Performant Financial Corporation Announces Financial Results for Third Quarter 2021

Rhea-AI Summary

Performant Financial Corporation (Nasdaq: PFMT) reported a significant decline in its third quarter financial results for 2021. Total revenues fell to $28.6 million, down 21% from $36.2 million in the previous year. The company recorded a net loss of approximately $1.7 million or $(0.03) per diluted share, compared to a net income of $2.0 million or $0.04 per share in the prior year. Adjusted EBITDA was $2.7 million, a drop from $3.8 million last year. Despite this, healthcare revenues grew by 14% to $20.0 million. Cash and cash equivalents stood at approximately $53.5 million.

Positive

• Healthcare revenues increased by 14% to $20.0 million.
• Successful equity offering raised approximately $42.6 million for working capital.

Negative

• Total revenues decreased by 21% from $36.2 million to $28.6 million.
• Net loss of $1.7 million compared to a net income of $2.0 million last year.
• Adjusted net income dropped to $0.1 million from $3.2 million.

LIVERMORE, Calif.--(BUSINESS WIRE)-- Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), a leading provider of technology-enabled audit, recovery, and related analytics services in the United States with a focus in the healthcare payment integrity services industry, today reported the following financial results for its third quarter ended September 30, 2021:

Third Quarter Financial Highlights

• Total revenues of $28.6 million, compared to revenues of $36.2 million in the prior year period.
• Net loss of approximately $1.7 million, or $(0.03) per diluted share, compared to net income of $2.0 million, or $0.04 per diluted share, in the prior year period.
• Adjusted net income was $0.1 million, or $0.00 per diluted share, compared to adjusted net income of $3.2 million or $0.06 per diluted share in the prior year period.
• Adjusted EBITDA of $2.7 million, compared to $3.8 million in the prior year period.

Third Quarter 2021 Results

Total revenues in the third quarter were $28.6 million, a decrease of $7.6 million, or 21% from revenues of $36.2 million in the prior year period. Healthcare revenues in the third quarter of 2021 were $20.0 million, an increase of $2.4 million, or 14%, from revenues of $17.6 million in the prior year period. Within Healthcare, claims-based services revenue in the third quarter of 2021 was $7.3 million, while revenue from eligibility-based services in the third quarter was $12.7 million.

Recovery revenues in the third quarter were $5.5 million, a decrease of $9.9 million, or 64%, from revenues of $15.4 million in the prior year period. Revenues from our Customer Care / Outsourced Services in the third quarter were $3.1 million, a decrease of $0.1 million, or 3%, from revenues of $3.2 million in the prior year period.

Net loss for the third quarter was $1.7 million, or $(0.03) per share on a diluted basis, compared to net income of $2.0 million, or $0.04 per share on a diluted basis, in the prior year period. Adjusted net income for the third quarter was $0.1 million, or $0.00 per share on a diluted basis, compared to adjusted net income of $3.2 million, or $0.06 per diluted share, in the prior year period. Adjusted EBITDA for the third quarter was $2.7 million as compared to $3.8 million in the prior year period.

As of September 30, 2021, the Company had cash, cash equivalents, and restricted cash of approximately $53.5 million.

Equity Offering

On August 20, 2021, the Company completed a registered public offering of 12,103,750 shares of common stock, which resulted in the Company receiving net proceeds of approximately $42.6 million. The Company intends to use the net proceeds from this offering for working capital and other general corporate purposes, which may include the repayment of outstanding indebtedness.

Business Commentary and Outlook

“Our third quarter showcased the strength of our technology platform and demonstrated our ability to continue to increase our healthcare market share by winning business away from legacy providers, despite a challenging operating environment. From a macro perspective, core hospital utilization rates have still not returned to pre-COVID levels, and the delays that have impacted the healthcare industry are showing flow-down impact on our operations. In light of these delays amongst other movements we've updated our 2021 healthcare revenue guidance to a range of $77 - $80 million with nearly double digit EBITDA for the full year,” stated Lisa Im, CEO of Performant.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share. These measures are not in accordance with accounting principles generally accepted in the United States of America (US GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net income (loss) to net income (loss) determined in accordance with US GAAP are included in the “Reconciliation of Non-GAAP Results” table at the end of this press release. We have included adjusted EBITDA and adjusted net income (loss) in this press release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. Accordingly, we believe that adjusted EBITDA and adjusted net income (loss) provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and board of directors. Our use of adjusted EBITDA and adjusted net income (loss) has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. In particular, many of the adjustments to our US GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

Earnings Conference Call

The Company will hold a conference call to discuss its third quarter 2021 results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company’s website at investors.performantcorp.com. The conference call is also available by dialing 877-344-8082 (domestic) or 213-992-4618 (international).

