Performant Financial (US:PFMT)2022-11-12 16:12Financial Data and Key Metrics Changes - Total revenues for Q3 2022 were $27.2 million, with Healthcare revenues at $23.5 million, representing an 18% increase year-over-year [23][34] - Adjusted EBITDA for Q3 was a loss of $275,000 compared to a profit of $2.7 million in the prior year [26] - Operating expenses increased to $29.5 million, up $1 million from Q3 of the previous year, primarily due to salary expenses related to hiring for healthcare markets [30] Business Line Data and Key Metrics Changes - Healthcare revenue increased by approximately 18% year-over-year, with claims auditing revenues rising nearly 43% to $10.4 million [8][27] - Revenue from eligibility services was $13.1 million, a modest increase from $12.7 million in the prior year [28] - Customer Care/Outsourced Services revenues were $3.6 million, a slight decline from the previous quarter but in line with expectations [24] Market Data and Key Metrics Changes - The company completed 15 new implementations year-to-date, with an additional seven expected by the end of 2022 [10] - The sales pipeline remains robust, with expectations for balanced growth trends across all healthcare product offerings [29] Company Strategy and Development Direction - The company is focused on refining technology to create value for clients and open new market opportunities, leveraging a healthcare data repository of over 200 million covered lives [14] - The recent award of an 8.5-year contract by CMS as the Region 2 recovery audit contractor reinforces the company's competitive position [17][19] - The transition to a pure-play healthcare technology company is expected to strengthen the company's market position and operational capabilities [22][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2022 Healthcare revenue guidance of $92 million to $96 million despite delays in some implementations [9][34] - The macroeconomic environment is prompting payers to seek cost reductions, which may lead to increased outsourcing of payment integrity functions [40][41] - The company anticipates that the RAC Region 2 contract will initially depress margins but may accelerate growth in the medium term [45] Other Important Information - The company has recalibrated its operational footprint, selling buildings previously used for call center operations, resulting in a net gain of $1.1 million [33] - The company maintains a strong cash position, positioning itself well for organic growth opportunities [33] Q&A Session Summary Question: Impact of RAC Region 2 contract on commercial momentum - Management noted that the confirmation of the RAC Region 2 contract has created positive buzz among commercial clients, although it is too early to assess direct impacts on the pipeline [39] Question: Economic sensitivity and outsourcing potential - Management indicated that the business is relatively recession-proof, with increased conversations about cost reduction among payers, potentially leading to more outsourcing of payment integrity functions [40][41] Question: Future implementation cadence and margin evolution - Management confirmed expectations of five to seven new program implementations per quarter going forward, with long-term margin goals in the 20s [43][45] Question: Revised EBITDA guidance and cost breakdown - Management clarified that the majority of the revised EBITDA guidance is due to unforeseen excess costs related to the transformation from legacy markets, with some costs associated with the RAC Region 2 implementation still uncertain [47][48]