PFMT - Earnings call transcript Q3 2019 | Performant Healthcare, Inc.

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Operator

Greetings and welcome to the Performant Financial Corp.

Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to conference like host, to now Mr. would turn over the your I Investor Zubek Relations. Richard of you. Thank

may You sir. begin,

Richard Zubek

for of you, Thank operator, earnings XXXX copy should and By third release result. the everyone. now, good you received have the quarter company’s afternoon, a

have Im, available the If Chief portion Executive not, Investor be will copy Today’s website. Officer. our call a led Relations is you on of by Lisa

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

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

With turn over Lisa? Lisa Im. the now that, like to call I’d to

Lisa Im

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

our already, third form. haven’t you supplements walks website more on find XXXX the through our If quarter that in financial results financial please detailed

in our in achieve to our to demonstrate results and profitability Our the our EBITDA remain third of XX% XXXX. on track internal million successful plans as $XXX on execution revenue quarter margins move goal we back in to long-term

successes and third will QX quarter confident beyond. that the the continue We have we in seen are into

a versus prior of was of prior third line nearly with million in the year EBITDA $XX nearly revenue year to period. up in period. XXXX, $X.X loss million just quarter our over was of Adjusted and QX In reported $X compared loss which of we internal in over a the projections XX% the million,

$X third increase was higher revenues quarter which in quarter of $X third an XX% totals it over $XX of third nearly just CMS prior quarter the in compared related in XX% Healthcare year-over-year. nearly than revenues of XXXX was to in the million, million exceeded Overall period, million year XXXX. the XXXX of

operations quarter healthcare $X to of our the Commercial a last results $X healthcare year. compared revenues the grow year-to-date under in just than third that million are was third nearly for in onetime year-to-date higher were $XX.X apparent, million, in of even XXXX as basis, million XXXX quarter excluding over CMS in XXXX. which recognized is were million to of in our just XXXX reserve $XX revenues after of the XX% accounted On efforts more they the appeals

third recovery the our was revenue Premiere lending, than QX, Treasury was just markets, tax, approximately last quarter well year. which XX% in of student includes higher as under which as million, and $XX IRS Total

Customer Care Services from Lastly, of of the and quarter to our $X was last $X million revenue the million Outsourced year. compared flat when third

related expenses Premiere higher in in reductions QX $XX higher overall prior were $X $XX our expenses million approximately Expense growth growth and the million acquisition period. operation. year headcount healthcare following operations by to offset million than of the of of recovery of in our were over increases

beyond. position make to drive better revenue continuing anticipate to XXXX into us to investments additional We sound and

the guidance we a well that challenges as some are color update slight well quarter of we fourth Finally, as reflect our in decisions QX. our ranges as providing made to some we incremental revenue expectations to on faced XXXX as

become as start and reporting more our In two meaningfully positive we our investments mature contracts the the to quarter, past EBITDA from fourth adjusted benefit we over anticipate years.

issues $XXX $XXX few our identified a behind which healthcare. to $X $XXX expectations. data There decision is that a our business are between from our million. guidance matching guidance line a $XXX But within revenue we a million loss XXXX, we to loss down updating One year of some maintaining million. For was we million, EBITDA lower are of the range our to revenue $X million and million related items to full single are of to

the not not the this identified the first but since is in problem Rather, half but through immediately We’ve also revenue, are that will and reworked recouped the that in with best the any as of it revenue gets being described the revenues million of client correct delayed healthcare XXXX. issue will half it to XXXX. $XX be is revenue as delay with associated believe This we working issue, the impact by second is lost system.

is Another piece to $X rendered revenue that already services for our million yet range be paid. nearly impacting a of payment has

this these that delays EBITDA earlier XXXX. that in the we around But business, going as our a we provides to this which the believe we order fourth is we likely meaningfully in lowered becoming positioned year, range. expenses or made revenue, into offset all be quarter. Recovery payment it was payment of the million we Although, in believe are partially portion a well to confident for maybe $X increasingly operation Moreover, delayed profitable manage

against that we established the goals entering company. the executing XXXX, transformation of are continued We successful

our as a Healthcare, to year We particularly build and the growth, quarter business strategy will XXXX continue beyond we of in want have of $XXX revenue execute anticipate contracts be our longer-term in XX% revenue and margin, with Looking to fourth and the EBITDA margins XXXX, million drive we we believe confidence that investments to that XXXX our contracts. profitable these reiterate client goals respectively. will and revenue in in

call to open like for questions. With that, the up I’d

Operator

Thank [Operator question. a your you. Instructions] question-and-answer conduct we with this session. proceed will Please time, At

Brian Hogan

afternoon. Good

Lisa Im

Hey, Brian.

