Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 5-May-14 | |
Document Documentand Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'Performant Financial Corporation | ' |
Entity Central Index Key | '0001550695 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Trading Symbol | 'PFMT | ' |
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | 'Q1 | ' |
Amendment Flag | 'false | ' |
Entity Common Stock, Shares Outstanding | ' | 48,456,967 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $90,743 | $81,909 |
Trade accounts receivable, net of allowance for doubtful accounts of $32 and $32, respectively and estimated allowance for appeals of $743 and $1,160 respectively | 16,987 | 19,649 |
Deferred income taxes | 7,562 | 6,847 |
Prepaid expenses and other current assets | 3,968 | 4,400 |
Debt issuance costs, current portion | 1,039 | 1,055 |
Total current assets | 120,299 | 113,860 |
Property, equipment, and leasehold improvements, net | 26,977 | 26,247 |
Identifiable intangible assets, net | 31,580 | 32,513 |
Goodwill | 81,572 | 81,572 |
Debt issuance costs, net | 2,539 | 2,789 |
Other assets | 259 | 279 |
Total assets | 263,226 | 257,260 |
Current liabilities: | ' | ' |
Current maturities of notes payable | 22,217 | 10,763 |
Accrued salaries and benefits | 7,879 | 11,826 |
Accounts payable | 1,500 | 2,383 |
Other current liabilities | 4,353 | 5,311 |
Income taxes payable | 5,492 | 103 |
Estimated liability for appeals | 17,683 | 15,283 |
Total current liabilities | 59,124 | 45,669 |
Notes payable, net of current portion | 108,396 | 122,541 |
Deferred income taxes | 12,016 | 12,612 |
Other liabilities | 1,968 | 2,204 |
Total liabilities | 181,504 | 183,026 |
Commitments and contingencies | ' | ' |
Stockholders’ equity: | ' | ' |
Common stock, $0.0001 par value. Authorized, 500,000 shares at March 31, 2014 and December 31, 2013; issued and outstanding 48,457 and 48,316 shares at March 31, 2014 and December 31, 2013, respectively | 5 | 5 |
Additional paid-in capital | 50,934 | 49,791 |
Retained earnings | 30,783 | 24,438 |
Total stockholders’ equity | 81,722 | 74,234 |
Total liabilities and stockholders’ equity | $263,226 | $257,260 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Statement of Financial Position [Abstract] | ' | ' |
Allowance for doubtful accounts | $32 | $32 |
Estimated allowance for appeals | $743 | $1,160 |
Common Stock, par value | $0.00 | $0.00 |
Common Stock, Authorized shares | 500,000 | 500,000 |
Common Stock, issued shares | 48,457 | 48,316 |
Common Stock, outstanding shares | 48,457 | 48,316 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Income Statement [Abstract] | ' | ' |
Revenues | $58,624 | $49,363 |
Operating expenses: | ' | ' |
Salaries and benefits | 24,787 | 23,982 |
Other operating expenses | 20,265 | 18,868 |
Total operating expenses | 45,052 | 42,850 |
Income from operations | 13,572 | 6,513 |
Interest expense | -2,704 | -2,965 |
Income before provision for income taxes | 10,868 | 3,548 |
Provision for income taxes | 4,523 | 1,727 |
Net income | $6,345 | $1,821 |
Net income per share (in dollars per share) | ' | ' |
Basic | $0.13 | $0.04 |
Diluted | $0.13 | $0.04 |
Weighted average shares (in shares) | ' | ' |
Basic | 48,427 | 46,121 |
Diluted | 49,639 | 49,007 |
Consolidated_Statement_of_Chan
Consolidated Statement of Changes in Stockholders' Equity (USD $) | Total | Common Stock | Additional Paid-In Capital | Retained Earnings |
In Thousands, except Share data | ||||
Balance, value at Dec. 31, 2013 | $74,234 | $5 | $49,791 | $24,438 |
Balance, shares at Dec. 31, 2013 | ' | 48,316,000 | ' | ' |
Exercise of stock options (in shares) | ' | 141,000 | ' | ' |
Exercise of stock options | 45 | ' | 45 | ' |
Stock-based compensation expense | 891 | ' | 891 | ' |
Income tax benefit from employee stock options | 207 | ' | 207 | ' |
Net income | 6,345 | ' | ' | 6,345 |
Balance, value at Mar. 31, 2014 | $81,722 | $5 | $50,934 | $30,783 |
Balance, shares at Mar. 31, 2014 | ' | 48,457,000 | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net income | $6,345 | $1,821 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Loss on disposal of asset | 21 | 0 |
Depreciation and amortization | 2,933 | 2,509 |
Deferred income taxes | -1,311 | 0 |
Stock-based compensation | 891 | 712 |
Interest expense from debt issuance costs and amortization of discount note payable | 297 | 314 |
Changes in operating assets and liabilities: | ' | ' |
Trade accounts receivable | 2,662 | 3,620 |
Prepaid expenses and other current assets | 432 | -382 |
Income tax receivable | 0 | -2,092 |
Other assets | 20 | 21 |
Accrued salaries and benefits | -3,947 | -3,139 |
Accounts payable | -883 | 33 |
Other current liabilities | -958 | -2,190 |
Income taxes payable | 5,389 | -430 |
Deferred revenue | 0 | -909 |
Estimated liability for appeals | 2,400 | 2,131 |
Other liabilities | -16 | -57 |
Net cash provided by operating activities | 14,275 | 1,962 |
Cash flows from investing activities: | ' | ' |
Purchase of property, equipment, and leasehold improvements | -2,752 | -2,359 |
Net cash used in investing activities | -2,752 | -2,359 |
