Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), primarily operating as Performant Healthcare Solutions, a leading provider of technology-enabled audit, recovery, and related analytics services in the United States with a focus in the healthcare payment integrity industry, today reported the following financial results for its third quarter ended September 30, 2023:

Third Quarter Financial Highlights

  • Healthcare revenues of $28.5 million, compared to $23.5 million in the prior year period, an increase of approximately 21%.
  • Total revenues of $30.0 million, compared to total revenues of $27.2 million in the prior year period.
  • Net loss of approximately $0.6 million, or $(0.01) per diluted share, compared to net loss of $1.5 million, or $(0.02) per diluted share, in the prior year period.
  • Adjusted net income was $0.4 million, or $0.01 per diluted share, compared to adjusted net loss of $1.7 million, or $(0.02) per diluted share, in the prior year period.
  • Adjusted EBITDA of $1.8 million, compared to $(0.3) million in the prior year period.

Third Quarter 2023 Results

Healthcare revenues in the third quarter of 2023 were $28.5 million, an increase of approximately 21% from $23.5 million in the prior year period. Total revenues in the third quarter were $30.0 million, an increase from total revenues of $27.2 million in the prior year period. Within healthcare, claims-based services revenue in the third quarter of 2023 was $10.3 million, while revenue from eligibility-based services in the third quarter was $18.2 million.

“Our healthcare revenue enjoyed strong double-digit growth in the quarter led by commercial client growth," stated Simeon Kohl, CEO of Performant. "Continuing our first half trend, we implemented 12 additional commercial programs in Q3. This brings our 2023 total to 34 implementations. We anticipate these 34 programs will deliver $16 million in annualized revenues at steady state. On the government side of the business, we were excited to announce the New York State Medicaid RAC win in early October. We continue to feel confident in our growth strategy as we have implemented commercial programs at a more disciplined pace and solidified our government footprint with multiple headline wins over the past few years." Kohl further remarked.

Revenues from our customer care / outsourced services in the third quarter were $1.5 million, down from $3.6 million in the prior year period.

Net loss for the third quarter was $0.6 million, or $(0.01) per diluted share, compared to a net loss of $1.5 million, or $(0.02) per diluted share, in the prior year period. Adjusted net income for the third quarter was $0.4 million, or $0.01 per share on a diluted basis, compared to adjusted net loss of $1.7 million, or $(0.02) per diluted share, in the prior year period. Adjusted EBITDA for the third quarter was $1.8 million as compared to $(0.3) million in the prior year period.

“We remain excited about our growth prospects as we have continued to build upon our record year of commercial implementations in the third quarter alongside further traction with major government wins," stated Rohit Ramchandani, CFO of Performant. "With regard to the near term, we maintain visibility into our annual healthcare market guidance of $105 million to $110 million in revenues. We also maintain annual guidance for the customer care market revenues of $6.75 million to $8 million, thus bringing our total Company revenue guidance to $111.75 million to $118 million. We are seeing gains from our focus on quicker scaling and efficiencies within our business and are excited about our opportunity to expand EBITDA margins as we execute. We are also excited about our new credit agreement which we believe provides us increased flexibility to further grow our business."

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 2023 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 webcast link will be also be available on the investor relations portion of our website.

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 13741089. The telephonic replay will be available approximately three hours after the call, through November 14, 2023.

About Performant Healthcare Solutions

Performant provides technology-enabled audit, recovery, and analytics services in the United States to the healthcare industry. Performant works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits, or COB) 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.

To learn more, please visit http://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 2023 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 Company’s ability to generate revenue following long implementation periods associated with new customer contracts; client relationships and the Company’s ability to maintain such client relationships; downturns in domestic or global economic conditions and other macroeconomic factors; the Company’s ability to generate sufficient cash flows to fund our ongoing operations and other liquidity needs; the Company’s ability to hire and retain employees with specialized skills that are required for its healthcare business; anticipated trends and challenges in our business and competition in the markets in which the Company operates; the impact of COVID-19 on the Company’s business and operations, opportunities and expectations for the markets in which the Company operates; the Company’s indebtedness and compliance, or failure to comply, with restrictive covenants in the Company’s credit agreement; opportunities and expectations for growth in the various markets in which the Company operates; anticipated trends and challenges in the Company’s business and competition in the markets in which it operates; the adaptability of the Company’s technology platform to new markets and processes; the Company’s ability to invest in and utilize our data and analytics capabilities to expand its capabilities; the Company’s growth strategy of expanding in existing markets and considering strategic alliances or acquisitions; the Company’s ability to meet liquidity and working capital needs; expectations regarding future expenses; expected future financial performance; and the Company’s ability to comply with and adapt to industry regulations and compliance demands.

