PFMT - Earnings call transcript Q1 2018 | Performant Financial Corporation

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Performant Financial First Quarter 2018 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Richard Zubek, Investor Relations. ahead. go Please

Richard Zubek

Good received Operator. for By you now, company's Thank the afternoon, copy have result. a quarter release of should first you, XXXX everyone. the the earnings

available you on are If Im, Officer; Chief President Executive Jeff Chief a Operating not, copy Officer. Lisa our www.performantcorp.com. Today's have website, speakers Haughton, and and is

These to Before I'd described like financial of risks on made comments including including we in to our some those subject Actual from call. begin, the with today's are may guidance statements and uncertainties, statements. company's those forward-looking the materially the differ the the remind you are results call, described during that SEC. filings

most the reconciled update the to I call forward-looking turn are as table during to on are made based to all expectations. the to new would of circumstances our attached addition, or in company this non-GAAP comparable statements release. forward-looking undertake call discussed any Im. Lisa financial press the measures GAAP revised Lisa? statements and measures In to Also, like over today does now not directly

Lisa Im

you, everyone, Good thank you Rich. joining for our call. Thank us and earnings for afternoon,

find walks packet detailed for the already, our website on that form. If haven't first quarter you through please results financial more our financial the in

will to both to defaulted part loans, defaulted. billion, current XX, This and for given $XXX X.X% of protest. prior. May rate just defaulted that of Department the which at not procurement which awardee. Court and Department and billion another that Department the Managed On the for procurement. Ed From % award Federal on its performance as do eliminate went XXXX, on years to by due unsuccessful of Education federal in terminate for as had services been in protest XXXX, of you stayed the direct Performant These that Court has of in plan announced has rationale XX.X The U.S. to and XXXX would the decision, collection this X, of recovery from been result, student student Department the Department particularly in imply on We substantial XXXX to Department numbers defaulted of and administrative debt student of second convenience the XXXX, managed loan. the the loans and Justice, of billion XX, procurement, changes Education's for Federal U.S. of Recovery, this make of the Department student the the states decided Education's contracts as to over resolution January contracts have collection loans Inc., the direct the Education down [indiscernible] company of As concluded been is to that or in decided XXXX, of Education $XX awarded from September understand XXXX $XX defaulted the their need cancel a X recall, Department since up loans. XX% that bidders the of behalf, Claims. awarded Performant of to loans, XXXX. Department Claims subject Education cancel provide Those this contracts The Education notice notified of has federal

business margins. are with XX% XXXX revenues with excludes of snapshot stay be we provided necessitate guidance entered XXXX million actions because reflects default rates This close taken XXXX, view our to $XXX than said, the for and higher for business, to any going continue will XXXX, earnings details inventory is of a before EBITDA accelerating a as of and long. placements That that to given our which In of QX we clients attributable Performant We were situation vision in award. included prior year large higher of X during inventory includes positive XXXX. routine XX% EV Lending of of is volume Student our This to in $XXX and call. increase existing last an guidance QX reshuffling impact XX% among of recall than vendors, million our their

prior we our QX, reminder, our XXXX. recovery of servicer, Additionally, with subcontractor turn strategic Great million, exclusive and for Since XX% In talk below a the as The transition a entire largely $XX million below to last student as Haughton down Lakes, to million, and year, of over lending Great Great prior to Navient. Lakes of revenue we inventory have Great QX I'd servicing health was the to recovery vendor our year began was contract or the to placements Great loan $X.X the which Lakes is Jeff the loan due for Lakes. recovery Lakes XXXX student $XX.X Lakes of of due about their become worked and contractor bond that, decision portfolio. to $XXX to a terminated like year during we year. contract Great in received other in when million care which markets. Student call prime October With timing termination partner new our placement loan

Jeffrey Haughton

Thanks, Lisa.

