PFMT - Earnings call transcript Q2 2018 | Performant Healthcare, Inc.

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Operator

Greetings, and welcome to Performant Financial Corp Second Quarter 2018 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Richard Zubek, with Investor Relations.

Richard Zubek

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

you Officer. website. copy Relations a and Jeff Im, have on and Officer; If Investor Chief President the Operating Chief is Executive portion speakers Today's available our Haughton, are Lisa of not,

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

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

Jeffrey Haughton

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

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

Premier We as lender. to from a agreement our ECMC acquire our also the one clients America slide today and to have Group, posted we Premier North announced deck to related referred Credit largest of of

the supports diversification. about excited as believe and and our are We growth attractive transaction is of we it Premier strategy financial

of margins plus while transaction goal enhances $XXX our in revenues million XX% the strategic with value plus supporting Importantly, performance XXXX. of

detailed our to posted Slide for transaction X. QX Before Referencing more there to transaction three the we discuss components on are the as overall in slide the discuss we would on detail. results like deck website, our

Premier complementary state to for client months services we government, of highly Premier, approximately XX% of of clients. mix and performance and ended come healthcare Premier's a from approximately acquiring across the which diversified XXXX. commercial First, recovery loan $XX is it's are XX July revenues generated loan, million clients. municipal trailing is provider and student non-student revenues

Our care located and are dedicated Indianapolis consumer Nashville. Premier's compliant focus ethical philosophies and with aligned employees in completely XXX of and client-centric

and Additional Page agreement business on the materials, student performance Page grow in materials. current is where ECMC summarized ECMC's primary loan creating Premier our business student as our Premier's detail of with will loan future portfolios. is recovery the to managed the ECMC multi-year their service regarding increase of provider recovery X transaction with on opportunities X component combined Continuing second meaningful the they

extensions with that transaction one-year one-year XXXX. The maturity term performance third two credit which XXXX amendment extension to while out agreement extend of out if a retaining our component of the of the would exercised the ECMC beneficial August the initial is to option maturity includes at to

amendment to and us the a growth addition, borrowing on execute of flexibility total million $XX more expansion additional if as includes our alternatives. will give $XX we strategic In needed million which our capacity

three transaction these ECMC million Page closing. shares the performance components, at for presentation, in receive to of will Moving exchange X X

there is relationship. addition, ECMC achieving In the and is based expanded out revenues through earn on Premier a X-year that

of potential X earn consideration reflecting out X.X% million shares share shares. upfront total approximately represents performance to of out earn additional to XXX% currently approximately over the expect deliver achievement We The outstanding X ECMC assuming targets. the years and

the providing accelerates by growth revenue the and there relationship stream with for to numerous portfolios in generated student an enhances a largest clients. strategy aggregator the opportunity Turning The managers to in highly is meaningful recovery diversified in transaction. while benefit Page this one and center state X expanding student of additional our portfolios, be the and Premier footprint. of and our clients value healthcare which meaningful complementary loan is of municipal adds client There of future. loan to revenue and expanded diversifying are well government is and services commercial positioned call materials; significant ECMC acquisition

vendor to our We them larger to credit to ECMC Also future. honored in serving be partner extending are a and forward structure. the while the borrowing trusted our capacity a maturity look amended expands agreement the in of capacity capital

financially success as structure of to ECMC the transaction a is Finally, There the alignment Premier earn objectives support which XX% performance of represents out value. is an through is deal incented strong the attractive. estimated and

while of X.X% In ECMC addition, of shares guidance to current estimated shares. Premier's performance be revenue contribution revenue XX% delivered outstanding of midpoint our expected XXXX the to approximately the represents approximately represents

efficiencies million to recovery $XXX,XXX new relationship And materials to As in transaction additional close. expanded won't investment reconciliation EBITDA but the materials, $XX the from on website, to impact for the million our that is until revenues transaction provide EBITDA meaningful the EBITDA $X the required we reducing $X revenues in XXXX there XXXX EBITDA we to assuming shown appendix adjusted though the by of to deliver of of XXXX. also on million million. $X expect transaction, of both, that $XXX,XXX range September support of XXXX realization of cost from a to adjusted of to Page transaction business ECMC revenues timing million adjusted $X generate in in the and $XX the million of the expect XXXX the while X reflects

