Q1 2024 Performant Financial Corp Earnings Call
Operator: Greetings, ladies and gentlemen, and welcome to Performant Financial Corporation's first quarter 2024 earnings call. At this time, all lines are in a listen-only mode.
Greetings, ladies and gentlemen, and welcome to Paris format Financial Corporation first quarter 'twenty 'twenty four earnings call. At this time all lines are in a listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. This call is being recorded on Tuesday, May 7, 2024. I would now like to turn the conference over to Jon Bozzuto, Head of Investor Relations. Please go ahead.
Operator: Following the presentation, we will conduct a question and answer session. This call is being recorded on Tuesday may seven 'twenty 'twenty four I would now like to turn the conference over to John.
Jon Bozzuto: Go head of Investor Relations. Please go ahead. Thank you operator, good afternoon, everyone. By now you should have received a copy of the earnings release for the company's first quarter 2024 results. If you have not a copy is available on the Investor relations portion of our website.
Jon Bozzuto: Thank you, operator. Good afternoon, everyone.
Jon Bozzuto: By now, you should have received a copy of the earnings release for the company's first quarter 2024 results. If you have not, a copy is available on the investor relations portion of our website. On today's call, we will be joined by Simeon Kohl, Chief Executive Officer, and Rohit Ramchandani, Chief Financial Officer. Before we begin, I'd like to remind you that some of the comments made on today's call, including our financial guidance, are forward-looking statements.
Speaker Change: On today's call, we will be we'll be Simeon Cole Chief Executive Officer, and Brocade ROM, John Donahue, Chief Financial Officer.
Jon Bozzuto: Before we begin I'd like to remind you that some of the comments made on today's call, including our financial guidance are forward looking statements.
Jon Bozzuto: These statements are subject to risks and uncertainties, including those described in the company's filings with the SEC. Consequently, actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. Also, all non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release. I would now like to turn the call over to Simeon Kohl. Simeon?
Jon Bozzuto: These statements are subject to risks and uncertainties, including those described in the company's filings with the SEC.
Jon Bozzuto: Actual results may differ materially from those described during the call. In addition, all forward looking statements are made as of today and the company does not undertake to update any forward looking statements based on new circumstances or revised expectations.
Simeon M. Kohl: Also all non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release.
Simeon M. Kohl: I would now like to turn the call over to Simeon coal Tim.
Simeon M. Kohl: Thank you, Jon. Good afternoon, everyone, and thank you for joining us on our earnings call. We are pleased with our first quarter results and are encouraged by our prospects, which gives us the confidence to reiterate our expectations for the remainder of the year. I will share our operational accomplishments, and then Rohit will walk you through our financial results. Our double-digit year-over-year revenue growth as well as our double-digit growth projections for the first quarter of 2024 are a result of the consistent execution of our growth strategy.
Simeon M. Kohl: Thank you John Good afternoon, everyone and thank you for joining us for our earnings call.
Simeon M. Kohl: We're pleased with our first quarter results and are encouraged by our prospects, which gives us the confidence to reiterate expectations for the remainder of the year.
Simeon M. Kohl: I will share our operational accomplishments and then Rohit will walk you through our financial results.
Simeon M. Kohl: Our double digit year over year revenue growth as well as our double digit implementations for the first quarter of 2024 are a result of the consistent execution of our growth strategy, we recognize we need to be innovative and disciplined in order to penetrate our large addressable market.
Simeon M. Kohl: We recognize we need to be innovative and disciplined in order to penetrate our large addressable market. Quarterly, our strategy has been our client-centric and technology-driven approach. I will dive into each as we highlight our first quarter results.
Simeon M. Kohl: Our strategy has been our client centric and technology driven approach I will dive into each as we highlight our first quarter results.
Simeon M. Kohl: Being client-centric at Performant means that we partner with our clients to build and optimize payment integrity programs tailored to their respective needs today and into the future. Our commitment to partnership as the market shifts and evolves has led to Performant having completed 10 new implementations in the first quarter, collectively expected to generate between $5 and $6 million of revenue on an annualized basis, and all 10 implementations were additional opportunities with an existing client.
Simeon M. Kohl: Being client centric and perform it means that we partner with our clients to build and optimize payment integrity programs tailored to their respective needs today and into the future.
Simeon M. Kohl: Our commitment to partnership as the market shifts and evolves has led to performance having completed 10, new implementations in the first quarter collectively expected to generate between five and $6 million of revenue on an annualized basis, and all 10 implementations where additional opportunities within existing clients.
Simeon M. Kohl: I often tell our team that acquiring new clients is certainly rewarding, but expansion with an existing client is a testament to the value of our services and our ability to cultivate enduring partnerships. Our consistent cadence of implementations is proof that our client-centric approach and results-driven culture are effectively serving our clients. Partnering with clients to navigate the complexities of the healthcare industry lies at the heart of the performance value proposition. However, when navigating the payment integrity landscape, numerous factors influence decision making.
Simeon M. Kohl: I often tell our team that acquiring new clients is certainly rewarding but expansion with an existing clients is a testament to the value of our services and our ability to cultivate enduring partnerships.
Simeon M. Kohl: Our consistent cadence of implementations is proof that our client centric approach and results driven culture are effectively serving our clients.
Simeon M. Kohl: Partnering with clients to navigate the complexities of the health care industry's lies at the heart of performance value proposition.
Simeon M. Kohl: When navigating the payment integrity landscape numerous factors influence decision, making amongst these is the recent change health care outage, a complex challenge that disproportionately strained the payor provider relationships.
Simeon M. Kohl: Amongst these is the recent change healthcare outage, a complex challenge that disproportionately strained the payer-provider relationship. Throughout this period of instability, we worked with our clients to delicately navigate the situation while also minimizing provider abrasion. We continue to see evidence that the impact of the outage on performance should be temporary.
Simeon M. Kohl: Throughout this period of instability, we worked with our clients to delicately navigate the situation while also minimizing provider abrasion.
