PFMT - Earnings call transcript Q1 2021 | Performant Financial Corporation

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Operator

Greetings, and welcome to Performant Financial Corporation's First Quarter 2021 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Richard Zubek, Investor Relations. you. Thank

begin. may You

Richard Zubek

and a everyone. release copy XXXX first operator, should for now, have quarter received of results. good you, By afternoon, you our Thank the earnings

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

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

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

Lisa Im

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

to are revenues, regard and we recovery a broader The recovery know, more through likely ecosystem approach included more going face the continues with and which business, you As pandemic disrupted multipronged declining already to loan student a composition. company regulatory legacy our currently COVID-XX our acceleration pressure. that of recovery

our down a in of recovery receivable contract a specialized to to aspects approach outsourced Our recovery includes winding while buyer agreement portion operation. of non-healthcare sell our an solutions that other

market, from to in fully industry and restart incumbents. to we fulfill in renew down, our expanding position recovery we part plan efforts do the but long-term contracts decision non-healthcare This success pursue taking current As resources our new our business on where dedicate or healthcare continue or our not opportunities. contracts, plan recovery the will continue we wind reflects demonstrate to to existing of

services operations flows plan purpose tighter We also delevering offering. cash to potential a see our integration maintain generate growth the approach Furthermore, the a healthcare company. we multipronged we for as will contracts our for recovery market with of care outsourced customer expect the with our through

We strength continue that believe focus healthcare of our shareholders. the the is to best on in high-growth and our market interest

the made have going decision we legacy and forward, XXXX focus in some healthcare our the healthcare operations. results recovery Although reflect our on blend to will continue quarterly of to

positive over the million EBITDA. For to QX impact and breakeven the are but remain the to in impacts, coronavirus to first current of $XX quarter targets stated the last year COVID we a these of to range were be to due $XX million down We trends trickle pandemic. share and our quarter and unchanged, the of $XX in the in remain Further, figures to adjusted quarter revenues EBITDA. essentially healthcare Both previously of excited the XXXX of to achieve had long-term of very smaller ability positive. due compared and revenue our million annual XXXX, we of first of guidance confident that XXXX a anticipated our lower are

and of for equipment, award home in renewal us audit This of X CMS addition base expand commercial to in clients, or offering focus contract, as to launch is healthcare recompete medical comprehensive CMS. CMS on a backbone term we with years. a then, and recovery served our operations contract. but our hospice continue CMS X.X Region our ongoing a business recovery awarded One foundational Region since Most Our developed recently, health a our relationship national RAC, durable to with XXXXs, we've both the healthcare

proprietary our upon we integrity a efforts our focus to our We're build industry market leader has created. take industry through to center regardless as platform. or client-centric platform successfully via technology come and greater contracts our and existing competitive position winning service. data The operate categories, on We further of on success are flexibility. payment our This Much eligibility the focus a combination offering healthcare our our expanding allows not claims market in new incumbents. provides business terms us driving payment Within capabilities, based and and excited the of both existing our new This to perfecting offering. the processing healthcare effectively share that the services namely while value same is based and something of differentiated of ability platform an payment within us integrity. of our the advantage in times markets healthcare focus to our from integrity,

will We talent foundation a have solid in We medium invest industry-leading attract growth and the to further the in scale continue and short technology we believe term. to business. meaningful for

company a remain client-centric always our core. will to We

healthcare, introduce Ramchandani, you Strategy, our clients, cost to helping our excited focus the results Rohit? Vice I'd to of Rohit President rising services. the to are commitment our like Senior to healthcare quarter. through on the of that, We strengthen walk With our manage of resources and Finance

Rohit Ramchandani

Thanks, Lisa.