million to the the expect range, $X per in rate $XX to transaction run we million and XXXX, Beyond year. to of revenues million adjusted EBITDA $XX deliver million $X.X

after the of and any answer QX session to transaction during happy are results. review our the Q&A about questions We

our last the second $XXX business Lakes are million QX lending of million QX among routine in for it of XXXX during to vendors, XXXX. than QX That high the management $XXX volume earnings recall due a number. was our placements also than inventory our moving includes due placements QX student to also it and quarter; increase $XXX attributable portfolio clients call. in for of a year large results loss is on Great and QX two was the million inventory So reshuffling prior which included existing to of guidance less late lower contract by artificially to accelerating given an

become QX in million, build Great MSPC $XX of decline is was momentum as commercial Offsetting million line C-contract contracts. XX.X% and ramping which As due last portfolio. we Great decision the of transition Great Lakes. was revenues Great year our million loan Since below million across vendor million prior In [ph] student contractor million Lakes. $XXX $XXX,XXX, QX, to a our exclusive largely and Lakes year, of of The reminder, began for $X.X as placement revenues XXXX. provided Lake in servicing or have contract a to inventory to a The Lakes revenue which Great Great servicer, we received in is $XX our the entire worked recovery Student both in down from continue partner bundle healthcare a to recovery year with new in Lakes, anticipated or around decrease operations due recovery strategic Navient. Great of guidance loan $XX their the and Lakes in we with sub-contractor terminated October loan recovery, $XX.X prime to in termination lending student contract previously student we XXXX. when below and government for prior to our our loan we

our the $X.X just For this under period QX contract. revenues for were million

$XXX,XXX For commercial XXXX, QX year-over-year, up $XXX,XXX of sequentially. revenues million $X.X and our healthcare were or up XX%

more benefits coordination our will backhalf programs We of of become entail continue which we also this although revenues program healthcare to commercial the ramp recovery expect in material large up the of Medicaid year. several for those

result were during million last $X.X of the first of revenues slowness Recovery CMS for and QX. internal contracts XXXX. QX other the scaling of Region programs, CMS's program in a On versus And were volume under the million million X Due during some as of year and to up enhancements, up claims began X technology the we $X.X RAC sequentially. category; Audit and year revenues $XXX,XXX up of our audits lower half revenue the $X.X work and volume a

$X care operations was generated $X.X QX customer prior versus $X.X revenues sequentially. million year which million Our up and of million

the from In that up treasury which million has soon. contract Again, of These start-up about reflects at million, by been treasury but $X increases are which IRS target on-growth as addition, $X.X growth recovery timing think contract. were which from tax other business lost year. state contract, prior our quarters new other to expect of the contracts delayed versus miss a versus several revenue this revenue our we and delay enough line begin offset we to is

Lisa. it So I to with will turn that, over

Lisa Im

fees collection ramp The larger up several commensurate to X%. Thanks, of related $X.X primarily which $XX.X partially due investment Lakes to were by Great and revenue or Expenses expenses in year in contracts. below offset decrease due third-party large salaries Jeff. prior decrease was by to XXXX with in were million million

discussed several QX million. we year total and last front. cost in line of expenses require about As investment between $X our in on for were a contracts investment our large million with investment These expectations call, in estimate $XX

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

QX which will and contract continue During we grow QX, was revenue QX. million this to during $X.X from believe

still healthcare are and ramping our strong up XXXX on will engaging results on successfully We employees. achieving and hiring, contract this training depend

QX. have better ramp-up process through push timing much We as full the we the will of visibility into

have revenues year. include these the expect expect provided full additional cautiously will the and adjusting for will which but of investing completed, expense will QX of significant particularly be a full EBITDA and the new build year momentum Premier a the the We continue loss, half for and a that We guidance in balance the which acquisition contracts be year to the is an drive in have our range guidance in in for year. we impact to greater student QX first of ramping that remain revenue With but small investment of we XXXX positive of in XXXX. expected to optimistic the the an the in impact backhalf loan investment have and QX of healthcare year, positive total are backhalf contract

$XXX is impact $XX.X to and guidance the revenue service. We A updated Region that is guidance trust million million in to of the we revenue potential open and healthcare $X.X both, the commercial A expenses Excluding by for is CMS MSP million contract, termination revenue to and to for million $XXX executing on million, EBITDA the million, forward million. guidance up million, Performant million, including $XXX we and terminated by prior in broad the range to the the the EBITDA which $XX of to like thank $XX remains range. of $XX.X that, million, start-up. contract With the Adjusted range $X call a impacted in XXXX $X contracts Region our have CMS year between impact full look adjusted by $XXX their questions. EBITDA This our the for Premier narrow million due to family and I'd ECMC join for having the