Simeon M. Kohl: We continue to see evidence that the impact of the outage on performance should be temporary certain products that are introduced early in the claim lifecycle experienced several weeks of decreased volume, but then returned to normal levels as claims processing restarted.
Simeon M. Kohl: Certain products that are introduced early in the claim life cycle experience several weeks of decreased volume but then return to normal levels as claims processing restarts. For some clients, we can quickly catch up on volume. For others, we would redeploy resources to work age inventory to minimize impact. And there may be a few that will take longer for us to catch up on productive volume.
Simeon M. Kohl: For some clients, we can quickly catch up on volumes for others, we would redeploy resources to work age inventory to minimize impact and there may be a few that will take longer for us to catch up on productive volumes.
Simeon M. Kohl: Our eligibility business continues to perform well, with growth of 7% in the first quarter. Additionally, certain commercial clients have shown significant expansion in addition to new clients coming on board. Our MSP premium solution, which supports Medicare Advantage programs in identifying the most suitable payer, has seen noticeable success amidst industry challenges. Medicare Advantage has faced many industry headwinds, including adjustments to star ratings and reductions in Medicare Advantage reimbursement rates, with each putting additional pressure on MCOs operating Medicare Advantage plans.
Simeon M. Kohl: Our eligibility business continues to perform well with growth of 7% in the first quarter.
Simeon M. Kohl: Certain commercial clients have shown significant expansion in addition to new clients coming on board.
Simeon M. Kohl: Our MSP premium solution, which supports Medicare advantage programs in identifying the most suitable payer has seen noticeable success in this industry challenges Medicare advantage has faced many industry headwinds, including adjustments to star ratings and reduction in Medicare advantage reimbursement rates with each putting additional pressure on.
Simeon M. Kohl: M C OS operating Medicare advantage plans demonstrating.
Simeon M. Kohl: Demonstrating our client-centric approach, we quickly identified this challenge for certain of our MCO partners by leveraging our MSP premium solution as an avenue to further contain costs. Furthermore, our expansion into cost avoidance solutions within the eligibility business has proven successful. Leveraging our robust data assets and expertise, and in response to clients requesting that we coordinate benefits earlier in the payment cycle, we've successfully launched new cost avoidance offerings to the commercial market.
Simeon M. Kohl: Demonstrating our client centric approach we quickly identified this challenge for certain of our M. C O partners by leveraging our MSP premium solution as an avenue to further contain costs.
Simeon M. Kohl: Furthermore, our expansion into cost avoidance solutions within the eligibility business has proven successful.
Simeon M. Kohl: Leveraging our robust data assets and expertise and in response to clients requesting that we coordinate benefits earlier in the payment cycle, we've successfully launched new cost avoidance offerings to the commercial market.
Simeon M. Kohl: Our ability to work closely with clients to understand their evolving needs has been instrumental in driving our growth. I am confident that this strategic approach will continue to reap dividends as the performance story progresses, while also providing welcome product diversification and growth to offset the growth headwind of our longstanding CMS-MSP contract. Demand for our clinical audit business has been strong, with a 19 percent increase in the first quarter, due to continued scaling of commercial client implementations and our CMS RAC Region 2 contract.
Simeon M. Kohl: Our ability to work closely with clients to understand their evolving needs has been instrumental in driving our growth I am confident that the strategic approach will continue to reap dividends as the performance story progresses, while also providing a welcome product diversification and growth to offset the gross headwind of our longstanding CMS MSP.
Simeon M. Kohl: Contract.
Simeon M. Kohl: Demand for our clinical audit business has been strong with a 19% increase in the first quarter through continued scaling of commercial client implementations and our CMS rack region to contract.
Simeon M. Kohl: We continue to capitalize on efficiency gains in this segment of our business. In previous quarters, we discussed reconfiguring the factory workflow with larger audit-based clients to optimize workflows, data exchanges, and client collaboration and communication. This effort began with a select group of clients, primarily with readmission audits.
Simeon M. Kohl: We continue to capitalize on efficiency gains in this segment of our business.
Simeon M. Kohl: In previous quarters, we have discussed Reconfiguring the factory workflow with larger audit based clients to optimize workflows data exchanges and client collaboration and communication.
Simeon M. Kohl: This effort began with a select group of clients, primarily with readmission audits.
Simeon M. Kohl: Encouraged by the outcomes, we've expanded our scope to include outpatient audits as well. This strategic shift not only enhances our operational efficiency but also offers our clients a more streamlined experience, enabling them to optimize their allocation of resources. Turning to technology, I'm excited to welcome the Records1 Team to performance. Cutting-edge technology has been core to both performance identity and strategy, and while our existing technology uses machine learning to effectively manage and score large clusters of data, the addition of Records1 technology incorporates more advanced AI technology that uses large language models and natural language processing.
Simeon M. Kohl: Encouraged by the outcomes, we've expanded our scope to include outpatient audits as well.
Simeon M. Kohl: This strategic shift not only enhances our operational efficiency, but also offers our clients a more streamlined experience, enabling them to optimize their allocation of resources.
Simeon M. Kohl: Turning to technology I'm excited to welcome the records one team's performance.
Simeon M. Kohl: Cutting edge technology has been core to both performance identity and strategy and while our existing technology uses machine learning to effectively manage and score large clusters of data. The addition of records one technology incorporates more advanced AI technology that uses large language models and natural language processing we.
Simeon M. Kohl: We've previously piloted and licensed this technology to enhance our audit workflow process and quickly realized its potential to improve our accuracy and efficiency. The use case today centers around our ability to ingest and score large volumes of claims, identifying those with a higher likelihood of findings and, equally as important, those without. We are also exploring how natural language processing may improve the speed and accuracy with which our audit teams review medical records. Today, nurses and coders spend a significant amount of time combing through data necessary to assess clinical outcomes.
Simeon M. Kohl: Previously piloted in license this technology to enhance our audit workflow process and quickly realize its potential to improve our accuracy and efficiency.