way operations our of in approximately MSP geographic our of through year about XXX was versus in of benefit and $X.X XXX% clients Healthcare with increase XXXX, scale the contract Our in million, the excluding reserve new XXXX. expansion under our employees. our by CRC last began healthcare launch We region of totaled CMS mid-February targeted of X/X QX which MSP QX employees revenues growth of driven represent contract. contract reaching versus currently recovery the XX commercial for a the released, are the

financial just was under the results a for program, revenues In were terms our month which QX, of just for of $XXX,XXX. March, MSP basically

and our the stated of that I from for MSP the While early, and this size from those annually. initial comments to reiterate range program, sizable approximately fiscal Medicaid about contractor, results quarter Along in CRC the which confident Most annual Medicare the $XX recovery million represent of expectation which which MSP million costs have program, last over continued would costs that these years a Performant. regarding now Centers include is $XX still for will are progress the to and the opportunity. published our excited we're administrative last paid be long-term lines, potential fees X over

for In which up care addition program. benefits to ramp we're Medicaid coordination commercial large the of the also continuing to of health MSP program, several recovery programs, our entail

Although become those back material half the this year. in revenues of more will

$XXX,XXX, million $X newer QX and impacts For XXXX, commercial due ordinary up were or increase of XX% course timing recoveries sequentially our recognition, revenues client programs. particularly of to but related $X.X down revenue on an care million health year-over-year, to

and CMS Recovery X work during XXXX. the under Region contracts our began we On X QX of Audit programs,

Region are of excluding growing, RAC RAC Although the by old release CMS's the during revenues liability claims for totaled measured and pace revenues, scaling impacted XXXX. QX $XXX,XXX benefit of reserve RAC program. the A volume of

year X are revenues with million for line of these We in to our $X estimate full be targeting to XXXX regions million. the $X

at liability million old released and As added our expired and Region to by RAC the the of respectively. $XX.X remaining January, $XX.X end which revenue reserves, million, EBITDA we A contract

awarded our from are which the delayed new in nice revenue healthcare Department works category. new pivot last treasury category, we across was year. clients growth been seeing contract our overall new toward exception and we revenue recovery Finally, Treasury implementing platform. The has as look launch contract, for this This is we at other X a and technology

placement a contract, we new have the under working in X recovery old inventory are not we While currently received for months. treasury

new able treasury revenue to this The of new recapture should contract in $XXX,XXX versus of As been of a the launch $X contract year. result, versus that start couple equaled revenue with $XXX,XXX be revenue which prior total in growth and had aside revenues months. year. was include last that of have of We $X.X old estimate the the areas flat of contract expected category in our is in the other other would to this been category from which approximately is care increase new delayed as QX the view in the QX XXXX. $X.X this category treasury customer We the higher, if treasury operation, The million, our generated next down million million versus an contract we contract.

state In recovery contracts IRS by tax addition, grew and other $X.X last year. our QX million over

in million revenue to category I'll to XXXX back it on previously growth our drive Lisa. provided revenues. of guidance this $XX overall expect in that, to We based $XX million turn With of

Lisa Im

to excluding of $X.X year expenses expenses were Touching million A related million impact Region on $X closeout, our operating RAC of Jeff. by above prior contract million of CMS the $XX.X X%. expenses, or QX Thanks,

were between in about If require contracts These expenses and Region year in estimate revenues $XX for we CMS QX on investment million, call, the related which subcontractors million old $XX million. total front. include expenses our were to expectations million closeout, line served includes RAC in last large As investments who we and $X were that with discussed cost of investments adjustments A contract. $XX.X contract total expenses up our several

in earnings revenue which will ramp-up MSP our to year, despite expected continue year. including being As It positive this last the EBITDA CRC increase contract, to a we is our the this significant have contract. on be contracts, care mentioned we health investment impact call, and build and a a

achieving weeks strong of represents work $XXX,XXX results will health XXXX mentioned, successfully QX training depend we headcount at X/X hiring, As of and revenue total employees. care X on engaging of in about