Cash flows from financing activities: | ' | ' |
Repayment of notes payable | -2,691 | -2,760 |
Proceeds from exercise of stock options | 45 | 735 |
Income tax benefit from employee stock options | 207 | 4,176 |
Payment of purchase obligation | -250 | -250 |
Net cash provided by (used in) financing activities | -2,689 | 1,901 |
Net increase in cash and cash equivalents | 8,834 | 1,504 |
Cash and cash equivalents at beginning of period | 81,909 | 37,843 |
Cash and cash equivalents at end of period | 90,743 | 39,347 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid for income taxes | 230 | 1,550 |
Cash paid for interest | $2,401 | $2,559 |
Organization_and_Description_o
Organization and Description of Business | 3 Months Ended | |
Mar. 31, 2014 | ||
Accounting Policies [Abstract] | ' | |
Organization and Description of Business | ' | |
Organization and Description of Business | ||
(a) | Basis of Presentation and Organization | |
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary (consisting only of normal recurring adjustments) for a fair presentation of our and our subsidiaries’ financial position at March 31, 2014, the results of our operations for the three months ended March 31, 2014 and 2013 and cash flows for the three months ended March 31, 2014 and 2013. Interim financial statements are prepared on a basis consistent with our annual consolidated financial statements. The interim financial statements included herein should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the years ended December 31, 2013, 2012 and 2011. | ||
The Company is a leading provider of technology-enabled recovery and analytics services in the United States. The Company's services help identify, restructure and recover delinquent or defaulted assets and improper payments for both government and private clients in a broad range of markets. Company clients typically operate in complex and regulated environments and outsource their recovery needs in order to reduce losses on billions of dollars of defaulted student loans, improper healthcare payments and delinquent state tax and federal treasury receivables. The Company generally provides services on an outsourced basis, where we handle many or all aspects of the clients’ recovery processes. | ||
The Company's consolidated financial statements include the operations of Performant Financial Corporation (PFC), its wholly owned subsidiary Performant Business Services, Inc., and its wholly owned subsidiaries Performant Recovery, Inc. (Recovery) and Performant Technologies, Inc. PFC is a Delaware corporation headquartered in California and was formed in 2003. Performant Business Services, Inc. is a Nevada corporation founded in 1997. Recovery is a California corporation founded in 1976. Performant Technologies, Inc. is a California corporation that was formed in 2004. All significant intercompany balances and transactions have been eliminated in consolidation. | ||
The Company is managed and operated as one business, with a single management team that reports to the Chief Executive Officer. | ||
The preparation of the consolidated financial statements in conformity with U.S. GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, primarily accounts receivable, intangible assets, goodwill, estimated liability for appeals, accrued expenses, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Our actual results could differ from those estimates. | ||
(b) | Revenues, Accounts Receivable, and Estimated Liability for Appeals | |
Revenue is recognized upon the collection of defaulted loan and debt payments. Loan rehabilitation revenue is recognized when the rehabilitated loans are sold (funded) by clients. Incentive revenue is recognized upon receipt of official notification of incentive award from customers. Under the Company’s Medicare Recovery Audit Contractors or RAC contract with Centers for Medicare and Medicaid Services or CMS, the Company recognizes revenues when the healthcare provider has paid CMS for a given claim or offset. Providers have the right to appeal a claim and may pursue additional appeals if the initial appeal is found in favor of CMS. The Company accrues an estimated liability for appeals based on the amount of commissions received which are subject to appeal and which the Company estimates are probable of being returned to providers following successful appeal. At March 31, 2014, a total of $18.4 million was presented as an allowance against revenue, representing the Company’s estimate of claims that may be overturned. Of this amount, $0.7 million was related to amounts in accounts receivable and $17.7 million was related to commissions which had already been received. The $17.7 million balance at March 31, 2014, and the $15.3 million balance as of December 31, 2013, represents the Company’s best estimate of the probable amount of losses related to appeals of claims for which commissions were previously collected. In addition to the $17.7 million amount accrued at March 31, 2014, the Company estimates that it is reasonably possible that it could be required to pay an additional amount up to approximately $5.2 million as a result of potentially successful appeals. To the extent that required payments by the Company exceed the amount accrued, revenues in the applicable period would be reduced by the amount of the excess. |