Simeon M. Kohl: The use case today centers around our ability to ingest and score large amounts of claims identifying those with a higher likelihood of findings and equally as important those without.
Simeon M. Kohl: We are also exploring how natural language processing may improve the speed and accuracy with which our audit teams review medical records.
Simeon M. Kohl: Today nurses and coders spend a significant amount of time combing through data necessary to assess clinical outcomes.
Simeon M. Kohl: We believe this technology will empower our clinical teams to review claims and extract pertinent information more quickly. Additionally, we see numerous strategic benefits from bringing this technology in-house. We believe being able to couple the technology with performance-rich data assets should provide numerous opportunities to expand the technology well beyond its current scope. And perhaps more importantly, we can now guide the development of this new AI platform to align with performance existing technology roadmaps.
Simeon M. Kohl: We believe this technology will empower our clinical teams to review claims and extract pertinent information more quickly.
Simeon M. Kohl: We see numerous strategic benefits from bringing this technology in house, we believe being able to couple the technology with performance rich data assets should provide numerous opportunities to expand the technology well beyond its current scope and perhaps more importantly, we can now guide the development of this new AI platform to align with performance.
Simeon M. Kohl: <unk> technology roadmap.
Simeon M. Kohl: Our core principles of client-centricity and technology-enabled solutions have driven results and afforded us unique credibility in this industry. We continue to make significant inroads with commercial payers, our largest opportunity. We have also expanded our operations and bolstered our credibility to be competitive in the state Medicaid market, a new space for performance and one with significant upsides. This new state market opportunity is only made possible through well-proven solutions. High-adaptable workflows and a robust information security infrastructure that our clients can rely on.
Simeon M. Kohl: Our core principles of client Centricity and technology enabled solutions have driven our results and afforded us unique credibility in this industry we.
Simeon M. Kohl: We continue to make significant inroads with commercial payers our largest opportunity.
Simeon M. Kohl: We have also expanded our operations and bolstered our credibility to can be competitive in the state Medicaid market, a new space for performance and one with significant upside.
Simeon M. Kohl: This new state market opportunity is only made possible through well proven solutions highly adaptable workflows and robust information security infrastructure that our clients can rely on.
Simeon M. Kohl: Our ability to compete was illustrated by one of the largest state Medicaid RAC programs, New York, awarding us its Medicaid Recovery Audit Contract in October of 2020. While the award was protested and ultimately overturned, the decision to do so was not based on performance, capabilities, or qualifications.
Simeon M. Kohl: Our ability to compete was illustrated by one of the largest state Medicaid rack programs, New York awarding us their Medicare recovery audit contract in October 2023.
Simeon M. Kohl: The award was protested and ultimately overturned the decision to do so it was not based on performance capabilities or qualifications. It was a technicality relating to a reference that we cited in our proposal.
Simeon M. Kohl: It was a technicality relating to a reference that we cited in our proposal. The good news, however, is that New York State has decided to reissue all three cost containment RFPs, including the RAC, TPL, and subrogation. We are actively pursuing the RAC and TPL opportunities, applying the lessons learned from our original proposal submission. While the protest outcome was unfortunate, we're confident in our ability to demonstrate the value of our services and overall partnership to New York State once again.
Simeon M. Kohl: The good news however is that New York State has decided to Rishi reissue all three cost containment rfps, including the rack PPL and subrogation.
Simeon M. Kohl: We are actively pursuing the rack and tcl opportunities applying the lessons learned from our original proposal submissions while.
Simeon M. Kohl: While the protests outcome was unfortunate we're confident in our ability to demonstrate the value of our services and overall partnership to New York State once again.
Simeon M. Kohl: Meanwhile, we continue to pursue other state RFPs, and we maintain significant enthusiasm for the potential this market holds. Our commitment to client centricity and innovative technology is the bedrock on which performance value propositions stand. These principles are not just integral to our culture but have also been instrumental in driving our strong first quarter growth, a trend we anticipate continuing throughout 2024. However, it's crucial to note that financial metrics are just one aspect of our growth narrative.
Simeon M. Kohl: Meanwhile, we continue to pursue other state Rfps and we maintain significant enthusiasm for the potential this market holds.
Simeon M. Kohl: Our commitment to client Centricity and innovative technology as the bedrock on which performance value proposition stands.
Simeon M. Kohl: These principles are not just integral to our culture that have also been instrumental in driving our strong first quarter growth a trend we anticipate continuing throughout 2024.
Simeon M. Kohl: It's crucial to note that financial metrics are just one aspect of our growth narrative. Our strategic approach has improved our efficiency, we've implemented new opportunities for future growth and are aggressively pursuing new market opportunities I am excited about our present standing and the promising trajectory, we're charging for the future.
Simeon M. Kohl: Our strategic approach has improved our efficiency. We've implemented new opportunities for future growth and are aggressively pursuing new market opportunities. I'm excited about our present standing and the promising trajectory we're charting for the future. With that, I'll hand it over to Rohit Ramchandani, our Chief Financial Officer, for a discussion of the financial... Rohit.
Rohit Ramchandani: With that I'll hand, it over to Rohit Rafsanjani, our chief financial Officer for a discussion of the financials rohit. Thanks.
Rohit Ramchandani: Thanks, Sim. As Sim mentioned, we are encouraged by our results in the first quarter of 2024. Total company revenues in the quarter were $27.3 million, which included healthcare revenues of $25.8 million. Our customer care outsourced services business accounted for $1.5 million of revenue during the quarter, a decline from last year, which is in line with our expectations for this business. We expect this business to remain flat compared to the first quarter results in the second quarter.
Rohit Ramchandani: Thanks, Tim as Tim mentioned, we are encouraged by our results in the first quarter of 2020 for total company revenues in the quarter were $27 3 million, which included health care revenues of $25 8 million.
Rohit Ramchandani: Our customer care outsource services business accounted for $1 5 million of the revenue during the quarter a decline from last year, which is in line with our expectations for this business.
