Performant Financial Corporation (Nasdaq: PFMT), a leading provider of technology-enabled cost containment and related analytics services, today reiterated its intention to focus future investments on the long-term growth and profitability of its Healthcare operations, which for the full year 2020 had revenues of $68.5 million, an increase of greater than 58% as compared to 2019.
Additionally, the Company is also reporting that it has signed an agreement to sell certain of its non-healthcare, recovery contracts to a buyer that specializes in outsourced receivables solutions. As a result of the transaction, we modified the terms of our credit agreement with ECMC to partially de-lever the Company, extend the maturity one year to August 2022, as well as achieve a modified covenant structure to support continued investment and growth. The credit agreement modifications will become effective upon the closing of the recovery contracts sale.
"Our decision to sell these recovery contracts reflects our plan to fully dedicate our resources and efforts on expanding our position in the Healthcare market, where we continue to demonstrate success in taking business from long-term industry incumbents. Our intention is to build upon our recent achievement of five consecutive quarters of positive EBITDA, while still delivering what we believe is best-in-class service that our clients have come to expect," stated Lisa Im, CEO of Performant.
"The COVID-19 pandemic disrupted our legacy Recovery business, which included the acceleration of already declining student loan recovery revenues," continued Im. "We will continue to fulfill our current recovery contracts, but do not plan to renew or restart existing contracts, nor pursue new non-healthcare recovery opportunities. We believe that our strengthened focus on the high growth, healthcare market is in the best interest of our shareholders."
"We continue to invest in technology and attract industry leading talent to further scale our healthcare business. We believe we have a solid foundation for meaningful growth in the short and medium term, and we will always remain a client-centric company to our core," stated Simeon Kohl, SVP and GM Healthcare. "With the ongoing market consolidation, Performant has emerged as the leading independent Payment Integrity company capable of delivering innovative cost management solutions for healthcare payors of all sizes. This unique position enables us to tailor our services to the needs of each client, while refining our technology-assets to support future growth across both government and commercial markets. We are excited to strengthen our commitment to healthcare, focusing our resources on helping our clients manage the rising cost of healthcare services."
"We expect revenues from our Healthcare market in 2021 will be in the range of $83 and $90 million, which represents continued strong top line growth, along with positive EBITDA for 2021. However, we expect to record cash charges of between $1.5 million and $2.5 million during the second and third quarters of 2021 consisting primarily of severance and labor costs, which will result in near-term pressure on our results," added Im.
Truist Securities, Inc. is acting as financial advisor to Performant, and Pillsbury Winthrop Shaw Pittman LLP is serving as legal advisor to Performant.
About Performant Financial Corporation
Performant helps government and commercial organizations enhance revenue and contain costs by preventing, identifying and recovering waste, improper payments and defaulted assets. Performant is a leading provider of these services in several industries, including healthcare, student loans and government. Performant has been providing recovery audit services for more than nine years to both commercial and government clients, including serving as a Recovery Auditor for the Centers for Medicare and Medicaid Services.
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 our outlook for revenues, net income (loss), and adjusted EBITDA in 2020 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, the material adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition as well as on the business operations and financial performance of many of our customers, that the Company may not have sufficient cash flows from operations to fund ongoing operations and other liquidity needs, 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 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, the high level of revenue concentration among the Company's largest customers and any termination in the Company's relationship with any of our significant clients would result in a material decline in our 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 Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, that continuing limitations on the scope of our audit activity under our RAC contracts have significantly reduced our revenue opportunities with this client, that the U.S. federal government accounts for a significant portion of the Company's revenues, 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, 2020 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.
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