Property_Equipment_and_Leaseho
Property, Equipment, and Leasehold Improvements | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||
Property, Equipment, and Leasehold Improvements | ' | |||||||
Property, Equipment, and Leasehold Improvements | ||||||||
Property, equipment, and leasehold improvements consist of the following at March 31, 2014 and December 31, 2013 (in thousands): | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Land | $ | 1,767 | $ | 1,767 | ||||
Building and leasehold improvements | 5,869 | 5,773 | ||||||
Furniture, equipment, and automobile | 5,001 | 4,932 | ||||||
Computer hardware and software | 54,388 | 52,021 | ||||||
67,025 | 64,493 | |||||||
Less accumulated depreciation and amortization | (40,048 | ) | (38,246 | ) | ||||
Property, equipment and leasehold improvements, net | $ | 26,977 | $ | 26,247 | ||||
Depreciation and amortization expense of property, equipment and leasehold improvements was $2.0 million and $1.6 million for the three months ended March 31, 2014 and 2013, respectively. |
Credit_Agreement
Credit Agreement | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Debt Disclosure [Abstract] | ' | |||
Credit Agreement | ' | |||
Credit Agreement | ||||
On March 19, 2012, the Company recapitalized entering into a credit agreement (the Agreement) consisting of a Term A Loan of $57.0 million, a Term B Loan of $79.5 million, and a revolving credit facility of $11.0 million. In connection with the recapitalization, our old credit facility, scheduled to mature in 2012, was extinguished, and our indebtedness on the old facility was paid in full. On June 28, 2012, the Agreement was amended to increase the Term B Loan to $99.0 million. Scheduled payments under the Agreement for the next five years and thereafter are as follows (in thousands): | ||||
Year Ending December 31, | Amount | |||
Remainder of 2014 | $ | 8,073 | ||
2015 | 10,763 | |||
2016 | 10,763 | |||
2017 | 9,996 | |||
2018 | 91,018 | |||
Thereafter | — | |||
Total | $ | 130,613 | ||
The Term A Loan is charged interest either at Prime (subject to a 2.50% floor) +4.25% or LIBOR (subject to a 1.50% floor) +5.25%, which was 6.75% at March 31, 2014. The Term A loan requires quarterly payments of $2.5 million, with the remaining outstanding principal balance due March 19, 2017. As of March 31, 2014, the Term A loan ending balance, including the current portion was $36.0 million. | ||||
The Term B loan is charged interest at Prime +4.75% (subject to a 2.50% floor) or LIBOR (subject to a 1.50% floor) +5.75% which was 7.25% at March 31, 2014. The Term B loan requires quarterly payments of $0.2 million, with the outstanding principal balance due March 19, 2018. As of March 31, 2014, the Term B loan ending balance, including the current portion was $94.6 million. | ||||
The Company has a line of credit under the Agreement which allows for borrowings of up to $11.0 million. Borrowings accrue interest at Prime +4.25% or LIBOR +5.25%, which was 6.75% at March 31, 2014. Both the Prime and the LIBOR alternatives are subject to minimum rate floors. In addition, a facility fee of 0.5% is assessed on the commitment amount. There were no outstanding borrowings under this line of credit at March 31, 2014, other than letters of credit outstanding in the amount of $1.6 million, leaving remaining borrowing capacity under the line of credit of $9.4 million at March 31, 2014. The line of credit expires in March 19, 2017. | ||||
The Agreement contains a prepayment provision which requires the Company to perform an annual excess cash flow computation based on earnings before interest, taxes, depreciation and amortization compared to changes in working capital. Based on the results of this computation the Company expects to make a prepayment of approximately $11.5 million to the lenders in May 2014, which has been included in the current maturities of notes payable on the March 31, 2014 balance sheet. | ||||
The Agreement contains certain restrictive financial covenants, which require, among other things, that we meet a minimum fixed charge coverage ratio of 1.20 and maximum total debt to EBITDA ratio of 3.25. Additionally, these covenants restrict the Company and its subsidiaries’ ability to incur certain types or amounts of indebtedness, incur liens on certain assets, make material changes in corporate structure or the nature of its business, dispose of material assets, engage in a change in control transaction, make certain foreign investments, enter into certain restrictive agreements, or engage in certain transactions with affiliates. We were in compliance with all such covenants at March 31, 2014. |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Leases [Abstract] | ' | |||
Commitments and Contingencies | ' | |||
Commitments and Contingencies | ||||
