restricted Stock Unit Awards (RSUs)

Restricted stock unit activity for the nine months ended June 30, 2017 is presented below:

	Number of Restricted Stock Units	Weighted Average Grant-Date Fair Value
Non-vested units at September 30, 2016	442,528	$	21.24
Granted	530,660	17.73
Forfeited	70,205	19.26
Vested	119,823	22.46
Non-vested units at June 30, 2017	783,160	$	18.85

The fair value of each restricted stock unit was determined based on the Company's closing stock price on the date of grant. The Company recognizes the fair value of the RSUs as stock-based compensation expense over the requisite service period of the individual grantee, which equals the vesting period.

Performance Based Restricted Stock Units (PRSUs)

During the nine months ended June 30, 2017, the Company awarded 45,624 PRSUs under the 2014 Plan. The number of PRSUs earned is determined based on the Company's attainment of predefined performance targets set by the Compensation Committee. The number of PRSUs earned will be determined based on the Company's actual performance against established performance targets during the three year performance period (the “Performance Condition”). The number of PRSUs earned based on the Performance Condition may range from 0% to 200% of the initial award. All of the PRSUs will be settled in shares of the Company’s common stock, which will be issued following the end of the three-year performance period, subject to the actual achievement of the predefined performance targets. The per share fair value of the PRSUs was determined based on the Company's closing stock price on the date of grant. To calculate compensation expense, the Company forecasts the likelihood of achieving the predefined performance targets and calculates the number of PRSUs expected to be earned.

A summary of PRSU activity for the nine months ended June 30, 2017 is as follows:

	Number of Performance Based Restricted Stock Units	Weighted Average Grant-Date Fair Value
Non-vested units at September 30, 2016	42,467	$	19.84
Granted	45,624	19.85
Forfeited	3,586	19.84
Vested	—	—
Non-vested units at June 30, 2017	84,505	$	19.84

The Company recorded stock-based compensation expense for stock options, RSUs and PRSUs under the 2014 Plan of $2.2 million and $6.6 million during the three and nine months ended June 30, 2017, respectively, and $1.8 million and $4.7 million during the three and nine months ended June 30, 2016, respectively. Stock-based compensation expense is included in general and administrative expense in the consolidated statements of operations.

Unit Plan

Prior to October 1, 2015, NMH Investment maintained the Amended and Restated 2006 Unit Plan (the “Unit Plan”). Under the Unit Plan, NMH Investment issued units of limited liability company interests pursuant to such plan, consisting of Class B Common Units, Class C Common Units, Class D Common Units, Class E Common Units, Class F Common Units, Class G Common Units and Class H Common Units. These units derived their value from the value of the Company.

On October 1, 2015, in connection with a secondary offering, NMH Investment distributed all of the 25,250,000 shares of our common stock it held to its existing members in accordance with their respective membership interests and pursuant to the terms of the NMH Investment's Limited Liability Company Agreement and the management

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unitholders agreements (the “Distribution”). The Distribution triggered the vesting condition for the Class H Common Units and the acceleration of unvested Class F Common Units. As a result, the Company recorded compensation expense of $10.5 million related to these awards during the quarter ended December 31, 2015. This expense is not deductible for tax purposes. The expense is included in general and administrative expense in the consolidated statements of operations. As a result of the Distribution, the Unit Plan has concluded and there will be no future issuances under this plan.

6. Business Combinations

The operating results of the businesses acquired are included in the consolidated statements of operations from the date of acquisition. The Company accounted for the acquisitions under the acquisition method and, as a result, the purchase price was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess of the purchase price over the estimated fair value of net tangible assets was allocated to specifically identified intangible assets, with the residual being allocated to goodwill.

Fiscal 2017 Acquisitions

During the nine months ended June 30, 2017, the Company acquired the assets of eight companies complementary to its business for a total cash consideration of $42.5 million.

Loma Linda Management Company, Inc. ("Loma Linda"). On January 31, 2017, the Company acquired the assets of Loma Linda for $2.7 million. Loma Linda is located in California and provides adult day health and community integration services to individuals with developmental disabilities and other special needs. The Company acquired $2.2 million of identified intangible assets which included approximately $1.7 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of the acquisition, the Company recorded $0.5 million of goodwill in the I/DD segment, which is expected to be deductible for tax purposes.

Rainbow Adult Day Health ("Rainbow ADH"). On March 1, 2017, the Company acquired the assets of Rainbow ADH for $24.6 million. Rainbow ADH is located in Maryland and provides adult day health services. The Company acquired $13.3 million of identified intangible assets which included $11.3 million of agency contracts with a weighted average useful life of 12 years, $2.0 million of licenses and permits with a weighted average useful life of 10 years. In addition, the Company acquired total tangible assets of $1.5 million, consisting primarily of vehicles. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $9.9 million of goodwill in the Corporate and other segment, which is expected to be deductible for tax purposes.

JLH Enterprises, Chippewa Valley, Inc ("JLH"). On June 1, 2017, the Company acquired the assets of JLH for $1.5 million. JLH is located in Wisconsin and is engaged in the business of providing residential services, supported living services, day program services and similar services to individuals with developmental disabilities and similar conditions. The Company acquired $1.3 million of identified intangible assets, all of which were agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $0.1 million of goodwill in the I/DD segment, which is expected to be deductible for tax purposes.

Mi Casa es Su Casa, Inc. ("Mi Casa"). On June 9, 2017, the Company acquired the assets of Mi Casa for $4.9 million. Mi Casa is located in New Jersey and provides adult day health services. The Company acquired $3.0 million of identified intangible assets which included $2.5 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $1.9 million of goodwill in the Corporate and other segment, which is expected to be deductible for tax purposes.

Harbor Rehabilitation, LLC ("Harbor Rehab"). On June 12, 2017, the Company acquired the assets of Harbor Rehab for $2.1 million. Harbor Rehab is located in Michigan and provides physical therapy, rehabilitation and related services to individuals with injuries or impairments. The Company acquired $1.6 million of identified intangible assets which included $1.1 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $0.5 million of goodwill in the SRS segment, which is expected to be deductible for tax purposes.

Brockton and Stoughton Adult Medical Day Care Center, Inc. ("Brockton Stoughton ADH"). On June 26, 2017, the Company acquired the assets of Brockton Stoughton ADH for $6.3 million. Brockton Stoughton ADH is located in Massachusetts and provides adult day health services. The Company acquired $4.0 million of identified intangible assets which

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included $3.4 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $2.1 million of goodwill in the Corporate and other segment, which is expected to be deductible for tax purposes.

Other Acquisitions. During fiscal 2017, the Company acquired the assets of Hope Homes, Inc. ("Hope Homes") and Res-Care Wisconsin, Inc. ("Res-Care"). Hope Homes provides residential and day program services for individuals with developmental disabilities in Ohio and Res-Care provides adult family home residential services to elderly individuals in Wisconsin. Both acquisitions are included in our I/DD segment. Total cash consideration for these companies was $0.4 million.

(in thousands)	Identifiable Intangible Assets		Tangible Assets		Total Identifiable Assets		Goodwill		Purchase Consideration
Loma Linda	$	2,225	$	33	$	2,258	$	483	$	2,741
Rainbow ADH	13,260		1,497		14,757		9,873		24,630
JLH	1,301		60		1,361		136		1,497
Mi Casa	2,960		59		3,019		1,921		4,940
Harbor Rehab	1,642		—		1,642		461		2,103
Brockton Stoughton ADH	4,000		195		4,195		2,055		6,250
Other acquisitions	246		99		345		7		352
Total	$	25,634	$	1,943	$	27,577	$	14,936	$	42,513

The Company has not disclosed revenue or income from operations from these acquisitions for the three and nine months ended June 30, 2017 because they are immaterial.

Fiscal 2017 Pro Forma Results of Operations

The following table reflects the unaudited pro forma results of operations for the three and nine months ended June 30, 2017  and 2016 assuming that the acquisitions made during the three and nine months ended June 30, 2017 and 2016 had occurred on October 1, 2015 and 2014, respectively.

(in thousands)	Three Months Ended June 30,				Nine Months Ended June 30,
	2017		2016		2017		2016
Net revenue	$	375,285	$	363,971	$	1,113,093	$	1,089,813
Net income	7,685		5,897		19,198		11,611

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the actual results that would have been achieved had the acquisitions occurred as of October 1, 2015 and 2014, or the results that may be achieved in future periods.

7. Goodwill and Intangible Assets

Goodwill

As a result of recent changes in the Company's organizational structure, which took effect on October 1, 2016, the Company now has three reportable business segments: the Intellectual and Developmental Disabilities (“I/DD”) segment, the Post-Acute Specialty Rehabilitation Services (“SRS”) Segment and the At-Risk Youth (“ARY”) segment. The Adult Day Health (“ADH”) operating segment, which was previously aggregated in the Human Services segment, is included in Corporate and Other. For more information refer to Note 10, "Segment Information."

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The changes in goodwill for the nine months ended June 30, 2017 are as follows (in thousands):

	I/DD		SRS		ARY			Corporate and Other			Total
Balance as of September 30, 2016	$	104,155	$	81,909	$	73,464		$	14,132		$	273,660
Impact of segment change	35,212		—		(35,212		)	—			—
Goodwill acquired through acquisitions	626		461		—			13,849			14,936
Acquisition adjustments	—		—		—			(6		)	(6		)
Balance as of June 30, 2017	$	139,993	$	82,370	$	38,252		$	27,975		$	288,590

As a result of the changes in the organizational structure (Refer to Note 10, "Segment Information"), the Company's reporting units composed of the Company's I/DD and ARY operations changed. On October 1, 2016, the Company allocated goodwill between the new reporting units based on the relative fair values. The Company estimated the fair value of the new reporting units using the income approach. The income approach is based on a discounted cash flow analysis and calculates the fair value of a reporting unit by estimating the after–tax cash flows attributable to a reporting unit and then discounting them to a present value using a risk-adjusted discount rate. In our discounted cash flow analysis, we forecasted cash flows for the new reporting units for each of the next ten years and applied a long term growth rate to the final year of the forecasted cash flows to estimate terminal value. The cash flows were then discounted to a present value using a risk-adjusted discount rate. The discount rates, which are intended to reflect the risks inherent in future cash flow projections used in the discounted cash flow analysis, are based on estimates of the weighted average costs of capital of market participants relative to each respective reporting unit. 

This change was considered a triggering event that indicated a test for goodwill impairment was necessary as of October 1, 2016. The Company completed impairment tests of the new reporting units as of October 1, 2016 and it was determined that the carrying value of goodwill was not impaired as the fair value of the reporting units significantly exceeded the carrying value.  

Intangible Assets

Intangible assets consist of the following as of June 30, 2017 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	521,172	$	282,066	$	239,106
Non-compete/non-solicit agreements	1 year	7,003		5,009		1,994
Relationship with contracted caregivers	—	7,521		7,521		—
Trade names	2 years	6,658		4,607		2,051
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	53,180		41,716		11,464
Intellectual property	—	452		452		—
		$	641,786	$	341,371	$	300,415

Intangible assets consist of the following as of September 30, 2016 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	499,652	$	257,104	$	242,548
Non-compete/non-solicit	2 years	6,438		4,432		2,006
Relationship with contracted caregivers	—	7,521		7,505		16
Trade names	2 years	6,516		4,014		2,502
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	49,773		40,416		9,357
Intellectual property	—	452		452		—
		$	616,152	$	313,923	$	302,229

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Amortization expense was $9.4 million and $27.4 million for the three and nine months ended June 30, 2017, respectively, and $10.1 million and $29.2 million for the three and nine months ended June 30, 2016, respectively.

The estimated remaining amortization expense related to intangible assets with finite lives for the three months remaining in fiscal 2017 and each of the four succeeding years and thereafter is as follows:

Year Ended September 30,	(in thousands)
2017	$	9,363
2018	37,492
2019	37,561
2020	36,507
2021	32,894
Thereafter	100,798
Total	$	254,615

8. Fair Value Measurements

The Company measures and reports its financial assets and liabilities on the basis of fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

A three-level hierarchy for disclosure has been established to show the extent and level of judgment used to estimate fair value measurements, as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Significant other observable inputs (quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability).

Level 3: Significant unobservable inputs for the asset or liability. These values are generally determined using pricing models which utilize management estimates of market participant assumptions.

Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

A description of the valuation methodologies used for instruments measured at fair value as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2017.

(in thousands)	Total			Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap agreements	$	(850	)	$	—	$	(850	)	$	—

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The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016.

(in thousands)	Total			Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap agreements	$	(5,979	)	$	—	$	(5,979	)	$	—
Contingent consideration	$	(5,915	)	$	—	$	—		$	(5,915	)

Interest rate-swap agreements. The Company’s interest rate-swap agreements are classified within Level 2 of the fair value hierarchy. The fair value of the swap agreements is recorded in current liabilities (under other accrued liabilities) in the Company’s consolidated balance sheets. The fair value of these agreements is determined based on pricing models and independent formulas using current assumptions that included swap terms, interest rates and forward LIBOR curves and the Company’s credit risk.

Contingent consideration. In connection with the acquisition of Mass Adult Day Health (“Adult Day Health”) in September 2014 and Cassell in January 2015, the Company recorded contingent consideration pertaining to the amounts potentially payable to the former owners upon the businesses achieving certain performance targets.

The Company settled the remaining Adult Day Health and Cassell contingent consideration obligations during the three months ended March 31, 2017 for $6.1 million.

The following table presents a summary of changes in fair value of the Company’s Level 3 liabilities (acquisition related contingent consideration) measured on a recurring basis for the six months ended March 31, 2017. The three months ended June 30, 2017 is excluded from the table because the associated contingent consideration obligations were settled as of March 31, 2017.

(in thousands)	Six Months Ended March 31, 2017
Balance at September 30, 2016	$	5,915
Fair value adjustment	375
Balance at December 31, 2016	$	6,290
Fair value adjustment	(181		)
Payment	(6,109		)
Balance at March 31, 2017	$	—

The following table presents a summary of changes in fair value of the Company’s Level 3 liabilities (acquisition related contingent consideration) measured on a recurring basis for the nine months ended June 30, 2016.

(in thousands)	Nine Months Ended June 30, 2016
Balance at September 30, 2015	$	9,075
Present value accretion	(211		)
Cassell fair value adjustment	(2,945		)
Balance at December 31, 2015	$	5,919
Payment	(1,307		)
Balance at March 31, 2016	$	4,612
Cassell and Mass ADH fair value adjustment	2,600
Payment	(2,258		)
Balance at June 30, 2016	$	4,954

As of June 30, 2017 the Company had no contingent consideration liability. As of September 30, 2016, the Company had $5.9 million of contingent consideration liabilities, which was reflected in Other accrued liabilities.

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At June 30, 2017 and September 30, 2016, the carrying values of cash, accounts receivable, accounts payable and variable rate debt approximated fair value.

9. Income Taxes

The Company’s effective income tax rate for the interim periods is based on management’s estimate of the Company’s annual effective tax rate for the applicable year. It is also affected by discrete items that may occur in any given period. The rates differ from the federal statutory income tax rate primarily due to state income taxes and nondeductible permanent differences such as meals and nondeductible compensation. For the three and nine months ended June 30, 2017, the Company’s effective income tax rate was 37.5% and 38.5%, respectively, as compared to an effective tax rate of 47.0% and 65.8%, respectively, for the three and nine months ended June 30, 2016. The higher effective tax rate for the three and nine months ended June 30, 2016 is primarily due to $10.5 million of stock-based compensation expense related to certain awards under our former equity compensation plan that vested in October 2015, which was not deductible for tax purposes.

The Company files a federal consolidated return and files various state income tax returns and, generally, is no longer subject to income tax examinations by the taxing authorities for years prior to September 30, 2014. The Company did not have a reserve for uncertain income tax positions at June 30, 2017 and September 30, 2016. The Company does not expect any significant changes to unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as charges to income tax expense.

10. Segment Information

The Company previously operated its business in two reportable segments, Human Services and Post-Acute Specialty Rehabilitation Services ("SRS"). Effective as of October 1, 2016, the Company re-aligned its businesses within our Human Services reporting segment to a service line organizational structure. As a result of such change our Human Services reporting segment has been divided into two reporting segments: the Intellectual and Developmental Disabilities ("I/DD") segment and the At-Risk Youth ("ARY") segment. This change aligns with the Company's service offerings and how it conducts and operates its businesses commencing in the first quarter of fiscal 2017. The Adult Day Health ("ADH") operating segment, which was previously aggregated in the Human Services segment, is now included in Corporate and Other. There has been no change to the SRS segment.

The change results in the Company having three reportable business segments: the I/DD segment, the SRS segment, and the ARY segment.

Through the I/DD segment, the Company provides home- and community-based human services to adults and children with intellectual and developmental disabilities. Through the SRS segment, the Company delivers services to individuals who have suffered acquired brain injury, spinal injuries and other catastrophic injuries and illnesses. The operations of the SRS segment have been organized by management into two operating segments, NeuroRestorative and CareMeridian, based upon service type. The NeuroRestorative operating group provides behavioral therapies to brain injured clients in post-acute community settings and the CareMeridian operating group provides a higher level of medical support to traumatically injured clients. Through the ARY segment we provide home- and community-based human services to youth with emotional, behavioral and/or medically complex challenges.

 Each operating group is aligned with the Company’s reporting structure and has a segment manager that is directly accountable for its operations and regularly reports results to the chief operating decision maker, which is the Company's Chief Operating Officer, for the purpose of evaluating these results and making decisions regarding resource allocations.

The Company evaluates performance based on EBITDA. EBITDA for each segment is defined as income (loss) from continuing operations for the segment before income taxes, before depreciation and amortization, and interest income (expense).

Activities classified as “Corporate and Other” in the table below relate to the results of our ADH operating segment and unallocated home office expenses, management fees, and stock-compensation expense. Total assets included in the Corporate and Other segment include assets associated with our ADH operating segment and assets maintained by our corporate entity including cash, restricted cash, and other current and non-current assets.

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The following table is a financial summary by reportable segments for the periods indicated (in thousands):

For the three months ended June 30,	I/DD		SRS		ARY		Corporate and Other			Consolidated
2017
Net revenue	$	243,496	$	77,758	$	35,368	$	15,723		$	372,345
EBITDA	34,098		13,778		5,786		(14,377		)	39,285
Total assets	469,612		261,129		85,393		264,971			1,081,105
Depreciation and amortization	9,451		5,858		1,407		2,445			19,161
Purchases of property and equipment	7,093		2,865		329		1,899			12,186
2016(1)
Net revenue	$	233,836	$	73,506	$	35,364	$	11,257		$	353,963
EBITDA	34,161		14,391		5,993		(18,282		)	36,263
Depreciation and amortization	9,717		5,827		1,433		1,657			18,634
Purchases of property and equipment	5,444		2,497		692		4,003			12,636

⁽¹⁾ The previously reported segment information for the three months ended June 30, 2016 has been revised to reflect the new composition of the reportable segments. 

A reconciliation of EBITDA to income from continuing operations before income taxes on a consolidated basis is as follows (in thousands):

	For the three months ended June 30,
	2017		2016
EBITDA	$	39,285	$	36,263
Less:
Depreciation and amortization	19,161		18,634
Interest expense, net	8,339		8,490
Income from continuing operations before income taxes	$	11,785	$	9,139

The following table is a financial summary by reportable segments for the periods indicated (in thousands):

For the nine months ended June 30,	I/DD		SRS		ARY		Corporate and Other			Consolidated
2017
Net revenue	$	719,207	$	229,301	$	106,784	$	38,846		$	1,094,138
EBITDA	99,971		40,670		16,614		(48,344		)	108,911
Total assets	469,612		261,129		85,393		264,971			1,081,105
Depreciation and amortization	27,988		17,483		4,255		6,420			56,146
Purchases of property and equipment	18,390		8,016		961		5,614			32,981
2016(2)
Net revenue	$	694,351	$	213,549	$	113,279	$	24,214		$	1,045,393
EBITDA	102,114		40,471		15,883		(58,402		)	100,066
Depreciation and amortization	28,638		17,639		4,407		4,268			54,952
Purchases of property and equipment	15,327		7,774		1,508		7,046			31,655

⁽²⁾ The previously reported segment information for the nine months ended June 30, 2016 has been revised to reflect the new composition of the reportable segments. 

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A reconciliation of EBITDA to income from continuing operations before income taxes on a consolidated basis is as follows (in thousands):

	For the nine months ended June 30,
	2017		2016
EBITDA	$	108,911	$	100,066
Less:
Depreciation and amortization	56,146		54,952
Interest expense, net	25,112		25,300
Income from continuing operations before income taxes	$	27,653	$	19,814

Revenue derived from contracts with state and local governmental payors in the state of Minnesota, the Company’s largest state operation, which is included in the I/DD segment, accounted for approximately 15% of the Company’s net revenue for the three and nine months ended June 30, 2017 and 2016.

11. Disposition of Business

During fiscal 2015, the Company decided to discontinue ARY services in the states of Florida, Louisiana, Indiana, North Carolina and Texas. These operations were included in the ARY segment. On December 1, 2015, the Company completed the sale of its ARY operations in the state of North Carolina. As consideration, the buyer assumed our lease and service delivery obligations in exchange for the assets of the business, excluding working capital items, and a cash payment of $1.3 million to the buyer. Upon the completion of the sale, the Company recorded a loss of $1.3 million. The closures of the ARY operations in Florida and Louisiana were complete as of December 31, 2015 and the closures of our ARY operations in Indiana and Texas were completed in January 2016. During the nine months ended June 30, 2016, the Company recorded cash charges of approximately $2.1 million, consisting of severance costs of $0.5 million and lease termination costs of $1.6 million.

The Company assessed the disposal group under the guidance of ASU 2014-08, Discontinued Operations and Disclosures of Disposals of Components of an Entity and concluded that the closure of the disposal group does not represent a "strategic shift" and therefore has not been classified as discontinued operations for any of the periods presented. However, the Company has concluded that the disposal group was an individually significant disposal group. There were no operating results for the disposal group during the three and nine months ended June 30, 2017. Pretax losses of the disposal group were $0.2 million and $5.8 million for the three and nine months ended June 30,2016, respectively. Pretax losses of the disposal group for the three and nine months ended June 30,2016 included exit costs of $2.1 million disclosed above.

12. Net Income Per Share

Basic net income per common share is computed by dividing net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share, if applicable, is computed by dividing net income by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding options and vesting of restricted stock units and performance based restricted stock units when dilutive.

