Performant Healthcare (PHLT) 10-Q 12 Nov 20 2020 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 10, 2020
Document Documentand Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-35628
Entity Registrant Name	PERFORMANT FINANCIAL CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-0484934
Entity Address, Address Line One	333 North Canyons Parkway
Entity Address, City or Town	Livermore
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94551
City Area Code	(925)
Local Phone Number	960-4800
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Interactive Data Current	Yes
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock, par value $.0001 per share
Trading Symbol	PFMT
Security Exchange Name	NASDAQ
Entity Central Index Key	0001550695
Entity Common Stock, Shares Outstanding (in shares)		54,756,683
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 15,655	$ 3,373
Restricted cash	1,622	1,622
Trade accounts receivable, net of allowance for doubtful accounts of $21 and $237, respectively	22,414	27,170
Contract assets	2,862	1,339
Prepaid expenses and other current assets	2,846	3,329
Income tax receivable	3,719	164
Total current assets	49,118	36,997
Property, equipment, and leasehold improvements, net	17,647	18,769
Identifiable intangible assets, net	748	925
Goodwill	47,372	74,372
Right-of-use assets	4,948	6,834
Other assets	1,160	975
Total assets	120,993	138,872
Current liabilities:
Current maturities of notes payable to related party, net of unamortized debt issuance costs of $1,285 and $130, respectively	60,440	3,320
Accrued salaries and benefits	5,045	6,126
Accounts payable	1,372	2,532
Other current liabilities	4,199	3,576
Deferred revenue	1,062	83
Estimated liability for appeals and disputes	1,033	1,018
Lease liabilities	2,338	2,775
Total current liabilities	75,489	19,430
Notes payable to related party, net of current portion and unamortized debt issuance costs of $— and $2,301, respectively	0	58,562
Earnout payable	375	475
Lease liabilities	3,514	4,984
Other liabilities	3,962	1,796
Total liabilities	83,340	85,247
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2020 and December 31, 2019 respectively; issued and outstanding 54,735 and 53,900 shares at September 30, 2020 and December 31, 2019, respectively	5	5
Additional paid-in capital	82,326	80,589
Accumulated deficit	(44,678)	(26,969)
Total stockholders’ equity	37,653	53,625
Total liabilities and stockholders’ equity	$ 120,993	$ 138,872

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 21	$ 237
Current liabilities, debt issuance costs	1,285	130
Note payable, debt issuance costs	$ 0	$ 2,301
Common stock, par or stated value per share (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)	54,735,000	54,735,000
Common stock, outstanding shares (in shares)	53,900,000	53,900,000

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Revenues	$ 36,228	$ 35,903	$ 115,901	$ 106,609
Operating expenses:
Salaries and benefits	23,522	28,771	74,493	86,816
Other operating expenses	10,813	12,948	32,075	37,112
Impairment of goodwill	0	0	27,000	0
Total operating expenses	34,335	41,719	133,568	123,928
Income (loss) from operations	1,893	(5,816)	(17,667)	(17,319)
Interest expense	(1,569)	(2,166)	(5,827)	(5,260)
Interest income	6	11	18	33
Income (loss) before provision for (benefit from) income taxes	330	(7,971)	(23,476)	(22,546)
Provision for (benefit from) income taxes	(1,644)	99	(5,767)	412
Net income (loss)	$ 1,974	$ (8,070)	(17,709)	(22,958)
Net loss			$ (17,709)	$ (22,958)
Net income (loss) per share
Basic (USD per share)	$ 0.04	$ (0.15)	$ (0.33)	$ (0.43)
Diluted (USD per share)	$ 0.04	$ (0.15)	$ (0.33)	$ (0.43)
Weighted average shares
Basic (in shares)	54,684	53,665	54,299	53,366
Diluted (in shares)	54,710	53,665	54,299	53,366