Brian Hogan

business, was down – is it a Healthcare, quarter-over-quarter, commercial the little on obviously, I year-over-year. of First in I question actually up what’s business? just trends trends But the a – had is data just of slower, I kind the was some of the guess, where the lot think there. kind that healthcare healthcare potential I it the has with was of kind you in issues or just

Lisa Im

That as the in the identified and where with fixed, matching call, one of this quarter. what are particular particular get we’ve data client identified point we is mentioned one issue in with happen that I we which we and Yeah. that business. our think working issue single line will was to But

– we’re we’ll So on it of and all on in were we be healthcare. was doing client commercial this this that back work back we in think the business, that track. delayed particular line But with definitely

Brian Hogan

your discuss pipeline, years? look commercial can does it I look next mean, Okay. business what Can several you over the that what like? healthcare like

Lisa Im

Sure.

want the double-digit range. look particular year-to-date high of And our if another look discussed XXXX you what it’s with we that business fixed our we’ve behind into this sure at this growth with actually, also client, I to into mentioned, right delayed As at it, in growth, we make XXXX. with we line again, which we contract think growth that as some double-digit done strong because just get rate that and a is, we there implementation, pretty is also and

are implementing, these new we’ve contracts been that with clients. So earned we’ve contracts these same

of terms just as isn’t business we’re in much these. that go-get against that as much So, really executing there overall build,

out that this come provide long-term for with across to as base revenues, particular And view these we but line work very we if work business, to delay growth. have have something out, occasionally, really, may – really contracts of a because we’ll some strong we that the sound like, client, we’ll we with

Brian Hogan

is CMS Okay. got there like But Sticking different document execution? the my quarter. X as a within they’ve the contracts reviews? calculations, increased CMS, just anything looks into contract RAC is Healthcare Is anything obviously, had you’ve the it it there Or Or there. there? nice the done really

Lisa Im

It’s just execution. really

However, successful particularly us. with abrasion, respect think been issue. this continue time around, as that we’re with to to they work provider very that We the really optimistic CMS view program being said, which cautiously hasn’t will an with

of of we’ve part making just audits that that enough just So our going. sure execution, is got

pretty so that contract groundwork to continued contract. that we’ve our the into going cautiously see of just XXXX. to conduct we’re optimistic in good well. we audits as laid feel see in terms the we’ll current ability executing more there the increase on we’re also And But against a that But about

Brian Hogan

Okay. does to again quarter I subcontracting just business, subcontract – that any to want and this to the million, the is Recovery down strictly direct? shift include over Or the just that $XXX placements? placements fell

Lisa Im

includes that think the don’t subcontractors. I

to mean I the that Department Of So referring subcontracting the business Education? on you’re the we – have

Brian Hogan

correct. That’s

Lisa Im

Yeah. That it does – not I does mean, those those. exclude not include

Brian Hogan

Okay.

discuss subcontracting So can agency opportunity, I the your guarantee existing I opportunity? to guess, that you compare mean

Lisa Im

Sure.

channel loans made were FFELP you FFELP the July in know, As of since XXXX. – channel no the

the of years. to – think from see we subcontractors, look that will And loan this with subcontracting we meaningful as probably decline to our help defaulted a population, When a we the underserved forward look probably, being actually able be in the The to they’re the So X FFELP of for quality move Education continue Department small in those their can several and to those borrowers. business standpoint, the again, more And sizing next, overall as help best think over that it’s that bit. the we service at at program. business, we quite X we direct the work doing volume quality. going to contractors, we we improve we know not –

the see be borrowers of we’re direct work that small the subcontractor. growing. to continues businesses portfolio. a those and for you in a the service for to loan Education Defaulted there see also to the is pool news need as obviously borrower increasing, well. Department grateful the opportunity We for Obviously, volume So as and defaulted

greater we move standpoint, we a So a sizing think from as this maybe forward. opportunity provides even actually

Brian Hogan

mid the you there. I the sheet. you kind Sure. next sheet other through guess, I the have your left? you Do waivers balance level just discuss your covenant of covenants? the year discuss capacity commentary anticipate you moment? balance do obviously, appreciate And and comfort with can expand can that, the at Shifting much to needing And how to

Lisa Im

Yeah. Sure.

