Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), primarily operating under subsidiary Performant Healthcare Solutions, a leading provider of technology-enabled audit, recovery, and related analytics services in the United States with a focus in the healthcare payment integrity industry, today reported the following financial results for its second quarter ended June 30, 2023:

Second Quarter Financial Highlights

  • Healthcare revenues of $23.9 million, compared to $21.8 million in the prior year period, an increase of approximately 10%
  • Total revenues of $25.5 million, compared to total revenues of $25.7 million in the prior year period.
  • Net loss of approximately $4.0 million, or $(0.05) per diluted share, compared to net loss of $3.2 million, or $(0.04) per diluted share, in the prior year period.
  • Adjusted net loss was $3.2 million, or $(0.04) per diluted share, compared to adjusted net loss of $2.9 million, or $(0.04) per diluted share, in the prior year period.
  • Adjusted EBITDA of $(1.3) million, compared to $(1.4) million in the prior year period.

Second Quarter 2023 Results

Healthcare revenues in the second quarter of 2023 were $23.9 million, an increase of approximately 10% from $21.8 million in the prior year period. Total revenues in the second quarter were $25.5 million, a decrease from total revenues of $25.7 million in the prior year period. Within healthcare, claims-based services revenue in the second quarter of 2023 was $9.8 million, while revenues from eligibility-based services in the second quarter was $14.1 million.

“Within our commercial clients, both eligibility and claims-based revenues enjoyed strong double-digit year over year growth through the first half of 2023, demonstrating our continued focus on growing this piece of the business,” stated Simeon Kohl, CEO of Performant. “I am also excited to report that our efforts to compress the implementation cycle continue to bear fruit as we implemented 11 additional commercial programs in Q2, bringing our 2023 total to 22 implementations. This already surpasses the total number of commercial implementations we completed in all of 2022. We anticipate that these 22 programs will deliver an estimated $11 million in annualized revenues at steady state,” Kohl further remarked.

Revenues from our customer care / outsourced services in the second quarter were $1.5 million, down from $3.9 million in the prior year period.

Net loss for the second quarter was $4.0 million, or $(0.05) per share on a diluted basis, compared to a net loss of $3.2 million, or $(0.04) per share on a diluted basis, in the prior year period. Adjusted net loss for the second quarter was $3.2 million, or $(0.04) per share on a diluted basis, compared to adjusted net income of $2.9 million, or $(0.04) per diluted share, in the prior year period. Adjusted EBITDA for the second quarter was $(1.3) million as compared to $(1.4) million in the prior year period.

“We are excited about the increased pace of commercial implementations and the core potential of our government programs, which combine for strong continued traction toward our overall vision and goals,” stated Rohit Ramchandani, Chief Financial Officer of Performant. “With regard to the nearer term, we maintain visibility into our annual healthcare market guidance of $105 million to $110 million in revenues. At this stage in the year, we are also comfortable providing annual guidance for the customer care market revenues of $6.75 million to $8 million, thus bringing our total company revenue guidance to $111.75 million to $118 million. We are excited to continue delivering growth, enhancing our product offerings, broadening our market footprint, and expanding EBITDA margins. Furthermore, we remain well capitalized to tackle our organic growth initiatives and will continue to take steps to ensure we maintain flexibility in available capital for other strategic growth opportunities.”

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 2023 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 888-886-7786 (domestic) or 416-764-8658 (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 87483139. The telephonic replay will be available approximately three hours after the call, through August 15, 2023.

About Performant Healthcare Solutions

Performant provides technology-enabled audit, recovery, and analytics services in the United States to the healthcare industry. Performant works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits, or COB) 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.

To learn more, please visit http://www.performanthealth.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 the Company's outlook for revenues, net income (loss), and adjusted EBITDA in 2023 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 Company’s ability to generate revenue following long implementation periods associated with new customer contracts; client relationships and the Company’s ability to maintain such client relationships; downturns in domestic or global economic conditions and other macroeconomic factors; the Company’s ability to generate sufficient cash flows to fund our ongoing operations and other liquidity needs; the Company’s ability to hire and retain employees with specialized skills that are required for its healthcare business; anticipated trends and challenges in our business and competition in the markets in which the Company operates; the impact of COVID-19 on the Company’s business and operations, opportunities and expectations for the markets in which the Company operates; the Company’s indebtedness and compliance, or failure to comply, with restrictive covenants in the Company’s credit agreement; opportunities and expectations for growth in the various markets in which the Company operates; anticipated trends and challenges in the Company’s business and competition in the markets in which it operates; the adaptability of the Company’s technology platform to new markets and processes; the Company’s ability to invest in and utilize our data and analytics capabilities to expand its capabilities; the Company’s growth strategy of expanding in existing markets and considering strategic alliances or acquisitions; the Company’s ability to meet liquidity and working capital needs; expectations regarding future expenses; expected future financial performance; and the Company’s ability to comply with and adapt to industry regulations and compliance demands.