Consolidated Statements of Chan

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
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)		686,000
Common stock issued under stock plans, net of shares withheld for employee taxes	(432)		(432)
Stock-based compensation expense	1,743		1,743
Adjustments to Additional Paid in Capital, Warrant Issued	1,165		1,165
Net income (loss)	(22,958)			(22,958)
Ending balance (in shares) at Sep. 30, 2019		53,685,000
Ending balance at Sep. 30, 2019	56,744	$ 5	79,846	(23,107)
Beginning balance (in shares) at Jun. 30, 2019		53,648,000
Beginning balance at Jun. 30, 2019	63,948	$ 5	78,980	(15,037)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares)		37,000
Common stock issued under stock plans, net of shares withheld for employee taxes	(21)		(21)
Stock-based compensation expense	525		525
Adjustments to Additional Paid in Capital, Warrant Issued	362		362
Net income (loss)	(8,070)			(8,070)
Ending balance (in shares) at Sep. 30, 2019		53,685,000
Ending balance at Sep. 30, 2019	$ 56,744	$ 5	79,846	(23,107)
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)		835,000
Common stock issued under stock plans, net of shares withheld for employee taxes	(260)		(260)
Stock-based compensation expense	1,997		1,997
Adjustments to Additional Paid in Capital, Warrant Issued	0		0
Net income (loss)	$ (17,709)			(17,709)
Ending balance (in shares) at Sep. 30, 2020	53,900,000	54,735,000
Ending balance at Sep. 30, 2020	$ 37,653	$ 5	82,326	(44,678)
Beginning balance (in shares) at Jun. 30, 2020		54,462,000
Beginning balance at Jun. 30, 2020	35,033	$ 5	81,680	(46,652)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares)		273,000
Common stock issued under stock plans, net of shares withheld for employee taxes	(11)		(11)
Stock-based compensation expense	657		657
Adjustments to Additional Paid in Capital, Warrant Issued	0
Net income (loss)	$ 1,974			1,974
Ending balance (in shares) at Sep. 30, 2020	53,900,000	54,735,000
Ending balance at Sep. 30, 2020	$ 37,653	$ 5	$ 82,326	$ (44,678)

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net loss	$ (17,709)	$ (22,958)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on disposal of assets	88	7
Impairment of goodwill	27,000	0
Depreciation and amortization	4,072	6,698
Right-of-use assets amortization	1,886	1,913
Stock-based compensation	1,997	1,743
Interest expense from debt issuance costs	1,145	896
Earnout mark-to-market	(162)	(1,086)
Changes in operating assets and liabilities:
Trade accounts receivable	4,756	354
Contract assets	(1,523)	(1,159)
Prepaid expenses and other current assets and other assets	298	(219)
Income tax receivable	(3,555)	179
Accrued salaries and benefits	(1,081)	1,236
Accounts payable	(1,160)	460
Deferred revenue and other current liabilities	1,664	280
Estimated liability for appeals and disputes	15	159
Lease liabilities	(1,907)	(2,066)
Other liabilities	2,168	187
Net cash provided by (used in) operating activities	17,992	(13,376)
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements	(2,862)	(4,101)
Net cash used in investing activities	(2,862)	(4,101)
Cash flows from financing activities:
Repayment of notes payable	(2,588)	(1,750)
Debt issuance costs paid	0	(68)
Taxes paid related to net share settlement of stock awards	(260)	(466)
Proceeds from exercise of stock options	0	34
Borrowings from notes payable	0	21,000
Net cash (used in) provided by financing activities	(2,848)	18,750
Net increase in cash, cash equivalents and restricted cash	12,282	1,273
Cash, cash equivalents and restricted cash at beginning of period	4,995	7,275
Cash, cash equivalents and restricted cash at end of period	17,277	8,548
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Total cash, cash equivalents and restricted cash at end of period	17,277	8,548
Additional Cash Flow Elements, Financing Activities [Abstract]
Recognition of warrants issued in debt financing	0	1,165
Supplemental disclosures of cash flow information:
Cash received for income taxes	2,280	87
Cash paid for interest	$ 4,616	$ 4,363

Leases

Leases	9 Months Ended
	Sep. 30, 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 September 30, 2020 and 2019, respectively, and $2.3 million and $2.5 million for the nine months ended September 30, 2020 and 2019, respectively. Supplemental cash flow and other information related to operating leases was as follows: September 30, September 30, Weighted Average Remaining Lease Term (in years) 3.1 3.9 Weighted Average Discount Rate 6.7% 6.5% Cash paid for amounts included in the measurement of operating lease liabilities $2.2 million $2.7 million The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2020 (in thousands): Year Ending December 31, Amount Remainder of 2020 842 2021 2,401 2022 1,700 2023 578 2024 585 Thereafter 398 Total undiscounted cash flows $ 6,504 Less imputed interest $ (652) Present value of lease liabilities $ 5,852

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2020
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes Our effective income tax rate changed to 25% for the nine months ended September 30, 2020 from (2)% for the nine months ended September 30, 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 nine months ended September 30, 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 $5.9 million associated with these previously unrecognized DTA in the nine months ended September 30, 2020.

