Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 27, 2020 | |
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 | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Entity Small Business | true | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 54,428,324 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 8,574 | $ 3,373 |
Restricted cash | 1,622 | 1,622 |
Trade accounts receivable, net of allowance for doubtful accounts of $518 and $237, respectively | 27,276 | 27,170 |
Contract assets | 1,201 | 1,339 |
Prepaid expenses and other current assets | 3,780 | 3,329 |
Income tax receivable | 3,989 | 164 |
Total current assets | 46,442 | 36,997 |
Property, equipment, and leasehold improvements, net | 18,361 | 18,769 |
Identifiable intangible assets, net | 866 | 925 |
Goodwill | 55,372 | 74,372 |
Right-of-use assets | 6,235 | 6,834 |
Other assets | 986 | 975 |
Total assets | 128,262 | 138,872 |
Current liabilities: | ||
Current maturities of notes payable to related party, net of unamortized debt issuance costs of $111 and $130, respectively | 3,339 | 3,320 |
Accrued salaries and benefits | 7,676 | 6,126 |
Accounts payable | 3,007 | 2,532 |
Other current liabilities | 3,830 | 3,659 |
Estimated liability for appeals and disputes | 1,169 | 1,018 |
Lease liabilities | 2,601 | 2,775 |
Total current liabilities | 21,622 | 19,430 |
Notes payable to related party, net of current portion and unamortized debt issuance costs of $1,938 and $2,301, respectively | 58,062 | 58,562 |
Deferred income taxes | 35 | 35 |
Earnout payable | 475 | 475 |
Lease liabilities | 4,481 | 4,984 |
Other liabilities | 1,839 | 1,761 |
Total liabilities | 86,514 | 85,247 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $0.0001 par value. Authorized, 500,000 shares at March 31, 2020 and December 31, 2019 respectively; issued and outstanding 54,022 and 53,900 shares at March 31, 2020 and December 31, 2019, respectively | 5 | 5 |
Additional paid-in capital | 81,196 | 80,589 |
Accumulated deficit | (39,453) | (26,969) |
Total stockholders’ equity | 41,748 | 53,625 |
Total liabilities and stockholders’ equity | $ 128,262 | $ 138,872 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 518 | $ 237 |
Debt issuance costs (current) | 111 | 130 |
Debt issuance costs notes payable (non current) | $ 1,938 | $ 2,301 |
Common Stock, par value (USD per share) | $ 0.0001 | $ 0.0001 |
Common Stock, authorized shares (in shares) | 500,000,000 | 500,000,000 |
Common Stock, issued shares (in shares) | 54,022,000 | 53,900,000 |
Common Stock, outstanding shares (in shares) | 54,022,000 | 53,900,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Revenues | $ 45,888 | $ 34,876 |
Operating expenses: | ||
Salaries and benefits | 28,805 | 29,116 |
Other operating expenses | 12,220 | 12,953 |
Impairment of goodwill | 19,000 | 0 |
Total operating expenses | 60,025 | 42,069 |
Loss from operations | (14,137) | (7,193) |
Interest expense | (2,227) | (1,136) |
Interest income | 6 | 11 |
Loss before provision for income taxes | (16,358) | (8,318) |
Provision for (benefit from) income taxes | (3,874) | 171 |
Net loss | $ (12,484) | $ (8,489) |
Net loss per share | ||
Basic (USD per share) | $ (0.23) | $ (0.16) |
Diluted (USD per share) | $ (0.23) | $ (0.16) |
Weighted average shares | ||
Basic (in shares) | 53,943 | 53,059 |
Diluted (in shares) | 53,943 | 53,059 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Retained Earnings |
Beginning balance (in shares) at Dec. 31, 2018 | 52,999,000 | ||||
Beginning balance at Dec. 31, 2018 | $ 77,226 | $ 5 | $ 77,370 | $ (149) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares) | 147,000 | ||||
Common stock issued under stock plans, net of shares withheld for employee taxes | (122) | (122) | |||
Stock-based compensation expense | 499 | 499 | |||
Net loss | (8,489) | (8,489) | |||
Ending balance (in shares) at Mar. 31, 2019 | 53,146,000 | ||||
Ending balance at Mar. 31, 2019 | $ 69,114 | $ 5 | 77,747 | $ (8,638) | |
Beginning balance (in shares) at Dec. 31, 2019 | 53,900,000 | 53,900,000 | |||
Beginning balance at Dec. 31, 2019 | $ 53,625 | $ 5 | 80,589 | $ (26,969) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares) | 122,000 | ||||
Common stock issued under stock plans, net of shares withheld for employee taxes | (84) | (84) | |||
Stock-based compensation expense | 691 | 691 | |||
Net loss | $ (12,484) | (12,484) | |||
Ending balance (in shares) at Mar. 31, 2020 | 54,022,000 | 54,022,000 | |||
Ending balance at Mar. 31, 2020 | $ 41,748 | $ 5 | $ 81,196 | $ (39,453) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (12,484) | $ (8,489) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Impairment of goodwill | 19,000 | 0 |
Depreciation and amortization | 1,540 | 2,312 |
Right-of-use assets amortization | 599 | 660 |
Deferred income taxes | 0 | 31 |
Stock-based compensation | 691 | 499 |
Interest expense from debt issuance costs | 382 | 232 |
Earnout mark-to-market | 0 | 276 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | (106) | 3,002 |
Contract assets | 138 | 0 |
Prepaid expenses and other current assets | (451) | (372) |
Income tax receivable | (3,825) | 165 |
Other assets | (11) | 0 |
Accrued salaries and benefits | 1,550 | 1,605 |
Accounts payable | 475 | 587 |
Other current liabilities | 171 | 483 |
Estimated liability for appeals and disputes | 151 | 45 |
Lease liabilities | (677) | (723) |
Other liabilities | 78 | 43 |
Net cash provided by operating activities | 7,221 | 356 |
Cash flows from investing activities: | ||
Purchase of property, equipment, and leasehold improvements | (1,073) | (1,486) |
Net cash used in investing activities | (1,073) | (1,486) |
Cash flows from financing activities: | ||
Repayment of notes payable | (863) | 0 |
Taxes paid related to net share settlement of stock awards | (84) | (156) |
Proceeds from exercise of stock options | 0 | 34 |
Net cash used in financing activities | (947) | (122) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 5,201 | (1,252) |
Cash, cash equivalents and restricted cash at beginning of period | 4,995 | 7,275 |
Cash, cash equivalents and restricted cash at end of period | 10,196 | 6,023 |
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets: | ||
Total cash, cash equivalents and restricted cash at end of period | 10,196 | 6,023 |
Supplemental disclosures of cash flow information: | ||
Cash received for income taxes | 72 | 54 |
Cash paid for interest | $ 1,845 | $ 0 |
Organization and Description of
Organization and Description of Business | 3 Months Ended |
Mar. 31, 2020 | |
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 accounting principles generally accepted in the United States of America, 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 financial position at March 31, 2020 , and the results of our operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019 . 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 year ended December 31, 2019 . Performant Financial Corporation (the "Company" or "we") 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. Clients of the Company typically operate in complex and regulated environments and contract for their recovery needs in order to reduce losses on defaulted student loans, improper healthcare payments and delinquent state tax and federal treasury receivables. The Company generally provides services on an outsourced basis; handling many or all aspects of the clients’ recovery processes. The Company's consolidated financial statements include the operations of Performant Financial Corporation (Performant), its wholly-owned subsidiaries Premiere Credit of North America, LLC (Premiere) and Performant Business Services, Inc. (PBS), and PBS's wholly-owned subsidiaries Performant Recovery, Inc. (Recovery) and Performant Technologies, LLC (PTL). Performant is a Delaware corporation headquartered in California and was formed in 2003. Premiere is an Indiana limited liability company acquired by Performant on August 31, 2018. PBS is a Nevada corporation founded in 1997. Recovery is a California corporation founded in 1976. PTL is a California limited liability company that was originally formed in 2004. All 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, contract assets, intangible assets, goodwill, right-of-use assets, estimated liability for appeals and disputes, lease liabilities, earnout payable, other liabilities, deferred income taxes and income tax expense (benefit) and disclosure of contingent 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) Liquidity The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates that the Company will be able to realize assets and discharge its liabilities in the normal course of business. Accordingly, they do not give effect to any adjustments that would be necessary should the Company be required to liquidate its assets. The ability of the Company to continue to fund its business plans is dependent upon realizing sufficient cash flows in the future. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. In March 2020, the World Health Organization declared the outbreak of novel coronavirus (“COVID-19”) a pandemic. COVID-19 has had, and will likely continue to have, an impact on the Company’s business, both operationally and financially. For example, all states in which the Company has offices are under state of emergency and continue to have shelter-in-place or equivalent orders as of the filing of this Form 10-Q, which has resulted in both management and employees continuing to work remotely (from home). The United States Government passed multiple new laws designed to help companies respond to the COVID-19 pandemic. Specifically, on March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which included several student loan-related changes. These changes have had an impact on the Company’s financial results and management expects that they will continue to affect the Company’s financial results into the foreseeable future. The CARES Act included changes to student loans owned by the Department of Education. These changes include the suspension of payments, the ceasing of accruing interest, and stopping involuntary collections of payments (e.g., wage garnishments). The changes are in effect through September 30, 2020. While these changes impact the set-up of new loan rehabilitation agreements by defaulted student loan borrowers, the Department of Education will consider each month during the period of suspended payments as an eligible month towards achieving loan rehabilitation, which is an element in determining future revenue to which the Company is entitled. In addition, student loan revenue and related cash flows will continue during this period because the Company earns revenue for a number of months from existing in-process borrower rehabilitation agreements. Further, while not mandated by the CARES Act, all of the Company’s Guaranty Agency clients (who administer the Federal Family Education Loan Program) are largely complying with the provisions of the Act, with the exception of counting missed payments toward qualification for loan rehabilitation. Given the CARES Act impacts on the Company’s recovery activities through September 30, 2020, the Company has furloughed more than 500 employees to date, which will result in annual savings of more than $18 million . The Company’s healthcare business has not experienced, and is not currently expected to experience, a similar level of impact as the recovery business due to the fact that only two healthcare customers have been impacted by congressional regulations to date. While a few healthcare customers placed short term pauses on audit activities, the Company has continued to see growth and expansion in other healthcare offerings; notably, the Company’s Third Party Liability contracts have not experienced any contractions to date. Additionally, the Company does not foresee any permanent negative effects to its relationships or overall contract expectations within the healthcare markets. With respect to favorable impacts to the Company’s liquidity, the CARES Act provided the right to carryback net operating losses from 2018 and 2019 to earlier periods. The Company has already filed for a refund request for the 2013 tax year which will result in an approximately $2.4 million cash refund, and the Company will file a refund request for the 2014 tax year which is expected to result in a refund of approximately $1.5 million . The CARES Act also allows deferrals and credits for payroll tax amounts, which is expected to provide approximately $3 million in cash savings through the remainder of 2020. The Company continues to analyze the impact of COVID-19. However, the Company believes that its forecasted results, considering the impact of COVID-19, will be sufficient to fund the Company’s current operations, for at least a year from the issuance of these consolidated financial statements. While the Company believes its financial projections are attainable, there can be no assurances that the financial results will be recognized in a timeframe necessary to meet the Company’s ongoing cash requirements. To address the Company’s liquidity needs, the Company may need to execute various actions to increase cash necessary for operations. These actions include, but are not limited to, additional reductions in workforce (both through furloughs and layoffs), reduce or delay capital expenditures, seek additional capital infusions through public and/or private means, sales of real estate assets or operations, and scaling back of certain lower margin operations. (c) Revenues, Accounts Receivable, and Estimated Liability for Appeals The Company derives its revenues primarily from providing recovery services and healthcare audit services. Revenues are recognized when control of these services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: • Identification of the contract with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, the performance obligations are satisfied The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company’s contracts generally contain a single performance obligation, delivered over time as a series of services that are substantially the same and have the same pattern of transfer to the client, as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct. For contracts with multiple performance obligations, the Company would allocate the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct service in the contract. The Company determines the standalone selling prices by taking into consideration the value of the services being provided, the client type and how similar services are priced in other contracts on a standalone basis. The Company’s contracts are composed primarily of variable consideration. Fees earned under the Company’s recovery service contracts consist primarily of contingency fees based on a specified percentage of the amount the Company enables its clients to recover. The contingency fee percentage for a particular recovery depends on the type of recovery or claim facilitated. In certain contracts the Company can earn additional performance-based consideration determined based on its performance relative to the client’s other contractors providing similar services. Revenue from contingency fees earned upon recovery of funds is generally recognized as amounts are invoiced based on either the ‘as-invoiced’ practical expedient when such amounts reflect the value of the services completed to-date, or an output measure based on milestones which is used to measure progress of the satisfaction of its performance obligation. The Company estimates any performance-based variable consideration and recognizes such revenue over the performance period only if it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Under certain contracts, consideration can include periodic performance-based bonuses which can be awarded based on the Company’s performance under the specific contract. These performance-based awards are considered variable and may be constrained by the Company until there is not a risk of a material reversal. For contracts that contain a refund right, these amounts are considered variable consideration and the Company estimates its refund liability for each claim and recognizes revenue net of such estimate. The Company generally either applies the as-invoiced practical expedient where its right to consideration corresponds directly to its right to invoice its clients, or the variable consideration allocation exception where the variable consideration is attributable to one or more, but not all, of the services promised in a series of distinct services that form part of a single performance obligation. As such the Company has elected the optional exemptions related to the as-invoiced practical expedient and the variable consideration allocation exception whereby the disclosure of the amount of transaction price allocated to the remaining performance obligations is not required. The Company has applied the as-invoiced practical expedient or the variable consideration allocation exception to contracts with performance obligations that have an average remaining duration of less than a year. 