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):

	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands, except share and per share amounts)	2017		2016		2017		2016
Numerator
Net income	$	7,361	$	4,816	$	17,019	$	6,527
Denominator
Weighted average shares outstanding, basic	37,323,458		37,108,486		37,278,760		37,101,968
Weighted average common equivalent shares	172,030		143,858		134,504		145,816
Weighted average shares outstanding, diluted	37,495,488		37,252,344		37,413,264		37,247,784
Net income per share, basic	$	0.20	$	0.13	$	0.46	$	0.18
Net income per share, diluted	$	0.20	$	0.13	$	0.45	$	0.18
Equity instruments excluded from diluted net income per share calculation as the effect would have been anti-dilutive:
Stock options	936,459		699,171		891,187		483,620
Restricted stock units	129,440		129,252		99,489		111,435

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13. Other Commitments and Contingencies

The Company is in the health and human services business and, therefore, has been and continues to be subject to numerous claims alleging that the Company, its employees or its independently contracted host-home caregivers (“Mentors”) failed to provide proper care for a client. The Company is also subject to claims by its clients, its employees, its Mentors or community members against the Company for negligence, intentional misconduct or violation of applicable laws. Included in the Company’s recent claims are claims alleging personal injury, assault, abuse, wrongful death and other charges. Regulatory agencies may initiate administrative proceedings alleging that the Company’s programs, employees or agents violate statutes and regulations and seek to impose monetary penalties on the Company. The Company could be required to incur significant costs to respond to regulatory investigations or defend against civil lawsuits and, if the Company does not prevail, the Company could be required to pay substantial amounts of money in damages, settlement amounts or penalties arising from these legal proceedings.

The Company is also subject to potential lawsuits under the False Claims Act and other federal and state whistleblower statutes designed to combat fraud and abuse in the health care industry. These lawsuits can involve significant monetary awards that may incentivize private plaintiffs to bring these suits. If the Company is found to have violated the False Claims Act, it could be excluded from participation in Medicaid and other federal healthcare programs. The Patient Protection and Affordable Care Act provides a mandate for more vigorous and widespread enforcement activity to combat fraud and abuse in the health care industry.

The Company is also subject to employee-related claims under state and federal law, including claims for wage and hour violations under the Fair Labor Standards Act or state wage and hour laws, and claims for discrimination, wrongful discharge or retaliation. The Company currently has three pending complaints in California state court that allege certain

wage and hour violations of California labor laws and seek to be designated as class-action. One such wage and hour complaint has been settled and preliminarily approved by the court. The Company's policy is to accrue for all probable and estimable claims using information available at the time the financial statements are issued. Actual claims could settle in the future at materially different amounts due to the nature of litigation.

14. Subsequent Events

On July 1, 2017, the Company acquired the assets of Country Life Care Center ("Country Life") for cash consideration of $9.5 million. Country Life is a rehabilitation and post acute care facility located in Utah and is included in the Company's Specialty Rehabilitation Services business.

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

The following discussion of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as well as our reports on Form 8-K and other publicly available information. This discussion may contain forward-looking statements about our markets, the demand for our services and our future results. We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons, including those discussed in the “Risk Factors” and “Forward-Looking Statements” sections of this report.

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Overview

We are the leading national provider of home- and community-based health and human services to must-serve individuals with a range of intellectual, developmental, behavioral and/or medically complex disabilities and challenges. Since our founding, we have been a pioneer in the movement to provide home- and community-based services for people who would otherwise be institutionalized. During our more than 36-year history, we have evolved from a single residential program serving at-risk youth to a diversified national network providing an array of high-quality services and care in large, growing and highly-fragmented markets. While we have the capabilities to serve individuals with a wide variety of special needs and disabilities, we currently provide our services to individuals with intellectual and/or developmental disabilities ("I/DD"), individuals with catastrophic injuries and illnesses, particularly acquired brain injury ("ABI"), youth with emotional, behavioral and/or medically complex challenges, or at-risk youth ("ARY"), and elders in need of day health services to support their independence, or adult day health (“ADH”). As of June 30, 2017, we operated in 36 states, serving approximately 11,800 clients in residential settings and more than 18,600 clients in non-residential settings. We have a diverse group of hundreds of public payors which fund our services with a combination of federal, state and local funding, as well as, an increasing number of non-public payors related to our services for ABI and other catastrophic injuries and illnesses.

We previously operated our business in two reportable segments, Human Services and Post-Acute Specialty Rehabilitation Services ("SRS"). As a result of recent changes in our organizational structure which took effect on October 1, 2016, we have changed our reportable segments. Beginning with the first quarter of fiscal 2017, our Human Services segment was divided into two reportable segments: the Intellectual and Developmental Disabilities (“I/DD”) segment and the At-Risk Youth (“ARY”) segment. This change aligns with the way we have begun to operate our business commencing in the first quarter of fiscal 2017. The Adult Day Health (“ADH”) operating segment, which was previously aggregated in the Human Services segment, is included in Corporate and Other. There has been no change to the Post-Acute Specialty Rehabilitation Services (“SRS”) Segment.

As described above we now have three reportable segments: the I/DD segment, the SRS segment, and the ARY segment.

Our I/DD segment is the largest portion of our business. Through the I/DD segment, we provide home- and community-based human services to adults and children with intellectual and developmental disabilities. Our I/DD programs include residential support, day habilitation, vocational services, case management, crisis intervention and hourly support care.

Through the SRS segment, which is our second largest segment, we deliver services to individuals who have suffered acquired brain injury, spinal injuries and other catastrophic injuries and illnesses. Within our SRS segment, our NeuroRestorative operating segment is primarily focused on providing behavioral therapies to brain injured clients in post-acute community settings and our CareMeridian operating segment is primarily focused on providing more medically-intensive post-acute care services. Our SRS services range from sub-acute healthcare for individuals with intensive medical needs to day treatment programs, and include, neurorehabilitation, neurobehavioral rehabilitation, specialized nursing, physical, occupational and speech therapies, supported living, outpatient treatment and pre-vocational services.

Through the ARY segment we provide home- and community-based human services to youth with emotional, behavioral and/or medically complex challenges. Our ARY programs include therapeutic foster care, family preservation, adoption services, early intervention, school-based services and juvenile offender programs.

Our newest operating segment, ADH, delivers elder services including case management, nursing oversight, medication management, nutrition, daily living assistance, therapeutic services and transportation. The results of our ADH operating segment are included within Corporate and Other.     

Factors Affecting our Operating Results

Demand for Home and Community-Based Health and Human Services

Our growth in revenue has historically been primarily related to increases in the number of individuals served, as well as increases in the rates we receive for our services. This growth has depended largely upon development-driven activities, including the maintenance and expansion of existing contracts and the award of new contracts, our new start program and acquisitions. We also attribute the long-term growth in our client base to certain trends that are increasing demand in our industry, including demographic, health-care and political developments.

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Demographic trends have a particular impact on our I/DD business. Increases in the life expectancy of individuals with I/DD, we believe, have resulted in steady increases in the demand for I/DD services. In addition, caregivers currently caring for their relatives at home are aging and many may soon be unable to continue with these responsibilities. Many states continue to downsize or close large, publicly-run facilities for individuals with I/DD and refer those individuals to private providers of community-based services. Each of these factors affects the size of the I/DD population in need of services. Demand for our SRS services has also grown as emergency response and improved medical techniques have resulted in more people surviving a catastrophic injury. SRS services are increasingly sought out as a clinically-appropriate and less-expensive alternative to institutional care and as a “step-down” for individuals who no longer require care in acute settings.

Our residential ARY services were negatively impacted by a substantial decline in the number of children and adolescents in foster care placements during the last decade, although the population has stabilized in recent years.  The decline contributed to increased demand for periodic, non-residential services to support at-risk youth and their families. In connection with a strategic review of our ARY service line in fiscal 2015, we decided to discontinue ARY services in the states of Florida, Louisiana, Indiana, North Carolina and Texas. We completed the sale of our ARY business in North Carolina in December 2015 and completed the closures of our ARY operations in Florida and Louisiana in December 2015 and Indiana and Texas in January 2016.

Political and economic trends can also affect our operations. Reductions or changes in Medicaid funding or changes in budgetary priorities by the federal, state and local governments that pay for our services could have a material adverse effect on our revenue and profitability. Recent efforts at the federal level to reduce the federal budget deficit, repeal and/or replace the Patient Protection and Affordable Care Act and/or restructure the Medicaid program pose risk for significant reductions in federal Medicaid matching funds to state governments. In addition, budgetary pressures facing state governments, especially within Medicaid programs, as well as other economic, industry and political factors could cause state governments to limit spending, which could significantly reduce our revenue, referrals, margins and profitability, and adversely affect our growth strategy. Government agencies generally condition their contracts with us upon a sufficient budgetary appropriation. If the government agency does not receive an appropriation sufficient to cover its obligations with us, it may terminate a contract or defer or reduce our reimbursements. In the past, certain states in which we operate, including Minnesota, California, Florida, Indiana and Arizona implemented rate reductions, rate freezes and service reductions, in response to state budgetary deficits. In 2017, we continue to expect the overall rate environment to remain stable.

Beginning in 2015, West Virginia implemented a redesign of its I/DD Waiver Program. This redesign has resulted in a reduction in our West Virginia net revenue and income from operations during the nine months ended June 30, 2017 of $6.3 million and $0.1 million, respectively, as compared to the same period of the prior year. As a result of the redesign, five individual consumers under the I/DD Waiver Program commenced litigation against the Secretary of the State’s Health and Human Resources Department in response to the State’s reduction in their service authorization levels. On September 13, 2016, the District Court for the Southern District of West Virginia issued a preliminary injunction for the five named plaintiffs, endeavoring to restore their service authorization levels to the level that pre-dated the redesign.  On September 30, 2016, the Court certified the class of all the I/DD waiver participants in the State and a motion to expand the protections of the preliminary injunction is pending before the Court. The ultimate outcome of the litigation is unclear, but absent a change in policy we anticipate that our West Virginia operation will experience a reduction in revenue and income from operations, estimated to be in the range of $6.0 to $8.0 million and $2.0 to $4.0 million, respectively, in fiscal 2017.

Historically, our business has benefited from the trend toward privatization and the efforts of groups that advocate for the populations we serve. These groups lobby governments to fund residential services that use our small group home or host home models, rather than large, institutional models. Furthermore, we believe that successful lobbying by advocacy groups has preserved I/DD and ARY services and, therefore, our revenue base for these services, from significant reductions as compared with certain other human services, although in the past certain states have imposed rate reductions, rate freezes, and service reductions in response to state budgetary pressures. In addition, a number of states have developed community-based waiver programs to support long-term care services for survivors of a traumatic brain injury. However, the majority of our specialty rehabilitation services revenue is derived from non-public payors, such as commercial insurers, managed care and other private payors.

Expansion of Services

We have grown our business through expansion of existing markets and programs, entry into new geographical markets, as well as through acquisitions.

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Organic Growth

Various economic, fiscal, public policy and legal factors are contributing to an environment with a number of organic growth opportunities, particularly within the I/DD segment, and, as a result, we have a continued emphasis on growing our business organically and making investments to support the effort. Our future growth will depend heavily on our ability to expand our current programs and identify and execute upon new opportunities. Our organic expansion activities consist of both new program starts in existing markets and expansion into new geographical markets. Our new programs in new and existing geographic markets typically require us to incur and fund operating losses for a period of approximately 18 to 24 months (we refer to these new programs as “new starts”). Net operating loss or income of a new start is defined as its revenue for the period less direct expenses but not including allocated overhead costs. The aggregation of all programs with net operating losses that are less than 18 months old comprises the new start operating loss and the aggregation of all programs with net operating income that are less than 18 months old comprises the new start operating income for such period. During the three months ended June 30, 2017 and 2016, new starts generated operating losses of $1.4 million and $2.2 million, respectively, and operating income of $1.4 million and $1.1 million, respectively. During the nine months ended June 30, 2017 and 2016, new starts generated operating losses of $4.8 million and $5.4 million, respectively, and operating income of $3.8 million and $2.8 million, respectively.

Acquisitions

From the beginning of fiscal 2011 through June 30, 2017, we have completed 58 acquisitions, including several acquisitions of small providers, which we have integrated with our existing operations. We have pursued larger strategic acquisitions in the past and may opportunistically do so in the future. Acquisitions could have a material impact on our consolidated financial statements.

During the nine months ended June 30, 2017, we acquired the assets and operations of eight companies complementary to our business for total consideration of $42.5 million. During the nine months ended June 30, 2016, we acquired the assets and operations of ten companies complementary to our business for total cash consideration of $44.5 million.

Divestitures

We regularly review and consider the divestiture of underperforming or non-strategic businesses to improve our operating results and better utilize our capital. We have made divestitures from time to time and expect that we may make additional divestitures in the future. Divestitures could have a material impact on our consolidated financial statements.

During fiscal 2015, the Company decided to discontinue ARY services in the states of Florida, Louisiana, Indiana, North Carolina and Texas. In connection with these divestitures we recorded impairment charges for intangible assets of $10.4 million in fiscal 2015, exit costs of $2.1 and a loss on sale of $1.3 million during during the first two quarters of fiscal 2016. It was determined that this disposal group did not meet the criteria to be presented as discontinued operations and, as a result, the operating results are included within continuing operating results in the Consolidated Statement of Income.

Revenue

Revenue is reported net of allowances for unauthorized sales and estimated sales adjustments, and net of any state provider taxes or gross receipts taxes levied on services we provide. We derive revenue from contracts with state, local and other government payors and non-public payors. During both the three and nine months ended June 30, 2017, we derived 89% of our net revenue from contracts with state, local and other government payors, and 11% of our net revenue from non-public payors. During both the three and nine months ended June 30, 2016, we derived 88% of our net revenue from contracts with state, local and other government payors, and 12% of our net revenue from non-public payors. Substantially all of our non-public revenue is generated by our SRS business through contracts with commercial insurers, workers’ compensation carriers and other private payors. The payment terms and rates of our contracts vary widely by jurisdiction and service type. We have four types of contractual arrangements with payors which include negotiated contracts, fixed fee contracts, retrospective reimbursement contracts and prospective payments contracts. Our revenue may be affected by adjustments to our billed rates as well as adjustments to previously billed amounts. Revenue in the future may be affected by changes in rates, rate-setting structures, methodologies or interpretations that may be proposed in states where we operate or by the federal government which provides matching funds. We cannot determine the impact of such changes or the effect of any possible governmental actions. In general, we take prices set by our payors and do not compete based on pricing.

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We bill the majority of our residential services on a per person per-diem basis. We believe important performance measures of revenues in our residential service business include average daily residential census and average daily billing rates. We bill the majority of our non-residential service on a per service unit basis. These service units, which vary in length, are converted to billable units which are the hourly equivalent for the service provided. We believe important performance measures of revenues in our non-residential service business include billable units and average billable unit rates. We calculate the impact of these factors on gross revenue rather than net revenue because the timing of sales adjustments, both positive and negative, is unpredictable. We define these measures and gross revenue as follows:

• Gross Revenue: Revenues before adjusting for sales adjustments and state provider and gross receipts taxes.

• Average Residential Census: The average daily residential census over the respective period.

• Average Daily Rate: A mathematical calculation derived by dividing the gross residential revenue by the residential census and the resulting quotient by the number of days during the respective period.

• Non-Residential Billable Units: The hourly equivalent of non-residential services provided.

• Average Billable Unit Rate: Gross non-residential revenue divided by the billable units provided during the period.

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A comparative summary of gross revenues by service line and our key metrics is as follows (dollars in thousands, except for daily and billable unit rates):

	Three Months Ended June 30,					Nine Months Ended June 30,
	2017			2016		2017			2016
I/DD Services
Gross Revenues	$	246,497		$	237,718	$	729,104		$	704,254
Average Residential Census	8,308			8,103		8,229			8,047
Average Daily Rate	$	247.11		$	244.10	$	246.46		$	240.44
Non-Residential Billable Units	3,192,750			3,200,631		9,453,052			9,502,337
Average Non-Residential Billable Unit Rate	$	18.69		$	18.04	$	18.56		$	18.33
Gross Revenue Growth %	3.7		%			3.5		%
Gross Revenue growth due to:
Volume Growth	1.9		%			1.5		%
Average Rate Growth	1.8		%			2.0		%
Specialty Rehabilitation Services
Gross Revenues	$	80,163		$	73,688	$	234,592		$	214,660
Average Residential Census	1,325			1,271		1,313			1,247
Average Daily Rate	$	636.98		$	610.06	$	627.90		$	604.12
Non-residential Billable Units	43,346			41,342		124,199			116,899
Average Non-Residential Billable Unit Rate	$	77.79		$	75.78	$	77.34		$	70.86
Gross Revenue Growth %	8.8		%			9.3		%
Gross Revenue growth due to:
Volume Growth	4.3		%			5.3		%
Average Rate Growth	4.5		%			4.0		%
At-Risk Youth Services
Gross Revenues (1)	$	35,235		$	35,767	$	106,887		$	114,055
Average Residential Census	2,144			2,139		2,139			2,382
Average Daily Rate	$	123.05		$	127.89	$	126.00		$	124.22
Non-residential Billable Units	131,967			135,314		398,416			411,118
Average Non-Residential Billable Unit Rate	$	85.06		$	80.34	$	83.57		$	80.21
Gross Revenue Growth %	(1.5		)%			(6.3		)%
Gross Revenue growth due to:
Volume Growth	(0.6		)%			(8.1		)%
Average Rate Growth	(0.9		)%			1.8		%
Adult Day Health
Gross Revenues	$	15,873		$	11,399	$	39,381		$	24,425
Non-residential Billable Units	885,372			680,536		2,244,585			1,523,440
Average Non-Residential Billable Unit Rate	$	17.93		$	16.75	$	17.54		$	16.03
Gross Revenue Growth %	39.3		%			61.2		%
Gross Revenue growth due to:
Volume Growth	30.1		%			47.3		%
Average Rate Growth	9.2		%			13.9		%

⁽¹⁾ Includes $7.3 million of gross revenue for the nine months ended June 30, 2016 from the ARY operations that were divested during first half of fiscal 2016.

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Expenses

Expenses directly related to providing services are classified as cost of revenue. These expenses consist of direct labor costs which principally include salaries and benefits for service provider employees and per diem payments to our Mentors; client program costs such as food, medicine and professional and general liability and employment practices liability expenses; residential occupancy expenses which are primarily composed of rent and utilities related to facilities providing direct care; travel and transportation costs for clients requiring services; and other ancillary direct costs associated with the provision of services to clients including workers’ compensation expense.

Wages and benefits to our employees and per diem payments to our Mentors constitute the most significant operating cost in each of our operations. Most of our employee caregivers are paid on an hourly basis, with hours of work generally tied to client need. Our Mentors are paid on a per diem basis, but only if the Mentor is currently caring for a client. Our labor costs are generally influenced by levels of service, and these costs can vary in material respects across regions. In addition, our labor costs are expected to rise as a result of recent regulatory actions at both the state and Federal levels. For example, in May 2016, the Federal Department of Labor raised the current base salary minimum to be exempt from overtime pay for all hours worked over 40 hours in a designated work-week from $23,660 ($455 per week) to $47,476 ($913/week) to be effective December 1, 2016, with adjustments thereafter every three years based on a standard metric, with the first adjustment to be no earlier than January 2020 (the “FLSA Final Rule”). On November 22, 2016, the U.S. Federal District Court for the Eastern District of Texas granted a nationwide preliminary injunction enjoining the implementation and enforcement of the FLSA Final Rule, which has been appealed to the Fifth Circuit by the DOL. As a result of the injunction, we have delayed the complete implementation of our plan to comply with the FLSA Final Rule, pending the outcome of the injunction and the treatment of the FLSA Final Rule by the new Administration. However, we did implement during the second quarter of fiscal 2017 some changes that were too far along in implementation prior to the issuance of the injunction. The potential cost in fiscal 2017 associated with these changes are expected to be in the range of $2.0 to $2.5 million. In the event that the injunction is not made permanent and/or the FLSA Final Rule is ultimately determined to be valid and enforceable, we believe we will be prepared to implement the FLSA Final Rule within a reasonable time frame, resulting in significant additional labor costs in the form of overtime pay for previously exempt employees, increased salaries and additional hires to minimize overtime exposure. The potential annual costs that may be incurred as a result of our compliance with the currently-enjoined FLSA Final Rule  if it were to be upheld are difficult to quantify and predict but were previously estimated to be in a range of $7.0 million to $9.0 million annually, including the approximately $2.0 to $2.5 million of expected cost for the changes implemented during the second quarter of fiscal 2017. However, a legal resolution through the courts is at least several months away and the DOL has told the Fifth Circuit that it is not advocating for the $913/week salary increase at this time and requested that the Court only address the issue of whether the DOL has the right to set a minimum salary amount at all.  The DOL has also informed the Court of its intention to undertake further rulemaking to determine what the appropriate salary level should be, and has recently initiated a Request For Information as a starting point to that effort.  We will continue to monitor the rulings and the position of the new Administration but currently expect that the Administration will not implement the FLSA Final Rule in its current form.

Occupancy costs represent a significant portion of our operating costs. As of June 30, 2017, we owned 356 facilities and three offices, and we leased 1,739 facilities and 200 offices. We expect occupancy costs to increase during fiscal 2017 as a result of new leases entered into pursuant to acquisitions and new starts. We incur no facility costs for services provided in the home of a Mentor.

Our business insurance programs include professional and general liability insurance, for which we are self-insured for $3.0 million per claim and $28.0 million in the aggregate, and employment practices liability insurance, for which we are fully self-insured, among others. Professional and general liability expense totaled 0.8% and 0.5% of gross revenue for the three and nine months ended June 30, 2017, respectively, as compared to 0.7% and 0.9% for the three and nine months ended June 30, 2016, respectively. We incurred professional and general liability expenses of $2.9 million and $5.6 million during the three and nine months ended June 30, 2017, respectively, and $2.6 million and $9.2 million during the three and nine months ended June 30, 2016, respectively. These expenses are incurred in connection with our claims reserves and insurance premiums. The decrease in our professional and general liability expense during the nine months ended June 30, 2017 as compared to the same period of the prior year was due to changes in certain assumptions used by our actuaries as a result of positive claims experience. For our employment practices liability, we currently have three pending complaints in California state court that allege certain wage and hour violations of California labor laws and seek to be designated as class-actions. One such wage and hour complaint has been settled and preliminarily approved by the court. These actions have increased our expenses and it is reasonably possible that they will further increase our expenses, as we are self-insured for employment-practices liability related claims.

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General and administrative expenses primarily include salaries and benefits for administrative employees, or employees that are not directly providing services, administrative occupancy costs as well as professional expenses such as accounting, consulting and legal services, and stock-based compensation expense. Depreciation and amortization includes depreciation for fixed assets utilized in both facilities providing direct care and administrative offices, and amortization related to intangible assets.