Rohit Ramchandani: We expect this business to remain flat to the first quarter results in the second quarter last quarter. We spoke about this business, having the potential to grow but we remain conservative with our expectations as we are beholden to a turbulent regulatory environment within this market.
Rohit Ramchandani: Last quarter, we spoke about this business having the potential to grow, but we remain conservative with our expectations as we are beholden to a turbulent regulatory environment within this market. Turning to healthcare, our first quarter revenues grew roughly 13% year-over-year, displaying all-around solid growth. Our eligibility markets within health care for the first quarter were $13.4 million in revenues, representing an increase of roughly 7%. Commercial clients led the way, as Sim highlighted, through the adoption and scale of newer products that are relevant to market trends. These help to offset the eligibility growth anchor of our longstanding CMS MSP contract.
Rohit Ramchandani: Turning to healthcare, our first quarter revenues grew roughly 13% year over year displaying all round solid growth our eligibility markets within health care for the first quarter were $13 4 million in revenues, representing an increase of roughly 7%.
Rohit Ramchandani: Commercial clients led the way as Tim highlighted through the adoption and scale of newer products that are relevant to market trends.
Rohit Ramchandani: These helped to offset the eligibility growth anchor of our long standing CNS MSP contract.
Rohit Ramchandani: We expect overall positive results to continue as we feel we have a best-in-class offering, especially for our commercial clients, as we leverage learnings from our long-term government relationships. For our claims-based business, also known as claims auditing, revenues in the first quarter of 2024 were $12.4 million, representing an increase of almost 20%. Commercial operations continue to perform well as existing implementations scale in line with our expectations. Government, in particular, also performed well as CMS RAC Region 2 continues to grow.
Rohit Ramchandani: We expect overall results to continue as we feel we have a best in class offering, especially within our commercial clients as we leverage learnings from our long term government relationships.
Rohit Ramchandani: Within our claim space business also known as claims auditing revenues in the first quarter of 2024 or $12 4 million, representing an increase of almost 20%.
Rohit Ramchandani: <unk> operations continue to perform well as existing implementation scaled in line with our expectations.
Rohit Ramchandani: Government particular also performed well as CMS recreation two continues to grow.
Rohit Ramchandani: As I've previously noted, we expect this contract to hit steady state in late 2025. We believe that all of our claims-based offerings will continue to bear fruit of efficiency efforts from our project touring initiative, which itself will be further bolstered from our latest venture of adding natural language processing technology to the acquisition of technology assets from records one. We maintain our enthusiasm for commercial growth, having implemented 10 opportunities in the first quarter with a robust schedule still ahead. As Sim mentioned, all 10 are new statements of work with existing clients.
Rohit Ramchandani: As I have previously noted we expect this contract.
Rohit Ramchandani: In late 2025.
Rohit Ramchandani: We believe that all of our claims based offerings will continue to bear fruit of efficiency efforts from a project or initiative, which itself will be further bolstered from our latest venture of adding natural language processing technology through the acquisition of technology assets from reference one.
Rohit Ramchandani: We maintain our enthusiasm for commercial growth, having implemented 10 opportunities in the first quarter with a robust schedule is still ahead as Tim mentioned, all 10 of our new statements of work with existing clients. We have previously detailed that our most significant opportunity lies within commercial clients with a great deal of our growth strategy stemming from our land and expand.
Rohit Ramchandani: We have previously detailed that our most significant opportunity lies within commercial clients, with a great deal of our growth strategy stemming from a land and expand approach. We have existing relationships with five of the top seven commercial plans, and we believe it's a strong validation of our continued value proposition that all 10 implementations this quarter came from existing clients. Our implementation momentum is promising, with these Q1 implementations carrying an estimated annual contract value of $5-6 million.
Rohit Ramchandani: Approach.
Rohit Ramchandani: We have existing relationships with five of the top set in commercial plans and we believe it's a strong validation of our continued value proposition that all tenants limitations this quarter came from existing clients or.
Rohit Ramchandani: Our implementation momentum is promising with these key one implementations carrying an estimated annual contract value of $5 million to $6 million.
Rohit Ramchandani: We maintain our outlook for the 2024 implementations to match or surpass the estimated annual contract value from those that we did in 2023 of $18 million. In addition to revenue growth, we maintain our commitment to expand margins through scale and efficiency gains. I'm encouraged by the early pace of RIT teams in the project touring initiative, and, as Sim discussed, the conversion of Records One from a partner into a key technology asset for performant healthcare solutions. I won't rehash the details of that technology, but I do want to touch on the dynamics of the acquisition.
Rohit Ramchandani: We maintain our outlook for the 2024 implementations to match or surpass the estimated annual contract value from those that we did in 2023 of $18 million.
Rohit Ramchandani: In addition to revenue growth, we maintain our commitment to expand margins through scale and efficiency gains.
Rohit Ramchandani: Encouraged by the early pace R&D teams and the private touring initiative and as Tim discussed the conversion of records one from a partner into a key technology asset performance healthcare solutions.
Rohit Ramchandani: I won't rehash, the details of that technology, but I do want to touch on the dynamics of the acquisition.
Rohit Ramchandani: As I stated on the fourth quarter call, Project Turing included IT improvements to increase efficiency as we intentionally expanded spend in the short term to streamline and reduce our overall IT footprint in the long term. This acquisition fits squarely into that strategy to ultimately make our workflows more efficient. We have strategically structured this deal to fit within our capital needs and ultimately feel comfortable having financed the transaction between our cash on hand and our current credit facility with Wells Fargo without sacrificing the ability to continue addressing organic growth opportunities.
Rohit Ramchandani: As I stated on the fourth quarter call project touring including improvements to increase efficiency as we intentionally expand spend in the short term to streamline and reduce our overall footprint in the long term.
Rohit Ramchandani: This acquisition fits squarely into that strategy.
