Q3 2024 Performant Financial Corp Earnings Call
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Operator: Good afternoon, ladies and gentlemen, and welcome to the Performant Financial Corp's 3rd Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session.
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Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the performance financial Corp's third quarter 'twenty 'twenty four earnings conference call.
At this time all lines are in listen only mode.
Speaker Change: Following the presentation, we will conduct a question and answer session.
Operator: This call is being recorded on Wednesday, November 6th, 2024.
This call is being recorded and Wednesday November six 2024.
Jon Bozzuto: I would now like to turn the conference over to Jon Bozzuto, Head of Investor Relations.
Speaker Change: I'd now like to turn the conference over to John Basuto head of Investor Relations. Please go ahead.
Jon Bozzuto: Thank you operator.
Speaker Change: Thank you operator, good afternoon, everyone by now you should have received a copy of the earnings release for the company's third quarter 2024 results. If you have not a copy is available on the Investor relations portion of our website.
Simeon Kohl: Good afternoon everyone. By now you should have received a copy of the earnings release for the company's third quarter 2024 results. If you have not, a copy is available on the investor relations portion of our website.
Simeon Kohl: Joining me on today's call are 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. These statements are subject to risks and uncertainties, including those described in the company's filings with the SEC. 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.
Speaker Change: Joining me on today's call are semi and cold Chief Executive Officer, and Bro here from John Donny Chief Financial Officer.
Speaker Change: 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.
These statements are subject to risks and uncertainties, including those described in the company's filings with the SEC.
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.
Simeon Kohl: I would now like to turn the call over to Simeon Kohl.
Speaker Change: I'd now like to turn the call over to Sami and cold chain.
Simeon Kohl: Simeon? Thank you, Jon.
Sami: Thank you John and good afternoon, everyone and thank you for joining us for our earnings call.
Simeon Kohl: Good afternoon, everyone, and thank you for joining us for our earnings call. Earlier this afternoon, we reported third quarter results, which were highlighted by 6% growth in health care revenues compared to the same quarter of 2023 and positive adjusted EBITDA of $2 million. Our team continues to deliver on our mission to reduce payment, waste, and abuse in the healthcare system.
Sami: Earlier. This afternoon, we reported third quarter results, which were highlighted by 6% growth in health care revenues compared to the same quarter of 2023 and positive adjusted EBITDA of $2 million. Our team continues to deliver on our mission to reduce payment waste and abuse in the health care system.
Simeon Kohl: I'll begin by sharing our operational accomplishments, followed by Rohit, who will walk you through our financial results. In the first nine months of the year, we successfully capitalized on market opportunities, advanced our organizational transformation, and expanded our technology footprint, all while scaling a record number of new contracts. This has been achieved despite several challenges in the healthcare industry. As a disruptive player in the payment integrity space, our client-centric philosophy remains the primary catalyst to growing our market share. In the third quarter, we implemented 12 statements of work, primarily with existing commercial clients who continue to purchase additional services from Performant.
Sami: I'll begin by sharing our operational accomplishments followed by Rohit, who will walk you through our financial results.
Sami: And the first nine months of the year, we successfully capitalized on market opportunities advance our organizational transformation and expanded our technology footprint, all while scaling a record number of new contracts. This has been achieved despite several challenges in the health care industry.
Sami: As a disruptive player in the payment integrity space, our client centric philosophy remains the primary catalyst to growing our market share.
Sami: In the third quarter, we implemented 12 statements of work primarily with existing commercial clients, who continue to purchase additional services from performance year.
Simeon Kohl: Year-to-date, we've implemented 32 programs that we currently expect to deliver between $13 and $14 million of annualized revenue at steady state. Our journey began with our first health care contract with CMS, which established our strong reputation in the industry. Since then, we've expanded to serve the majority of the largest commercial payers in the country, albeit still with a small wallet share. We've also carved out a solid foothold in the middle market payer space by staying laser-focused on meeting our clients where they are and partnering to expand their payment integrity efforts. While the commercial market remains our largest growth opportunity, we've experienced some delays in our sales and implementation cycle.