A replay of the call will be available on the Company's website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 147424. The telephonic replay will be available approximately three hours after the call, through November 16, 2021.

About Performant Financial Corporation

Performant provides technology-enabled audit, recovery, and analytics services in the United States with a focus in the healthcare payment integrity industry. Performant works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits) services to identify improper payments. The Company engages clients in both government and commercial markets. The Company also has a call center which serves clients with complex consumer engagement needs. Clients of the Company typically operate in complex and highly regulated environments and contract for their payment integrity needs in order to reduce losses on improper healthcare payments.

Powered by a proprietary analytic platform and workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our outlook for revenues, net income (loss), and adjusted EBITDA in 2020 and beyond. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the material adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition as well as on the business operations and financial performance of many of our customers, that the Company may not have sufficient cash flows from operations to fund ongoing operations and other liquidity needs, that the Company’s indebtedness could adversely affect its business and financial condition and could reduce the funds available for other purposes and the failure to comply with covenants contained in its credit agreement could result in an event of default that could adversely affect its results of operations, that the Company faces a long period to implement a new contract which may result in the incurring of expenses before the receipt of revenues from new client relationships, the high level of revenue concentration among the Company's largest customers and any termination in the Company’s relationship with any of our significant clients would result in a material decline in our revenues, that many of the Company's customer contracts are subject to periodic renewal, are not exclusive, do not provide for committed business volumes and may be changed or terminated unilaterally and on short notice, that the Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, that continuing limitations on the scope of our audit activity under our RAC contracts have significantly reduced our revenue opportunities with this client, that the U.S. federal government accounts for a significant portion of the Company's revenues, that future legislative and regulatory changes may have significant effects on the Company's business, that failure of the Company's or third parties' operating systems and technology infrastructure could disrupt the operation of the Company's business and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company's financial condition and operating results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's annual report on Form 10-K for the year ended December 31, 2020 and subsequently filed reports on Forms 10-Q and 8-K. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share amounts)
	September 30, 2021				December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	51,323			$	16,043
Restricted cash	2,203				2,253
Trade accounts receivable, net of allowance for doubtful accounts of $49 and $49, respectively	18,203				23,216
Contract assets	4,950				4,466
Prepaid expenses and other current assets	2,539				3,784
Income tax receivable	3,453				4,758
Total current assets	82,671				54,520
Property, equipment, and leasehold improvements, net	16,280				17,497
Identifiable intangible assets, net	—				689
Goodwill	47,372				47,372
Right-of-use assets	3,630				5,043
Other assets	986				1,106
Total assets	$	150,939			$	126,227
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of notes payable to related party, net of unamortized debt issuance costs of $4,500 and $906, respectively	$	47,925			$	59,957
Accrued salaries and benefits	5,060				8,799
Accounts payable	829				407
Other current liabilities	3,295				3,841
Deferred revenue	—				867
Estimated liability for appeals, disputes, and refunds	2,254				1,014
Lease liabilities	2,105				2,327
Total current liabilities	61,468				77,212
Notes payable to related party, net of current portion and unamortized debt issuance costs of $0 and $0, respectively	—				—
Lease liabilities	2,029				3,442
Other liabilities	3,055				3,593
Total liabilities	66,552				84,247
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2021 and December 31, 2020 respectively; issued and outstanding 69,144 and 54,764 shares at September 30, 2021 and December 31, 2020, respectively	7				5
Additional paid-in capital	132,990				82,933
Accumulated deficit	(48,610		)		(40,958		)
Total stockholders’ equity	84,387				41,980
Total liabilities and stockholders’ equity	$	150,939			$	126,227

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Revenues		$	28,582			$	36,228			$	92,814			$	115,901
Operating expenses:
Salaries and benefits		19,686				23,522				67,071				74,493
Other operating expenses		8,781				10,813				29,896				32,075
Impairment of goodwill		—				—				—				27,000
Total operating expenses		28,467				34,335				96,967				133,568
Income (loss) from operations		115				1,893				(4,153		)		(17,667		)
Gain on sale of certain recovery contracts		579				—				2,428				—
Interest expense		(2,394		)		(1,569		)		(5,866		)		(5,827		)
Interest income		—				6				—				18
Income (loss) before provision for (benefit from) income taxes		(1,700		)		330				(7,591		)		(23,476		)
Provision for (benefit from) income taxes		(9		)		(1,644		)		61				(5,767		)
Net income (loss)		$	(1,691	)		$	1,974			$	(7,652	)		$	(17,709	)
Net income (loss) per share
Basic		$	(0.03	)		$	0.04			$	(0.13	)		$	(0.33	)
Diluted		$	(0.03	)		$	0.04			$	(0.13	)		$	(0.33	)
Weighted average shares
Basic		62,127				54,684				57,512				54,299
Diluted		62,127				54,710				57,512				54,299