Rohit Ramchandani: And ultimately make our workflows more efficient.
Rohit Ramchandani: We have strategically structured with steel to fit within our capital needs and ultimately feel comfortable having financed the transaction between our cash on hand, and current credit facility with wells Fargo without sacrificing the ability to continue tackling organic growth opportunities.
Rohit Ramchandani: Shifting to operating expenses, these represented $31.3 million in the first quarter, or roughly $2 million higher compared to the first quarter of last year. This was primarily driven by increased spend to scale our record implementations, as well as investments into sales and marketing to drive further growth. Our adjusted EBITDA for the quarter was negative $1.2 million, approximately half a million ahead of the prior year period. This was slightly ahead of expectations, led by revenue growth.
Rohit Ramchandani: Shifting to operating expenses. These represented 31 3 million in the first quarter or roughly $2 million higher compared to the first quarter of last year. This was primarily driven by increased spend to scale, our record implementations as well as investments into sales and marketing to drive further growth.
Rohit Ramchandani: Our adjusted EBITDA for the quarter was negative $1 2 million approximately half a million ahead of the prior year period. This was slightly ahead of expectations led by revenue growth.
Rohit Ramchandani: We feel confident in reiterating our guidance for 2020 for healthcare revenue to be in the range of $117 million to $122 million.
Rohit Ramchandani: We feel confident reiterating our guidance for 2024 healthcare revenues to be in the range of $117 to $122 million, full company revenue to be between $124 and $129 million, and for the full year adjusted EBITDA to be in the range of $4 to $5 million.
Rohit Ramchandani: Company revenue to be between 124 and $129 million.
Rohit Ramchandani: And for the full year adjusted EBITDA to be in the range of $4 million to $5 million.
Rohit Ramchandani: As mentioned last quarter, between project touring and our investments in sales and business development, we are still on track to add three to three and a half million dollars in discrete increased operating spend on top of our typical investment in contract implementation. We continue to have a strong pipeline of sales and implementations ahead of us. And we are excited to reach the expanded opportunities and scale efficiencies that will come from these tactical investments.
Rohit Ramchandani: Mentioned last quarter between project Turing and our investments in the sales and business development. We are still on track to add three to $3 $5 million and discrete increased operating spend on top of our typical investment into contract implementations.
Rohit Ramchandani: We continue to have a strong pipeline of sale implementations ahead of US and were excited to recently expanded opportunities and scale efficiencies that will come from these tactical investments.
Rohit Ramchandani: We made the decision three years ago to become a pure play healthcare company, and we expect to hit an adjusted EBITDA inflection point later this year and a cash inflection point in the next. We were diligent to renegotiate a revolving credit facility that would safely support our growth efforts until we flipped in self-sustaining cash flows. We continue to feel confident about our ability to increase revenue and expand our footprint with our market positioning and capital structure we have today. Operator, would you please open up the line for questions?
Rohit Ramchandani: We made the decision three years ago, it would become a pure play health care company and we expect to hit an adjusted EBITA inflection point later this year and our cash inflection point in the next we were diligent to renegotiate our revolving credit facility that was safely support our growth efforts until we flipped and self sustaining cash flows we continue to feel confident.
Rohit Ramchandani: Our ability to increase revenue and expand our footprint with our market positioning and capital structure, we have today.
Rohit Ramchandani: Operator would you please open up the line for questions.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star T is.
Operator: Our first question is from George Sutton with Craig Callum Capital Group. Please proceed. Thank you, guys.
Operator: Our first question is from George Sutton with Craig Hallum Capital Group. Please proceed.
George Frederick Sutton: Thank you, guys. Nice results. So you mentioned that all 10 of your implementations this quarter were existing clients. Why don't you just talk about what that means relative to your speed to revenues and your, Incrementally spend less on what normally would be new clients?
George Frederick Sutton: Thank you guys nice results. So you mentioned that all 10 of your implementations. This quarter were existing clients could you just talk about what that means relative to your speed to revenues and Europe.
George Frederick Sutton: Incrementally spent less for what normally would be new clients.
George Frederick Sutton: Joe you want to take that.
George Frederick Sutton: Sure.
Rohit Ramchandani: Sure. So in terms of, I'll take the second part of the question first. Yes, you are correct; there would be a little less incremental spend compared to a net new implementation. And that's, as a reminder for folks, because there's less work in terms of that initial IT integration we would have to do, and that initial IT integration skipping would then also save us a little bit of time. But I wouldn't view it as anything massively faster, just given the dynamics of some of the larger clients we're working with on these.
Speaker Change: So in terms of I'll take the second part of the question first.
Rohit Ramchandani: Yes, you are correct, there would be a little less incremental spend compared to a net new implementation.
Rohit Ramchandani: As a reminder for folks because theres less some work in terms of that initial integration, we would have to deal.
Rohit Ramchandani: And that initial.
Rohit Ramchandani: Integration skipping would then also stainless a moment of time.
Rohit Ramchandani: But I wouldn't view it as anything.
Rohit Ramchandani: Massively faster just given the dynamic of some of the larger clients, we're working with on this.
Simeon M. Kohl: Yeah, George, I think to Rohit's point, you know, again, the effort that we go through with a net new client in terms of the onboarding of the data, policies, all those types of things, that certainly, the good news is that much of that is accounted for when we think about these expansions within existing clients, but we still are kind of beholden to client ramp times, making sure that they're going through quality checks, etc So it's definitely a bit faster than a net new client, but still things that we have to kind of go through those gates, various quality gates.
Speaker Change: Yes, George I think I think the Roes point.
Simeon M. Kohl: Again, the effort that we go through with a net new clients in terms of the Onboarding of the data policies. All those types of things that certainly the good news is much of that is accounted for when we think about these expansions within existing clients, but we still are kind of beholden to client ramp time.
Simeon M. Kohl: Making sure that theyre going through quality checks et cetera, So it's definitely a bit faster than our net new client, but still things that we have to kind of go through those gates various quality gates.