We have entered into various non-cancelable operating lease agreements for certain of our office facilities and equipment with original lease periods expiring between 2014 and 2020. Certain of these arrangements have free rent periods and /or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis. | ||||
Future minimum rental commitments under non-cancelable leases as of March 31, 2014 are as follows (in thousands): | ||||
Year Ending December 31, | Amount | |||
Remainder of 2014 | $ | 1,625 | ||
2015 | 1,908 | |||
2016 | 1,577 | |||
2017 | 1,118 | |||
2018 | 308 | |||
Thereafter | 463 | |||
Total | $ | 6,999 | ||
Operating lease expense was $0.7 million and $0.6 million for the three months ended March 31, 2014 and 2013, respectively. |
Secondary_Offerings_of_Capital
Secondary Offerings of Capital Stock | 3 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
Secondary Offerings of Capital Stock | ' |
Secondary Offerings of Capital Stock | |
In January 2013, we completed a secondary offering in which selling stockholders sold 9,200,000 shares of Common Stock at a public offering price of $10.65 per share. The Company did not receive any proceeds from the sale of the shares by the selling stockholders. The Company paid related offering expenses of $0.6 million. In addition, a financial advisor to the Company was paid $1.0 million for financial advisory services. These costs have been expensed, and are included in other operating expenses. |
Stockbased_Compensation
Stock-based Compensation | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||
Stock-based Compensation | ' | ||||||||||||
6. Stock-based Compensation | |||||||||||||
(a) Stock Options | |||||||||||||
Total stock-based compensation expense charged as salaries and benefits expense in the consolidated statements of operations was $0.9 million and $0.7 million for the three months ended March 31, 2014 and 2013, respectively. | |||||||||||||
The following table shows stock option activity for the three months ended March 31, 2014: | |||||||||||||
Outstanding | Weighted | Weighted | Aggregate | ||||||||||
Options | average | average | Intrinsic Value | ||||||||||
exercise price | remaining | (in thousands) | |||||||||||
per share | contractual life | ||||||||||||
(Years) | |||||||||||||
Outstanding at December 31, 2013 | 5,212,821 | $ | 6.03 | 6.62 | $ | 23,466 | |||||||
Granted | — | — | |||||||||||
Forfeited | (13,745 | ) | 10.6 | ||||||||||
Exercised | (141,256 | ) | 0.56 | ||||||||||
Outstanding at March 31, 2014 | 5,057,820 | $ | 6.17 | 6.51 | $ | 18,935 | |||||||
Vested, exercisable, and expected to vest(1) at March 31, 2014 | 4,954,036 | $ | 6.09 | 6.47 | $ | 18,879 | |||||||
Exercisable at March 31, 2014 | 2,923,021 | $ | 3.48 | 5.29 | $ | 17,491 | |||||||
-1 | Options expected to vest reflect an estimated forfeiture rate. | ||||||||||||
The Company recognizes share-based compensation costs as expense on a straight-line basis over the option vesting period, which generally is four to five years. | |||||||||||||
(b) Restricted Stock Units | |||||||||||||
The following table summarizes restricted stock unit activity for the three months ended March 31, 2014: | |||||||||||||
Number of Awards | Weighted | ||||||||||||
average | |||||||||||||
grant date fair value | |||||||||||||
per share | |||||||||||||
Outstanding at December 31, 2013 | 5,263 | $ | 10.59 | ||||||||||
Granted | 13,495 | 7.41 | |||||||||||
Forfeited | — | — | |||||||||||
Vested and converted to shares | — | — | |||||||||||
Outstanding at March 31, 2014 | 18,758 | $ | 8.3 | ||||||||||
Expected to vest at March 31, 2014 | 18,758 | $ | 8.3 | ||||||||||
As of March 31, 2014, there was $0.1 million of compensation expense that has yet to be recognized related to non-vested restricted stock units. This expense is expected to be recognized over the remaining weighted-average vested period of approximately four years. None of the restricted stock units vested during the three months ended March 31, 2014. Restricted stock units granted under the Performant Financial Corporation 2012 Stock Incentive Plan generally vest over four years. The company did not realize any tax benefits related to the restricted stock units during the three months ended March 31, 2014. |
Income_Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
Income Taxes | |
Our effective income tax rate changed to 41.6% for the three months ended March 31, 2014 from 48.7% for the three months ended March 31, 2013. The decrease in the effective rate is primarily due to the one-time nondeductible secondary offering expenses that occurred in the quarter ended March 31, 2013. | |
We file income tax returns with the U.S. federal government and various state jurisdictions. We operate in a number of state and local jurisdictions, most of which have never audited our records. Accordingly, we are subject to state and local income tax examinations based upon the various statutes of limitations in each jurisdiction. For tax years before 2009, the Company is no longer subject to Federal and certain other state tax examinations. However, we are currently being examined by the state of Florida for tax years 2009, 2010 and 2011. |
