Performant Financial Corporation (Nasdaq: PFMT) (the "Company"),
a leading provider of technology-enabled audit, recovery, and
related analytics services in the United States with a focus in the
healthcare payment integrity services industry, today reported the
following financial results for its second quarter ended June 30,
2022:
Second Quarter Financial Highlights
- Total revenues of $25.7 million, compared to revenues of $32.8
million in the prior year period.
- Healthcare revenues of $21.8 million, compared to $18.6 million
in the prior year period, an increase of 17.0%
- Net loss of approximately $(3.2) million, or $(0.04) per
diluted share, compared to net loss of $(1.5) million, or $(0.03)
per diluted share, in the prior year period.
- Adjusted net loss was $(2.9) million, or $(0.04) per diluted
share, compared to adjusted net income of 0.5 million, or $0.01 per
diluted share, in the prior year period.
- Adjusted EBITDA of $(1.4) million, compared to $4.2 million in
the prior year period.
Second Quarter 2022 Results
Total revenues in the second quarter were $25.7 million, a
decrease from revenues of $32.8 million in the prior year period.
Healthcare revenues in the second quarter of 2022 were $21.8
million, an increase of 17% from revenues of $18.6 million in the
prior year period. Within Healthcare, claims-based services revenue
in the second quarter of 2022 was $9.3 million, while revenues from
eligibility-based services in the second quarter was $12.4
million.
“The second quarter of 2022 marked yet another quarter of strong
year-over-year growth in our healthcare revenues supported by our
robust sales pipeline and steady implementation conversion,” stated
Simeon Kohl, President of Performant. “We are also pleased to
announce that Melissa Christ has joined Performant as Chief People
Officer. Melissa brings over 20 years of experience in people
strategy and working with high-growth companies. People are at the
core of everything we do, and we are excited to have such an
experienced leader to help navigate this important period of
growth.”
Recovery revenues in the second quarter were $7 thousand, a
decrease of 99.9% from revenues of $11.1 million in the prior year
period due to the cessation of non-healthcare recovery activity
which largely occurred by the end of 2021. Revenues from our
Customer Care / Outsourced Services in the second quarter were $3.9
million, up $0.8 million compared to the prior year period.
Net loss for the second quarter was $3.2 million, or $(0.04) per
share on a diluted basis, compared to a net loss of $1.5 million,
or $(0.03) per share on a diluted basis, in the prior year period.
Adjusted net loss for the second quarter was $2.9 million, or
$(0.04) per share on a diluted basis, compared to adjusted net
income of $0.5 million, or $0.01 per diluted share, in the prior
year period. Adjusted EBITDA for the second quarter was $(1.4)
million as compared to $4.2 million in the prior year period.
As of June 30, 2022, the Company had cash, cash equivalents, and
restricted cash of approximately $18.2 million.
“Given our continued achievements in the second quarter, and in
combination with the KPI and opportunity growth ahead of us, we
remain pleased with how we are tracking toward current year
expectations and more importantly, our long-term goals,” stated
Rohit Ramchandani, Senior Vice President of Finance and Strategy at
Performant. “Despite a tumultuous macroeconomic climate we remain
well capitalized and positioned to continue executing against our
investment strategies, which will promote continued long-term
growth. As we look ahead to the second half of the year, we are
pleased to reiterate our Healthcare revenue and adjusted EBITDA
guidance ranges for 2022 of $92-$96MM and $2-$4 million
respectively.”
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 second
quarter 2022 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 877-704-4453 (domestic) or
201-389-0920 (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 13731883. The telephonic
replay will be available approximately three hours after the call,
through August 15, 2022.
About Performant Financial Corporation
Performant is a leading provider of technology-enabled audit,
recovery, and analytics services in the United States with a focus
in the healthcare payment integrity industry. Performant works with
healthcare payers through claims auditing and eligibility-based
(also known as coordination-of-benefits) services to identify
improper payments. The Company engages clients in both government
and commercial markets. The Company also has a call center which
serves clients with complex consumer engagement needs. Clients of
the Company typically operate in complex and highly regulated
environments and contract for their payment integrity needs in
order to reduce losses on improper healthcare payments.