Organization and Description of

Organization and Description of Business	9 Months Ended
	Sep. 30, 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 September 30, 2020, and the results of our operations for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 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, deferred revenue, 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, many states in which the Company has offices are under state of emergency or other public health emergency and continue to have emergency orders, 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). On August 21, 2020, the Department of Education announced that the student loan relief to borrowers would be extended through December 31, 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 impact on the Company’s recovery activities, the Company had furloughed more than 500 employees by the end of the second quarter, which has resulted in significant savings to date. During this quarter, the Company recalled a number of employees to work on contracts that resumed recovery activities, which resulted in over 300 employees remaining on furlough at the end of this quarter. The Company’s healthcare business has not been impacted by COVID-19 to the extent that the recovery business has been impacted. While a few healthcare customers placed short term pauses on audit activities during the second quarter and part of third quarter of 2020, the Company has begun to resume growth in its healthcare business. 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 received a cash refund of approximately $2.4 million. The Company further expects to file a refund request for an additional $0.5 million for the 2013 tax year, and an additional refund request for the 2014 tax year which is currently expected to result in a refund of approximately $3.1 million. The CARES Act also allows deferrals and credits for payroll tax amounts, which is expected to result in approximately $3 million in cash savings through 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. The Company’s contracts are composed primarily of variable consideration. Fees earned under the Company’s recovery service and healthcare audit 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 bonuses determined based on its performance relative to the client’s other contractors providing similar services. 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 estimates variable consideration upon completion of service using an output method to measure the satisfaction of its performance obligations 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. The Company exercises judgment to estimate the amount of constraint on variable consideration based on the facts and circumstances of the relevant contract operations and availability and reliability of data. Although the Company believes the estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the amount of variable consideration. For contracts that contain a refund right, these amounts are considered variable consideration and the Company estimates its refund exposure and recognizes revenue net of such estimate. 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 bonuses are considered variable and may be constrained by the Company until there is not a risk of a material reversal. 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. For certain recovery contracts, revenue is recognized when the clients collect on amounts owed to them as a result of the Company’s services. For student loan recovery services, loan rehabilitation revenue is recognized when the rehabilitated loans are funded by clients. Bonuses are recognized upon receipt of official notification of bonus awards from customers. For healthcare claims audit contracts, 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 based on an output metric that reasonably measures the Company's satisfaction of its performance obligation. For coordination-of-benefits contracts, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to the clients. 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 and nine months ended September 30, 2020 and 2019 (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 (in thousands) (in thousands) Healthcare 17,566 10,757 49,682 29,040 Recovery (1) 15,443 20,936 55,876 64,418 Customer Care / Outsourced Services 3,219 4,210 10,343 13,151 Total Revenues $ 36,228 $ 35,903 $ 115,901 $ 106,609 (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 claims audit findings and may pursue additional appeals if the initial appeal is found in favor of healthcare clients. For coordination-of-benefits contracts, insurance companies or other responsible parties may dispute the Company’s findings regarding our clients not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $1.0 million and $1.0 million as of September 30, 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 or disputes of responsible payer 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 accounts was $21 thousand and $0.2 million at September 30, 2020 and December 31, 2019, respectively. The Company determined that it does not have any material costs related to obtaining or fulfilling a contract that are recoverable and as such, these contract costs are generally expensed as incurred. The Company had contract assets of $2.9 million and $1.3 million as of September 30, 2020 and December 31, 2019, respectively. Contract assets relate to the Company’s rights to payment for services completed, but not invoiced at the reporting date, and receipt of payment is conditional upon factors other than the passage of time. Contract assets primarily consist of completed claims audit findings submitted to healthcare clients. Generally, the Company’s right to payment occurs when healthcare providers have paid our healthcare clients. The change in contract assets primarily resulted from an update in the measure of progress under certain contracts, consideration earned for services provided to healthcare clients, offset by invoiced amounts. Contract assets are recorded to accounts receivable when the rights become unconditional and amounts are invoiced. There was no impairment loss related to contract assets for the three and nine months ended September 30, 2020. The Company had contract liabilities of $1.1 million and $0.1 million as of September 30, 2020 and December 31, 2019, respectively, which are included in deferred revenue on the consolidated balance sheets. The Company’s contract liabilities mainly relate to an advance recovery commission payment received from a client, for which the Company anticipates revenue to be recognized as services are delivered. (d) Prepaid Expenses and Other Current Assets At September 30, 2020, prepaid expenses and other current assets were $2.8 million and included approximately $2.0 million related to prepaid software licenses and maintenance agreement s, $0.1 million for prepaid insurance, and $0.7 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 or as certain events or conditions arise. The balance of goodwill was $47.4 million as of September 30, 2020 and $74.4 million as of December 31, 2019. 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 analysis, we concluded that the carrying value of our reporting unit was not greater than its fair value as of September 30, 2020, as such there was no impairment charge for the three months ended September 30, 2020. For the nine months ended September 30, 2020, a non-cash goodwill impairment charge of $27.0 million was recorded. The goodwill impairment charges 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 September 30, 2020. (f) Other Current Liabilities At September 30, 2020, other current liabilities primarily included $1.9 million for services received for which we have not received an invoice, $1.6 million for accrued settlement costs, $0.3 million for third party fees and equipment financing payables, and $0.4 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 Accounting Standards Update (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 December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intra-period tax allocation principles and the methodology for calculating income tax rates in an interim period, among other updates. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the effect of the adoption of this pronouncement. In February 2020, the FASB issued ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” This ASU provides updated guidance on how an entity should measure credit losses on financial instruments, including trade receivables, held at the reporting date. The amendments make each Topic easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. It also addresses transition and open effective date information for Topic 842. ASU 2016-13, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 (collectively, “ASC 326”) are effective for public entities for fiscal years beginning after December 15, 2019, 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 15, 2022. In March 2020, the FASB issued ASU No 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. ASU 2020-04 is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company does not expect ASU 2020-04 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Property, Equipment, and Leaseh

