PFMT - Earnings call transcript Q4 2019 | Performant Healthcare, Inc.

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Operator

Greetings and welcome to Performant Financial Corporation's Fourth Quarter and Full Year 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] Please note that this conference is being recorded.

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

begin. may You

Richard Zubek

afternoon, of now the the full quarter Good received company’s should a and result. XXXX copy earnings year everyone. operator. you By have fourth Thanks release for

our is have you the portion and call Im, by not, Finance be copy Chief and website. If Vice available Executive President today’s On of Officer a Investor on Relations led Lisa will of Rohit Strategy. Ramchandani,

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

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

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

Lisa Im

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

find provides supplements our a already, our website on that haven’t you financial results. If some please regarding details additional financial recent

product contract For a contracts to bring large into the to company and tirelessly from margin. resources investor to required past from base. small several company steady-state website client on number of our a diversified years transform that with success Performant offering we've major We worked the dynamic a derives shared it's highly

is for revenue growth This year reported of EBITDA positive of of EBITDA versus XXXX achieved Hard operational quarter had in $X.X profitability and million. largest and since prior our XXXX. share made and dedication drove and positive We gains EBITDA. our positive have investments work across With XXXX. target of growth market fourth QX. We entering we are revenue we with quarterly our strong results those that XX%

Additionally from EBITDA continued approximately These events. the these million fourth was to the positive in to is work strong higher large results Thus third operational $X.X negative turn than day. to a EBITDA quarter a one-time were the due XXXX. that any Rather not to improvements QX hard fourth QX due are improvement. do quarter due of we quarter every positive

talked to and needing inflection how about to past would time on call need business. earnings patient We've you we grow our point healthcare

investment client contract before rack market required contract the particularly We Medicare new that footing, strengthen investments heavy return of to two demonstrate which and margin. side, provided steady-state share the trend beyond the on commercial detailing would show are Just growth. profitability and years gain that our general our contracts diagrams of plus these demonstrated

confidence you been which in have your stated speaking. technology our and The point is with results fourth of are period, inflection that position and your real organization the to XXXX to going already we and deliver our you thank quarter These shares on Most believe long-term us I of indicative this our large adding strategy. platform our have forward. waited during with will potential of are the many to for patiently ability execute of shareholders we

strong are XXXX times two recoveries overall revenue of nearly we're nothing XXXX and just Healthcare remain currently ago our a From revenue end than In like at years revenue. business just XXXX overall was just more of Total our a shy which XXXX was double-digit At healthcare prior. recovery X.X%. of four end they healthcare the than projecting has and years the XX% million were of balanced in more XX% growth revenues grown just what composition nearly standpoint or looks in over for XXXX. XX%. of company is higher Performant $XX.X versus two XX% to up our the XXXX it accounted

decision to question already some whether disrupt be the able relationships. had we questioned would approximately $X with many years the expand to Through trillion into our meaningfully where relationships healthcare those established industry companies

and contract. clarify back already we not XXXX to made all going worked healthcare we receivables in when Just are through CNS the a inroads the we our start-up had market way strong to on treasury

would strong the service Our to is analysis and indicated competitor showcase that which client the happened. correct our market prospective market for to focus and offering platform. a we're a differentiated result this for significant demonstrate with what and opportunity effective Performant more uplift as the we healthcare a dynamics be of able In and ready establish exactly

vendor. Just as vendor, a of this the expand and NCOs is Medicaid client; conduct particular largest of we after one anecdotal hired second of second our new we're recovery nation's to In the which one a over incumbent example capacity to XX% identification returned reclamation lift saving. as a vendor by results

date were first states. XX% incumbent about those historical X lives test for demonstrated a the the position again results providing covering we results we moved this, over for impressive into five Following across and gain million

was As canceled Performant. services that overall in our work and strong their important significant XXXX. that state the operation years to result vendor XXXX early of client we in our with of of report shifted client robust incumbent recovery QX XX Despite a Similarly, business. XX hard to and results were all with and of a remains strong momentum over into the with implementation XXXX piece challenges Performant happy our

commercial diversified years growing several platform into consumer extended and past the recovery and Over additional our opportunity. significant have successfully with are markets entered market. we in We've