Operator

from Our Instructions] is question Point. Michael Tarkan [Operator with Compass first

Michael Tarkan

small A with side; sub-contractor? they with the Premier. Do whether those are the that work it's work any Do or they [ph]? student a under two the any business as the AD XXXX on of other operating collection few currently on first lending agencies, of

Jeffrey Haughton

there as Yes, well. they have growing, have new that a compliments relationship and that is do. there we relationships They the and

Michael Tarkan

-- bit? Can little a you lending new this of just can you opportunity, on elaborate touch on kind student that mentioned you

Jeffrey Haughton

to we've that small -- an again, business the It's have developed portfolio relationship added that additional overtime. we

of contract it's while to undecided work So unrestricted is way still for a us I the this in term Department guess. -- Education business

Michael Tarkan

of kind that a of relationship that are just department volume, color sub-contractor, more walk little sort volume? a through any you bit us Just of is new doing mentioned what of on them as that; there. You kind and of the Navient with legacy kind of you is work education sort for can

Lisa Im

Great think talked having receiving we transition is this Navient over actually So, management. sub-contract that I Navient Great a we're Lakes the so the the platform, under last their Lakes year when to servicing with about business Navient;

Michael Tarkan

commercial in outlook I taking guess little anything a bit is or The commercial up? just there delayed, business to ramp little longer it's -- bit heard changed I it's your a healthcare;

Jeffrey Haughton

that just well has that the of it's delayed, as the and we to start goes changed It outlook new I wouldn't say along, we've into on everything you revenue contracts call we've anything as that some reclamation backhalf QX really would audit don't see there. launched said as the as in, it's the the I newer we list of Medicaid come timing in where that loaded in, of some it, inventory the and side. contracts see XXXX in recognition that come additional is timing commercial some given

is So I it been and we've has changed, wouldn't focusing a opportunities on anything characterize lot foreheads that of there happen. it as down, making executing new on

Michael Tarkan

you -- business, The think kind with I talked curious IRS contract, where another stands just just of one in about that this quarter? connection

Jeffrey Haughton

regards to With say is how feel think the I IRS program, in ramped contract; there if step up. growth we a we good take is look, the good the we about back program

momentum total in of the and the we what opportunity, be. we think opportunity term haven't talk that that expect we what specifically we as for good and about the feel about size As the revenue in could contract of specifics about in about in year terms IRS, on program we but this longer talked

Lisa Im

it's And past, that of the was -- working, agency say, in service were IRS this itself contract, a was ensure which in rolling accordance spot is payers what make to cared Mike vendors on delinquent with that that just were but that methodical executed ramp that the to objective important the sure way taxes also program payers program sure providing the as cautious that objectives because the paying I we've making in for to the of cautious is. in consistent the them their the out talked is with would up in been the tax everything it's get pretty way IRS contract to quality those obviously tax was has and

-- on think That's the what that look we we're sort objective thinking. we think said, IRS to we in as size black an of believe the the now is probably that IRS's of as QX into we part. that there program with is head forward, So increase is and the we the what

Michael Tarkan

out run squeeze here does of that's And sort point to rate? for big EBITDA for to as at -- run it what expense that you're kind a the of like coming long get side how take there rationalize The well? in economics? with rate it the of projecting part. to the kind that more most Is then, there talk looks the Premier, on plan expenses connection to that you XXXX Is

Jeffrey Haughton

our cost efficiencies, as info-set how [ph]. and Yes, to is years you we've IT think with they certainly this for is business other, that there combining theirs compliance complement a be and is have [ph], lot transaction there and about there [indiscernible] that things each of and meet certainly done scale,

got positive. certainly there efficiencies and think very those what could scale strong for a I So think certainly so that's we've is here I be, feel

that's to those revenue $XX -- we to our integrate platform [ph]. with about adjusted rate how and in I them basically of it's run that don't run XXXX As we the growth gains drive look But we what together, answer growth -- businesses $XX the take of there guidance, think still us, and X numbers very we million to some both talk ability actually productivity from with into there. platform, beyond are after platform out about that we and we we think things and have, as question at that exclusively best about that's practices like certainly of or of feel not specifically, account the think see rate, X.X good think the certainly opportunities look the to in we -- best as of I that get that's EBITDA XXXX-XXXX to your believe they we million practices saying; from that

