Performant Healthcare (PHLT) 7 Aug 242024 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to Performant Financial's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, August 7, 2024.

I would now like to turn the conference over to Jon Bozzuto, Head of Investor Relations. Please go ahead.

Thank you, operator. everyone. afternoon, Good should release you a of copy By the have company's earnings for results. second the now, received quarter XXXX

have Kohl, Officer. Chief is copy Officer; and portion On not, Chief the Executive call you Financial Ramchandani, today's Simeon Relations website. of available be will Rohit Investor our If on a

those made These I'd financial including guidance, our during begin, you in statements we and including subject described to Before risks that some those call. the filings SEC. forward-looking statements. company's today, remind like of are to differ described the with comments results Actual the are materially uncertainties, the from may

new In table financial to company addition, undertake measures forward-looking the this to discussed made as forward-looking on expectations. in GAAP the are any during our reconciled release. does or all Also, to of circumstances today, measures call revised non-GAAP not most statements and are update comparable press the based attached directly all statements

turn to I like call Simeon would to Kohl. Sim? now the over

you, reported positive second million. thank operational our financial compared afternoon, will health the Good revenues through This for XXXX, highlighted of followed call. accomplishments, earnings joining $X.X Rohit, us we our for results. care Thank everyone, quarter walk XX% by you growth you afternoon, to by EBITDA in our results, of will quarter and second and I Jon. share who

demonstrate our approach before penetrating second the in us revenue disciplined as quarter, growth In effectiveness well profitability. to our our EBITDA double-digit significant positive that as market and the driving opportunity lies year-over-year

as highlight operational and results. each client these our needs, Our on second unchanged: innovate we remained quarter these touch I'll deliver prioritized strategy to of excellence. achieve results has continuously

work, as we at implemented new year-to-date, quarter, implemented proposition collectively will steady state. XX of of effectively services million including which our our new current and our work, approximately statements roster. continue XX clients value to we past prospective we revenue for have generate This $X annualized we to adding clients. estimate And Demand X remains statements to both demonstrate strong in

required encouraging ability it and and meaningful from is And the deliver a see their our returns to timely their significant clients client bandwidth on to despite and investment. our for switch testament legacy to partners choose continue implementations, Performant, to trust

with important Our business started government CMS today. engagement, a operations RAC single remain of and contracts our backbone an

government credibility our and through We Region ramp we our relationship growing RAC to continue built CMS, about X. have federal are with as strong business with optimistic we the

year, This election industry. uncertainty our however, for presents potential

take oversight agencies conservative programs. with several more seeing a approach are We

measured So cycle. to are outcome. prior election will we this confident we commitment government's and likely multiple limited the unchanged, to will transparency both payment no accuracy anticipate more matter federal remain approach state be the Having the election that and elections, current navigated

Staying see on to theme, the in opportunity market. $XXX $XXX an the we government to state million continue million

been as award have with our third-party state continue both for RFPs for and active our audit refine liability We contract first we and recovery solutions. wait the to strategy

The a to evolving and care, minor a reimbursements impact within highlight redeterminations. including meaningful on would processing, challenge had pools to One care constant Change date. only risk we and our the numerous face claims outage, adjustments health has challenges, and is clients Change had has Performant Healthcare Healthcare due impact adjudication which and Medicaid outage fortunately delivery. is Change on

clients we their decision-making are seeing they new From by priorities. as near-term slower an sales implementations standpoint, and adjust

for and expect to the While we our growth of positive long-term have seen impact our Healthcare not results do isolated drive the strength Change we services clients, incident our strategy. delays, continues to

on results in receiving resulting with for in operations to to we temporary the no delays continues Change of And assessment. in support quick date outage be the Performant. that loss impact operational the to existing anticipated initially likely our opportunity have restoration claims, seen We Healthcare

will We operational we minimal but operations, have for to date, our monitor downstream seen to disruption. again, impacts continue to

topic the and of security comprehensive role-based and underscore through our practices. This access to standard includes audits data controls, strategy. security, and and us I'd anomaly ensure tests with robust We On encryption, data to regular dedication vulnerability compliance vendor data our multitiered safeguarding protection external management. entrusted and to penetration industry internal the requirements best detection undergo

