Performant Financial Corporation Announces Financial Results for Third Quarter 2022

Rhea-AI Summary

Performant Financial Corporation (Nasdaq: PFMT) reported its third quarter results for the period ending September 30, 2022. Total revenues decreased to $27.2 million from $28.6 million year-over-year, while healthcare revenues rose by 18% to $23.5 million. The net loss was $1.5 million, or $(0.02) per diluted share, an improvement from a loss of $1.7 million the previous year. Adjusted EBITDA fell to $(0.3) million from $2.7 million. The company maintains a strong cash position of $25.7 million and reiterates healthcare revenue guidance of $92-$96 million for 2022.

Positive

• Healthcare revenues increased by 18% year-over-year to $23.5 million.
• Cash position remains strong at approximately $25.7 million.
• Reiterated healthcare revenue guidance of $92-$96 million for 2022.

Negative

• Total revenues decreased to $27.2 million from $28.6 million year-over-year.
• Adjusted EBITDA fell to $(0.3) million from $2.7 million in the prior year.
• Recovery revenues dropped 99.3% to $41 thousand due to cessation of non-healthcare recovery activities.

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, 2022:

Third Quarter Financial Highlights

• Total revenues of $27.2 million, compared to revenues of $28.6 million in the prior year period.
• Healthcare revenues of $23.5 million, compared to $20.0 million in the prior year period, an increase of approximately 18%.
• Net loss of approximately $1.5 million, or $(0.02) per diluted share, compared to net loss of $1.7 million, or $(0.03) per diluted share, in the prior year period.
• Adjusted net loss was $1.7 million, or $(0.02) per diluted share, compared to adjusted net income of 0.1 million, or $0.00 per diluted share, in the prior year period.
• Adjusted EBITDA of $(0.3) million, compared to $2.7 million in the prior year period.

Third Quarter 2022 Results

Total revenues in the third quarter were $27.2 million, a decrease from revenues of $28.6 million in the prior year period. Healthcare revenues in the third quarter of 2022 were $23.5 million, an increase of 18% from revenues of $20.0 million in the prior year period. Within Healthcare, claims-based services revenue in the third quarter of 2022 was $10.4 million, while revenues from eligibility-based services in the third quarter was $13.1 million.

“We are excited to see our efforts successfully drive strong top line growth particularly among commercial payors,” stated Simeon Kohl, President of Performant. “Our recently announced strategic engagement with Priority Health highlights our partnership model for commercial payors, and our focus of growing our healthcare operations through a customized high-touch approach. As we go to market as a pure-play healthcare technology company, we are aligned from a cultural, technology and leadership team perspective .”

Recovery revenues in the third quarter were $41 thousand, a decrease of 99.3% from revenues of $5.5 million in the prior year period due to the cessation of non-healthcare recovery activity which largely occurred by the end of 2021. Revenues from our Customer Care / Outsourced Services in the third quarter were $3.6 million, up $0.5 million compared to the prior year period.

Net loss for the third quarter was $1.5 million, or $(0.02) per share on a diluted basis, compared to a net loss of $1.7 million, or $(0.03) per share on a diluted basis, in the prior year period. Adjusted net loss for the third quarter was $1.7 million, or $(0.02) per share on a diluted basis, compared to adjusted net income of $0.1 million, or $0.00 per diluted share, in the prior year period. Adjusted EBITDA for the third quarter was $(0.3) million as compared to $2.7 million in the prior year period.

As of September 30, 2022, the Company had cash, cash equivalents, and restricted cash of approximately $25.7 million.

“Our third quarter results were largely inline with our expectations and our long-term plan and strategy remains intact. Our healthcare offerings demonstrated continued year-over-year growth, which we expect will continue into 2023 based on our robust sales and implementation pipelines,” stated Rohit Ramchandani, Senior Vice President of Finance and Strategy at Performant. “Our cash position remains strong and we are pleased to reiterate our healthcare revenue guidance of $92-$96 million for 2022. Following the recent re-affirmation of the contract award for RAC Region 2 from CMS, we expect to start spending on the implementation work in the current month. This RAC related spend in tandem with additional costs incurred during the protest process, as well as increases in operating expenses related to our transformation from legacy markets served to today, leads us to a revised EBITDA range for the year of negative $1MM to a positive $1MM.”

