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Form 8-K Performant Financial For: Aug 08

August 8, 2022 4:14 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 8, 2022 
 
Performant Financial Corporation
(Exact name of registrant as specified in its charter)

Delaware 001-35628 20-0484934
(State or other jurisdiction
of incorporation)
 (Commission
File Number)
 (IRS Employer
Identification No.)
333 North Canyons Parkway
Livermore, California 94551
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (925) 960-4800

N/A
(Former name or former address, if changed since last report.)
 
 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).     

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s) Name of exchange on which registered
Common Stock, par value $.0001 per share
PFMT
The Nasdaq Stock Market LLC



Item 2.02Results of Operations and Financial Condition.
On August 8, 2022 Performant Financial Corporation issued a press release announcing financial results for its quarter ended June 30, 2022. The full text of the press release is furnished as Exhibit 99.1.
The information furnished in this Form 8-K, including the exhibit attached, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and it shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01Financial Statements and Exhibits.
(d)Exhibits
99.1   
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)



SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 8, 2022
 
PERFORMANT FINANCIAL CORPORATION
By: /s/ Ian Johnston
 Ian Johnston
 Chief Accounting Officer

Exhibit 99.1
Performant Financial Corporation Announces Financial Results for Second Quarter 2022
Livermore, Calif., August 8, 2022 - Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), a leading provider of technology-enabled audit, recovery, and related analytics services in the United States with a focus in the healthcare payment integrity services industry, today reported the following financial results for its second quarter ended June 30, 2022:

Second Quarter Financial Highlights

Total revenues of $25.7 million, compared to revenues of $32.8 million in the prior year period.
Healthcare revenues of $21.8 million, compared to $18.6 million in the prior year period, an increase of 17.0%
Net loss of approximately $(3.2) million, or $(0.04) per diluted share, compared to net loss of $(1.5) million, or $(0.03) per diluted share, in the prior year period.
Adjusted net loss was $(2.9) million, or $(0.04) per diluted share, compared to adjusted net income of 0.5 million, or $0.01 per diluted share, in the prior year period.
Adjusted EBITDA of $(1.4) million, compared to $4.2 million in the prior year period.

Second Quarter 2022 Results
Total revenues in the second quarter were $25.7 million, a decrease from revenues of $32.8 million in the prior year period. Healthcare revenues in the second quarter of 2022 were $21.8 million, an increase of 17% from revenues of $18.6 million in the prior year period. Within Healthcare, claims-based services revenue in the second quarter of 2022 was $9.3 million, while revenues from eligibility-based services in the second quarter was $12.4 million.
“The second quarter of 2022, marked yet another quarter of strong year-over-year growth in our healthcare revenues supported by our robust sales pipeline and steady implementation conversion,” stated Simeon Kohl, President of Performant. “We are also pleased to announce that Melissa Christ has joined Performant as Chief People Officer. Melissa brings over 20 years of experience in people strategy and working with high-growth companies. People are at the core of everything we do, and we are excited to have such an experienced leader to help navigate this important period of growth.”
Recovery revenues in the second quarter were $7 thousand, a decrease of 99.9% from revenues of $11.1 million in the prior year period due to the cessation of non-healthcare recovery activity which largely occurred by the end of 2021. Revenues from our Customer Care / Outsourced Services in the second quarter were $3.9 million, up $0.8 million compared to the prior year period.
Net loss for the second quarter was $3.2 million, or $(0.04) per share on a diluted basis, compared to a net loss of $1.5 million, or $(0.03) per share on a diluted basis, in the prior year period. Adjusted net loss for the second quarter was $2.9 million, or $(0.04) per share on a diluted basis, compared to adjusted net income of $0.5 million, or $0.01 per diluted share, in the prior year period. Adjusted EBITDA for the second quarter was $(1.4) million as compared to $4.2 million in the prior year period.
As of June 30, 2022, the Company had cash, cash equivalents, and restricted cash of approximately $18.2 million.

“Given our continued achievements in the second quarter, and in combination with the KPI and opportunity growth ahead of us, we remain pleased with how we are tracking toward current year expectations and more importantly, our long term goals,” stated Rohit Ramchandani, Senior Vice President of Finance and Strategy at Performant. “Despite a tumultuous macroeconomic climate we remain well capitalized and positioned to continue executing against our investment strategies, which will promote continued long-term growth. As we look ahead to the second half of the year, we are pleased to reiterate our Healthcare revenue and adjusted EBITDA guidance ranges for 2022 of $92-$96MM and $2-$4 million respectively.”