SOX, standards security SOC rigorous with certifications, audits. and Performant's And by CMS along HITRUST, validated including control annual are

and with, focus the predictability for claims, firmly care. consistent pay challenges greater remains matters that high-quality, contend of believe them yielding there delivery value we more our clients While what as help to will on proposition accurately our I be cost-effective ensuring allowing clients always to our most: patient

quarter, our operational business. to productivity million second To claims-based million, shared drive the we efforts. in $X.X efficiency primary particularly to do this, quarter. positive greater $X.X while of we efficiency, prior In ahead increased often year's profitability prioritized achieved and to of drive EBITDA our through that achieve the have our has profitability. we revenues, Rohit path is opportunities have to Turning

nicely components The folded margin will year, achieving which to in acquisition in technology this be these Turing gains. one of earlier of Project has RecordsOne the major

this accuracy As a improving integrates workflow, intelligence-based artificial into auditors. reminder, the and efficiency audit our of solution medical our

and by have development been RecordsOne in to the encouraged active Performant this team of key powerful who plan, pleased highly for adoption doing AI We technology joined the according process. The alongside remain prospects technology. are and be integration this remain has we progressing so integration, from members plan to and

initiative core for purchase deliver employees step corporate towards journey one By pillars. which employee our care our of our ownership company, plan. results best-in-class, clients. culture approved we is As continue mentality, health an This the we I encouraging pure-play our a of that ownership, our significant best fostering becoming a a thrilled an am have is empower to stock shareholders to

development, confident that accomplishments. aligning be of success the it to of in I And growth, this there's I our of success. greater our am members share strengthen plan speak the a will when and about team growth This our our accelerate team and to company's to enable direction palpable excitement with excellence personal prouder commitment that company. and I couldn't will number collective

Overall, I results. am by our second quarter encouraged

to deliver within which our payment remains opportunities dividends. gains continue for investments increase finally, tangible solutions Operationally, to ever. a system strong technology and macro control integrity as led We are clients, to paying from care has for the efficiency for And as to growth. future costs productivity more need perspective, health help our our

Rohit Financial With Ramchandani, financials. hand to a it that, of I'll Officer, discussion Chief for Rohit? the our over

Sim. Thanks,

revenues were $XX.X included by we the Total health revenues the in of results million, the second encouraged Our $XX.X remain our XXXX remainder in for care quarter quarter which have exceeded the year. expectations, company prospects and of million. of

decline care/outsourced of million million for business services customer from quarter, the $X.X Our during previous revenue year. the $X.X accounted of the a

for eagerly the resumption guided a expectations future our are growth achieve targets federal service We numerous student of loan anticipating to and us line. which programs, allow this would

care second quarter year grew prior Our implementations. successfully year-over-year XX% as health revenue a of result ramping

commercial growth. also claims almost million with and to XX% the an Our revenues government in roughly Both way claims-based business, the led $XX of auditing, year-over-year. our contributed as known representing this clients increase quarter, of

as continued RAC draws that to commercial, while top We Within X, with we Region though sector anticipate our to election contributing federal more growth, growth strong RAC well the successfully implementations expected, have continued government approach taken this programs scaled X do clients scale. continued the existing as contract conservative in recognize oversight the commercial as as of Region near. the scale line

and RAC wins Looking of state forward, we Region of and flows continue region RAC clients, other government or with ebbs to RAC ramping strong would CMS commercial federal growth growth the meaningful foundation, X. healthy anticipate in programs alongside the the existing a beyond support

in the to last roughly million, $XX.X were an Eligibility revenues increase for year. of quarter representing comparison X%

a about with mature CRC now our XXXX, think reminder on relationship business our the we eligibility contract. that CMS MSP, new As includes

refine we and our eligibility to clients assets, our more our optimize aiming opportunities, data With use and data commercial to effectively. continue

we leverage streamlines clients. analytics high-quality, workflow, approach we only improving operational Additionally, efficiency. eliminate accurate positives but additional also and results This our not processes, deliver our our our services to further from false to advanced ensures

well setting ourselves future for sustainable are growth. up We

As at we $X implementations revenues worth state. at in steady year-to-date mentioned, Sim approximately annualized are now million

fluctuate these basis. quarterly discussed, can As we've a often work of the statements value of on

This quarter, to market support continuing players. new X welcome amongst our middle thesis clients, value net we did

these Our or annualized a to contracts confident execute We growth. that to XXXX our testament commitment secure from $XX revenues and implementations in position ongoing match the estimated new and million are remain revenues anticipation sticky implementations. XXXX market from to efforts exceed the will annualized our in strong total in

Project Turing we spend Shifting to business operating to year. by These an investments $X roughly development, sales last million IT this in million second to quarter, of of higher second year. implementations, or which in quarter driven This discussed increased represented to primarily compared all related $XX.X scale investments when was the earlier and the and expenses.

