PFMT
$0.70
Performant Financial
$.01
1.45%
Earnings Details
Quarter December 2019
Tuesday, March 17, 2020 4:05:00 PM
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Summary

Performant Financial Reaffirms

Performant Financial (PFMT) reported Quarter December 2019 earnings of $0.02 per share on revenue of $43.8 million. The consensus estimate was a loss of $0.02 per share on revenue of $40.8 million. Revenue grew 10.3% on a year-over-year basis.

The company said it continues to expect 2020 revenue of $170.0 million to $180.0 million. The current consensus estimate is revenue of $175.4 million for the year ending December 31, 2020.

Performant Financial Corp provides technology-enabled recovery and related analytics services in the United States. It helps identify and recover delinquent or defaulted assets and improper payments for both government and private clients.

Results
Reported Earnings
$0.02
Earnings Whisper
-
Consensus Estimate
($0.02)
Reported Revenue
$43.8 Mil
Revenue Estimate
$40.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Performant Financial Corporation Announces Financial Results for Fourth Quarter and Full Year 2019

LIVERMORE, Calif., March 17, 2020 (GLOBE NEWSWIRE) -- 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, 2019:

Fourth Quarter Financial Highlights

  • Total revenues of $43.8 million, compared to $39.7 million in the prior year period, up 10.3%
  • Net loss of $3.9 million or $(0.07) per diluted share, compared to net loss of $5.3 million, or $(0.10) per diluted share, in the prior year period
  • Adjusted EBITDA of $6.5 million, compared to $2.5 million in the prior year period
  • Adjusted net income of $1.5 million, or $0.03 per diluted share, compared to adjusted net loss of $0.4 million or $(0.01) per diluted share, in the prior year period

Full Year 2019 Financial Highlights

  • Total revenues of $150.4 million, compared to $155.7 million in 2018, a change of (3.4)%
  • Net loss of $26.8 million, or $(0.50) per diluted share, compared to net loss of $8.0 million, or $(0.15) per diluted share, in 2018
  • Adjusted EBITDA of $(3.2) million, compared to $(5.2) million in 2018
  • Adjusted net loss of $20.0 million, or $(0.37) per diluted share, compared to adjusted net loss of $14.3 million, or $(0.27) per diluted share, in 2018

Fourth Quarter 2019 Results

Healthcare revenues in the fourth quarter were $14.3 million, up from $9.9 million in the prior year period. Recovery revenues in the fourth quarter were $25.2 million, consistent with revenues of $25.2 million in the prior year period. Revenues from our Customer Care / Outsourced Services in the fourth quarter were $4.3 million, down from $4.6 million in the prior year period.

Net loss for the fourth quarter of 2019 was $3.9 million, or $(0.07) per share on a fully diluted basis, compared to net loss of $5.3 million or $(0.10) per share on a fully diluted basis in the prior year period. Adjusted EBITDA for the fourth quarter of 2019 was $6.5 million as compared to $2.5 million in the prior year period. Adjusted net income for the fourth quarter of 2019 was $1.5 million or $0.07 per share on a fully diluted basis. This compares to adjusted net loss of $0.4 million, or $(0.01) per fully diluted share in the prior year period.

Full Year 2019 Results

Revenues for the full year ended December 31, 2019 were $150.4 million, a decrease of $5.3 million compared to revenues of $155.7 million in 2018, which included $28.4 million related to the net impact of the termination of the Company's 2009 CMS Region A contract during 2018. Healthcare revenues decreased $11.2 million in 2019 to $43.3 million from $54.5 million in the prior year. For the full year 2019, we reported recovery revenue of $89.6 million, an increase of 7.0% vs. 2018.  Revenues from our Customer Care / Outsourced Services were $17.5 million, consistent with revenues in the prior year.