We continue to review of our operations in an effort to improve efficiencies, reduce overtime expenses, and implement cost saving measures throughout the Company. This expense reduction project includes a multi-pronged review of total company-wide expenses, inclusive of labor management and organizational structure. We have engaged outside consultants to assist us with this project and provide recommendations to us regarding ways to optimize our business operations and realize savings. Wehave incurred $0.9 million and $2.7 million in consulting, severance, and contract termination costs in the three and nine months ended June 30, 2017. The cost savings associated with this project are expected to be at least $2.0 million in fiscal year 2017 and by the end of fiscal year 2018 we anticipate annual cost savings of more than $4.0 million.

Results of Operations

The following table sets forth our consolidated results of operations as a percentage of total gross revenues for the periods indicated.

	Three Months Ended June 30,				Nine Months Ended June 30,
	2017		2016		2017		2016
Gross revenue	100.0	%	100.0	%	100.0	%	100.0	%
Sales adjustments	(1.4	)%	(1.3	)%	(1.4	)%	(1.1	)%
Net revenue	98.6	%	98.7	%	98.6	%	98.9	%
Cost of revenue	77.4	%	76.6	%	77.7	%	76.7	%
Operating expenses:
General and administrative	10.7	%	12.0	%	11.2	%	12.5	%
Depreciation and amortization	5.1	%	5.2	%	5.1	%	5.2	%
Total operating expense	15.8	%	17.2	%	16.3	%	17.7	%
Income from operations	5.4	%	5.0	%	4.6	%	4.5	%
Other income (expense):
Other expense, net	—	%	—	%	0.1	%	(0.1	)%
Interest expense	(2.2	)%	(2.4	)%	(2.3	)%	(2.4	)%
Income from continuing operations before income taxes	3.2	%	2.6	%	2.4	%	2.0	%
Provision for income taxes	1.2	%	1.2	%	1.0	%	1.2	%
Income from continuing operations	2.0	%	1.4	%	1.4	%	0.7	%
Loss from discontinued operations, net of tax	—	%	—	%	—	%	—	%
Net income	2.0	%	1.4	%	1.4	%	0.7	%

Three Months Ended June 30, 2017 and 2016

Consolidated Overview

	Three Months Ended June 30,						Increase
(in thousands)	2017			2016			(Decrease)
Gross Revenue	$	377,768		$	358,572		$	19,196
Sales Adjustments	(5,423		)	(4,609		)	(814		)
Net Revenue	$	372,345		$	353,963		$	18,382
Income from Operations	20,273			17,772			2,501
Operating Margin (as a % of gross revenue)	5.4		%	5.0		%

Consolidated gross revenue for the three months ended June 30, 2017increased by $19.2 million, or 5.4%, compared to the three months ended June 30, 2016. Gross revenue increased by $12.5 million from organic growth and $6.7 million from acquisitions that closed during and after the third quarter of fiscal 2016. Sales adjustments as a percentage of gross revenue

29

remained relatively consistent as a percentage of gross revenue during the three months ended June 30, 2017 and June 30, 2016.

Consolidated income from operations was $20.3 million, or 5.4% of gross revenue, for the three months ended June 30, 2017 compared to $17.8 million, or 5.0% of gross revenue, for the three months ended June 30, 2016. The increase in our operating margin as compared to the three months ended June 30, 2016 was primarily due to a decrease in general and administrative expenses as a percentage of gross revenue of 1.3%, partially offset by an increase in costs of revenues as a percentage of gross revenue of 0.8%. The decrease in general and administrative expense as a percentage of gross revenue was mainly due to decreases in indirect labor expense as well as reduced administrative costs as we continue to focus on optimizing our cost structure. In addition, general and administrative expenses during the third quarter of the prior year were negatively impacted by a $2.6 million charge for acquisition related contingent consideration liabilities. The increase in costs of revenues as a percentage of gross revenue was primarily due to an increase in direct labor costs due to higher amounts of overtime pay as we continue to experience labor pressures, and an increase in health insurance expense due to higher enrollment and utilization compared to the three months ended June 30, 2016.

I/DD Results of Operations

The following table sets forth the results of operations for the I/DD segment for the periods indicated (in thousands):

	Three Months Ended June 30,
	2017				2016						Change in % of gross revenue
	Amount		% of gross revenue		Amount		% of gross revenue		Increase (Decrease)
Revenue:
I/DD gross revenue	246,497		100.0	%	237,718		100.0	%	8,779
Sales adjustments	(3,001	)	(1.2	)%	(3,882	)	(1.6	)%	881		0.4	%
I/DD net revenue	243,496		98.8	%	233,836		98.4	%	9,660		0.4	%
Cost of revenue:
Direct labor costs	158,516		64.3	%	150,455		63.3	%	8,061		1.0	%
Client program costs	10,330		4.2	%	9,630		4.1	%	700		0.1	%
Client occupancy costs	16,732		6.8	%	16,114		6.8	%	618		—	%
Other direct costs	10,888		4.4	%	11,176		4.7	%	(288	)	(0.3	)%
Total cost of revenues	196,466		79.7	%	187,375		78.9	%	9,091		0.8	%
General and administrative	12,932		5.2	%	12,300		5.2	%	632		—	%
I/DD EBITDA	34,098		13.9	%	34,161		14.3	%	(63	)	(0.4	)%
Depreciation and amortization	9,451		3.8	%	9,717		4.1	%	(266	)	(0.3	)%
Income from Operations	24,647		10.1	%	24,444		10.2	%	203		(0.1	)%

I/DD gross revenue

I/DD gross revenue for the three months ended June 30, 2017increased by $8.8 million, or 3.7%, compared to the three months ended June 30, 2016. The increase in I/DD gross revenue included $7.0 million from organic growth and $1.8 million from acquisitions that closed during and after the three months ended June 30, 2016. The organic growth was the result of a 2.0%increase in average billing rates and a 0.9%increase in volume compared to the three months ended June 30, 2016.

I/DD EBITDA

I/DD EBITDA decreased from $34.2 million during the three months ended June 30, 2016 to $34.1 million during the three months ended June 30, 2017. I/DD EBITDA as a percentage of gross revenue decreased from 14.3% during the three months ended June 30, 2016 to 13.9% during the three months ended June 30, 2017. The decrease in our I/DD EBITDA margin

30

was mainly due to an increase in cost of revenues as a percentage of gross revenue compared to the third quarter of the prior year.

I/DD cost of revenues for the three months ended June 30, 2017increased, as a percentage of gross revenue, by 0.8%, compared to the three months ended June 30, 2016. This was primarily due to an increase in direct labor costs as a percentage of gross revenue of 1.0%, partially offset by a decrease in other direct costs as a percentage of gross revenue of 0.3%. The increase in direct labor costs was due to higher amounts of overtime pay as we continue to experience increased competition for labor in some markets and an increase in health insurance expense due to higher enrollment and utilization compared to the three months ended June 30, 2016. The decrease in other direct costs was mainly due to a decrease in worker's compensation expense compared to the same period of the prior year.

I/DD general and administrative expenses remained consistent as a percentage of gross revenue at 5.2% during the three months ended June 30, 2017 and June 30, 2016.

I/DD Depreciation and amortization expense

Depreciation and amortization expense as a percentage of gross revenue decreased by 0.3% compared to the three months ended June 30, 2016.

SRS Results of Operations

The following table sets forth the results of operations for the SRS segment for the periods indicated (in thousands):

	Three Months Ended June 30,
	2017				2016						Change in % of gross revenue
	Amount		% of gross revenue		Amount		% of gross revenue		Increase (Decrease)
Revenue:
SRS gross revenue	80,163		100.0	%	73,688		100.0	%	6,475
Sales adjustments	(2,405	)	(3.0	)%	(182	)	(0.2	)%	(2,223	)	(2.8	)%
SRS net revenue	77,758		97.0	%	73,506		99.8	%	4,252		(2.8	)%
Cost of revenue:
Direct labor costs	40,747		50.8	%	37,307		50.6	%	3,440		0.2	%
Client program costs	4,926		6.1	%	5,013		6.8	%	(87	)	(0.7	)%
Client occupancy costs	8,631		10.8	%	8,057		10.9	%	574		(0.1	)%
Other direct costs	2,279		2.8	%	2,257		3.1	%	22		(0.3	)%
Total cost of revenue	56,583		70.5	%	52,634		71.4	%	3,949		(0.9	)%
General and administrative	7,397		9.2	%	6,481		8.8	%	916		0.4	%
SRS EBITDA	13,778		17.3	%	14,391		19.6	%	(613	)	(2.3	)%
Depreciation and amortization	5,858		7.3	%	5,827		7.9	%	31		(0.6	)%
Income from Operations	7,920		10.0	%	8,564		11.7	%	(644	)	(1.7	)%

SRS gross revenue

SRS gross revenue for the three months ended June 30, 2017increased by $6.5 million, or 8.8%, compared to the three months ended June 30, 2016. The increase in SRS gross revenue included $6.2 million from organic growth and $0.3 million from acquisitions that closed during and after the three months ended June 30, 2016. The organic growth was driven by an increase in volume of 3.6% and in the average billing rate of 4.8%. The increase in volume was primarily due to lower levels of open occupancy resulting from the maturation of new programs started in recent years. The increase in average billing rate was primarily due to changes in consumer mix.

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SRS EBITDA

SRS EBITDA decreased from $14.4 million during the three months ended June 30, 2016 to $13.8 million during the three months ended June 30, 2017. SRS EBITDA as a percentage of gross revenue decreased from 19.6% during the three months ended June 30, 2016 to 17.3% during the three months ended June 30, 2017. The decrease in our SRS EBITDA margin was primarily due to increases in net sales adjustments and general and administrative expenses as a percentage of gross revenue. The decrease was partially offset by a decrease in cost of revenues as percentage of gross revenue compared to the third quarter of the prior year.

Sales adjustments for the three months ended June 30, 2017increased by $2.2 million, or 2.8% of gross revenue, compared to the three months ended June 30, 2016. The increase is primarily attributable to higher accounts receivable reserve levels resulting from the centralization of the remaining SRS locations into our shared service center.

Cost of revenues for the three months ended June 30, 2017decreased as a percentage of gross revenue by 0.9% compared to the three months ended June 30, 2016. The decrease was primarily due to a decrease in client program costs as a percentage of gross revenue of 0.7% and a decrease in other direct costs as a percentage of gross revenue of 0.3% . The decrease in client program costs was the result of decreases in medical costs and professional and general liability expense. The decrease in other direct costs was primarily due to a decrease in workers compensation expense.

General and administrative expenses increased as a percentage of gross revenue by 0.4% during the three months ended June 30, 2017. The increase in general and administrative expenses was primarily due to consulting and severance costs incurred in connection with the Company's project to optimize business operations and reduce expenses.

SRS Depreciation and amortization expense

Depreciation and amortization expense as a percentage of gross revenue decreased by 0.6% compared to the three months ended June 30, 2016.

ARY Results of Operations

The following table sets forth the results of operations for the ARY segment for the periods indicated (in thousands):

	Three Months Ended June 30,
	2017			2016						Change in % of gross revenue
	Amount	% of gross revenue		Amount		% of gross revenue		Increase (Decrease)
Revenue:
ARY gross revenue	35,235	100.0	%	35,767		100.0	%	(532	)
Sales adjustments	133	0.4	%	(403	)	(1.1	)%	536		1.5	%
ARY net revenue	35,368	100.4	%	35,364		98.9	%	4		1.5	%
Cost of revenues	26,858	76.2	%	26,194		73.2	%	664		3.0	%
General and administrative	2,724	7.7	%	3,177		8.9	%	(453	)	(1.2	)%
ARY EBITDA	5,786	16.5	%	5,993		16.8	%	(207	)	(0.3	)%
Depreciation and amortization	1,407	4.0	%	1,433		4.0	%	(26	)	—	%
Income from Operations	4,379	12.5	%	4,560		12.8	%	(181	)	(0.3	)%

ARY gross revenue

ARY gross revenue for the three months ended June 30, 2017decreased by $0.5 million, or 1.5%, compared to the three months ended June 30, 2016. The $0.5 milliondecrease in ARY gross revenue was due to a 0.6%decrease in volume and a 0.9%decrease in average billing rate.

32

ARY EBITDA

ARY EBITDA decreased from $6.0 million during the three months ended June 30, 2016 to $5.8 million during the three months ended June 30, 2017. ARY EBITDA as a percentage of gross revenue decreased from 16.8% during the three months ended June 30, 2016 to 16.5% during the three months ended June 30, 2017. The decrease in our ARY EBITDA margin was the result of an increase in direct labor cost due to higher overtime pay and an increase in health insurance expense due to higher enrollment and utilization compared to the three months ended June 30, 2016. The decrease was partially offset by improvements in net sales adjustments and a decrease in general and administrative expense as compared to the same period of the prior year.

ARY Depreciation and amortization expense

Depreciation and amortization expense for the three months ended June 30, 2017 remained consistent as a percentage of gross revenue compared to the three months ended June 30, 2016.

Corporate and Other Results of Operations

The following table sets forth the results of operations for Corporate and Other for the periods indicated (in thousands):

	Three Months Ended June 30,
	2017			2016
	Amount			Amount			Increase (Decrease)
Revenue:
Corporate and Other gross revenue	$	15,873		$	11,399		$	4,474
Sales adjustments	(150		)	(142		)	(8		)
Corporate and Other net revenue	15,723			11,257			4,466
Cost of revenues	12,591			8,366			4,225
General and administrative	17,361			21,030			(3,669		)
Depreciation and amortization	2,445			1,657			788
Income from Operations	(16,674		)	(19,796		)	3,122

Corporate and Other revenue

Corporate and Other revenue consists of revenue from our Adult Day Health ("ADH") business. ADH gross revenue for the three months ended June 30, 2017increased by $4.5 million , or 39.2%, compared to the three months ended June 30, 2016. The increase in gross revenue was mainly due to acquisitions that closed during and after the three months ended June 30, 2016.

Corporate and Other cost of revenue

Corporate and Other cost of revenue consists of costs associated with our ADH business. Corporate and Other costs of revenue for the three months ended June 30, 2017increased by $4.2 million, as compared to the three months ended June 30, 2016. The increase as a percentage of revenue was primarily due to impact of ADH new start programs with higher levels of open capacity.

Corporate and Other operating expense

General and administrative expenses for the three months ended June 30, 2017decreased by $3.7 million as compared to three months ended June 30, 2016. The decrease in general and administrative expense was primarily due to a $2.6 million charge recorded during the third quarter of the prior year for an increase in our reserves for acquisition related contingent consideration. In addition, there were decreases in indirect labor costs and other administrative expenses compared to the three months ended June 30, 2016 as we continue to focus on optimizing our cost structure.

33

Depreciation and amortization expense for the three months ended June 30, 2017increased by $0.8 million, compared to the three months ended June 30, 2016. This was primarily due to acquisitions that closed during and after the third quarter of the prior year.

Consolidated Other income (expense)

Other income (expense), net, which primarily consists of interest income, mark to market adjustments of the cash surrender value of Company owned life insurance policies and the accretion of interest on acquisition related contingent consideration liabilities, was $0.1 million of expense for the three months ended June 30, 2017 and June 30, 2016.

Consolidated Provision (benefit) for income taxes

For the three months ended June 30, 2017, our effective income tax rate was 37.5% compared to an effective tax rate of 47.0% for the three months ended June 30, 2016. The Company’s effective income tax rate for the interim periods is based on management’s estimate of the Company’s annual effective tax rate for the applicable year. It is also affected by discrete items that may occur in any given period, but are not consistent from year to year. These rates differ from the federal statutory income tax rate primarily due to state income taxes and nondeductible permanent differences such as meals and nondeductible compensation. The higher effective tax rate for the three months ended June 30, 2016 was due to a $10.5 million stock-based compensation charge recorded during the first quarter of fiscal 2016. This charge resulted in a higher effective tax rate during the prior year because it was not deductible for tax purposes.

Nine Months Ended June 30, 2017 and 2016

Consolidated Overview

	Nine Months Ended June 30,						Increase
(in thousands)	2017			2016			(Decrease)
Gross Revenue	$	1,109,964		$	1,057,394		$	52,570
Sales Adjustments	(15,826		)	(12,001		)	(3,825		)
Net Revenue	$	1,094,138		$	1,045,393		$	48,745
Income from Operations	52,008			46,442			5,566
Operating Margin (as a % of gross revenue)	4.7		%	4.4		%

Consolidated gross revenue for the nine months ended June 30, 2017increased by $52.6 million, or 5.0%, compared to the nine months ended June 30, 2016. Gross revenue increased$27.5 million from acquisitions that closed during and after the nine months ended June 30, 2016 and $25.1 million from organic growth. Organic growth was negatively impacted by the ARY Divestitures, which resulted in a decrease of $7.3 million in gross revenue. Excluding the operating results of the ARY Divestitures, gross revenue increased $32.4 million from organic growth.

Consolidated income from operations was $52.0 million, or 4.7% of gross revenue, for the nine months ended June 30, 2017 compared to $46.4 million, or 4.4% for the nine months ended June 30, 2016. The increase in our operating margin was primarily due to a decrease in general and administrative expenses, partially offset by an increase in cost of revenue compared to the nine months ended June 30, 2016. The decrease in general and administrative expense was primarily due to an $8.6 million reduction in stock-based compensation expense resulting from a $10.5 million charge recorded during the nine months ended June 30, 2016 for awards under our former equity plan. In addition, there were decreases in indirect labor and administrative occupancy costs compared to the nine months ended June 30, 2016 as we continue to focus on optimizing our cost structure. The increase in the cost of revenue was driven by higher overtime pay as we continue to experience labor pressures, an increase in client occupancy costs, and an increase in health insurance expense due to higher enrollment and utilization compared to the nine months ended June 30, 2016.

34

I/DD Results of Operations

The following table sets forth the results of operations for the I/DD segment for the periods indicated (in thousands):

	Nine Months Ended June 30,
	2017				2016						Change in % of gross revenue
	Amount		% of gross revenue		Amount		% of gross revenue		Increase (Decrease)
Revenue:
I/DD gross revenue	729,104		100.0	%	704,254		100.0	%	24,850
Sales adjustments	(9,897	)	(1.4	)%	(9,903	)	(1.4	)%	6		—	%
I/DD net revenue	719,207		98.6	%	694,351		98.6	%	24,856		—	%
Cost of revenue:
Direct labor costs	468,784		64.3	%	448,044		63.6	%	20,740		0.7	%
Client program costs	30,013		4.1	%	29,018		4.1	%	995		—	%
Client occupancy costs	50,228		6.9	%	46,506		6.6	%	3,722		0.3	%
Other direct costs	31,835		4.4	%	31,151		4.4	%	684		—	%
Total cost of revenues	580,860		79.7	%	554,719		78.7	%	26,141		1.0	%
General and administrative	38,376		5.3	%	37,518		5.3	%	858		—	%
I/DD EBITDA	99,971		13.6	%	102,114		14.6	%	(2,143	)	(1.0	)%
Depreciation and amortization	27,988		3.8	%	28,638		4.1	%	(650	)	(0.3	)%
Income from Operations	71,983		9.8	%	73,476		10.5	%	(1,493	)	(0.7	)%

I/DD gross revenue

I/DD gross revenue for the nine months ended June 30, 2017increased by $24.9 million, or 3.5%, compared to the nine months ended June 30, 2016. The increase in I/DD gross revenue included $15.4 million from organic growth and $9.5 million from acquisitions. The organic growth was the result of a 1.8%increase in average billing rates and 0.4% in volume growth compared to the nine months ended June 30, 2016.

I/DD EBITDA

I/DD EBITDA decreased from $102.1 million during the nine months ended June 30, 2016 to $100.0 million during the nine months ended June 30, 2017. I/DD EBITDA as a percentage of gross revenue decreased from 14.6% during the nine months ended June 30, 2016 to 13.6% during the nine months ended June 30, 2017. The decrease in our I/DD EBITDA margin was primarily due to an increase in cost of revenues as a percentage of gross revenue compared to the nine months ended June 30, 2016.

I/DD cost of revenue for the nine months ended June 30, 2017increased as a percentage of gross revenue by 1.0%, as compared to the nine months ended June 30, 2016. This was primarily due to an increase in direct labor costs as percentage of gross revenue of 0.7% and an increase in client occupancy costs as a percentage of gross revenue of 0.3%. The increase in direct labor costs as a percentage of gross revenue was due to higher amounts of overtime pay and an increase in health insurance expense due to higher enrollment and utilization compared to the nine months ended June 30, 2016. The increase in client occupancy costs as a percentage of gross revenue was primarily due to increases in rent, utilities, and repairs and maintenance costs.

I/DD general and administrative expenses as percentage of gross revenue increased$0.9 million but remained consistent as a percentage of gross revenue during the nine months ended June 30, 2017.

I/DD Depreciation and amortization expense

35

Depreciation and amortization expense decreased by $0.7 million or 0.3% as a percentage of gross revenue, compared to the nine months ended June 30, 2016.

SRS Results of Operations

The following table sets forth the results of operations for the SRS segment for the periods indicated (in thousands):

	Nine Months Ended June 30,
	2017				2016						Change in % of gross revenue
	Amount		% of gross revenue		Amount		% of gross revenue		Increase (Decrease)
Revenue:
SRS gross revenue	234,592		100.0	%	214,660		100.0	%	19,932
Sales adjustments	(5,291	)	(2.3	)%	(1,111	)	(0.5	)%	(4,180	)	(1.8	)%
SRS net revenue	229,301		97.7	%	213,549		99.5	%	15,752		(1.8	)%
Cost of revenue:
Direct labor costs	119,817		51.1	%	108,324		50.5	%	11,493		0.6	%
Client program costs	15,639		6.7	%	14,996		7.0	%	643		(0.3	)%
Client occupancy costs	25,826		11.0	%	24,325		11.3	%	1,501		(0.3	)%
Other direct costs	6,415		2.7	%	5,967		2.8	%	448		(0.1	)%
Total cost of revenue	167,697		71.5	%	153,612		71.6	%	14,085		(0.1	)%
General and administrative	20,934		8.9	%	19,466		9.1	%	1,468		(0.2	)%
SRS EBITDA	40,670		17.3	%	40,471		18.8	%	199		(1.5	)%
Depreciation and amortization	17,483		7.5	%	17,639		8.2	%	(156	)	(0.7	)%
Income from Operations	23,187		9.8	%	22,832		10.6	%	355		(0.8	)%

SRS gross revenue

SRS gross revenue for the nine months ended June 30, 2017increased by $19.9 million, or 9.3%, compared to the nine months ended June 30, 2016. The increase in SRS gross revenue included $16.2 million from organic growth and $3.7 million from acquisitions that closed during and after the nine months ended June 30, 2016. The organic growth was driven by an increase in volume of 4.2% and in the average billing rate of 3.4%. The increase in volume was primarily driven by lower levels of open occupancy due to the maturation of new programs started in recent years. The increase in average billing rate was primarily due to changes in consumer mix.

