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 first quarter ended
March 31, 2020:
First Quarter Financial Highlights
- Total revenues of $45.9 million, compared to revenues of $34.9
million in the prior year period
- Net loss of approximately $12.5 million, or $(0.23) per diluted
share, compared to a net loss of $8.5 million, or $(0.16) per
diluted share, in the prior year period. Included in the net loss
was a non-cash impairment to goodwill of $19.0 million
- Adjusted net income, excluding the non-cash goodwill charge was
$2.1 million, or $0.04 per diluted share, compared to an adjusted
net loss of $7.9 million or $(0.15) per diluted share in the prior
year period
- Adjusted EBITDA of $7.1 million, compared to $(4.4) million in
the prior year period
First Quarter 2020 Results
Total revenues in the first quarter were $45.9 million, an
increase of 31.5% from revenues of $34.9 million in the prior year
period. Healthcare revenues in the first quarter of 2020 were
$17.5 million, an increase of 94.3% from revenues of $9.0 million
in the prior year period. Recovery revenues in the first quarter
were $24.3 million, an increase of $2.9 million, or 13.5% from
revenues of $21.4 million in the prior year period. Revenues
from our Customer Care / Outsourced Services in the first quarter
were $4.1 million, a decrease of $0.4 million from the prior year
period.
The Company recorded a non-cash impairment to goodwill of $19.0
million as of March 31, 2020. This is mainly due to the
decrease in the Company’s stock price and associated market
capitalization. There has been significant negative impact to the
global economy and the public securities markets as a result of the
COVID-19 pandemic since March 2020. As a result, the Company’s
goodwill is at elevated risk of additional impairment should there
be further decline in the Company’s stock price and associated
market capitalization, which may result in a potentially material
non-cash charge to earnings.
Net loss for the first quarter of 2020 was $12.5 million,
or $(0.23) per share on a fully diluted basis, compared
to net loss of $8.5 million or $(0.16) per share on
a fully diluted basis in the prior year period. Adjusted net
income for the first quarter of 2020 was $2.1 million,
resulting in $0.04 per share on a fully diluted basis.
This compares to an adjusted net loss of $7.9 million
or $(0.15) per fully diluted share in the prior year
period. Adjusted EBITDA for the first quarter of 2020 was $7.1
million as compared to $(4.4) million in the prior
year period.
As of March 31, 2020, the Company had cash, cash
equivalents and restricted cash of approximately $10.2 million.
Impact of COVID-19
Since March 11, 2020, when the World Health Organization
declared the COVID-19 outbreak a pandemic, the Company has taken
many proactive actions to protect the health of our employees and
their families, including limiting the number of people permitted
to be present in any particular meeting, curtailing business travel
and encouraging videoconferencing whenever possible. As the
COVID-19 pandemic worsened throughout March and into April 2020,
the Company required almost all personnel, approximately 1,200
employees, to work remotely and access to Company sites was
restricted to personnel who are required to perform critical
business continuity activities.
While the Company currently believes it has taken steps that
will allow it to continue to function as a result of the COVID-19
pandemic, the extent of the COVID-19 pandemic’s effect on
Performant's operational and financial performance will depend on
future developments and it is not currently possible to predict the
overall long-term impact of the COVID-19 pandemic on the Company's
business.
For example, pursuant to the terms of the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”) enacted in
March 2020, the U.S. Federal government suspended payments, ceased
accruing interest, and stopped involuntary collections of payments
(e.g., wage garnishments) for student loans owned by the Department
of Education through September 30, 2020. There is significant
uncertainty around the breadth and duration of business disruptions
related to the COVID-19 pandemic, as well as its impact on the
Company and the U.S. economy as a whole.
Business Commentary and Outlook
“As the pandemic unfolded in March, we were in the process of
reporting a second consecutive quarter with strong operating
results that was built on momentum from the solid execution on our
contracts and plans. Although we have had to pause active outbound
work on most student loan and government contracts, we are still
driving good operational momentum in most of our other contracts
which have not been as significantly impacted by the pandemic,”
stated Lisa Im, CEO of Performant.