back of are and We compared year to of the upward which quarter in this reported claims Overall, progress activities than continue which and past continued in reported to that We excited into U.S. of than $X.X to executing on we pre-COVID an in healthcare growth expanding based, this the lower also the than ongoing million to effort and related based As our levels across if approximately than year impact the first audit, sequentially of revenue due sequentially KPIs Adjusted which made period. the by from clarity quarter recorded offerings. we In back for the have to see due $XX better future and demonstrating Claims healthcare to anticipate period sequentially XXXX the XXXX offerings. we in expand the as of anticipate will see million, growth $X.X provide in claims be revenues additionally we eligibility new of the largest in XXXX, And higher these about some taken from lower in our have half Tangentially, million, revenues was operations accuracy in our revenues $X.X QX customer million Lisa quarter the but prior of million which in normalize utilization the XXXX. clients. was we evidenced the interesting also first this volume $X.X we the a pandemic. We the programs in business. revenue the that of reported both year more million year-over-year, decrease the an largely have health greater million slight remain $XX.X normal X-plus you trends in expectations lower note, significant to quarter and health of evidences were negative million service within business, reclassify untouched, versus the outsourced $X.X related XXXX. lower and EBITDA mentioned, reported seasonality. fourth opportunity. of $XX.X based our of of XXXX, but to quarter pre-pandemic are $X and than Of non-COVID growth payors in growth trend million, XXXX, rates COVID-XX step we claims quarterly through space to course was Revenue fourth the XXXX. of prior continue total to having represent quarter the first during levels. XXXX, $XX.X the eligibility the been are imminently return public in in quarter the over of to how which of first we XXXX emergency, breakdown providing the can lower expected able our consistent of years, return first our claims the care history to meaning the services could trends million the was

continue exposure we to of via information, on million liability an work we the through And we X these have growing eligibility as new based some a of quarter, Around our ramp. on multiple SOW SOWs. accrued the detected against who expect clients, our year first $X.X do discrete the revenues. We this of end at programs within serve

liability on our quarter this based out offsets in we is not that million reflected analysis, healthcare $XX.X million the or will charge. expect the close coming We the first to and in future via incur year total prior in anticipate revenues so This $XX.X do charge or of to our liabilities. future

be the progress years by current levels effects the we investment million from programs far, and half the of XXXX. announced return the first the majority in we of of to Of short-term see were pre-COVID reported a we to XXXX, including are made the XX we with we have our revenues onboarding programs of we expected investment, our the than programs will XXXX back healthcare of programs with expect through progress growth lower of in prior Based we the quarter implementing. of phase the quarter. these in significant expansion last on While leveraging note, our that end continue expansion the the new efforts, including $XX.X make new thus that the that

this confidence revenues, half significantly While of represent XXXX of we second we XXXX and mentioned, at of contracted. the in anticipate revenue stage, XXXX over XXXX our XX% expectations maintain will expectations a our portion that outsized Lisa as are

clients current pipeline remainder a of look beyond, new year within and of implementation strong customers. and to pipeline and we As our forward of expansion services diverse this with mix remain the sales

launched based based. of additional based we illustration, an audit these of the in XXXX. X X claims eligibility and is are For quarter programs X or first

expand were opportunities land existing of examples of All programs and clients. these within

are outsourced at period, in recovery of first in XXXX future temporary outsourced our million, revenue to quarter business, for non-healthcare any start strong healthcare year $XX.X continue as related revenue the XXXX. anticipate throughout were our customer results, XXXX healthcare activities will work remainder than lower was CARES revenue of care a the we and into decision We We channel Act. that while the anticipate of driven investments revenues non-healthcare will we services and being care recovery amounts services EBITDA not customer growth. do about approach, reporting prior believe our such our in Both to were of Total to the payment to slowdown revenue multi-pronged decline by integrity we very revenues continue million quarter. $X.X the yield with total these and the entirely decrease through the market excited our

were prior via million As result response a period we year $XX.X as I'd million, Lisa which offerings. I, of Lisa customer reductions services reductions, quarter growth Operating costs goodwill is $X.X the in questions. potential healthcare were to to impairment over the like recovery With in the in pauses revenues excluding for is integration up a levels after return tighter outsourced care and your charge our decrease before back slowdown or in the in our mostly activities, lower. that, which pre-COVID there Lisa? call the mentioned in turn both anticipate earlier, and to continue. expenses to to first to open to we expense due The with