Property, Equipment, and Leasehold Improvements	9 Months Ended
	Sep. 30, 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 September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Land $ 1,943 $ 1,943 Building and leasehold improvements 8,085 8,124 Furniture and equipment 6,132 6,257 Computer hardware and software 79,400 79,066 95,560 95,390 Less accumulated depreciation and amortization (77,913) (76,621) Property, equipment and leasehold improvements, net $ 17,647 $ 18,769 Depreciation expense of property, equipment and leasehold improvements was $1.2 million and $2.1 million for the three months ended September 30, 2020 and 2019, respectively, and $3.9 million and $6.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Credit Agreement

Credit Agreement	9 Months Ended
	Sep. 30, 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 obligations 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 September 30, 2020, $61.7 million was outstanding under the Credit Agreement. While this amount is classified in current liabilities, 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 September 30, 2020 was 8.0% 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 that became effective on June 30, 2020, which require, among other things, that we: (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): September 30, 2020 Principal amount $ 61,725 Less: unamortized discount and debt issuance costs (1,285) Notes payable less unamortized discount and debt issuance costs 60,440 Less: current maturities, net of unamortized discount and debt issuance costs (60,440) Long-term notes payable, net of current maturities and unamortized discount and debt issuance costs $ —

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 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 $2.0 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively. The following table sets forth a summary of the Company's stock option activity for the nine months ended September 30, 2020: Outstanding Weighted Weighted Aggregate Outstanding at December 31, 2019 1,991,166 $ 10.06 2.81 $ — Granted — — — Forfeited (163,605) 7.48 — Exercised — — — Outstanding at September 30, 2020 1,827,561 $ 10.29 2.19 $ — Vested and exercisable at September 30, 2020 1,827,561 $ 10.29 2.19 $ — 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 nine months ended September 30, 2020: Number of Awards Weighted Outstanding at December 31, 2019 3,254,254 $ 2.12 Granted 2,804,479 0.64 Forfeited (158,783) 2.18 Vested and converted to shares, net of units withheld for taxes (835,073) 2.02 Units withheld for taxes (318,481) 2.02 Outstanding at September 30, 2020 4,746,396 $ 1.27 Expected to vest at September 30, 2020 4,516,968 $ 1.22