“Our Company’s Business Continuity Pandemic Taskforce has been
extremely responsive in managing a multitude of changes coming from
clients and various governing bodies (i.e., federal, states,
counties, cities, etc.). We are actively monitoring the
impacts of the COVID-19 pandemic and although we may take further
actions to alter our business operations, the full impact of the
COVID-19 pandemic on our operating results, financial condition, or
liquidity for fiscal year 2020 and beyond cannot be estimated at
this point. As a result, we have made the decision to withdraw our
future guidance,” 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
income. 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 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 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 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 first
quarter 2020 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 13703913. The telephonic
replay will be available approximately three hours after the call,
through May 26, 2020.
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 2020 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 material adverse
impact of the COVID-19 pandemic on our business, results of
operations and financial condition as well as on the business
operations and financial performance of many of our customers, 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, 2019 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 InformationRichard ZubekInvestor
Relations925-960-4988investors@performantcorp.com
|
PERFORMANT
FINANCIAL CORPORATION AND SUBSIDIARIESConsolidated Balance
Sheets(In thousands, except per share amounts) |
|
|
March 31, 2020 |
|
December 31, 2019 |
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
8,574 |
|
|
$ |
3,373 |
|
Restricted cash |
1,622 |
|
|
1,622 |
|
Trade accounts receivable, net of allowance for doubtful accounts
of $518 and $237, respectively |
27,276 |
|
|
27,170 |
|
Contract assets |
1,201 |
|
|
1,339 |
|
Prepaid expenses and other current assets |
3,780 |
|
|
3,329 |
|
Income tax receivable |
3,989 |
|
|
164 |
|
Total current assets |
46,442 |
|
|
36,997 |
|
Property, equipment, and
leasehold improvements, net |
18,361 |
|
|
18,769 |
|
Identifiable intangible
assets, net |
866 |
|
|
925 |
|
Goodwill |
55,372 |
|
|
74,372 |
|
Right-of-use assets |
6,235 |
|
|
6,834 |
|
Other assets |
986 |
|
|
975 |
|
Total assets |
$ |
128,262 |
|
|
$ |
138,872 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Current maturities of notes payable to related party, net of
unamortized debt issuance costs of $111 and $130, respectively |
$ |
3,339 |
|
|
$ |
3,320 |
|
Accrued salaries and benefits |
7,676 |
|
|
6,126 |
|
Accounts payable |
3,007 |
|
|
2,532 |
|
Other current liabilities |
3,830 |
|
|
3,659 |
|
Estimated liability for appeals and disputes |
1,169 |
|
|
1,018 |
|
Lease liabilities |
2,601 |
|
|
2,775 |
|
Total current liabilities |
21,622 |
|
|
19,430 |
|
Notes payable to related
party, net of current portion and unamortized debt issuance costs
of $1,938 and $2,301, respectively |
58,062 |
|
|
58,562 |
|
Deferred income taxes |
35 |
|
|
35 |
|
Earnout payable |
475 |
|
|
475 |
|
Lease liabilities |
4,481 |
|
|
4,984 |
|
Other liabilities |
1,839 |
