Delaware | 001-35628 | 20-0484934 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | 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)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits |
PERFORMANT FINANCIAL CORPORATION | ||
By: | /s/ Ian Johnston | |
Ian Johnston | ||
Chief Accounting Officer |
• | Total revenues of $39.8 million, compared to $33.3 million in the prior year period, up 19.5% |
• | Net loss of $5.3 million or $(0.10) per diluted share, compared to net income of $0.5 million, or $0.01 per diluted share, in the prior year period |
• | Adjusted EBITDA of $2.5 million, compared to $2.0 million in the prior year period |
• | Adjusted net loss of $0.4 million, or $(0.01) per diluted share, compared to adjusted net income of $1.3 million or $0.02 per diluted share, in the prior year period |
• | Total revenues of $155.7 million, compared to $132.0 million in 2017, growth of 18.0% |
• | Net loss of $8.0 million, or $(0.15) per diluted share, compared to net loss of $12.7 million, or $(0.25) per diluted share, in 2017 |
• | Adjusted EBITDA of $(5.2) million, compared to $9.2 million in 2017 |
• | Adjusted net loss of $14.3 million, or $(0.27) per diluted share, compared to adjusted net loss of $7.5 million, or $(0.15) per diluted share, in 2017 |
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||
Consolidated Balance Sheets | |||||||
(In thousands, except per share amounts) | |||||||
(Unaudited) | |||||||
Assets | December 31, 2018 | December 31, 2017 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,462 | $ | 21,731 | |||
Restricted cash | 1,813 | 1,788 | |||||
Trade accounts receivable, net of allowance for doubtful accounts of $22 and $35, respectively | 20,879 | 12,494 | |||||
Prepaid expenses and other current assets | 3,420 | 12,678 | |||||
Income tax receivable | 179 | 6,839 | |||||
Total current assets | 31,753 | 55,530 | |||||
Property, equipment, and leasehold improvements, net | 22,255 | 20,944 | |||||
Identifiable intangible assets, net | 1,160 | 4,864 | |||||
Goodwill | 81,572 | 81,572 | |||||
Deferred income taxes | — | 468 | |||||
Other assets | 1,019 | 1,058 | |||||
Total assets | $ | 137,759 | $ | 164,436 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Current maturities of notes payable to related party, net of unamortized discount and debt issuance costs of $126 and $171, respectively | $ | 2,224 | $ | 2,029 | |||
Accrued salaries and benefits | 5,759 | 4,569 | |||||
Accounts payable | 1,402 | 1,518 | |||||
Other current liabilities | 3,414 | 3,347 | |||||
Deferred revenue | 1,078 | — | |||||
Estimated liability for appeals | 210 | 18,817 | |||||
Net payable to client | — | 12,800 | |||||
Total current liabilities | 14,087 | 43,080 | |||||
Notes payable to related party, net of current portion and unamortized discount and debt issuance costs of $2,345 and $3,245, respectively | 41,105 | 38,555 | |||||
Deferred income taxes | 22 | — | |||||
Earnout payable | 1,936 | — | |||||
Other liabilities | 3,383 | 2,476 | |||||
Total liabilities | 60,533 | 84,111 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Common stock, $0.0001 par value. Authorized, 500,000 shares at December 31, 2018 and 2017, respectively; issued and outstanding, 52,999 and 51,085 shares at December 31, 2018 and 2017, respectively | 5 | 5 | |||||
Additional paid-in capital | 77,370 | 72,459 | |||||
Retained earnings (accumulated deficit) | (149 | ) | 7,861 | ||||
Total stockholders’ equity | 77,226 | 80,325 | |||||
Total liabilities and stockholders’ equity | $ | 137,759 | $ | 164,436 |
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | $ | 39,730 | $ | 33,289 | $ | 155,668 | $ | 132,049 | |||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | 27,782 | 20,551 | 96,144 | 82,191 | |||||||||||
Other operating expenses | 12,409 | 13,925 | 58,333 | 55,863 | |||||||||||
Impairment of goodwill and intangible assets | 2,988 | — | 2,988 | 1,081 | |||||||||||
Total operating expenses | 43,179 | 34,476 | 157,465 | 139,135 | |||||||||||
Loss from operations | (3,449 | ) | (1,187 | ) | (1,797 | ) | (7,086 | ) | |||||||
Interest expense | (1,165 | ) | (1,289 | ) | (4,699 | ) | (6,972 | ) | |||||||
Interest income | 9 | 4 | 28 | 4 | |||||||||||
Loss before provision for (benefit from) income taxes | (4,605 | ) | (2,472 | ) | (6,468 | ) | (14,054 | ) | |||||||