Net loss for the full year was $26.8 million, or $(0.50) per share on a fully diluted basis, compared to net loss of $8.0 million or $(0.15) per share on a fully diluted basis in 2018. Adjusted EBITDA for 2019 was $(3.2) million as compared to $(5.2) million in 2018.   Adjusted net loss for 2019 was $20.0 million, or $(0.37) per fully diluted share. This compares to adjusted net loss of $14.3 million or $(0.27) per fully diluted share in 2018.

As of December 31, 2019, the Company had cash, cash equivalents and restricted cash of approximately $5.0 million.

Business Commentary and 2020 Outlook

“We are taking all precautions to ensure the health and safety of our employees as the situation around COVID-19 is evolving on a daily basis, and the impact on our business remains fluid. We are encouraging the adoption of good hygiene practices at all of our facilities, and we will continue to take precautionary and preventive measures deemed appropriate. Most importantly, we have extensive business continuity plans that are re-tested annually for a variety of scenarios including one such as this.

Hard work and dedication drove our strong operating results in the fourth quarter. Our ability to turn negative EBITDA in the third quarter into positive EBITDA just one quarter later was due to continued operational improvements.  The improvements in the fourth quarter were not due to any large, positive one-time events, rather, these results are due to the hard work that we do every day.”

“We are excited for 2020 and beyond as our larger contracts are now actively moving into the positive EBTIDA phase that we believe will strengthen and drive our business in the mid to longer term. Additionally, we are reiterating our full year 2020 revenue guidance of $170 to $180 million, a projected increase of 16.5% at the midpoint and Adjusted EBITDA to be between $12 and $15 million. We are excited to continue pushing forward on our positive trajectory into 2020, and we plan on continuing to strategically invest in expansion across all markets,” concluded Lisa Im, CEO of Performant.

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 to net income 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.

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 2019 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 13699739. The telephonic replay will be available approximately three hours after the call, through March 24, 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, 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, 2018 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 Information
Richard Zubek
Investor Relations
925-960-4988
investors@performantcorp.com

 
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
    
AssetsDecember 31, December 31,
20192018
Current assets:   
Cash and cash equivalents$3,373  $5,462 
Restricted cash1,622  1,813 
Trade accounts receivable, net of allowance for doubtful accounts of $237 and $22, respectively27,170  20,879 
Contract asset1,339   
Prepaid expenses and other current assets3,329  3,420 
Income tax receivable164  179 
Total current assets36,997  31,753 
Property, equipment, and leasehold improvements, net18,769  22,255 
Identifiable intangible assets, net925  1,160 
Goodwill74,372  81,572 
ROU Assets6,834   
Other assets975  1,019 
Total assets$138,872  $137,759 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Current maturities of notes payable to related party, net of unamortized discount and debt issuance costs of $130 and $126, respectively$3,320  $2,224 
Accrued salaries and benefits6,126  5,759 
Accounts payable2,532  1,402 
Other current liabilities3,514  3,414 
Deferred revenue83  1,078 
Estimated liability for appeals and disputes1,018  210 
Earnout payable62   
Lease liabilities2,775   
Total current liabilities19,430  14,087 
Notes payable to related party, net of current portion and unamortized discount and debt issuance costs of $2,301 and $2,345, respectively58,562  41,105 
Deferred income taxes35  22 
Earnout payable475  1,936 
Lease liabilities4,984   
Other liabilities1,761  3,383 
Total liabilities85,247  60,533 
Commitments and contingencies   
Stockholders’ equity:   
Common stock, $0.0001 par value. Authorized, 500,000 shares at December 31, 2019 and 2018, respectively; issued and outstanding, 53,900 and 52,999 shares at December 31, 2019 and 2018, respectively5  5 
Additional paid-in capital80,589  77,370 
Accumulated deficit(26,969) (149)
Total stockholders’ equity53,625  77,226 
Total liabilities and stockholders’ equity$138,872  $137,759 
        