We and federal market. clients receivables and as also state in treasury with our healthcare well to federal as recovery work tax expand continue

of recovery that the much-needed stuff underpayment. sector to outreach to creation tax IRS in expertise Private program while capacity the IRS leveraging service for of of taxes mandated Collection federal customer and activities private Congress Internal Service, who expand to federal Revenue the to Related technology PDC revenue, tax Debt taxpayers the particular conduct

the currently Performant is firms partners with this effort. for one of four IRS that

initial of start, contract commenced placement receivables when from tripled up low we the which placement initial that we the contract more number this IRS volumes start of in methodical tax the XXXX, in were April processed than year. what the from that work under the IRS' the we get federal reflect that had Although have objective

Furthermore IRS it's tax US full-time incremental program launching allows officially provided IRS in XXXX, to internal has the into dollars the program treasury, staff rapidly the fund PDC the dedicated demonstrating that and collection. increase value funding the to significant driven to to self is

recovery. on strong Our long-term strategy a build our strength; compliance, analytic, to always business has innovation, diversified core audit been and

strength they value propositions create client, our unique find Fourth those competitively to strong solid and results we we opportunity. can we XXXX believe that and positive deliver in and of in While and with show believe can to rebuilt quarter capabilities we one were business. quarter win combined and $X.X refocus reporting the of quarter. accomplish great $X.X and EBITDA our market loss go million million Company next don’t things typically an EBITDA from

have our XXXX. and on the of succeed we in and part largely believe indicative investment QX knew of becoming future this our our goal positive accomplished complete was transformation achieving in operating purely that EBITDA of We success We we our is results. we would

Finance Strategy Vice Rohit President With walk results our of you that, to like I'd Ramchandani and to quarter. the of through introduce Rohit? the

Rohit Ramchandani

versus in line reported of million to loss our period was a with the period. $X.X Adjusted prior XX.X% the we of compared in XXXX $XX.X fourth quarter prior million of in QX the which and was In $X.X million and this revenue in year. million up internal production quarter year of the EBITDA Lisa. $X.X year third Thanks

of $XXX.X revenues For to the of the revenues full XXXX. full million reported year as we million year for $XXX.X XXXX compared

million for XXXX CMS net the XXXX termination CMS over However, impact XXXX revenues full XXXX XXXX an of year contract. of as Adjusted $X.X million adjusted impact million. an a $XXX.X million included the XX.X% excludes this adjusting of the $X.X EBITDA of in full a EBITDA release. loss related which the in to the of loss year a revenues company's of reminder were compared was benefit reserve increase After to of of the for our revenues release one-time $XX.X XXXX

Overall investments year totaled potential we've state further non-federal achieve Healthcare expansion as in offering. our quarter of operations strides tier the well continues. last fourth and aforementioned across contracts our to the as of over the fourth XX.X% with made relative steady coordination higher higher started was which positive has mid margin base $XX.X the growth and in CMS benefits quarter. those million size of as quarter XXXX benefited other key the in contracts our and The of client reflects audit both outside in of than revenues and the investments quarter contribution investments to increase XX.X%

onetime as prior contract. XX% $XX.X healthcare XXXX compared which revenues our growth year benefit CMS million revenues healthcare excludes release full our market. progress may again rack reserve very an the $XX.X the from XXXX the were of of increase the that in of the drive we excited healthcare of to We're For

As to that under Lisa healthcare market just and XX% we two of revenue and versus mentioned now our years market our continue roughly both healthcare stream will audit offering. XX% our represent anticipate ago grow business via

was QX. grew revenue fourth quarter up essentially the of and quarter flat last year from $XX.X million over recovery which for Total XX.X% fourth

For the increase we an of of million X% recovery revenue $XX.X XXXX reported XXXX. full year versus

helped in growth countering our the the these trend diversification overall as decline. has are to offset to those revenues Although due expected strategy market macro