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, 2022 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, 2023

 

December 31, 2022

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

14,982

 

 

$

23,384

 

Restricted cash

 

81

 

 

 

81

 

Trade accounts receivable

 

12,790

 

 

 

15,794

 

Contract assets

 

6,947

 

 

 

11,460

 

Prepaid expenses and other current assets

 

2,982

 

 

 

3,665

 

Income tax receivable

 

3,176

 

 

 

3,123

 

Total current assets

 

40,958

 

 

 

57,507

 

Property, equipment, and leasehold improvements, net

 

10,688

 

 

 

10,897

 

Goodwill

 

47,372

 

 

 

47,372

 

Right-of-use assets

 

602

 

 

 

2,057

 

Other assets

 

975

 

 

 

1,000

 

Total assets

$

100,595

 

 

$

118,833

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current maturities of notes payable, net of unamortized debt issuance costs of $63 and $17, respectively

$

1,437

 

 

$

983

 

Accrued salaries and benefits

 

6,118

 

 

 

6,938

 

Accounts payable

 

1,195

 

 

 

1,262

 

Other current liabilities

 

1,920

 

 

 

2,252

 

Contract liabilities

 

112

 

 

 

438

 

Estimated liability for appeals and disputes

 

807

 

 

 

1,106

 

Lease liabilities

 

465

 

 

 

1,228

 

Total current liabilities

 

12,054

 

 

 

14,207

 

Notes payable, net of current portion and unamortized debt issuance costs of $421 and $316, respectively

 

9,579

 

 

 

18,184

 

Lease liabilities

 

148

 

 

 

1,076

 

Other liabilities

 

894

 

 

 

881

 

Total liabilities

 

22,675

 

 

 

34,348

 

Commitments and contingencies (note 3 and note 4)

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value. Authorized, 500,000 shares at June 30, 2023 and December 31, 2022 respectively; issued and outstanding 76,088 and 75,505 shares at June 30, 2023 and December 31, 2022, respectively

 

7

 

 

 

7

 

Additional paid-in capital

 

143,890

 

 

 

142,261

 

Accumulated deficit

 

(65,977

)

 

 

(57,783

)

Total stockholders’ equity

 

77,920

 

 

 

84,485

 

Total liabilities and stockholders’ equity

$

100,595

 

 

$

118,833

 

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,

 

 

2023

 

2022

 

2023

 

2022

Revenues

 

$

25,485

 

 

$

25,681

 

 

$

51,214

 

 

$

52,764

 

Operating expenses:

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

21,710

 

 

 

20,903

 

 

 

44,159

 

 

 

41,342

 

Other operating expenses

 

 

7,376

 

 

 

8,081

 

 

 

14,445

 

 

 

16,212

 

Total operating expenses

 

 

29,086

 

 

 

28,984

 

 

 

58,604

 

 

 

57,554

 

Loss from operations

 

 

(3,601

)

 

 

(3,303

)

 

 

(7,390

)

 

 

(4,790

)

Gain on sale of certain recovery contracts

 

 

 

 

 

382

 

 

 

3

 

 

 

382

 

Interest expense

 

 

(351

)

 

 

(216

)

 

 

(765

)

 

 

(371

)

Loss before provision for income taxes

 

 

(3,952

)

 

 

(3,137

)

 

 

(8,152

)

 

 

(4,779

)

Provision for income taxes

 

 

21

 

 

 

32

 

 

 

42

 

 

 

63

 

Net loss

 

$

(3,973

)

 

$

(3,169

)

 

$

(8,194

)

 

$

(4,842

)

Net loss per share

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

 

$

(0.04

)

 

$

(0.11

)

 

$

(0.07

)

Diluted

 

$

(0.05

)

 

$

(0.04

)

 

$

(0.11

)

 

$

(0.07

)

Weighted average shares

 

 

 

 

 

 

 

 

Basic

 

 

75,752

 

 

 

73,502

 

 

 

75,629

 

 

 

71,698

 

Diluted

 

 

75,752

 

 

 

73,502

 

 

 

75,629

 

 

 

71,698

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)

 

 

Six Months Ended June 30,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net loss

$

(8,194

)

 

$

(4,842

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

Loss on disposal of assets and impairment of long-lived assets

 

36

 

 

 

(15

)

Depreciation and amortization

 

2,512

 

 

 

2,260

 