SRS EBITDA

SRS EBITDA increased from $40.5 million during the nine months ended June 30, 2016 to $40.7 million during the nine months ended June 30, 2017. SRS EBITDA as a percentage of gross revenue decreased from 18.8% during the nine months ended June 30, 2016 to 17.3% during the nine months ended June 30, 2017. The decrease in our SRS EBITDA margin was due to an increase in net sales adjustments, partially offset by a decrease in cost of revenues as a percentage of gross revenue and a decrease in general and administrative expenses as a percentage of gross revenue compared to the nine months ended June 30, 2016.

Sales adjustments for the nine months ended June 30, 2017increased by $4.2 million, or 1.8% as a percentage of gross revenue, compared to the nine months ended June 30, 2016. The increase in sales adjustments was primarily attributable to higher accounts receivable reserve levels resulting from the centralization of the remaining SRS locations into our shared service center as well as some favorable adjustments to our reserves during the nine months ended June 30, 2016 that did not recur.

36

SRS segment’s cost of revenues for the nine months ended June 30, 2017increased by $14.1 million but decreased as a percentage of gross revenue by 0.1% compared to the nine months ended June 30, 2016. The decrease as a percentage of gross revenue was primarily due to decreases in client occupancy costs and client program costs as a percentage of gross revenue of 0.3% and 0.3%, respectively, offset by an increase in direct labor costs as a percentage of gross revenue of 0.6%. The decrease in client occupancy costs as a percentage of revenue was mainly due to lower levels of open occupancy resulting from the maturation of programs started in recent years. The decrease in client program as a percentage of gross revenue was primarily due to lower consumer related medical expenses compared to the nine months ended June 30, 2016. The increase in direct labor costs as a percentage of gross revenue was primarily due to increases in overtime pay and an increase in health insurance expense due to higher enrollment and utilization compared to the nine months ended June 30, 2016.

SRS general and administrative expenses increased by $1.5 million but decreased as a percentage of gross revenue by 0.2% during the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016. The decrease in general and administrative expenses as a percentage of gross revenue was primarily due to a decrease in indirect labor costs compared to the nine months ended June 30, 2016.

SRS depreciation and amortization expense

Depreciation and amortization expense for the nine months ended June 30, 2017decreased by $0.2 million or 0.7% as a percentage of gross revenue compared to the nine months ended June 30, 2016.

ARY Results of Operations

The following table sets forth the results of operations for the ARY segment for the periods indicated (in thousands):

	Nine Months Ended June 30,
	2017				2016						Change in % of gross revenue
	Amount		% of gross revenue		Amount		% of gross revenue		Increase (Decrease)
Revenue:
ARY gross revenue	106,887		100.0	%	114,055		100.0	%	(7,168	)
Sales adjustments	(103	)	(0.1	)%	(776	)	(0.7	)%	673		0.6	%
ARY net revenue	106,784		99.9	%	113,279		99.3	%	(6,495	)	0.6	%
Cost of revenues	81,301		76.1	%	85,134		74.6	%	(3,833	)	1.5	%
General and administrative	8,869		8.3	%	12,262		10.8	%	(3,393	)	(2.5	)%
ARY EBITDA	16,614		15.5	%	15,883		13.9	%	731		1.6	%
Depreciation and amortization	4,255		4.0	%	4,407		3.9	%	(152	)	0.1	%
Income from Operations	12,359		11.5	%	11,476		10.0	%	883		1.5	%

ARY gross revenue

ARY gross revenue for the nine months ended June 30, 2017decreased by $7.2 million, or 6.3%, compared to the nine months ended June 30, 2016. The $7.2 milliondecrease in ARY gross revenue was due to a 8.1%decrease in volume resulting from the ARY divestitures during the first half of fiscal 2016, slightly offset by a 1.8%increase in billing rate. The ARY divestitures resulted in a decrease of $7.3 million in gross revenue compared to the nine months ended June 30, 2016.

ARY EBITDA

ARY EBITDA increased from $15.9 million during the nine months ended June 30, 2016 to $16.6 million during the nine months ended June 30, 2017. ARY EBITDA as a percentage of gross revenue increased from 13.9% during the nine months ended June 30, 2016 to 15.5% during the nine months ended June 30, 2017. The increase in our ARY EBITDA margin

37

was primarily due to a decrease in general and administrative expenses as a percentage of gross revenue, partially offset by an increase in cost of revenues as a percentage of gross revenue compared to the same period of the prior year.

ARY cost of revenues for the nine months ended June 30, 2017increased as a percentage of gross revenue by 1.5% as compared to the nine months ended June 30, 2016. This was primarily due to higher amount of overtime pay and an increase in client occupancy costs compared to the same period of the prior year.

ARY general and administrative expenses decreased by $3.4 million, or 2.5% of gross revenue, during the nine months ended June 30, 2017. The decrease in general and administrative expenses was primarily due to a decrease in administrative occupancy costs resulting from the ARY divestitures and $2.1 million of exit costs that was recorded during the nine months ended June 30, 2016 in connection with these divestitures.

ARY depreciation and amortization expense

Depreciation and amortization expense for the nine months ended June 30, 2017 remained relatively consistent as a percentage of gross revenue compared to the nine months ended June 30, 2016.

Corporate and Other Results of Operations

The following table sets forth the results of operations for Corporate and Other for the periods indicated (in thousands):

	Nine Months Ended June 30,
	2017			2016
	Amount			Amount			Increase (Decrease)
Revenue:
Corporate and Other gross revenue	$	39,381		$	24,425		$	14,956
Sales adjustments	(535		)	(211		)	(324		)
Corporate and Other net revenue	38,846			24,214			14,632
Cost of revenues	32,134			17,920			14,214
General and administrative	55,814			63,368			(7,554		)
Depreciation and amortization	6,420			4,268			2,152
Income from Operations	(55,522		)	(61,342		)	5,820

Corporate and Other revenue

Corporate and Other revenue consists of revenue from our ADH business. ADH gross revenue for the nine months ended June 30, 2017increased by $15.0 million, or 61.2%, compared to the nine months ended June 30, 2016. The increase in gross revenue included $14.3 million from acquisitions that closed during and after the nine months ended June 30, 2016 and $0.7 million from organic growth.

Corporate and Other cost of revenue

Corporate and Other cost of revenue consists of costs associated with our ADH business. Corporate and Other cost of revenue for the nine months ended June 30, 2017increased as a percentage of gross revenue by 8.2%, as compared to the nine months ended June 30, 2016. The increase was primarily due to the impact of an acquisition with lower operating margins and ADH new start programs with higher levels of open capacity.

Corporate and Other operating expense

General and administrative expenses for the nine months ended June 30, 2017decreased by $7.6 million as compared to nine months ended June 30, 2016. This was primarily due to a $8.6 million reduction in stock-based compensation expense resulting from a $10.5 million charge recorded during the nine months ended June 30, 2016 related to awards under our former equity plan.

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Depreciation and amortization expense as a percentage of gross revenue decreased by 1.2% as a percentage of revenue as compared to the nine months ended June 30, 2016. The decrease was the result of certain intangibles assets becoming fully amortized during the nine months ended June 30, 2017.

Consolidated Other income (expense)

Other income (expense), net, which primarily consists of interest income and mark to market adjustments of the cash surrender value of Company owned life insurance policies and the accretion of interest on acquisition related contingent consideration liabilities, was $0.8 million of income for the nine months ended June 30, 2017 compared to $1.1 million of expense for the nine months ended June 30, 2016. Otherincomeof$0.8 million for theninemonths endedJune 30, 2017 was primarily the result of gains from our Company owned life insurance policies.Other expense of $1.1 million for the nine months ended June 30, 2016 was due to a $1.3 million loss recorded on the sale of our ARY operations in the state of North Carolina.

Consolidated Provision (benefit) for income taxes

For the nine months ended June 30, 2017, our effective income tax rate was 38.5% compared to an effective tax rate of 65.8% for the nine months ended June 30, 2016. The Company’s effective income tax rate for the interim periods is based on management’s estimate of the Company’s annual effective tax rate for the applicable year. It is also affected by discrete items that may occur in any given period, but are not consistent from year to year. These rates differ from the federal statutory income tax rate primarily due to state income taxes and nondeductible permanent differences such as meals and nondeductible compensation. The change in the effective tax rate during the nine months ended June 30, 2017 compared to the nine months ended June 30, 2016 was primarily due to a $10.5 million of stock-based compensation charge related to certain awards under our former equity compensation plan that vested in October 2015. This charge resulted in a higher effective tax rate during the prior year because it was not deductible for tax purposes.

Liquidity and Capital Resources

Our principal uses of cash are to meet working capital requirements, fund debt obligations and finance capital expenditures and acquisitions. Cash flows from operations have historically been sufficient to meet these cash requirements. Our principal sources of funds are cash flows from operating activities, cash on hand, available borrowings under our senior revolver and proceeds from the sale of equity securities.

Operating activities

Net cash provided by operating activities was $70.0 million for the nine months ended June 30, 2017 and $60.6 million for the nine months ended June 30, 2016. Net cash provided by operating activities during the nine months ended June 30, 2017 was positively impacted by an improvement in our days sales outstanding ("DSO") compared to the nine months ended June 30, 2016.

Investing activities

Net cash used in investing activities was $82.2 million and $75.0 million for the nine months ended June 30, 2017 and 2016, respectively. Cash paid for property and equipment for the nine months ended June 30, 2017 was $33.0 million, or 3.0% of net revenue, compared to $31.7 million, or 3.0% of net revenue, for the nine months ended June 30, 2016. During the nine months ended June 30, 2017 and June 30, 2016, we paid $42.4 million for eight acquisitions, and $44.5 million for ten acquisitions, respectively. In addition, during the nine months ended June 30, 2017, a cash deposit of $9.5 million was made on an acquisition that closed on July 1, 2017.

Financing activities

Net cash used in financing activities was $12.4 million for the nine months ended June 30, 2017 as compared to $8.0 million for the nine months ended June 30, 2016.

At June 30, 2017, we had no outstanding loans and $117.1 million of availability under the senior revolver due to $2.9 million in standby letters of credit issued under the senior revolver, which reduce the availability under the senior revolver. Letters of credit can be issued under our institutional letter of credit facility up to the $50.0 million limit, subject to certain maintenance and issuance limitations and letters of credit in excess of that amount reduce availability under our senior revolver.

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As of June 30, 2017, $47.4 million of letters of credit were issued under the institutional letter of credit facility and $2.9 million of letters of credit were issued under the senior revolver.

We believe that available borrowings under our senior revolver and cash flow from operations will provide sufficient liquidity and capital resources to meet our financial obligations for the next twelve months, including scheduled principal and interest payments, as well as to provide funds for working capital, acquisitions, capital expenditures and other needs. No assurance can be given, however, that this will be the case.

Debt and Financing Arrangements

Senior Secured Credit Facilities

On January 31, 2014, NMHI and NMHH, wholly-owned subsidiaries of Civitas, entered into a senior credit agreement (the “senior credit agreement”) with Barclays Bank PLC, as administrative agent, and the other agents and lenders named therein, for the new senior secured credit facilities (the “senior secured credit facilities”). The senior credit agreement, as amended, governs a $655.0 million term loan facility (the “term loan facility”), of which $50.0 million was deposited in a cash collateral account in support of issuance of letters of credit under an institutional letter of credit facility (the “institutional letter of credit facility”), and a $120.0 million senior secured revolving credit facility (the “senior revolver”). As of June 30, 2017, NMHI had $634.1 million of borrowings under the term loan and no borrowings under the senior revolver. The aggregate amount of the revolving commitment under the senior revolver as of June 30, 2017 was $120.0 million, and we had $2.9 million of letters of credit and $117.1 million of availability under the senior revolver.

On May 25, 2017, NMHI entered into Amendment No. 5 to its senior credit agreement (the "repricing amendment"). Under the terms of the repricing amendment, the applicable interest margin for the term loan facility under the senior credit agreement decreased by 25 basis points for both alternate base rate ("ABR") borrowings and Eurodollar borrowings, and reduced the Eurodollar floor by 25 basis points. The repricing amendment also reset the period during which a 1.0% prepayment premium may be repriced for a repricing transaction (as defined in the senior credit agreement) until one year after the effective date of the repricing amendment.

As a result of the repricing amendment, borrowings under the term loan facility bear interest, at our option, at: (i) an alternate base rate ("ABR") equal to the greater of (a) the prime rate of Barclays Bank PLC, (b) the federal funds rate plus 1/2 of 1.0%, and (c) the Eurodollar rate for an interest period of one-month plus 100 basis points (provided that the ABR rate applicable to the term loan facility will not be less than 2.00% per annum), plus 2.00%; or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the term loan facility will not be less than 0.75% per annum), plus 3.00%. Borrowings under the revolving and swingline loans bear interest at our option at (i) an alternate base rate ("ABR") equal to the greater of (a) the prime rate of Barclays Bank PLC, (b) the federal funds rate plus 1/2 of 1.0%, and (c) the Eurodollar rate for an interest period of one-month plus 100 basis points (provided that the ABR rate applicable to the term loan facility will not be less than 2.00% per annum), plus 2.25%; or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the term loan facility will not be less than 0.75% per annum), plus 3.25%. NMHI is also required to pay a commitment fee to the lenders under the senior revolver at an initial rate of 0.50% of the average daily unutilized commitments thereunder. NMHI must also pay customary letter of credit fees.

Covenants

The senior credit agreement also contains a number of covenants that, among other things, restrict, subject to certain exceptions, NMHI’s ability and the ability of its subsidiaries to: (i) incur additional indebtedness; (ii) create liens on assets; (iii) engage in mergers or consolidations; (iv) sell assets; (v) pay dividends and distributions or repurchase our capital stock; (vi) enter into swap transactions; (vii) make investments, loans or advances; (viii) repay certain junior indebtedness; (ix) engage in certain transactions with affiliates; (x) enter into sale and leaseback transactions; (xi) amend material agreements governing certain of our junior indebtedness; (xii) change our lines of business; (xiii) make certain acquisitions; and (xiv) limitations on the letter of credit cash collateral account. If we withdraw any of the $50.0 million from the cash collateral account supporting the issuance of letters of credit, we must use the cash to either prepay the term loan facility or to secure any other obligations under the senior secured credit facilities in a manner reasonably satisfactory to the administrative agent. We were in compliance with these covenants as of June 30, 2017 and September 30, 2016. The senior credit agreement contains customary affirmative covenants and events of default.

The senior credit agreement contains a springing financial covenant. If, at the end of any fiscal quarter, NMHI's usage of the senior revolver exceeds 30% of the commitments thereunder, NMHI is required to maintain at the end of each such fiscal quarter a consolidated first lien leverage ratio of not more than 5.50 to 1.00. This consolidated first lien leverage ratio stepped

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down to 5.00 to 1.00 during the fiscal quarter ending March 31, 2017. The springing financial covenant was not in effect as of June 30, 2017 or September 30, 2016 as NMHI's usage of the senior revolver did not exceed the threshold for those quarters.

Inflation

We do not believe that general inflation in the U.S. economy has had a material impact on our financial position or results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet transactions or interests.

Critical Accounting Policies

The Company's critical accounting policies are discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations and notes accompanying the consolidated financial statements that appear in the Annual Report on Form 10-K for the fiscal year ended September 30, 2016. Except as otherwise disclosed in the financial statements and accompanying notes included in this report, there were no material changes subsequent to the filing of the Annual Report on Form 10-K for the fiscal year ended September 30, 2016, in the Company's critical accounting policies or in the assumptions or estimates used to prepare the financial information appearing in this report.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.    

Subsequent Events

On July 1, 2017, the Company acquired the assets of Country Life Care Center ("Country Life") for cash consideration of $9.5 million. Country Life is a rehabilitation and post acute care facility located in Utah and is included in the Company's Specialty Rehabilitation Services business.

Forward-Looking Statements

Some of the matters discussed in this report may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These statements relate to future events or our future financial performance, and include statements about our expectations for future periods with respect to our markets, demand for our services, the political climate and budgetary and rate environment, the impact of the redesign of the I/DD Waiver program in West Virginia, our expansion efforts and the impact of our recent acquisitions, our plans for investments to further grow and develop our business, the impact of our business optimization and cost savings project, our margins, the impact of litigation, our liquidity and our labor costs, including the impact of the FLSA Final Rule. Terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or similar expressions are intended to identify these forward looking statements. These statements are only predictions. Actual events or results may differ materially.

The information in this report is not a complete description of our business or the risks associated with our business. There can be no assurance that other factors will not affect the accuracy of these forward-looking statements or that our actual results will not differ materially from the results anticipated in such forward-looking statements. While it is not possible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to, those factors or conditions described in our Annual Report on Form 10-K for the year ended September 30, 2016, as well as the following:

• reductions or changes in Medicaid or other funding or changes in budgetary priorities by federal, state and local governments;

• substantial claims, litigation and governmental proceedings;

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• an increase in labor costs or labor-related liability;

• reductions in reimbursement rates, policies or payment practices by our payors;

• matters involving employees that expose us to potential liability;

• our ability to maintain effective internal controls;

• our ability to attract and retain experienced personnel;

• our ability to comply with complicated billing and collection rules and regulations;

• failure to comply with reimbursement procedures and collect accounts receivable;

• our substantial amount of debt, our ability to meet our debt service obligations and our ability to incur additional debt;

• our history of losses;

• changes in economic conditions;

• an increase in our self-insured retentions and changes in the insurance market for professional and general liability, workers’ compensation and automobile liability and our claims history and our ability to obtain coverage at reasonable rates;

• an increase in workers’ compensation related liability;

• our ability to control labor costs, including healthcare costs imposed by the Patient Protection and Affordable Care Act;

• our ability to establish and maintain relationships with government agencies and advocacy groups;

• negative publicity or changes in public perception of our services;

• our ability to maintain our status as a licensed service provider in certain jurisdictions;

• our susceptibility to any reduction in budget appropriations for our services in Minnesota or any other adverse developments in that state;

• our ability to maintain, expand and renew existing services contracts and to obtain additional contracts or acquire new licenses;

• our ability to successfully integrate acquired businesses;

• our inability to successfully expand into adjacent markets;

• government regulations, changes in government regulations and our ability to comply with such regulations;

• increased competition;

• decrease in popularity of home- and community-based human services among our targeted client populations and/or state and local governments;

• our ability to operate our business due to constraints imposed by covenants in our senior credit agreement;

• our ability to retain the continued services of certain members of our management team;

• our ability to manage and integrate key administrative functions;

• failure of our information systems or failure to upgrade our information systems when required;

• information technology failure, inadequacy, interruption or security failure;

• write-offs of goodwill or other intangible assets; and

• natural disasters or public health catastrophes.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the “Risk Factors” and other cautionary statements referenced and included herein. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to changes in interest rates as a result of our outstanding variable rate debt. As of May 25, 2017 pursuant to an amendment to the senior credit agreement, the variable rate debt outstanding relates to the term loan, which bears interest at (i) a rate equal to the greater of (a) the prime rate, (b) the federal funds rate plus 1/2 of 1% and (c) the Eurodollar rate for an interest period of one-month beginning on such day plus 100 basis points; plus 2.00%; or (ii) the Eurodollar rate for a one, two, three or six month period at our option (subject to a LIBOR floor of 0.75%); plus 3.00%. A 1% increase in the interest rate on our floating rate debt as of June 30, 2017 would have increased cash interest expense on the floating rate debt by approximately $6.4 million per annum, without giving effect to the interest rate swap agreement discussed below.

To reduce the interest rate exposure related to our variable debt, NMHI entered into two interest rate swaps in an aggregate notional amount of $375.0 million, effective on January 20, 2015. Under the terms of the swaps, we receive from the counterparty a quarterly payment based on a rate equal to the greater of 3-month LIBOR or 1.00% per annum, and we make

42

payments to the counterparty based on a fixed rate of 1.795% per annum, in each case on the notional amount of $375.0 million, settled on a net payment basis.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are intended to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. As of June 30, 2017, the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2017.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are in the health and human services business and, therefore, we have been and continue to be subject to substantial claims alleging that we, our employees or our Mentors failed to provide proper care for a client. We are also subject to claims by our clients, our employees, our Mentors or community members against us for negligence, intentional misconduct or violation of applicable laws. Included in our recent claims are claims alleging personal injury, assault, abuse, wrongful death and other charges. Regulatory agencies may initiate administrative proceedings alleging that our programs, employees or agents violate statutes and regulations and seek to impose monetary penalties on us. We could be required to incur significant costs to respond to regulatory investigations or defend against civil lawsuits and, if we do not prevail, we could be required to pay substantial amounts of money in damages, settlement amounts or penalties arising from these legal proceedings.

We also are subject to potential lawsuits under the False Claims Act and other federal and state whistleblower statutes designed to combat fraud and abuse in the health care industry. These lawsuits can involve significant monetary awards that may incentivize private plaintiffs to bring these suits. If we are found to have violated the False Claims Act, we could be excluded from participation in Medicaid and other federal healthcare programs. The Patient Protection and Affordable Care Act provides a mandate for more vigorous and widespread enforcement activity to combat fraud and abuse in the health care industry.

Finally, we are also subject to employee-related claims under state and federal law, including claims for wage and hour violations under the Fair Labor Standards Act or state wage and hour laws and claims for discrimination, wrongful discharge or retaliation. The Company currently has three pending complaints in California state court that allege certain wage and hour violations of California labor laws and seek to be designated as class-action. One such wage and hour complaint has been settled and preliminarily approved by the court. The Company's policy is to accrue for all probable and estimable claims using information available at the time the financial statements are issued. Actual claims could settle in the future at materially different amounts due to the nature of litigation.

We reserve for costs related to contingencies when a loss is probable and the amount is reasonably estimable. While we believe our provision for legal contingencies is adequate, the outcome of our legal proceedings is difficult to predict, and we may settle legal claims or be subject to judgments for amounts that differ from our estimates. In addition, legal contingencies could have a material adverse impact on our results of operations in any given future reporting period.

See “Part II. Item 1A. Risk Factors” and “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

Item 1A. Risk Factors

There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2016, except that under our risk factors “The nature of our operations subjects us to substantial claims, litigation and governmental proceedings” and "Reductions or changes in Medicaid funding or changes in budgetary priorities by the federal, state and local governments that pay for our services could have a material adverse effect on our revenue and profitability" we are supplementing such risk factors to include the following disclosures:

The nature of our operations subjects us to substantial claims, litigation and governmental proceedings

There are currently three pending complaints in California state court that allege certain wage and hour violations of California laws and seek to be designated as class-actions. One such wage and hour complaint has been settled and preliminarily approved by the court. The Company's policy is to accrue for all probable and estimable claims using information available at the time the financial statements are issued. Actual claims could settle in the future at materially different amounts due to the nature of litigation.