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,
 2019 2018 2019 2018
Revenues$43,823  $39,730  $150,432  $155,668 
Operating expenses:       
Salaries and benefits28,378  27,782  115,194  96,144 
Other operating expenses10,575  12,409  47,687  58,333 
Impairment of goodwill and intangible assets7,200  2,988  7,200  2,988 
Total operating expenses46,153  43,179  170,081  157,465 
Loss from operations(2,330) (3,449) (19,649) (1,797)
Interest expense(2,329) (1,165) (7,589) (4,699)
Interest income8  9  41  28 
Loss before (benefit from) provision for income taxes(4,651) (4,605) (27,197) (6,468)
(Benefit from) provision for income taxes(789) 660  (377) 1,542 
Net loss$(3,862) $(5,265) $(26,820) $(8,010)
        
Net loss per share       
Basic$(0.07) $(0.10) $(0.50) $(0.15)
Diluted$(0.07) $(0.10) $(0.50) $(0.15)
Weighted average shares       
Basic53,773  52,991  53,468  52,064 
Diluted53,773  52,991  53,468  52,064 
                



PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Twelve Months Ended
 December 31,
 2019 2018
Cash flows from operating activities:   
Net loss$(26,820) $(8,010)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Loss on disposal of assets44  44 
Release of net payable to client related to contract termination  (9,860)
Release of estimated liability for appeals due to termination of contract  (18,531)
Derecognition of subcontractor receivable for appeals due to termination of contract  5,535 
Derecognition of subcontractor receivable for overturned claims  1,536 
Provision for doubtful account for subcontractor receivable  1,868 
Impairment of goodwill and intangible assets7,200  2,988 
Depreciation and amortization8,536  10,234 
ROU asset amortization2,589   
Gain on lease modification(137)  
Deferred income taxes13  490 
Stock-based compensation2,311  2,750 
Interest expense from debt issuance costs1,286  1,221 
Earnout mark-to-market(1,223) (218)
Changes in operating assets and liabilities:   
Trade accounts receivable(6,291) (6,695)
Contract asset(1,339)  
Prepaid expenses and other current assets91  895 
Income tax receivable15  6,660 
Other assets40  69 
Accrued salaries and benefits367  220 
Accounts payable1,130  (445)
Deferred revenue and other current liabilities(895) (657)
Estimated liability for appeals and disputes808  (76)
Net payable to client  (2,940)
Lease liabilities(2,786)  
Other liabilities(362) 773 
Net cash used in operating activities(15,423) (12,149)
Cash flows from investing activities:   
Purchase of property, equipment, and leasehold improvements(4,856) (7,645)
Premiere Credit of North America, LLC cash acquired  2,285 
Net cash used in investing activities(4,856) (5,360)
Cash flows from financing activities:   
Repayment of notes payable(2,488) (2,200)
Debt issuance costs paid(81) (27)
Taxes paid related to net share settlement of stock awards(466) (663)
Proceeds from exercise of stock options34  187 
Borrowings from notes payable21,000  4,000 
Net cash provided by financing activities17,999  1,297 
Effect of foreign currency exchange rate changes on cash  (32)
Net decrease in cash, cash equivalents and restricted cash(2,280) (16,244)
Cash, cash equivalents and restricted cash at beginning of year7,275  23,519 
Cash, cash equivalents and restricted cash at end of year$4,995  $7,275 
        
Reconciliation of the consolidated statements of cash flows to the consolidated balance sheets:   
Cash and cash equivalents$3,373  $5,462 
Restricted cash$1,622  $1,813 
Total cash, cash equivalents and restricted cash at end of period$4,995  $7,275 
Non-cash investing activities:   
Recognition of contingent consideration in acquisition$  $2,154 
Non-cash financing activities:   
Recognition of shares issued in acquisition$  $2,420 
Recognition of earnout shares issued$176  $ 
Recognition of warrant issued in debt financing$1,165  $249 
Supplemental disclosures of cash flow information:   
Cash received for income taxes$(202) $(6,228)
Cash paid for interest$6,304  $3,477 
        