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 2022 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 800-954-0628 (domestic) or 212-231-2928 (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 22021062. The telephonic replay will be available approximately three hours after the call, through November 15, 2022.

About Performant Healthcare Solutions

Performant Healthcare Solutions is a leading provider of 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.

To learn more, please visit https://www.performanthealth.com

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 the Company's outlook for revenues, net income (loss), and adjusted EBITDA in 2022 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, 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, that the high level of revenue concentration among the Company's largest customers and any termination of or deterioration in the Company’s relationship with any of its significant clients would result in a material decline in 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 U.S. federal government accounts for a significant portion of the Company's revenues, that downturns in domestic or global economic conditions and other macroeconomic factors could harm the Company’s business and results of operations, that the Company may not have sufficient cash flows from operations to fund ongoing operations and other liquidity needs, that the Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, the material adverse impact of the COVID-19 pandemic on the Company's business, results of operations and financial condition as well as on the business operations and financial performance of many of its customers, that limitations on the scope of the Company's audit activity under its claims audit contracts may reduce revenue opportunities, 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 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, 2021 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, 2022				December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	25,591			$	17,347
Restricted cash		81				2,203
Trade accounts receivable, net of allowance for doubtful accounts of $0 and $0, respectively		15,850				20,808
Contract assets		9,735				8,113
Prepaid expenses and other current assets		2,395				3,077
Income tax receivable		3,211				3,159
Total current assets		56,863				54,707
Property, equipment, and leasehold improvements, net		10,681				15,708
Goodwill		47,372				47,372
Right-of-use assets		2,394				3,235
Other assets		970				963
Total assets	$	118,280			$	121,985
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of notes payable, net of unamortized debt issuance costs of $16 and $11, respectively	$	859			$	489
Accrued salaries and benefits		6,532				8,476
Accounts payable		785				1,124
Other current liabilities		2,304				3,732
Contract liabilities		531				634
Estimated liability for appeals and disputes		1,148				1,190
Lease liabilities		1,303				1,862
Total current liabilities		13,462				17,507
Notes payable, net of current portion and unamortized debt issuance costs of $341 and $416, respectively		18,409				19,084
Lease liabilities		1,365				1,803
Other liabilities		1,148				1,168
Total liabilities		34,384				39,562
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2022 and December 31, 2021 respectively; issued and outstanding 74,212 and 69,281 shares at September 30, 2022 and December 31, 2021, respectively		7				7
Additional paid-in capital		141,437				133,662
Accumulated deficit		(57,548	)			(51,246	)
Total stockholders’ equity		83,896				82,423
Total liabilities and stockholders’ equity	$	118,280			$	121,985

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,
			2022				2021				2022				2021
Revenues		$	27,178			$	28,582			$	79,942			$	92,814
Operating expenses:
Salaries and benefits			21,759				19,686				63,101				67,071
Other operating expenses			7,733				8,781				23,945				29,896
Impairment of goodwill			—				—				—				—
Total operating expenses			29,492				28,467				87,046				96,967
Income (loss) from operations			(2,314	)			115				(7,104	)			(4,153	)
Gain on sale of certain recovery contracts			—				579				382				2,428
Gain on sale of land and buildings			1,120				—				1,120				—
Interest expense			(277	)			(2,394	)			(648	)			(5,866	)
Loss before provision for income taxes			(1,471	)			(1,700	)			(6,250	)			(7,591	)
Provision for (benefit from) income taxes			(11	)			(9	)			52				61
Net loss		$	(1,460	)		$	(1,691	)		$	(6,302	)		$	(7,652	)
Net loss per share
Basic		$	(0.02	)		$	(0.03	)		$	(0.09	)		$	(0.13	)
Diluted		$	(0.02	)		$	(0.03	)		$	(0.09	)		$	(0.13	)
Weighted average shares
Basic			74,021				62,127				72,480				57,512
Diluted			74,021				62,127				72,480				57,512