Reductions or changes in Medicaid funding or changes in budgetary priorities by the federal, state and local governments that pay for our services could have a material adverse effect on our revenue and profitability.

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We currently derive approximately 89% of our revenue from contracts with state and local governments. These governmental payors fund a significant portion of their payments to us through Medicaid, a joint federal and state health insurance program through which state expenditures are matched by federal funds typically ranging from 50% to approximately 75% of total costs, a number based largely on a state’s per capita income. Our revenue, therefore, is largely determined by the level of federal, state and local governmental spending for the services we provide.

Recent efforts at the federal level to reduce the federal budget deficit, repeal and/or replace the Patient Protection and Affordable Care Act and/or restructure the Medicaid program pose risk for significant reductions in federal Medicaid matching funds to state governments. Such efforts could include proposals to provide states with more flexibility to determine Medicaid benefits, eligibility or provider payments through the use of block grants, per capita caps or streamlined waiver approvals, as well as those that would reduce the amount of federal Medicaid matching funding available to states by curtailing the use of provider taxes or by adjusting the Federal Medical Assistance Percentage (FMAP). Furthermore, any new Medicaid-funded benefits and requirements established by Congress, particularly those included in the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, and the rules and regulations thereunder, that mandate certain uses for Medicaid funds could have the effect of diverting those funds from the services we provide.

Budgetary pressures, a decline in tax revenue, as well as other economic, industry, and political factors, could cause state governments to limit spending, which could significantly reduce our revenue, referrals, margins and profitability, and adversely affect our growth strategy. Governmental agencies generally condition their contracts with us upon a sufficient budgetary appropriation. If a government agency does not receive an appropriation sufficient to cover its contractual obligations with us, it may terminate a contract or defer or reduce our reimbursement. There is also risk that previously appropriated funds could be reduced through subsequent legislation. In the past, certain states in which we operate, including Minnesota, California, Florida, Indiana and Arizona, implemented rate reductions, rate freezes and service reductions in response to state budgetary deficits. More recently, West Virginia undertook a redesign of its I/DD waiver program, initiated in part due to state budgetary concerns. Delays in payment caused by a decline in tax revenue could have a material adverse effect on our cash flows, liquidity and financial condition. In the event that our payors or other counterparties are financially unstable or delay payments to us, our financial condition could be impaired. Similarly, programmatic changes such as conversions to managed care with related contract demands regarding billing and services, unbundling of services, governmental efforts to increase consumer autonomy and reduce provider oversight, coverage and other changes under state Medicaid plans, may cause unanticipated costs and risks to our service delivery. The loss or reduction of or changes to reimbursement under our contracts could have a material adverse effect on our business, financial condition and operating results.

For more information regarding the risks regarding our business and industry, please see our Annual Report on Form 10-K for the year ended September 30, 2016.

Item 2. Unregistered Sales of Equity Securities

Unregistered Sales of Equity Securities

No unregistered equity securities of the Company were sold during the three months ended June 30, 2017.

Repurchases of Equity Securities

The following table provides information about purchases we made during the three months ended June 30, 2017 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

	Total Number of Shares Purchased (1)	Average Price Paid per Share
04/01/2017 - 04/30/2017	—	$	—
05/01/2017 - 05/31/2017	—	$	—
06/01/2017 - 06/30/2017	694	$	16.63

⁽¹⁾ Our employees surrendered an aggregate of 694 shares to us in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the three months ended June 30, 2017.

Item 3. Defaults Upon Senior Securities.

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None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

The Exhibit Index is incorporated herein by reference.

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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.

	CIVITAS SOLUTIONS, INC.
August 9, 2017	By:	/s/ Denis M. Holler
		Denis M. Holler
		Its:	Chief Financial Officer and duly authorized officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Amendment No. 5 to the Credit Agreement, dates as of May 25, 2017, among NMH Holdings, LLC, as parent guarantor, National Mentor Holdings, Inc. as borrower, certain subsidiaries of National Mentor Holdings, Inc. party thereto, as guarantors, the lenders party thereto and Barclays Bank PLC, as administrative agent.	Incorporated by reference to Exhibit 10.1 to Civitas Solutions, Inc. Form 8-K filed May 26, 2017
31.1	Certification of principal executive officer.	Filed herewith
31.2	Certification of principal financial officer.	Filed herewith
32	Certifications furnished pursuant to 18 U.S.C. Section 1350.	Filed herewith
101.INS	XBRL Instance Document.	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document.	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith

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EX-31.1

Exhibit 31.1

Certification required by Rule 13a-14(a) or 15d-14(a)

under the Securities Exchange Act of 1934

I, Bruce F. Nardella, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Civitas Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 9, 2017	/s/ Bruce F. Nardella
	Bruce F. Nardella President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification required by Rule 13a-14(a) or 15d-14(a)

under the Securities Exchange Act of 1934

I, Denis M. Holler, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Civitas Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 9, 2017	/s/ Denis M. Holler
	Denis M. Holler Chief Financial Officer

EX-32

Exhibit 32

Certifications Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report of Civitas Solutions, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350 that, to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2017	/s/ Bruce F. Nardella
	Bruce F. Nardella President and Chief Executive Officer

Date: August 9, 2017	/s/ Denis M. Holler
	Denis M. Holler Chief Financial Officer

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Document and Entity Information - shares	9 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	CIVI
Entity Registrant Name	CIVITAS SOLUTIONS, INC.
Entity Central Index Key	0001608638
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		37,362,925

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Sep. 30, 2016
Current assets:
Cash and cash equivalents	$ 26,103	$ 50,683
Restricted cash	295	1,046
Accounts receivable, net of allowances of $14,794 and $11,863 at June 30, 2017 and September 30, 2016	159,154	155,767
Deferred tax assets, net	15,956	18,013
Prepaid expenses and other current assets	26,166	20,841
Total current assets	227,674	246,350
Property and equipment, net	179,717	175,008
Intangible assets, net	300,415	302,229
Goodwill	288,590	273,660
Restricted cash	50,000	50,000
Other assets	34,709	38,911
Total assets	1,081,105	1,086,158
Current liabilities:
Accounts payable	30,387	32,131
Accrued payroll and related costs	72,880	78,082
Other accrued liabilities	43,142	51,680
Obligations under capital lease, current	592	549
Current portion of long-term debt	6,554	6,554
Total current liabilities	153,555	168,996
Other long-term liabilities	78,284	81,466
Deferred tax liabilities, net	51,836	59,686
Obligations under capital lease, less current portion	4,562	5,012
Long-term debt, less current portion	621,024	625,408
Commitments and Contingencies (Note 13)
Stockholders’ equity
Common stock, $0.01 par value; 350,000,000 shares authorized; and 37,331,714 and 37,214,758 shares issued and outstanding at June 30, 2017 and September 30, 2016, respectively	373	372
Additional paid-in capital	300,474	294,295
Accumulated loss on derivatives, net of taxes of $344 and $2,418 at June 30, 2017 and September 30, 2016, respectively	(506)	(3,561)
Accumulated deficit	(128,497)	(145,516)
Total stockholders’ equity	171,844	145,590
Total liabilities and stockholders’ equity	$ 1,081,105	$ 1,086,158

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Sep. 30, 2016
Statement of Financial Position [Abstract]
Allowances for accounts receivable	$ 14,794	$ 11,863
Common stock, par value (dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	350,000,000	350,000,000
Common stock, shares issued (shares)	37,331,714	37,214,758
Common stock, shares outstanding (shares)	37,331,714	37,214,758
Accumulated loss on derivatives, tax	$ 344	$ 2,418

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Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Net revenue	$ 372,345	$ 353,963	$ 1,094,138	$ 1,045,393
Cost of revenue	292,498	274,569	861,992	811,385
Operating expenses:
General and administrative	40,413	42,988	123,992	132,614
Depreciation and amortization	19,161	18,634	56,146	54,952
Total operating expenses	59,574	61,622	180,138	187,566
Income from operations	20,273	17,772	52,008	46,442
Other income (expense):
Other income (expense), net	(149)	(140)	762	(1,098)
Interest expense	(8,339)	(8,493)	(25,117)	(25,530)
Income from continuing operations before income taxes	11,785	9,139	27,653	19,814
Provision for income taxes	4,424	4,296	10,634	13,032
Income from continuing operations	7,361	4,843	17,019	6,782
Loss from discontinued operations, net of tax	0	(27)	0	(255)
Net income	$ 7,361	$ 4,816	$ 17,019	$ 6,527
Income per common share, basic
Income from continuing operations, basic (in dollars per share)	$ 0.20	$ 0.13	$ 0.46	$ 0.18
Loss from discontinued operations, net of tax (in dollars per share)	0.00	0.00	0.00	0.00
Net income per share, basic (in dollars per share)	0.20	0.13	0.46	0.18
Income per common share, diluted
Income from continuing operations, diluted (in dollars per share)	0.20	0.13	0.45	0.18
Loss from discontinued operations, net of tax (in dollars per share)	0.00	0.00	0.00	0.00
Net income per share, diluted (in dollars per share)	$ 0.20	$ 0.13	$ 0.45	$ 0.18
Weighted average number of common shares outstanding, basic (in shares)	37,323,458	37,108,486	37,278,760	37,101,968
Weighted average number of common shares outstanding, diluted (in shares)	37,495,488	37,252,344	37,413,264	37,247,784

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 7,361	$ 4,816	$ 17,019	$ 6,527
Other comprehensive income (loss), net of tax:
Gain (loss) on derivative instrument classified as cash flow hedge, including a tax effect of ($339) and $2,074 for the three and nine months ended June 30, 2017, respectively, and ($595) and ($1,699) for the three and nine months ended June 30, 2016	(499)	(877)	3,055	(2,503)
Comprehensive income	$ 6,862	$ 3,939	$ 20,074	$ 4,024

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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Tax effects of changes in unrealized gain on derivatives	$ (339)	$ (595)	$ 2,074	$ (1,699)

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Condensed Consolidated Statement of Stockholders' Equity - 9 months ended Jun. 30, 2017 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Income (Loss) on Derivatives	Accumulated Deficit
Beginning balance at Sep. 30, 2016	$ 145,590	$ 372	$ 294,295	$ (3,561)	$ (145,516)
Beginning balance (shares) at Sep. 30, 2016	37,214,758	37,214,758
Increase (Decrease) in Stockholders' Equity
Issuance of common stock under employee incentive plans, net of shares surrendered	$ (78)	$ 1	(79)
Issuance of common stock under employee incentive plans, net of shares surrendered (shares)		116,956
Stock-based compensation	6,596		6,596
Tax shortfall from stock-based compensation awards	(338)		(338)
Other comprehensive income, net of tax	3,055			3,055
Net income	17,019				17,019
Ending balance at Jun. 30, 2017	$ 171,844	$ 373	$ 300,474	$ (506)	$ (128,497)
Ending balance (shares) at Jun. 30, 2017	37,331,714	37,331,714

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Operating activities:
Net income	$ 17,019	$ 6,527
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for accounts receivable allowances	13,940	10,834
Depreciation and amortization	56,146	54,985
Amortization original issue discount and financing costs	1,407	1,379
Stock-based compensation	6,596	15,200
Deferred income taxes	(8,205)	2,476
Loss on disposal of assets	327	722
Gain from company owned life insurance policy	(501)	0
Change in fair value of contingent consideration	194	(556)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(17,327)	(27,356)
Other assets	8,280	(7,393)
Accounts payable	(1,896)	3,881
Accrued payroll and related costs	(5,202)	(4,156)
Other accrued liabilities	2,424	7,462
Other long-term liabilities	(3,182)	(3,364)
Net cash provided by operating activities	70,020	60,641
Investing activities:
Acquisition of businesses, net of cash acquired	(42,432)	(44,481)
Purchases of property and equipment	(32,981)	(31,655)
Deposit on acquisition	(9,451)	0
Change in restricted cash	751	(121)
Proceeds from company owned life insurance policy	738	0
Proceeds from sale of assets	1,164	1,219
Net cash used in investing activities	(82,211)	(75,038)
Financing activities:
Repayments of long-term debt	(4,916)	(4,916)
Proceeds from borrowings under senior revolver	4,100	45,900
Repayments of borrowings under senior revolver	(4,100)	(45,900)
Repayments of capital lease obligations	(407)	(371)
Cash paid for earn-out obligations	(6,109)	(3,565)
Payments of deferred financing costs	(878)	0
Issuance of common stock under employee equity incentive plans	357	142
Tax windfall from stock-based compensation	0	745
Taxes paid related to net share settlements of equity awards	(436)	(82)
Net cash used in financing activities	(12,389)	(8,047)
Net decrease in cash and cash equivalents	(24,580)	(22,444)
Cash and cash equivalents at beginning of period	50,683	41,690
Cash and cash equivalents at end of period	26,103	19,246
Supplemental disclosure of cash flow information
Cash paid for interest	23,261	23,664
Cash paid for income taxes	13,493	11,993
Supplemental disclosure of non-cash activities:
Accrued property and equipment	946	1,166
Tenant reimbursements for leasehold improvements	$ 0	$ 2,130

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Business Overview

9 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Overview

1. Business Overview

Civitas Solutions, Inc. ("Civitas"), through its wholly-owned subsidiaries (collectively, the "Company"), is the leading provider of home- and community-based health and human services to must-serve individuals with a range of intellectual, developmental, behavioral and/or medically complex disabilities and challenges. Since the Company’s founding in 1980, the Company has evolved into a diversified national network providing an array of high-quality services and care in large, growing and highly-fragmented markets. The Company currently provides services to individuals with intellectual and/or developmental disabilities (“I/DD”), individuals with catastrophic injuries and illnesses, particularly acquired brain injury (“ABI”), youth with emotional, behavioral and/or medically complex challenges, or at-risk youth (“ARY”), and elders in need of day health services to support their independence, or adult day health (“ADH”). Since the Company’s founding in 1980, the Company’s operations have grown to 36 states. The Company provides residential services to approximately 11,800 clients and more than 18,600 clients receive periodic services from the Company in non-residential settings.

The Company designs customized service plans to meet the individual needs of its clients, which it delivers in home- and community-based settings. Most of the Company’s service plans involve residential support, typically in small group homes, host home settings, or specialized community facilities, designed to improve an individual's quality of life and to promote independence and participation in community life. Other services offered include supported living, day and transitional programs, vocational services, case management, family-based and outpatient therapeutic services, post-acute treatment and neurorehabilitation, neurobehavioral rehabilitation and physical, occupational and speech therapies, among others. The Company’s customized service plans offer its clients as well as the payors of these services, an attractive, cost-effective alternative to health and human services provided in large, institutional settings.

Civitas is the parent of a consolidated group of subsidiaries that market their services under The MENTOR Network tradename. Prior to October 1, 2015, Civitas was a wholly-owned subsidiary of NMH Investment, LLC (“NMH Investment”), which was formed in connection with the acquisition of our business by affiliates of Vestar Capital Partners (“Vestar”) in 2006. The equity interests of NMH Investment were owned by Vestar and certain executive officers, directors and other members of management. On October 1, 2015, in connection with an underwritten secondary offering, NMH Investment distributed all of the 25,250,000 shares of common stock of Civitas it held to its existing members in accordance with their respective membership interests. NMH Holdings, LLC ("NMHH") is a wholly-owned subsidiary of Civitas and National Mentor Holdings, Inc. (“NMHI”) is a wholly-owned subsidiary of NMHH. The financial results of Civitas are primarily composed of the financial results of NMHI and its subsidiaries on a consolidated basis.

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Significant Accounting Policies

9 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, which is on file with the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring adjustments, necessary to present fairly the financial statements in accordance with GAAP. Intercompany balances and transactions between the Company and its subsidiaries have been eliminated in consolidation. Operating results for the three and nine months ended June 30, 2017 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Effective October 1, 2016, the Company completed changes to its organizational structure that resulted from a change in how the Company manages its business, allocates resources and measures performance. As a result, the Company has revised its reportable segments to reflect how management currently reviews financial information and makes operating decisions. Refer to Note 10, “Segment Information” for additional information on the changes in reportable segments.  All prior period amounts have been adjusted to reflect the changes in reportable segments.

On October 1, 2016, the Company adopted ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs and ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. As a result of the retrospective adoption of this standard, the Company recast its balance sheet presentation to reflect $5.9 million of deferred financing costs as of September 30, 2016 as a direct deduction to the carrying amount of its long-term debt. Prior to the adoption these costs were included within Other Assets.

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Recent Accounting Pronouncements

9 Months Ended

Jun. 30, 2017

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

3. Recent Accounting Pronouncements

Revenue from Contracts with Customers— In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers Topic 606 (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

Subsequent to issuing ASU No. 2014-09, the FASB issued the following amendments concerning the adoption and clarification of ASU No. 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard for the Company from October 1, 2017 to October 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which further clarifies the implementation guidance on principal versus agent considerations. The new guidance requires either a retrospective or a modified retrospective approach to adoption. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the identification of the performance obligations and licensing implementation guidance, while retaining the related principals of those areas. In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. In December 2016, the FASB issued ASU 2016-20 Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements, which provides corrections or improvements to certain aspects of the guidance issued in Update 2014-09. The Company is evaluating the method of adoption and the potential impact that these ASUs will have on our financial position, results of operations, cash flows, and liquidity.

Income Taxes— In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new standard requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The amendments in this update apply to all entities that present a classified statement of financial position. The Company is planning to adopt this standard as of July 1, 2017. As of June 30, 2017 and September 30, 2016, the Company had current deferred tax assets, net of current deferred tax liabilities, of $16.0 million and $18.0 million, respectively.

Leases— In February 2016, the FASB issued ASU No. 2016-02—Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The standard is to be applied using a modified retrospective approach and will be effective for the Company on October 1, 2019. The adoption of this standard is expected to have a material impact on the Company's financial position. As of September 30, 2016, the Company had gross operating lease commitments of approximately $284.1 million. Upon adoption, a substantial portion of these lease commitments will be recorded at their net present value as a right of use asset and a lease obligation.

Stock Compensation— In March 2016, the FASB issued ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard will be effective for the Company on October 1, 2017. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

Statement of Cash Flows— In August 2016, the FASB issued ASU No. 2016-15—Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new standard will be effective for the Company on October 1, 2018. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Statement of Cash Flows— In November 2016, the FASB issued ASU No. 2016-18—Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard will be effective for the Company on October 1, 2018. As of June 30, 2017 and September 30, 2016, the Company had total restricted cash amounts of $50.3 million and $51.0 million, respectively. The Company is currently evaluating the method and timing of the adoption of this standard.

Business Combinations— In January 2017, the FASB issued ASU No. 2017-01—Business Combinations (Topic 805): Clarifying the Definition of a Business. The update provides guidance to determine when an integrated set of assets and activities is not a business. When substantially all of the fair value of the gross assets acquired, or disposed of, is concentrated in a single identifiable asset or a group of similar identifiable assets, then the acquisition, or disposition, is not a business. Under this update there will be fewer purchases that will be treated as business combinations. The new standard will be effective for the Company on October 1, 2018. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Intangibles—Goodwill and Other— In January 2017, the FASB issued ASU No. 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The new standard is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill tests performed on testing dates after January 1, 2017. The Company is planning to adopt this standard as of July 1, 2017 and currently evaluating the potential impact.

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Long-Term Debt

9 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Long-Term Debt

4. Long-Term Debt

As of June 30, 2017 and September 30, 2016, the Company’s long-term debt consisted of the following:

(in thousands)	June 30, 2017			September 30, 2016
Term loan principal; principal and interest are due in quarterly installments through January 31, 2021	$	634,115		$	639,030
Original issue discount on term loan, net of accumulated amortization	(970		)	(1,178		)
Deferred financing costs, net of accumulated amortization	(5,567		)	(5,890		)
	627,578			631,962
Less current portion	6,554			6,554
Long-term debt	$	621,024		$	625,408

Senior Secured Credit Facilities

NMHI's senior credit agreement (the “senior credit agreement”), as amended, governs a $655.0 million Tranche B term loan facility (the “term loan facility”), of which $50.0 million was deposited in a cash collateral account in support of the issuance of letters of credit under an institutional letter of credit facility (the “institutional letter of credit facility”), and a $120.0 million senior secured revolving credit facility (the “senior revolver”). The term loan facility has a 7 year maturity and the senior revolver has a 5 year maturity from the effective date, or January 31, 2014. All of the obligations under the senior secured credit facilities are guaranteed by NMHH and the subsidiary guarantors named therein. The senior credit agreement provides that NMHI may make one or more offers to the lenders, and consummate transactions with individual lenders that accept the terms contained in such offers, to extend the maturity date of the lender’s term loans and/or revolving commitments, subject to certain conditions, and any extended term loans or revolving commitments will constitute a separate class of term loans or revolving commitments.

On May 25, 2017, NMHI entered into Amendment No. 5 to its senior credit agreement (the "repricing amendment"). Under the terms of the repricing amendment, the applicable interest margin for the term loan facility under the senior credit agreement decreased by 25 basis points for both alternate base rate ("ABR") borrowings and Eurodollar borrowings, and reduced the Eurodollar floor by 25 basis points. The repricing amendment also reset the period during which a 1.0% prepayment premium may be repriced for a repricing transaction (as defined in the senior credit agreement) until one year after the effective date of the repricing amendment.

The senior revolver includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as the “swingline loans.” Any issuance of letters of credit or borrowing on a swingline loan will reduce the amount available under the senior revolver. As of June 30, 2017, NMHI had no loans under the senior revolver and $47.4 million of letters of credit issued under the institutional letter of credit facility and $2.9 million of letters of credit issued under the senior revolver.

As a result of the repricing amendment, borrowings under the term loan facility bear interest, at our option, at: (i) an alternate base rate ("ABR") equal to the greater of (a) the prime rate of Barclays Bank PLC, (b) the federal funds rate plus 1/2 of 1.0%, and (c) the Eurodollar rate for an interest period of one-month plus 100 basis points (provided that the ABR rate applicable to the term loan facility will not be less than 2.00% per annum), plus 2.00%; or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the term loan facility will not be less than 0.75% per annum), plus 3.00%. Borrowings under the revolving and swingline loans bear interest at our option at (i) an alternate base rate ("ABR") equal to the greater of (a) the prime rate of Barclays Bank PLC, (b) the federal funds rate plus 1/2 of 1.0%, and (c) the Eurodollar rate for an interest period of one-month plus 100 basis points (provided that the ABR rate applicable to the term loan facility will not be less than 2.00% per annum), plus 2.25%; or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the term loan facility will not be less than 0.75% per annum), plus 3.25%. NMHI is also required to pay a commitment fee to the lenders under the senior revolver at an initial rate of 0.50% of the average daily unutilized commitments thereunder. NMHI must also pay customary letter of credit fees.