Provision for (benefit from) income taxes | 660 | (2,993 | ) | 1,542 | (1,325 | ) | |||||||||
Net income (loss) | $ | (5,265 | ) | $ | 521 | $ | (8,010 | ) | $ | (12,729 | ) | ||||
Net income (loss) per share | |||||||||||||||
Basic | $ | (0.10 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.25 | ) | ||||
Diluted | $ | (0.10 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.25 | ) | ||||
Weighted average shares | |||||||||||||||
Basic | 52,991 | 51,004 | 52,064 | 50,688 | |||||||||||
Diluted | 52,991 | 51,599 | 52,064 | 50,688 |
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||
Consolidated Statements of Cash Flows | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
Twelve Months Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (8,010 | ) | $ | (12,729 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Loss on disposal of assets | 44 | 67 | |||||
Release of net payable to client related to contract termination | (9,860 | ) | — | ||||
Release of estimated liability for appeals due to termination of contract | (18,531 | ) | — | ||||
Derecognition of subcontractor receivable for appeals due to termination of contract | 5,535 | — | |||||
Derecognition of subcontractor receivable for overturned claims | 1,536 | — | |||||
Provision for doubtful account for subcontractor receivable | 1,868 | — | |||||
Impairment of goodwill and intangible assets | 2,988 | 1,081 | |||||
Depreciation and amortization | 10,234 | 10,888 | |||||
Deferred income taxes | 490 | 3,733 | |||||
Stock-based compensation | 2,750 | 3,740 | |||||
Interest expense from debt issuance costs | 1,221 | 1,336 | |||||
Earnout mark-to-market | (218 | ) | — | ||||
Write-off of unamortized debt issuance costs | — | 1,049 | |||||
Interest expense paid in kind | — | 331 | |||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable | (6,695 | ) | (1,010 | ) | |||
Prepaid expenses and other current assets | 895 | 8 | |||||
Income tax receivable | 6,660 | (4,812 | ) | ||||
Other assets | 69 | (148 | ) | ||||
Accrued salaries and benefits | 220 | 254 | |||||
Accounts payable | (445 | ) | 890 | ||||
Deferred revenue and other current liabilities | (657 | ) | (1,062 | ) | |||
Estimated liability for appeals | (76 | ) | (488 | ) | |||
Net payable to client | (2,940 | ) | (274 | ) | |||
Other liabilities | 773 | 120 | |||||
Net cash provided by (used in) operating activities | (12,149 | ) | 2,974 | ||||
Cash flows from investing activities: | |||||||
Purchase of property, equipment, and leasehold improvements | (7,645 | ) | (7,259 | ) | |||
Premiere Credit of North America, LLC cash acquired | 2,285 | — | |||||
Net cash used in investing activities | (5,360 | ) | (7,259 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of notes payable | (2,200 | ) | (55,513 | ) | |||
Debt issuance costs paid | (27 | ) | (934 | ) | |||
Taxes paid related to net share settlement of stock awards | (663 | ) | (385 | ) | |||
Proceeds from exercise of stock options | 187 | 155 | |||||
Borrowings from notes payable | 4,000 | 44,000 | |||||
Net cash provided by (used in) financing activities | 1,297 | (12,677 | ) | ||||
Effect of foreign currency exchange rate changes on cash | (32 | ) | (3 | ) | |||
Net decrease in cash, cash equivalents and restricted cash | (16,244 | ) | (16,965 | ) | |||
Cash, cash equivalents and restricted cash at beginning of year | 23,519 | 40,484 | |||||
Cash, cash equivalents and restricted cash at end of year | $ | 7,275 | $ | 23,519 | |||
Non-cash investing activities: | |||||||
Recognition of contingent consideration in acquisition | $ | 2,154 | $ | — |
Non-cash financing activities: | |||||||
Recognition of shares issued in acquisition | $ | 2,420 | $ | — | |||
Recognition of warrant issued in debt financing | $ | 249 | $ | 3,302 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid (received) for income taxes | $ | (6,228 | ) | $ | (353 | ) | |
Cash paid for interest | $ | 3,477 | $ | 4,284 | |||
Reconciliation of the consolidated statements of cash flows to the consolidated balance sheets: | |||||||
Cash and cash equivalents | $ | 5,462 | $ | 21,731 | |||
Restricted cash | $ | 1,813 | $ | 1,788 | |||
Total cash, cash equivalents and restricted cash at end of period | $ | 7,275 | $ | 23,519 |
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
