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,
2021:
First Quarter Financial Highlights
- Total revenues of $31.4 million, compared to revenues of $45.9
million in the prior year period
- Net loss of approximately $4.4 million, or $(0.08) per diluted
share, compared to a net loss of $12.5 million, or $(0.23) per
diluted share, in the prior year period.
- Adjusted net loss was $2.8 million, or $(0.05) per diluted
share, compared to an adjusted net income of $2.1 million or $0.04
per diluted share in the prior year period
- Adjusted EBITDA of $(0.2) million, compared to $7.1 million in
the prior year period
First Quarter 2021 Results
Total revenues in the first quarter were $31.4 million, a
decrease of $14.5 million, or 31.6% from revenues of $45.9 million
in the prior year period. Healthcare revenues in the first quarter
of 2021 were $13.3 million, a decrease of $4.2 million, or 24.2%,
from revenues of $17.5 million in the prior year period. In April,
the Company identified discrete exposure within one of its
statements of work related to eligibility-based services, and
accrued a $3.3 million liability against revenues, which
contributed to the decline in Healthcare revenues. The Company
expects to settle this liability during the year or shortly
thereafter via future offsets. The Company does not anticipate the
need to incur future liabilities related to this.
In an effort to provide greater clarity and accuracy on the
health of the Company's overall business, the Company has decided
to re-classify how Healthcare revenues are reported into
claims-based and eligibility-based offerings. Claims-based or
claims audit revenue in the first quarter of 2021 was $5.4 million
dollars, while revenue from eligibility-based claims in the first
quarter was $7.9 million. For comparison purposes, a table has been
provided at the end of this press release with historical quarterly
data through 2019.
Recovery revenues in the first quarter were $14.5 million, a
decrease of $9.8 million, or 40.3%, from revenues of $24.3 million
in the prior year period. Revenues from our Customer Care /
Outsourced Services in the first quarter were $3.6 million, a
decrease of $0.5 million, or 12.2%, from revenues of $4.1 million
in the prior year period.
Net loss for the first quarter was $4.4 million, or $(0.08) per
share on a diluted basis, compared to net loss of $12.5 million, or
$(0.23) per share on a diluted basis, in the prior year period.
Adjusted net loss for the first quarter was $2.8 million, or
$(0.05) per share on a diluted basis, compared to an adjusted net
income of $2.1 million, or $0.04 per diluted share, in the prior
year period. Adjusted EBITDA for the first quarter was $(0.2)
million as compared to $7.1 million in the prior year period.
As of March 31, 2021, the Company had cash, cash equivalents and
restricted cash of approximately $21.4 million.
Business Commentary and Outlook
“We anticipated Q1 to be a smaller quarter in 2021 due to the
trickle-down of COVID impacts, but are excited to share that the
current and long-term trends remain very positive as evidenced by
the five additional programs that we launched in the first
quarter,” stated Lisa Im, CEO of Performant. “Our targets for 2021
are unchanged as we are confident in our ability to execute and
achieve our previously stated guidance of annual healthcare revenue
in the range of $83 - $90 million and positive EBITDA.”
“We are successfully winning new business and expanding our
existing contracts through the combination of our client centric
focus and our proprietary and differentiated technology platform.
We continue to be very focused on healthcare growth opportunities
as we move further into 2021, and believe the solid traction that
we achieved during the 18 months of contract implementation
highlights our ability to serve healthcare clients with products
that better meet their needs than offered by competitors,”
continued 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.
