Performant Financial Announces Financial Results for Second Quarter 2018

Performant Financial (NASDAQ:PFMT), a leading provider of technology enabled recovery and related analytics services reported revenues of US$31.3 million for the second quarter ended June 30, 2018.

The company had a net loss of US$3.6 million or 0.07 per diluted share as compared to a net loss of US$2.4 million in the prior year period.

Performant also announced that it has signed an agreement to acquire Premiere Credit of North America. Premiere, a leading provider of recovery services is an affiliate of ECMC Group.

As quoted in the press release:

Second Quarter Financial Highlights

• Adjusted EBITDA of $0.1 million, compared to adjusted EBITDA of $5.0 million in the prior year period
• Adjusted net loss of $2.5 million, or $(0.05) per diluted share, compared to an adjusted net loss of $0.5 million or $(0.01) per diluted share in the prior year period

Second Quarter 2018 Results

Student lending revenues in the second quarter were $17.5 million, a decrease of $10.0 million, or 36.4% from revenues of $27.5 million in the prior year period. Reduced revenues from Great Lakes Higher Education Guaranty Corporation accounted for 75% of this decrease year over year, with revenues of $7.6 million in the second quarter of 2018, compared to $15.2 million in the prior year period.  All other Guaranty Agencies accounted for revenues of $9.9 million in the second quarter of 2018, compared to $12.2 million in the prior year period. Student loan placement volume (defined below) during the quarter totaled $0.5 billion, compared to $0.9 billion in the prior year period.

Healthcare revenues in the second quarter were $6.1 million, up from $2.1 million in the prior year period. Combined Medicare MSP and audit recovery revenues were $3.5 million in the second quarter, an increase of $3.4 million from the prior year period. Commercial healthcare clients contributed revenues of $2.6 million, an increase of $0.6 million or 30.0% from the prior year period.

Other revenues in the second quarter were $7.7 million, up from $6.4 million in the prior year period.

Net loss for the second quarter of 2018 was $3.6 million, or $(0.07) per share on a fully diluted basis, compared to net loss of $2.4 million or $(0.05) per share on a fully diluted basis in the prior year period. Adjusted EBITDA for the second quarter of 2018 was $0.1 million as compared to $5.0 million in the prior year period. Adjusted net loss for the second quarter of 2018 was $2.5 million, resulting in $(0.05) per share on a fully diluted basis. This compares to adjusted net loss of $0.5 million or $(0.01) per fully diluted share in the prior year period.

As of June 30, 2018, the Company had cash, cash equivalents and restricted cash of approximately $9.8 million.

Agreement to Acquire Premiere

“We believe this transaction is positive on numerous fronts, including addition of a complimentary business which enhances our strategy and generated approximately $23 million of revenue over the last twelve months. We are targeting close of the transaction in September,” said Jeff Haughton, President and Chief Operating Officer of Performant.

The Company also announced that it has signed an agreement to acquire Premiere Credit of North America (“Premiere”).  Premiere is a leading provider of recovery services to government, student loan and commercial clients with approximately 330 employees located primarily in Indianapolis and Nashville.  Premiere is an affiliate of ECMC Group, a Guaranty Agency with one of the largest student loan portfolios and a longstanding client of Performant.

Performant will issue one million shares of its common stock at the closing and will be obligated to issue additional shares of common stock based on revenues associated with the Premiere business over the next five years (estimated to total approximately one million additional shares based on full achievement of revenue targets).  Closing of the acquisition is subject to the satisfaction of customary closing conditions.  Performant and ECMC will also expand their existing commercial relationship.  At closing, Performant and ECMC will enter into a long-term agreement to be ECMC’s primary student loan recovery vendor.  Performant will also enter into amendments to its existing credit agreement with ECMC, including an extension of the maturity date by one year to August 2021 and a $10 million increase in Performant’s additional borrowing capacity under this facility. Additional information is available on the slide deck which can be found on Performant’s website.

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