Sami: Year to date, we've implemented 32 programs that we currently expect to deliver between 13 and $14 million of annualized revenue at steady state.
Sami: Our journey began with our first health care contract with CMS, which established our strong reputation in the industry.
Sami: Since then we've expanded to serve the majority of the large largest commercial payers in the country, albeit still with a small wallet share. We've also carved out a solid foothold in the middle market payer space by staying laser focused on meeting our clients, where they are and partnering to expand their payment integrity efforts.
Sami: While the commercial market remains our largest growth opportunity we've experienced some delays in our sales and implementation cycle. We believe these delays are largely due to slower decision, making resulting from the change healthcare breach earlier this year.
Simeon Kohl: We believe these delays are largely due to slower decision making resulting from the change healthcare breach earlier this year. As we've discussed previously, this indirect impact has affected the market, but we remain confident that our strong compliance and security credentials demonstrated by our rigorous controls, which are regularly tested by CMS and our commercial partners, will continue to reinforce our commitment to safeguarding client interests and ultimately help to increase market share over the long term. I am happy to report that our RAC Region 2 implementation, which began approximately a year ago, continues to scale well, helping to counter the election-related tamp down in our overall RAC auditing business.
Sami: As we've discussed previously this indirect impact has affected the market, but we remain confident that our strong compliance and security credentials demonstrated by a rigorous controls which are regularly tested by CMS and our commercial partners will continue to reinforce our commitment to safeguarding client interests and often ultimate.
Sami: We help to increase market share over the long term.
Sami: I am happy to report that our rack region to implementation, which began approximately a year ago continues to scale well.
Sami: To counter the election related tamped down and our overall rack auditing business. We are excited that the end of the election cycle is upon us in the hope of moving past this distraction.
Simeon Kohl: We are excited that the end of the election cycle is upon us in the hope of moving past this distraction. Our other federal contracts are performing to expectation, rounding out a continued strong partnership with CMS and its parent organization, HHS. Fortunately, our diversified base of clients has allowed us to achieve our year-to-date revenue targets despite the macro challenges. Looking ahead, we anticipate CMS will issue RFPs for RAC Regions 3, 4, and 5 by the end of the year. As the current contractor for Region 5, we expect CMS to initiate the standard contract wind down process, leading to a decline in work and revenues associated with this contract in early 2025, regardless of the RFP's outcome.
Sami: Our other federal contracts are performing to expectation rounding out a continued strong partnership with CMS and its parent organization HHS.
Sami: Fortunately our diversified base of clients has allowed us to achieve our year to date revenue targets. Despite the macro challenges.
Sami: Looking ahead, we anticipate CMS will issue Rfps for rack regions, three four and five by the end of the year.
Sami: As the current contractor for region five we expect CMS to initiate the standard contract wind down process, leading to a decline in work and revenues associated with this contract in early 2025, regardless of the Rfps outcome.
Simeon Kohl: RAC Regions 3 and 4, which encompass the western and southeast portion of the United States, present potential opportunities for Performant to expand our footprint with CMS, and we are carefully evaluating our options as the procurement nears.
Sami: Rack regions, three and four which encompass the western and South east portion of the United States present potential opportunities for performance to expand our footprint with CMS and we are carefully evaluating our options as the procurement in years.
Simeon Kohl: Turning to the state Medicaid market, we've recently made inroads into this space, which we estimate to be a $300 to $500 million annual revenue opportunity across both audit and TPL services. In early September, we are excited to announce the tentative award of the New York State Recovery Audit Contract. This award is significant for three key reasons. First, the award was made based on overall value, with performance technical qualifications being the primary factor behind the award. Second, I'd like to highlight that this is the second time New York has awarded Performant the RAC opportunity, following a protest from the incumbent after our initial award in 2023, which led to the RFP being reissued.
