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CST: 07/12/2019 20:54:36   

Performant Financial Corporation Announces Financial Results for Second Quarter 2019

116 Days ago

LIVERMORE, Calif., Aug. 13, 2019 (GLOBE NEWSWIRE) -- Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), a leading provider of technology-enabled recovery and related analytics services in the United States, today reported the following financial results for its second quarter ended June 30, 2019:

Second Quarter Financial Highlights

  • Total revenues of $35.8 million, compared to revenues of $31.3 million in the prior year period, up 14.4%
  • Net loss of $6.4 million, or $(0.12) per diluted share, compared to net loss of $3.6 million, or $(0.07) per diluted share, in the prior year period
  • Adjusted EBITDA of $(2.5) million, compared to adjusted EBITDA of $0.1 million in the prior year period
  • Adjusted net loss of $6.5 million, or $(0.12) per diluted share, compared to an adjusted net loss of $2.5 million or $(0.05) per diluted share in the prior year period

Second Quarter 2019 Results

Total revenues in the second quarter were $35.8 million, an increase of 14.4% from revenues of $31.3 million in the prior year period.  Healthcare revenues in the second quarter of 2019 were $9.3 million, an increase of 52.5% from revenues of $6.1 million in the prior year period. Combined CMS MSP and other CMS audit recovery revenues were $4.9 million in the second quarter, a 40.0% increase over the prior year period. Commercial healthcare clients contributed revenues of $4.4 million, an increase of $1.8 million or 69.2% from the prior year period. Recovery revenues in the second quarter were $22.1 million, an increase of $1.6 million, or 7.8% from revenues of $20.5 million in the prior year period.  Revenues from our Customer Care / Outsourced Services in the second quarter were $4.4 million, down from $4.7 million in the prior year period.

Net loss for the second quarter of 2019 was $6.4 million, or $(0.12) per share on a fully diluted basis, compared to net loss of $3.6 million or $(0.07) per share on a fully diluted basis in the prior year period.  Adjusted net loss for the second quarter of 2019 was $6.5 million, resulting in $(0.12) per share on a fully diluted basis. This compares to an adjusted net loss of $2.5 million or $(0.05) per fully diluted share in the prior year period. Adjusted EBITDA for the second quarter of 2019 was $(2.5) million as compared to $0.1 million in the prior year period.

As of June 30, 2019, the Company had cash, cash equivalents and restricted cash of approximately $6.0 million.

Business Outlook

“Our second quarter results highlight the disruptive nature of our Healthcare technology platform and our ability to gain market share from established industry participants.  As we continue to execute on our existing contracts and expand to serve clients across a wider spectrum including healthcare agencies, state and federal taxing authorities, other federal agencies and commercial clients, we believe the depth and potential of our platform will be recognized.  We are well-positioned to achieve our long-term strategy and reiterate our belief in being able to deliver total revenues of $200 million with margins in excess of 20% by 2021,” stated Lisa Im, CEO of Performant.

“As for today, we feel confident with our current trajectory for 2019 and we are reiterating our guidance of revenues between $158 and $168 million, and adjusted EBITDA to be a loss of between $2 and $6 million,” concluded Im.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA and adjusted net loss. 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 loss to net 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 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 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 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 2019 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 877-705-6003 (domestic) or 201-493-6725 (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 13693265. The telephonic replay will be available approximately three hours after the call, through August 20, 2019.

About Performant Financial Corporation

Performant helps government and commercial organizations enhance revenue and contain costs by preventing, identifying and recovering waste, improper payments and defaulted assets. Performant is a leading provider of these services in several industries, including healthcare, student loans and government. Performant has been providing recovery audit services for more than nine years to both commercial and government clients, including serving as a Recovery Auditor for the Centers for Medicare and Medicaid Services.

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 2019 and 2021. 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 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 faces a long period to implement a new contract which may result in the incurrence of expenses before the receipt of revenues from new client relationships, that the Company may not have sufficient cash flows from operations or the availability of funds under its credit agreement 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 continuing limitations on the scope of our audit activity under our RAC contracts have significantly reduced our revenue opportunities with this client, that the Company faces significant competition in all of its markets, 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, 2018 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.