will visibility into ramp-up process. of the the months, much have we next few full better timing Over the

the the contracts part QX, back expect continue the of the the these in and We in of and that the will greater investment investing first balance of year. drive to expect year ramping year, half for revenues particularly

seems momentum towards QX, to back lumpy, healthcare year. at to move we these the commercial care continue the a half although in of bit results light revenues health we the the As see revenue look and is work still for required

for MSP the and we in and only With represent total optimistic million, potential be between the EBITDA range executing we with the of termination that this mentioned, range the we contract Adjusted have ramp. Region due year. remain of the reiterate remains associated build million completed, $XXX have MSP broad We on excluding we and headcount million. CRC momentum of guidance $XXX total and cautiously full our a to hired is in believe need prior just X/X to final contracts health the we the million guidance health significant both A full revenues provided we guidance March, have CRC This care $X that will for contract. about will really revenues $X XXXX revenue of this CMS start-up. commercial care As QX range

I'd our to Our be of quality to that perform. through analytics, value foundation by client. that through dollars competitors actual with strong and enhance clients to based unique reputation them. results. innovative picture client-centric ourselves are value to for up proposition from a work financial distinguish recovery on our the care our of call We With tailored and continues to that, We the like the for we questions. And innovation, programs we open the client and compliance add

Operator

[Operator Instructions].

Tarkan Our comes question first Michael of Compass Point. from

Michael Tarkan

regarding as you Education. to the here? they're Department they what direction their additional It with them of Have from color crew any collectors or content from Just and received just incumbents. sounds go existing like may

if into a kind thought they color or bring any of think a there's there? for you Just there potential it could if wondering is just reprocurement treasury, that

Lisa Im

that pretty can heard XXXX defaulted Education point where from a dramatic haven't as continue -- to call, which, that access probably Department really dollars which, in the just would the reduction as said published into we know, program substantially, anything the the by to again, are point of old from coincides the contracts. Department recovery XXXX and with numbers of borrowers end XXXX, and really you of But and reductions Education. unrestricted also a to volumes, the Mike, I are increase as you

hard as performance-based along I heard So I less but a from at believe organization, what going Department also to plug we to be have do probably are because 'XX the held you think not standard will oversight. Education is just a know, rate. XXXX, they that of the them, to anything it's recovery than that are think with they congressional

what at actually XX-day to that sure don't to action, But suffice sort some will think they there action has they to portfolio. I this not I I'm of So do. a address think plan administrative be

Michael Tarkan

question, the with doing who think subcontractor that with a go Okay. we that's potentially there are mean, as expenses do then abilities is associated is secondary ability assuming their case, they back. I as are contract that -- to Do you -- currently the it a coming you that work? some are don't and incumbents for their you contract? right, serve And those carrying have --

Lisa Im

absolutely. efforts. to to Jeff? excess And The let question is we I'm we question, that have to intend your been first certainly With question. we those ramp carrying answer respect actually second going as are up answer Jeff cost, to and Haughton the

Jeffrey Haughton

Yes, wanted wouldn't overly I end we there invested to cost view is the We some them Mike, old before we significantly. modest watched significant there, as out. process through play the see as

I So are there's visibility and the would making reprioritize up. and on the just it for of the expenses some, near will items but it's revenues have we just modest that say pretty site means elsewhere, we frankly, we some

Michael Tarkan

is associated there position Okay. timing that? issues The cash moved bit with little a down sequentially,

Lisa Im

some just contracts mentioned. result in of as Mike, anticipate increasing Yes, investment we so these cash reduction in we our a as of did a

we've working that our local to a bit that on with organizations. There's Lakes areas is portfolio with the have to over clients of logistics of been moved Great Navient. One manage the we

we around. come So that seeing are back

think as we of that So over we the back the out quarters our will next be in expected. actually cash of range we kind look few position,

Michael Tarkan

Okay.