Sami: Turning to the state Medicaid market. We've recently made inroads into this space, which we estimate to be a $3 million to $500 million annual revenue opportunity across both audit and PPL services.
Sami: In early September we were excited to announce the tentative award of the New York State recovery audit contract.
Sami: This award is significant for three key reasons first the award was made based on overall value with performance technical qualifications being the primary factor behind the award.
Sami: Second I'd like to highlight that this is the second time, New York has awarded perform at the rack opportunity. Following a protest from the incumbent after our initial award in 2023, which led to the RFP being reissued.
Simeon Kohl: This reinforces our ability to successfully navigate and withstand protests when replacing a long-standing incumbent, both at the federal and state level. Finally, New York boasts one of the largest and most sophisticated Medicaid programs in the country. Our entry into this market has been both strategic and deliberate, with years spent expanding our product offerings, refining our methodologies, and positioning ourselves to effectively meet the needs of state Medicaid agencies. Securing Performance New York RAC Award is a significant achievement and should resonate across the industry. We're excited about the anticipated contract start in early Q2 2025, which will provide us with the opportunity to demonstrate our capabilities in a state market eager for a fresh approach.
Sami: This reinforces our ability to successfully navigate and withstand protests when replacing a longstanding incumbent both at the federal and state level.
Sami: Finally, New York boasts one of the largest and most sophisticated met at Medicaid programs in the country. Our entry into this market has been both strategic and deliberate with years spend expanding our product offerings refining our methodologies and positioning ourselves to effectively meet the needs of state Medicaid agencies.
Sami: Securing performance New York Rack Award is a significant achievement and should resonate across the industry.
Sami: We're excited about the anticipated contract start in early Q2, 2025, which will provide us with the opportunity to demonstrate our capabilities.
Sami: In a state market eager for a fresh approach.
Simeon Kohl: Staying on the state market, in Q3, we sponsored the NAMPY Conference, which gave us an opportunity to hear from many state Medicaid programs to better understand current gaps. For those unfamiliar, NAMPY stands for the National Association for Medicaid Program Integrity and includes representation from all 50 states. Given that this market has primarily been served by a single program integrity vendor for decades, it was encouraging to receive direct feedback from state stakeholders on how Performant can differentiate itself in the marketplace.
Sami: Staying on the state market in Q3, we sponsored the Nappy conference, which gave US an opportunity to hear from many state Medicaid programs to better understand current gaps for those unfamiliar Namphy stands for the National Association of Association for Medicaid program integrity and includes representation from all 50 states.
Sami: Yeah.
Sami: Given that this market has primarily been served by a single program integrity vendor for decades. It was encouraging to receive direct feedback from state stakeholders and how performance can differentiate itself in the marketplace.
Simeon Kohl: Gaining market share and expanding our influence within the payment integrity industry was our primary goal when we transitioned to a pure play healthcare company in 2021. We achieve this by recruiting influential leaders from payers, providers, vendors, and government organizations, each contributing their unique expertise to support our vision and reinforce our position in the payment integrity industry. Our growth and success since then speaks for themselves and our team remains focused and committed to achieving even greater achievements in the years ahead.
Sami: Gaining market share and expanding our influence within the payment integrity industry was our primary goal when we transition to a pure play health care company in 2021.
Sami: We achieved this by recruiting influential leaders from payers providers vendors and government organizations each contributing their unique expertise to support our vision and reinforce our position in the payment integrity industry.
Sami: Our growth and success. Since then speaks for themselves and our team remains focused and committed to achieving either even greater achievements in the years ahead.
Simeon Kohl: As I look ahead, the next phase of our organizational transformation is centered around scale to innovate, one of our four core pillars alongside client centricity, ownership culture, and operational excellence. Fail to innovate is a theme that is woven into the very fabric of our organization. Importantly, we now have company-wide initiatives that support this theme. Through our focus on scalable infrastructure and workflows, particularly as part of Project TORING, we are strategically positioning ourselves to drive greater innovation and value for our clients while also advancing our margin expansion goals. Technology has always been central to scaling capabilities.