Lisa Im

point, look locations, at most at how the both aggressive and current cost our we're and the understanding Indianapolis tip Performant locations I the we and both, between we as at than say would but structures what forward Premier. think look we're of be opportunity look kind of the how And efficient terms and about in at still the cautious -- be are which way in very we let's this maximize in it Nashville the cost at of we businesses look as of in we say, we let's certainly iceberg organizations, the and we at exist synergies

around look of we're as well -- really the try cost get just rationalizing to way sort arms it to efficiencies and our not something, best overhead a Let's best of production. say Premier the costs, going best for at we're around as and is place figure more that but and out to really the is the use creating practices where who

we're because that businesses but worked at we're the and iceberg organization embrace platform obviously and business on the So, the it opportunity really is the kind tip we have. there think around they eager additional of to we've the

have mentioned, commercial municipal a it's for also on. just state platform loans not to for student which collections As is business in and Jeff well recovery a terrific they're business the working they and but healthcare us practice, decent as as grow fairly

Michael Tarkan

me, for the to the option assuming I'm coupon dates; one then there is that debt would you that for it the you Last and you. say that Thank maturity facility. give just the the option? sounds extend anything up like same have anything -- on

Jeffrey Haughton

we coupons, extended terms for nothing the deal three year, structure, one it by one out in options maturity into the we it, well [ph] as The years, interest pricing the at either, it in past the hasn't new extend terms just has it year keeping initial the we there. we expanded of place. the which so have what a the changed end options are maturity at that, to we're we effectively years initially option that's payback nothing those that rates, So, that ECMC changed year. extend in was by continue changed for The the so terms -- period, same the need of to of the can

Operator

from question Brian Blair. Our with William Hogan next is

Brian Hogan

consider competitor Would Premier will? some you more if you

Jeffrey Haughton

they've they've past could one space good competitors, strong Yes, a lines. and how to been look loan on like and in along overtime, the business, the been to already part of very student business, spaces radar so everything approach over our compliance They in the what far years able the they've you we been them do and clients consider seeing and those the ED a it's consider as the we've -- [ph] competitor. and that would in and their are seen contract, stay-on from other them we're on

we've Now there is what -- terms in yes, we've been with overlap impressed and but well. what done certainly they as pursued of historically

Lisa Im

works not it's as well contracts payer our and nice interesting the side it's agencies we combined Brian, strong do of to a where the and that you side. of just is said really terms we contracts part that as know, provider that it's handful, and business test of the municipalities, that about With as always business there tax municipal with, enough affecting and they a these space great want the is to again, state have work continue in in fairly away particular businesses, we who talk that part of non-overlapping grow in the on know, they as business do while on you are to added and and have easy take all -- and more to platform to healthcare

leveraging path So us really our core or consumer be capability and but grow recovery. a a different care it will in way for

Jeffrey Haughton

we Lisa's we relationships is complement similar, and right. last municipal have the have and to on a thing there some about I state they a is ago and the just point out government side very add; guess moment of that ED And there sub-contracting nice to talked

market to a as important way. to of business clients new so us do really that got nice have scale we've pursue to clients ability us an effective go So in and those are they, together bring and and pretty helps a out a and for combined it in is portfolio the good --

Brian Hogan

mean, I talking what about? or come was process a was ECMC? deal the it does with competitive How the

Jeffrey Haughton

we've thought want Needless say get and and of to that's broadly don't so was I gotten have I time the to -- on opportunity, ECMC mean specifics speaking, had time for in some that was been they made overtime business. get business eye folks. and pursue into -- terms that processor investment the or I time was of our it think discussions with the More to there had an a ago some a have it's us for Yes, and called out right good ECMC's something it it.

