Performant Financial Corporation Announces Financial Results for Second Quarter 2022

Rhea-AI Summary

Performant Financial Corporation (Nasdaq: PFMT) reported its second-quarter results for 2022, showing total revenues of $25.7 million, a decline from $32.8 million year-over-year. Healthcare revenues increased by 17% to $21.8 million. The company incurred a net loss of approximately $(3.2) million, or $(0.04) per diluted share, compared to a net loss of $(1.5) million, or $(0.03) per diluted share in the previous year. Adjusted EBITDA stood at $(1.4) million, significantly down from $4.2 million in the prior year. The company maintains 2022 healthcare revenue guidance of $92-$96 million.

Positive

• Healthcare revenues increased by 17% to $21.8 million.
• The company maintains its healthcare revenue guidance of $92-$96 million for 2022.

Negative

• Total revenues decreased to $25.7 million from $32.8 million year-over-year.
• Net loss increased to $(3.2) million from $(1.5) million in the previous year.
• Adjusted EBITDA declined to $(1.4) million from $4.2 million year-over-year.
• Recovery revenues fell by 99.9% to $7 thousand due to the cessation of non-healthcare recovery activity.

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 second quarter ended June 30, 2022:

Second Quarter Financial Highlights

• Total revenues of $25.7 million, compared to revenues of $32.8 million in the prior year period.
• Healthcare revenues of $21.8 million, compared to $18.6 million in the prior year period, an increase of 17.0%
• Net loss of approximately $(3.2) million, or $(0.04) per diluted share, compared to net loss of $(1.5) million, or $(0.03) per diluted share, in the prior year period.
• Adjusted net loss was $(2.9) million, or $(0.04) per diluted share, compared to adjusted net income of 0.5 million, or $0.01 per diluted share, in the prior year period.
• Adjusted EBITDA of $(1.4) million, compared to $4.2 million in the prior year period.

Second Quarter 2022 Results

Total revenues in the second quarter were $25.7 million, a decrease from revenues of $32.8 million in the prior year period. Healthcare revenues in the second quarter of 2022 were $21.8 million, an increase of 17% from revenues of $18.6 million in the prior year period. Within Healthcare, claims-based services revenue in the second quarter of 2022 was $9.3 million, while revenues from eligibility-based services in the second quarter was $12.4 million.

“The second quarter of 2022 marked yet another quarter of strong year-over-year growth in our healthcare revenues supported by our robust sales pipeline and steady implementation conversion,” stated Simeon Kohl, President of Performant. “We are also pleased to announce that Melissa Christ has joined Performant as Chief People Officer. Melissa brings over 20 years of experience in people strategy and working with high-growth companies. People are at the core of everything we do, and we are excited to have such an experienced leader to help navigate this important period of growth.”

Recovery revenues in the second quarter were $7 thousand, a decrease of 99.9% from revenues of $11.1 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 second quarter were $3.9 million, up $0.8 million compared to the prior year period.

Net loss for the second quarter was $3.2 million, or $(0.04) per share on a diluted basis, compared to a net loss of $1.5 million, or $(0.03) per share on a diluted basis, in the prior year period. Adjusted net loss for the second quarter was $2.9 million, or $(0.04) per share on a diluted basis, compared to adjusted net income of $0.5 million, or $0.01 per diluted share, in the prior year period. Adjusted EBITDA for the second quarter was $(1.4) million as compared to $4.2 million in the prior year period.

As of June 30, 2022, the Company had cash, cash equivalents, and restricted cash of approximately $18.2 million.

“Given our continued achievements in the second quarter, and in combination with the KPI and opportunity growth ahead of us, we remain pleased with how we are tracking toward current year expectations and more importantly, our long-term goals,” stated Rohit Ramchandani, Senior Vice President of Finance and Strategy at Performant. “Despite a tumultuous macroeconomic climate we remain well capitalized and positioned to continue executing against our investment strategies, which will promote continued long-term growth. As we look ahead to the second half of the year, we are pleased to reiterate our Healthcare revenue and adjusted EBITDA guidance ranges for 2022 of $92-$96MM and $2-$4 million respectively.”

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 second 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 877-704-4453 (domestic) or 201-389-0920 (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 13731883. The telephonic replay will be available approximately three hours after the call, through August 15, 2022.

About Performant Financial Corporation

Performant 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.