should saying? expect back pick sequentially, up then we So you're what is to it

Lisa Im

have kinds would everyone as just that goes work to as through. as transitions, everything these you not with And we Yes, know smoothly like. of

will and optimistic that it, some -- monitoring. you few can cautiously definitely we working get to we we see on we that in are it believe itself seeing fixed So will without that the we're we're are fix we just going next that But constant improvement months. -- we tell

Jeffrey Haughton

at the balance the accounts of up pick sheet. end quarter [Indiscernible] receivable the on

Michael Tarkan

mode, pretty you. out look months being be I because and so the me this as I'm versus valuable yourselves in the been investment alternatives, entity view Got still which have you're needs in considering Yes, you is, guess, strategic kind situation question you yes. terms you little to sense Last an that XX to you flexibility from makes invested of months, want? a again, over wondering in grow. of contracts fluid, has the guys you bit next just how give should is or independent Ed which some XX way

Lisa Im

our strategy continue will and that should And discussion. Board answer Yes, pretty at that asked Mike, Board the you've -- constantly discussing company. which what and a be actually question the for the continually remains are we level, before as right for is have consistent, topic we and to

we'll but outcome to monitor situation, shareholders. know, to what's So as company you continue the have for consider the strategic we the and best

Operator

from comes Our question next of Hogan William Blair. Brian

Brian Hogan

looking kind give more it the as out, and step they the just you MSP of think I least. and X rate after ramp should there -- from get really run XX and, quarterly of is said margin what's the On the of paid that staff XX contract, month understand the X just that ramp? target you obviously, by that we what really How ramp, to like historically at revenues. How -- the you $X.X up multiplied is up you take to and million the of

Jeffrey Haughton

Yes, so...

Lisa Im

Yes, go ahead, Jeff.

Jeffrey Haughton

sorry, I'm Lisa.

I it. cases. Yes, work a full would the that. get how initially under quarters transition belt operations deals worth in you going we're is so you see these think of way does Here work contract can certainly, about the pickup The is from our to

some in amount of started we cases contract. were these took and were So are when over the that completion

see cases working been cases. working some timely building this way, agreements cases cases new in process service those own. transition the will and our we're then order with and that's we need we And make to have doing so time, sure we get you'll happening going And that we've level to Over a be in been CMS be there's to those certainly, start that's meet And on will to completed very is largely effectively. what quarter. those

to this QX, ultimately our transition end an see being full that they you we're people working point see So larger, the cases. in My that of pickup to showing we're time to rates going But XXX new bit more it's in reflective towards are a from organization back revenue of the revenues revenues going cases cases that this. run also and of QX. little year, the having transition new get will on certainly perspective a MSP a in

dip So $XXX,XXX initial in I you but the we're going in transition to certainly QX, QX, process. definitely of see don't the is that through mean And to side. to this going at than year growth is in imply greater that you're back be working half going see some the

that's of not kind it's linear blends So how together. the mix but perfectly

Brian Hogan

Obviously, healthcare, think on and of it back can express kind you guess, health the thought but little XQ to staying what going be of pipeline there there, ramp? I outline lumpy thoughts taken shifting bit you on there, can of I step should commercial. care little quarter-over-quarter, cadence but Yes. commercial a we had nice And a your a in in but

Jeffrey Haughton

Sure. It's again. Jeff,

then that some about share recognition you're impact, of reviewed that look we say businesses, inventory expand and with little I would we've programs. back will is you we revenue revenue see. months, commercial the amount as the a will start got newer that recovery there think and timing second what a those recognition at X business, of kind certain that's going seeing the of bit audits programs recovery you you what of claims in programs As work those work, just commercial to from and

we When linear. timing little the comes be in again, there's it revenue, being, it's when when the and differences. to look not about at a inventory just going we generates that the as think program, new perfectly the that little pint lumpiness the so bit of think of working drive And When that you of in at look a ahead in us recovery we're you that what right quarter. about moving programs overall as and first trajectory opportunity bit particular,

all it's we like as together XXXX. that function those know look playing what throughout going that's about are So revenues. Don't the look of factors to a of those timing