Lisa Im

they Brian, And Premier achieving about to scale the company the we like to and of trying as think more with what was and combination available seemed of through what they get growth as been in objective holding growth. Premier. of And terms working their objective a objectives needed their growth, grow investment be and we've to company understand readily through in our that Premier ours know growth; because clearly, objective for ECMC's are,

growth. to felt objective, us to that like Premier so they for the their And combining achieve way best was really with achieve probably Premier growth

we to and so great about how have very and we of for grow. they work discussions deal And of respect those help ECMC engage very that we Premier do the and were in excited can very a happy course,

of of course I honored right it that. think of in to ECMC them -- the just in seems knows just good market and be player it very we choosing objectives, of part it a for the of was So platform; it terms was philosophy, was the players match as -- were and all

Brian Hogan

the shares years prorata five come in? going of does The or incremental to -- the out, how is share course the that over assuming earn be the account

Jeffrey Haughton

and the and deal. targets think converted fixed revenue been a converted they to prior amount; to which price are that meet on of share announcement at has to based those overtime, then I are value get it's shares converted It's the

mechanism. level, high that's a So the

say different a think little I than you prorata. when So,

Brian Hogan

much the incremental is to opportunity; loan and additional tied how The student investment? that investment

Jeffrey Haughton

new us If opportunities excluding you look the Premier? at about [ph] the talking for alone, you're -- staying so

Brian Hogan

right. That's

a as that mentioned have opportunity different [ph]. You

Jeffrey Haughton

piece as sizeable EBITDA a the of relatively we it's look impact say at. would the I

Lisa Im

-- on depending could we're think that $X seen. how somewhere on estimating it up. and ramp sort of the $X based between just estimating million, can between we we've We're million be volumes I quickly

Jeffrey Haughton

then and that you for happens got said, in to what That 'XX. adjust

Brian Hogan

I'm confused that last on little Sorry, statement.

Jeffrey Haughton

least that before like for several student of say, revenue course loan have from it's which you any as contract, get months to at over know the you significant other you invest portion So right, contract the rehabs. to of comes

we period. to called So of guidance terms of million life a of for talked then $X million is million Premier down, that -- and of of this over as in we $ impact What there the in you X as estimating was like impact component -- was to of gave investment some to contract, of million, to we was about, specifically of point making. that think tied was the the fact this that to $XXX,XXX adjustments that that million I Premier EBITDA that were when the $X the $X $X part talking our to was breaking guidance year, about I

Brian Hogan

to wide And true? range low-end midpoint I look as you quite right a execution is contracts the lowered mention high-end Premier; you what you for guidance your heard some or guidance, -- do at you blackout understand and gets of that and on your the but it of I I the looks as slightly, that's like the

Lisa Im

was somewhere guidance our think XXX it sort I original so to XXX XXX, to into of we're bringing between range. just XXX No,

and early seeing still ramping to Jeff's you the for working -- we I what clients were objective we're Medicaid, to strong to reclamation the Brian, to as you about just part our the -- top up know, would but we're as on get quarter our with difference really the work we're point, some we ramping third us think significantly good up end a -- quarter. productivity into -- that is fourth mean, just of Medicare, through a think which lot as very the head [ph], up NSPC also so actually ramped of I know, progress in we're so we we

revenue. really that about of but book And get comes so to the range the able top being also the work only end to not completed

all QX. QX we So as into some Certainly is into get hoping there we slip into can XXXX. of think revenue sort that is that that of about could we're risk rolling what end that QX of of a

Brian Hogan

rate, it And still is what… it's or XX.X% the tax around

Lisa Im

I'm Officer ask to that question answer going Chief to Ian, for our Accounting you.

Ian Johnston

revised expectation For XX%, of XX% in the mainly to full our profitability XXXX the we effective up looking do our XX.X%, future, is state XX%. from our has more rate the range range which about profitability rate XXXX and have year, XX%. structure and as states to but with That in into we're move and subsidiaries our we business XX% full at in with tax for XX% good doing a of the of to

Operator

at I conference turn [Operator for like Instructions]. would There the this are no to to back more questions over management time. closing remarks.

Lisa Im

companies. ECMC we Premier them servicing to excited trust, in thank Performant look We capacity. forward you. very thank to for about and larger Thank We're to of want you the for We being today. family us with a welcoming their

value. our at to to and provide again, in to objective service We And and their the to I with with us, we the of also employees best want their you best clients Premier employees best every us the today. as trust know, thank thank their day. our bringing bringing rest best, them is for you workplace our thank for for want being Performant the to

Operator

conference. concludes Thank you. This today's

time. at And this you You for your may your thank lines disconnect participation.

Performant Healthcare (PHLT) 13 Aug 182018 Q2 Earnings call transcript