Performant Financial (US:PFMT)2022-11-09 21:21Revenue Performance - Healthcare revenues for the nine months ended September 30, 2022, were $68.6 million, up from $51.9 million for the same period in 2021, representing a 32% increase[82]. - Total revenues for the three months ended September 30, 2022, were $27.2 million, compared to $28.6 million for the same period in 2021, reflecting a 5% decrease[80]. - Eligibility-based services generated $13.1 million in revenue for the three months ended September 30, 2022, compared to $12.7 million in the same period of 2021, a 3% increase[80]. - Claims-based services revenue increased to $10.4 million for the three months ended September 30, 2022, from $7.3 million in the same period of 2021, a 42% increase[80]. - The company anticipates that healthcare revenues will drive the majority of overall revenue growth moving forward[88]. - Total revenues for the nine months ended September 30, 2022, were $79.9 million, a decrease of approximately 14% compared to $92.8 million for the same period in 2021[129]. - Healthcare revenues increased by $3.5 million, or 18%, to $23.5 million for the three months ended September 30, 2022, driven by growth from fully implemented statements of work and new program implementations[118]. - Recovery revenues significantly decreased to $41 thousand for the three months ended September 30, 2022, from $5.5 million in the same period of 2021, due to the sale of certain recovery contracts and regulatory impacts[119]. - Revenues from claims-based services during the nine months ended September 30, 2022, were $9.2 million, or 47% higher than the same period in 2021[130]. - Recovery revenues decreased to $0.2 million for the nine months ended September 30, 2022, from $31.1 million in the same period of 2021, primarily due to the sale of recovery contracts and regulatory impacts[131]. Operational Performance - Loss from operations was $2.3 million for the three months ended September 30, 2022, compared to income from operations of $0.1 million for the same period in 2021, reflecting a $2.4 million increase in loss[123]. - Loss from operations increased to $7.1 million for the nine months ended September 30, 2022, compared to a loss of $4.2 million in the same period of 2021, attributed to a greater decrease in total revenues[135]. - Net loss was $6.3 million for the nine months ended September 30, 2022, representing a decrease of approximately $1.4 million, or 18%, compared to a net loss of $7.7 million for the same period in 2021[139]. Expenses - Salaries and benefits expense rose to $21.8 million for the three months ended September 30, 2022, an increase of $2.1 million, or 11%, compared to $19.7 million for the same period in 2021[121]. - Salaries and benefits expense decreased by $4.0 million, or 6%, to $63.1 million for the nine months ended September 30, 2022, compared to $67.1 million in the prior year, due to lower headcount in non-healthcare recovery activities[133]. - Other operating expenses decreased to $23.9 million for the nine months ended September 30, 2022, from $29.9 million in the same period of 2021, mainly due to the cessation of non-healthcare recovery activities[134]. Cash Flow and Liquidity - Cash and cash equivalents totaled $25.7 million as of September 30, 2022, up from $19.6 million as of December 31, 2021, indicating improved liquidity[147]. - Cash used in operating activities was $2.2 million for the nine months ended September 30, 2022, compared to cash provided of $1.3 million in the same period of 2021[150]. - Cash provided by investing activities was $3.1 million for the nine months ended September 30, 2022, primarily from the sale of land and buildings[151]. - Cash provided by financing activities was $5.2 million for the nine months ended September 30, 2022, primarily from $5.6 million in proceeds from warrant exercises[152]. Debt and Financial Agreements - As of September 30, 2022, $19.6 million was outstanding under the Credit Agreement with an interest rate of 5.3%[155]. - The Credit Agreement includes a $20 million term loan commitment and a $15 million revolving loan commitment, which remains undrawn as of September 30, 2022[154]. - The Credit Agreement matures on December 17, 2026, and requires quarterly principal repayments starting March 31, 2022, with specific amortization percentages over five years[157]. - The company was in compliance with all financial covenants under the Credit Agreement as of September 30, 2022, including a total leverage ratio of not greater than 3.00 to 1.00[162]. - The Credit Agreement contains financial covenants requiring a fixed charge coverage ratio of not less than 1.20 to 1.00[161]. - The obligations under the Credit Agreement are secured by substantially all of the company's assets and guaranteed by its subsidiaries[162]. Market and Regulatory Environment - Regulatory changes and the COVID-19 pandemic have significantly impacted recovery revenues, with a pause in medical review activities under RAC contracts during the pandemic[97]. - The company has been awarded multiple contracts, including an 8.5-year Medicare Recovery Audit Contractor (RAC) contract for Region 1, which was re-awarded in March 2021[85]. - The company sold certain non-healthcare recovery contracts in 2021 and will not pursue new non-healthcare recovery opportunities, leading to minimal expected revenues from this segment going forward[89]. - The company’s revenue model is success-based, earning fees on the amount of funds recovered for clients, aligning business objectives with client interests[78]. - The company’s contracts with large clients are subject to unilateral termination, which poses a risk to revenue stability if significant clients are lost[99].