Lisa Im

Rohit. Thanks,

We healthcare further with by evidences as the focused that that believe needs ability products contract during healthcare serve growth of move continue to better offered We be XXXX. traction meet than very implementations into on competitors. their XX clients we months the to our achieved we solid opportunities

in launched XX XXXX. mentioned, additional the we've of which XXXX, which programs on of component QX further several competitive bolstered As procurements, our by a we based diversified QX strategy programs is key and X is of new were in launched of previously we growth

execute and our we streamlining we to brand. a improved of healthcare much the future stronger and growth, focus growing our As margins of execution look business, revenue from

execute renaming we exploring strategy. this the are also We company as

and to about are we prospects the our that, in We up of questions. the believe the we'd scale Performant grow that will your take call long-term open coming and like business to and With continue confident years.

Operator

[Operator Instructions].

comes Our Krug from Capital. Chatham Chris first line of with question the Harbor

Chris Krug

walking great is between lag you time this XX starts me I when a program line? revenues through addition natural last to Would up. new the understand the show there's five time a program in guys, quarter, mind Fantastic quarter. you and start when

Rohit Ramchandani

Certainly, Chris.

Lisa Im

ahead, Sure. Go Rohit.

Rohit Ramchandani

So yes.

by we've the So a up prior made implementation quicker we we of mentioned, the believe, this running all we the as in these given should be will that it and investments implement as be end fully and years, programs, year.

good seeing start real you'll state. some from XXXX in all into these impacts at they're QX, material So but impacts steady as

Chris Krug

Okay. Great.

have seen that year? incredibly would you've that revenues years, for have will answer, of mean based you contracts, few last given your you you into up know clear very does given next over start patterns. that in a So the revenue on strong What that XX signed the ramping that that that visibility out, QX -- mean months must dozens an the of usage

Rohit Ramchandani

And certainly what described. over with to And guidance Absolutely. our that confidence just based being history I that's lends contracted. in then and our have think projections you XX% the we on that of experience

we play months how will next So the XX do strong have into visibility out.

Chris Krug

Great. Great. Great.

this And so the about. year, rate beyond? future? XXXX Do What guidance of think the is XX% very and XX% you're you about confident sustainable in growth

Rohit Ramchandani

feel growth the rates are digit future. do that strong in We double sustainable

term we exact progressing of better opine through on think a continue execute and our goals. growth and near to I we'd the be year position beyond in this rates as 'XX against

Chris Krug

sense. makes That Okay.

you're market growing? it market away share reasonable that from you've rapidly. HMS end assume How Is So really to and the is Cotiviti? taking fast grown

Rohit Ramchandani

ahead, market healthcare go Lisa. overall -- The

Lisa Im

Yes, I and about we healthcare, market. competed going to mean, speaking, But certainly, mid-single think think where say, I and players sort that the are, the growing probably a have healthcare And digits. U.S. significant large market overall the to the generally HMS players say share in of have But of speak the that certainly who are is can I going. market market. other is Cotiviti you was that I would the the as are in there players spend

of is last of what to the we've XX a in think lot XX I seen companies. probably months aggregation

will of Commercial a us the great industry. There's step isn't the declining of through to think exactly that. sheer will claims on continue market I of in growth controlling errors enhance submitted on rate want a a But continue be that how does based processed -- the certain get that lay consolidation the a the great or on think do will single-digit away you and we job. just months and But frankly, what for level, with will market that at grow sort materially. speaking, payors Chris, for level Rohit, that? growth the then daily steady, not it year next commercial taking and generally coming be mean, job already are add volume be of interesting I happen to to of better so that will of land so, and a share to we market payment just And if and us. -- sort that to do

Rohit Ramchandani

you think I well. it No, encompassed

Chris Krug

Okay.