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, 2022 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,
2023

 

December 31,
2022

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

17,308

 

 

$

23,384

 

Restricted cash

 

81

 

 

 

81

 

Trade accounts receivable

 

14,129

 

 

 

15,794

 

Contract assets

 

6,850

 

 

 

11,460

 

Prepaid expenses and other current assets

 

3,104

 

 

 

3,665

 

Income tax receivable

 

516

 

 

 

3,123

 

Total current assets

 

41,988

 

 

 

57,507

 

Property, equipment, and leasehold improvements, net

 

9,790

 

 

 

10,897

 

Goodwill

 

47,372

 

 

 

47,372

 

Right-of-use assets

 

646

 

 

 

2,057

 

Other assets

 

914

 

 

 

1,000

 

Total assets

$

100,710

 

 

$

118,833

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current maturities of notes payable, net of unamortized debt issuance costs of $78 and $17, respectively

$

1,672

 

 

$

983

 

Accrued salaries and benefits

 

5,643

 

 

 

6,938

 

Accounts payable

 

872

 

 

 

1,262

 

Other current liabilities

 

2,147

 

 

 

2,252

 

Contract liabilities

 

500

 

 

 

438

 

Estimated liability for appeals and disputes

 

906

 

 

 

1,106

 

Lease liabilities

 

333

 

 

 

1,228

 

Total current liabilities

 

12,073

 

 

 

14,207

 

Notes payable, net of current portion and unamortized debt issuance costs of $423 and $316, respectively

 

9,077

 

 

 

18,184

 

Lease liabilities

 

326

 

 

 

1,076

 

Other liabilities

 

903

 

 

 

881

 

Total liabilities

 

22,379

 

 

 

34,348

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2023 and December 31, 2022 respectively; issued and outstanding 76,875 and 75,505 shares at September 30, 2023 and December 31, 2022, respectively

 

8

 

 

 

7

 

Additional paid-in capital

 

144,880

 

 

 

142,261

 

Accumulated deficit

 

(66,557

)

 

 

(57,783

)

Total stockholders’ equity

 

78,331

 

 

 

84,485

 

Total liabilities and stockholders’ equity

$

100,710

 

 

$

118,833

 

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,

 

 

2023

 

2022

 

2023

 

2022

Revenues

 

$

29,962

 

 

$

27,178

 

 

$

81,176

 

 

$

79,942

 

Operating expenses:

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

22,980

 

 

 

21,759

 

 

 

67,139

 

 

 

63,101

 

Other operating expenses

 

 

7,632

 

 

 

7,733

 

 

 

22,077

 

 

 

23,945

 

Total operating expenses

 

 

30,612

 

 

 

29,492

 

 

 

89,216

 

 

 

87,046

 

Loss from operations

 

 

(650

)

 

 

(2,314

)

 

 

(8,040

)

 

 

(7,104

)

Gain on sale of certain recovery contracts

 

 

—

 

 

 

—

 

 

 

3

 

 

 

382

 

Gain on sale of land and buildings

 

 

—

 

 

 

1,120

 

 

 

—

 

 

 

1,120

 

Interest expense

 

 

(423

)

 

 

(277

)

 

 

(1,188

)

 

 

(648

)

Interest income

 

 

86

 

 

 

—

 

 

 

86

 

 

 

—

 

Loss before provision for income taxes

 

 

(987

)

 

 

(1,471

)

 

 

(9,139

)

 

 

(6,250

)

Provision for (benefit from) income taxes

 

 

(407

)

 

 

(11

)

 

 

(365

)

 

 

52

 

Net loss

 

$

(580

)

 

$

(1,460

)

 

$

(8,774

)

 

$

(6,302

)

Net loss per share

 

 

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

$

(0.02

)

 

$

(0.12

)

 

$

(0.09

)

Diluted

 

$

(0.01

)

 

$

(0.02

)

 

$

(0.12

)

 

$

(0.09

)

Weighted average shares

 

 

 

 

 

 

 

 

Basic

 

 

76,454

 

 

 

74,021

 

 

 

75,907

 

 

 

72,480

 

Diluted

 

 

76,454

 

 

 

74,021

 

 

 

75,907

 

 

 

72,480

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net loss

$

(8,774

)

 

$

(6,302

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Loss on disposal of assets and impairment of long-lived assets

 

258

 

 

 

40

 

Depreciation and amortization

 

3,805

 

 

 

3,355

 

Right-of-use assets amortization

 

1,411

 

 

 

841

 

Stock-based compensation

 

2,815

 

 

 

2,212

 

Interest expense from debt issuance costs

 

256

 

 

 

71

 

Gain on sale of certain recovery contracts

 

(3

)

 

 

(382

)