Contact Information
Richard Zubek
Investor Relations
925-960-4988
investors@performantcorp.com

       
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
       
  June 30,
 2019
  December 31,
 2018
  (Unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 4,313     $ 5,462  
Restricted cash 1,659     1,813  
Trade accounts receivable, net of allowance for doubtful accounts of $184 and $22, respectively 18,662     20,879  
Prepaid expenses and other current assets 4,044     3,420  
Income tax receivable     179  
Total current assets 28,678     31,753  
Property, equipment, and leasehold improvements, net 20,871     22,255  
Identifiable intangible assets, net 1,042     1,160  
Goodwill 81,572     81,572  
ROU assets 9,046      
Other assets 1,043     1,019  
Total assets $ 142,252     $ 137,759  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Current maturities of notes payable to related party, net of unamortized debt issuance costs of $136 and $126, respectively $ 2,677     $ 2,224  
Accrued salaries and benefits 5,478     5,759  
Accounts payable 1,958     1,402  
Other current liabilities 3,074     3,414  
Income taxes payable 24      
Deferred revenue 1,053     1,078  
Estimated liability for appeals 315     210  
Earnout payable 196      
Lease liabilities 2,880      
Total current liabilities 17,655     14,087  
Notes payable to related party, net of current portion and unamortized debt issuance costs of $2,619 and $2,345, respectively 50,218     41,105  
Deferred income taxes 53     22  
Earnout payable 828     1,936  
Lease liabilities 7,310      
Other liabilities 2,240     3,383  
Total liabilities 78,304     60,533  
Commitments and contingencies      
Stockholders’ equity:      
Common stock, $0.0001 par value. Authorized, 500,000 shares at June 30, 2019 and December 31, 2018 respectively; issued and outstanding 53,648 and 52,999 shares at June 30, 2019 and December 31, 2018, respectively 5     5  
Additional paid-in capital 78,980     77,370  
Accumulated deficit (15,037 )   (149 )
Total stockholders’ equity 63,948     77,226  
Total liabilities and stockholders’ equity $ 142,252     $ 137,759  


         
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
         
    Three Months Ended   Six Months Ended
     June 30,    June 30,
      2019       2018       2019       2018  
Revenues   $ 35,830     $ 31,336     $ 70,706     $ 88,357  
Operating expenses:                                
Salaries and benefits     28,929       22,305       58,045       44,086  
Other operating expenses     11,211       12,399       24,164       35,419  
Total operating expenses     40,140       34,704       82,209       79,505  
(Loss) income from operations     (4,310 )     (3,368 )     (11,503 )     8,852  
Interest expense     (1,958 )     (1,141 )     (3,094 )     (2,411 )
Interest income     11       7       22       13  
(Loss) income before provision for income taxes     (6,257 )     (4,502 )     (14,575 )     6,454  
Provision for (benefit from) income taxes     142       (911 )     313       1,590  
Net (loss) income   $ (6,399 )   $ (3,591 )   $ (14,888 )   $ 4,864  
Net (loss) income per share                                
Basic   $ (0.12 )   $ (0.07 )   $ (0.28 )   $ 0.09  
Diluted   $ (0.12 )   $ (0.07 )   $ (0.28 )   $ 0.09  
Weighted average shares                                
Basic     53,367       51,643       53,214       51,483  
Diluted     53,367       51,643       53,214       53,501  
                                 


 
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Equity
(In thousands)
(Unaudited)
 
    Three Months Ended June 30, 2019
  Three Months Ended June 30, 2018
    Common Stock
                          Common Stock
                       
    Shares     Amount     Additional
Paid-In
Capital
    Accumulated
Deficit
      Total     Shares
  Amount     Additional
Paid-In
Capital
      Retained
Earnings
(Accumulated
Deficit)
      Total
 
Balances at beginning of period   53,146   $ 5   $ 77,747     $ (8,638 )   $ 69,114     51,495   5   $ 72,915     $ 16,316     $ 89,236  
Common stock issued under stock plans, net of shares withheld for employee taxes   502         (289 )           (289 )   425       (223 )           (223 )
Stock-based compensation expense           719             719           950             950  
Recognition of warrant issued in debt financing           803             803                        
Net loss                 (6,399 )     (6,399 )               (3,591 )     (3,591 )
Balances at end of period   53,648     5   $ 78,980     $ (15,037 )   $ 63,948     51,920   5   $ 73,642     $ 12,725     $ 86,372  
                                                                   
                                                                   
    Six Months Ended June 30, 2019
  Six Months Ended June 30, 2018
    Common Stock
                          Common Stock
                       