Reconciliation of Non-GAAP Results | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Adjusted Earnings Per Diluted Share: | |||||||||||||||
Net income (loss) | $ | (5,265 | ) | $ | 521 | $ | (8,010 | ) | $ | (12,729 | ) | ||||
Plus: Adjusted items per reconciliation of adjusted net income | 4,889 | 760 | (6,306 | ) | 5,208 | ||||||||||
Adjusted Net Income (Loss) | $ | (376 | ) | $ | 1,281 | $ | (14,316 | ) | $ | (7,521 | ) | ||||
Adjusted Earnings Per Diluted Share | (0.01 | ) | 0.02 | (0.27 | ) | (0.15 | ) | ||||||||
Diluted average shares outstanding | 52,991 | 51,599 | 52,064 | 50,688 | |||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Adjusted EBITDA: | |||||||||||||||
Net income (loss) | $ | (5,265 | ) | $ | 521 | $ | (8,010 | ) | $ | (12,729 | ) | ||||
Provision for (benefit from) income taxes | 660 | (2,993 | ) | 1,542 | (1,325 | ) | |||||||||
Interest expense | 1,165 | 1,289 | 4,699 | 6,972 | |||||||||||
Interest income | (9 | ) | (4 | ) | (28 | ) | (4 | ) | |||||||
Transaction expenses (1) | — | — | — | 576 | |||||||||||
Depreciation and amortization | 2,633 | 2,507 | 10,234 | 10,888 | |||||||||||
Impairment of goodwill and intangible assets (4) | 2,988 | — | 2,988 | 1,081 | |||||||||||
CMS Region A contract termination (6) | — | — | (19,415 | ) | — | ||||||||||
Stock based compensation | 347 | 713 | 2,750 | 3,740 | |||||||||||
Adjusted EBITDA | $ | 2,519 | $ | 2,033 | $ | (5,240 | ) | $ | 9,199 | ||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Adjusted Net Income (Loss): | |||||||||||||||
Net income (loss) | $ | (5,265 | ) | $ | 521 | $ | (8,010 | ) | $ | (12,729 | ) | ||||
Transaction expenses (1) | — | — | — | 576 | |||||||||||
Stock based compensation | 347 | 713 | 2,750 | 3,740 | |||||||||||
Amortization of intangibles (2) | 3,150 | 207 | 3,758 | 898 | |||||||||||
Impairment of goodwill and intangible assets (4) | 2,988 | — | 2,988 | 1,081 | |||||||||||
Deferred financing amortization costs (3) | 258 | 346 | 1,221 | 2,385 | |||||||||||
CMS Region A contract termination (6) | — | — | (19,415 | ) | — | ||||||||||
Tax adjustments (5) | (1,854 | ) | (506 | ) | 2,392 | (3,472 | ) | ||||||||
Adjusted Net Income (Loss) | $ | (376 | ) | $ | 1,281 | $ | (14,316 | ) | $ | (7,521 | ) | ||||
Year Ended | |||||||
December 31, 2018 | December 31, 2019 | ||||||
Actual | Estimate | ||||||
Adjusted EBITDA: | |||||||
Net income (loss) | $ | (8,010 | ) | $ (18,460) to (26,445) | |||
Provision for (benefit from) income taxes | 1,542 | (500) to 500 | |||||
Interest expense | 4,699 | 5,500 to 6,500 | |||||
Interest income | (28 | ) | (40) to (55) | ||||
Depreciation and amortization | 10,234 | 9,500 to 10,500 | |||||
Impairment of goodwill and customer relationship (4) | 2,988 | — | |||||
CMS Region A contract termination (6) | (19,415 | ) | — | ||||
Stock-based compensation | 2,750 | 2,000 to 3,000 | |||||
Adjusted EBITDA | $ | (5,240 | ) | $ (2,000) to (6,000) |
(1) Represents costs and expenses related to the refinancing of our indebtedness. | ||||||||||
(2) Represents amortization of capitalized expenses related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004, an acquisition in the first quarter of 2012 to enhance our analytics capabilities, and an acquisition of Premiere Credit of North America, LLC in the third quarter of 2018. | ||||||||||
(3) Represents amortization of capitalized financing costs related to our Credit Agreement for 2018 and 2017, and amortization of capitalized financing costs related to our Prior Credit Agreement for 2017. | ||||||||||
(4) Represents intangible assets impairment charges related to Great Lakes customer relationship in 2018 and impairment charges related to our Performant Europe Ltd. subsidiary in 2017. | ||||||||||
(5) Represents tax adjustments assuming a marginal tax rate of 27.5% for 2018, and 40% for 2017. | ||||||||||
(6) Represents the net impact of the termination of our 2009 CMS Region A contract during 2018, comprised of release of an aggregate of $28.4 million of the estimated liability for appeals and the net payable to client balances into revenue, net of derecognition of $9.0 million of prepaid expenses and other current assets, with a charge to other operating expenses, reflecting accrued receivables associated with amounts due from subcontractors for decided and yet-to-be decided appeals. |