Earnings_per_Share
Earnings per Share | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Earnings Per Share [Abstract] | ' | |||||
Earnings per Share | ' | |||||
Earnings per Share | ||||||
For the three months ended March 31, 2014 and 2013, basic income per share is calculated by dividing net income by the sum of the weighted average number of shares of Common Stock outstanding during the period. Diluted income per share is calculated by dividing net income by the weighted average number of shares of Common Stock and dilutive common share equivalents outstanding during the period. Common share equivalents consist of stock options and restricted stock units. The Company excluded 2,735,489 options and 2,539,000 options from the calculation of diluted earnings per share for the three months ended March 31, 2014 and 2013, respectively, whose combined exercise price, unamortized fair value and excess tax benefits were greater during the period than the average price for the Company’s common stock because their effect would be anti-dilutive. | ||||||
The following table reconciles the basic to diluted weighted average shares outstanding using the treasury stock method (shares in thousands): | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
Weighted average shares outstanding – basic | 48,427 | 46,121 | ||||
Dilutive effect of stock options | 1,212 | 2,886 | ||||
Weighted average shares outstanding – diluted | 49,639 | 49,007 | ||||
Subsequent_Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
Subsequent Events | |
We have evaluated subsequent events through the date these consolidated financial statements were issued and there are no other events that have occurred that would require adjustments or disclosures to our consolidated financial statements. |
Organization_and_Description_o1
Organization and Description of Business (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' |
Basis of Presentation and Organization | ' |
Basis of Presentation and Organization | |
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary (consisting only of normal recurring adjustments) for a fair presentation of our and our subsidiaries’ financial position at March 31, 2014, the results of our operations for the three months ended March 31, 2014 and 2013 and cash flows for the three months ended March 31, 2014 and 2013. Interim financial statements are prepared on a basis consistent with our annual consolidated financial statements. The interim financial statements included herein should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the years ended December 31, 2013, 2012 and 2011. | |
The Company is a leading provider of technology-enabled recovery and analytics services in the United States. The Company's services help identify, restructure and recover delinquent or defaulted assets and improper payments for both government and private clients in a broad range of markets. Company clients typically operate in complex and regulated environments and outsource their recovery needs in order to reduce losses on billions of dollars of defaulted student loans, improper healthcare payments and delinquent state tax and federal treasury receivables. The Company generally provides services on an outsourced basis, where we handle many or all aspects of the clients’ recovery processes. | |
The Company's consolidated financial statements include the operations of Performant Financial Corporation (PFC), its wholly owned subsidiary Performant Business Services, Inc., and its wholly owned subsidiaries Performant Recovery, Inc. (Recovery) and Performant Technologies, Inc. PFC is a Delaware corporation headquartered in California and was formed in 2003. Performant Business Services, Inc. is a Nevada corporation founded in 1997. Recovery is a California corporation founded in 1976. Performant Technologies, Inc. is a California corporation that was formed in 2004. All significant intercompany balances and transactions have been eliminated in consolidation. | |
The Company is managed and operated as one business, with a single management team that reports to the Chief Executive Officer. | |
The preparation of the consolidated financial statements in conformity with U.S. GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, primarily accounts receivable, intangible assets, goodwill, estimated liability for appeals, accrued expenses, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Our actual results could differ from those estimates. | |
Revenues, Accounts Receivable, and Estimated Liability for Appeals | ' |
Revenues, Accounts Receivable, and Estimated Liability for Appeals | |