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities:
Net loss	$	(6,302	)		$	(7,652	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets and impairment of long-lived assets		40				718
Depreciation and amortization		3,355				3,883
Right-of-use assets amortization		841				1,413
Stock-based compensation		2,212				1,963
Interest expense from debt issuance costs		71				2,453
Gain on sale of certain recovery contracts		(382	)			(2,428	)
Gain on sale of land and buildings		(1,120	)			—
Changes in operating assets and liabilities:
Trade accounts receivable		4,958				4,270
Contract assets		(1,622	)			(484	)
Prepaid expenses and other current assets		682				1,245
Income tax receivable		(52	)			1,305
Other assets		(7	)			120
Accrued salaries and benefits		(1,944	)			(3,739	)
Accounts payable		(339	)			422
Contract liabilities and other current liabilities		(1,515	)			(1,363	)
Estimated liability for appeals, disputes, and refunds		(42	)			1,240
Lease liabilities		(997	)			(1,635	)
Other liabilities		(19	)			(445	)
Net cash (used in) provided by operating activities		(2,182	)			1,286
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements		(2,198	)			(2,695	)
Proceeds from sale of certain recovery contracts		382				3,171
Proceeds from sales of property, equipment, and leasehold improvements		4,934				—
Net cash provided by investing activities		3,118				476
Cash flows from financing activities:
Repayment of notes payable		(375	)			(8,438	)
Debt issuance costs paid		(2	)			(150	)
Taxes paid related to net share settlement of stock awards		—				(633	)
Proceeds from exercise of warrants		5,563				41
Proceeds from public offering, net of costs		—				42,648
Net cash provided by financing activities		5,186				33,468
Net increase in cash, cash equivalents and restricted cash		6,122				35,230
Cash, cash equivalents and restricted cash at beginning of period		19,550				18,296
Cash, cash equivalents and restricted cash at end of period	$	25,672			$	53,526
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	25,591			$	51,323
Restricted cash		81				2,203
Total cash, cash equivalents and restricted cash at end of period	$	25,672			$	53,526
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	$	267			$	(683	)
Cash paid for interest	$	449			$	3,413

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,
	2022				2021			2022			2021
	(in thousands)						(in thousands)
Adjusted EBITDA:
Net income (loss)	$	(1,460	)	$	(1,691	)	$	(6,302	)	$	(7,652	)
Provision for (benefit from) income taxes		(11	)		(9	)		52			61
Interest expense (1)		277			2,394			648			5,866
Stock-based compensation		931			540			2,212			1,963
Depreciation and amortization		1,095			843			3,355			3,883
Impairment of long-lived assets		—			—			—			636
Severance expenses (4)		10			380			189			1,876
Non-core operating expenses (5)		3		$	775			9			2,683
Gain on sale of certain recovery contracts (6)		—			(579	)		(382	)		(2,428	)
Gain on sale of land and buildings (7)	$	(1,120	)	$	—		$	(1,120	)	$	—
Adjusted EBITDA	$	(275	)	$	2,653		$	(1,339	)	$	6,888
	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021					2022			2021
	(in thousands)						(in thousands)
Adjusted Net Income (Loss):
Net income (loss)	$	(1,460	)	$	(1,691	)	$	(6,302	)	$	(7,652	)
Stock-based compensation		931			540			2,212			1,963
Amortization of intangible assets (2)		—			72			—			689
Amortization of debt issuance costs (3)		23			1,320			71			2,453
Impairment of long-lived assets		—			—			—			636
Severance expenses (4)		10			380			189			1,876
Non-core operating expenses (5)		3			—			9			2,683
Gain on sale of certain recovery contracts (6)		—			(579	)		(382	)		(2,428	)
Gain on sale of land and buildings (7)		(1,120	)		—			(1,120	)		—
Tax adjustments (8)		(42	)		(690	)		(269	)		(2,165	)
Adjusted net income (loss)	$	(1,655	)	$	127		$	(5,592	)	$	(1,945	)