The senior credit agreement requires NMHI to make mandatory prepayments, subject to certain exceptions, on a percentage of NMHI's annual Excess Cash Flow, as defined in the senior credit agreement. NMHI determines whether or not a mandatory prepayment is required at the end of each fiscal year. NMHI was not required to make a prepayment for the fiscal year ended September 30, 2016.

Covenants

The senior credit agreement contains negative covenants, including, among other things, limitations on the Company’s ability to incur additional debt, create liens on assets, transfer or sell assets, pay dividends, redeem stock or make other distributions or investments, and engage in certain transactions with affiliates. The senior credit agreement contains a springing financial covenant. If, at the end of any fiscal quarter, the Company’s outstanding borrowings under the senior revolver exceeds 30% of the commitments thereunder, it is required to maintain at the end of each such fiscal quarter a consolidated first lien leverage ratio of not more than 5.50 to 1.00. This consolidated first lien leverage ratio stepped down to 5.00 to 1.00 during the fiscal quarter ending March 31, 2017. The springing financial covenant was not in effect as of June 30, 2017 or September 30, 2016 as NMHI’s outstanding borrowings on the senior revolver did not exceed the threshold.

Derivatives

On January 20, 2015, NMHI entered into two interest rate swap agreements in an aggregate notional amount of $375.0 million in order to reduce the variability of cash flows of our variable rate debt. NMHI entered into these interest rate swaps to hedge the risk of changes in the floating rate of interest on borrowings under the term loan. Under the terms of the swaps, NMHI will receive from the counterparty a quarterly payment based on a rate equal to the greater of 3-month LIBOR or 1.00% per annum, and NMHI will make payments to the counterparty based on a fixed rate of 1.795% per annum, in each case on the notional amount of $375.0 million, settled on a net payment basis. The swap agreements expire on March 31, 2020.

The fair value of the swap agreements, representing the price that would be received to transfer the liability in an orderly transaction between market participants, was $0.9 million and $6.0 million as of June 30, 2017 and September 30, 2016, respectively. The fair value was recorded in Other accrued liabilities and was determined based on pricing models and independent formulas using current assumptions. Hedge ineffectiveness, if any, associated with the swap will be reported by the Company in interest expense. There was no ineffectiveness associated with the swap during the nine months ended June 30, 2017, nor was any amount excluded from ineffectiveness testing for the period.

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Stock-Based Compensation

9 Months Ended

Jun. 30, 2017

Share-based Compensation [Abstract]

Stock-Based Compensation

5. Stock-Based Compensation

2014 Plan

Civitas maintains a 2014 Omnibus Incentive Plan (“2014 Plan”). As of June 30, 2017, the 2014 Plan authorized the issuance of up to 6,663,240 shares of common stock as stock-based awards, including incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), restricted stock units (“RSUs”) and performance based restricted stock units ("PRSUs").

Stock Options

Stock option activity for the nine months ended June 30, 2017 is presented below:

(in thousands, except share and per share amounts)	Number of Shares	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2016	709,832	$	19.42
Granted	314,757	16.87
Exercised	35,196	17.00
Forfeited	72,400	19.19
Expired	2,864	25.41
Outstanding at June 30, 2017	914,129	$	18.64	8.1	$	408
Exercisable at June 30, 2017	352,597	$	18.49	7.0	$	154
Vested or expected to vest as of June 30, 2017	887,482	$	18.64	8.0	$	395

The Company utilizes the Black-Scholes valuation model for estimating the fair value of stock options. Options granted under the 2014 Plan during the nine months ended June 30, 2017 were valued using the following assumptions:

	2017
Risk-free interest rate	1.83% - 2.08%
Expected term	6 years
Expected volatility	36.16% - 36.21%
Expected dividend yield	—	%

The Company recognizes the fair value of the stock option awards as stock-based compensation expense over the requisite service period of the individual grantee, which equals the vesting period.

Restricted Stock Unit Awards (RSUs)

Restricted stock unit activity for the nine months ended June 30, 2017 is presented below:

	Number of Restricted Stock Units	Weighted Average Grant-Date Fair Value
Non-vested units at September 30, 2016	442,528	$	21.24
Granted	530,660	17.73
Forfeited	70,205	19.26
Vested	119,823	22.46
Non-vested units at June 30, 2017	783,160	$	18.85

The fair value of each restricted stock unit was determined based on the Company's closing stock price on the date of grant. The Company recognizes the fair value of the RSUs as stock-based compensation expense over the requisite service period of the individual grantee, which equals the vesting period.

Performance Based Restricted Stock Units (PRSUs)

During the nine months ended June 30, 2017, the Company awarded 45,624 PRSUs under the 2014 Plan. The number of PRSUs earned is determined based on the Company's attainment of predefined performance targets set by the Compensation Committee. The number of PRSUs earned will be determined based on the Company's actual performance against established performance targets during the three year performance period (the “Performance Condition”). The number of PRSUs earned based on the Performance Condition may range from 0% to 200% of the initial award. All of the PRSUs will be settled in shares of the Company’s common stock, which will be issued following the end of the three-year performance period, subject to the actual achievement of the predefined performance targets. The per share fair value of the PRSUs was determined based on the Company's closing stock price on the date of grant. To calculate compensation expense, the Company forecasts the likelihood of achieving the predefined performance targets and calculates the number of PRSUs expected to be earned.

A summary of PRSU activity for the nine months ended June 30, 2017 is as follows:

	Number of Performance Based Restricted Stock Units	Weighted Average Grant-Date Fair Value
Non-vested units at September 30, 2016	42,467	$	19.84
Granted	45,624	19.85
Forfeited	3,586	19.84
Vested	—	—
Non-vested units at June 30, 2017	84,505	$	19.84

The Company recorded stock-based compensation expense for stock options, RSUs and PRSUs under the 2014 Plan of $2.2 million and $6.6 million during the three and nine months ended June 30, 2017, respectively, and $1.8 million and $4.7 million during the three and nine months ended June 30, 2016, respectively. Stock-based compensation expense is included in general and administrative expense in the consolidated statements of operations.

Unit Plan

Prior to October 1, 2015, NMH Investment maintained the Amended and Restated 2006 Unit Plan (the “Unit Plan”). Under the Unit Plan, NMH Investment issued units of limited liability company interests pursuant to such plan, consisting of Class B Common Units, Class C Common Units, Class D Common Units, Class E Common Units, Class F Common Units, Class G Common Units and Class H Common Units. These units derived their value from the value of the Company.

On October 1, 2015, in connection with a secondary offering, NMH Investment distributed all of the 25,250,000 shares of our common stock it held to its existing members in accordance with their respective membership interests and pursuant to the terms of the NMH Investment's Limited Liability Company Agreement and the management

unitholders agreements (the “Distribution”). The Distribution triggered the vesting condition for the Class H Common Units and the acceleration of unvested Class F Common Units. As a result, the Company recorded compensation expense of $10.5 million related to these awards during the quarter ended December 31, 2015. This expense is not deductible for tax purposes. The expense is included in general and administrative expense in the consolidated statements of operations. As a result of the Distribution, the Unit Plan has concluded and there will be no future issuances under this plan.

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Business Combinations

9 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

Business Combinations

6. Business Combinations

The operating results of the businesses acquired are included in the consolidated statements of operations from the date of acquisition. The Company accounted for the acquisitions under the acquisition method and, as a result, the purchase price was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess of the purchase price over the estimated fair value of net tangible assets was allocated to specifically identified intangible assets, with the residual being allocated to goodwill.

Fiscal 2017 Acquisitions

During the nine months ended June 30, 2017, the Company acquired the assets of eight companies complementary to its business for a total cash consideration of $42.5 million.

Loma Linda Management Company, Inc. ("Loma Linda"). On January 31, 2017, the Company acquired the assets of Loma Linda for $2.7 million. Loma Linda is located in California and provides adult day health and community integration services to individuals with developmental disabilities and other special needs. The Company acquired $2.2 million of identified intangible assets which included approximately $1.7 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of the acquisition, the Company recorded $0.5 million of goodwill in the I/DD segment, which is expected to be deductible for tax purposes.

Rainbow Adult Day Health ("Rainbow ADH"). On March 1, 2017, the Company acquired the assets of Rainbow ADH for $24.6 million. Rainbow ADH is located in Maryland and provides adult day health services. The Company acquired $13.3 million of identified intangible assets which included $11.3 million of agency contracts with a weighted average useful life of 12 years, $2.0 million of licenses and permits with a weighted average useful life of 10 years. In addition, the Company acquired total tangible assets of $1.5 million, consisting primarily of vehicles. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $9.9 million of goodwill in the Corporate and other segment, which is expected to be deductible for tax purposes.

JLH Enterprises, Chippewa Valley, Inc ("JLH"). On June 1, 2017, the Company acquired the assets of JLH for $1.5 million. JLH is located in Wisconsin and is engaged in the business of providing residential services, supported living services, day program services and similar services to individuals with developmental disabilities and similar conditions. The Company acquired $1.3 million of identified intangible assets, all of which were agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $0.1 million of goodwill in the I/DD segment, which is expected to be deductible for tax purposes.

Mi Casa es Su Casa, Inc. ("Mi Casa"). On June 9, 2017, the Company acquired the assets of Mi Casa for $4.9 million. Mi Casa is located in New Jersey and provides adult day health services. The Company acquired $3.0 million of identified intangible assets which included $2.5 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $1.9 million of goodwill in the Corporate and other segment, which is expected to be deductible for tax purposes.

Harbor Rehabilitation, LLC ("Harbor Rehab"). On June 12, 2017, the Company acquired the assets of Harbor Rehab for $2.1 million. Harbor Rehab is located in Michigan and provides physical therapy, rehabilitation and related services to individuals with injuries or impairments. The Company acquired $1.6 million of identified intangible assets which included $1.1 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $0.5 million of goodwill in the SRS segment, which is expected to be deductible for tax purposes.

Brockton and Stoughton Adult Medical Day Care Center, Inc. ("Brockton Stoughton ADH"). On June 26, 2017, the Company acquired the assets of Brockton Stoughton ADH for $6.3 million. Brockton Stoughton ADH is located in Massachusetts and provides adult day health services. The Company acquired $4.0 million of identified intangible assets which included $3.4 million of agency contracts with a weighted average useful life of 12 years. The estimated fair values of the intangible assets acquired at the date of acquisition were determined based on a preliminary valuation that has yet to be finalized. As a result of this acquisition, the Company recorded $2.1 million of goodwill in the Corporate and other segment, which is expected to be deductible for tax purposes.

Other Acquisitions. During fiscal 2017, the Company acquired the assets of Hope Homes, Inc. ("Hope Homes") and Res-Care Wisconsin, Inc. ("Res-Care"). Hope Homes provides residential and day program services for individuals with developmental disabilities in Ohio and Res-Care provides adult family home residential services to elderly individuals in Wisconsin. Both acquisitions are included in our I/DD segment. Total cash consideration for these companies was $0.4 million.

(in thousands)	Identifiable Intangible Assets		Tangible Assets		Total Identifiable Assets		Goodwill		Purchase Consideration
Loma Linda	$	2,225	$	33	$	2,258	$	483	$	2,741
Rainbow ADH	13,260		1,497		14,757		9,873		24,630
JLH	1,301		60		1,361		136		1,497
Mi Casa	2,960		59		3,019		1,921		4,940
Harbor Rehab	1,642		—		1,642		461		2,103
Brockton Stoughton ADH	4,000		195		4,195		2,055		6,250
Other acquisitions	246		99		345		7		352
Total	$	25,634	$	1,943	$	27,577	$	14,936	$	42,513

The Company has not disclosed revenue or income from operations from these acquisitions for the three and nine months ended June 30, 2017 because they are immaterial.

Fiscal 2017 Pro Forma Results of Operations

The following table reflects the unaudited pro forma results of operations for the three and nine months ended June 30, 2017  and 2016 assuming that the acquisitions made during the three and nine months ended June 30, 2017 and 2016 had occurred on October 1, 2015 and 2014, respectively.

(in thousands)	Three Months Ended June 30,				Nine Months Ended June 30,
	2017		2016		2017		2016
Net revenue	$	375,285	$	363,971	$	1,113,093	$	1,089,813
Net income	7,685		5,897		19,198		11,611

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the actual results that would have been achieved had the acquisitions occurred as of October 1, 2015 and 2014, or the results that may be achieved in future periods.

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Goodwill and Intangible Assets

9 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill

As a result of recent changes in the Company's organizational structure, which took effect on October 1, 2016, the Company now has three reportable business segments: the Intellectual and Developmental Disabilities (“I/DD”) segment, the Post-Acute Specialty Rehabilitation Services (“SRS”) Segment and the At-Risk Youth (“ARY”) segment. The Adult Day Health (“ADH”) operating segment, which was previously aggregated in the Human Services segment, is included in Corporate and Other. For more information refer to Note 10, "Segment Information."

The changes in goodwill for the nine months ended June 30, 2017 are as follows (in thousands):

	I/DD		SRS		ARY			Corporate and Other			Total
Balance as of September 30, 2016	$	104,155	$	81,909	$	73,464		$	14,132		$	273,660
Impact of segment change	35,212		—		(35,212		)	—			—
Goodwill acquired through acquisitions	626		461		—			13,849			14,936
Acquisition adjustments	—		—		—			(6		)	(6		)
Balance as of June 30, 2017	$	139,993	$	82,370	$	38,252		$	27,975		$	288,590

As a result of the changes in the organizational structure (Refer to Note 10, "Segment Information"), the Company's reporting units composed of the Company's I/DD and ARY operations changed. On October 1, 2016, the Company allocated goodwill between the new reporting units based on the relative fair values. The Company estimated the fair value of the new reporting units using the income approach. The income approach is based on a discounted cash flow analysis and calculates the fair value of a reporting unit by estimating the after–tax cash flows attributable to a reporting unit and then discounting them to a present value using a risk-adjusted discount rate. In our discounted cash flow analysis, we forecasted cash flows for the new reporting units for each of the next ten years and applied a long term growth rate to the final year of the forecasted cash flows to estimate terminal value. The cash flows were then discounted to a present value using a risk-adjusted discount rate. The discount rates, which are intended to reflect the risks inherent in future cash flow projections used in the discounted cash flow analysis, are based on estimates of the weighted average costs of capital of market participants relative to each respective reporting unit. 

This change was considered a triggering event that indicated a test for goodwill impairment was necessary as of October 1, 2016. The Company completed impairment tests of the new reporting units as of October 1, 2016 and it was determined that the carrying value of goodwill was not impaired as the fair value of the reporting units significantly exceeded the carrying value.  

Intangible Assets

Intangible assets consist of the following as of June 30, 2017 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	521,172	$	282,066	$	239,106
Non-compete/non-solicit agreements	1 year	7,003		5,009		1,994
Relationship with contracted caregivers	—	7,521		7,521		—
Trade names	2 years	6,658		4,607		2,051
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	53,180		41,716		11,464
Intellectual property	—	452		452		—
		$	641,786	$	341,371	$	300,415

Intangible assets consist of the following as of September 30, 2016 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	499,652	$	257,104	$	242,548
Non-compete/non-solicit	2 years	6,438		4,432		2,006
Relationship with contracted caregivers	—	7,521		7,505		16
Trade names	2 years	6,516		4,014		2,502
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	49,773		40,416		9,357
Intellectual property	—	452		452		—
		$	616,152	$	313,923	$	302,229

Amortization expense was $9.4 million and $27.4 million for the three and nine months ended June 30, 2017, respectively, and $10.1 million and $29.2 million for the three and nine months ended June 30, 2016, respectively.

The estimated remaining amortization expense related to intangible assets with finite lives for the three months remaining in fiscal 2017 and each of the four succeeding years and thereafter is as follows:

Year Ended September 30,	(in thousands)
2017	$	9,363
2018	37,492
2019	37,561
2020	36,507
2021	32,894
Thereafter	100,798
Total	$	254,615

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Fair Value Measurements

9 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

8. Fair Value Measurements

The Company measures and reports its financial assets and liabilities on the basis of fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

A three-level hierarchy for disclosure has been established to show the extent and level of judgment used to estimate fair value measurements, as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Significant other observable inputs (quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability).

Level 3: Significant unobservable inputs for the asset or liability. These values are generally determined using pricing models which utilize management estimates of market participant assumptions.

Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

A description of the valuation methodologies used for instruments measured at fair value as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2017.

(in thousands)	Total			Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap agreements	$	(850	)	$	—	$	(850	)	$	—

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016.

(in thousands)	Total			Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap agreements	$	(5,979	)	$	—	$	(5,979	)	$	—
Contingent consideration	$	(5,915	)	$	—	$	—		$	(5,915	)

Interest rate-swap agreements. The Company’s interest rate-swap agreements are classified within Level 2 of the fair value hierarchy. The fair value of the swap agreements is recorded in current liabilities (under other accrued liabilities) in the Company’s consolidated balance sheets. The fair value of these agreements is determined based on pricing models and independent formulas using current assumptions that included swap terms, interest rates and forward LIBOR curves and the Company’s credit risk.

Contingent consideration. In connection with the acquisition of Mass Adult Day Health (“Adult Day Health”) in September 2014 and Cassell in January 2015, the Company recorded contingent consideration pertaining to the amounts potentially payable to the former owners upon the businesses achieving certain performance targets.

The Company settled the remaining Adult Day Health and Cassell contingent consideration obligations during the three months ended March 31, 2017 for $6.1 million.

The following table presents a summary of changes in fair value of the Company’s Level 3 liabilities (acquisition related contingent consideration) measured on a recurring basis for the six months ended March 31, 2017. The three months ended June 30, 2017 is excluded from the table because the associated contingent consideration obligations were settled as of March 31, 2017.

(in thousands)	Six Months Ended March 31, 2017
Balance at September 30, 2016	$	5,915
Fair value adjustment	375
Balance at December 31, 2016	$	6,290
Fair value adjustment	(181		)
Payment	(6,109		)
Balance at March 31, 2017	$	—

The following table presents a summary of changes in fair value of the Company’s Level 3 liabilities (acquisition related contingent consideration) measured on a recurring basis for the nine months ended June 30, 2016.

(in thousands)	Nine Months Ended June 30, 2016
Balance at September 30, 2015	$	9,075
Present value accretion	(211		)
Cassell fair value adjustment	(2,945		)
Balance at December 31, 2015	$	5,919
Payment	(1,307		)
Balance at March 31, 2016	$	4,612
Cassell and Mass ADH fair value adjustment	2,600
Payment	(2,258		)
Balance at June 30, 2016	$	4,954

As of June 30, 2017 the Company had no contingent consideration liability. As of September 30, 2016, the Company had $5.9 million of contingent consideration liabilities, which was reflected in Other accrued liabilities.

At June 30, 2017 and September 30, 2016, the carrying values of cash, accounts receivable, accounts payable and variable rate debt approximated fair value.

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Income Taxes

9 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The Company’s effective income tax rate for the interim periods is based on management’s estimate of the Company’s annual effective tax rate for the applicable year. It is also affected by discrete items that may occur in any given period. The rates differ from the federal statutory income tax rate primarily due to state income taxes and nondeductible permanent differences such as meals and nondeductible compensation. For the three and nine months ended June 30, 2017, the Company’s effective income tax rate was 37.5% and 38.5%, respectively, as compared to an effective tax rate of 47.0% and 65.8%, respectively, for the three and nine months ended June 30, 2016. The higher effective tax rate for the three and nine months ended June 30, 2016 is primarily due to $10.5 million of stock-based compensation expense related to certain awards under our former equity compensation plan that vested in October 2015, which was not deductible for tax purposes.

The Company files a federal consolidated return and files various state income tax returns and, generally, is no longer subject to income tax examinations by the taxing authorities for years prior to September 30, 2014. The Company did not have a reserve for uncertain income tax positions at June 30, 2017 and September 30, 2016. The Company does not expect any significant changes to unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as charges to income tax expense.

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Segment Information

9 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment Information

10. Segment Information

The Company previously operated its business in two reportable segments, Human Services and Post-Acute Specialty Rehabilitation Services ("SRS"). Effective as of October 1, 2016, the Company re-aligned its businesses within our Human Services reporting segment to a service line organizational structure. As a result of such change our Human Services reporting segment has been divided into two reporting segments: the Intellectual and Developmental Disabilities ("I/DD") segment and the At-Risk Youth ("ARY") segment. This change aligns with the Company's service offerings and how it conducts and operates its businesses commencing in the first quarter of fiscal 2017. The Adult Day Health ("ADH") operating segment, which was previously aggregated in the Human Services segment, is now included in Corporate and Other. There has been no change to the SRS segment.

The change results in the Company having three reportable business segments: the I/DD segment, the SRS segment, and the ARY segment.

Through the I/DD segment, the Company provides home- and community-based human services to adults and children with intellectual and developmental disabilities. Through the SRS segment, the Company delivers services to individuals who have suffered acquired brain injury, spinal injuries and other catastrophic injuries and illnesses. The operations of the SRS segment have been organized by management into two operating segments, NeuroRestorative and CareMeridian, based upon service type. The NeuroRestorative operating group provides behavioral therapies to brain injured clients in post-acute community settings and the CareMeridian operating group provides a higher level of medical support to traumatically injured clients. Through the ARY segment we provide home- and community-based human services to youth with emotional, behavioral and/or medically complex challenges.

 Each operating group is aligned with the Company’s reporting structure and has a segment manager that is directly accountable for its operations and regularly reports results to the chief operating decision maker, which is the Company's Chief Operating Officer, for the purpose of evaluating these results and making decisions regarding resource allocations.

The Company evaluates performance based on EBITDA. EBITDA for each segment is defined as income (loss) from continuing operations for the segment before income taxes, before depreciation and amortization, and interest income (expense).

Activities classified as “Corporate and Other” in the table below relate to the results of our ADH operating segment and unallocated home office expenses, management fees, and stock-compensation expense. Total assets included in the Corporate and Other segment include assets associated with our ADH operating segment and assets maintained by our corporate entity including cash, restricted cash, and other current and non-current assets.