Net Income (Loss) per Share

Net Income (Loss) per Share	9 Months Ended
	Sep. 30, 2020
Earnings Per Share [Abstract]
Net Income (Loss) per Share	oss) per ShareFor the three and nine month periods ended September 30, 2020 and 2019, basic net income (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 nine months ended September 30, 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 Nine Months Ended 2020 2019 2020 2019 Weighted average shares outstanding – basic 54,684 53,665 54,299 53,366 Dilutive effect of stock options 26 — — — Weighted average shares outstanding – diluted 54,710 53,665 54,299 53,366

Subsequent Events

Subsequent Events	9 Months Ended
	Sep. 30, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsWe 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)	9 Months Ended
	Sep. 30, 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 September 30, 2020, and the results of our operations for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 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, deferred revenue, 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. The Company’s contracts are composed primarily of variable consideration. Fees earned under the Company’s recovery service and healthcare audit 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 bonuses determined based on its performance relative to the client’s other contractors providing similar services. 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 estimates variable consideration upon completion of service using an output method to measure the satisfaction of its performance obligations 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. The Company exercises judgment to estimate the amount of constraint on variable consideration based on the facts and circumstances of the relevant contract operations and availability and reliability of data. Although the Company believes the estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the amount of variable consideration. For contracts that contain a refund right, these amounts are considered variable consideration and the Company estimates its refund exposure and recognizes revenue net of such estimate. 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 bonuses are considered variable and may be constrained by the Company until there is not a risk of a material reversal. 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. For certain recovery contracts, revenue is recognized when the clients collect on amounts owed to them as a result of the Company’s services. For student loan recovery services, loan rehabilitation revenue is recognized when the rehabilitated loans are funded by clients. Bonuses are recognized upon receipt of official notification of bonus awards from customers. For healthcare claims audit contracts, 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 based on an output metric that reasonably measures the Company's satisfaction of its performance obligation. For coordination-of-benefits contracts, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to the clients. 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 and nine months ended September 30, 2020 and 2019 (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 (in thousands) (in thousands) Healthcare 17,566 10,757 49,682 29,040 Recovery (1) 15,443 20,936 55,876 64,418 Customer Care / Outsourced Services 3,219 4,210 10,343 13,151 Total Revenues $ 36,228 $ 35,903 $ 115,901 $ 106,609 (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 claims audit findings and may pursue additional appeals if the initial appeal is found in favor of healthcare clients. For coordination-of-benefits contracts, insurance companies or other responsible parties may dispute the Company’s findings regarding our clients not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $1.0 million and $1.0 million as of September 30, 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 or disputes of responsible payer 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 accounts was $21 thousand and $0.2 million at September 30, 2020 and December 31, 2019, respectively. The Company determined that it does not have any material costs related to obtaining or fulfilling a contract that are recoverable and as such, these contract costs are generally expensed as incurred. The Company had contract assets of $2.9 million and $1.3 million as of September 30, 2020 and December 31, 2019, respectively. Contract assets relate to the Company’s rights to payment for services completed, but not invoiced at the reporting date, and receipt of payment is conditional upon factors other than the passage of time. Contract assets primarily consist of completed claims audit findings submitted to healthcare clients. Generally, the Company’s right to payment occurs when healthcare providers have paid our healthcare clients. The change in contract assets primarily resulted from an update in the measure of progress under certain contracts, consideration earned for services provided to healthcare clients, offset by invoiced amounts. Contract assets are recorded to accounts receivable when the rights become unconditional and amounts are invoiced. There was no impairment loss related to contract assets for the three and nine months ended September 30, 2020.
Impairment of Goodwill and Long-Lived Assets	Impairment of Goodwill and Long-Lived AssetsGoodwill is reviewed for impairment at least annually or as certain events or conditions arise.
New Accounting Pronouncements	In August 2018, the FASB issued Accounting Standards Update (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 December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intra-period tax allocation principles and the methodology for calculating income tax rates in an interim period, among other updates. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the effect of the adoption of this pronouncement. In February 2020, the FASB issued ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” This ASU provides updated guidance on how an entity should measure credit losses on financial instruments, including trade receivables, held at the reporting date. The amendments make each Topic easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. It also addresses transition and open effective date information for Topic 842. ASU 2016-13, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 (collectively, “ASC 326”) are effective for public entities for fiscal years beginning after December 15, 2019, 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 15, 2022. In March 2020, the FASB issued ASU No 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. ASU 2020-04 is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company does not expect ASU 2020-04 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Organization and Description _3