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 Secondary Payer (MSP) Commercial Payment Center (CPC) contract with Centers for Medicare and Medicaid Services (CMS), the Company recognizes revenues when insurance companies or other responsible parties remit payment to reimburse CMS for claims for which they are responsible, and the remittance has been applied in the CMS database. Under the Company’s Medicare Recovery Audit Contractor (RAC) contract with CMS, the Company recognizes revenues when the healthcare provider has paid CMS for a given claim or has agreed to an offset against other claims by the provider. For healthcare claims audit contracts with commercial clients, the Company may recognize revenue upon delivering the results of claims audits, when sufficient reliable information is available to the Company for estimating the variable consideration earned, as it is a reasonable measure of the Company’s progress toward complete satisfaction of our performance obligation. For coordination-of-benefits contracts with commercial clients, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to the client. For customer care / outsourced services clients, the Company recognizes revenues based on the volume of processed transactions or the quantity of labor hours provided. The following table presents revenue disaggregated by category for the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended 2020 2019 (in thousands) Healthcare 17,524 9,020 Recovery (1) 24,265 21,375 Customer Care / Outsourced Services 4,099 4,481 Total Revenues $ 45,888 $ 34,876 (1) Represents student lending, state and municipal tax authorities, IRS and Department of Treasury markets, select financial institutions, as well as Premiere Credit of North America. Healthcare providers have the right to appeal a claim and may pursue additional appeals if the initial appeal is found in favor of CMS or other healthcare clients under the RAC or other commercial healthcare contracts, respectively. Under the MSP contract, insurance companies or other responsible parties may dispute the Company’s findings regarding Medicare not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $1.2 million and $1.0 million as of March 31, 2020 and December 31, 2019, respectively. This represents the Company’s best estimate of the amount probable of being refunded to the Company’s healthcare clients following successful appeals of claims for which commissions were previously collected. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts by specific identification. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is consider remote. The allowance for doubtful account was $0.5 million and $0.2 million at March 31, 2020 and December 31, 2019, respectively. The Company determined that it does not have any costs related to obtaining or fulfilling a contract that are recoverable and as such, these contract costs are expensed as incurred. The Company has contract assets of $1.2 million and $1.3 million as of March 31, 2020 and December 31, 2019 , respectively. The contract assets relate to the Company’s rights to consideration for services completed during the three months ended March 31, 2020 and year ended December 31, 2019, but not invoiced at the reporting date. The decrease in contract assets is primarily due to timing of invoices issued. Contract assets are recorded to accounts receivable when the rights become unconditional and amounts are invoiced. The Company has contract liabilities of $0.1 million as of March 31, 2020 and December 31, 2019 , respectively, which are included in other current liabilities in the consolidated balance sheets. The Company’s contract liability relates to an advance recovery commission payment received from a customer, for which the Company anticipates revenue to be recognized as services are delivered. (d) Prepaid Expenses and Other Current Assets At March 31, 2020 , prepaid expenses and other current assets were $3.8 million and included approximately $2.1 million related to prepaid software licenses and maintenance agreements, $0.8 million for prepaid insurance, and $0.9 million for various other prepaid expenses. At December 31, 2019 , prepaid expenses and other current assets were $3.3 million and included approximately $2.2 million related to prepaid software licenses and maintenance agreements, $0.7 million for prepaid insurance, and $0.4 million for various other prepaid expenses. (e) Impairment of Goodwill and Long-Lived Assets Goodwill is reviewed for impairment at least annually. The balance of goodwill was $55.4 million as of March 31, 2020 and $74.4 million as of December 31, 2019 , respectively. The economic impact from the COVID-19 pandemic was a triggering factor requiring an interim assessment of goodwill for impairment. In performing the quantitative assessment of goodwill, if the carrying value of the Company, as one reporting unit, exceeds its fair value, goodwill is considered impaired. The amount of impairment loss is measured as the difference between the carrying value and the fair value of the reporting unit. Impairment testing is based upon the best information available and estimates of fair value which incorporate assumptions marketplace participants would use in making their estimates of fair value. Significant assumptions and estimates are required, including, but not limited to, our market capitalization, projecting future cash flows and other assumptions, to estimate the fair value of the reporting unit. Although the Company believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the amount of impairment. Based on management’s quantitative analysis, we concluded that the carrying value of our reporting unit was greater than its fair value, which resulted in a non-cash goodwill impairment charge of $19.0 million . The goodwill impairment charge had no impact on the Company’s cash flows or compliance with debt covenants. Long-lived assets and intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. There was no need to impair long-lived assets or intangible assets as of March 31, 2020 . (f) Other Current Liabilities At March 31, 2020 , other current liabilities primarily included $2.5 million for services received for which we have not received an invoice, $0.6 million for insurance premium financing payables, and $0.3 million for estimated workers' compensation claims incurred but not reported. At December 31, 2019, other current liabilities primarily included $2.2 million for services received for which we have not received an invoice, $0.6 million for insurance premium financing payables, $0.3 million for accrued subcontractor fees, and $0.3 million for estimated workers' compensation claims incurred but not reported. (g) New Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, " Fair Value Measurements", which eliminates, adds or modifies certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this pronouncement on January 1, 2020, noting no impact to the consolidated financial statements as the amounts subject to Level 3 fair value measurements are not material. In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments" as modified by subsequently issued ASU's 2018-19, 2019-04, 2019-05 and 2019-11. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted, for public entities, except for Smaller Reporting Companies. This ASU is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2022. The Company is evaluating the effect of the adoption of this pronouncement. |
Property, Equipment, and Leaseh
Property, Equipment, and Leasehold Improvements | 3 Months Ended |
Mar. 31, 2020 | |