Revenue is recognized upon the collection of defaulted loan and debt payments. Loan rehabilitation revenue is recognized when the rehabilitated loans are sold (funded) by clients. Incentive revenue is recognized upon receipt of official notification of incentive award from customers. Under the Company’s Medicare Recovery Audit Contractors or RAC contract with Centers for Medicare and Medicaid Services or CMS, the Company recognizes revenues when the healthcare provider has paid CMS for a given claim or offset. Providers have the right to appeal a claim and may pursue additional appeals if the initial appeal is found in favor of CMS. The Company accrues an estimated liability for appeals based on the amount of commissions received which are subject to appeal and which the Company estimates are probable of being returned to providers following successful appeal. At March 31, 2014, a total of $18.4 million was presented as an allowance against revenue, representing the Company’s estimate of claims that may be overturned. Of this amount, $0.7 million was related to amounts in accounts receivable and $17.7 million was related to commissions which had already been received. The $17.7 million balance at March 31, 2014, and the $15.3 million balance as of December 31, 2013, represents the Company’s best estimate of the probable amount of losses related to appeals of claims for which commissions were previously collected. In addition to the $17.7 million amount accrued at March 31, 2014, the Company estimates that it is reasonably possible that it could be required to pay an additional amount up to approximately $5.2 million as a result of potentially successful appeals. To the extent that required payments by the Company exceed the amount accrued, revenues in the applicable period would be reduced by the amount of the excess. |
Property_Equipment_and_Leaseho1
Property, Equipment, and Leasehold Improvements (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||
Property, Equipment, and Leasehold Improvements | ' | |||||||
Property, equipment, and leasehold improvements consist of the following at March 31, 2014 and December 31, 2013 (in thousands): | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Land | $ | 1,767 | $ | 1,767 | ||||
Building and leasehold improvements | 5,869 | 5,773 | ||||||
Furniture, equipment, and automobile | 5,001 | 4,932 | ||||||
Computer hardware and software | 54,388 | 52,021 | ||||||
67,025 | 64,493 | |||||||
Less accumulated depreciation and amortization | (40,048 | ) | (38,246 | ) | ||||
Property, equipment and leasehold improvements, net | $ | 26,977 | $ | 26,247 | ||||
Credit_Agreement_Tables
Credit Agreement (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Debt Disclosure [Abstract] | ' | |||
Payments Under Credit Agreement | ' | |||
payments under the Agreement for the next five years and thereafter are as follows (in thousands): | ||||
Year Ending December 31, | Amount | |||
Remainder of 2014 | $ | 8,073 | ||
2015 | 10,763 | |||
2016 | 10,763 | |||
2017 | 9,996 | |||
2018 | 91,018 | |||
Thereafter | — | |||
Total | $ | 130,613 | ||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Leases [Abstract] | ' | |||
Future Minimum Rental Commitments Under Non-Cancelable Leases | ' | |||
Future minimum rental commitments under non-cancelable leases as of March 31, 2014 are as follows (in thousands): | ||||
Year Ending December 31, | Amount | |||
Remainder of 2014 | $ | 1,625 | ||
2015 | 1,908 | |||
2016 | 1,577 | |||
2017 | 1,118 | |||
2018 | 308 | |||
Thereafter | 463 | |||
Total | $ | 6,999 | ||
Stockbased_Compensation_Tables
Stock-based Compensation (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||
Stock Option Activity | ' | ||||||||||||
The following table shows stock option activity for the three months ended March 31, 2014: | |||||||||||||
Outstanding | Weighted | Weighted | Aggregate | ||||||||||
Options | average | average | Intrinsic Value | ||||||||||
exercise price | remaining | (in thousands) | |||||||||||
per share | contractual life | ||||||||||||
(Years) | |||||||||||||
Outstanding at December 31, 2013 | 5,212,821 | $ | 6.03 | 6.62 | $ | 23,466 | |||||||
Granted | — | — | |||||||||||
Forfeited | (13,745 | ) | 10.6 | ||||||||||
Exercised | (141,256 | ) | 0.56 | ||||||||||
Outstanding at March 31, 2014 | 5,057,820 | $ | 6.17 | 6.51 | $ | 18,935 | |||||||
Vested, exercisable, and expected to vest(1) at March 31, 2014 | 4,954,036 | $ | 6.09 | 6.47 | $ | 18,879 | |||||||
Exercisable at March 31, 2014 | 2,923,021 | $ | 3.48 | 5.29 | $ | 17,491 | |||||||
-1 | Options expected to vest reflect an estimated forfeiture rate. | ||||||||||||
Restricted Stock Activity | ' | ||||||||||||
The following table summarizes restricted stock unit activity for the three months ended March 31, 2014: | |||||||||||||
Number of Awards | Weighted | ||||||||||||
average | |||||||||||||
grant date fair value | |||||||||||||
per share | |||||||||||||
Outstanding at December 31, 2013 | 5,263 | $ | 10.59 | ||||||||||
Granted | 13,495 | 7.41 | |||||||||||
Forfeited | — | — | |||||||||||
Vested and converted to shares | — | — | |||||||||||
Outstanding at March 31, 2014 | 18,758 | $ | 8.3 | ||||||||||
Expected to vest at March 31, 2014 | 18,758 | $ | 8.3 | ||||||||||
Earnings_per_Share_Tables
Earnings per Share (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Earnings Per Share [Abstract] | ' | |||||
Reconciliation of Basic to Diluted Weighted Average Shares | ' | |||||