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)
	June 30, 2022				December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	15,973			$	17,347
Restricted cash		2,203				2,203
Trade accounts receivable, net of allowance for doubtful accounts of $29 and $—, respectively		19,880				20,808
Contract assets		9,197				8,113
Prepaid expenses and other current assets		3,334				3,077
Income tax receivable		3,248				3,159
Total current assets		53,835				54,707
Property, equipment, and leasehold improvements, net		15,036				15,708
Goodwill		47,372				47,372
Right-of-use assets		2,647				3,235
Other assets		969				963
Total assets	$	119,859			$	121,985
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of notes payable, net of unamortized debt issuance costs of $14 and $11, respectively	$	736			$	489
Accrued salaries and benefits		7,395				8,476
Accounts payable		963				1,124
Other current liabilities		2,124				3,732
Contract liabilities		366				634
Estimated liability for appeals and disputes		1,076				1,190
Lease liabilities		1,404				1,862
Total current liabilities		14,064				17,507
Notes payable, net of current portion and unamortized debt issuance costs of $366 and $416, respectively		18,634				19,084
Lease liabilities		1,557				1,803
Other liabilities		1,179				1,168
Total liabilities		35,434				39,562
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at June 30, 2022 and December 31, 2021 respectively; issued and outstanding 73,818 and 69,281 shares at June 30, 2022 and December 31, 2021, respectively		7				7
Additional paid-in capital		140,506				133,662
Accumulated deficit		(56,088	)			(51,246	)
Total stockholders’ equity		84,425				82,423
Total liabilities and stockholders’ equity	$	119,859			$	121,985

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Revenues		$	25,681			$	32,842			$	52,764			$	64,232
Operating expenses:
Salaries and benefits			20,903				23,295				41,342				47,385
Other operating expenses			8,081				10,759				16,212				21,115
Total operating expenses			28,984				34,054				57,554				68,500
Loss from operations			(3,303	)			(1,212	)			(4,790	)			(4,268	)
Interest expense			(216	)			(2,126	)			(371	)			(3,472	)
Loss before provision for income taxes			(3,137	)			(1,489	)			(4,779	)			(5,891	)
Provision for income taxes			32				33				63				70
Net loss		$	(3,169	)		$	(1,522	)		$	(4,842	)		$	(5,961	)
Net loss per share
Basic		$	(0.04	)		$	(0.03	)		$	(0.07	)		$	(0.11	)
Diluted		$	(0.04	)		$	(0.03	)		$	(0.07	)		$	(0.11	)
Weighted average shares
Basic			73,502				55,516				71,698				55,167
Diluted			73,502				55,516				71,698				55,167

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2022				2021
Cash flows from operating activities:
Net loss	$	(4,842	)		$	(5,961	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss (gain) on disposal of assets and impairment of long-lived assets		(15	)			674
Depreciation and amortization		2,260				3,040
Right-of-use assets amortization		588				1,015
Stock-based compensation		1,281				1,423
Interest expense from debt issuance costs		48				1,133
Gain on sale of certain recovery contracts		(382	)			(1,849	)
Changes in operating assets and liabilities:
Trade accounts receivable		928				3,417
Contract assets		(1,084	)			(1,304	)
Prepaid expenses and other current assets		(257	)			564
Income tax receivable		(89	)			(934	)
Other assets		(6	)			121
Accrued salaries and benefits		(1,081	)			(1,072	)
Accounts payable		(161	)			439
Contract liabilities and other current liabilities		(1,860	)			(1,147	)
Estimated liability for appeals and disputes		(114	)			3,486
Lease liabilities		(704	)			(1,167	)
Other liabilities		12				(414	)
Net cash (used in) provided by operating activities		(5,478	)			1,464
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements		(1,589	)			(1,604	)
Proceeds from sale of certain recovery contracts		382				2,406
Net cash (used in) provided by investing activities		(1,207	)			802
Cash flows from financing activities:
Repayment of notes payable		(250	)			(7,650	)
Debt issuance costs paid		(2	)			(150	)
Taxes paid related to net share settlement of stock awards		—				(633	)
Proceeds from exercise of warrants		5,563				23
Net cash provided by (used in) financing activities		5,311				(8,410	)
Net decrease in cash, cash equivalents and restricted cash		(1,374	)			(6,144	)
Cash, cash equivalents and restricted cash at beginning of period		19,550				18,296
Cash, cash equivalents and restricted cash at end of period	$	18,176			$	12,152
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	15,973			$	9,949
Restricted cash		2,203				2,203
Total cash, cash equivalents and restricted cash at end of period	$	18,176			$	12,152
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 for income taxes	$	238			$	1,482
Cash paid for interest	$	244			$	2,340