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, 2020 and December 31, 2019 (in thousands): March 31, December 31, Land $ 1,943 $ 1,943 Building and leasehold improvements 8,146 8,124 Furniture and equipment 6,257 6,257 Computer hardware and software 80,117 79,066 96,463 95,390 Less accumulated depreciation and amortization (78,102 ) (76,621 ) Property, equipment and leasehold improvements, net $ 18,361 $ 18,769 Depreciation expense of property, equipment and leasehold improvements was $ 1.5 million and $2.3 million for the three months ended March 31, 2020 and 2019, respectively. |
Credit Agreement
Credit Agreement | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Credit Agreement | Credit Agreement On August 7, 2017, we, through our wholly-owned subsidiary Performant Business Services, Inc. (the "Borrower"), entered into a credit agreement (as amended, the “Credit Agreement”) with ECMC Group, Inc. Before the amendment described below, the Credit Agreement provided for a term loan facility in the initial amount of $44 million (the “Initial Term Loan”) and for up to $15 million of additional term loans (“Additional Term Loans”; and together with the Initial Term Loan, the “Loans”) which original Additional Term Loans were initially able to be drawn until the second anniversary of the funding of the Initial Term Loans, subject to the satisfaction of customary conditions. On August 31, 2018, we entered into Amendment No. 2 to the Credit Agreement to among other things (i) extend the maturity date of the Initial Term Loan and any Additional Term Loans by one year to August 2021, (ii) expand the Additional Term Loans commitment from $15 million to $25 million , (iii) extend the period during which Additional Term Loans can be borrowed by one year to August 2020, and (iv) relieve the Borrower from its obligation to comply with the financial covenants in the Credit Agreement during the six fiscal quarters following the Premiere acquisition. On March 21, 2019, we entered into Amendment No. 3 to the Credit Agreement to, among other things, relieve the Borrower from its obligation to comply with the financial covenants in the Credit Agreement until the quarter ending June 30, 2020. As of September 30, 2019, the Company has borrowed all of the $25 million available as Additional Term Loans. As of March 31, 2020 , $63.5 million was outstanding under the Credit Agreement. We have the option to extend the maturity of the Loans for two additional one -year periods, subject to the satisfaction of customary conditions. The Loans bear interest at the one-month LIBOR rate (subject to a 1% per annum floor) plus a margin which may vary from 5.5% per annum to 10.0% per annum based on our total debt to EBITDA ratio. Our annual interest rate at March 31, 2020 was 11.0% and 11.8% at December 31, 2019 . We are required to pay 5% of the original principal balance of the Loans annually in quarterly installments and to make mandatory prepayments of the Loans with a percentage of our excess cash flow which may vary between 75% and 0% depending on our total debt to EBITDA ratio and from the net cash proceeds of certain asset dispositions and debt not otherwise permitted under the Credit Agreement, in each case, subject to the lender's right to decline to receive such payments. The Credit Agreement contains certain restrictive financial covenants which are not effective until the quarter ending June 30, 2020, at which point, we will be required to (1) achieve a minimum fixed charge coverage ratio of 1.0 through December 31, 2020 and 1.25 to 1.0 through June 30, 2022 if the maturity date of the Loans is extended until the fifth anniversary of the Closing Date and (2) maintain a maximum total debt to EBITDA ratio of 6.00 to 1.00 . The Credit Agreement also contains covenants that restrict the Company's 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. The Credit Agreement also contains various customary events of default, including with respect to change of control of the Company or its ownership of the Borrower. The obligations under the Credit Agreement are secured by substantially all of our subsidiaries' assets and are guaranteed by the Company and its subsidiaries, other than the Borrower. In consideration for, and concurrently with, the origination of the Initial Term Loan in accordance with the terms of the Credit Agreement, we issued a warrant to the lender to purchase up to an aggregate of 3,863,326 shares of the Company’s common stock (representing approximately up to 7.5% of our diluted common stock as calculated using the “treasury stock” method as defined under U.S. GAAP for the three month period ended June 30, 2017) with an exercise price of $1.92 per share (the "Exercise Price"). Upon borrowing of the Additional Term Loans, the Company was required to issue additional warrants at the same Exercise Price to purchase up to an aggregate of 77,267 additional shares of common stock (which represents approximately 0.15% of our diluted common stock calculated using the “treasury stock” method as defined under U.S. GAAP for the fiscal quarter ended June 30, 2017) for each $ 1.0 million of such Additional Term Loans. Similarly, upon our election to extend the maturity of the loans for two additional one year periods, we will be required to issue additional warrants at the same Exercise Price to purchase up to an aggregate of 515,110 additional shares of common stock for the first year, and to purchase up to an aggregate of 772,665 additional shares of common stock for the second year (which represent approximately 1.0% and 1.5% of our diluted common stock for the first and second years, respectively, calculated using the “treasury stock” method as defined under U.S. GAAP for the fiscal quarter ended June 30, 2017). The Company has accounted for these warrants as equity instruments since the warrants are indexed to the Company’s common shares and meet the criteria for classification in shareholders’ equity. The relative fair values of the warrants are noted below and were treated as a discount to the associated debt. These amounts are being amortized to interest expense under the effective interest method over the life of the Term Loan and Additional Term Loans, respectively, which is a period of 48 months . The Company estimated the value of the warrants using the Black-Scholes model. The key information and assumptions used to value the warrants are as follows: August 2017 Issuance October 2018 Issuance April 2019 Issuance May 2019 Issuance August 2019 Issuance September 2019 Issuance Exercise price $1.92 $1.92 $1.92 $1.92 $1.92 $1.92 Share price on date of issuance $1.85 $1.93 $2.24 $1.75 $1.11 $1.10 Volatility 50.0% 55.0% 57.5% 57.5% 67.5% 67.5% Risk-free interest rate 1.83% 3.01% 2.31% 2.15% 1.53% 1.60% Expected dividend yield —% —% —% —% —% —% Contractual term (in years) 5 5 5 5 5 5 Number of shares 3,863,326 309,066 386,333 463,599 386,333 386,333 Relative fair value of each warrant $3.3 million $0.2 million $0.4 million $0.4 million $0.2 million $0.2 million In addition, at the closing of the Initial Term Loan, the Company paid transaction costs of $0.6 million , which were recorded as a discount on the debt and are being amortized to interest expense using the effective interest method over the life of the Initial Term Loan, which is a period of 48 months . Outstanding debt obligations are as follows (in thousands): March 31, 2020 Principal amount $ 63,450 Less: unamortized discount and debt issuance costs (2,049 ) Notes payable less unamortized discount and debt issuance costs 61,401 Less: current maturities, net of unamortized discount and debt issuance costs (3,339 ) Long-term notes payable, net of current maturities and unamortized discount and debt issuance costs $ 58,062 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company has entered into various non-cancelable operating lease agreements for office facilities and equipment with original lease periods expiring between 2020 and 2025 . Certain of these arrangements have free rent periods and/or escalating rent payment provisions. As such, we recognize rent expense under such arrangements on a straight-line basis in accordance with U.S. GAAP. Some leases include options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Operating lease expense was $0.8 million and $0.8 million for the three months ended March 31, 2020 and 2019, respectively. Supplemental cash flow and other information related to operating leases was as follows: March 31, March 31, Weighted Average Remaining Lease Term (in years) 3.3 4.5 Weighted Average Discount Rate 6.3% 6.4% Cash paid for amounts included in the measurement of operating lease liabilities $0.8 million $0.9 million The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2020 (in thousands): Year Ending December 31, Amount Remainder of 2020 2,375 2021 2,313 2022 1,690 2023 569 2024 579 Thereafter 397 Total undiscounted cash flows $ 7,923 Less imputed interest $ (841 ) Present value of lease liabilities $ 7,082 |