of line our negotiated need the amount credit expansion we for when a we of the a certain last So – year, cash. anticipated

look where also with of and positive flow positive that. feel And we I what earnings with in pretty we terms think, anticipated are EBITDA. future our we comfortable would like

covenant which to comfortable start the the going see into year, we’re the So we to goes profitability. feel as pretty next of relief, call, And mentioned we mid-half on with.

sort into in as see to So profitability. of see we’ve of you a contracts. lot we the fourth investments and as But we expect quarter XXXX, do lot done moving of know, – a

with we are. So we’re pretty this at think we’re I where – point comfortable

Brian Hogan

expenses. Sure and is the me moment last on at for actually one

mix? expenses mentioned here, the of ramping business You flattish Is did a the kind goes be to about you How business. of cutting from there kind going cost decent is we forward? or think as it fixed what – cost/variable going is – of bit Recovery is should a amount little in the it

Lisa Im

to as going continue we’re what have see in think in workforce we expect obviously would I continues high-double-digit, to Healthcare revenue continue there. grow to expect hire and Yeah, we strong expenses is the to growth to to

we’re On seeing shift. the think kind side, is of Recovery I what a

So reduce place, while we’ll one of growth again, as are growth the at areas look we other in see in some our in Recovery, expenses where we in places.

think be flat along it relatively Care And on of be Customer we will expect side, side we with our revenue. flat. the to So course, would Recovery then, that

in overall, think going we growth growth, we I really see think slight I driven it’s Healthcare. by might be the to So but strong just see that

Brian Hogan

Okay, thank time. you for your

Lisa Im

you, Brian. Thank

Operator

LaPointe with comes Please question. with question proceed Investments. Alex your from next Our Adviser

Alex LaPointe

Hi, Lisa.

Lisa Im

Hi, Alex.

Alex LaPointe

hi, my is – is so question first So my question guidance. around first

delays, how has there sort there forecasted. I I in been that? are the burn. think Can just guidance, going up how even since just a gave hit been has the confident guidance come roadmap hasn’t of maybe growth, or you’re been cleared cash that? don’t a It And to close. And some as you you me show exactly guess, you of couple serious I recently XXXX see to

Lisa Im

on business. show we a can roadmap this see call. growth But much I think certainly higher can Healthcare which than double-digit don’t I business, our a Well, a strong in Recovery has our margin you

is Healthcare contracts growth expect XXXX into not continue, but hinged our actually we we Healthcare, today, we’re that our guidance growth because providing really in in on have. already So to

continue up. So ramp to and going expand to we’re just

fairly And, past misses would and quarters goes when are yes, healthcare some we in we that exactly at have as you the we’re like. space, had implementing not look as contracts the clients large with everything

delays in we But for that are go to had delays we expect so, implementation. revenue some away. the contract And not these

our with just on continue focus clients. to implemented We need these to getting

them. So we clients a that can of a can to we legacy we to are with cautiously and moved the optimistic solutions bring continue to made commitment these that result who’ve of away us vendors kind execute from as

out moving going business. expect as growth in XXXX expect – and to strong we profitable to see our be the in coming into out as So quarter fairly we of quarter fourth well fourth Healthcare

Alex LaPointe

including And can warrants that Okay. [ph]? equity the then, some [I’m total outstanding, the true holders] give diluted, to shares me see all fully you seeking taking you

Lisa Im

Yeah, Ian.

Ian Johnston

Hi, the Chief – are diluted today Officer. basic stand this we anti-dilutive where be fully is to a as a is it Ian Accounting our as use shares, have because shares Johnston, would in shares. there the The diluted situation loss same you

balance So at the dilution. XX,XXX,XXX we lot share shares a And of sheet September don’t we have – price XX day, this current outstanding. at have we don’t average

currently X.X We outstanding with a are million number have do would outstanding. of Those But a warrants price warrants $X.XX. not about of be strike dilutive. that

Alex LaPointe

Okay. Thank you.

Operator

closing to like Instructions] for call There no comments. further to turn back the [Operator are over in management queue. I’d questions

Lisa Im

Once thank very quarter. We want this employees for for letting I to thank our want clients call. Thank thank to our again, to day. to our Performant us us serve bringing their for want earnings And them you for operator. you, every we past best joining

Operator

does today’s you. conclude Thank teleconference. This

disconnect day. may have your a lines this You time great at and

Performant Healthcare (PHLT) 12 Nov 192019 Q3 Earnings call transcript