The following table reconciles the basic to diluted weighted average shares outstanding using the treasury stock method (shares in thousands): | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
Weighted average shares outstanding – basic | 48,427 | 46,121 | ||||
Dilutive effect of stock options | 1,212 | 2,886 | ||||
Weighted average shares outstanding – diluted | 49,639 | 49,007 | ||||
Organization_and_Description_o2
Organization and Description of Business - Additional Information (Detail) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Accounting Policies [Abstract] | ' | ' |
Allowance against revenue | $18,400,000 | ' |
Estimated allowance for appeals | 743,000 | 1,160,000 |
Estimated liability for appeals | 17,683,000 | 15,283,000 |
Estimated additional liability for appeals | $5,200,000 | ' |
Property_Equipment_and_Leaseho2
Property, Equipment, and Leasehold Improvements (Detail) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Property, Plant and Equipment [Line Items] | ' | ' |
Property, equipment and leasehold equipment, gross | $67,025 | $64,493 |
Less accumulated depreciation and amortization | -40,048 | -38,246 |
Property, equipment and leasehold improvements, net | 26,977 | 26,247 |
Land | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property, equipment and leasehold equipment, gross | 1,767 | 1,767 |
Building and leasehold improvements | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property, equipment and leasehold equipment, gross | 5,869 | 5,773 |
Furniture, equipment, and automobile | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property, equipment and leasehold equipment, gross | 5,001 | 4,932 |
Computer hardware and software | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property, equipment and leasehold equipment, gross | $54,388 | $52,021 |
Property_Equipment_and_Leaseho3
Property, Equipment, and Leasehold Improvements - Additional Information (Detail) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Property, Plant and Equipment [Abstract] | ' | ' |
Depreciation and amortization expense of property, equipment and leasehold improvements | $2 | $1.60 |
Credit_Agreement_Additional_In
Credit Agreement - Additional Information (Detail) (USD $) | 31-May-13 | Mar. 19, 2012 | Mar. 31, 2014 | Mar. 19, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Jun. 28, 2012 | Mar. 19, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 19, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 |
Term A Loan | Term A Loan | Term A Loan | Term A Loan | Term B Loan | Term B Loan | Term B Loan | Term B Loan | Term B Loan | Revolving credit facility | Line of Credit | Line of Credit | Line of Credit | Line of Credit | Line of Credit | |||
Prime Rate Plus | LIBOR Plus | Prime Rate Plus | LIBOR Plus | Minimum | Maximum | Prime Rate Plus | LIBOR Plus | ||||||||||
Line of Credit Facility [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Recapitalized amount under credit agreement | ' | ' | $36,000,000 | $57,000,000 | ' | ' | $94,600,000 | ' | $79,500,000 | ' | ' | $11,000,000 | ' | ' | ' | ' | ' |
Credit facility maturity year | ' | '2012 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amendment of agreement to increase Term B Loan | ' | ' | ' | ' | ' | ' | ' | 99,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate terms | ' | ' | 'Interest either at Prime (subject to a 2.50% floor) +4.25% or LIBOR (subject to a 1.50% floor) +5.25%, which was 6.75% | ' | ' | ' | 'Interest at Prime +4.75% (subject to a 2.50% floor) or LIBOR (subject to a 1.50% floor) +5.75%, which was 7.25% | ' | ' | ' | ' | ' | 'Interest at Prime + 4.25% or LIBOR + 5.25%, which was 6.75% | ' | ' | ' | ' |
Floor rate (as a percent) | ' | ' | ' | ' | 2.50% | 1.50% | ' | ' | ' | 2.50% | 1.50% | ' | ' | ' | ' | ' | ' |
Basis spread on variable rate (as a percent) | ' | ' | ' | ' | 4.25% | 5.25% | ' | ' | ' | 4.75% | 5.75% | ' | ' | ' | ' | 4.25% | 5.25% |
Interest rate (as a percent) | ' | ' | 6.75% | ' | ' | ' | 7.25% | ' | ' | ' | ' | ' | 6.75% | ' | ' | ' | ' |
Quarterly payments of principal | ' | ' | 2,500,000 | ' | ' | ' | 200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expiry date of line of credit | ' | ' | 19-Mar-17 | ' | ' | ' | 19-Mar-18 | ' | ' | ' | ' | ' | 19-Mar-17 | ' | ' | ' | ' |
Borrowing under line of credit, maximum | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 11,000,000 | ' | ' | ' | ' |
Facility commitment fee (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.50% | ' | ' | ' | ' |
Letter of credit outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,600,000 | ' | ' | ' | ' |
Remaining borrowing capacity under the line of credit | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9,400,000 | ' | ' | ' | ' |
Prepayment of excess cash flow | $11,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed charge coverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.2 | ' | ' | ' |
Total debt to EBITDA ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3.25 | ' | ' |
Payments_Under_Credit_Agreemen
Payments Under Credit Agreement (Detail) (USD $) | Mar. 31, 2014 |
In Thousands, unless otherwise specified | |
