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1. Company Snapshot

1.a. Company Description

Performant Financial Corporation provides technology-enabled audit, recovery, outsource customer, and related analytics services in the United States.The company offers recovery services to the clients in Federal guaranteed student loan program and private institutions; identifies and tracks defaulted borrowers across its clients' portfolios of student loans; rehabilitates and recovers past due student loans; provides tax recovery services to federal, state and municipal agencies; recovers government debt for various federal agencies; and offers audit and recovery services to identify improper healthcare payments for public and private healthcare clients.It also identifies improper payments resulting from incorrect coding, procedures that were not medically necessary, incomplete documentation, and claims submitted based on outdated fee schedules; and provides first party call center and other outsourced services.


In addition, the company offers Performant Insight that provides various services, such as post- and pre-payment audit of healthcare claims, detection of fraud, waste and abuse of healthcare claims, coordination of benefits, and pharmacy fraud detection services.The company was formerly known as DCS Holdings, Inc.and changed its name to Performant Financial Corporation in 2005.


Performant Financial Corporation was founded in 1976 and is headquartered in Livermore, California.

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1.b. Last Insights on PFMT

Recent headwinds, including the election cycle and the Change Healthcare cybersecurity breach in February, have impacted Performant Financial's performance. The company's decision to further reduce customer care services will also negatively affect top-line growth. Despite these challenges, management reiterated full-year projections for profitability and core healthcare revenues in the recent Q3/2024 earnings release. The company's strategic shift to focus on healthcare payment integrity, marked by its name change to Performant Healthcare, Inc. and upcoming ticker symbol change to "PHLT", may also pose uncertainty in the short term. According to a recent analyst report, the company's Q3 results were in line with expectations, but the outlook remains cautious, earning a "Hold" rating.

1.c. Company Highlights

2. Performant Healthcare Delivers Strong Q1 with 22% Revenue Growth and Improved Margins

Performant Healthcare, Inc. reported a robust first quarter, with total revenue of $33.3 million, marking a 22% year-over-year increase. This growth was fueled by strong performance across both claims-based and eligibility services. Claims-based revenue surged 38% to $17.1 million, while eligibility revenue grew 20% to $16.1 million. The company also posted positive adjusted EBITDA of $3.3 million, a significant turnaround from the $1.2 million loss in the same period last year. On the profitability front, the company reported an EPS of -0.01, beating consensus estimates of -0.02, showcasing improving operational efficiency.

Publication Date: May -10

📋 Highlights
  • Strong Q1 Revenue Growth: Healthcare revenue increased by 29%, with total revenue reaching $33.3 million, up 22% year-over-year.
  • Improved Profitability: Adjusted EBITDA turned positive at $3.3 million, a significant improvement from the $1.2 million loss in Q1 2024.
  • Revenue Guidance Raised: Full-year revenue guidance increased to $133-$135 million, with adjusted EBITDA guidance now $9-$10 million.
  • Commercial Program Expansion: 13 new commercial programs implemented, expected to add $4.5-$5 million in annualized revenue.
  • Eligibility Services Growth: Eligibility revenue grew 20% year-over-year, contributing 48% of total revenue, driven by enhanced data enrichment capabilities.

Revenue Growth and Margin Expansion

The strong top-line growth was complemented by disciplined cost management, leading to a notable expansion in margins. Adjusted EBITDA margins improved significantly, reflecting the company's ability to scale its operations efficiently. Management highlighted that this performance underscores the effectiveness of its cost-control measures and the growing demand for payment integrity services. As Rohit Ramchandani, CFO, noted, "The growth was driven by a mix of implementations and strong commercial performance," emphasizing the balanced contribution from both claims-based and eligibility revenue streams.

Commercial and Government Momentum

The company's commercial segment continues to be a key growth driver, with 13 new commercial programs implemented during the quarter. These programs are expected to contribute $4.5 to $5 million in annualized revenue, highlighting the strong demand for payment integrity solutions. Additionally, the federal government business remains stable, with a significant presence in two RAC regions, a nationwide Medicare contract, and a contract with HHS. The recent implementation of the New York State Medicaid RAC program further strengthens the company's position in the government sector, with expectations of double-digit annualized revenue.

Valuation and Outlook

Performant Healthcare's strong Q1 performance has positioned it well for future growth. The company raised its full-year revenue guidance to $133 to $135 million and adjusted EBITDA guidance to $9 to $10 million, reflecting confidence in its ability to sustain momentum. From a valuation perspective, the stock currently trades at a P/S ratio of 1.59 and a P/B ratio of 2.53, which appears reasonable given the growth prospects and improving profitability. However, the negative ROIC and ROE metrics (-10.4% and -12.97%, respectively) suggest that the company still needs to demonstrate sustained profitability over the long term.