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Nine Months Ended September 30,
	2021				2020
Cash flows from operating activities:
Net loss	$	(7,652	)		$	(17,709	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairment of long-lived assets	718				88
Impairment of goodwill	—				27,000
Depreciation and amortization	3,883				4,072
Right-of-use assets amortization	1,413				1,886
Stock-based compensation	1,963				1,997
Interest expense from debt issuance costs	2,453				1,145
Earnout mark-to-market	—				(162		)
Gain on sale of certain recovery contracts	(2,428		)		—
Changes in operating assets and liabilities:
Trade accounts receivable	4,270				4,756
Contract assets	(484		)		(1,523		)
Prepaid expenses and other current assets and other assets	1,245				298
Income tax receivable	1,305				(3,555		)
Other assets	120				—
Accrued salaries and benefits	(3,739		)		(1,081		)
Accounts payable	422				(1,160		)
Deferred revenue and other current liabilities	(1,363		)		1,664
Estimated liability for appeals, disputes, and refunds	1,240				15
Lease liabilities	(1,635		)		(1,907		)
Other liabilities	(445		)		2,168
Net cash provided by operating activities	1,286				17,992
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements	(2,695		)		(2,862		)
Proceeds from sale of certain recovery contracts	3,171				—
Net cash provided by (used) in investing activities	476				(2,862		)
Cash flows from financing activities:
Repayment of notes payable	(8,438		)		(2,588		)
Debt issuance costs paid	(150		)		—
Taxes paid related to net share settlement of stock awards	(633		)		(260		)
Proceeds from exercise of stock options	41				—
Proceeds from public offering, net of costs	42,648				—
Net cash provided by (used in) financing activities	33,468				(2,848		)
Net increase in cash, cash equivalents and restricted cash	35,230				12,282
Cash, cash equivalents and restricted cash at beginning of period	18,296				4,995
Cash, cash equivalents and restricted cash at end of period	$	53,526			$	17,277
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	51,323			$	15,655
Restricted cash	2,203				1,622
Total cash, cash equivalents and restricted cash at end of period	$	53,526			$	17,277
Non-cash financing activities:
Recognition of earnout shares issued	$	801			$	—
Recognition of warrants associated with notes payable	$	5,237			$	—
Supplemental disclosures of cash flow information:
Cash paid (received) for income taxes	$	(683	)		$	(2,280	)
Cash paid for interest	$	3,413			$	4,616

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Results (In thousands, except per share amount) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
		(in thousands)								(in thousands)
Adjusted EBITDA:
Net income (loss)		$	(1,691	)		$	1,974			$	(7,652	)		$	(17,709	)
Provision for (benefit from) income taxes		(9		)		(1,644		)		61				(5,767		)
Interest expense (1)		2,394				1,569				5,866				5,827
Interest income		—				(6		)		—				(18		)
Stock-based compensation		540				657				1,963				1,997
Depreciation and amortization		843				1,277				3,883				4,072
Impairment of goodwill (4)		—				—				—				27,000
Impairment of long-lived assets		—				—				636				—
Earnout mark-to-market (5)		—				—				—				(162		)
Severance expenses (6)		380				—				1,876				—
Non-core operating expenses (7)		775				—				2,683				—
Gain on sale of certain recovery contracts (8)		(579		)		—				(2,428		)		—
Adjusted EBITDA		$	2,653			$	3,827			$	6,888			$	15,240
		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
		(in thousands)								(in thousands)
Adjusted Net Income (Loss):
Net income (loss)		$	(1,691	)		$	1,974			$	(7,652	)		$	(17,709	)
Stock-based compensation		540				657				1,963				1,997
Amortization of intangible assets (2)		72				58				689				176
Amortization of debt issuance costs (3)		1,320				249				2,453				1,145
Impairment of goodwill (4)		—				—				—				27,000
Impairment of long-lived assets		—				—				636				—
Earnout mark-to-market (5)		—				—				—				(162		)
Severance expenses (6)		380				—				1,876				—
Non-core operating expenses (7)		775				—				2,683				—
Gain on sale of certain recovery contracts (8)		(579		)		—				(2,428		)		—
Tax adjustments (9)		(690		)		265				(2,165		)		(8,293		)
Adjusted net income (loss)		$	127			$	3,203			$	(1,945	)		$	4,154

