Performant Issues Statement Regarding Schedule 13D Filing
February 28 2020 - 8:30AM
Performant Financial Corporation (Nasdaq:PFMT),(“the Company”), a
provider of technology-enabled recovery and related analytics
services, today issued the following statement in response to the
Schedule 13D filed today with the U.S. Securities and Exchange
Commission by 22NW Fund, LP:
The Performant Board of Directors and management team maintains
open and ongoing discussions with all our shareholders, and we
value any opinions and feedback that furthers our goal of growing
our business and delivering increased shareholder value. We are
aligned with and committed to acting in the best interests of the
Company’s shareholders, which is perhaps best evidenced by the
significant ownership stakes across our Board of Directors and
management. Furthermore, as the Company’s largest shareholder,
Parthenon DCS has not divested any shares of the Company since
2014.
We would like to thank 22NW Fund, LP for sharing its concerns.
However, as we communicated to them and which was referenced in
their Schedule 13D filing, the material non-public information
specified by 22NW Fund, LP in its Schedule 13D filing is either
inaccurate or incomplete and based on dated information.
To that end, on February 26, 2020, we issued a press release
that provided an update on adjusted EBITDA guidance for the fourth
quarter of 2019 and initial 2020 annual guidance ranges for revenue
and adjusted EBITDA. As referenced in that press release, we
anticipate reporting strong operational results in the fourth
quarter of 2019 with revenue in the range of $43 million to $44
million and adjusted EBITDA in the range of $6.0 and $6.5 million.
Furthermore, we believe these strong results will continue into
2020 as demonstrated by our current full-year 2020 revenue and
adjusted EBITDA guidance ranges of $170 million to $180 million and
$12 million to $15 million, respectively.
As it relates to our long-term targets, we continue to be
committed to our goal of achieving annual revenues of $200 million
with 20% margins. However, we are excited about growth
opportunities in front of us that may require additional investment
from time to time. Should the right opportunity to invest in a
significant and differentiated product offering that may fuel
growth in our top line and expand margins present itself, we may
consider that type of investment.
The Performant Board of Directors and management team would like
to thank all of our shareholders for their continued patience and
understanding during our continued transformation. We are committed
to growing value and acting in the best interests of our
shareholders.
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.
About Performant Financial Corporation
Performant Financial Corporation is a leading provider of
technology-enabled recovery and related analytics services. The
Company's services help identify and recover delinquent or
defaulted assets and improper payments for various government,
healthcare and financial services markets in the United States. The
Company was founded in 1976 and is headquartered in Livermore,
California. To learn more about Performant Financial, please
visit https://www.performantcorp.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 our outlook for EBITDA in
2019 and 2020. 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 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 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, 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 may not be able to manage its potential growth
effectively, that the Company faces significant competition in all
of its markets, 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 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 925-960-4988investors@performantcorp.com
|
PERFORMANT FINANCIAL CORPORATION AND
SUBSIDIARIES |
Reconciliation of Non-GAAP Results |
(In thousands) |
(Unaudited) |
|
|
|
|
|
|
We are providing
the following preliminary estimates of our financial results for
the three months ended December 31, 2019 and year ended
December 31, 2020: |
|
|
|
|
|
Nine Months Ended |
|
Three Months Ended |
|
Twelve Months Ended |
|
September 30, |
|
December 31, |
|
December 31, |
|
2019 |
|
2019 |
|
2020 |
|
Actual |
|
Estimate |
|
Estimate |
Adjusted
EBITDA: |
|
|
|
|
|
Net income (loss) |
$ |
(22,958) |
|
$ 2,982 to 2,987 |
|
$ (2,960) to (3,945) |
Provision for (benefit from)
income taxes |
412 |
|
(800) to (750) |
|
0 to 1,000 |
Interest expense |
5,260 |
|
2,300 to 2,350 |
|
8,000 to 9,000 |
Interest income |
(33) |
|
(5) to (10) |
|
(40) to (55) |
Client contract termination settlement (1) |
— |
|
(677) |
|
— |
Non-core operating expenses
(2) |
309 |
|
— |
|
— |
Earnout mark-to-market
(3) |
(1,086) |
|
(100) to (300) |
|
— |
Depreciation and
amortization |
6,698 |
|
1,800 to 1,850 |
|
6,000 to 7,000 |
Impairment of goodwill
(4) |
— |
|
0 to 500 |
|
— |
Stock based compensation |
1,743 |
|
500 to 550 |
|
1,000 to 2,000 |
Adjusted
EBITDA |
$ |
(9,655) |
|
$ 6,000 to 6,500 |
|
$ 12,000 to 15,000 |
(1) Represents a contract termination settlement from the
Department of Education in 2019.
(2) Represents professional fees related to strategic corporate
development activities.
(3) 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.
(4) Represents potential goodwill impairment charge in
2019.
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