Right-of-use assets amortization

 

1,455

 

 

 

588

 

Stock-based compensation

 

1,686

 

 

 

1,281

 

Interest expense from debt issuance costs

 

122

 

 

 

48

 

Gain on sale of certain recovery contracts

 

(3

)

 

 

(382

)

Changes in operating assets and liabilities:

 

 

 

Trade accounts receivable

 

3,004

 

 

 

928

 

Contract assets

 

4,513

 

 

 

(1,084

)

Prepaid expenses and other current assets

 

683

 

 

 

(257

)

Income tax receivable

 

(53

)

 

 

(89

)

Other assets

 

25

 

 

 

(6

)

Accrued salaries and benefits

 

(820

)

 

 

(1,081

)

Accounts payable

 

(67

)

 

 

(161

)

Contract liabilities and other current liabilities

 

(658

)

 

 

(1,860

)

Estimated liability for appeals, disputes, and refunds

 

(299

)

 

 

(114

)

Lease liabilities

 

(1,691

)

 

 

(704

)

Other liabilities

 

14

 

 

 

12

 

Net cash provided by (used in) operating activities

 

2,265

 

 

 

(5,478

)

Cash flows from investing activities:

 

 

 

Purchase of property, equipment, and leasehold improvements

 

(2,339

)

 

 

(1,589

)

Proceeds from sale of certain recovery contracts

 

3

 

 

 

382

 

Net cash used in investing activities

 

(2,336

)

 

 

(1,207

)

Cash flows from financing activities:

 

 

 

Repayment of notes payable

 

(8,000

)

 

 

(250

)

Debt issuance costs paid

 

(274

)

 

 

(2

)

Taxes paid related to net share settlement of stock awards

 

(57

)

 

 

 

Proceeds from exercise of warrants

 

 

 

 

5,563

 

Proceeds from public offering, net of costs

 

 

 

 

 

Net cash (used in) provided by financing activities

 

(8,331

)

 

 

5,311

 

Net decrease in cash, cash equivalents and restricted cash

 

(8,402

)

 

 

(1,374

)

Cash, cash equivalents and restricted cash at beginning of period

 

23,465

 

 

 

19,550

 

Cash, cash equivalents and restricted cash at end of period

$

15,063

 

 

$

18,176

 

Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:

 

 

 

Cash and cash equivalents

$

14,982

 

 

$

15,973

 

Restricted cash

 

81

 

 

 

2,203

 

Total cash, cash equivalents and restricted cash at end of period

$

15,063

 

 

$

18,176

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for income taxes

$

143

 

 

$

238

 

Cash paid for interest

$

721

 

 

$

244

 

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,

 

 

2023

 

2022

 

2023

 

2022

 

 

(in thousands)

 

(in thousands)

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,973

)

 

$

(3,169

)

 

$

(8,194

)

 

$

(4,842

)

Provision for income taxes

 

 

21

 

 

 

32

 

 

 

42

 

 

 

63

 

Interest expense (1)

 

 

351

 

 

 

216

 

 

 

765

 

 

 

371

 

Stock-based compensation

 

 

888

 

 

 

723

 

 

 

1,686

 

 

 

1,281

 

Depreciation and amortization

 

 

1,265

 

 

 

1,158

 

 

 

2,512

 

 

 

2,260

 

Severance expenses (3)

 

 

119

 

 

 

37

 

 

 

182

 

 

 

179

 

Other (4)

 

 

30

 

 

 

(380

)

 

 

29

 

 

 

(376

)

Adjusted EBITDA

 

$

(1,299

)

 

$

(1,383

)

 

$

(2,978

)

 

$

(1,064

)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

2022

 

2023

 

2022

 

 

(in thousands)

 

(in thousands)

Adjusted Net Income (Loss):

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,973

)

 

$

(3,169

)

 

$

(8,194

)

 

$

(4,842

)

Stock-based compensation

 

 

888

 

 

 

723

 

 

 

1,686

 

 

 

1,281

 

Amortization of debt issuance costs (2)

 

 

87

 

 

 

24

 

 

 

122

 

 

 

48

 

Severance expenses (3)

 

 

119

 

 

 

37

 

 

 

182

 

 

 

179

 

Other (4)

 

 

30

 

 

 

(380

)

 

 

29

 

 

 

(376

)

Tax adjustments (5)

 

 

(309

)

 

 

(111

)

 

 

(555

)

 

 

(311

)

Adjusted net income (loss)

 

$

(3,158

)

 

$

(2,876

)

 

$

(6,730

)

 

$

(4,021

)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

2022

 

2023

 

2022

 

 

(in thousands)

 

(in thousands)