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,
 2019 2018 2019 2018
Adjusted Earnings Per Diluted Share:       
Net loss$(3,862) $(5,265) $(26,820) $(8,010)
Plus: Adjusted items per reconciliation of adjusted net income5,370  4,889  6,847  (6,306)
Adjusted Net income (loss)$1,508  $(376) $(19,973) $(14,316)
        
Adjusted Earnings Per Diluted Share0.03  (0.01) (0.37) (0.27)
Diluted average shares outstanding (9)53,837  52,991  53,468  52,064 
        
 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2019 2018 2019 2018
Adjusted EBITDA:       
Net loss$(3,862) $(5,265) $(26,820) $(8,010)
Provision for (benefit from) income taxes(789) 660  (377) 1,542 
Interest expense2,329  1,165  7,589  4,699 
Interest income(8) (9) (41) (28)
Client contract termination settlement (8)(677)   (677)  
Non-core operating expenses (7)    309   
Earnout mark-to-market (6)(137)   (1,223)  
Depreciation and amortization1,839  2,633  8,536  10,234 
Impairment of goodwill and intangible assets (3)7,200  2,988  7,200  2,988 
CMS Region A contract termination      (19,415)
Stock based compensation568  347  2,311  2,750 
Adjusted EBITDA$6,463  $2,519  $(3,193) $(5,240)
        
 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2019 2018 2019 2018
Adjusted Net Income (Loss):       
Net loss$(3,862) $(5,265) $(26,820) $(8,010)
Stock based compensation568  347  2,311  2,750 
Amortization of intangibles (1)63  3,150  239  3,758 
Impairment of goodwill and intangible assets (3)7,200  2,988  7,200  2,988 
Deferred financing amortization costs (2)390  258  1,286  1,221 
Client contract termination settlement (8)(677)   (677)  
Non-core operating expenses (7)    309   
Earnout mark-to-market (6)(137)   (1,223)  
CMS Region A contract termination (5)      (19,415)
Tax adjustments (4)(2,037) (1,854) (2,598) 2,392 
Adjusted Net income (loss)$1,508  $(376) $(19,973) $(14,316)
                

We are providing the following preliminary estimates of our financial results for the year ended December 31, 2020:

   
  Year Ended
  December 31, December 31,
20192020
  Actual Estimate
Adjusted EBITDA:    
Net income (loss) $(26,820) $ (2,960) to (3,945)
Provision for (benefit from) income taxes (377) 0 to 1,000
Interest expense 7,589  8,000 to 9,000
Interest income (41) (40) to (55)
Client contract termination settlement (8) (677)  
Non-core operating expenses (7) 309   
Earnout mark-to-market (6) (1,223)  
Depreciation and amortization 8,536  6,000 to 7,000
Impairment of goodwill and intangible assets (3) 7,200   
Stock-based compensation 2,311  1,000 to 2,000
Adjusted EBITDA $(3,193) $ 12,000 to 15,000
        


(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, and an acquisition of Premiere Credit of North America, LLC in the third quarter of 2018.
(2)Represents amortization of capitalized financing costs related to our Credit Agreement for 2018.
(3)Represents a goodwill impairment charge in 2019 and an intangible assets impairment charge related to Great Lakes customer relationship in 2018.
(4)Represents tax adjustments assuming a marginal tax rate of 27.5% for 2019 and 2018.
(5)Represents the net impact of the termination of our 2009 CMS Region A contract during 2018, comprised of release of an aggregate of $28.4 million of the estimated liability for appeals and the net payable to client balances into revenue, net of derecognition of $9.0 million of prepaid expenses and other current assets, with a charge to other operating expenses, reflecting accrued receivables associated with amounts due from subcontractors for decided and yet-to-be decided appeals.
(6)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.
(7)Represents professional fees related to strategic corporate development activities.
(8)Represents a contract termination settlement from the Department of Education in 2019.
(9)While Net income (loss) for the three months ended December 31, 2019 reflects a net loss of $3,862, the computation of adjusted net income results in adjusted net income of $1,508. Therefore, 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.

Performant Financial Corp.

Source: Performant Financial Corporation