Gain on sale of land and buildings

 

—

 

 

 

(1,120

)

Changes in operating assets and liabilities:

 

 

 

Trade accounts receivable

 

1,665

 

 

 

4,958

 

Contract assets

 

4,610

 

 

 

(1,622

)

Prepaid expenses and other current assets

 

561

 

 

 

682

 

Income tax receivable

 

2,607

 

 

 

(52

)

Other assets

 

86

 

 

 

(7

)

Accrued salaries and benefits

 

(1,295

)

 

 

(1,944

)

Accounts payable

 

(390

)

 

 

(339

)

Contract liabilities and other current liabilities

 

(43

)

 

 

(1,515

)

Estimated liability for appeals, disputes, and refunds

 

(200

)

 

 

(42

)

Lease liabilities

 

(1,645

)

 

 

(997

)

Other liabilities

 

23

 

 

 

(19

)

Net cash provided by (used in) operating activities

 

5,747

 

 

 

(2,182

)

Cash flows from investing activities:

 

 

 

Purchase of property, equipment, and leasehold improvements

 

(2,956

)

 

 

(2,198

)

Proceeds from sale of certain recovery contracts

 

3

 

 

 

382

 

Proceeds from sales of property, equipment, and leasehold improvements

 

—

 

 

 

4,934

 

Net cash (used in) provided by investing activities

 

(2,953

)

 

 

3,118

 

Cash flows from financing activities:

 

 

 

Repayment of notes payable

 

(8,250

)

 

 

(375

)

Debt issuance costs paid

 

(424

)

 

 

(2

)

Taxes paid related to net share settlement of stock awards

 

(196

)

 

 

—

 

Proceeds from exercise of warrants

 

—

 

 

 

5,563

 

Net cash (used in) provided by financing activities

 

(8,870

)

 

 

5,186

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(6,076

)

 

 

6,122

 

Cash, cash equivalents and restricted cash at beginning of period

 

23,465

 

 

 

19,550

 

Cash, cash equivalents and restricted cash at end of period

$

17,389

 

 

$

25,672

 

Reconciliation of the Consolidated Statements of Cash Flows to the

Consolidated Balance Sheets:

 

 

 

Cash and cash equivalents

$

17,308

 

 

$

25,591

 

Restricted cash

 

81

 

 

 

81

 

Total cash, cash equivalents and restricted cash at end of period

$

17,389

 

 

$

25,672

 

Supplemental disclosures of cash flow information:

 

 

 

Cash (received) paid for income taxes

$

(2,904

)

 

$

267

 

Cash paid for interest

$

1,084

 

 

$

449

 

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,

 

 

2023

 

2022

 

2023

 

2022

 

 

(in thousands)

 

(in thousands)

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(580

)

 

$

(1,460

)

 

$

(8,774

)

 

$

(6,302

)

Provision for (benefit from) income taxes

 

 

(407

)

 

 

(11

)

 

 

(365

)

 

 

52

 

Interest expense (1)

 

 

423

 

 

 

277

 

 

 

1,188

 

 

 

648

 

Interest income

 

 

(86

)

 

 

—

 

 

 

(86

)

 

 

—

 

Stock-based compensation

 

 

1,129

 

 

 

931

 

 

 

2,815

 

 

 

2,212

 

Depreciation and amortization

 

 

1,293

 

 

 

1,095

 

 

 

3,805

 

 

 

3,355

 

Severance expenses (3)

 

 

64

 

 

 

10

 

 

 

246

 

 

 

189

 

Other (4)

 

 

5

 

 

 

3

 

 

 

34

 

 

 

(373

)

Gain on sale of land and buildings (6)

 

 

—

 

 

 

(1,120

)

 

 

—

 

 

 

(1,120

)

Adjusted EBITDA

 

$

1,841

 

 

$

(275

)

 

$

(1,137

)

 

$

(1,339

)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

2022

 

2023

 

2022

 

 

(in thousands)

 

(in thousands)

Adjusted Net Income (Loss):

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(580

)

 

$

(1,460

)

 

$

(8,774

)

 

$

(6,302

)

Stock-based compensation

 

 

1,129

 

 

 

931

 

 

 

2,815

 

 

 

2,212

 

Amortization of debt issuance costs (2)

 

 

134

 

 

 

23

 

 

 

256

 

 

 

71

 

Severance expenses (3)

 

 

64

 

 

 

10

 

 

 

246

 

 

 

189

 

Other (4)

 

 

5

 

 

 

3

 

 

 

34

 

 

 

(373

)

Gain on sale of land and buildings (6)

 

 

—

 

 

$

(1,120

)

 

 

—

 

 

 

(1,120

)

Tax adjustments (5)

 

 

(366

)