We IRS diversified growing success offering the our term is make the traction consumer payers and government including in debt program service the which of opportunity. some tax in commercial for longer

to continued see Additionally, we've in our subcontracting BD opportunity. growth

that of the XXXX of of the our FYXXXX. chart revenues in As where is on really recover XX% over recover seen financial revenue we've our outside market included the XX% posted versus composition recovery website FY in in [indiscernible] addressing supplement

the the was business due period. productivity cost our charge to results. $X.X million of partly annual to in our goodwill quarter million executing result in our conducted $XX of restructuring. commitment on as mostly lower million a quarter impairment and in [indiscernible] fourth in recorded non-cash are The we in engaging were prior improving a test initiative $X.X decrease our the Expenses We on XX/XX/XXXX that expense and XXXX year fourth

forth Goodwill recorded operations in of covenants with agreement. any of will effect acquisition set our have cash ECMC compliant on flows any these our as charge or financial impact This the part credit Performant's XXXX. originally not was in liquidity, or on entire

like Lisa your up to With question. I'd to we before turn to call Lisa? back remarks the some that, closing open to over

Lisa Im

Rohit. Thanks

are We drive positive are certain as to and now we that our and term. excited contracts into the business mid strengthen will our beyond moving the in expect actively longer XXXX state larger for EBITDA

turn first two the contracts in heavier are while have a are As still of profitable reminder years begun many there required. to our number where that are investment

million $XXX of be and announced are $XXX $XX projected previously we and at to million midpoint $XX year full to we XXXX guidance the our XX.X% EBITDA million. adjusted As of million reiterating a revenue increase between

into on can achieve We $XXX are forward about and plan trajectory strategically continue we to revenue to believe across in expansion of continuing our excited excited all XXXX prospect on we that the future. We're and invest markets. pushing target long-term Performant in the the million positive

at choose look we to we the should a in make beyond investments return continued high expense may number driving goal. As sacrificing sustainable margin investment if on that consider growth opportunity that even means side. business strategic We near-term the

with COVID-XX hygiene of we're there. clients practices extensive business all facilities and Most including ensuring are investors one that's to for adoption to continuity retested good it as other scenarios and practices we we know relates of have a wanted health we importantly encouraging just of precautionary ailment, to the let safety standard our our annually that at health employee. are of that plan regards following variety the Lastly and our and

like that With the would your we take to call and up open questions.

Operator

comes this Brian we of session. At [Operator with Please state Blair. Hogan conducting question The the first your question. William a be you. will Thank question-and-answer instructions] line time

Brian Hogan

obviously could quarter My remind your are guess on you you is first had that EBITDA guidance mentioned second that obviously go your mode. ramp quarterly feeling but be comfortable your extends basically waivers and EBITDA through the those that question how contracts me is going I covenant covenant believe in leverage actually to are and I through covenant I cadence some up staying are and within given there ranges the

still is should be maybe going quarter So first some we in EBITDA to the forward? going it expect or positive negative

Lisa Im

had carrying EBITDA every is we're and a we coming positive where No forward I XXXX. especially we strong expecting quarter momentum of into think that out very operational Brian QX great believe

every to I think be every and a positive we sit as quarter going we results XXXX. like quarter we good have EBITDA very here of from feel feel it's really quarter like operations

So hour every that is issue said obviously evolving so. COVID-XX almost or

probably but momentum about were that couple in of all as if contracts that that effect think work It I lender I of we that only to contracts have pandemic a what issue imagine push economy pulling continuing the arise or our as forward would say deleterious So I would still a lender a COVID-XX almost but out COVID-XX. willing think economy of our we to of this is and entire on to threat not that. most are unreasonable the would any at be with us same have the would on at result a impact point the we consider the US of that doing would for otherwise current the be with said

this we I'm as good be. know values very don’t we will about pandemic impact the think saw operationally So but we what yet clearly

obviously it depends and is I provided it's how it local are other it governments. and minimal, hoping be long what think will just by on lasts We but guidance federal

Brian Hogan

you in work? Have changes Sure. doing as the in any outreach your your to seen from behavior

Lisa Im

yet obviously home we everyone will employee do take have otherwise make in business remote, our taking sure but most to remote at the in healthcare to recovery the other can this know at functions continuing not extent to we business the the to obviously I we because that now and facilities just extent but be and is find terms we and had our that monitoring far, an and functions that clearly our thinking as think and a for are run. home, in we're our many we're tried this impact situation issue operation keep we good precautions people to contracts so is safe to No of to time people business

we're turn the situation. I closely point it on as news no, know change hour so every very this you you by monitoring So the the could say but would time and

We have very, the managing that we're day and stand a a has business day if every call continuity so a up couple times team tightly. needed situation very