Earnings Conference Call
The Company will hold a conference call to discuss its first
quarter 2021 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 877-705-6011 (domestic) or
201-493-6730 (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 13719637. The telephonic
replay will be available approximately three hours after the call,
through May 18, 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 ten 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 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
incurring 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, 2020 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)
March 31, 2021
December 31,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
19,203
$
16,043
Restricted cash
2,203
2,253
Trade accounts receivable, net of
allowance for doubtful accounts of $49 and $49, respectively
20,600
23,216
Contract assets
4,749
4,466
Prepaid expenses and other current
assets
3,667
3,784
Income tax receivable
4,698
4,758
Total current assets
55,120
54,520
Property, equipment, and leasehold
improvements, net
16,730
17,497
Identifiable intangible assets, net
630
689
Goodwill
47,372
47,372
Right-of-use assets
4,536
5,043
Other assets
1,021
1,106
Total assets
$
125,409
$
126,227
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of notes payable to
related party, net of unamortized debt issuance costs of $537 and
$906, respectively
$
59,463
$
59,957
Accrued salaries and benefits
9,598
8,799
Accounts payable
865
407
Other current liabilities
4,128
3,841
Deferred revenue
466
867
Estimated liability for appeals, disputes,
and refunds
4,373
1,014
Lease liabilities
2,264
2,327
Total current liabilities
81,157
77,212
Lease liabilities
2,914
3,442
Other liabilities
3,171
3,593
Total liabilities
87,242
84,247
Commitments and contingencies (note 3 and
note 4)
Stockholders’ equity:
Common stock, $0.0001 par value.
Authorized, 500,000 shares at March 31, 2021 and December 31, 2020
respectively; issued and outstanding 54,825 and 54,764 shares at
March 31, 2021 and December 31, 2020, respectively
5
5
Additional paid-in capital
83,559
82,933
Accumulated deficit
(45,397
)
(40,958
)
Total stockholders’ equity
38,167
41,980
Total liabilities and stockholders’
equity
$
125,409
$
126,227
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended March
31,
2021
2020
Revenues
$
31,390
$
45,888
Operating expenses:
Salaries and benefits
24,090
28,805
Other operating expenses
10,356
12,220
Impairment of goodwill
—
19,000
Total operating expenses
34,446
60,025
Loss from operations
(3,056
)
(14,137
)
Interest expense
(1,346
)
(2,227
)
Interest income
—
6
Loss before provision for (benefit from)
income taxes
(4,402
)
(16,358
)
Provision for (benefit from) income
taxes
37
(3,874
)
Net loss
$
(4,439
)
$
(12,484
)
Net loss per share
Basic
$
(0.08
)
$
(0.23
)
Diluted
$
(0.08
)
$
(0.23
)
Weighted average shares
Basic
54,813
53,943
Diluted
54,813
53,943
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(In thousands)
(Unaudited)
Three Months Ended March
31,
2021
2020
Cash flows from operating
activities:
Net loss
$
(4,439
)
$
(12,484
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Impairment of long-lived assets
636
—
Impairment of goodwill
—
19,000
Depreciation and amortization
1,016
1,540
Right-of-use assets amortization
507
599
Stock-based compensation
649
691
Interest expense from debt issuance
costs
369
382
Changes in operating assets and
liabilities:
Trade accounts receivable
2,616
(106
)
Contract assets
(283
)
138
Prepaid expenses and other current assets
and other assets
117
(451
)
Income tax receivable
60
(3,825
)
Other assets
85
(11
)
Accrued salaries and benefits
799
1,550
Accounts payable
458
475
Deferred revenue and other current
liabilities
(114
)
171
Estimated liability for appeals, disputes,
and refunds
3,359
151
Lease liabilities
(591
)
(677
)
Other liabilities
(422
)
78
Net cash provided by operating
activities
4,822
7,221
Cash flows from investing
activities:
Purchase of property, equipment, and
leasehold improvements
(826
)
(1,073
)
Net cash used in investing activities
(826
)
(1,073
)