They So HMS EBITDA and EBITDA because was own growing they're you that of out maturity range well. similarities to the and assume HMS, just single the XX%, acquired X, be in by XX% the XX digits line Veritas Is looking would for reasonable XXx Cotiviti between same times had top it at of their also EBITDA. And margins as years? margins.

Lisa Im

reasonable I think that a be will approach.

Chris Krug

Okay.

years, you is mean, numbers, over get couple So million my of XXXX. I -- digits, what EBITDA next can at close of revenue, well, in can in HMS's can you double said EBITDA XX% margins at digits, if to grow XX%. if that $XXX I'm year hearing growing grow to EBITDA be but and is, the you growing state, could multiple you And a going use steady if steady at XXx you're then cap Xx single in but not this we XX% do do mean, XXx $XXX at by you or market somewhere $XX easily would years, have I today. couple of it you what a a in be and EBITDA could HMS' it me, in years, could which around be going to million to state could of But because million be growing. is or then $XX not you're like multiple you'll almost you're Hopefully, million, mean, couple of trading I you seems the be That EBITDA. margins

So I mean that's great.

the to debt. moving on So

As recovery, net down of seems gone something and net in math proceeds million, use to million of this that to mean in cash in is for X my generated XXXX, which you You sale $XX $XX recovery, pay the the and And math free if is our million you press extremely through correct? is manageable. Is debt in you $XX the sales debt said to from between does debt. like what of correct, the the if debt? going correct, were have some that this year this and end now releases

Rohit Ramchandani

Yes.

relates well X maturity transaction your think able I we which do to healthcare out we as will business, well, the itself that debt the math XXXX. and to would is close of debt our tracking recovery our be we as other extending being believe the year thing as at service to continue growing

Operator

[Operator Instructions].

from question Investment Tudor Corporation. with Craig next Melcher of comes Our the line

Craig Melcher

offer or Can Congrats the this incentives Really might prices as about might if lower gains differently, to of on healthcare. why thinking progress customers tempting about put gain pleased a with you not versus incumbent, speak the when other about in Or bit share from were well. and opportunity, sort maintain be I vendors? of they're a among position. to it me great to selecting continued might be either rate share? my to share thinking take pricing the quarter to try charged how In all in enough quality be terms maybe maintain

Lisa Im

Yes.

Rohit, thanks, start jump you I Craig, for and can in. can think, that I But question.

pricing. business example. pricing, of month a a types a There's and And obviously, the per the choose that's fee-based I'll on different pricing, is right? industry there then fee-based an simple per is member this pricing, success So X of sort success very

to change going are sophisticated substantially And actual competitor of we $XX return a even of part month, Even vendors. that's a like us their them client. willy and where, -- our the the fees takes our a enough returning So a implementation improve they systems, is to it really takes if currently data return not time, dollar is they if client don't long the if $XX. for nilly long fees, with a time. just lower takes one, client time line It sort of while, which sort meshing the

it's not And so cost. without

they about and drive they they're lower have And very compete level to have because can vendors don't offered don't our clients, clients don't our They -- feel fly. think so that we somebody change anyway. vendors account. on We the as that pricing, bank think savvy. a we has They their results in that on can change that better we just

great constituents that all that We have activities our to with, any explanation of to deal isn't into sooner. we -- dollars there clients isn't a service that There the client turn good and so the can actually there provide is abrasion.

about shoddy think -- all competitors, share. that all. They've gained companies their companies. compete is work, done we is service very are from respectable None that product They've They're we product are climate of as but So just these respectable a them I return standpoint. a that or we a and good competitive companies as against. better just what think provide or service is at

way our we be with that has -- our all company been centric. also it's clients, with philosophy that we're the is and deal our think the constituents and that to as -- We is and interact that client we customer have to great constituents again, going really important service, always

from -- a our still we treating right, of How of on decision drive versus Performant. sensitive that, in returning may our we never certainly extremely that you being that you're probably work is and an in -- base say, of market, think whether very not of fees doing? our But may that the we're substantially, to commercial -- are constituents? if work as What they're not cases. results twice reduce your of little it I the the quality that not work the they my bit healthcare sort you're we going an way unless provide. really the month is payors to in $XX providers. We fees some -- I their clients higher be are think high. important a conscientious and sure be -- mean seeing you They're aspect role with $XX, irrespective reduce As want what that I'm fee, So be

it's a So not I think of matter pricing.

