Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), a leading provider of technology-enabled audit, recovery, and related analytics services in the United States with a focus in the healthcare payment integrity services industry, today reported the following financial results for its third quarter ended September 30, 2022:

Third Quarter Financial Highlights

• Total revenues of $27.2 million, compared to revenues of $28.6 million in the prior year period.
• Healthcare revenues of $23.5 million, compared to $20.0 million in the prior year period, an increase of approximately 18%.
• Net loss of approximately $1.5 million, or $(0.02) per diluted share, compared to net loss of $1.7 million, or $(0.03) per diluted share, in the prior year period.
• Adjusted net loss was $1.7 million, or $(0.02) per diluted share, compared to adjusted net income of 0.1 million, or $0.00 per diluted share, in the prior year period.
• Adjusted EBITDA of $(0.3) million, compared to $2.7 million in the prior year period.

Third Quarter 2022 Results

Total revenues in the third quarter were $27.2 million, a decrease from revenues of $28.6 million in the prior year period. Healthcare revenues in the third quarter of 2022 were $23.5 million, an increase of 18% from revenues of $20.0 million in the prior year period. Within Healthcare, claims-based services revenue in the third quarter of 2022 was $10.4 million, while revenues from eligibility-based services in the third quarter was $13.1 million.

“We are excited to see our efforts successfully drive strong top line growth particularly among commercial payors,” stated Simeon Kohl, President of Performant. “Our recently announced strategic engagement with Priority Health highlights our partnership model for commercial payors, and our focus of growing our healthcare operations through a customized high-touch approach. As we go to market as a pure-play healthcare technology company, we are aligned from a cultural, technology and leadership team perspective .”

Recovery revenues in the third quarter were $41 thousand, a decrease of 99.3% from revenues of $5.5 million in the prior year period due to the cessation of non-healthcare recovery activity which largely occurred by the end of 2021. Revenues from our Customer Care / Outsourced Services in the third quarter were $3.6 million, up $0.5 million compared to the prior year period.

Net loss for the third quarter was $1.5 million, or $(0.02) per share on a diluted basis, compared to a net loss of $1.7 million, or $(0.03) per share on a diluted basis, in the prior year period. Adjusted net loss for the third quarter was $1.7 million, or $(0.02) per share on a diluted basis, compared to adjusted net income of $0.1 million, or $0.00 per diluted share, in the prior year period. Adjusted EBITDA for the third quarter was $(0.3) million as compared to $2.7 million in the prior year period.

As of September 30, 2022, the Company had cash, cash equivalents, and restricted cash of approximately $25.7 million.

“Our third quarter results were largely inline with our expectations and our long-term plan and strategy remains intact. Our healthcare offerings demonstrated continued year-over-year growth, which we expect will continue into 2023 based on our robust sales and implementation pipelines,” stated Rohit Ramchandani, Senior Vice President of Finance and Strategy at Performant. “Our cash position remains strong and we are pleased to reiterate our healthcare revenue guidance of $92-$96 million for 2022. Following the recent re-affirmation of the contract award for RAC Region 2 from CMS, we expect to start spending on the implementation work in the current month. This RAC related spend in tandem with additional costs incurred during the protest process, as well as increases in operating expenses related to our transformation from legacy markets served to today, leads us to a revised EBITDA range for the year of negative $1MM to a positive $1MM.”

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share. These measures are not in accordance with accounting principles generally accepted in the United States of America (US GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net income (loss) to net income (loss) determined in accordance with US GAAP are included in the “Reconciliation of Non-GAAP Results” table at the end of this press release. We have included adjusted EBITDA and adjusted net income (loss) in this press release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. Accordingly, we believe that adjusted EBITDA and adjusted net income (loss) provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and board of directors. Our use of adjusted EBITDA and adjusted net income (loss) has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. In particular, many of the adjustments to our US GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

Earnings Conference Call

The Company will hold a conference call to discuss its third quarter 2022 results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company’s website at investors.performantcorp.com. The conference call is also available by dialing 800-954-0628 (domestic) or 212-231-2928 (international).

A replay of the call will be available on the Company's website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 22021062. The telephonic replay will be available approximately three hours after the call, through November 15, 2022.

About Performant Healthcare Solutions

Performant Healthcare Solutions is a leading provider of technology-enabled audit, recovery, and analytics services in the United States with a focus in the healthcare payment integrity industry. Performant works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits) services to identify improper payments. The Company engages clients in both government and commercial markets. The Company also has a call center which serves clients with complex consumer engagement needs. Clients of the Company typically operate in complex and highly regulated environments and contract for their payment integrity needs in order to reduce losses on improper healthcare payments.

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.

To learn more, please visit https://www.performanthealth.com

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 the Company's outlook for revenues, net income (loss), and adjusted EBITDA in 2022 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, 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, that the high level of revenue concentration among the Company's largest customers and any termination of or deterioration in the Company’s relationship with any of its significant clients would result in a material decline in 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 U.S. federal government accounts for a significant portion of the Company's revenues, that downturns in domestic or global economic conditions and other macroeconomic factors could harm the Company’s business and results of operations, that the Company may not have sufficient cash flows from operations to fund ongoing operations and other liquidity needs, that the Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, the material adverse impact of the COVID-19 pandemic on the Company's business, results of operations and financial condition as well as on the business operations and financial performance of many of its customers, that limitations on the scope of the Company's audit activity under its claims audit contracts may reduce revenue opportunities, 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 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, 2021 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.

We are providing the following preliminary estimates of our financial results as follows:

1. Represents interest expense and amortization of debt issuance costs related to our Credit Agreement and Prior Credit Agreement.
2. Represents amortization of intangibles related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004.
3. Represents amortization of debt issuance costs related to our Credit Agreement and Prior Credit Agreement.
4. Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.
5. Represents professional fees related to strategic corporate development activities.
6. Represents gain on the sale of certain non-healthcare recovery contracts.
7. Represents gain on the sale of land and two office buildings.
8. Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.
9. While net loss for the three months ended September 30, 2021 is ($1,691), the computation of adjusted net income (loss) results in adjusted net income of $127. Therefore, the calculation of the adjusted earnings per diluted share for the three months ended September 30, 2021 includes dilutive common share equivalents of 5,821 added to the basic weighted average shares of 62,127.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Results

(In thousands, except per share amount)

(Unaudited)

We are providing the following historical breakdown of the quarterly and annual revenue contributions under the new contribution breakdowns of our healthcare revenue results for the three and nine months ended September 30, 2022, and for the years ended December 31, 2021 and 2020:

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