Debt Disclosure [Abstract] | ' |
Remainder of 2014 | $8,073 |
2015 | 10,763 |
2016 | 10,763 |
2017 | 9,996 |
2018 | 91,018 |
Thereafter | 0 |
Total | $130,613 |
Commitments_and_Contingencies_1
Commitments and Contingencies - Additional Information (Detail) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Commitment And Contingencies [Line Items] | ' | ' |
Operating lease expense | $0.70 | $0.60 |
Minimum | ' | ' |
Commitment And Contingencies [Line Items] | ' | ' |
Non-cancelable operating lease agreements expiration date | '2014 | ' |
Maximum | ' | ' |
Commitment And Contingencies [Line Items] | ' | ' |
Non-cancelable operating lease agreements expiration date | '2020 | ' |
Commitments_and_Contingencies_2
Commitments and Contingencies Future Minimum Rental Commitments Under Non-Cancelable Leases (Detail) (USD $) | Mar. 31, 2014 |
In Thousands, unless otherwise specified | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Remainder of 2014 | $1,625 |
2015 | 1,908 |
2016 | 1,577 |
2017 | 1,118 |
2018 | 308 |
Thereafter | 463 |
Total | $6,999 |
Secondary_Offerings_of_Capital1
Secondary Offerings of Capital Stock - Additional Information (Detail) (USD $) | 1 Months Ended |
In Millions, except Share data, unless otherwise specified | Jan. 31, 2013 |
Capital Stock [Line Items] | ' |
Offering expenses | $0.60 |
Amount paid to financial advisor | $1 |
Common Stock | ' |
Capital Stock [Line Items] | ' |
Common stock, shares sold | 9,200,000 |
Stock, price per share | $10.65 |
Stockbased_Compensation_Additi
Stock-based Compensation - Additional Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | 12 Months Ended | ||||
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 |
Minimum | Maximum | Restricted Stock | Restricted Stock | 2012 Equity Incentive Plan | |||
Restricted Stock | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Total stock-based compensation expense | $0.90 | $0.70 | ' | ' | ' | ' | ' |
Options vesting period (in years) | ' | ' | '4 years | '5 years | '4 years | ' | '4 years |
Compensation expense yet to be recognized | ' | ' | ' | ' | ' | $0.10 | ' |
Stockbased_Compensation_Stock_
Stock-based Compensation Stock Option Activity (Detail) (Options, USD $) | 3 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | |
Options | ' | ' | |
Outstanding Options (in shares) | ' | ' | |
Balance at beginning of period | 5,212,821 | ' | |
Granted | 0 | ' | |
Forfeited | -13,745 | ' | |
Exercised | -141,256 | ' | |
Balance at end of period | 5,057,820 | ' | |
Vested, exercisable, and expected to vest | 4,954,036 | [1] | ' |
Exercisable | 2,923,021 | ' | |
Weighted average exercise price per share (in dollars per share) | ' | ' | |
Balance at beginning of period | $6.03 | ' | |
Granted | $0 | ' | |
Forfeited | $10.60 | ' | |
Exercised | $0.56 | ' | |
Balance at end of period | $6.17 | ' | |
Vested or expected to vest | $6.09 | [1] | ' |
Exercisable | $3.48 | ' | |
Weighted average remaining contractual life (in years) | ' | ' | |
Balance at beginning of period | '6 years 6 months 4 days | '6 years 7 months 13 days | |
Balance at end of period | '6 years 6 months 4 days | '6 years 7 months 13 days | |
Vested, exercisable, and expected to vest | '6 years 5 months 19 days | [1] | ' |
Exercisable | '5 years 3 months 15 days | ' | |
Aggregate Intrinsic Value | ' | ' | |
Balance at beginning of period | $23,466 | ' | |
Balance at end of period | 18,935 | ' | |
Vested, exercisable, and expected to vest | 18,879 | [1] | ' |
Exercisable | $17,491 | ' | |
[1] | Options expected to vest reflect an estimated forfeiture rate. |
Stockbased_Compensation_Restri
Stock-based Compensation Restricted Stock Activity (Details) (Restricted Stock Units (RSUs), USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Restricted Stock Units (RSUs) | ' |
Number of Awards (in shares) | ' |
Outstanding beginning of period | 5,263 |
Granted | 13,495 |
Forfeited | 0 |
Vested and converted to shares | 0 |
Outstanding end of period | 18,758 |
Expected to vest end of period | 18,758 |
Weighted average grant date fair value per share (in dollars per share) | ' |
Outstanding beginning of period | $10.59 |
Granted | $7.41 |
Forfeited | $0 |
Vested and converted to shares | $0 |
Outstanding end of period | $8.30 |
Expected to vest end of period | $8.30 |
Income_Taxes_Additional_Inform
Income Taxes - Additional Information (Detail) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' |
Effective income tax rate (as a percent) | 41.60% | 48.70% |
Earnings_per_Share_Additional_
Earnings per Share - Additional Information (Detail) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Earnings Per Share [Abstract] | ' | ' |
Options to purchase shares (in shares) | 2,735,489 | 2,539,000 |
Reconciliation_of_Basic_to_Dil
Reconciliation of Basic to Diluted Weighted Average Shares (Detail) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Earnings Per Share [Abstract] | ' | ' |
Weighted average shares outstanding – basic | 48,427 | 46,121 |
Dilutive effect of stock options | 1,212 | 2,886 |
Weighted average shares outstanding – diluted | 49,639 | 49,007 |