The following table is a financial summary by reportable segments for the periods indicated (in thousands):

For the three months ended June 30,	I/DD		SRS		ARY		Corporate and Other			Consolidated
2017
Net revenue	$	243,496	$	77,758	$	35,368	$	15,723		$	372,345
EBITDA	34,098		13,778		5,786		(14,377		)	39,285
Total assets	469,612		261,129		85,393		264,971			1,081,105
Depreciation and amortization	9,451		5,858		1,407		2,445			19,161
Purchases of property and equipment	7,093		2,865		329		1,899			12,186
2016(1)
Net revenue	$	233,836	$	73,506	$	35,364	$	11,257		$	353,963
EBITDA	34,161		14,391		5,993		(18,282		)	36,263
Depreciation and amortization	9,717		5,827		1,433		1,657			18,634
Purchases of property and equipment	5,444		2,497		692		4,003			12,636

⁽¹⁾ The previously reported segment information for the three months ended June 30, 2016 has been revised to reflect the new composition of the reportable segments. 

A reconciliation of EBITDA to income from continuing operations before income taxes on a consolidated basis is as follows (in thousands):

	For the three months ended June 30,
	2017		2016
EBITDA	$	39,285	$	36,263
Less:
Depreciation and amortization	19,161		18,634
Interest expense, net	8,339		8,490
Income from continuing operations before income taxes	$	11,785	$	9,139

The following table is a financial summary by reportable segments for the periods indicated (in thousands):

For the nine months ended June 30,	I/DD		SRS		ARY		Corporate and Other			Consolidated
2017
Net revenue	$	719,207	$	229,301	$	106,784	$	38,846		$	1,094,138
EBITDA	99,971		40,670		16,614		(48,344		)	108,911
Total assets	469,612		261,129		85,393		264,971			1,081,105
Depreciation and amortization	27,988		17,483		4,255		6,420			56,146
Purchases of property and equipment	18,390		8,016		961		5,614			32,981
2016(2)
Net revenue	$	694,351	$	213,549	$	113,279	$	24,214		$	1,045,393
EBITDA	102,114		40,471		15,883		(58,402		)	100,066
Depreciation and amortization	28,638		17,639		4,407		4,268			54,952
Purchases of property and equipment	15,327		7,774		1,508		7,046			31,655

⁽²⁾ The previously reported segment information for the nine months ended June 30, 2016 has been revised to reflect the new composition of the reportable segments. 

A reconciliation of EBITDA to income from continuing operations before income taxes on a consolidated basis is as follows (in thousands):

	For the nine months ended June 30,
	2017		2016
EBITDA	$	108,911	$	100,066
Less:
Depreciation and amortization	56,146		54,952
Interest expense, net	25,112		25,300
Income from continuing operations before income taxes	$	27,653	$	19,814

Revenue derived from contracts with state and local governmental payors in the state of Minnesota, the Company’s largest state operation, which is included in the I/DD segment, accounted for approximately 15% of the Company’s net revenue for the three and nine months ended June 30, 2017 and 2016.

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Disposition of Business

9 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposition of Business

11. Disposition of Business

During fiscal 2015, the Company decided to discontinue ARY services in the states of Florida, Louisiana, Indiana, North Carolina and Texas. These operations were included in the ARY segment. On December 1, 2015, the Company completed the sale of its ARY operations in the state of North Carolina. As consideration, the buyer assumed our lease and service delivery obligations in exchange for the assets of the business, excluding working capital items, and a cash payment of $1.3 million to the buyer. Upon the completion of the sale, the Company recorded a loss of $1.3 million. The closures of the ARY operations in Florida and Louisiana were complete as of December 31, 2015 and the closures of our ARY operations in Indiana and Texas were completed in January 2016. During the nine months ended June 30, 2016, the Company recorded cash charges of approximately $2.1 million, consisting of severance costs of $0.5 million and lease termination costs of $1.6 million.

The Company assessed the disposal group under the guidance of ASU 2014-08, Discontinued Operations and Disclosures of Disposals of Components of an Entity and concluded that the closure of the disposal group does not represent a "strategic shift" and therefore has not been classified as discontinued operations for any of the periods presented. However, the Company has concluded that the disposal group was an individually significant disposal group. There were no operating results for the disposal group during the three and nine months ended June 30, 2017. Pretax losses of the disposal group were $0.2 million and $5.8 million for the three and nine months ended June 30,2016, respectively. Pretax losses of the disposal group for the three and nine months ended June 30,2016 included exit costs of $2.1 million disclosed above.

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Net Income Per Share

9 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Net Income Per Share

12. Net Income Per Share

Basic net income per common share is computed by dividing net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share, if applicable, is computed by dividing net income by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding options and vesting of restricted stock units and performance based restricted stock units when dilutive.

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):

	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands, except share and per share amounts)	2017		2016		2017		2016
Numerator
Net income	$	7,361	$	4,816	$	17,019	$	6,527
Denominator
Weighted average shares outstanding, basic	37,323,458		37,108,486		37,278,760		37,101,968
Weighted average common equivalent shares	172,030		143,858		134,504		145,816
Weighted average shares outstanding, diluted	37,495,488		37,252,344		37,413,264		37,247,784
Net income per share, basic	$	0.20	$	0.13	$	0.46	$	0.18
Net income per share, diluted	$	0.20	$	0.13	$	0.45	$	0.18
Equity instruments excluded from diluted net income per share calculation as the effect would have been anti-dilutive:
Stock options	936,459		699,171		891,187		483,620
Restricted stock units	129,440		129,252		99,489		111,435

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Other Commitments and Contingencies

9 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Other Commitments and Contingencies

13. Other Commitments and Contingencies

The Company is in the health and human services business and, therefore, has been and continues to be subject to numerous claims alleging that the Company, its employees or its independently contracted host-home caregivers (“Mentors”) failed to provide proper care for a client. The Company is also subject to claims by its clients, its employees, its Mentors or community members against the Company for negligence, intentional misconduct or violation of applicable laws. Included in the Company’s recent claims are claims alleging personal injury, assault, abuse, wrongful death and other charges. Regulatory agencies may initiate administrative proceedings alleging that the Company’s programs, employees or agents violate statutes and regulations and seek to impose monetary penalties on the Company. The Company could be required to incur significant costs to respond to regulatory investigations or defend against civil lawsuits and, if the Company does not prevail, the Company could be required to pay substantial amounts of money in damages, settlement amounts or penalties arising from these legal proceedings.

The Company is also subject to potential lawsuits under the False Claims Act and other federal and state whistleblower statutes designed to combat fraud and abuse in the health care industry. These lawsuits can involve significant monetary awards that may incentivize private plaintiffs to bring these suits. If the Company is found to have violated the False Claims Act, it could be excluded from participation in Medicaid and other federal healthcare programs. The Patient Protection and Affordable Care Act provides a mandate for more vigorous and widespread enforcement activity to combat fraud and abuse in the health care industry.

The Company is also subject to employee-related claims under state and federal law, including claims for wage and hour violations under the Fair Labor Standards Act or state wage and hour laws, and claims for discrimination, wrongful discharge or retaliation. The Company currently has three pending complaints in California state court that allege certain

wage and hour violations of California labor laws and seek to be designated as class-action. One such wage and hour complaint has been settled and preliminarily approved by the court. The Company's policy is to accrue for all probable and estimable claims using information available at the time the financial statements are issued. Actual claims could settle in the future at materially different amounts due to the nature of litigation.

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Subsequent Events

9 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent Events

On July 1, 2017, the Company acquired the assets of Country Life Care Center ("Country Life") for cash consideration of $9.5 million. Country Life is a rehabilitation and post acute care facility located in Utah and is included in the Company's Specialty Rehabilitation Services business.

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Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, which is on file with the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring adjustments, necessary to present fairly the financial statements in accordance with GAAP. Intercompany balances and transactions between the Company and its subsidiaries have been eliminated in consolidation. Operating results for the three and nine months ended June 30, 2017 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Effective October 1, 2016, the Company completed changes to its organizational structure that resulted from a change in how the Company manages its business, allocates resources and measures performance. As a result, the Company has revised its reportable segments to reflect how management currently reviews financial information and makes operating decisions. Refer to Note 10, “Segment Information” for additional information on the changes in reportable segments.  All prior period amounts have been adjusted to reflect the changes in reportable segments.

Recent Accounting Pronouncements

On October 1, 2016, the Company adopted ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs and ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. As a result of the retrospective adoption of this standard, the Company recast its balance sheet presentation to reflect $5.9 million of deferred financing costs as of September 30, 2016 as a direct deduction to the carrying amount of its long-term debt. Prior to the adoption these costs were included within Other Assets.

3. Recent Accounting Pronouncements

Revenue from Contracts with Customers— In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers Topic 606 (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

Subsequent to issuing ASU No. 2014-09, the FASB issued the following amendments concerning the adoption and clarification of ASU No. 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard for the Company from October 1, 2017 to October 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which further clarifies the implementation guidance on principal versus agent considerations. The new guidance requires either a retrospective or a modified retrospective approach to adoption. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the identification of the performance obligations and licensing implementation guidance, while retaining the related principals of those areas. In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. In December 2016, the FASB issued ASU 2016-20 Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements, which provides corrections or improvements to certain aspects of the guidance issued in Update 2014-09. The Company is evaluating the method of adoption and the potential impact that these ASUs will have on our financial position, results of operations, cash flows, and liquidity.

Income Taxes— In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new standard requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The amendments in this update apply to all entities that present a classified statement of financial position. The Company is planning to adopt this standard as of July 1, 2017. As of June 30, 2017 and September 30, 2016, the Company had current deferred tax assets, net of current deferred tax liabilities, of $16.0 million and $18.0 million, respectively.

Leases— In February 2016, the FASB issued ASU No. 2016-02—Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The standard is to be applied using a modified retrospective approach and will be effective for the Company on October 1, 2019. The adoption of this standard is expected to have a material impact on the Company's financial position. As of September 30, 2016, the Company had gross operating lease commitments of approximately $284.1 million. Upon adoption, a substantial portion of these lease commitments will be recorded at their net present value as a right of use asset and a lease obligation.

Stock Compensation— In March 2016, the FASB issued ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard will be effective for the Company on October 1, 2017. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

Statement of Cash Flows— In August 2016, the FASB issued ASU No. 2016-15—Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new standard will be effective for the Company on October 1, 2018. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Statement of Cash Flows— In November 2016, the FASB issued ASU No. 2016-18—Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard will be effective for the Company on October 1, 2018. As of June 30, 2017 and September 30, 2016, the Company had total restricted cash amounts of $50.3 million and $51.0 million, respectively. The Company is currently evaluating the method and timing of the adoption of this standard.

Business Combinations— In January 2017, the FASB issued ASU No. 2017-01—Business Combinations (Topic 805): Clarifying the Definition of a Business. The update provides guidance to determine when an integrated set of assets and activities is not a business. When substantially all of the fair value of the gross assets acquired, or disposed of, is concentrated in a single identifiable asset or a group of similar identifiable assets, then the acquisition, or disposition, is not a business. Under this update there will be fewer purchases that will be treated as business combinations. The new standard will be effective for the Company on October 1, 2018. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

Intangibles—Goodwill and Other— In January 2017, the FASB issued ASU No. 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The new standard is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill tests performed on testing dates after January 1, 2017. The Company is planning to adopt this standard as of July 1, 2017 and currently evaluating the potential impact.

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Long-Term Debt (Tables)

9 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

As of June 30, 2017 and September 30, 2016, the Company’s long-term debt consisted of the following:

(in thousands)	June 30, 2017			September 30, 2016
Term loan principal; principal and interest are due in quarterly installments through January 31, 2021	$	634,115		$	639,030
Original issue discount on term loan, net of accumulated amortization	(970		)	(1,178		)
Deferred financing costs, net of accumulated amortization	(5,567		)	(5,890		)
	627,578			631,962
Less current portion	6,554			6,554
Long-term debt	$	621,024		$	625,408

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Stock-Based Compensation (Tables)

9 Months Ended

Jun. 30, 2017

Share-based Compensation [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

Stock option activity for the nine months ended June 30, 2017 is presented below:

(in thousands, except share and per share amounts)	Number of Shares	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2016	709,832	$	19.42
Granted	314,757	16.87
Exercised	35,196	17.00
Forfeited	72,400	19.19
Expired	2,864	25.41
Outstanding at June 30, 2017	914,129	$	18.64	8.1	$	408
Exercisable at June 30, 2017	352,597	$	18.49	7.0	$	154
Vested or expected to vest as of June 30, 2017	887,482	$	18.64	8.0	$	395

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The Company utilizes the Black-Scholes valuation model for estimating the fair value of stock options. Options granted under the 2014 Plan during the nine months ended June 30, 2017 were valued using the following assumptions:

	2017
Risk-free interest rate	1.83% - 2.08%
Expected term	6 years
Expected volatility	36.16% - 36.21%
Expected dividend yield	—	%

Schedule of Nonvested Restricted Stock Units Activity

A summary of PRSU activity for the nine months ended June 30, 2017 is as follows:

	Number of Performance Based Restricted Stock Units	Weighted Average Grant-Date Fair Value
Non-vested units at September 30, 2016	42,467	$	19.84
Granted	45,624	19.85
Forfeited	3,586	19.84
Vested	—	—
Non-vested units at June 30, 2017	84,505	$	19.84

Restricted stock unit activity for the nine months ended June 30, 2017 is presented below:

	Number of Restricted Stock Units	Weighted Average Grant-Date Fair Value
Non-vested units at September 30, 2016	442,528	$	21.24
Granted	530,660	17.73
Forfeited	70,205	19.26
Vested	119,823	22.46
Non-vested units at June 30, 2017	783,160	$	18.85

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Business Combinations (Tables)

9 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition

(in thousands)	Identifiable Intangible Assets		Tangible Assets		Total Identifiable Assets		Goodwill		Purchase Consideration
Loma Linda	$	2,225	$	33	$	2,258	$	483	$	2,741
Rainbow ADH	13,260		1,497		14,757		9,873		24,630
JLH	1,301		60		1,361		136		1,497
Mi Casa	2,960		59		3,019		1,921		4,940
Harbor Rehab	1,642		—		1,642		461		2,103
Brockton Stoughton ADH	4,000		195		4,195		2,055		6,250
Other acquisitions	246		99		345		7		352
Total	$	25,634	$	1,943	$	27,577	$	14,936	$	42,513

Business Acquisition, Pro Forma Information

The following table reflects the unaudited pro forma results of operations for the three and nine months ended June 30, 2017  and 2016 assuming that the acquisitions made during the three and nine months ended June 30, 2017 and 2016 had occurred on October 1, 2015 and 2014, respectively.

(in thousands)	Three Months Ended June 30,				Nine Months Ended June 30,
	2017		2016		2017		2016
Net revenue	$	375,285	$	363,971	$	1,113,093	$	1,089,813
Net income	7,685		5,897		19,198		11,611

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Goodwill

The changes in goodwill for the nine months ended June 30, 2017 are as follows (in thousands):

	I/DD		SRS		ARY			Corporate and Other			Total
Balance as of September 30, 2016	$	104,155	$	81,909	$	73,464		$	14,132		$	273,660
Impact of segment change	35,212		—		(35,212		)	—			—
Goodwill acquired through acquisitions	626		461		—			13,849			14,936
Acquisition adjustments	—		—		—			(6		)	(6		)
Balance as of June 30, 2017	$	139,993	$	82,370	$	38,252		$	27,975		$	288,590

Schedule of Finite-lived Intangible Assets

Intangible assets consist of the following as of June 30, 2017 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	521,172	$	282,066	$	239,106
Non-compete/non-solicit agreements	1 year	7,003		5,009		1,994
Relationship with contracted caregivers	—	7,521		7,521		—
Trade names	2 years	6,658		4,607		2,051
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	53,180		41,716		11,464
Intellectual property	—	452		452		—
		$	641,786	$	341,371	$	300,415

Intangible assets consist of the following as of September 30, 2016 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	499,652	$	257,104	$	242,548
Non-compete/non-solicit	2 years	6,438		4,432		2,006
Relationship with contracted caregivers	—	7,521		7,505		16
Trade names	2 years	6,516		4,014		2,502
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	49,773		40,416		9,357
Intellectual property	—	452		452		—
		$	616,152	$	313,923	$	302,229

Schedule of Indefinite-Lived Intangible Assets

Intangible assets consist of the following as of June 30, 2017 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	521,172	$	282,066	$	239,106
Non-compete/non-solicit agreements	1 year	7,003		5,009		1,994
Relationship with contracted caregivers	—	7,521		7,521		—
Trade names	2 years	6,658		4,607		2,051
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	53,180		41,716		11,464
Intellectual property	—	452		452		—
		$	641,786	$	341,371	$	300,415

Intangible assets consist of the following as of September 30, 2016 (in thousands):

Description	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
Agency contracts	7 years	$	499,652	$	257,104	$	242,548
Non-compete/non-solicit	2 years	6,438		4,432		2,006
Relationship with contracted caregivers	—	7,521		7,505		16
Trade names	2 years	6,516		4,014		2,502
Trade names (indefinite life)	—	45,800		—		45,800
Licenses and permits	2 years	49,773		40,416		9,357
Intellectual property	—	452		452		—
		$	616,152	$	313,923	$	302,229

Schedule of Amortization Expense Related to Intangible Assets

The estimated remaining amortization expense related to intangible assets with finite lives for the three months remaining in fiscal 2017 and each of the four succeeding years and thereafter is as follows:

Year Ended September 30,	(in thousands)
2017	$	9,363
2018	37,492
2019	37,561
2020	36,507
2021	32,894
Thereafter	100,798
Total	$	254,615

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Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Assets and Liabilities on a Recurring Basis

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2017.

(in thousands)	Total			Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap agreements	$	(850	)	$	—	$	(850	)	$	—

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016.

(in thousands)	Total			Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap agreements	$	(5,979	)	$	—	$	(5,979	)	$	—
Contingent consideration	$	(5,915	)	$	—	$	—		$	(5,915	)

Summary of Changes in Fair Value of Company's Level 3 Liabilities Measured on Recurring Basis

The following table presents a summary of changes in fair value of the Company’s Level 3 liabilities (acquisition related contingent consideration) measured on a recurring basis for the six months ended March 31, 2017. The three months ended June 30, 2017 is excluded from the table because the associated contingent consideration obligations were settled as of March 31, 2017.

(in thousands)	Six Months Ended March 31, 2017
Balance at September 30, 2016	$	5,915
Fair value adjustment	375
Balance at December 31, 2016	$	6,290
Fair value adjustment	(181		)
Payment	(6,109		)
Balance at March 31, 2017	$	—

The following table presents a summary of changes in fair value of the Company’s Level 3 liabilities (acquisition related contingent consideration) measured on a recurring basis for the nine months ended June 30, 2016.

(in thousands)	Nine Months Ended June 30, 2016
Balance at September 30, 2015	$	9,075
Present value accretion	(211		)
Cassell fair value adjustment	(2,945		)
Balance at December 31, 2015	$	5,919
Payment	(1,307		)
Balance at March 31, 2016	$	4,612
Cassell and Mass ADH fair value adjustment	2,600
Payment	(2,258		)
Balance at June 30, 2016	$	4,954

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Segment Information (Tables)

9 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Performance of Operating Segments

The following table is a financial summary by reportable segments for the periods indicated (in thousands):

For the nine months ended June 30,	I/DD		SRS		ARY		Corporate and Other			Consolidated
2017
Net revenue	$	719,207	$	229,301	$	106,784	$	38,846		$	1,094,138
EBITDA	99,971		40,670		16,614		(48,344		)	108,911
Total assets	469,612		261,129		85,393		264,971			1,081,105
Depreciation and amortization	27,988		17,483		4,255		6,420			56,146
Purchases of property and equipment	18,390		8,016		961		5,614			32,981
2016(2)
Net revenue	$	694,351	$	213,549	$	113,279	$	24,214		$	1,045,393
EBITDA	102,114		40,471		15,883		(58,402		)	100,066
Depreciation and amortization	28,638		17,639		4,407		4,268			54,952
Purchases of property and equipment	15,327		7,774		1,508		7,046			31,655

⁽²⁾ The previously reported segment information for the nine months ended June 30, 2016 has been revised to reflect the new composition of the reportable segments. 

The following table is a financial summary by reportable segments for the periods indicated (in thousands):

For the three months ended June 30,	I/DD		SRS		ARY		Corporate and Other			Consolidated
2017
Net revenue	$	243,496	$	77,758	$	35,368	$	15,723		$	372,345
EBITDA	34,098		13,778		5,786		(14,377		)	39,285
Total assets	469,612		261,129		85,393		264,971			1,081,105
Depreciation and amortization	9,451		5,858		1,407		2,445			19,161
Purchases of property and equipment	7,093		2,865		329		1,899			12,186
2016(1)
Net revenue	$	233,836	$	73,506	$	35,364	$	11,257		$	353,963
EBITDA	34,161		14,391		5,993		(18,282		)	36,263
Depreciation and amortization	9,717		5,827		1,433		1,657			18,634
Purchases of property and equipment	5,444		2,497		692		4,003			12,636

⁽¹⁾ The previously reported segment information for the three months ended June 30, 2016 has been revised to reflect the new composition of the reportable segments. 