Cash flows from financing
activities:
Repayment of notes payable
(863
)
(863
)
Taxes paid related to net share settlement
of stock awards
(23
)
(84
)
Net cash used in financing activities
(886
)
(947
)
Net increase in cash, cash equivalents and
restricted cash
3,110
5,201
Cash, cash equivalents and restricted cash
at beginning of period
18,296
4,995
Cash, cash equivalents and restricted cash
at end of period
$
21,406
$
10,196
Reconciliation of the Consolidated
Statements of Cash Flows to the Consolidated Balance
Sheets:
Cash and cash equivalents
$
19,203
$
8,574
Restricted cash
2,203
1,622
Total cash, cash equivalents and
restricted cash at end of period
$
21,406
$
10,196
Supplemental disclosures of cash flow
information:
Cash paid (received) for income taxes
$
432
$
(72
)
Cash paid for interest
$
977
$
1,845
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP
Results
(In thousands, except per share
amount)
(Unaudited)
Three Months Ended March
31,
2021
2020
Adjusted EBITDA:
Net income (loss)
$
(4,439
)
$
(12,484
)
Provision for (benefit from) income
taxes
37
(3,874
)
Interest expense (1)
1,346
2,227
Interest income
—
(6
)
Stock-based compensation
649
691
Depreciation and amortization
1,016
1,540
Impairment of goodwill (5)
—
19,000
Impairment of long-lived assets
636
—
Transaction expenses (6)
511
—
Adjusted EBITDA
$
(244
)
$
7,094
Three Months Ended March
31,
2021
2020
Adjusted Net Income (Loss):
Net income (loss)
$
(4,439
)
$
(12,484
)
Stock-based compensation
649
691
Amortization of intangibles (2)
59
59
Deferred financing amortization costs
(3)
369
382
Impairment of goodwill (5)
—
19,000
Impairment of long-lived assets
636
—
Transaction expenses (6)
511
—
Tax adjustments (4)
(611
)
(5,536
)
Adjusted net income (loss)
$
(2,826
)
$
2,112
Three Months Ended March
31,
2021
2020
Adjusted Net Income (Loss) Per Diluted
Share:
Net income (loss)
$
(4,439
)
$
(12,484
)
Plus: Adjustment items per reconciliation
of adjusted net income (loss)
1,613
14,596
Adjusted net income (loss)
$
(2,826
)
$
2,112
Adjusted net income (loss) per diluted
share
$
(0.05
)
$
0.04
Diluted average shares outstanding (7)
54,813
54,166
(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 noncash goodwill impairment
charge in 2020 mainly due to the decrease of our market
capitalization in the first half of 2020.
(6)
Represents direct and incremental costs
associated with expenses incurred in 2021 for a potential sale of
recovery contracts.
(7)
While net loss for the three months ended
March 31, 2020 is ($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.
We are providing the following historical breakdown of the
quarterly and annual revenue contributions under the new
contribution breakdowns of our healthcare revenue results for the
years ended December 31, 2019 and December 31, 2020, and three
months ended March 31, 2021:
For the Three Months Ended
For the Year Ended
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
December 31, 2019
(in thousands)
Eligibility
$
7,742
$
7,042
$
8,005
$
9,987
$
32,776
Claims Based
1,278
2,221
2,752
4,301
10,552
Healthcare Total
9,020
9,263
10,757
14,288
43,328
Recovery
21,375
22,107
20,936
25,208
89,626
Customer Care / Outsourced Services
4,481
4,460
4,210
4,327
17,478
Total
$
34,876
$
35,830
$
35,903
$
43,823
$
150,432
For the Three Months Ended
For the Year Ended
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
December 31, 2020
(in thousands)
Eligibility
$
10,949
$
11,292
$
13,480
$
14,126
$
49,847
Claims Based
6,575
3,301
4,086
4,739
18,701
Healthcare Total
17,524
14,593
17,566
18,865
68,548
Recovery
24,265
16,167
15,443
17,521
73,396
Customer Care / Outsourced Services
4,099
3,025
3,219
3,650
13,993
Total
$
45,888
$
33,785
$
36,228
$
40,036
$
155,937
For the Three Months Ended
March 31, 2021
(in thousands)
Eligibility
$
7,911
Claims Based
5,375
Healthcare Total
13,286
Recovery
14,491
Customer Care / Outsourced Services
3,613
Total
$
31,390
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210513005979/en/
Richard Zubek Investor Relations 925-960-4988
investors@performantcorp.com
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