 

 

(42

)

 

 

(921

)

 

 

(269

)

Adjusted net income (loss)

 

$

386

 

 

$

(1,655

)

 

$

(6,344

)

 

$

(5,592

)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

2022

 

2023

 

2022

 

 

(in thousands)

 

(in thousands)

Adjusted Net Income (Loss) Per Diluted Share:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(580

)

 

$

(1,460

)

 

$

(8,774

)

 

$

(6,302

)

Plus: Adjustment items per reconciliation of adjusted net income (loss)

 

 

966

 

 

 

(195

)

 

 

2,430

 

 

 

710

 

Adjusted net income (loss)

 

$

386

 

 

$

(1,655

)

 

$

(6,344

)

 

$

(5,592

)

Adjusted net income (loss) per diluted share

 

$

0.01

 

 

$

(0.02

)

 

$

(0.08

)

 

$

(0.08

)

Diluted average shares outstanding (7)

 

 

76,830

 

 

 

74,021

 

 

 

75,907

 

 

 

72,480

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Results

(In thousands, except per share amount)

(Unaudited)

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

 

 

Nine Months Ended

 

Three Months Ended

 

Year Ended

 

 

September 30, 2023

 

December 31, 2023

 

December 31, 2023

 

December 31, 2022

 

 

Actual

 

Estimate

 

Estimate

 

Actual

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(8,774

)

 

$ 1,577 to 725

 

$ (6,464) to (8,015)

 

$

(6,537

)

Provision for (benefit from) income taxes

 

 

(365

)

 

115 to 1,115

 

(250) to 750

 

 

132

 

Interest expense (1)

 

 

1,188

 

 

0 to 812

 

1,000 to 2,000

 

 

1,007

 

Interest income

 

 

(86

)

 

0 to (64)

 

(86) to (150)

 

 

—

 

Stock-based compensation

 

 

2,815

 

 

0 to 685

 

2,500 to 3,500

 

 

3,036

 

Depreciation and amortization

 

 

3,805

 

 

1,445 to 2,695

 

5,250 to 6,500

 

 

4,524

 

Severance expenses (3)

 

 

246

 

 

0 to 169

 

50 to 415

 

 

274

 

Other (4)

 

 

34

 

 

—

 

—

 

 

(372

)

Gain on sale of land and buildings (6)

 

 

—

 

 

—

 

—

 

 

(1,120

)

Adjusted EBITDA

 

$

(1,137

)

 

$ 3,137 to 6,137

 

$ 2,000 to 5,000

 

$

944

 

(1)

Represents interest expense and amortization of debt issuance costs related to our MUFG Credit Agreement.

(2)

Represents amortization of debt issuance costs related to our MUFG Credit Agreement.

(3)

Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.

(4)

Represents professional fees related to strategic corporate development activities and gain on sale of certain non-healthcare recovery contracts in prior years.

(5)

Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.

(6)

Represents gain on the sale of land and two office buildings in September of 2022.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Quarterly and Annual Revenues

(In thousands)

(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 nine months ended September 30, 2023, and for the years ended December 31, 2022 and 2021:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31, 2023

 

June 30, 2023

 

September 30, 2023

 

September 30, 2023

 

 

 

 

 

 

 

Eligibility-based

 

$

12,480

 

$

14,131

 

$

18,165

 

$

44,776

Claims-based

 

 

10,412

 

 

9,798

 

 

10,325

 

 

30,535

Healthcare Total

 

 

22,892

 

 

23,929

 

 

28,490

 

 

75,311

Recovery

 

 

19

 

 

14

 

 

 

 

33

Customer Care / Outsourced Services

 

 

2,818

 

 

1,542

 

 

1,472

 

 

5,832

Total

 

$

25,729

 

$

25,485

 

$

29,962

 

$

81,176

 

 

Three Months Ended

 

Year Ended

 

 

March 31, 2022

 

June 30, 2022

 

September 30, 2022

 

December 31, 2022

 

December 31, 2022

 

 

 

Eligibility-based

 

$

14,214

 

$

12,417

 

$

13,142

 

$

13,511

 

$

53,284

Claims-based

 

 

9,150

 

 

9,339

 

 

10,377

 

 

12,516

 

 

41,382

Healthcare Total

 

 

23,364

 

 

21,756

 

 

23,519

 

 

26,027

 

 

94,666

Recovery

 

 

118

 

 

7

 

 

41

 

 

75

 

 

241

Customer Care / Outsourced Services

 

 

3,601

 

 

3,918

 

 

3,618

 

 

3,140

 

 

14,277

Total

 

$

27,083

 

$

25,681

 

$

27,178

 

$

29,242

 

$

109,184

 

 

Three Months Ended

 

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