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 cash1,659  1,813 
Trade accounts receivable, net of allowance for doubtful accounts of $184 and $22, respectively18,662  20,879 
Prepaid expenses and other current assets4,044  3,420 
Income tax receivable  179 
Total current assets28,678  31,753 
Property, equipment, and leasehold improvements, net20,871  22,255 
Identifiable intangible assets, net1,042  1,160 
Goodwill81,572  81,572 
ROU assets9,046   
Other assets1,043  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 benefits5,478  5,759 
Accounts payable1,958  1,402 
Other current liabilities3,074  3,414 
Income taxes payable24   
Deferred revenue1,053  1,078 
Estimated liability for appeals315  210 
Earnout payable196   
Lease liabilities2,880   
Total current liabilities17,655  14,087 
Notes payable to related party, net of current portion and unamortized debt issuance costs of $2,619 and $2,345, respectively50,218  41,105 
Deferred income taxes53  22 
Earnout payable828  1,936 
Lease liabilities7,310   
Other liabilities2,240  3,383 
Total liabilities78,304  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, respectively5  5 
Additional paid-in capital78,980  77,370 
Accumulated deficit(15,037) (149)
Total stockholders’ equity63,948  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.