Brian Hogan

can but that particularly you prepared generally expand your was the You all weak see that on see I on across I the based some your volume businesses I mentioned strength? the you could well, placement coming the some in strength guess of guess subcontract across so did strength of remarks as and from board was assume what I business in

Lisa Im

would like answer to Rohit you question. Sure, that

Rohit Ramchandani

declining known I regard Sure think lending business of in something yes student declining recovery other report and and we and guaranteed always seeing volumes, across line. as every are within that planned those the that's coming almost we're for related kind revenue strength

contract, brand counter So some that's strong as of within with on newer consumer state IRS the showing tax all the commercial are our prepared treasury well the as contract on name and to growing opportunities contract and quite that.

Brian Hogan

the bump, was Sure may has IRS was bit some that seasonal or little that that the minor expectation. treasury that be a or been case historically quarter and of fourth is

Rohit Ramchandani

answer to be yes both would those. of The

of little in bump was is actually the expected. quarter from a usually which fourth more market So seasonal student a the so loan but experienced bit there also

Brian Hogan

healthcare the to you right and I lighter and in I trend expected pipeline positive trends in going a discuss but and that than over business? All switching still the is other can there commercial the was right guess the building direction little

Lisa Im

as question well. that answer to like you would Rohit

Rohit Ramchandani

space. high of Sure for as numbers the clients XXXX. strong with that gone with now kind so I coronation not commercial past It's something expected of business over think do taking limitations some we've in some some that of into maybe the to the issues as of have

healthcare pipeline continuing results growth again we're market execute double-digit base going client out existing strong additionally solely we're a expecting the and continuing forward So alone let the network of robust and within expecting on. to

very about we're that in strong So going market. feeling

Brian Hogan

solid of then and anything maybe there are kind focusing up Interesting the the on just execution. you seem and for or then the particularly any CMS what's losing Reg change there on is

Rohit Ramchandani

in change a program have yet. So rules the overall of seen we not terms

limits of feel expansion continued still current for within they a we cadence there's allow. lot and the However, room the current

continue we carry forward. and they'll it's to operational So results expect been

Brian Hogan

shifting that that going little the in over investing All how we invested forward, you're bit the think in about it some guess nice quarter was ramping up are given was a you’ve expenses right expenses to actually under trend the in contracts operating I more jump should revenue. the control the

So I we think rate as how going should about expenses forward? guess operating a run

Rohit Ramchandani

all continue slightly we our expand as about as would I every up as think contracts well to future stepping them invest as growth. in quarter

there starting the quarter from we good growing I a we're fourth be an think where the business. increase as and ended point early will

Brian Hogan

And bigger as your guess market in high I obviously guess and around then your internal one debt relatively expense look there refi the any that? any and there potentially to to are opportunities doing bothering, that I up is on positive start interest rate you the last out one picture comments interest XXXX and

Lisa Im

Yeah I that are seriously into interest as we at rates we head go start result yeah opportunity high have Brian we're sort strong the look as thanks and here going deleverage evaluating we're to little XXXX of definitely because to Rohit. think of quickly. we as obviously sort

debt. good like some feel refinance opportunity we So to the pretty there's

a So it so that very changing terms. looking think market now now mean we're favorable the especially I I at that obviously right market definitely where think is we for

for So seriously have is and there actually year, that look a less to out as opportunity. sure into expensive we opportunity strong we're this for think us I interest-rate evaluating

Brian Hogan

is certainly through the your job. nice nice business, turning a time navigating business job Appreciate as the did Interesting. and you

Operator

Im for question-and-answer over Ladies like I'd any gentlemen, floor and this closing back conclude Lisa does turn to session remarks. now and to our the

Lisa Im

by that We to those want a Clearly heart Thank out everyone know go and folks. serious thinking about we're it's to just you, COVID who XX. My impacted those all prayers are operator. issues.

We do and employees commitment we them as want thank executed continuing against we also their want and and to being Thank strategy you. I their for to growth for clients us letting of to want Performant. company shareholders appreciate to to for today. our the serve bringing our with for our our thank support best the thank your us

Operator

This concludes today's teleconference.

have this now participation your Thank you lines a for may at day. your and wonderful disconnect You time.

Performant Healthcare (PHLT) 17 Mar 202019 Q4 Earnings call transcript