Performant Financial Corporation (Nasdaq: PFMT), a leading
provider of technology-enabled recovery and related analytics
services in the United States, today reported the following
financial results for its fourth quarter and full year ended
December 31, 2020:
Fourth Quarter Financial Highlights
- Total revenues of $40.0 million, compared to $43.8 million in
the prior year period, a decrease of 9%
- Net income of $3.7 million or $0.07 per diluted share, compared
to a net loss of $3.9 million, or $(0.07) per diluted share, in the
prior year period, an increase of 195%
- Adjusted EBITDA of $5.2 million, compared to $6.5 million in
the prior year period, a decrease of 20%
- Adjusted net income of $4.5 million, or $0.08 per diluted
share, compared to adjusted net income of $1.5 million or $0.03 per
diluted share, in the prior year period, an increase of 200%
Full Year 2020 Financial Highlights
- Total revenues of $155.9 million, compared to $150.4 million in
the prior year period, an increase of 4%
- Net loss of $14.0 million, or $(0.26) per diluted share,
compared to net loss of $26.8 million, or $(0.50) per diluted share
in the prior year period, an improvement of 48%
- Adjusted EBITDA of $20.5 million, compared to $(3.2) million in
the prior year period, an increase of 738%
- Adjusted net income of $8.5 million, or $0.16 per diluted
share, compared to adjusted net loss of $20.0 million, or $(0.37)
per diluted share, in the prior year period, an increase of
143%
Fourth Quarter 2020 Results
Healthcare revenues in the fourth quarter were $18.9 million, up
from $14.3 million in the prior year period. Recovery revenues in
the fourth quarter were $17.5 million, compared to revenues of
$25.2 million in the prior year period. Revenues from our Customer
Care / Outsourced Services in the fourth quarter were $3.7 million,
down from $4.3 million in the prior year period.
Net income for the fourth quarter of 2020 was $3.7 million, or
$0.07 per share on a fully diluted basis, compared to net loss of
$3.9 million or $(0.07) per share on a fully diluted basis in the
prior year period. Adjusted EBITDA for the fourth quarter of 2020
was $5.2 million as compared to $6.5 million in the prior year
period. Adjusted net income for the fourth quarter of 2020 was $4.5
million or $0.08 per share on a fully diluted basis. This compares
to adjusted net income of $1.5 million, or $0.03 per fully diluted
share in the prior year period.
Full Year 2020 Results
Revenues for the full year ended December 31, 2020 were $155.9
million, an increase of $5.5 million compared to revenues of $150.4
million in 2019. Healthcare revenues increased $25.2 million in
2020 to $68.5 million from $43.3 million in the prior year. For the
full year 2020, we reported recovery revenue of $73.4 million, a
decrease of $16.2 million compared to $89.6 million in the prior
year. Revenues from our Customer Care / Outsourced Services were
$14.0 million in 2020, a decrease of $3.5 million compared to $
$17.5 million in the prior year.
Net loss for the full year was $14.0 million, or $(0.26) per
share on a fully diluted basis, compared to net loss of $26.8
million or $(0.50) per share on a fully diluted basis in 2019.
Adjusted EBITDA for 2020 was $20.5 million as compared to a loss of
$(3.2) million in 2019. Adjusted net income for 2020 was $8.5
million, or $0.16 per fully diluted share. This compares to
adjusted net loss of $20.0 million or $(0.37) per fully diluted
share in 2019.
As of December 31, 2020, the Company had cash, cash equivalents
and restricted cash of approximately $18.3 million.
Business Commentary
“Coming into 2020, we were on course to report a transformative
year, following multiple years of hard work transitioning
Performant from a company deriving its success from a small number
of large recovery contracts, into a highly, dynamic company with
diversified healthcare offerings. Although we were able to report a
strong year, the impact of the global pandemic brought material
disruption to our operations,” commented Lisa Im, CEO of
Performant.
“However, the resiliency of our business can be seen in our
results. Despite the delays and shutdowns of multiple contracts
across both of our businesses, we reported revenue growth as well
as over $20 million in EBITDA, something we haven't achieved since
2016. As we look ahead, beyond an expectation of continuing to
report positive EBITDA for the full year, we are not providing a
more detailed outlook for 2021. Spearheaded by the continued
impacts from COVID-19, there is still too much uncertainty with
respect to our recovery operations at this point for us to provide
a meaningful outlook,” 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, 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.
Terms used in this Press Release
Student Loan Placement Volume refers to the dollar volume of
defaulted student loans first placed with us during the specified
period by public and private clients for recovery. Placement Volume
allows us to measure and track trends in the amount of inventory
our clients in the student lending market are placing with us
during any period. The revenue associated with the recovery of a
portion of these loans may be recognized in subsequent accounting
periods, which assists management in estimating future revenues and
in allocating resources necessary to address current Placement
Volumes.
