Performant Financial (PFMT) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2019 was nearly $36 million, up over 14% compared to the prior year period [11] - Adjusted EBITDA for Q2 was a loss of approximately $3 million, compared to a profit of just over $119,000 in the prior year period [11] - Total expenses for Q2 were $40.1 million, which was $5.4 million higher than the prior year period [17] Business Line Data and Key Metrics Changes - Health-care revenues in Q2 exceeded $9 million, a 52% increase year-over-year [12] - Federal health-care client revenues were approximately $5 million, up nearly 40% year-over-year [12] - Commercial health-care revenues accounted for over $4.4 million, compared to $2.6 million in the prior year period [13] - Total recovery revenue in Q2 was just over $22 million, approximately 8% higher than the second quarter of last year [15] - Customer care and outsourced services revenues were nearly $4.5 million, down $6.1 million versus last year [16] Market Data and Key Metrics Changes - Health-care revenues for the first half of 2019 were $18.3 million, up 90% over the prior year period [13] - Year-to-date recovery revenue was $43.5 million, up $1.1 million or 2.6% versus the prior year period [15] Company Strategy and Development Direction - The company is focused on technology investment to create capabilities that exceed current market services [7] - The platform, Performant Insight, is seen as a disruptive health-care technology, actively taking market share from established players [8] - The company aims to achieve $200 million in revenue with margins in excess of 20% by 2021 [18] Management's Comments on Operating Environment and Future Outlook - Management expects strong double-digit growth to continue into the mid- and long-term future [10] - The company is confident in meeting its 2019 revenue and EBITDA guidance of $158 million to $168 million and a loss of $2 million to $6 million, respectively [18] - Management anticipates that most growth will come from the health-care business [19] Other Important Information - The company is transforming from a dependency on the student lending industry to a diversified offering across various sectors [18] - The company is executing against increasing the number of office adds for CMS recovery audit contracts [25] Q&A Session Summary Question: On the cost basis and revenue crossover - Management sees expenses at a steady rate with a slight uptick due to a large health-care contract ramping up [22] Question: Drivers of federal RAC and MSP contracts being down - Management noted occasional delays but expects an upward trend as they move into the third quarter [24] Question: Differentiation in commercial health care offerings - The company utilizes a proprietary analytical platform to drive value and has a strong customer service organization [26][27] Question: Outlook for student loan placements - Management believes there are seven plus years of servicing left in the FFELP funnel and sees continued opportunity for stability [30] Question: Comfort level with the balance sheet - Management feels confident about meeting covenants and expects good results as they enter 2020 [33][34] Question: Confidence in achieving 2021 targets - Management is confident due to understanding contract cycles and ongoing technology improvements [36]