3. NewsRoom

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Performant Healthcare, Inc. Ticker Symbol Change to “PHLT”

Dec -16

Source: businesswire.com

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Performant Announces Name Change to Performant Healthcare, Inc. – Concludes Strategic Shift to Healthcare

Dec -10

Source: businesswire.com

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Performant Financial: In-Line Quarter And Outlook Despite Headwinds - Hold

Nov -27

Source: seekingalpha.com

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Performant Financial (PFMT) Reports Q3 Loss, Misses Revenue Estimates

Nov -06

Source: zacks.com

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Performant Financial Corporation to Present at August 20th Virtual Investor Summit Microcap Event

Aug -15

Source: accesswire.com

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Performant Financial: Decent Quarter But Further Progress Required

Aug -13

Source: seekingalpha.com

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Performant Financial Corporation (PFMT) Q2 2024 Earnings Call Transcript

Aug -08

Source: seekingalpha.com

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Performant to Participate in June Investor Conferences

May -30

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.34%)

6. Segments

Healthcare - Eligibility-based

Expected Growth: 10%

Strong demand for eligibility-based services, driven by the Affordable Care Act and Medicaid expansion, fuels 10% growth. Increasing healthcare costs and complexity also boost demand for Performant Financial's expertise in eligibility determination and enrollment services.

Healthcare - Claims-based

Expected Growth: 11%

Performant Financial Corporation's 11% growth in Healthcare - Claims-based segment is driven by increasing demand for claims resolution services, expansion of Medicare and Medicaid programs, and rising healthcare expenditure. Additionally, the company's proprietary technology and analytics capabilities enable efficient claims processing, contributing to its growth momentum.

Customer Care / Outsourced Services

Expected Growth: 9%

Performant Financial Corporation's 9% growth in Customer Care/Outsourced Services is driven by increasing demand for efficient debt recovery, expansion into new markets, and strategic partnerships. Additionally, investments in technology and process improvements have enhanced operational efficiency, allowing the company to scale and capture market share.

Recovery

Expected Growth: 13%

Performant Financial Corporation's 13% growth is driven by increasing demand for its recovery services, expansion into new markets, and strategic partnerships. Additionally, the company's focus on technology innovation, process efficiencies, and talent acquisition have enhanced its operational capabilities, leading to improved revenue cycle management and stronger client relationships.

7. Detailed Products

Recovery and Resolution

Performant Financial Corporation provides recovery and resolution services to help clients recover debts and resolve delinquent accounts.

Customer Service and Sales

Performant offers customer service and sales solutions to help clients engage with their customers and drive revenue growth.

Business Process Outsourcing (BPO)

Performant provides business process outsourcing services to help clients streamline operations, reduce costs, and improve efficiency.

Analytical and Consulting Services

Performant offers analytical and consulting services to help clients make data-driven decisions and improve business outcomes.

Digital Channels and Communications

Performant provides digital channels and communications solutions to help clients engage with customers and improve customer experience.

8. Performant Financial Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Performant Financial Corporation is moderate, as there are some alternative financial services available to customers, but they are not highly attractive or widely available.

Bargaining Power Of Customers

The bargaining power of customers for Performant Financial Corporation is low, as customers have limited options and are not highly concentrated, giving the company more power in negotiations.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Performant Financial Corporation is moderate, as suppliers have some bargaining power due to the specialized nature of their services, but the company has some flexibility in its supply chain.

Threat Of New Entrants

The threat of new entrants for Performant Financial Corporation is high, as the financial services industry is highly competitive and new entrants can easily enter the market with innovative products and services.

Intensity Of Rivalry

The intensity of rivalry for Performant Financial Corporation is high, as the financial services industry is highly competitive, with many established players and new entrants vying for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 6.11%
Debt Cost 4.53%
Equity Weight 93.89%
Equity Cost 4.53%
WACC 4.53%
Leverage 6.51%

11. Quality Control: Performant Financial Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Viad

A-Score: 5.3/10

Value: 9.0

Growth: 4.9

Quality: 6.1

Yield: 0.0

Momentum: 6.5

Volatility: 5.3

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Kodak

A-Score: 4.5/10

Value: 7.2

Growth: 4.7

Quality: 3.8

Yield: 0.0

Momentum: 9.0

Volatility: 2.3

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DLH

A-Score: 3.8/10

Value: 8.0

Growth: 5.8

Quality: 3.9

Yield: 0.0

Momentum: 1.0

Volatility: 4.0

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Odyssey Marine Exploration

A-Score: 3.8/10

Value: 6.0

Growth: 5.2

Quality: 6.1

Yield: 0.0

Momentum: 5.0

Volatility: 0.3

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Spire Global

A-Score: 3.7/10

Value: 6.6

Growth: 4.6

Quality: 3.0

Yield: 0.0

Momentum: 7.0

Volatility: 1.3

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Performant Financial

A-Score: 3.4/10

Value: 4.6

Growth: 3.9

Quality: 4.5

Yield: 0.0

Momentum: 2.5

Volatility: 4.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

3.56$

Current Price

3.56$

Potential

-0.00%

Expected Cash-Flows