Simeon M. Kohl: So we were on a priority health webinar recently, they were very animated about the impact that they've seen from working with you on the middle market side. That's a new effort for you that we've talked about historically is offering up a lot of new opportunities can you just give us an update on what.
Simeon M. Kohl: So we were on a priority health webinar recently. They were very animated about the impact that they've seen from working with you on the middle market side. That's a new effort for you that we've talked about historically as offering up a lot of new opportunities. Can you just give us an update on what the middle market opportunities look like here?
Simeon M. Kohl: The middle market opportunities look like here.
Simeon M. Kohl: Yeah, yeah, and specific priority. We, too, are excited. We have, it's been a fantastic partnership. I think, as we've talked about on a few prior calls, you know, that type of relationship where we're thinking about such a broad implementation of numerous opportunities. We're kind of working through that, trying to perfect that. But look, having the opportunity to be able to showcase with other payers and the success that we're having clearly is helping in the sales pipeline.
Speaker Change: Yeah, Yeah, and specifics priority. We too are excited we have a it's been a fantastic partnership I think as we've talked about on a few prior calls.
Simeon M. Kohl: That type of relationship where we're thinking about such a broad implementation of numerous opportunities, we're kind of working through that trying to perfect that.
Simeon M. Kohl: But look having the opportunity to be able to showcase with other payers and the success that we're having clearly is helping in the sales pipeline and so we're seeing other opportunities begin to emerge that are similar to priority in terms of expansive.
Simeon M. Kohl: And so we're seeing other opportunities begin to emerge that are similar to Priority in terms of expansive, you know, broad opportunities for, you know, different programs out of the gate versus, you know, more traditional waterfall cadence. We're also seeing that just having the opportunity to talk about the dynamics of a mid-market plan and some of the real bespoke needs that they have and how those are not easily addressed by some of our large competitors, that story is resonating as well. So, in general, the relationship is working quite well, and it's definitely helping us as we think about leveraging it in our sales initiative.
Simeon M. Kohl: Broad opportunities for <unk>.
Simeon M. Kohl: Different programs out of the gate versus more traditional waterfall cadence. We're also seeing that just having the opportunity to talk about the dynamics of our mid market plan and some of the real bespoke needs that they have and how those are not easily addressed by some of our large competitors that story is resonating as well so.
Simeon M. Kohl: In general the relationship is working quite well and it's definitely helping us as we think about leveraging it and our sales initiatives.
Simeon M. Kohl: Okay and then finally there were two things that you mentioned that sounded new to me that I just wanted a little more clarity on and that is increased you've had certain clients increase their claim volumes I just wanted a little bit more specificity there if you could and then you mentioned new cost avoidance offerings and I'm just if you can give us a sense of what kinds of offerings those are and what kind of impact Yeah, so if you think about the
Speaker Change: Okay and then finally, there were two things that you mentioned that sounded new to me that I just wanted a little more clarity on and that has increased.
Simeon M. Kohl: You've had certain clients increase their claim volumes just wanted a little bit more specificity. There if he could and then you mentioned new cost avoidance offerings and I'm. Just if you can give us a sense of what kinds of offerings those are and what kind of impact you could see.
Simeon M. Kohl: And so that's a process that we work through in kind of a post-paid environment. The cost avoidance is where, through those well-established data assets that we've now been building for the last few years, we can actually go out to plans and demonstrate, show them where there is other coverage for their members and sell that; we refer to it as flags.
Simeon M. Kohl: Yeah, so if you think about the new offerings that we have on the cost avoidance side, it's in the eligibility side. So today, a great majority of the eligibility offerings are where we identify claims that have been paid, but the wrong party ultimately paid the bill, right? So we identify, use our data assets or matching technologies to identify where there's other primary responsibility from another party, and then we go ahead and coordinate to make sure that we get those dollars back to our payer client.
Simeon M. Kohl: Yes, so if you think about the.
Simeon M. Kohl: The new offerings that we have on the cost avoidance side its in the eligibility side. So today the great majority of the eligibility offerings are where we identify claims that have been paid.
Simeon M. Kohl: But the wrong party ultimately paid the bill right. So we identify use our data assets, our matching technologies to identify where there is other primary responsibility from another party and then we go ahead and coordinate making sure that we get those dollars back to our payer clients and so that's a process that we worked through in kind of a postpaid.
Simeon M. Kohl: Good environment. The cost avoidance is we're through those well established data assets that we've now been building for the last few years, we can actually go out to plans and demonstrate show them, where there are other coverage for their members and sell that we referred to it as flags and so we can be proactive.
Simeon M. Kohl: And so we can be proactive and be able to share that coverage with our payer clients, and so that allows them to actually coordinate the payment on the front end, and so you don't have to do this kind of pay-and-chase environment. And so again, I think that's a testament to what we've been talking about how our data assets are really growing, and our matching technologies are becoming more and more proficient.
Simeon M. Kohl: And.
Simeon M. Kohl: Be able to share that coverage with our payer clients and so that allows them to actually coordinate the payments on the front end. So you don't have to do this kind of pay and chase environment and so again I think that's a testament to what we've been talking about how our data assets are really growing and our matching technologies.
Simeon M. Kohl: Coming more and more proficient so we're excited about that.
Simeon M. Kohl: So we're excited about that. It's a nice diversification in terms of the product offering on the eligibility side, and a little bit quicker speed to revenue in terms of how we think about those solutions versus post-pay. I think the claims volume point that you bring up is really just kind of that expansion as we think about broader opportunities within clients getting more access to different types of payments of, I'm sorry, spend. We're just seeing larger volumes of claims that we can look at as clients are expanding their opportunities for us to just... audit more types of different claims.
Simeon M. Kohl: It's a nice diversification in terms of the product offering on the eligibility side, a little bit quicker speed to revenue in terms of how we think about those solutions versus postpaid so happy to see that and I think the claims volume point that you bring up it's really just kind of that expansion as we think about broader opportunities within <unk>.