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Results (In thousands, except per share amount) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Adjusted EBITDA:
Net income (loss)		$	(3,169	)		$	(1,522	)		$	(4,842	)		$	(5,961	)
Provision for income taxes			32				33				63				70
Interest expense (1)			216				2,126				371				3,472
Stock-based compensation			723				774				1,281				1,423
Depreciation and amortization			1,158				2,024				2,260				3,040
Impairment of long-lived assets			—				—				—				636
Severance expenses (4)			37				1,188				179				1,496
Non-core operating expenses (5)			2			$	1,397				6				1,908
Gain on sale of certain recovery contracts (6)			(382	)			(1,849	)			(382	)			(1,849	)
Adjusted EBITDA		$	(1,383	)		$	4,171			$	(1,064	)		$	4,235
		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Adjusted Net Income (Loss):
Net income (loss)		$	(3,169	)		$	(1,522	)		$	(4,842	)		$	(5,961	)
Stock-based compensation			723				774				1,281				1,423
Amortization of intangible assets (2)			—				558				—				617
Amortization of debt issuance costs (3)			24				764				48				1,133
Impairment of long-lived assets			—				—				—				636
Severance expenses (4)			37				1,188				179				1,496
Non-core operating expenses (5)			2				1,397				6				1,908
Gain on sale of certain recovery contracts (6)			(382	)			(1,849	)			(382	)			(1,849	)
Tax adjustments (7)			(111	)			(779	)			(311	)			(1,475	)
Adjusted net income (loss)		$	(2,876	)		$	531			$	(4,021	)		$	(2,072	)

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Results (In thousands, except per share amount) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Adjusted Net Income (Loss) Per Diluted Share:
Net income (loss)		$	(3,169	)		$	(1,522	)		$	(4,842	)		$	(5,961	)
Plus: Adjustment items per reconciliation of adjusted net income (loss)			293				2,053				821				3,889
Adjusted net income (loss)		$	(2,876	)		$	531			$	(4,021	)		$	(2,072	)
Adjusted net income (loss) per diluted share		$	(0.04	)		$	0.01			$	(0.06	)		$	(0.04	)
Diluted average shares outstanding (8)			73,502				60,617				71,698				55,167

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

		Six Months Ended				Six Months Ended		Year Ended
		June 30, 2022				December 31, 2022		December 31, 2021				December 31, 2022
		Actual				Estimate		Actual				Estimate
Adjusted EBITDA:
Net income (loss)		$	(4,842	)		$ (282) to (2,287)		$	(10,288	)		$ (5,124) to (7,124)
Provision for income taxes			63			(413) to 687			62			(350) to 750
Interest expense (1)			371			629 to 1,129			11,313			1,000 to 1,500
Stock-based compensation			1,281			719 to 1,719			2,640			2,000 to 3,000
Depreciation and amortization			2,260			2,490 to 3,490			5,188			4,750 to 5,750
Impairment of long-lived assets			—			—			636			—
Severance expenses (4)			179			(79) to 321			2,160			100 to 500
Non-core operating expenses (5)			6			—			2,588			6
Gain on sale of certain recovery contracts (6)			(382	)		—			(2,403	)		(382)
Adjusted EBITDA		$	(1,064	)		$ 3,064 to 5,064		$	11,896			$ 2,000 to 4,000

(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 tax adjustments assuming a marginal tax rate of 27.5% at full profitability.
(8)		While net loss for the three months ended June 30, 2021 is ($1,522), the computation of adjusted net income results in adjusted net income of $531. Therefore, the calculation of the adjusted earnings per diluted share for the three months ended June 30, 2021 includes dilutive common share equivalents of 5,101 added to the basic weighted average shares of 55,516.

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 six months ended June 30, 2022, and for the years ended December 31, 2021 and 2020:
										For the Three Months Ended								For the Six Months Ended
										March 31, 2022				June 30, 2022				June 30, 2022
										(in thousands)
Eligibility-based										$	14,215			$	12,417			$	26,632
Claims-based											9,149				9,339				18,488
Healthcare Total											23,364				21,756				45,120
Recovery											118				7				125
Customer Care / Outsourced Services											3,601				3,918				7,519
Total										$	27,083				25,681			$	52,764
		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/20220808005653/en/

Richard Zubek

Investor Relations

925-960-4988

investors@performantcorp.com

Source: Performant Financial Corporation

FAQ

What were the total revenues for PFMT in Q2 2022?

Total revenues were $25.7 million, down from $32.8 million in the prior year.

How much did PFMT report as a net loss in Q2 2022?

PFMT reported a net loss of approximately $(3.2) million, or $(0.04) per diluted share.

What is the guidance for PFMT's healthcare revenues in 2022?

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

How did PFMT's adjusted EBITDA change in Q2 2022?

Adjusted EBITDA decreased to $(1.4) million from $4.2 million in the prior year period.