Earnings Conference Call
The Company will hold a conference call to discuss its fourth
quarter and full year 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 13717499. The telephonic
replay will be available approximately three hours after the call,
through March 23, 2021.
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, 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.
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share
amounts)
(Unaudited)
Assets
December 31,
2020
December 31,
2019
Current assets:
Cash and cash equivalents
$
16,043
$
3,373
Restricted cash
2,253
1,622
Trade accounts receivable, net of
allowance for doubtful accounts of $49 and $237, respectively
23,216
27,170
Contract assets
4,466
1,339
Prepaid expenses and other current
assets
3,784
3,329
Income tax receivable
4,758
164
Total current assets
54,520
36,997
Property, equipment, and leasehold
improvements, net
17,497
18,769
Identifiable intangible assets, net
689
925
Goodwill
47,372
74,372
ROU assets
5,043
6,834
Other assets
1,106
975
Total assets
$
126,227
$
138,872
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of notes payable to
related party, net of unamortized discount and debt issuance costs
of $906 and $130, respectively
$
59,957
$
3,320
Accrued salaries and benefits
8,799
6,126
Accounts payable
407
2,532
Other current liabilities
3,841
3,576
Deferred revenue
867
83
Estimated liability for appeals and
disputes
1,014
1,018
Lease liabilities
2,327
2,775
Total current liabilities
77,212
19,430
Notes payable to related party, net of
current portion and unamortized discount and debt issuance costs of
$0 and $2,301, respectively
—
58,562
Earnout payable
89
475
Lease liabilities
3,442
4,984
Other liabilities
3,504
1,796
Total liabilities
84,247
85,247
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value.
Authorized, 500,000 shares at December 31, 2020 and 2019,
respectively; issued and outstanding, 54,764 and 53,900 shares at
December 31, 2020 and 2019, respectively
5
5
Additional paid-in capital
82,933
80,589
Accumulated deficit
(40,958
)
(26,969
)
Total stockholders’ equity
41,980
53,625
Total liabilities and stockholders’
equity
$
126,227
$
138,872
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2020
2019
2020
2019
Revenues
$
40,036
$
43,823
$
155,937
$
150,432
Operating expenses:
Salaries and benefits
26,161
28,378
100,654
115,194
Other operating expenses
10,173
10,575
42,248
47,687
Impairment of goodwill
—
7,200
27,000
7,200
Total operating expenses
36,334
46,153
169,902
170,081
Income (loss) from operations
3,702
(2,330
)
(13,965
)
(19,649
)
Interest expense
(1,400
)
(2,329
)
(7,227
)
(7,589
)
Interest income
3
8
21
41
Income (loss) before benefit from income
taxes
2,305
(4,651
)
(21,171
)
(27,197
)
Benefit from income taxes
1,415
789
7,182
377
Net income (loss)
$
3,720
$
(3,862
)
$
(13,989
)
$
(26,820
)
Net income (loss) per share
Basic
$
0.07
$
(0.07
)
$
(0.26
)
$
(0.50
)
Diluted
$
0.07
$
(0.07
)
$
(0.26
)
$
(0.50
)
Weighted average shares
Basic
54,754
53,773
54,414
53,468
Diluted
56,206
53,773
54,414
53,468
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(In thousands)
(Unaudited)
Twelve Months Ended
December 31,
2020
2019
Cash flows from operating
activities:
Net loss
$
(13,989
)
$
(26,820
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Loss on disposal of assets and other
88
57
Impairment of goodwill
27,000
7,200
Depreciation and amortization
5,216
8,536
ROU asset amortization
1,791
2,589
Gain on lease modification
—
(137
)
Stock-based compensation
2,610
2,311
Interest expense from debt issuance
costs
1,525
1,286
Earnout mark-to-market
(398
)
(1,223
)
Changes in operating assets and
liabilities:
Trade accounts receivable
3,954
(6,291
)
Contract assets
(3,127
)
(1,339
)
Prepaid expenses and other current
assets
(455
)
91
Income tax receivable
(4,594
)
15
Other assets
(135
)
40
Accrued salaries and benefits
2,673
367
Accounts payable
(2,125
)
1,130
Deferred revenue and other current
liabilities
1,061
(895
)
Estimated liability for appeals and
disputes
(4
)
808
Lease liabilities
(1,990
)
(2,786
)
Other liabilities
1,708
(362
)
Net cash provided by (used in) operating
activities
20,809
(15,423
)
Cash flows from investing
activities:
Purchase of property, equipment, and
leasehold improvements
(3,792
)
(4,856
)
Net cash used in investing activities
(3,792
)
(4,856
)
Cash flows from financing
activities:
Repayment of notes payable
(3,450
)
(2,488
)
Debt issuance costs paid
—