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,
			2022				2021				2022				2021
		(in thousands)								(in thousands)
Adjusted Net Income (Loss) Per Diluted Share:
Net income (loss)		$	(1,460	)		$	(1,691	)		$	(6,302	)		$	(7,652	)
Plus: Adjustment items per reconciliation of adjusted net income (loss)			(195	)			1,818				710				5,707
Adjusted net income (loss)		$	(1,655	)		$	127			$	(5,592	)		$	(1,945	)
Adjusted net income (loss) per diluted share		$	(0.02	)		$	—			$	(0.08	)		$	(0.03	)
Diluted average shares outstanding (9)			74,021				67,948				72,480				57,512

We are providing the following preliminary estimates of our financial results as follows:

		Nine months ended				Three months ended		Year Ended
		September 30, 2022				December 31, 2022		December 31, 2021				December 31, 2022
		Actual				Estimate		Actual				Estimate
Adjusted EBITDA:
Net income (loss)		$	(6,302	)		$ (1,144) to (1,755)		$	(10,288	)		$ (7,446) to (8,057)
Provision for (benefit from) income taxes		$	52			(302) to 198			62			(250) to 250
Interest expense (1)		$	648			102 to 602			11,313			750 to 1,250
Stock-based compensation		$	2,212			538 to 1,038			2,640			2,750 to 3,250
Depreciation and amortization		$	3,355			1,145 to 2,145			5,188			4,500 to 5,500
Impairment of long-lived assets		$	—			—			636			—
Severance expenses (4)		$	189			0 to 111			2,160			189 to 300
Non-core operating expenses (5)		$	9			—			2,588			9
Gain on sale of certain recovery contracts (6)		$	(382	)		—			(2,403	)		(382	)
Gain on sale of land and buildings (7)		$	(1,120	)		—			—			(1,120	)
Adjusted EBITDA		$	(1,339	)		$ 339 to 2,339		$	11,896			$ (1,000) to 1,000

1. Represents interest expense and amortization of debt issuance costs related to our Credit Agreement and Prior 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 and Prior Credit Agreement.
4. Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.
5. Represents professional fees related to strategic corporate development activities.
6. Represents gain on the sale of certain non-healthcare recovery contracts.
7. Represents gain on the sale of land and two office buildings.
8. Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.
9. 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.

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 three and nine months ended September 30, 2022, and for the years ended December 31, 2021 and 2020:

		For the Three Months Ended									For the Nine Months Ended
		March 31, 2022			June 30, 2022			September 30, 2022			September 30, 2022
		(in thousands)
Eligibility-based		$	14,214		$	12,417		$	13,142		$	39,773
Claims-based			9,150			9,339			10,377			28,866
Healthcare Total			23,364			21,756			23,519			68,639
Recovery			118			7			41			166
Customer Care / Outsourced Services			3,601			3,918			3,618			11,137
Total		$	27,083		$	25,681		$	27,178		$	79,942

		For the Three Months Ended												For the Year Ended
		March 31, 2021			June 30, 2021			September 30, 2021			December 31, 2021			December 31, 2021
Eligibility-based		$	7,911		$	11,577		$	12,727		$	16,061		$	48,276
Claims-based			5,375			7,025			7,280			9,498			29,178
Healthcare Total			13,286			18,602			20,007			25,559			77,454
Recovery			14,491			11,091			5,490			2,333			33,405
Customer Care / Outsourced Services			3,613			3,149			3,085			3,687			13,534
Total		$	31,390		$	32,842		$	28,582		$	31,579		$	124,393

		For the Three Months Ended												For the Year Ended
		March 31, 2020			June 30, 2020			September 30, 2020			December 31, 2020			December 31, 2020
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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221108005989/en/

Richard Zubek

Investor Relations

925-960-4988

investors@performantcorp.com

Source: Performant Financial Corporation

FAQ

What were the third quarter 2022 earnings for PFMT?

Performant Financial reported a net loss of approximately $1.5 million, or $(0.02) per diluted share.

How much did healthcare revenues increase in the third quarter of 2022 for PFMT?

Healthcare revenues rose by approximately 18% to $23.5 million compared to the prior year.

What is the revenue guidance for PFMT in 2022?

The company has reiterated its healthcare revenue guidance of $92-$96 million for 2022.

What was the adjusted EBITDA for PFMT in the third quarter of 2022?

Adjusted EBITDA was $(0.3) million, a decline from $2.7 million in the prior year.