    Shares     Amount      Additional
Paid-In
Capital
    Accumulated
Deficit
      Total     Shares   Amount      Additional
Paid-In
Capital
       Retained
Earnings
      Total  
Balances at beginning of period   52,999   $ 5   $ 77,370     $ (149 )   $ 77,226     51,085   5   $ 72,459     $ 7,861     $ 80,325  
Common stock issued under stock plans, net of shares withheld for employee taxes   649         (411 )           (411 )   835       (406 )           (406 )
Stock-based compensation expense           1,218               1,218           1,589             1,589  
Recognition of warrant issued in debt financing           803             803                        
Net income (loss)                 (14,888 )     (14,888 )               4,864       4,864  
Balances at end of period   53,648     5   $ 78,980     $ (15,037 )   $ 63,948     51,920   5   $ 73,642     $ 12,725     $ 86,372  
                                                                   

 

   
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
  Six Months Ended
   June 30,
Cash flows from operating activities: 2019
  2018
Net (loss) income $ (14,888 )   $ 4,864  
Adjustments to reconcile net (loss) income to net cash used in operating activities:              
Loss on disposal of assets         43  
Release of net payable to client related to contract termination         (9,860 )
Release of estimated liability for appeals due to termination of contract         (17,932 )
Derecognition of subcontractor receivable for appeals due to termination of contract         5,535  
Derecognition of subcontractor receivable for overturned claims         1,536  
Provision for doubtful accounts for subcontractor receivable         1,868  
Depreciation and amortization   4,557       5,113  
ROU assets amortization   1,335        
Deferred income taxes   31       49  
Stock-based compensation   1,218       1,589  
Interest expense from debt issuance costs   543       664  
Earnout mark-to-market   (912 )      
Changes in operating assets and liabilities:              
Trade accounts receivable   2,217       (3,098 )
Prepaid expenses and other current assets   (624 )     521  
Income tax receivable   179       1,237  
Other assets   (24 )     45  
Accrued salaries and benefits   (281 )     101  
Accounts payable   556       116  
Deferred revenue and other current liabilities   (365 )     2,144  
Income taxes payable   24        
Estimated liability for appeals   105       (12 )
Net payable to client         (2,940 )
Lease liabilities   (1,443 )      
Other liabilities   117       641  
Net cash used in operating activities   (7,655 )     (7,776 )
Cash flows from investing activities:              
Purchase of property, equipment, and leasehold improvements   (3,062 )     (4,473 )
Net cash used in investing activities   (3,062 )     (4,473 )
Cash flows from financing activities:              
Repayment of notes payable   (1,150 )     (1,100 )
Debt issuance costs paid   (25 )      
Taxes paid related to net share settlement of stock awards   (445 )     (591 )
Proceeds from exercise of stock options   34       186  
Borrowings from notes payable   11,000        
Net cash provided by (used in) financing activities   9,414       (1,505 )
Net decrease in cash, cash equivalents and restricted cash   (1,303 )     (13,754 )
Cash, cash equivalents and restricted cash at beginning of period   7,275       23,519  
Cash, cash equivalents and restricted cash at end of period $ 5,972     $ 9,765  
Non-cash financing activities:              
Recognition of warrant issued in debt financing $ 803     $  
Supplemental disclosures of cash flow information:              
Cash received for income taxes $ 20     $ 82  
Cash paid for interest $ 2,551     $ 1,748  
Reconciliation of the Consolidated Statements of Cash Flows to the              
Consolidated Balance Sheets:              
Cash and cash equivalents $ 4,313     $ 7,977  
Restricted cash   1,659       1,788  
Total cash, cash equivalents and restricted cash at end of period $ 5,972     $ 9,765  

 

     
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Results
(In thousands, except per share amount)
(Unaudited)
    Three Months Ended
     June 30,
    2019
    2018
Adjusted Loss Per Diluted Share:              
Net loss $ (6,399 )   $ (3,591 )
Plus: Adjustment items per reconciliation of adjusted net (loss) income   (77 )     1,076  
Adjusted net loss   (6,476 )     (2,515 )
Adjusted Loss Per Diluted Share $ (0.12 )   $ (0.05 )
Diluted avg shares outstanding   53,367       51,643  
               
    Three Months Ended
     June 30,
    2019
    2018
Adjusted EBITDA:              
Net loss $ (6,399 )   $ (3,591 )
Provision for income taxes   142       (911 )
Interest expense (1)   1,958       1,141  
Interest income   (11 )     (7 )
Depreciation and amortization   2,245       2,537  
Earnout mark-to-market (6)   (1,188 )      
Stock-based compensation   719       950  
Adjusted EBITDA $ (2,534 )   $ 119  
               