Stock-based Compensation
Stock-based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-based Compensation | Stock-based Compensation (a) Stock Options Total stock-based compensation expense charged as salaries and benefits expense in the consolidated statements of operations was $0.7 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively. The following table sets forth a summary of the Company's stock option activity for the three months ended March 31, 2020 : Outstanding Options Weighted average exercise price per share Weighted average remaining contractual life (Years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2019 1,991,166 $ 10.06 2.89 $ — Granted — — Forfeited (141,105 ) 7.55 Exercised — — Outstanding at March 31, 2020 1,850,061 $ 10.25 2.70 $ — Vested and exercisable at March 31, 2020 1,850,061 $ 10.25 2.70 $ — The Company recognizes share-based compensation costs as expense on a straight-line basis over the option vesting period, which generally is four years . (b) Restricted Stock Units and Performance Stock Units The following table summarizes restricted stock unit and performance stock unit activity for the three months ended March 31, 2020 : Number of Awards Weighted average grant date fair value per share Outstanding at December 31, 2019 3,254,254 $ 2.12 Granted 55,000 1.07 Forfeited (52,375 ) 2.23 Vested and converted to shares, net of units withheld for taxes (122,529 ) 1.72 Units withheld for taxes (73,346 ) 1.72 Outstanding at March 31, 2020 3,061,004 $ 2.13 Expected to vest at March 31, 2020 2,730,719 $ 2.13 Restricted stock units and performance stock units granted under the Performant Financial Corporation Amended and Restated 2012 Stock Incentive Plan generally vest over periods ranging from one to four years . |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our effective income tax rate changed to 24% for the three months ended March 31, 2020 from (2)% for the three months ended March 31, 2019 . The change in the effective tax rate is primarily driven by the net operating loss (“NOL”) carryback benefit recorded as a result of the newly enacted provisions of the CARES Act for the three months ended March 31, 2020 . 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 2016, the Company is no longer subject to Federal and certain other state tax examinations. We are currently being examined by the Franchise Tax Board of California for tax years 2011 through 2014 and by the Internal Revenue Service for tax year 2017. On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. This modification significantly impacts the Company by allowing for the carryback of 2018 and 2019 NOL to tax years 2013 and 2014, respectively. These NOL carryforwards had been represented in the December 31, 2019 financial statements by deferred tax assets (“DTA”) for which a valuation allowance had been recorded as the Company did not expect that these DTA would be more likely than not realizable in future periods. As a result of carrying back the NOL, the Company is recognizing an income tax benefit of $3.9 million associated with these previously unrecognized DTA in the three months ended March 31, 2020. |
Loss per Share
Loss per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Loss Per Share | Loss per Share For the three months ended March 31, 2020 and 2019 , basic loss per share is calculated by dividing net loss by the sum of the weighted average number of shares of common stock outstanding during the period. Diluted earnings 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, restricted stock units, performance stock units, and warrants. When there is a loss in the period, dilutive common share equivalents are excluded from the calculation of diluted earnings per share, as their effect would be anti-dilutive. For example, for the three months ended March 31, 2020 and 2019, respectively, diluted weighted average shares outstanding are the same as basic average shares outstanding. When there is net income in the period, the Company excludes stock options, restricted stock units, performance stock units and warrants from the calculation of diluted earnings per share when their combined exercise price and unamortized fair value exceeds the average market price of 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 2020 2019 Weighted average shares outstanding – basic 53,943 53,059 Dilutive effect of stock options — — Weighted average shares outstanding – diluted 53,943 53,059 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events We have evaluated subsequent events through the date these consolidated financial statements were filed with the Securities and Exchange Commission and there are no other events that have occurred that would require adjustments or disclosures to our consolidated financial statements. |
Organization and Description _2
Organization and Description of Business (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
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 accounting principles generally accepted in the United States of America, 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 financial position at March 31, 2020 , and the results of our operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019 . 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 year ended December 31, 2019 . Performant Financial Corporation (the "Company" or "we") 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. Clients of the Company typically operate in complex and regulated environments and contract for their recovery needs in order to reduce losses on defaulted student loans, improper healthcare payments and delinquent state tax and federal treasury receivables. The Company generally provides services on an outsourced basis; handling many or all aspects of the clients’ recovery processes. The Company's consolidated financial statements include the operations of Performant Financial Corporation (Performant), its wholly-owned subsidiaries Premiere Credit of North America, LLC (Premiere) and Performant Business Services, Inc. (PBS), and PBS's wholly-owned subsidiaries Performant Recovery, Inc. (Recovery) and Performant Technologies, LLC (PTL). Performant is a Delaware corporation headquartered in California and was formed in 2003. Premiere is an Indiana limited liability company acquired by Performant on August 31, 2018. PBS is a Nevada corporation founded in 1997. Recovery is a California corporation founded in 1976. PTL is a California limited liability company that was originally formed in 2004. All 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, contract assets, intangible assets, goodwill, right-of-use assets, estimated liability for appeals and disputes, lease liabilities, earnout payable, other liabilities, deferred income taxes and income tax expense (benefit) and disclosure of contingent 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 The Company derives its revenues primarily from providing recovery services and healthcare audit services. Revenues are recognized when control of these services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: • Identification of the contract with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, the performance obligations are satisfied The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company’s contracts generally contain a single performance obligation, delivered over time as a series of services that are substantially the same and have the same pattern of transfer to the client, as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct. For contracts with multiple performance obligations, the Company would allocate the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct service in the contract. The Company determines the standalone selling prices by taking