Organization and Description of Business (Tables)	9 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Schedule of disaggregated revenue by category	The following table presents revenue disaggregated by category for the three and nine months ended September 30, 2020 and 2019 (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 (in thousands) (in thousands) Healthcare 17,566 10,757 49,682 29,040 Recovery (1) 15,443 20,936 55,876 64,418 Customer Care / Outsourced Services 3,219 4,210 10,343 13,151 Total Revenues $ 36,228 $ 35,903 $ 115,901 $ 106,609 (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)	9 Months Ended
	Sep. 30, 2020
Property, Plant and Equipment [Abstract]
Schedule of property, equipment, and leasehold improvements	Property, equipment, and leasehold improvements consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Land $ 1,943 $ 1,943 Building and leasehold improvements 8,085 8,124 Furniture and equipment 6,132 6,257 Computer hardware and software 79,400 79,066 95,560 95,390 Less accumulated depreciation and amortization (77,913) (76,621) Property, equipment and leasehold improvements, net $ 17,647 $ 18,769

Credit Agreement (Tables)

Credit Agreement (Tables)	9 Months Ended
	Sep. 30, 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): September 30, 2020 Principal amount $ 61,725 Less: unamortized discount and debt issuance costs (1,285) Notes payable less unamortized discount and debt issuance costs 60,440 Less: current maturities, net of unamortized discount and debt issuance costs (60,440) Long-term notes payable, net of current maturities and unamortized discount and debt issuance costs $ —

Leases (Tables)

Leases (Tables)	9 Months Ended
	Sep. 30, 2020
Leases [Abstract]
Schedule of lease cost	Supplemental cash flow and other information related to operating leases was as follows: September 30, September 30, Weighted Average Remaining Lease Term (in years) 3.1 3.9 Weighted Average Discount Rate 6.7% 6.5% Cash paid for amounts included in the measurement of operating lease liabilities $2.2 million $2.7 million
Schedule of maturities of lease liabilities	The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2020 (in thousands): Year Ending December 31, Amount Remainder of 2020 842 2021 2,401 2022 1,700 2023 578 2024 585 Thereafter 398 Total undiscounted cash flows $ 6,504 Less imputed interest $ (652) Present value of lease liabilities $ 5,852

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 30, 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 nine months ended September 30, 2020: Outstanding Weighted Weighted Aggregate Outstanding at December 31, 2019 1,991,166 $ 10.06 2.81 $ — Granted — — — Forfeited (163,605) 7.48 — Exercised — — — Outstanding at September 30, 2020 1,827,561 $ 10.29 2.19 $ — Vested and exercisable at September 30, 2020 1,827,561 $ 10.29 2.19 $ —
Schedule of restricted stock activity	The following table summarizes restricted stock unit and performance stock unit activity for the nine months ended September 30, 2020: Number of Awards Weighted Outstanding at December 31, 2019 3,254,254 $ 2.12 Granted 2,804,479 0.64 Forfeited (158,783) 2.18 Vested and converted to shares, net of units withheld for taxes (835,073) 2.02 Units withheld for taxes (318,481) 2.02 Outstanding at September 30, 2020 4,746,396 $ 1.27 Expected to vest at September 30, 2020 4,516,968 $ 1.22

Net Income (Loss) per Share (Ta

Net Income (Loss) per Share (Tables)	9 Months Ended
	Sep. 30, 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 Nine Months Ended 2020 2019 2020 2019 Weighted average shares outstanding – basic 54,684 53,665 54,299 53,366 Dilutive effect of stock options 26 — — — Weighted average shares outstanding – diluted 54,710 53,665 54,299 53,366