    Three Months Ended
    June 30,
    2019
    2018
Adjusted Net Loss:              
Net loss $ (6,399 )   $ (3,591 )
Stock-based compensation   719       950  
Amortization of intangibles (2)   52       202  
Deferred financing amortization costs (3)   311       333  
Earnout mark-to-market (6)   (1,188 )      
Tax adjustments (4)   29       (409 )
Adjusted Net Loss $ (6,476 )   $ (2,515 )
               
   
(1)  Represents interest expense and amortization of issuance costs related to the refinancing of our indebtedness.
(2)  Represents amortization of capitalized expenses related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004.
(3)  Represents amortization of capitalized financing costs related to our Credit Agreement for 2018.
(4)  Represents tax adjustments assuming a marginal tax rate of 27.5%.
(6) 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.

 

 
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 for the year ended December 31, 2019:
 
    Six Months Ended     Six Months Ended     Year Ended
    June 30,
2019
    December 31,
2019
    December 31,
2018
    December 31,
2019
    Actual     Estimate     Actual     Estimate
Adjusted EBITDA:                      
Net loss $ (14,888)   $ (5,160) to (13,145)   $ (8,010)   $ (20,048) to (28,033)
Provision for (benefit from) income taxes   313     (563) to 437     1,542     (250) to 750
Interest expense (1)   3,094     4,656 to 5,656     4,699     7,750 to 8,750
Interest income   (22)     (18) to (33)     (28)     (40) to (55)
Depreciation and amortization   4,557     4,943 to 5,943     10,234     9,500 to 10,500
Impairment of goodwill and customer relationship (7)           2,988    
Earnout mark-to-market (6)   (912)         (218)     (912)
CMS Region A contract termination (5)           (19,415)    
Stock-based compensation   1,218     782 to 1,782     2,750     2,000 to 3,000
Adjusted EBITDA $ (6,640)   $ 4,640 to 640   $ (5,458)   $ (2,000) to (6,000)
                       
 
(1) Represents interest expense and amortization of issuance costs related to the refinancing of our indebtedness.
(5) Represents the net impact of the termination of our 2009 CMS Region A contract during the first quarter of 2018, comprised of release of $27.8 million of the estimated liability for appeals and the net payable to client balances into revenue, net of derecognition of $9.0 million of prepaid expenses and other current assets with a charge to other operating expenses, reflecting accrued receivables associated with amounts due from subcontractors for decided and yet-to-be decided appeals.
(6) 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.
(7) Represents intangible assets impairment charge related to Great Lakes Higher Education Guaranty Corporation customer relationship.
   

 

 
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 revenue results for the years ended December 31, 2017 and December 31, 2018, and six months ended June 30, 2019:
 
    For the Three Months Ended
  For the Year Ended
    March 31,
2017
  June 30,
2017

  September 30,
2017

  December 31,
2017

  December 31,
2017

     
     
                     
    (in thousands)
Recovery   $ 28,223     $ 30,911     $ 23,094     $ 25,640     $ 107,868  
Healthcare     1,647       2,088       2,627       3,624       9,986  
Outsourced Services     3,239       2,909       4,023       4,024       14,195  
Total   $ 33,109     $ 35,908     $ 29,744     $ 33,288     $ 132,049  
                                         
                                         
    For the Three Months Ended
  For the Year Ended
    March 31,
2018

  June 30,
2018

  September 30,
2018

  December 31,
2018

  December 31,
2018

     
     
                     
    (in thousands)
Recovery   $ 21,940     $ 20,491     $ 16,162     $ 25,192     $ 83,785  
Healthcare (1)     3,523       6,095       6,553       9,893       26,064  
Outsourced Services     3,768       4,750       4,266       4,645       17,429  
Total   $ 29,231     $ 31,336     $ 26,981     $ 39,730     $ 127,278  
                                         
                                         
        For the Three Months Ended
  For the Six Months Ended
                    March 31,
2019
  June 30,
2019
  June 30,
2019

     
     
                     
                    (in thousands)
Recovery                   $ 21,375     $ 22,107     $ 43,482  
Healthcare                     9,020        9,263       18,283  
Outsourced Services                     4,481       4,460       8,941  
Total                   $ 34,876     $ 35,830     $ 70,706  
                                         
(1)  Excludes $27.8 million for the three months ended March 31, 2018, and $0.6 million for the three months ended September 30, 2018, related to the termination of the 2009 CMS Region A contract.

 

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