into consideration the value of the services being provided, the client type and how similar services are priced in other contracts on a standalone basis. The Company’s contracts are composed primarily of variable consideration. Fees earned under the Company’s recovery service contracts consist primarily of contingency fees based on a specified percentage of the amount the Company enables its clients to recover. The contingency fee percentage for a particular recovery depends on the type of recovery or claim facilitated. In certain contracts the Company can earn additional performance-based consideration determined based on its performance relative to the client’s other contractors providing similar services. Revenue from contingency fees earned upon recovery of funds is generally recognized as amounts are invoiced based on either the ‘as-invoiced’ practical expedient when such amounts reflect the value of the services completed to-date, or an output measure based on milestones which is used to measure progress of the satisfaction of its performance obligation. The Company estimates any performance-based variable consideration and recognizes such revenue over the performance period only if it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Under certain contracts, consideration can include periodic performance-based bonuses which can be awarded based on the Company’s performance under the specific contract. These performance-based awards are considered variable and may be constrained by the Company until there is not a risk of a material reversal. For contracts that contain a refund right, these amounts are considered variable consideration and the Company estimates its refund liability for each claim and recognizes revenue net of such estimate. The Company generally either applies the as-invoiced practical expedient where its right to consideration corresponds directly to its right to invoice its clients, or the variable consideration allocation exception where the variable consideration is attributable to one or more, but not all, of the services promised in a series of distinct services that form part of a single performance obligation. As such the Company has elected the optional exemptions related to the as-invoiced practical expedient and the variable consideration allocation exception whereby the disclosure of the amount of transaction price allocated to the remaining performance obligations is not required. The Company has applied the as-invoiced practical expedient or the variable consideration allocation exception to contracts with performance obligations that have an average remaining duration of less than a year. 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 Secondary Payer (MSP) Commercial Payment Center (CPC) contract with Centers for Medicare and Medicaid Services (CMS), the Company recognizes revenues when insurance companies or other responsible parties remit payment to reimburse CMS for claims for which they are responsible, and the remittance has been applied in the CMS database. Under the Company’s Medicare Recovery Audit Contractor (RAC) contract with CMS, the Company recognizes revenues when the healthcare provider has paid CMS for a given claim or has agreed to an offset against other claims by the provider. For healthcare claims audit contracts with commercial clients, the Company may recognize revenue upon delivering the results of claims audits, when sufficient reliable information is available to the Company for estimating the variable consideration earned, as it is a reasonable measure of the Company’s progress toward complete satisfaction of our performance obligation. For coordination-of-benefits contracts with commercial clients, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to the client. For customer care / outsourced services clients, the Company recognizes revenues based on the volume of processed transactions or the quantity of labor hours provided. The following table presents revenue disaggregated by category for the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended 2020 2019 (in thousands) Healthcare 17,524 9,020 Recovery (1) 24,265 21,375 Customer Care / Outsourced Services 4,099 4,481 Total Revenues $ 45,888 $ 34,876 (1) Represents student lending, state and municipal tax authorities, IRS and Department of Treasury markets, select financial institutions, as well as Premiere Credit of North America. Healthcare providers have the right to appeal a claim and may pursue additional appeals if the initial appeal is found in favor of CMS or other healthcare clients under the RAC or other commercial healthcare contracts, respectively. Under the MSP contract, insurance companies or other responsible parties may dispute the Company’s findings regarding Medicare not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $1.2 million and $1.0 million as of March 31, 2020 and December 31, 2019, respectively. This represents the Company’s best estimate of the amount probable of being refunded to the Company’s healthcare clients following successful appeals of claims for which commissions were previously collected. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts by specific identification. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is consider remote. The allowance for doubtful account was $0.5 million and $0.2 million at March 31, 2020 and December 31, 2019, respectively. The Company determined that it does not have any costs related to obtaining or fulfilling a contract that are recoverable and as such, these contract costs are expensed as incurred. The Company has contract assets of $1.2 million and $1.3 million as of March 31, 2020 and December 31, 2019 , respectively. The contract assets relate to the Company’s rights to consideration for services completed during the three months ended March 31, 2020 and year ended December 31, 2019, but not invoiced at the reporting date. The decrease in contract assets is primarily due to timing of invoices issued. Contract assets are recorded to accounts receivable when the rights become unconditional and amounts are invoiced. The Company has contract liabilities of $0.1 million as of March 31, 2020 and December 31, 2019 , respectively, which are included in other current liabilities in the consolidated balance sheets. The Company’s contract liability relates to an advance recovery commission payment received from a customer, for which the Company anticipates revenue to be recognized as services are delivered. |
Impairment of Goodwill and Long-Lived Assets | Impairment of Goodwill and Long-Lived Assets Goodwill is reviewed for impairment at least annually. |
New Accounting Pronouncements | In August 2018, the FASB issued ASU 2018-13, " Fair Value Measurements", which eliminates, adds or modifies certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this pronouncement on January 1, 2020, noting no impact to the consolidated financial statements as the amounts subject to Level 3 fair value measurements are not material. In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments" as modified by subsequently issued ASU's 2018-19, 2019-04, 2019-05 and 2019-11. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted, for public entities, except for Smaller Reporting Companies. This ASU is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2022. The Company is evaluating the effect of the adoption of this pronouncement. |
Organization and Description _3
Organization and Description of Business (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of disaggregated revenue by category | The following table presents revenue disaggregated by category for the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended 2020 2019 (in thousands) Healthcare 17,524 9,020 Recovery (1) 24,265 21,375 Customer Care / Outsourced Services 4,099 4,481 Total Revenues $ 45,888 $ 34,876 (1) Represents student lending, state and municipal tax authorities, IRS and Department of Treasury markets, select financial institutions, as well as Premiere Credit of North America. |
Property, Equipment, and Leas_2