|
|
1,761 |
|
Total liabilities |
86,514 |
|
|
85,247 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock, $0.0001 par value. Authorized, 500,000 shares at
March 31, 2020 and December 31, 2019 respectively; issued and
outstanding 54,022 and 53,900 shares at March 31, 2020 and
December 31, 2019, respectively |
5 |
|
|
5 |
|
Additional paid-in capital |
81,196 |
|
|
80,589 |
|
Accumulated deficit |
(39,453 |
) |
|
(26,969 |
) |
Total stockholders’ equity |
41,748 |
|
|
53,625 |
|
Total liabilities and stockholders’ equity |
$ |
128,262 |
|
|
$ |
138,872 |
|
|
PERFORMANT
FINANCIAL CORPORATION AND SUBSIDIARIESConsolidated
Statements of Operations(In thousands, except per share
amounts)(Unaudited) |
|
|
|
Three Months
Ended March 31, |
|
|
2020 |
|
2019 |
Revenues |
|
$ |
45,888 |
|
|
$ |
34,876 |
|
Operating expenses: |
|
|
|
|
Salaries and benefits |
|
28,805 |
|
|
29,116 |
|
Other operating expenses |
|
12,220 |
|
|
12,953 |
|
Impairment of goodwill |
|
19,000 |
|
|
— |
|
Total operating expenses |
|
60,025 |
|
|
42,069 |
|
Loss from operations |
|
(14,137 |
) |
|
(7,193 |
) |
Interest expense |
|
(2,227 |
) |
|
(1,136 |
) |
Interest income |
|
6 |
|
|
11 |
|
Loss before provision for income taxes |
|
(16,358 |
) |
|
(8,318 |
) |
Provision for (benefit from) income taxes |
|
(3,874 |
) |
|
171 |
|
Net loss |
|
$ |
(12,484 |
) |
|
$ |
(8,489 |
) |
Net loss per share |
|
|
|
|
Basic |
|
$ |
(0.23 |
) |
|
$ |
(0.16 |
) |
Diluted |
|
$ |
(0.23 |
) |
|
$ |
(0.16 |
) |
Weighted average shares |
|
|
|
|
Basic |
|
53,943 |
|
|
53,059 |
|
Diluted |
|
53,943 |
|
|
53,059 |
|
|
PERFORMANT FINANCIAL CORPORATION AND
SUBSIDIARIESConsolidated Statements of Cash Flows(In
thousands)(Unaudited) |
|
|
Three Months
Ended March 31, |
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
Net loss |
$ |
(12,484 |
) |
|
$ |
(8,489 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Impairment of goodwill |
19,000 |
|
|
— |
|
Depreciation and amortization |
1,540 |
|
|
2,312 |
|
ROU assets amortization |
599 |
|
|
660 |
|
Deferred income taxes |
— |
|
|
31 |
|
Stock-based compensation |
691 |
|
|
499 |
|
Interest expense from debt issuance costs |
382 |
|
|
232 |
|
Earnout mark-to-market |
— |
|
|
276 |
|
Changes in operating assets and liabilities: |
|
|
|
Trade accounts receivable |
(106 |
) |
|
3,002 |
|
Contract assets |
138 |
|
|
|
— |
|
Prepaid expenses and other current assets |
(451 |
) |
|
(372 |
) |
Income tax receivable |
(3,825 |
) |
|
165 |
|
Other assets |
(11 |
) |
|
— |
|
Accrued salaries and benefits |
1,550 |
|
|
1,605 |
|
Accounts payable |
475 |
|
|
587 |
|
Other current liabilities |
171 |
|
|
483 |
|
Estimated liability for appeals and disputes |
151 |
|
|
45 |
|
Lease liabilities |
(677 |
) |
|
(723 |
) |
Other liabilities |
78 |
|
|
43 |
|
Net cash provided by operating activities |
7,221 |
|
|
356 |
|
Cash flows from investing activities: |
|
|
|
Purchase of property, equipment, and leasehold improvements |
(1,073 |
) |
|
(1,486 |
) |
Net cash used in investing activities |
(1,073 |
) |
|
(1,486 |
) |
Cash flows from financing activities: |
|
|
|
Repayment of notes payable |
(863 |
) |
|
— |
|
Taxes paid related to net share settlement of stock awards |
(84 |
) |
|
(156 |
) |
Proceeds from exercise of stock options |
— |