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

A reconciliation of EBITDA to income from continuing operations before income taxes on a consolidated basis is as follows (in thousands):

	For the nine months ended June 30,
	2017		2016
EBITDA	$	108,911	$	100,066
Less:
Depreciation and amortization	56,146		54,952
Interest expense, net	25,112		25,300
Income from continuing operations before income taxes	$	27,653	$	19,814

A reconciliation of EBITDA to income from continuing operations before income taxes on a consolidated basis is as follows (in thousands):

	For the three months ended June 30,
	2017		2016
EBITDA	$	39,285	$	36,263
Less:
Depreciation and amortization	19,161		18,634
Interest expense, net	8,339		8,490
Income from continuing operations before income taxes	$	11,785	$	9,139

XML

Net Income Per Share (Tables)

9 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):

	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands, except share and per share amounts)	2017		2016		2017		2016
Numerator
Net income	$	7,361	$	4,816	$	17,019	$	6,527
Denominator
Weighted average shares outstanding, basic	37,323,458		37,108,486		37,278,760		37,101,968
Weighted average common equivalent shares	172,030		143,858		134,504		145,816
Weighted average shares outstanding, diluted	37,495,488		37,252,344		37,413,264		37,247,784
Net income per share, basic	$	0.20	$	0.13	$	0.46	$	0.18
Net income per share, diluted	$	0.20	$	0.13	$	0.45	$	0.18
Equity instruments excluded from diluted net income per share calculation as the effect would have been anti-dilutive:
Stock options	936,459		699,171		891,187		483,620
Restricted stock units	129,440		129,252		99,489		111,435

XML

Business Overview (Details)	Oct. 01, 2015 shares	Jun. 30, 2017 state client
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Area of operations, number of states | state		36
Number of residential clients		11,800
Number of periodic clients (more than)		18,600
2016 Unit Plan | Secondary Offering | NMH Investment | Common Stock
Product Information [Line Items]
Shares sold by stockholders (in shares) | shares	25,250,000

XML

Significant Accounting Policies (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Sep. 30, 2016
Accounting Policies [Abstract]
Deferred financing costs	$ 5,567	$ 5,890

XML

Recent Accounting Pronouncements (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Accounting Changes and Error Corrections [Abstract]
Deferred tax assets, net, current	$ 16.0	$ 18.0
Operating lease commitments		284.1
Restricted cash	$ 50.3	$ 51.0

XML

Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Sep. 30, 2016
Debt Disclosure [Abstract]
Term loan principal; principal and interest are due in quarterly installments through January 31, 2021	$ 634,115	$ 639,030
Original issue discount on term loan, net of accumulated amortization	(970)	(1,178)
Deferred financing costs, net of accumulated amortization	(5,567)	(5,890)
Long-term debt, current and non-current	627,578	631,962
Less current portion	6,554	6,554
Long-term debt	$ 621,024	$ 625,408

XML

Long-Term Debt - Senior Secured Credit Facilities - Additional Information (Details) - USD ($)		9 Months Ended
	May 25, 2017	Jun. 30, 2017	Jan. 31, 2014
National Mentor Holdings, Inc | Standby Letters of Credit Senior Revolver
Debt Instrument [Line Items]
Deposit in cash collateral			$ 120,000,000
Term Loan
Debt Instrument [Line Items]
Debt instrument maturity term		7 years
Term Loan | National Mentor Holdings, Inc
Debt Instrument [Line Items]
Amount of term loan facility			655,000,000
Senior Revolver | NMH Investment
Debt Instrument [Line Items]
Letters of credit outstanding, amount		$ 0
Line of credit facility, commitment fee		0.50%
Letter of Credit
Debt Instrument [Line Items]
Deposit in cash collateral			$ 50,000,000.0
Senior Secured Credit Facilities
Debt Instrument [Line Items]
Debt instrument maturity term		5 years
Senior Secured Credit Facilities | NMH Investment
Debt Instrument [Line Items]
Prepayment premium rate	1.00%
Senior Revolver | Line of Credit | NMH Investment | Letter of Credit
Debt Instrument [Line Items]
Amount of term loan facility		$ 2,900,000
Institutional Letter of Credit Facility | Line of Credit | NMH Investment | Letter of Credit
Debt Instrument [Line Items]
Amount of term loan facility		$ 47,400,000
Alternate Base Rate | Senior Secured Credit Facilities | NMH Investment
Debt Instrument [Line Items]
Basis points for interest rate	0.25%
Alternate Base Rate | Interest Rate Swap One | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.00%
Alternate Base Rate | Revolving and Swingline Loans | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.00%
Alternate Base Rate | Minimum | Term Loan
Debt Instrument [Line Items]
Variable rate floor		2.00%
Federal Funds | Term Loan | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		0.50%
Federal Funds | Line of Credit | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		0.50%
Eurodollar | Term Loan | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.00%
Variable rate floor		0.75%
Eurodollar | Senior Secured Credit Facilities | NMH Investment
Debt Instrument [Line Items]
Basis points for interest rate	0.25%
Eurodollar | Interest Rate Swap One | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.00%
Eurodollar | Revolving and Swingline Loans | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.25%
Eurodollar | Revolving and Swingline Loans | Term Loan | NMH Investment
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.25%
Eurodollar | Minimum | Term Loan | NMH Investment
Debt Instrument [Line Items]
Variable rate floor		0.75%

XML

Long-Term Debt - Covenants - Additional Information (Details) - NMH Investment	3 Months Ended	9 Months Ended
	Mar. 31, 2017	Jun. 30, 2017
Debt Instrument [Line Items]
Percentage of revolving commitments		30.00%
Consolidated first lien leverage ratio, maximum	5.00	5.50

XML

Long-Term Debt - Derivatives - Additional Information (Details)	9 Months Ended
	Jun. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Jan. 20, 2015 USD ($) swap
Debt Instrument [Line Items]
Ineffectiveness associated with swap	$ 0
Amount excluded from ineffectiveness testing	0
NMH Investment | Interest Rate Swap
Debt Instrument [Line Items]
Number of interest rate swap agreements | swap			2
Interest rate swap in a notional amount			$ 375,000,000
Payments on fixed rate			1.795%
Derivative liability	$ 900,000	$ 6,000,000
Minimum | NMH Investment | Interest Rate Swap
Debt Instrument [Line Items]
Minimum interest received from counter party			1.00%

XML

Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended
	Oct. 01, 2015	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)		6,663,240			6,663,240
Share-based compensation expense					$ 6,596	$ 15,200
NMH Investment | Common Stock | Secondary Offering | 2016 Unit Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares sold by stockholders (in shares)	25,250,000
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
PRSUs awarded (in shares)					45,624
Service period					3 years
Share-based compensation expense		$ 2,200	$ 1,800			$ 4,700
Performance Shares | 2016 Unit Plan | Class F Common Units and Class H Common Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense				$ 10,500
Minimum | Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options vesting percentage					0.00%
Maximum | Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options vesting percentage					200.00%

XML

Stock-Based Compensation - Stock Option Activity (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares
Number of Shares
Outstanding at period start (shares) | shares	709,832
Granted (shares) | shares	314,757
Exercised (shares) | shares	35,196
Forfeited (shares) | shares	72,400
Expired (shares) | shares	2,864
Outstanding at period end (shares) | shares	914,129
Exercisable at period end (shares) | shares	352,597
Vested or expected to vest (shares) | shares	887,482
Weighted- Average Exercise Price per Share
Outstanding at period start (dollars per share) | $ / shares	$ 19.42
Granted (dollars per share) | $ / shares	16.87
Exercised (dollars per share) | $ / shares	17.00
Forfeited (dollars per share) | $ / shares	19.19
Expired (dollars per share) | $ / shares	25.41
Outstanding at period end (dollars per share) | $ / shares	18.64
Exercisable at end of year (dollars per share) | $ / shares	18.49
Vested or expected to vest (dollars per share) | $ / shares	$ 18.64
Outstanding weighted-average remaining life	8 years 1 month 15 days
Exercisable weighted-average remaining life	7 years
Vested or expected to vest weighed-average remaining life	8 years 5 days
Outstanding at period end, aggregate intrinsic value | $	$ 408
Exercisable at period end, aggregate intrinsic value | $	154
Vested or expected to vest at period end, aggregate intrinsic value | $	$ 395

XML

Stock-Based Compensation - Assumptions in Calculating the Fair Value (Details) - Stock options	9 Months Ended
	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	6 years
Expected dividend yield	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.83%
Expected volatility	36.16%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	2.08%
Expected volatility	36.21%

XML

Stock-Based Compensation - Nonvested Restricted Stock Awards (Details) - Restricted stock units	9 Months Ended
	Jun. 30, 2017 $ / shares shares
Number of Restricted Stock Units
Non-vested beginning balance (shares) | shares	442,528
Granted (shares) | shares	530,660
Forfeited (shares) | shares	70,205
Vested (shares) | shares	119,823
Non-vested ending balance (shares) | shares	783,160
Weighted Average Grant-Date Fair Value
Non-vested beginning balance (dollars per share) | $ / shares	$ 21.24
Granted (dollars per share) | $ / shares	17.73
Forfeited (dollars per share) | $ / shares	19.26
Vested (dollars per share) | $ / shares	22.46
Non-vested ending balance (dollars per share) | $ / shares	$ 18.85

XML

Stock-Based Compensation - Performance Based Restricted Stock Awards (Details) - Performance Restricted Stock Units (PRSUs)	9 Months Ended
	Jun. 30, 2017 $ / shares shares
Number of Restricted Stock Units
Non-vested beginning balance (shares) | shares	42,467
Granted (shares) | shares	45,624
Forfeited (shares) | shares	3,586
Vested (shares) | shares	0
Non-vested ending balance (shares) | shares	84,505
Weighted Average Grant-Date Fair Value
Non-vested beginning balance (dollars per share) | $ / shares	$ 19.84
Granted (dollars per share) | $ / shares	19.85
Forfeited (dollars per share) | $ / shares	19.84
Vested (dollars per share) | $ / shares	0.00
Non-vested ending balance (dollars per share) | $ / shares	$ 19.84

XML

Business Combinations - Narrative (Details) $ in Thousands							9 Months Ended
	Jun. 26, 2017 USD ($)	Jun. 12, 2017 USD ($)	Jun. 09, 2017 USD ($)	Jun. 01, 2017 USD ($)	Mar. 01, 2017 USD ($)	Jan. 31, 2017 USD ($)	Jun. 30, 2017 USD ($) company	Sep. 30, 2016 USD ($)
Business Acquisition [Line Items]
Number of companies | company							8
Payment to acquire assets							$ 42,513
Assets acquired							25,634
Tangible assets							1,943
Goodwill							288,590	$ 273,660
Loma Linda
Business Acquisition [Line Items]
Payment to acquire assets						$ 2,700	2,741
Assets acquired						2,200	2,225
Tangible assets							33
Rainbow ADH
Business Acquisition [Line Items]
Payment to acquire assets					$ 24,600		24,630
Assets acquired					13,300		13,260
Tangible assets					1,500		1,497
Goodwill					9,900
JLH
Business Acquisition [Line Items]
Payment to acquire assets				$ 1,500			1,497
Assets acquired							1,301
Tangible assets							60
Goodwill				100
Mi Casa
Business Acquisition [Line Items]
Payment to acquire assets			$ 4,900				4,940
Assets acquired			3,000				2,960
Tangible assets							59
Goodwill			1,900
Harbor Rehab
Business Acquisition [Line Items]
Payment to acquire assets		$ 2,100					2,103
Assets acquired		1,600					1,642
Tangible assets							0
Goodwill		500
Brockton Stoughton ADH
Business Acquisition [Line Items]
Payment to acquire assets	$ 6,300						6,250
Assets acquired	4,000						4,000
Tangible assets							195
Goodwill	2,100
Hope Homes and Res-Care
Business Acquisition [Line Items]
Payment to acquire assets							$ 400
Agency contracts | Loma Linda
Business Acquisition [Line Items]
Assets acquired						$ 1,700
Useful life						12 years
Agency contracts | Rainbow ADH
Business Acquisition [Line Items]
Assets acquired					$ 11,300
Useful life					12 years
Agency contracts | JLH
Business Acquisition [Line Items]
Assets acquired				$ 1,300
Useful life				12 years
Agency contracts | Mi Casa
Business Acquisition [Line Items]
Assets acquired			$ 2,500
Useful life			12 years
Agency contracts | Harbor Rehab
Business Acquisition [Line Items]
Assets acquired		$ 1,100
Useful life		12 years
Agency contracts | Brockton Stoughton ADH
Business Acquisition [Line Items]
Assets acquired	$ 3,400
Useful life	12 years
Licenses permits and other | Rainbow ADH
Business Acquisition [Line Items]
Assets acquired					$ 2,000
Useful life					10 years
I/DD | Loma Linda
Business Acquisition [Line Items]
Goodwill						$ 500

XML

Business Combinations - Schedule of Business Acquisitions (Details) - USD ($) $ in Thousands							9 Months Ended
	Jun. 26, 2017	Jun. 12, 2017	Jun. 09, 2017	Jun. 01, 2017	Mar. 01, 2017	Jan. 31, 2017	Jun. 30, 2017
Business Acquisition [Line Items]
Identifiable Intangible Assets							$ 25,634
Tangible Assets							1,943
Total Identifiable Assets							27,577
Goodwill							14,936
Purchase Consideration							42,513
Loma Linda
Business Acquisition [Line Items]
Identifiable Intangible Assets						$ 2,200	2,225
Tangible Assets							33
Total Identifiable Assets							2,258
Goodwill							483
Purchase Consideration						$ 2,700	2,741
Rainbow ADH
Business Acquisition [Line Items]
Identifiable Intangible Assets					$ 13,300		13,260
Tangible Assets					1,500		1,497
Total Identifiable Assets							14,757
Goodwill							9,873
Purchase Consideration					$ 24,600		24,630
JLH
Business Acquisition [Line Items]
Identifiable Intangible Assets							1,301
Tangible Assets							60
Total Identifiable Assets							1,361
Goodwill							136
Purchase Consideration				$ 1,500			1,497
Mi Casa
Business Acquisition [Line Items]
Identifiable Intangible Assets			$ 3,000				2,960
Tangible Assets							59
Total Identifiable Assets							3,019
Goodwill							1,921
Purchase Consideration			$ 4,900				4,940
Harbor Rehab
Business Acquisition [Line Items]
Identifiable Intangible Assets		$ 1,600					1,642
Tangible Assets							0
Total Identifiable Assets							1,642
Goodwill							461
Purchase Consideration		$ 2,100					2,103
Brockton Stoughton ADH
Business Acquisition [Line Items]
Identifiable Intangible Assets	$ 4,000						4,000
Tangible Assets							195
Total Identifiable Assets							4,195
Goodwill							2,055
Purchase Consideration	$ 6,300						6,250
Other Acquisitions
Business Acquisition [Line Items]
Identifiable Intangible Assets							246
Tangible Assets							99
Total Identifiable Assets							345
Goodwill							7
Purchase Consideration							$ 352

XML

Business Combinations - Pro Forma Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Business Combinations [Abstract]
Net revenue	$ 375,285	$ 363,971	$ 1,113,093	$ 1,089,813
Net income	$ 7,685	$ 5,897	$ 19,198	$ 11,611

XML

Goodwill and Intangible Assets - Schedule of Changes in Goodwill (Details) $ in Thousands	9 Months Ended
	Jun. 30, 2017 USD ($)
Goodwill [Roll Forward]
Balance as of September 30, 2016	$ 273,660
Impact of segment change	0
Goodwill acquired through acquisitions	14,936
Acquisition adjustments	(6)
Balance as of June 30, 2017	288,590
Operating Segments | I/DD
Goodwill [Roll Forward]
Balance as of September 30, 2016	104,155
Impact of segment change	35,212
Goodwill acquired through acquisitions	626
Acquisition adjustments	0
Balance as of June 30, 2017	139,993
Operating Segments | SRS
Goodwill [Roll Forward]
Balance as of September 30, 2016	81,909
Impact of segment change	0
Goodwill acquired through acquisitions	461
Acquisition adjustments	0
Balance as of June 30, 2017	82,370
Operating Segments | ARY
Goodwill [Roll Forward]
Balance as of September 30, 2016	73,464
Impact of segment change	(35,212)
Goodwill acquired through acquisitions	0
Acquisition adjustments	0
Balance as of June 30, 2017	38,252
Corporate and Other
Goodwill [Roll Forward]
Balance as of September 30, 2016	14,132
Impact of segment change	0
Goodwill acquired through acquisitions	13,849
Acquisition adjustments	(6)
Balance as of June 30, 2017	$ 27,975

XML

Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Jun. 30, 2017	Sep. 30, 2016
Finite-Lived Intangible Assets [Line Items]
Accumulated Amortization	$ 341,371	$ 313,923
Total	254,615
Gross Carrying Value	641,786	616,152
Accumulated Amortization	341,371	313,923
Intangible Assets, Net	300,415	302,229
Trade names
Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	$ 45,800	$ 45,800
Agency contracts
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period	7 years	7 years
Gross Carrying Value	$ 521,172	$ 499,652
Accumulated Amortization	282,066	257,104
Total	239,106	242,548
Accumulated Amortization	$ 282,066	$ 257,104
Non-compete/non-solicit agreements
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period	1 year	2 years
Gross Carrying Value	$ 7,003	$ 6,438
Accumulated Amortization	5,009	4,432
Total	1,994	2,006
Accumulated Amortization	5,009	4,432
Relationship with contracted caregivers
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	7,521	7,521
Accumulated Amortization	7,521	7,505
Total	0	16
Accumulated Amortization	$ 7,521	$ 7,505
Trade names
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period	2 years	2 years
Gross Carrying Value	$ 6,658	$ 6,516
Accumulated Amortization	4,607	4,014
Total	2,051	2,502
Accumulated Amortization	$ 4,607	$ 4,014
Licenses and permits
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period	2 years	2 years
Gross Carrying Value	$ 53,180	$ 49,773
Accumulated Amortization	41,716	40,416
Total	11,464	9,357
Accumulated Amortization	41,716	40,416
Intellectual property
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	452	452
Accumulated Amortization	452	452
Total	0	0
Accumulated Amortization	$ 452	$ 452

XML

Goodwill and Intangible Assets - Narrative (Details) $ in Millions		3 Months Ended		9 Months Ended
	Sep. 30, 2016 segment	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) segment	Jun. 30, 2016 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Number of reportable segments | segment	2			3
Discounted cash flow analysis, forecast period				10 years
Amortization expense | $		$ 27.4	$ 29.2	$ 9.4	$ 10.1

XML

Goodwill and Intangible Assets - Amortization Expense (Details) $ in Thousands	Jun. 30, 2017 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2017	$ 9,363
2018	37,492
2019	37,561
2020	36,507
2021	32,894
Thereafter	100,798
Total	$ 254,615

XML

Fair Value Measurements - Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Sep. 30, 2016
Contingent consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities		$ (5,915)
Contingent consideration | Quoted Market Prices (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities		0
Contingent consideration | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities		0
Contingent consideration | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities		(5,915)
Interest rate swap agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	$ (850)	(5,979)
Interest rate swap agreements | Quoted Market Prices (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	0	0
Interest rate swap agreements | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	(850)	$ (5,979)
Interest rate swap agreements | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	$ 0

XML

Fair Value Measurements - Level 3 Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	$ 6,290	$ 5,915	$ 4,612	$ 5,919	$ 9,075
Present value accretion					(211)
Fair value adjustment	(181)	375	2,600		(2,945)
Payment	(6,109)		(2,258)	(1,307)
Balance at end of period	$ 0	$ 6,290	$ 4,954	$ 4,612	$ 5,919

XML

Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Sep. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liability	$ 0	$ 5,900
Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Settled obligation		$ 5,915
Contingent Consideration | Adult Day Health and Cassell
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Settled obligation	$ 6,100

XML

Income Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Effective income tax rate	37.50%	47.00%	38.50%	65.80%
Nondeductible expense, share-based compensation cost, amount		$ 10,500,000		$ 10,500,000
Reserve for uncertain income tax positions	$ 0		$ 0		$ 0

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Segment Information - Narrative (Details)		3 Months Ended		9 Months Ended
	Sep. 30, 2016 segment	Jun. 30, 2017 business_unit	Jun. 30, 2016	Jun. 30, 2017 business_unit segment	Jun. 30, 2016
Segment Reporting Information [Line Items]
Number of reportable segments | segment	2			3
SRS
Segment Reporting Information [Line Items]
Number of business units | business_unit		2		2
SRS | Minnesota | Geographic Concentration Risk | Sales Revenue, Segment
Segment Reporting Information [Line Items]
Percent of revenue		15.00%	15.00%	15.00%	15.00%

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Segment Information - Performance of Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Segment Reporting Information [Line Items]
Net revenue	$ 372,345	$ 353,963	$ 1,094,138	$ 1,045,393
EBITDA	39,285	36,263	108,911	100,066
Total assets	1,081,105		1,081,105		$ 1,086,158
Depreciation and amortization	19,161	18,634	56,146	54,952
Purchases of property and equipment	12,186	12,636	32,981	31,655
Operating Segments | I/DD
Segment Reporting Information [Line Items]
Net revenue	243,496	233,836	719,207	694,351
EBITDA	34,098	34,161	99,971	102,114
Total assets	469,612		469,612
Depreciation and amortization	9,451	9,717	27,988	28,638
Purchases of property and equipment	7,093	5,444	18,390	15,327
Operating Segments | SRS
Segment Reporting Information [Line Items]
Net revenue	77,758	73,506	229,301	213,549
EBITDA	13,778	14,391	40,670	40,471
Total assets	261,129		261,129
Depreciation and amortization	5,858	5,827	17,483	17,639
Purchases of property and equipment	2,865	2,497	8,016	7,774
Operating Segments | ARY
Segment Reporting Information [Line Items]
Net revenue	35,368	35,364	106,784	113,279
EBITDA	5,786	5,993	16,614	15,883
Total assets	85,393		85,393
Depreciation and amortization	1,407	1,433	4,255	4,407
Purchases of property and equipment	329	692	961	1,508
Corporate and Other
Segment Reporting Information [Line Items]
Net revenue	15,723	11,257	38,846	24,214
EBITDA	(14,377)	(18,282)	(48,344)	(58,402)
Total assets	264,971		264,971
Depreciation and amortization	2,445	1,657	6,420	4,268
Purchases of property and equipment	$ 1,899	$ 4,003	$ 5,614	$ 7,046

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Segment Information - Reconciliation of Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Segment Reporting [Abstract]
EBITDA	$ 39,285	$ 36,263	$ 108,911	$ 100,066
Depreciation and amortization	19,161	18,634	56,146	54,952
Interest expense, net	8,339	8,490	25,112	25,300
Income from continuing operations before income taxes	$ 11,785	$ 9,139	$ 27,653	$ 19,814

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Disposition of Business (Details) - ARY Services - Disposal Group, Disposed of by Sale, Not Discontinued Operations - USD ($)		3 Months Ended		9 Months Ended
	Dec. 01, 2015	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Payment from divestiture of business	$ 1,300,000
Loss on disposition of business	$ 1,300,000
Closure costs					$ 2,100,000
Severance costs					500,000
Lease termination costs					1,600,000
Discontinued operation, loss on disposal before income taxes		$ 0	$ 200,000	$ 0	5,800,000
Exit costs			$ 2,100,000		$ 2,100,000

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Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Numerator
Net income	$ 7,361	$ 4,816	$ 17,019	$ 6,527
Denominator
Weighted average shares outstanding, basic (in shares)	37,323,458	37,108,486	37,278,760	37,101,968
Weighted average common equivalent shares (in shares)	172,030	143,858	134,504	145,816
Weighted average shares outstanding, diluted (in shares)	37,495,488	37,252,344	37,413,264	37,247,784
Net income per share, basic (in dollars per share)	$ 0.20	$ 0.13	$ 0.46	$ 0.18
Net income per share, diluted (in dollars per share)	$ 0.20	$ 0.13	$ 0.45	$ 0.18
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Equity instruments excluded from diluted net income (loss) per share calculation as the effect would have been anti-dilutive (in shares)	936,459	699,171	891,187	483,620
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Equity instruments excluded from diluted net income (loss) per share calculation as the effect would have been anti-dilutive (in shares)	129,440	129,252	99,489	111,435

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Other Commitments and Contingencies (Details)	Jun. 30, 2017 complaint
Commitments and Contingencies Disclosure [Abstract]
Pending complaints	3

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Subsequent Events (Details) $ in Millions	Jul. 01, 2017 USD ($)
Subsequent Event
Subsequent Event [Line Items]
Consideration to acquire assets	$ 9.5