Simeon M. Kohl: Clients getting more access to different types of payments of I'm sorry spend.
Simeon M. Kohl: We're just seeing larger volumes of claims that we can look at as clients are expanding there.
Simeon M. Kohl: The opportunities for us to just audit more types of different claims.
Speaker Change: I understand.
Speaker Change: Appreciate it thanks guys.
Speaker Change: Yep. Thank you.
Operator: Our next question is from Jacob Stephan with Lake Street Capital Markets. Please proceed.
Simeon M. Kohl: Our next question is from Jacob Stefan with Lake Street Capital markets. Please proceed.
Jacob Michael Stephan: Hey guys, thanks for taking my questions. Congratulations on the quarter as well.
Jacob Michael Stephan: Yeah, Hey, guys. Thanks for taking my questions.
Jacob Michael Stephan: Congrats on the quarter as well.
Jacob Michael Stephan: Maybe just to kind of elaborate further on the existing customer expansion versus kind of new commercial payers could you just kind of talk about maybe what it's been historically in past quarters.
Jacob Michael Stephan: It sounds like this quarter was kind of the first one where we saw all 10 that were I guess expansion on existing clients.
Jacob Michael Stephan: Yes, and that's look I don't think thats anything that.
Jacob Michael Stephan: Should be concerning by any stretch it doesn't concern us whatsoever, I think as <unk> talked about previously.
Jacob Michael Stephan: Maybe just to kind of elaborate further on the existing customer expansion versus kind of new commercial payers. Could you just kind of talk about maybe what it's been historically in past quarters? It sounds like this quarter was kind of the first one where we saw all 10 that were, I guess, expansion on existing clients.
Jacob Michael Stephan: Theres ebbs and flows we still see a consistent number of new logos that are working their way through the implementation pipeline as well into the sales pipeline. So no no concern there I think this just was one of those quarters that.
Simeon M. Kohl: Yeah, and that's, look, I don't think that's anything that should be concerning by any stretch. It doesn't concern us whatsoever.
Simeon M. Kohl: I think, as Rohit talked about previously, there's ebbs and flows. We still see a consistent number of new logos that are working their way through the implementation pipeline, as well as into the sales pipeline. So no concern there. I think this just was one of those quarters where the moon and stars aligned, and whether it's priorities for implementations or what might you have there. But we've always seen a healthy amount of existing clients as per, as Rohit points out, the land and expand strategy.
Simeon M. Kohl: The Moon and stars aligned.
Simeon M. Kohl: And whether its priorities for implementations or what might you have there, but we've always seen a healthy amount of.
Simeon M. Kohl: Of existing clients as per as Rohit points out the land and expand strategy and when you have a relationship with five of the seven top payers. There's a lot of covered lives there and a lot of opportunity to expand so that's always going to be a big part of our of our strategy.
Simeon M. Kohl: And when you have a relationship with five of the seven top payers, there are a lot of covered lives there and a lot of opportunity to expand. So that's always gonna be a big part of our strategy. So nothing to be concerned about. We definitely fully anticipate that we'll see a number of those new logos contribute to our quarterly implementations going forward.
Simeon M. Kohl: So nothing to be concerned about we definitely fully anticipate that we will see a number of those new logos contribute to our quarterly implementations going forward.
Jacob Michael Stephan: Yeah, understood. Okay. And then maybe just touching on records one here, you know, maybe more specifically, if you could kind of point to just a couple of the most important things here, you know, what is this acquisition, kind of when fully implemented into your business, going to do for performance?
Speaker Change: Yeah understood Okay.
Simeon M. Kohl: And then maybe just touching on records one here.
Jacob Michael Stephan: Maybe more specifically.
Jacob Michael Stephan: If you could kind of point to just a couple of them.
Jacob Michael Stephan: The most important things here you know what does this acquisition.
Jacob Michael Stephan: When fully implemented into your business do for performance.
Simeon M. Kohl: Sure. So, you know, look, we talk about quite a bit how technology is a significant differentiator for us. It has been for some time with our own stack that we use here.
Speaker Change: Sure. So look we talk about quite a bit how technology is a significant differentiator for us. It has been for for some time with our own stack that we use here and the fact that performance continues to receive some of the highest quality scores in this space aligns well to the core objectives of payers that are really trying to make sure.
Simeon M. Kohl: And the fact that Performant continues to receive some of the highest quality scores in this space aligns well with the core objectives of payers that are really trying to make sure that they are protecting their dollars and, at the same time, not being too abrasive with their providers and their networks. And so having technology that can select the claims that have the highest degree of likelihood that there are errors or billing issues is key in this space. You don't want to cast a wide net. You don't want to have appeals, high appeals overturns, etc.
Simeon M. Kohl: Sure that they are protecting their dollars and at the same time, not being too abrasive with their providers in their networks and so having a technology that can select the claims that have the highest degree of likelihood that there is errors or billing issues.
Simeon M. Kohl: Is key in this space you don't want a caste wide nets, you don't want to have appeal high appeal overturns et cetera.
Simeon M. Kohl: And for Performance, as a contingency vendor, when we have human capital invested, we have the same objective. We want to make sure that we aren't selecting claims that are coming in-house that are not going to have findings. That's just we're investing human capital in areas that don't have a high yield. So we've always known to have technology that can help us really improve those selections. I think records one, as Rohit points out, it's another level.
Simeon M. Kohl: And for performance as a contingency vendor when we have key human capital invested we have the same objective we want to make sure that we arent selecting claims that are coming in house that are not going to have a finding that's just we're investing human capital in areas that doesn't have a high yield. So we've always known have technology that can help us.
Simeon M. Kohl: Improve those selections any records one is broker points out it's another level. It takes the machine learning that we've had for some time and through the leverage of large language models natural language processing.