Turing and only $X see we We are year-over-year, encouraged positive million and million growth by while the early of Project as operating incremental revenues of scale roughly adding of adding $X expense. margin results

sustainable positioned and We have profitability business growth. to drive strategically our

to second of quarter million an $X.X the We ahead or are report in period. pleased of EBITDA adjusted $X.X the million year prior

Project efficiency several notably and past commitment well. progressing our as through Sim the quarters, have initiatives, Turing, Over is emphasized productivity noted, to we which,

growth our reduce opportunities. We This to processes top compromising costs, capacity market we balance on and growth. efficiency without for focused that have and continue while seize een line presence ensures this expand new operational our streamline we

We these will accelerate initiatives that profitability trajectory. our confident are but sustain only not

are As for the alongside cycle, this in we and Healthcare half of direct outage reaffirm our revenues tumultuous excited consideration profitability. strong guidance impacts we taking our reflect to and on Change performance, first election the

be care success $XXX revenues to we full XXXX our in growth EBITDA This to the our and seeing to million the operations. strategies adjusted clear, are between the million, to $X $XXX of company million. full in health and $XXX confidence range To $XXX in is year for and revenues guidance million bolstered reiterating by be for are million million commercial of $X we be XXXX range to the be

marginally anticipated, looking sheet, acquisition. drawn facility recent And have support on debt of ramps our as in down our and implementation a our at balance technology we ongoing

continuing to relationship see with Wells Fargo We positive grow to in pleased manner. our are a credit

margin we revenues are to year. targets. sales achieve to adjusted toward scale such measured we our track approach million technology, EBITDA if already $XXX what progress and push earlier as care we this reach From making perspective, on This XX%-plus million. communicated margins efforts able our anticipate being in a $XXX people, development investments with The health business showing we is are

pleased of in the confidence and giving far, have thus growth hitting the very near growth. remainder achieving some of in next invest to half the of revenue XXXX. the at the the goal EBITDA me year in ability future our first in demonstrated, flows year, maintain inflection I'm with the self-sustaining we We without scale profitability the sacrificing in cash point point our term and

Operator, please up would questions? the for you open lines

[Operator Instructions] George Our first Group. Capital with question Sutton is Craig-Hallum from

broadly the So I wondered more now. could if through Medicaid you seeing that you're walk opportunities

there. Obviously, You mentioned we know some is New activity coming York up.

there of New New outside the And has York curious about any York. I'm assume just So opportunities changes not. been timing? other to I

so it early looks they to specific that Yes. proposals. next ahead time point, George, early and York, with we to sometime that rebid, The did be get submit what our decisioning, implementation committed to -- frame went on for originally New September and year. your is

track. to looks that So be on

first reasons, Look, things other I be have activity And seeing states. the through, rebid, We a there's with optimistic we think step the time any actually through we yes, quite remain about But bit confident rebid. good go continue to that. round to excited a are on cautiously were of we cetera. you on and pretty et for that you

team our responding. so very is And closely working in

right out with et closely watching We're states. now proposals few a have states, cetera. with other additional We

is refining and of we've as responses. closely indicated So as and our well team that our last really we watching opportunities call, our new proposals on sure making as the are focused kind

mean the Great. And explain the if do oversight? could see in more past I cycles. just might what relative you the by wondered oversight you we exactly election that conservative election, conservative to what's happened

Yes.

is there programs seen that when So are with these before, time oversight managing look, the you're we've and especially some of right? election period, agencies -- through. an this Any dealing

You are that have involved. legislative constituents

You have that pushing being folks are bit. back audited a little

determination. You policy have

et reviewed, get that concepts have cetera. You

some And more. little on that you if so things, into shown lots a you There's eyes those There's will. has sensitivities. tend delay things get when history bit of to more cycles,

more and you of so it through as And focused more eyes a having cycle, and that on agency. gets move the the bit those some around little concerns

And that. is this I cycle it just think will doubt I anyone unique think is, particular how which, don't

any and remarks, that it. change. likely or CMS, whether and been payment it's of focus we've as government on driving remain. the the agency, to in We disproportionately the said believe it's think HHS I I But accuracy through prepared fully federal is this, administration always that transparency regardless

I if broader thing, in any other One and, RecordsOne integration? could you impact you. wondered particular, to Project on starting Got you're the a give Turing us see update from

Yes.

called of Rohit AI into kind as to initiatives greater efficiencies. our of underway think team trying out, aspects we a the piece, I Turing, drive have architecture The under the of Turing. integrating of that fantastic a done number all grouped driving tightly right, RecordsOne all Project Project business, that has overall job the are

how to And not just we've excited our talked as so be aspect. really technology simply it's claims business. We're about applicable about, broadly X this could

complete iterative process, through for right? It's on get buck. think There's so process a the already And trying going that are working to a seeing prioritize we bang. be really areas we bang to ex-dates, an it's of We largest big right? not bit we're our a

claims noted the is And we lots how selecting some props of how helping gate. we I and just improve is the think impact Rohit some technology we're again, are value us areas that process. we first out probably of the spend. are -- terms and And of of have seeing one business the But in claims already the

we prioritizing we're out we where get think the largest bang so for of And gate. the the buck