I in great for they're long time. space a think They've have, been the this companies. again, incumbents

happened I way think is the in is something what above that we're the market, a step what's just around. providing all just just

of to of high, So given vendor a again, drive pricing vendor. long think and we sort they we level continue And the the us are think is change contract a concession, I to pretty our back place, as first switching expand, got don't continue provide can it's costs that that as think services -- going we to philosophy can to as that to greater we exceptional provide land -- in work clients.

Craig Melcher

ton That of makes a me. Great. sense to

and it how to yours, existing to product. as from -- how I exclusively know mentioned I really in or this a to customer a customer of just results. create either where quality. get industry on and then continue is bit is does sound have expand And be and in you as a it, a And as to it's kind better the easy from trial And opening guess a base? So remarks, of the stack have perspective bit I brought really And land within you to the really mentioned is kind your industry quality upgraded the when you expand model. highest lot of good you run like follow-up it understand be post a of but the on an sort might easy competition invested that, on you based the it better -- in

are it, drive in long continue can better outcomes. -- guess, as trial many in non-primary like like or upside your could you sort see what client of you how your in position where or of of you think these clients roughly, or I percentage to clients however you the So about as

be a customers great. just So bit I pipeline existing speak to would about guess the and opportunity

Lisa Im

Yes.

of and use implemented I recently. about yes, some contracts think -- maybe example, talk the real a life can can we've you we

Rohit Ramchandani

Certainly.

the question, of available include And I'll your vary about they terms for And what does as if example, willing pace performance. typically It's you make. the switches that just think it really of and within And fourth those, from expanding a we XX client about set. clients. or new the programs contracted the X new roughly expansion current at first our new programs, looking quarter in the what they're if within expansion. those But split a quarter well. XX-XX think on almost between client-by-client in to or predicated to it's it's entirely that client current so net with And have

with think continued that to as product in in base, offerings. so we the within client I is And mind, there every we spaces covered almost about expand their and think eligibility the within claims have, based opportunity live still or further

something doing amount So over a so. good us of think past we it's have we've I of ramp the that and few years, still continue to ahead demonstrated

Craig Melcher

incremental Awesome. imagine, a And benefit existing else higher customers equal, as that of That's super helpful. come the all at, expanding well, margin. should I would within

for a bit this and done me. down the your and work how drill just that's technology algorithms of once as are last on it question the I client, components trying operations my And your the in employees? how final by with client with to margin and you guess, bring of that like is Performant a so of actual base, versus much guess into incremental revenue your I company, much margin opportunity. just on so to far the just as contribution $XXX plugged done I'm point, would be, And existing by running is

Rohit Ramchandani

Certainly.

the so first. that's And

audit operating, a more in whether work it's the on claims our implementation offerings, So was is of audit. that technology it primarily automated and at it's based mental it's employee done on based it's once complex eligibility setup. And side whether And play. split, more the an or the

And initial so come is or automated audit, entirely it the will if coder all the to would validate. by and then done nurse I And behind say technology a platform it's an be complex on side, technology done by the platform. the would heavy lifting

is. offering specific between So it it varies product which

Operator

any our end session. the back management And to question-and-answer with would that, of turn I we've And remarks. over for the like reached to now call closing

Lisa Im

We want you operator. our joining earnings us today. for for you, call Thank thank to

you clients also thank again, past to serve quarter. our want to us this We for, allowing once

We thank to changing of our continued also our us. want we who business team the shareholders their productivity. for Performant We the to even bring have And all all through supporting of every day appreciate members, best to the efforts thank composition. again, and

Operator

that, this teleconference. today's with concludes And

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

Performant Financial (PFMT) 14 May 212021 Q1 Earnings call transcript