Organization and Description _4

Organization and Description of Business - Narrative (Details) $ in Thousands	Mar. 27, 2020USD ($)employee	Sep. 30, 2020USD ($)	Sep. 30, 2019USD ($)	Sep. 30, 2020USD ($)segment	Sep. 30, 2019USD ($)	Dec. 31, 2019USD ($)
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of operating segments | segment				1
Net income (loss)		$ 1,974	$ (8,070)	$ (17,709)	$ (22,958)
Net cash provided by operating activities				17,992	(13,376)
Number of employees furloughed | employee	500
Cash savings, remainder of year	$ 3,000
Estimated liability for appeals		1,033		1,033		$ 1,018
Allowance for doubtful accounts		21		21		237
Contract assets		2,862		2,862		1,339
Deferred revenue		1,062		1,062		83
Prepaid expenses and other current assets		2,846		2,846		3,329
Prepaid expense and other assets, prepaid software licenses and maintenance agreement		2,000		2,000		2,200
Prepaid expense and other assets, prepaid insurance		100		100		700
Prepaid expense		700		700		400
Goodwill		47,372		47,372		74,372
Goodwill, impairment charges		0	$ 0	27,000	$ 0
Accrued liabilities, current		1,900		1,900		2,200
Accrued settlement costs		1,600		1,600
Premium insurance financing payables		300		300		600
Accrued subcontractor fees, current						300
Workers' compensation liability, incurred		400		400		300
ROU assets		4,948		4,948		$ 6,834
Lease liabilities		$ 5,852		$ 5,852
Tax Year 2013
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Amended tax refund	500
Additional amended tax refund	2,400
Tax Year 2014
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Amended tax refund	$ 3,100

Organization and Description _5

Organization and Description of Business - Disaggregated Revenue by Category (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Total Revenues	$ 36,228	$ 35,903	$ 115,901	$ 106,609
Healthcare
Disaggregation of Revenue [Line Items]
Total Revenues	17,566	10,757	49,682	29,040
Recovery
Disaggregation of Revenue [Line Items]
Total Revenues	15,443	20,936	55,876	64,418
Customer Care / Outsourced Services
Disaggregation of Revenue [Line Items]
Total Revenues	$ 3,219	$ 4,210	$ 10,343	$ 13,151

Property, Equipment, and Leas_3

Property, Equipment, and Leasehold Improvements - Summary (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	$ 95,560	$ 95,390
Less accumulated depreciation and amortization	(77,913)	(76,621)
Property, equipment and leasehold improvements, net	17,647	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	8,085	8,124
Furniture and equipment
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	6,132	6,257
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	$ 79,400	$ 79,066

Property, Equipment, and Leas_4

Property, Equipment, and Leasehold Improvements - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense of property, equipment and leasehold improvements	$ 1.2	$ 2.1	$ 3.9	$ 6.5

Credit Agreement - Narrative (D

Credit Agreement - Narrative (Details)	Jun. 30, 2017USD ($)extension_period$ / sharesshares	Jun. 30, 2020	Sep. 30, 2020USD ($)	Aug. 30, 2020USD ($)	Dec. 31, 2019	Sep. 30, 2019USD ($)	Aug. 31, 2018USD ($)	Aug. 07, 2017USD ($)
Line of Credit Facility [Line Items]
Issuance costs	$ 600,000
New Credit Agreement
Line of Credit Facility [Line Items]
Floor rate (as a percent)			1.00%
Annual interest rate			8.00%		11.80%
Periodic payment of principal (as a percent)			5.00%
Total debt to EBITDA ratio		6
Warrants issued (in 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 (in 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 (in 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 (in 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			$ 61,725,000
Maximum borrowing capacity under line of credit				$ 15,000,000		$ 25,000,000	$ 25,000,000	$ 15,000,000