Property, Equipment, and Leasehold Improvements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, equipment, and leasehold improvements | Property, equipment, and leasehold improvements consist of the following at March 31, 2020 and December 31, 2019 (in thousands): March 31, December 31, Land $ 1,943 $ 1,943 Building and leasehold improvements 8,146 8,124 Furniture and equipment 6,257 6,257 Computer hardware and software 80,117 79,066 96,463 95,390 Less accumulated depreciation and amortization (78,102 ) (76,621 ) Property, equipment and leasehold improvements, net $ 18,361 $ 18,769 |
Credit Agreement (Tables)
Credit Agreement (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of warrant valuation | The Company estimated the value of the warrants using the Black-Scholes model. The key information and assumptions used to value the warrants are as follows: August 2017 Issuance October 2018 Issuance April 2019 Issuance May 2019 Issuance August 2019 Issuance September 2019 Issuance Exercise price $1.92 $1.92 $1.92 $1.92 $1.92 $1.92 Share price on date of issuance $1.85 $1.93 $2.24 $1.75 $1.11 $1.10 Volatility 50.0% 55.0% 57.5% 57.5% 67.5% 67.5% Risk-free interest rate 1.83% 3.01% 2.31% 2.15% 1.53% 1.60% Expected dividend yield —% —% —% —% —% —% Contractual term (in years) 5 5 5 5 5 5 Number of shares 3,863,326 309,066 386,333 463,599 386,333 386,333 Relative fair value of each warrant $3.3 million $0.2 million $0.4 million $0.4 million $0.2 million $0.2 million |
Schedule of outstanding debt | Outstanding debt obligations are as follows (in thousands): March 31, 2020 Principal amount $ 63,450 Less: unamortized discount and debt issuance costs (2,049 ) Notes payable less unamortized discount and debt issuance costs 61,401 Less: current maturities, net of unamortized discount and debt issuance costs (3,339 ) Long-term notes payable, net of current maturities and unamortized discount and debt issuance costs $ 58,062 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of lease cost | Supplemental cash flow and other information related to operating leases was as follows: March 31, March 31, Weighted Average Remaining Lease Term (in years) 3.3 4.5 Weighted Average Discount Rate 6.3% 6.4% Cash paid for amounts included in the measurement of operating lease liabilities $0.8 million $0.9 million |
Schedule of maturities of lease liabilities | The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2020 (in thousands): Year Ending December 31, Amount Remainder of 2020 2,375 2021 2,313 2022 1,690 2023 569 2024 579 Thereafter 397 Total undiscounted cash flows $ 7,923 Less imputed interest $ (841 ) Present value of lease liabilities $ 7,082 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock option activity | The following table sets forth a summary of the Company's stock option activity for the three months ended March 31, 2020 : Outstanding Options Weighted average exercise price per share Weighted average remaining contractual life (Years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2019 1,991,166 $ 10.06 2.89 $ — Granted — — Forfeited (141,105 ) 7.55 Exercised — — Outstanding at March 31, 2020 1,850,061 $ 10.25 2.70 $ — Vested and exercisable at March 31, 2020 1,850,061 $ 10.25 2.70 $ — |
Schedule of restricted stock activity | The following table summarizes restricted stock unit and performance stock unit activity for the three months ended March 31, 2020 : Number of Awards Weighted average grant date fair value per share Outstanding at December 31, 2019 3,254,254 $ 2.12 Granted 55,000 1.07 Forfeited (52,375 ) 2.23 Vested and converted to shares, net of units withheld for taxes (122,529 ) 1.72 Units withheld for taxes (73,346 ) 1.72 Outstanding at March 31, 2020 3,061,004 $ 2.13 Expected to vest at March 31, 2020 2,730,719 $ 2.13 |
Loss per Share (Tables)
Loss per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of 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 2020 2019 Weighted average shares outstanding – basic 53,943 53,059 Dilutive effect of stock options — — Weighted average shares outstanding – diluted 53,943 53,059 |
Organization and Description _4
Organization and Description of Business - Narrative (Details) $ in Thousands | Mar. 27, 2020USD ($)employee | Mar. 31, 2020USD ($)segmentreporting_unit | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) |
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | ||||
Number of operating segments | segment | 1 | |||
Net loss | $ (12,484) | $ (8,489) | ||
Net cash provided by operating activities | 7,221 | $ 356 | ||
Number of employees furloughed | employee | 500 | |||
Annual savings | $ 18,000 | |||
Cash savings, remainder of year | 3,000 | |||
Estimated liability for appeals | 1,169 | $ 1,018 | ||
Allowance for doubtful accounts | 518 | 237 | ||
Contract assets | 1,201 | 1,339 | ||
Contract liabilities | 100 | 100 | ||
Prepaid expenses and other current assets | 3,780 | 3,329 | ||
Prepaid expense and other assets, prepaid software licenses and maintenance agreement | 2,100 | 2,200 | ||
Prepaid expense and other assets, prepaid insurance | 800 | 700 | ||
Prepaid expense | 900 | 400 | ||
Goodwill | $ 55,372 | 74,372 | ||
Number of Reporting Units | reporting_unit | 1 | |||
Impairment of goodwill and intangible assets | $ 19,000 | |||
Contract with customer, liability, current | 2,500 | 2,200 | ||
Premium insurance financing payables | 600 | 600 | ||
Accrued subcontractor fees, current | 300 | |||
Workers' compensation liability, incurred | 300 | 300 | ||
ROU assets | 6,235 | $ 6,834 | ||
Lease Liabilities | $ 7,082 | |||
Tax Year 2013 | ||||
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | ||||
Amended tax refund | 2,400 | |||
Tax Year 2014 | ||||
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | ||||
Amended tax refund | $ 1,500 |
Organization and Description _5
Organization and Description of Business - Disaggregated Revenue by Category (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Total Revenues | $ 45,888 | $ 34,876 |
Healthcare | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenues | 17,524 | 9,020 |
Recovery | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenues | 24,265 | 21,375 |
Customer Care / Outsourced Services | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenues | $ 4,099 | $ 4,481 |
Property, Equipment, and Leas_3
Property, Equipment, and Leasehold Improvements - Summary (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property, equipment and leasehold improvements, gross | $ 96,463 | $ 95,390 |
Less accumulated depreciation and amortization | (78,102) | (76,621) |
Property, equipment and leasehold improvements, net | 18,361 | 18,769 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and leasehold improvements, gross | 1,943 | 1,943 |
Building and leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and leasehold improvements, gross | 8,146 | 8,124 |
Furniture and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and leasehold improvements, gross | 6,257 | 6,257 |
Computer hardware and software | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and leasehold improvements, gross | $ 80,117 | $ 79,066 |
Property, Equipment, and Leas_4
Property, Equipment, and Leasehold Improvements - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization expense of property, equipment and leasehold improvements | $ 1.5 | $ 2.3 |
Credit Agreement - Narrative (D
Credit Agreement - Narrative (Details) | Aug. 31, 2018USD ($)extension_periodshares | Aug. 07, 2017USD ($)$ / sharesshares | Jun. 30, 2017 | Mar. 31, 2020USD ($) | Dec. 31, 2019 |
Line of Credit Facility [Line Items] | |||||
Number of optional additional extension periods | extension_period | 2 | ||||
Duration of optional additional extension periods | 1 year | ||||
Issuance costs | $ 600,000 | ||||
New Credit Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Floor rate (as a percent) | 1.00% | ||||
Annual interest rate | 11.00% | 11.80% | |||
Periodic payment of principal (as a percent) | 5.00% | ||||
Total debt to EBITDA ratio | 6 | ||||
Warrants issued (shares) | shares | 3,863,326 | ||||
New Credit Agreement | Minimum | |||||
Line of Credit Facility [Line Items] | |||||
Excess cash flow for prepayments of lines of credit (as a percent) | 0.00% | ||||
New Credit Agreement | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Excess cash flow for prepayments of lines of credit (as a percent) | 75.00% | ||||
Initial Term Loan | |||||
Line of Credit Facility [Line Items] | |||||
Diluted common stock (as a percent) | 7.50% | ||||