Simeon M. Kohl: It takes the machine learning that we've had for some time, and through the leverage of large language models, and natural language processing, we can up that game pretty dramatically to make sure that we really have the best in class selection capability. And so as we think about that, we are bringing in claims that have a much higher degree of likelihood of a finding, which is again, good for us, and good for our payer clients.
Simeon M. Kohl: We can up that gain pretty dramatically to make sure that we are really have best in class.
Simeon M. Kohl: Selection capability and so as we think about that we are bringing in claims step have a much higher degree of likelihood of a finding.
Simeon M. Kohl: Which again good for us good for our.
Simeon M. Kohl: Our payer clients and then as we think about the technology moving forward being able to leverage that technology to help us through the workflow. There are some things as you think about.
Simeon M. Kohl: And then as we think about the technology moving forward, being able to leverage that technology to help us through the workflow. There are some things, as you think about, natural language processing, where there are components of the workflow, components of the review, that today you have to use a human to execute that review. And this technology can help us in certain areas as we step through the review to actually execute it through technology to kind of lower the human capital.
Simeon M. Kohl: Natural language processing, where theyre components of the workflow components of the review that today, you have to use a human to execute that review.
Simeon M. Kohl: And this technology can help us in certain areas as we step through the review to to actually execute it.
Simeon M. Kohl: I'd need to be very careful as I say that we're not yet in an environment where we're going to be using technology instead of nurses and coders to make a full review. There's a lot that has to happen in the industry, etc. before any of that is even possible. But there are components of that review that we can actually move to technology to lower our human capital.
Simeon M. Kohl: Through technology to kind of lower the human capital.
Simeon M. Kohl: I would need to be very careful as I say that right I don't we're not yet in an environment, where we're going to be using technology instead of nurses and coders to make a full review.
Simeon M. Kohl: There is a lot that has to happen in the industry et cetera, before any of that that is even possible, but there is components of that review that we can actually move to technology to lower our human capital investment.
Jacob Michael Stephan: Okay, yeah, no, that's helpful. I guess just one last one for me here in the eligibility segment. You know, it sounds like commercial continues to kind of excel lead the way there. But, you know, could you just kind of touch on the government side of eligibility based on, you know, what's, what's kind of the
Speaker Change: Okay, Yeah, no that is.
Simeon M. Kohl: Helpful.
Jacob Michael Stephan: I guess, just one last one for me here the eligibility segment.
Jacob Michael Stephan: It sounds like commercial continues to excel and lead the way there.
Jacob Michael Stephan: Could you just kind of touch on the.
Jacob Michael Stephan: The government side eligibility base.
Jacob Michael Stephan: What's what's kind of the.
Jacob Michael Stephan: I guess, what's going on there.
Simeon M. Kohl: Sure. So why don't you take a stab at that?
Speaker Change: Sure. So I can Jeff why did you take a stab at that and then I'll provide some meredith.
Simeon M. Kohl: Yeah, so what I was going to say is for that one, so we've had that relationship since 2017, and it is unique for southern government contracts. It is truly a single contract with us as the sole national vendor for it.
Speaker Change: Yeah. So what I was going to say is for that one so we've had that relationship in 2017.
Simeon M. Kohl: And unique set of government contracts it is truly a single contract with us.
Simeon M. Kohl: So a national vendor.
Simeon M. Kohl: And so if you look at some of the public reporting on the Medicare trust and on that contract, you'll see that the recovery grew a lot in those early years; we really brought our performance to that relationship. But in the last year or so, it has leveled off a bit in terms of hitting more of a steady state. And there are more volumes and opportunities within that contract that could be unlocked.
Simeon M. Kohl: For it and so if you look at some of the public reporting on the Medicare Trust and on that contract you will see that the recoveries grew a lot in those early years, and we really brought our performing way too to that relationship.
Simeon M. Kohl: In the last year, or so and it has leveled off a bit in terms of hitting more of a steady state.
Simeon M. Kohl: There is more and more volumes and opportunities within that contract that could be unlocked.
Simeon M. Kohl: I think we've hit more of a steady state as what's available today on that contract, which then, if you think about that year over year, becomes a hindrance on the growth rate. And then the other thing I would just mention is that the first contract ran from 2017 to 22, and the new one took over near the end of Q1 of 23, and so it'd be a new contract, sort of new SLAs, new economics, etc.
Simeon M. Kohl: Is it more of a steady state as what's available today.
Simeon M. Kohl: On that contract, which then if you think about that year over year becomes a hindrance on our growth rate.
Simeon M. Kohl: And then the other thing I would just mentioned is that first contract ran from 2017 to 22 and the new one took over.
Simeon M. Kohl: The end of Q1 of 'twenty, three and so again, you contract sort of SLA and your economics et cetera play.
Jacob Michael Stephan: Okay, got it. Very helpful. I appreciate the color. Good luck, guys.
Speaker Change: Okay got it very helpful. I appreciate the color good luck guys.
Speaker Change: Thank you.
Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to our CEO, Simeon Kohl, for closing remarks.
Jacob Michael Stephan: We have reached the end of our question and answer session I would like to turn the conference back over to our CEO Simeon call for closing remarks.
Simeon M. Kohl: Thank you, operator. I'd like to express our gratitude to everyone who joined us on today's call. I'd also like to thank our nearly 1,000 team members for all their hard work this quarter and our investors for their continued support. We are pleased with our performance in the quarter, and we remain optimistic about our opportunities ahead.
Simeon M. Kohl: Thank you operator.
Simeon M. Kohl: I'd like to express our gratitude to everyone who joined on today's call I'd also like to thank our nearly 1000 team members for all their hard work this quarter and our investors for their continued support we're pleased with our performance in the quarter and we remain optimistic about our opportunities ahead. So thanks again, and we look forward to providing everyone of progress on.
Operator: So thanks again, and we look forward to providing everyone with progress during the next quarterly call. Have a great evening, everyone. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you.
Operator: During the next quarter's call so have a great evening everyone.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Operator: Okay.
Operator: Thanks.
Operator: Yes.
Operator: Okay.
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