|
|
34 |
|
Net cash used in financing activities |
(947 |
) |
|
(122 |
) |
Net increase (decrease) in cash, cash equivalents and restricted
cash |
5,201 |
|
|
(1,252 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
4,995 |
|
|
7,275 |
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
10,196 |
|
|
$ |
6,023 |
|
|
|
|
|
Reconciliation of the Consolidated Statements of Cash
Flows to the Consolidated Balance Sheets: |
|
|
|
Cash and cash equivalents |
$ |
8,574 |
|
|
$ |
4,364 |
|
Restricted cash |
1,622 |
|
|
1,659 |
|
Total cash, cash equivalents and restricted cash at end of
period |
$ |
10,196 |
|
|
$ |
6,023 |
|
|
|
|
|
Supplemental disclosures of cash flow
information: |
|
|
|
Cash received for income taxes |
$ |
(72 |
) |
|
$ |
(54 |
) |
Cash paid for interest |
$ |
1,845 |
|
|
$ |
— |
|
|
|
|
|
|
PERFORMANT
FINANCIAL CORPORATION AND SUBSIDIARIESReconciliation of
Non-GAAP Results(In thousands, except per share
amount)(Unaudited) |
|
|
|
Three Months
Ended March 31, |
|
|
2020 |
|
2019 |
Adjusted Net Income (Loss) Per Diluted
Share: |
|
|
|
|
Net loss |
|
$ |
(12,484 |
) |
|
$ |
(8,489 |
) |
Plus: Adjustment items per reconciliation of adjusted net
(loss) income |
|
14,596 |
|
|
573 |
|
Adjusted net income (loss) |
|
2,112 |
|
|
(7,916 |
) |
Adjusted Loss Per Diluted Share |
|
$ |
0.04 |
|
|
$ |
(0.15 |
) |
Diluted avg shares outstanding (6) |
|
54,166 |
|
|
53,059 |
|
|
|
Three Months
Ended March 31, |
|
|
2020 |
|
2019 |
Adjusted EBITDA: |
|
|
|
|
Net loss |
|
$ |
(12,484 |
) |
|
$ |
(8,489 |
) |
Provision for (benefit from) income taxes |
|
(3,874 |
) |
|
171 |
|
Interest expense (1) |
|
2,227 |
|
|
1,136 |
|
Interest income |
|
(6 |
) |
|
(11 |
) |
Depreciation and amortization |
|
1,540 |
|
|
2,312 |
|
Impairment of goodwill (5) |
|
19,000 |
|
|
— |
|
Stock-based compensation |
|
691 |
|
|
499 |
|
Adjusted EBITDA |
|
$ |
7,094 |
|
|
$ |
(4,382 |
) |
|
|
Three Months
Ended March 31, |
|
|
2020 |
|
2019 |
Adjusted Net Income (Loss): |
|
|
|
|
Net loss |
|
$ |
(12,484 |
) |
|
$ |
(8,489 |
) |
Stock-based compensation |
|
691 |
|
|
499 |
|
Amortization of intangibles (2) |
|
59 |
|
|
59 |
|
Impairment of goodwill (5) |
|
19,000 |
|
|
— |
|
Deferred financing amortization costs (3) |
|
382 |
|
|
232 |
|
Tax adjustments (4) |
|
(5,536 |
) |
|
(217 |
) |
Adjusted Net Income (Loss) |
|
$ |
2,112 |
|
|
$ |
(7,916 |
) |
|
(1) |
|
Represents interest expense and amortization of issuance costs
related to the refinancing of our indebtedness. |
|
(2) |
|
Represents amortization of
intangibles 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. |
|
(4) |
|
Represents tax adjustments
assuming a marginal tax rate of 27.5% at full profitability. |
|
(5) |
|
Represents a non-cash goodwill
impairment charge in 2020 mainly due to the decrease of our market
capitalization. |
|
(6) |
|
While Net income (loss) for the
three months ended March 31, 2020 reflects a net loss of ($12,484),
the computation of adjusted net income results in adjusted net
income of $2,112. Therefore, the calculation of the adjusted
earnings per diluted share for the three months ended March 31,
2020 includes dilutive common share equivalents of 223 added to the
basic weighted average shares of 53,943. |
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