Exercise price of warrants (USD per share) | $ / shares | $ 1.92 | ||||
Amortization period | 48 months | ||||
Additional Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Number of optional additional extension periods | extension_period | 2 | ||||
Duration of optional additional extension periods | 1 year | ||||
Diluted common stock (as a percent) | 0.15% | ||||
Stock value of warrants per term loan (shares) | shares | 77,267 | ||||
Allotment for warrants purchased | $ 1,000,000 | ||||
Term Loan and Additional Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Amortization period | 48 months | ||||
London Interbank Offered Rate (LIBOR) | New Credit Agreement | Minimum | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate (as a percent) | 5.50% | ||||
London Interbank Offered Rate (LIBOR) | New Credit Agreement | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate (as a percent) | 10.00% | ||||
Period One | New Credit Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Interest coverage ratio | 1 | ||||
Period One | Additional Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Diluted common stock (as a percent) | 1.00% | ||||
Stock value of warrants per term loan (shares) | shares | 515,110 | ||||
Period Two | New Credit Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Interest coverage ratio | 1.25 | ||||
Period Two | Additional Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Diluted common stock (as a percent) | 1.50% | ||||
Stock value of warrants per term loan (shares) | shares | 772,665 | ||||
Line of Credit | Initial Term Loan | |||||
Line of Credit Facility [Line Items] | |||||
Amount outstanding under line of credit | $ 44,000,000 | ||||
Line of Credit | Additional Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Amount outstanding under line of credit | $ 63,450,000 | ||||
Maximum borrowing capacity under line of credit | $ 25,000,000 | $ 15,000,000 | $ 25,000,000 |
Credit Agreement - Warrant Valu
Credit Agreement - Warrant Valuation (Details) - Amendment Number One to Credit Agreement $ / shares in Units, $ in Millions | 1 Months Ended | |||||
Sep. 30, 2019USD ($)$ / sharesshares | Aug. 31, 2019USD ($)$ / sharesshares | May 31, 2019USD ($)$ / sharesshares | Apr. 30, 2019USD ($)$ / sharesshares | Oct. 31, 2018USD ($)$ / sharesshares | Aug. 31, 2017USD ($)$ / sharesshares | |
Debt Instrument [Line Items] | ||||||
Exercise price (USD per share) | $ 1.92 | $ 1.92 | $ 1.92 | $ 1.92 | $ 1.92 | $ 1.92 |
Share price on date of issuance (USD per share) | $ 1.10 | $ 1.11 | $ 1.75 | $ 2.24 | $ 1.93 | $ 1.85 |
Number of shares (in shares) | shares | 386,333 | 386,333 | 463,599 | 386,333 | 309,066 | 3,863,326 |
Relative fair value of each warrant | $ | $ 0.2 | $ 0.2 | $ 0.4 | $ 0.4 | $ 0.2 | $ 3.3 |
Volatility | ||||||
Debt Instrument [Line Items] | ||||||
Warrants and rights outstanding, measurement input | 0.675 | 0.675 | 0.575 | 0.575 | 0.550 | 0.500 |
Risk-free interest rate | ||||||
Debt Instrument [Line Items] | ||||||
Warrants and rights outstanding, measurement input | 0.0160 | 0.0153 | 0.0215 | 0.0231 | 0.0301 | 0.0183 |
Expected dividend yield | ||||||
Debt Instrument [Line Items] | ||||||
Warrants and rights outstanding, measurement input | 0 | 0 | 0 | 0 | 0 | 0 |
Contractual term (in years) | ||||||
Debt Instrument [Line Items] | ||||||
Contractual term (in years) | 5 years | 5 years | 5 years | 5 years | 5 years | 5 years |
Credit Agreement - Outstanding
Credit Agreement - Outstanding Debt Obligations (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Debt Disclosure [Abstract] | |
Less: unamortized discount and debt issuance costs | $ (2,049) |
Notes payable less unamortized discount and debt issuance costs | 61,401 |
Less: current maturities, net of unamortized discount and debt issuance costs | (3,339) |
Long-term notes payable, net of current maturities and unamortized discount and debt issuance costs | $ 58,062 |
Leases - Components of Lease Te
Leases - Components of Lease Term and Discount Rate (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Weighted Average Remaining Lease Term (in years) | 3 years 3 months 18 days | 4 years 6 months |
Weighted average discount rate (as a percent) | 6.30% | 6.40% |
Cash paid for amounts included in the measurement of operating lease liabilities | $ 0.8 | $ 0.9 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating lease expense | $ 0.8 | $ 0.8 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Lease Liabilities (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Maturities of Lease Liabilities after Adoption of ASC 842 | |
Remainder of 2020 | $ 2,375 |
2021 | 2,313 |
2022 | 1,690 |
2023 | 569 |
2024 | 579 |
Thereafter | 397 |
Total undiscounted cash flows | 7,923 |
Less imputed interest | (841) |
Present value of lease liabilities | $ 7,082 |
Stock-based Compensation - Narr
Stock-based Compensation - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 0.7 | $ 0.5 |
Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options vesting period | 4 years | |
Minimum | Restricted Stock and Performance Stock Units | 2012 Equity Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options vesting period | 1 year | |
Maximum | Restricted Stock and Performance Stock Units | 2012 Equity Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options vesting period | 4 years |
Stock-based Compensation - Stoc
Stock-based Compensation - Stock Option Activity (Details) - Options - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Outstanding Options | ||
Balance at beginning of period (in shares) | 1,991,166 | |
Granted (in shares) | 0 | |
Forfeited (in shares) | (141,105) | |
Exercised (in shares) | 0 | |
Balance at end of period (in shares) | 1,850,061 | 1,991,166 |
Vested and exercisable (in shares) | 1,850,061 | |
Weighted average exercise price per share | ||
Balance at beginning of period (USD per share) | $ 10.06 | |
Granted (USD per share) | 0 | |
Forfeited (USD per share) | 7.55 | |
Exercised (USD per share) | 0 | |
Balance at end of period (USD per share) | 10.25 | $ 10.06 |
Vested or expected to vest (USD per share) | $ 10.25 | |
Weighted average remaining contractual life (Years) | ||
Outstanding | 2 years 8 months 12 days | 2 years 10 months 20 days |
Vested, exercisable, and expected to vest | 2 years 8 months 12 days | |
Aggregate Intrinsic Value (in thousands) | ||
Outstanding | $ 0 | $ 0 |
Vested, exercisable, and expected to vest | $ 0 |
Stock-based Compensation - Rest
Stock-based Compensation - Restricted Stock and Performance Stock Units Activity (Details) - Restricted Stock and Performance Stock Units | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Number of Awards | |
Outstanding at beginning of period (in shares) | shares | 3,254,254 |
Granted (in shares) | shares | 55,000 |
Forfeited (in shares) | shares | (52,375) |
Vested and converted to shares, net of units withheld for taxes (in shares) | shares | (122,529) |
Units withheld for taxes (in shares) | shares | (73,346) |
Outstanding at end of period (in shares) | shares | 3,061,004 |
Expected to vest (in shares) | shares | 2,730,719 |
Weighted average grant date fair value per share | |
Outstanding beginning of period (USD per share) | $ / shares | $ 2.12 |
Granted (USD per share) | $ / shares | 1.07 |
Forfeited (USD per share) | $ / shares | 2.23 |
Vested and converted to shares, net of units withheld for taxes (USD per share) | $ / shares | 1.72 |
Units withheld for taxes (USD per share) | $ / shares | 1.72 |
Outstanding end of period (USD per share) | $ / shares | 2.13 |
Expected to vest (USD per share) | $ / shares | $ 2.13 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate (as a percent) | 24.00% | (2.00%) |
CARES Act, income tax expense (benefit) | $ 3.9 |
Loss per Share - Reconciliation
Loss per Share - Reconciliation of Basic to Diluted Weighted Average Shares (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Weighted average shares outstanding – basic (in shares) | 53,943 | 53,059 |
Dilutive effect of stock options (in shares) | 0 | 0 |
Weighted average shares outstanding – diluted (in shares) | 53,943 | 53,059 |
Uncategorized Items - pfmt-2020
Label | Element | Value |
Restricted Cash and Cash Equivalents | us-gaap_RestrictedCashAndCashEquivalents | $ 1,659,000 |
Restricted Cash and Cash Equivalents | us-gaap_RestrictedCashAndCashEquivalents | $ 1,622,000 |