Adjusted Net Income (Loss) Per Diluted Share:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,973

)

 

$

(3,169

)

 

$

(8,194

)

 

$

(4,842

)

Plus: Adjustment items per reconciliation of adjusted net income (loss)

 

 

815

 

 

 

293

 

 

 

1,464

 

 

 

821

 

Adjusted net income (loss)

 

$

(3,158

)

 

$

(2,876

)

 

$

(6,730

)

 

$

(4,021

)

Adjusted net income (loss) per diluted share

 

$

(0.04

)

 

$

(0.04

)

 

$

(0.09

)

 

$

(0.06

)

Diluted average shares outstanding

 

 

75,752

 

 

 

73,502

 

 

 

75,629

 

 

 

71,698

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Results (In thousands, except per share amount) (Unaudited)

 

We are providing the following preliminary estimates of our financial results as follows:

 

 

 

Six Months Ended

 

Six Months Ended

 

Year Ended

 

 

June 30, 2023

 

December 31, 2023

 

December 31, 2023

 

December 31, 2022

 

 

Actual

 

Estimate

 

Estimate

 

Actual

Adjusted EBITDA:

 

 

 

 

 

 

 

Net income (loss)

 

$

(8,194

)

 

$

1,615 to 0

 

$

(6,550) to (8,165)

 

$

(6,537

)

Provision for income taxes

 

 

42

 

 

(292) to 708

 

(250) to 750

 

 

132

 

Interest expense (1)

 

 

765

 

 

235 to 1,235

 

1,000 to 2,000

 

 

1,007

 

Stock-based compensation

 

 

1,686

 

 

814 to 1,814

 

2,500 to 3,500

 

 

3,036

 

Depreciation and amortization

 

 

2,512

 

 

2,738 to 3,988

 

5,250 to 6,500

 

 

4,524

 

Severance expenses (3)

 

 

182

 

 

(132) to 233

 

50 to 415

 

 

274

 

Other (4)

 

 

29

 

 

 

 

 

(372

)

Gain on sale of land and buildings (6)

 

 

 

 

 

 

 

(1,120

)

Adjusted EBITDA

 

$

(2,978

)

 

$

4,978 to 7,978

 

$

2,000 to 5,000

 

$

944

 

(1)

Represents interest expense and amortization of debt issuance costs related to our Credit Agreement.

(2)

Represents amortization of debt issuance costs related to our Credit Agreement.

(3)

Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.

(4)

Represents professional fees related to strategic corporate development activities and gain on sale of certain non-healthcare recovery contracts in prior years.

(5)

Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.

(6)

Represents gain on the sale of land and two office buildings.

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 six months ended June 30, 2023, and for the years ended December 31, 2022 and 2021:

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

March 31, 2023

 

June 30, 2023

 

June 30, 2023

 

 

(in thousands)

 

(in thousands)

Eligibility-based

 

$

12,480

 

$

14,131

 

$

26,611

Claims-based

 

 

10,412

 

 

 

9,798

 

 

 

20,210

 

Healthcare Total

 

 

22,892

 

 

 

23,929

 

 

 

46,821

 

Recovery

 

 

19

 

 

 

14

 

 

 

33

 

Customer Care / Outsourced Services

 

 

2,818

 

 

 

1,542

 

 

 

4,360

 

Total

 

$

25,729

 

 

$

25,485

 

 

$

51,214

 

 

 

For the Three Months Ended

 

For the Year Ended

 

 

March 31, 2022

 

June 30, 2022

 

September 30, 2022

 

December 31, 2022

 

December 31, 2022

 

 

(in thousands)

Eligibility-based

 

$

14,214

 

$

12,417

 

$

13,142

 

$

13,511

 

$

53,284

Claims-based

 

 

9,150

 

 

 

9,339

 

 

 

10,377

 

 

 

12,516

 

 

 

41,382

 

Healthcare Total

 

 

23,364

 

 

 

21,756

 

 

 

23,519

 

 

 

26,027

 

 

 

94,666

 

Recovery

 

 

118

 

 

 

7

 

 

 

41

 

 

 

75

 

 

 

241

 

Customer Care / Outsourced Services

 

 

3,601

 

 

 

3,918

 

 

 

3,618

 

 

 

3,140

 

 

 

14,277

 

Total

 

$

27,083

 

 

$

25,681

 

 

$

27,178

 

 

$

29,242

 

 

$

109,184

 

 

 

For the Three Months Ended

 

For the Year Ended

 

 

March 31, 2021

 

June 30, 2021

 

September 30, 2021

 

December 31, 2021

 

December 31, 2021

 

 

(in thousands)

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

 

 

Investor Relations investors@performantcorp.com

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