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, 2019$ / shares	Aug. 31, 2019USD ($)$ / sharesshares	May 31, 2019USD ($)$ / sharesshares	Apr. 30, 2019USD ($)$ / sharesshares	Oct. 31, 2018USD ($)$ / sharesshares	Aug. 31, 2017USD ($)$ / sharesshares	Dec. 31, 2019USD ($)$ / 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	463,599	386,333	309,066	3,863,326	386,333
Relative fair value of each warrant | $		$ 0.2	$ 0.4	$ 0.4	$ 0.2	$ 3.3	$ 0.2
Volatility
Debt Instrument [Line Items]
Warrants and rights outstanding, measurement input		0.675	0.575	0.575	0.550	0.500	0.675
Risk-free interest rate
Debt Instrument [Line Items]
Warrants and rights outstanding, measurement input		0.0153	0.0215	0.0231	0.0301	0.0183	0.0160
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	Sep. 30, 2020USD ($)
Debt Disclosure [Abstract]
Less: unamortized discount and debt issuance costs	$ (1,285)
Notes payable less unamortized discount and debt issuance costs	60,440
Less: current maturities, net of unamortized discount and debt issuance costs	(60,440)
Long-term notes payable, net of current maturities and unamortized discount and debt issuance costs	$ 0

Leases - Narrative (Details)

Leases - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Operating lease expense	$ 0.8	$ 0.8	$ 2.3	$ 2.5

Leases - Components of Lease Te

Leases - Components of Lease Term and Discount Rate (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Weighted Average Remaining Lease Term (in years)	3 years 1 month 6 days	3 years 10 months 24 days
Weighted average discount rate (as a percent)	6.70%	6.50%
Cash paid for amounts included in the measurement of operating lease liabilities	$ 2.2	$ 2.7

Leases - Schedule of Maturities

Leases - Schedule of Maturities of Lease Liabilities (Details) $ in Thousands	Sep. 30, 2020USD ($)
Maturities of Lease Liabilities after Adoption of ASC 842
Remainder of 2020	$ 842
2021	2,401
2022	1,700
2023	578
2024	585
Thereafter	398
Total undiscounted cash flows	6,504
Less imputed interest	(652)
Present value of lease liabilities	$ 5,852

Stock-Based Compensation - Narr

Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 2	$ 1.7
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	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Outstanding Options
Balance at beginning of period (in shares)	1,991,166
Granted (in shares)	0
Forfeited (in shares)	(163,605)
Exercised (in shares)	0
Balance at end of period (in shares)	1,827,561	1,991,166
Vested and exercisable (in shares)	1,827,561
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)	7.48
Exercised (USD per share)	0
Balance at end of period (USD per share)	10.29	$ 10.06
Vested or expected to vest (USD per share)	$ 10.29
Weighted average remaining contractual life (Years)
Outstanding	2 years 2 months 8 days	2 years 9 months 21 days
Vested, exercisable, and expected to vest	2 years 2 months 8 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	9 Months Ended
	Sep. 30, 2020$ / sharesshares
Number of Awards
Outstanding at beginning of period (in shares) | shares	3,254,254
Granted (in shares) | shares	2,804,479
Forfeited (in shares) | shares	(158,783)
Vested and converted to shares, net of units withheld for taxes (in shares) | shares	(835,073)
Units withheld for taxes (in shares) | shares	(318,481)
Outstanding at end of period (in shares) | shares	4,746,396
Expected to vest (in shares) | shares	4,516,968
Weighted average grant date fair value per share
Outstanding beginning of period (USD per share) | $ / shares	$ 2.12
Granted (USD per share) | $ / shares	0.64
Forfeited (USD per share) | $ / shares	2.18
Vested and converted to shares, net of units withheld for taxes (USD per share) | $ / shares	2.02
Units withheld for taxes (USD per share) | $ / shares	2.02
Outstanding end of period (USD per share) | $ / shares	1.27
Expected to vest (USD per share) | $ / shares	$ 1.22

Income Taxes - Narrative (Detai

Income Taxes - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Effective income tax rate (as a percent)	25.00%	(2.00%)
CARES Act, income tax expense (benefit)	$ 5.9

Net Income (Loss) per Share - R

Net Income (Loss) per Share - Reconciliation of Basic to Diluted Weighted Average Shares (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share [Abstract]
Weighted average shares outstanding – basic (in shares)	54,684	53,665	54,299	53,366
Dilutive effect of stock options (in shares)	26	0	0	0
Weighted average shares outstanding – diluted (in shares)	54,710	53,665	54,299	53,366