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 the Company's outlook for
revenues, net income (loss), and adjusted EBITDA in 2022 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 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, that the high level of revenue
concentration among the Company's largest customers and any
termination of or deterioration in the Company’s relationship with
any of its significant clients would result in a material decline
in 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 U.S. federal government
accounts for a significant portion of the Company's revenues, that
downturns in domestic or global economic conditions and other
macroeconomic factors could harm the Company’s business and results
of operations, that the Company may not have sufficient cash flows
from operations to fund ongoing operations and other liquidity
needs, that the Company may not be able to manage its potential
growth effectively, that the Company faces significant competition
in all of its markets, the material adverse impact of the COVID-19
pandemic on the Company's business, results of operations and
financial condition as well as on the business operations and
financial performance of many of its customers, that limitations on
the scope of the Company's audit activity under its claims audit
contracts may reduce revenue opportunities, 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 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, 2021 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)
June 30,
2022
December 31,
2021
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
15,973
$
17,347
Restricted cash
2,203
2,203
Trade accounts receivable, net of
allowance for doubtful accounts of $29 and $—, respectively
19,880
20,808
Contract assets
9,197
8,113
Prepaid expenses and other current
assets
3,334
3,077
Income tax receivable
3,248
3,159
Total current assets
53,835
54,707
Property, equipment, and leasehold
improvements, net
15,036
15,708
Goodwill
47,372
47,372
Right-of-use assets
2,647
3,235
Other assets
969
963
Total assets
$
119,859
$
121,985
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of notes payable, net
of unamortized debt issuance costs of $14 and $11, respectively
$
736
$
489
Accrued salaries and benefits
7,395
8,476
Accounts payable
963
1,124
Other current liabilities
2,124
3,732
Contract liabilities
366
634
Estimated liability for appeals and
disputes
1,076
1,190
Lease liabilities
1,404
1,862
Total current liabilities
14,064
17,507
Notes payable, net of current portion and
unamortized debt issuance costs of $366 and $416, respectively
18,634
19,084
Lease liabilities
1,557
1,803
Other liabilities
1,179
1,168
Total liabilities
35,434
39,562
Commitments and contingencies (note 3 and
note 4)
Stockholders’ equity:
Common stock, $0.0001 par value.
Authorized, 500,000 shares at June 30, 2022 and December 31, 2021
respectively; issued and outstanding 73,818 and 69,281 shares at
June 30, 2022 and December 31, 2021, respectively
7
7
Additional paid-in capital
140,506
133,662
Accumulated deficit
(56,088
)
(51,246
)
Total stockholders’ equity
84,425
82,423
Total liabilities and stockholders’
equity
$
119,859
$
121,985
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Revenues
$
25,681
$
32,842
$
52,764
$
64,232
Operating expenses:
Salaries and benefits
20,903
23,295
41,342
47,385
Other operating expenses
8,081
10,759
16,212
21,115
Total operating expenses
28,984
34,054
57,554
68,500
Loss from operations
(3,303
)
(1,212
)
(4,790
)
(4,268
)
Interest expense
(216
)
(2,126
)
(371
)
(3,472
)
Loss before provision for income taxes
(3,137
)
(1,489
)
(4,779
)
(5,891
)
Provision for income taxes
32
33
63
70
Net loss
$
(3,169
)
$
(1,522
)
$
(4,842
)
$
(5,961
)
Net loss per share
Basic
$
(0.04
)
$
(0.03
)
$
(0.07
)
$
(0.11
)
Diluted
$
(0.04
)
$
(0.03
)
$