Brian Hogan

the profitability And Lakes How to Great you the with subcontract? contract. of prior right. the compare shifting All contracts would exclusive

Lisa Im

take Jeff, would you question like that also? to

Jeffrey Haughton

similar and same would it's effectively terms we it's are getting, I the that before in just we pretty in the we're because consistent. different it's say know what size profitability very would inventory We Sure. of way. I just say working to

business as we view I taken would from it's changes, account some overall, that So overly are I the time, say pricing we've -- into about. wouldn't There being working what [indiscernible]. different largely over consist but

Lisa Im

to percentage all then And on add a higher this Great managing to managing when portfolio might we Brian, mathematical the we're pure we business, just mean, fees, had so be in not were from better should margin. margin the which, almost subcontractors, contract just we through subcontractors you just that, recall, I a -- Lakes a because There standpoint. was straight because of margin simply flow a as on whole

Jeffrey Haughton

My Yes, at. what [indiscernible] specifically subcontractors working versus on working that's focused the the we're right. business

Brian Hogan

how here then And we we placements about or reasonable from saw in the quarter Great the which second should Sure. Lakes think is that...

Lisa Im

Jeff, also? you do question to take that want

Jeffrey Haughton

Sure. But Yes, now, look our think to at. it's look share. to would increase we performance, now I to be then volume over way hopefully right the I that's think, right market it time and the for for that's our at able

Brian Hogan

in quick going delayed to start of like back contract doing? treasury up are technology launch run months? couple And government's you you And How implementation. were a you that's that pretty the what rate a is the referred you to of All right. can to then to get confident

Jeffrey Haughton

some would they've always so although gets right, this time. question. there's through a I Yes, been that working further, say risk, delayed it's for great

that. So is to sure, some there risk

specific of expecting. months I of programs given we that's has to take we're I certainly fair can in the But treasury X terms and X what think ways several us. there's right up timetable months think that that other back it's farther to say now risk. on some next the is And

we're So out. that something we're of watching see But giving a that's there. we'll to and us bit cushion plays closely definitely how

Brian Hogan

decision a anyway, would obviously, the I thoughts as And disappointed taxpayer, I then lenders redid in around being you to on But know covenants. just very cancel of contracts. I debt Education's mean the covenants. to shift any your sure understand a and Right. covenants, concerns debt I XXXX debt in guess, debt your I'm year ramp up that? obviously Department looser much

Lisa Im

you that Jeff, take like would also? question to

Jeffrey Haughton

from concerns in of have of how whatsoever covenants about of No, certainly this that about lender, overall quarter case in which CMS our And just, no Sure. then our think covenants. too. partner part in helps unwind terms EBITDA payable it's of our both [indiscernible] Obviously of results. the terms business structured, is forecasted the how perspective, this we an we in with ours the

So forward. issues going we our don't anticipate with any covenants

allows We grow in invest grow also us an and with flexibility if business, gives look have sure to increase value. we a our and us can it to dialogue that invest how our make to business them some longer-term want we we

no So concern. overall,

Operator

[Operator Im I over question-and-answer concludes Lisa the Mr. to to session. This would closing remarks. Instructions]. conference turn any the like for now back

Lisa Im

joining Thank for today. Thank you very much you. us

We of about QX, excited a rate the we are see and see steady-state up. QX, end look have does although the we QX contracts into strong the we as path and we QX very particularly a growth towards that And, run require as basis. on strong the revenue to to are roll it opportunity ramping both investment we

we the Thank this in look ahead. continuing forward joining So much quarters today. dialogue to us you for so

Operator

This call. concludes today's conference

for pleasant have and you participating Thank lines. your disconnect may You day. a

Performant Financial (PFMT) 13 May 182018 Q1 Earnings call transcript