Bauser is Riley question with Securities. next Our from B. Kyle

the Thanks for updates. Great.

year-to-date. 'XX in So then you programs and and implemented commercial XX XX XXXX XX in

to ramp about to is XX over strong get really stronger the should just given XX months. scale So time, that tailwind

we And are forward, quarter-over-quarter up? the know leverage? there's tailwinds of seasonality, kind we earnings but that I Going can in could potentially expect enough perhaps a step-up strong step see we do quarter? follow-up expect too. XX-ish this kind you how kind to that, about at should curious per is, on of Just think maybe of clip a to that continue of

Happy those. questions. to good take Kyle, Yes,

anticipate ones piece up. an of in of leverage was of that to EBITDA inflection getting sign close old terms flows. start about we what point So with your to do question, to itself. is means, if prepared the think, new I paying cash as the right, for at existing in the clipping have implementations, up the kind I some first point aligns that next generated mentioning yes, continue profitability year we start self-sustaining It to remarks What enough

some horizon do those see of in we And the coming so that near-term here with implementations. older

to go-forward the been SUVs. can estimated about the sort the of fact range think we of the and we due that in dollar they As impact have on reorienting scale implementations, size of focusing more

And into bring remain beating so where, about year, last we from that year added implementations this as or our that's in $X million year, million to the shared half. was committed think year. million estimate $XX what and meeting revenues annualized first We we on with this I then $XX as in next

to year, to going $XX quarter. whether we're look So number. tell the do committed at that $XX a million you I we as ahead getting it's But can't be million of

following there. of really it's issue? you the add to of the you've mean over this capacity the appreciate Is like a -- new of impressive clip? head a infrastructure got and kind lot years. And I couple Got just number count ability got feel an implementations it. you've I maybe Do up support to that. past

other come would time, of I years, current any you and we I the that XXs about team hit a And issues remembering, Yes, of plus, implementation, areas think I able might capacity in a you we were the the not hiring having up similar-sized was we good think lot macro some as that with mentioned. previous doing know we're but XX seen climate. to time fact in the be that do. And think we've work from the those already to

as And so we're well. that good point I standpoint, from pretty think seeing from a capacity

Now Project the it's then pieces some do will go a of if require year, XXX of be were you to but think XX, well implementations say, of able to I to underway. handle, XX, completion the Turing that

the that. how your the if the perspective goal the Okay. have on of years. talk side in of side? could about inherently higher commercial on, Will scale. government next EBITDA margin businesses a differ these an lastly, profit margin margin guess, few Just curious Maybe at from I appreciate XX% business just I you

question. Yes, great

generally similar. I view think we them

have government Now I and commercial the door, you final tends the that our think efficacy a side slightly than out the into in government will, one of But some converts of typically that would margin. lower where where work much to think, rules plans. expected if of would have a how a the balances itself I our is, dollar follow stricter that's engine back

And up balanced. so pretty they tend to end

is Stephan with question Jacob next from Lake Our Street.

Apologies kind sounds of like wanted things something an here. double Turing. on integrating it nicely. to I But are cover if Project RecordsOne, Obviously, get I update just

You're may But synergies may finding curious things there? I'm of have that And -- expected there -- that you color that what any across things kind not additional may is you're of of new finding kind originally? provide kind the any business.

but the There's I can if we to this us at trying handle core that the really our we at think how pretty focused benefit. have not some know interesting the can technology as mean help discussed, we're about efficiencies decision, driving as you I we've immediate Jacob, how selections good so it's have various we I yet. And technology kind point, of a apply in the we some think early there's in where then offerings opportunities help of think on kind and will. today, technology, us too downstream, right? game

over like to would remarks. If the questions Simeon hand session. we the from further no Jacob, there conclude closing back conference for I to question-and-answer are will

to want team, our we our I unwavering of innovation growth, earnings for shareholders call, QX continued value remain quarter, really their support, focused our stakeholders. and on and gratitude and customers, extend to proud accomplishments my Thanks, dedicated operator. our so we're wrap to Look, the this as we driving super our

you, for joining thank and again, everyone, reconnecting forward we QX. to So us, in look

does you. conference. conclude today's Thank This

your you lines You disconnect time, thank your for participation. may and at this