Note Regarding Use of Non-GAAP Financial Measures
In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share. These measures are not in accordance with accounting principles generally accepted in the United States of America (US GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net income (loss) to net income (loss) determined in accordance with US GAAP are included in the “Reconciliation of Non-GAAP Results” table at the end of this press release. We have included adjusted EBITDA and adjusted net income (loss) in this press release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. Accordingly, we believe that adjusted EBITDA and adjusted net income (loss) provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and board of directors. Our use of adjusted EBITDA and adjusted net income (loss) has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. In particular, many of the adjustments to our US GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.
Earnings Conference Call
The Company will hold a conference call to discuss its second quarter 2022 results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company’s website at investors.performantcorp.com. The conference call is also available by dialing 877-704-4453 (domestic) or 201-389-0920 (international).
A replay of the call will be available on the Company's website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13731883. The telephonic replay will be available approximately three hours after the call, through August 15, 2022.
About Performant Financial Corporation
Performant is a leading provider of technology-enabled audit, recovery, and analytics services in the United States with a focus in the healthcare payment integrity industry. Performant works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits) services to identify improper payments. The Company engages clients in both government and commercial markets. The Company also has a call center which serves clients with complex consumer engagement needs. Clients of the Company typically operate in complex and highly regulated environments and contract for their payment integrity needs in order to reduce losses on improper healthcare payments.
Powered by a proprietary analytic platform and workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.



Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's outlook for revenues, net income (loss), and adjusted EBITDA in 2022 and beyond. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, that the Company faces a long period to implement a new contract which may result in the incurring of expenses before the receipt of revenues from new client relationships, that the high level of revenue concentration among the Company's largest customers and any termination of or deterioration in the Company’s relationship with any of its significant clients would result in a material decline in revenues, that many of the Company's customer contracts are subject to periodic renewal, are not exclusive, do not provide for committed business volumes and may be changed or terminated unilaterally and on short notice, that the U.S. federal government accounts for a significant portion of the Company's revenues, that downturns in domestic or global economic conditions and other macroeconomic factors could harm the Company’s business and results of operations, that the Company may not have sufficient cash flows from operations to fund ongoing operations and other liquidity needs, that the Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, the material adverse impact of the COVID-19 pandemic on the Company's business, results of operations and financial condition as well as on the business operations and financial performance of many of its customers, that limitations on the scope of the Company's audit activity under its claims audit contracts may reduce revenue opportunities, that the Company’s indebtedness could adversely affect its business and financial condition and could reduce the funds available for other purposes and the failure to comply with covenants contained in its credit agreement could result in an event of default that could adversely affect its results of operations, that future legislative and regulatory changes may have significant effects on the Company's business, that failure of the Company's or third parties' operating systems and technology infrastructure could disrupt the operation of the Company's business and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company's financial condition and operating results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's annual report on Form 10-K for the year ended December 31, 2021 and subsequently filed reports on Forms 10-Q and 8-K. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations.
Contact Information
Richard Zubek
Investor Relations
925-960-4988
investors@performantcorp.com


PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
 June 30,
2022
December 31,
2021
 (Unaudited) 
Assets
Current assets:
Cash and cash equivalents$15,973 $17,347 
Restricted cash2,203 2,203 
Trade accounts receivable, net of allowance for doubtful accounts of $29 and $—, respectively
19,880 20,808 
Contract assets9,197 8,113 
Prepaid expenses and other current assets3,334 3,077 
Income tax receivable3,248 3,159 
Total current assets53,835 54,707 
Property, equipment, and leasehold improvements, net15,036 15,708 
Goodwill47,372 47,372 
Right-of-use assets2,647 3,235 
Other assets969 963 
Total assets$119,859 $121,985 
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of notes payable, net of unamortized debt issuance costs of $14 and $11, respectively
$736 $489 
Accrued salaries and benefits7,395 8,476 
Accounts payable963 1,124 
Other current liabilities2,124 3,732 
Contract liabilities366 634 
Estimated liability for appeals and disputes1,076 1,190 
Lease liabilities1,404 1,862 
Total current liabilities14,064 17,507 
Notes payable, net of current portion and unamortized debt issuance costs of $366 and $416, respectively
18,634 19,084 
Lease liabilities1,557 1,803 
Other liabilities1,179 1,168 
Total liabilities35,434 39,562 
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at June 30, 2022 and December 31, 2021 respectively; issued and outstanding 73,818 and 69,281 shares at June 30, 2022 and December 31, 2021, respectively
Additional paid-in capital140,506 133,662 
Accumulated deficit(56,088)(51,246)
Total stockholders’ equity84,425 82,423 
Total liabilities and stockholders’ equity$119,859 $121,985 



PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 Three Months Ended  
June 30,
Six Months Ended  
June 30,
 2022202120222021
Revenues$25,681 $32,842 $52,764 $64,232 
Operating expenses:
Salaries and benefits20,903 23,295 41,342 47,385 
Other operating expenses8,081 10,759 16,212 21,115 
Total operating expenses28,984 34,054 57,554 68,500 
Loss from operations(3,303)(1,212)(4,790)(4,268)
Interest expense(216)(2,126)(371)(3,472)
Loss before provision for income taxes(3,137)(1,489)(4,779)(5,891)
Provision for income taxes32 33 63 70 
Net loss$(3,169)$(1,522)$(4,842)$(5,961)
Net loss per share
Basic$(0.04)$(0.03)$(0.07)$(0.11)
Diluted$(0.04)$(0.03)$(0.07)$(0.11)
Weighted average shares
Basic73,502 55,516 71,698 55,167 
Diluted73,502 55,516 71,698 55,167 


PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Six Months Ended  
June 30,
 20222021
Cash flows from operating activities:
Net loss$(4,842)$(5,961)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss (gain) on disposal of assets and impairment of long-lived assets(15)674 
Depreciation and amortization2,260 3,040 
Right-of-use assets amortization588 1,015 
Stock-based compensation1,281 1,423 
Interest expense from debt issuance costs48 1,133 
Gain on sale of certain recovery contracts(382)(1,849)
Changes in operating assets and liabilities:
Trade accounts receivable928 3,417 
Contract assets(1,084)(1,304)
Prepaid expenses and other current assets(257)564 
Income tax receivable(89)(934)
Other assets(6)121 
Accrued salaries and benefits(1,081)(1,072)
Accounts payable(161)439 
Contract liabilities and other current liabilities(1,860)(1,147)
Estimated liability for appeals and disputes(114)3,486 
Lease liabilities(704)(1,167)
Other liabilities 12 (414)
Net cash (used in) provided by operating activities(5,478)1,464 
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements(1,589)(1,604)
Proceeds from sale of certain recovery contracts382 2,406 
Net cash (used in) provided by investing activities(1,207)802 
Cash flows from financing activities:
Repayment of notes payable(250)(7,650)
Debt issuance costs paid(2)(150)
Taxes paid related to net share settlement of stock awards— (633)
Proceeds from exercise of warrants5,563 23 
Net cash provided by (used in) financing activities5,311 (8,410)
Net decrease in cash, cash equivalents and restricted cash(1,374)(6,144)
Cash, cash equivalents and restricted cash at beginning of period19,550 18,296 
Cash, cash equivalents and restricted cash at end of period$18,176 $12,152 
Reconciliation of the Consolidated Statements of Cash Flows to the
Consolidated Balance Sheets:
Cash and cash equivalents$15,973 $9,949 
Restricted cash2,203 2,203 
Total cash, cash equivalents and restricted cash at end of period$18,176 $12,152 
Non-cash financing activities:
Recognition of earnout shares issued$— $801 
Recognition of warrants associated with notes payable $— $5,237 
Supplemental disclosures of cash flow information:
Cash paid for income taxes$238 $1,482 
Cash paid for interest$244 $2,340 


PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Results
(In thousands, except per share amount)
(Unaudited)
 Three Months Ended  
June 30,
Six Months Ended  
June 30,
 2022202120222021
(in thousands)(in thousands)
Adjusted EBITDA:
Net income (loss)$(3,169)$(1,522)$(4,842)$(5,961)
Provision for income taxes32 33 63 70 
Interest expense (1)
216 2,126 371 3,472 
Stock-based compensation723 774 1,281 1,423 
Depreciation and amortization1,158 2,024 2,260 3,040 
Impairment of long-lived assets— — — 636 
Severance expenses (4)
37 1,188 179 1,496 
Non-core operating expenses (5)
$1,397 1,908 
Gain on sale of certain recovery contracts (6)
(382)(1,849)(382)(1,849)
Adjusted EBITDA$(1,383)$4,171 $(1,064)$4,235 


 Three Months Ended  
June 30,
Six Months Ended  
June 30,
 2022202120222021
(in thousands)(in thousands)
Adjusted Net Income (Loss):
Net income (loss)$(3,169)$(1,522)$(4,842)$(5,961)
Stock-based compensation723 774 1,281 1,423 
Amortization of intangible assets (2)
— 558 — 617 
Amortization of debt issuance costs (3)
24 764 48 1,133 
Impairment of long-lived assets— — — 636 
Severance expenses (4)
37 1,188 179 1,496 
Non-core operating expenses (5)
1,397 1,908 
Gain on sale of certain recovery contracts (6)
(382)(1,849)(382)(1,849)
Tax adjustments (7)
(111)(779)(311)(1,475)
Adjusted net income (loss)$(2,876)$531 $(4,021)$(2,072)




PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Results
(In thousands, except per share amount)
(Unaudited)
Three Months Ended  
June 30,
Six Months Ended  
June 30,
2022202120222021
(in thousands)(in thousands)
Adjusted Net Income (Loss) Per Diluted Share:
Net income (loss)$(3,169)$(1,522)$(4,842)$(5,961)
Plus: Adjustment items per reconciliation of adjusted net income (loss)293 2,053 821 3,889 
Adjusted net income (loss)$(2,876)$531 $(4,021)$(2,072)
Adjusted net income (loss) per diluted share$(0.04)$0.01 $(0.06)$(0.04)
Diluted average shares outstanding (8)
73,502 60,617 71,698 55,167 
We are providing the following preliminary estimates of our financial results as follows:
Six Months EndedSix Months EndedYear Ended
June 30, 2022December 31, 2022December 31, 2021December 31, 2022
ActualEstimateActualEstimate
Adjusted EBITDA:
Net income (loss)$(4,842)$ (282) to (2,287)$(10,288)$ (5,124) to (7,124)
Provision for income taxes63 (413) to 68762 (350) to 750
Interest expense (1)
371 629 to 1,12911,313 1,000 to 1,500
Stock-based compensation1,281 719 to 1,7192,640 2,000 to 3,000
Depreciation and amortization2,260 2,490 to 3,4905,188 4,750 to 5,750
Impairment of long-lived assets— — 636 — 
Severance expenses (4)
179 (79) to 3212,160 100 to 500
Non-core operating expenses (5)
— 2,588 
Gain on sale of certain recovery contracts (6)
(382)— (2,403)(382)
Adjusted EBITDA$(1,064)$(1,064)$ 3,064 to 5,064$11,896 $ 2,000 to 4,000

(1)Represents interest expense and amortization of debt issuance costs related to our Credit Agreement and Prior Credit Agreement.
(2)Represents amortization of intangibles related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004.
(3)Represents amortization of debt issuance costs related to our Credit Agreement and Prior Credit Agreement.
(4)Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.
(5)Represents professional fees related to strategic corporate development activities.
(6)Represents gain on the sale of certain non-healthcare recovery contracts.
(7)Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.
(8)While net loss for the three months ended June 30, 2021 is ($1,522), the computation of adjusted net income results in adjusted net income of $531. Therefore, the calculation of the adjusted earnings per diluted share for the three months ended June 30, 2021 includes dilutive common share equivalents of 5,101 added to the basic weighted average shares of 55,516.


PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Results
(In thousands, except per share amount)
(Unaudited)
We are providing the following historical breakdown of the quarterly and annual revenue contributions under the new contribution breakdowns of our healthcare revenue results for the three and six months ended June 30, 2022, and for the years ended December 31, 2021 and 2020:
For the Three Months EndedFor the Six Months Ended
March 31, 2022June 30, 2022June 30, 2022
(in thousands)
Eligibility-based$14,215 $12,417 $26,632 
Claims-based9,149 9,339 18,488 
Healthcare Total23,364 21,756 45,120 
Recovery118 125 
Customer Care / Outsourced Services3,601 3,918 7,519 
Total$27,083 25,681 $52,764 


For the Three Months EndedFor the Year Ended
March 31, 2021June 30, 2021September 30, 2021December 31, 2021December 31, 2021
Eligibility-based$7,911 $11,577 $12,727 $16,061 $48,276 
Claims-based5,375 7,025 7,280 9,498 29,178 
Healthcare Total13,286 18,602 20,007 25,559 77,454 
Recovery14,491 11,091 5,490 2,333 33,405 
Customer Care / Outsourced Services3,613 3,149 3,085 3,687 13,534 
Total$31,390 $32,842 $28,582 $31,579 $124,393 


For the Three Months EndedFor the Year Ended
March 31, 2020June 30, 2020September 30, 2020December 31, 2020December 31, 2020
Eligibility-based$10,949 $11,292 $13,480 14,126 $49,847 
Claims-based6,575 3,301 4,086 4,739 18,701 
Healthcare Total17,524 14,593 17,566 18,865 68,548 
Recovery24,265 16,167 15,443 17,521 73,396 
Customer Care / Outsourced Services4,099 3,025 3,219 3,650 13,993 
Total$45,888 $33,785 $36,228 $40,036 $155,937 



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