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
		(in thousands)								(in thousands)
Adjusted Net Income (Loss) Per Diluted Share:
Net income (loss)		$	(1,691	)		$	1,974			$	(7,652	)		$	(17,709	)
Plus: Adjustment items per reconciliation of adjusted net income (loss)		1,818				1,229				5,707				21,863
Adjusted net income (loss)		$	127			$	3,203			$	(1,945	)		$	4,154
Adjusted net income (loss) per diluted share		$	—			$	0.06			$	(0.03	)		$	0.08
Diluted average shares outstanding (10)		67,948				54,710				57,512				54,363

(1)	Represents interest expense and amortization of debt issuance costs related to our Credit Agreement.
(2)	Represents amortization of intangibles related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004.
(3)	Represents amortization of debt issuance costs related to our Credit Agreement.
(4)	Represents a noncash goodwill impairment charge in 2020 mainly due to the decrease of our market capitalization in the first half of 2020.
(5)	Represents the change from prior reporting periods in the fair value of the potential earnout consideration payable to ECMC group in connection with the Premiere acquisition.
(6)	Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.
(7)	Represents professional fees related to strategic corporate development activities.
(8)	Represents gain on the sale of certain non-healthcare recovery contracts in 2021.
(9)	Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.
(10)	While net loss for the three months ended September 30, 2021 is ($1,691), the computation of adjusted net income (loss) results in adjusted net income of $127. Therefore, the calculation of the adjusted earnings per diluted share for the three months ended September 30, 2021 includes dilutive common share equivalents of 5,821 added to the basic weighted average shares of 62,127. While net income (loss) for the nine months ended September 30, 2020 was ($17,709), the computation of adjusted net income (loss) results in adjusted net income of $4,154. Therefore, the calculation of the adjusted net income per diluted share for the nine months ended September 30, 2020 includes dilutive common share equivalents of 64 added to the basic weighted average shares of 54,299.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Results (In thousands, except per share amount) (Unaudited)
We are providing the following historical breakdown of the quarterly and annual revenue contributions under the new contribution breakdowns of our healthcare revenue results for the years ended December 31, 2019 and December 31, 2020, and six months ended June 30, 2021:
		For the Three Months Ended																For the Year Ended
		March 31, 2019				June 30, 2019				September 30, 2019				December 31, 2019				December 31, 2019
		(in thousands)
Eligibility-based		$	7,742			$	7,042			$	8,005			$	9,987			$	32,776
Claims-based			1,278				2,221				2,752				4,301				10,552
Healthcare Total			9,020				9,263				10,757				14,288				43,328
Recovery			21,375				22,107				20,936				25,208				89,626
Customer Care / Outsourced Services			4,481				4,460				4,210				4,327				17,478
Total		$	34,876			$	35,830			$	35,903			$	43,823			$	150,432

		For the Three Months Ended																For the Year Ended
		March 31, 2020				June 30, 2020				September 30, 2020				December 31, 2020				December 31, 2020
		(in thousands)
Eligibility-based		$	10,949			$	11,292			$	13,480			$	14,126			$	49,847
Claims-based			6,575				3,301				4,086				4,739				18,701
Healthcare Total			17,524				14,593				17,566				18,865				68,548
Recovery			24,265				16,167				15,443				17,521				73,396
Customer Care / Outsourced Services			4,099				3,025				3,219				3,650				13,993
Total		$	45,888			$	33,785			$	36,228			$	40,036			$	155,937

		For the Three Months Ended												For the Nine Months Ended
		March 31, 2021				June 30, 2021				September 30, 2021				September 30, 2021
		(in thousands)
Eligibility-based		$	7,911			$	11,577			$	12,727			$	32,215
Claims-based			5,375				7,025				7,280				19,680
Healthcare Total			13,286				18,602				20,007				51,895
Recovery			14,491				11,091				5,490				31,072
Customer Care / Outsourced Services			3,613				3,149				3,085				9,847
Total		$	31,390			$	32,842			$	28,582			$	92,814

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211109006389/en/

Richard Zubek

Investor Relations

925-960-4988

investors@performantcorp.com

Source: Performant Financial Corporation

FAQ

What are Performant Financial's Q3 2021 revenue figures?

Performant Financial reported total revenues of $28.6 million for Q3 2021.

How did Performant Financial's net income change in Q3 2021?

The company experienced a net loss of $1.7 million in Q3 2021, compared to a net income of $2.0 million in the prior year.

What is the updated healthcare revenue guidance for Performant Financial for 2021?

Performant Financial has updated its healthcare revenue guidance to a range of $77 - $80 million for 2021.

What was the adjusted EBITDA for Performant Financial in Q3 2021?

The adjusted EBITDA for Performant Financial in Q3 2021 was $2.7 million, down from $3.8 million in the previous year.

What was the impact of the equity offering on Performant Financial?

The equity offering completed on August 20, 2021, raised approximately $42.6 million for working capital and other corporate purposes.