(81
)
Taxes paid related to net share settlement
of stock awards
(266
)
(466
)
Proceeds from exercise of stock
options
—
34
Borrowings from notes payable
—
21,000
Net cash (used in) provided by financing
activities
(3,716
)
17,999
Net increase (decrease) in cash, cash
equivalents and restricted cash
13,301
(2,280
)
Cash, cash equivalents and restricted cash
at beginning of year
4,995
7,275
Cash, cash equivalents and restricted cash
at end of year
$
18,296
$
4,995
Reconciliation of the consolidated
statements of cash flows to the consolidated balance
sheets:
Cash and cash equivalents
$
16,043
$
3,373
Restricted cash
$
2,253
$
1,622
Total cash, cash equivalents and
restricted cash at end of period
$
18,296
$
4,995
Non-cash financing activities:
Recognition of earnout shares issued
$
—
$
176
Recognition of warrants issued in debt
financing
$
—
$
1,165
Supplemental disclosures of cash flow
information:
Cash received for income taxes
$
(2,257
)
$
(202
)
Cash paid for interest
$
5,702
$
6,304
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP
Results
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2020
2019
2020
2019
Adjusted Earnings Per Diluted
Share:
Net income (loss)
$
3,720
$
(3,862
)
$
(13,989
)
$
(26,820
)
Plus: Adjusted items per reconciliation of
adjusted net income
742
5,370
22,458
6,847
Adjusted net income (loss)
$
4,462
$
1,508
$
8,469
$
(19,973
)
Adjusted earnings per diluted share
$
0.08
$
0.03
$
0.16
$
(0.37
)
Diluted average shares outstanding (8)
56,206
53,837
54,458
53,468
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2020
2019
2020
2019
Adjusted EBITDA:
Net income (loss)
$
3,720
$
(3,862
)
$
(13,989
)
$
(26,820
)
Benefit from income taxes
(1,415
)
(789
)
(7,182
)
(377
)
Interest expense
1,400
2,329
7,227
7,589
Interest income
(3
)
(8
)
(21
)
(41
)
Client contract termination settlement
(7)
—
(677
)
—
(677
)
Non-core operating expenses (6)
—
—
—
309
Earnout mark-to-market (5)
(235
)
(137
)
(397
)
(1,223
)
Depreciation and amortization
1,144
1,839
5,216
8,536
Impairment of goodwill (3)
—
7,200
27,000
7,200
Stock based compensation
613
568
2,610
2,311
Adjusted EBITDA
$
5,224
$
6,463
$
20,464
$
(3,193
)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2020
2019
2020
2019
Adjusted Net Income (Loss):
Net loss
$
3,720
$
(3,862
)
$
(13,989
)
$
(26,820
)
Stock based compensation
613
568
2,610
2,311
Amortization of intangibles (1)
63
63
239
239
Impairment of goodwill (3)
—
7,200
27,000
7,200
Deferred financing amortization costs
(2)
141
390
1,525
1,286
Client contract termination settlement
(7)
—
(677
)
—
(677
)
Non-core operating expenses (6)
—
—
—
309
Earnout mark-to-market (5)
(235
)
(137
)
(397
)
(1,223
)
Tax adjustments (4)
160
(2,037
)
(8,519
)
(2,598
)
Adjusted net income (loss)
$
4,462
$
1,508
$
8,469
$
(19,973
)
(1)
Represents amortization of capitalized
intangible assets related to the acquisition of Performant by an
affiliate of Parthenon Capital Partners in 2004, an acquisition in
the first quarter of 2012 to enhance our analytics
capabilities.
(2)
Represents amortization of capitalized
financing costs related to our Credit Agreement.
(3)
Represents non-cash goodwill impairment
charge.
(4)
Represents tax adjustments assuming a
marginal tax rate of 27.5%.
(5)
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.
(6)
Represents professional fees related to
strategic corporate development activities.
(7)
Represents a contract termination
settlement from the Department of Education in 2019.
(8)
While net loss for the year ended December
31, 2020 was $13,989, the computation of adjusted net income (loss)
results in adjusted net income of $8,469. Therefore, the
calculation of the adjusted earnings per diluted share for the year
ended December 31, 2020 includes dilutive common share equivalents
of 44 added to the basic weighted average shares of 54,414.
Similarly, the calculation of the adjusted earnings per diluted
share for the three months ended December 31, 2020 includes
dilutive common share equivalents of 1,452 added to the basic
weighted average shares of 54,754. The calculation of the adjusted
earnings per diluted share for the three months ended December 31,
2019 includes dilutive common share equivalents of 64 added to the
basic weighted average shares of 53,773.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210316005933/en/
Richard Zubek Investor Relations 925-960-4988
investors@performantcorp.com
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