(0.07
)
$
(0.11
)
Weighted average shares
Basic
73,502
55,516
71,698
55,167
Diluted
73,502
55,516
71,698
55,167
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2022
2021
Cash flows from operating
activities:
Net loss
$
(4,842
)
$
(5,961
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Loss (gain) on disposal of assets and
impairment of long-lived assets
(15
)
674
Depreciation and amortization
2,260
3,040
Right-of-use assets amortization
588
1,015
Stock-based compensation
1,281
1,423
Interest expense from debt issuance
costs
48
1,133
Gain on sale of certain recovery
contracts
(382
)
(1,849
)
Changes in operating assets and
liabilities:
Trade accounts receivable
928
3,417
Contract assets
(1,084
)
(1,304
)
Prepaid expenses and other current
assets
(257
)
564
Income tax receivable
(89
)
(934
)
Other assets
(6
)
121
Accrued salaries and benefits
(1,081
)
(1,072
)
Accounts payable
(161
)
439
Contract liabilities and other current
liabilities
(1,860
)
(1,147
)
Estimated liability for appeals and
disputes
(114
)
3,486
Lease liabilities
(704
)
(1,167
)
Other liabilities
12
(414
)
Net cash (used in) provided by operating
activities
(5,478
)
1,464
Cash flows from investing
activities:
Purchase of property, equipment, and
leasehold improvements
(1,589
)
(1,604
)
Proceeds from sale of certain recovery
contracts
382
2,406
Net cash (used in) provided by investing
activities
(1,207
)
802
Cash flows from financing
activities:
Repayment of notes payable
(250
)
(7,650
)
Debt issuance costs paid
(2
)
(150
)
Taxes paid related to net share settlement
of stock awards
—
(633
)
Proceeds from exercise of warrants
5,563
23
Net cash provided by (used in) financing
activities
5,311
(8,410
)
Net decrease in cash, cash equivalents and
restricted cash
(1,374
)
(6,144
)
Cash, cash equivalents and restricted cash
at beginning of period
19,550
18,296
Cash, cash equivalents and restricted cash
at end of period
$
18,176
$
12,152
Reconciliation of the Consolidated
Statements of Cash Flows to the Consolidated Balance
Sheets:
Cash and cash equivalents
$
15,973
$
9,949
Restricted cash
2,203
2,203
Total cash, cash equivalents and
restricted cash at end of period
$
18,176
$
12,152
Non-cash financing activities:
Recognition of earnout shares issued
$
—
$
801
Recognition of warrants associated with
notes payable
$
—
$
5,237
Supplemental disclosures of cash flow
information:
Cash paid for income taxes
$
238
$
1,482
Cash paid for interest
$
244
$
2,340
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP
Results
(In thousands, except per share
amount)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(in thousands)
(in thousands)
Adjusted EBITDA:
Net income (loss)
$
(3,169
)
$
(1,522
)
$
(4,842
)
$
(5,961
)
Provision for income taxes
32
33
63
70
Interest expense (1)
216
2,126
371
3,472
Stock-based compensation
723
774
1,281
1,423
Depreciation and amortization
1,158
2,024
2,260
3,040
Impairment of long-lived assets
—
—
—
636
Severance expenses (4)
37
1,188
179
1,496
Non-core operating expenses (5)
2
$
1,397
6
1,908
Gain on sale of certain recovery contracts
(6)
(382
)
(1,849
)
(382
)
(1,849
)
Adjusted EBITDA
$
(1,383
)
$
4,171
$
(1,064
)
$
4,235
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(in thousands)
(in thousands)
Adjusted Net Income (Loss):
Net income (loss)
$
(3,169
)
$
(1,522
)
$
(4,842
)
$
(5,961
)
Stock-based compensation
723
774
1,281
1,423
Amortization of intangible assets (2)
—
558
—
617
Amortization of debt issuance costs
(3)
24
764
48
1,133
Impairment of long-lived assets
—
—
—
636
Severance expenses (4)
37
1,188
179
1,496
Non-core operating expenses (5)
2
1,397
6
1,908
Gain on sale of certain recovery contracts
(6)
(382
)
(1,849
)
(382
)
(1,849
)
Tax adjustments (7)
(111
)
(779
)
(311
)
(1,475
)
Adjusted net income (loss)
$
(2,876
)
$
531
$
(4,021
)
$
(2,072
)
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP
Results
(In thousands, except per share
amount)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(in thousands)
(in thousands)
Adjusted Net Income (Loss) Per Diluted
Share:
Net income (loss)
$
(3,169
)
$
(1,522
)
$
(4,842
)
$
(5,961
)
Plus: Adjustment items per reconciliation
of adjusted net income (loss)
293
2,053
821
3,889
Adjusted net income (loss)
$
(2,876
)
$
531
$
(4,021
)
$
(2,072
)
Adjusted net income (loss) per diluted
share
$
(0.04
)
$
0.01
$
(0.06
)
$
(0.04
)
Diluted average shares outstanding (8)
73,502
60,617
71,698
55,167
We are providing the following preliminary estimates of our
financial results as follows:
Six Months Ended
Six Months Ended
Year Ended
June 30, 2022
December 31, 2022
December 31, 2021
December 31, 2022
Actual
Estimate
Actual
Estimate
Adjusted EBITDA:
Net income (loss)
$
(4,842
)
$ (282) to (2,287)
$
(10,288
)
$ (5,124) to (7,124)
Provision for income taxes
63
(413) to 687
62
(350) to 750
Interest expense (1)
371
629 to 1,129
11,313
1,000 to 1,500
Stock-based compensation
1,281
719 to 1,719
2,640
2,000 to 3,000
Depreciation and amortization
2,260
2,490 to 3,490
5,188
4,750 to 5,750
Impairment of long-lived assets
—
—
636
—
Severance expenses (4)
179
(79) to 321
2,160
100 to 500
Non-core operating expenses (5)
6
—
2,588
6
Gain on sale of certain recovery contracts
(6)
(382
)
—
(2,403
)
(382)
Adjusted EBITDA
$
(1,064
)
$ 3,064 to 5,064
$
11,896
$ 2,000 to 4,000
(1)
Represents interest expense and
amortization of debt issuance costs related to our Credit Agreement
and Prior Credit Agreement.
(2)
Represents amortization of intangibles
related to the acquisition of Performant by an affiliate of
Parthenon Capital Partners in 2004.
(3)
Represents amortization of debt issuance
costs related to our Credit Agreement and Prior Credit
Agreement.
(4)
Represents severance expenses incurred in
connection with a reduction in force for our non-healthcare
recovery services.
(5)
Represents professional fees related to
strategic corporate development activities.
(6)
Represents gain on the sale of certain
non-healthcare recovery contracts.
(7)
Represents tax adjustments assuming a
marginal tax rate of 27.5% at full profitability.
(8)
While net loss for the three months ended
June 30, 2021 is ($1,522), the computation of adjusted net income
results in adjusted net income of $531. Therefore, the calculation
of the adjusted earnings per diluted share for the three months
ended June 30, 2021 includes dilutive common share equivalents of
5,101 added to the basic weighted average shares of 55,516.
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 healthcare revenue results
for the three and six months ended June 30, 2022, and for the years
ended December 31, 2021 and 2020:
For the Three Months
Ended
For the Six Months
Ended
March 31, 2022
June 30, 2022
June 30, 2022
(in thousands)
Eligibility-based
$
14,215
$
12,417
$
26,632
Claims-based
9,149
9,339
18,488
Healthcare Total
23,364
21,756
45,120
Recovery
118
7
125
Customer Care / Outsourced Services
3,601
3,918
7,519
Total
$
27,083
25,681
$
52,764
For the Three Months
Ended
For the Year Ended
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
December 31, 2021
Eligibility-based
$
7,911
$
11,577
$
12,727
$
16,061
$
48,276
Claims-based
5,375
7,025
7,280
9,498
29,178
Healthcare Total
13,286
18,602
20,007
25,559
77,454
Recovery
14,491
11,091
5,490
2,333
33,405
Customer Care / Outsourced Services
3,613
3,149
3,085
3,687
13,534
Total
$
31,390
$
32,842
$
28,582
$
31,579
$
124,393
For the Three Months
Ended
For the Year Ended
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
December 31, 2020
Eligibility-based
$
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220808005653/en/
Richard Zubek Investor Relations 925-960-4988
investors@performantcorp.com
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