Sami: As I look ahead. The next phase of our organizational transformation is centered around scale to innovate one of our four core pillars alongside clients Centricity ownership culture and operational excellence.
Sami: The innovate is a theme that is woven into the very fabric of our organization.
Sami: Importantly, we now have company wide initiatives that support this theme.
Sami: Through our focus on scalable infrastructure and workflows, particularly as part of project touring we are strategically positioning ourselves to drive to drive greater innovation and value for our clients. While also advancing our margin expansion goals.
Sami: Technology has always been central to scaling capabilities, we've developed a world class data engine and recently integrated natural language processing technologies to enhance both our solutions and scalability.
Simeon Kohl: We've developed a world-class data engine and recently integrated natural language processing technologies to enhance both our solutions and scalability. I'm pleased to announce that we've successfully incorporated the assets from our recent acquisition into our technology stack and are now optimizing it for our workflows with plans to deploy it across our broader client and product suite. Our commitment to a data-driven approach remains unwavering, and this thoughtful integration is a key part of that strategy. Our goal is to equip our auditors with cutting edge tools that efficiently address the payment, waste, and abuse burdening our healthcare system.
Sami: I am pleased to announce that we've successfully incorporated the assets from our recent acquisition into our technology stack and are now optimizing it for our workflows with plans to deploy it across our broader client and product suites.
Sami: Our commitment to a data driven approach remains unwavering.
Sami: And this thoughtful integration is a key part of that strategy.
Sami: Our goal is to equip our auditors with cutting edge tools that.
Sami: <unk> addressed the payment waste and abuse burdening, our health care system.
Simeon Kohl: Finally, amid our ongoing business transformation and following our expansion into the state Medicaid market, we have made the strategic decision to reduce services within the customer care line of business. This decision is guided by two main considerations. First, while we have successfully managed our customer care revenue to a positive margin contribution, this industry has experienced significant volatility due to regulatory and oversight changes that have continued to make it difficult to effectively plan and operate. Second, it aligns with performance strategy to concentrate on the healthcare payment integrity market, which we believe offers the most effective path to achieving long-term profitability and sustained growth.
Sami: Finally.
Sami: Our ongoing business transformation and following our expansion into the state Medicaid market. We have made the strategic decision to reduce services within the customer care line of business <unk>.
Sami: This decision is guided by two main considerations.
Sami: First while we have successfully managed our customer care revenue to a positive margin contribution. This industry has experienced significant volatility due to regulatory and oversight changes that have continued to make it difficult to effectively plan and operate.
Sami: Second it aligns with performance strategy to concentrate on the health care payment integrity market, which we believe offers the most effective path to achieving long term profitability and sustained growth.
Simeon Kohl: We believe focusing entirely on this healthcare market opportunity continues to be in the best interest of our shareholders.
Sami: We believe focusing entirely on this health care market opportunity continues to be in the best interest of our shareholders Rohit will dive into some of the financial update and implications associated with deemphasizing. These services.
Simeon Kohl: Rohit will dive into some of the financial updates and implications associated with de-emphasizing these services.
Simeon Kohl: Before I turn it over to Rohit, I want to take a moment to express my gratitude to all our employees. Your dedication and hard work have been the driving force behind our success, particularly as we as we have collectively navigated a transformative period for our organization. This transformation, fueled by technology and our relentless pursuit of innovation, has not only strengthened our operations, but also positioned us to capture significant market opportunities. While this year has been atypical due to the impact of increased security breaches and the conservatism surrounding the election, we have successfully managed the business to maintain guidance in our range.
Sami: Before I turn it over to Rohit.
Sami: I want to take a moment to express my gratitude to all our employees.
Sami: Your dedication and hard work have been the driving force behind our success, particularly as we as we have collectively navigated a transformative period for our organization.
Sami: This transformation fueled by technology and a relentless pursuit of innovation is not only strengthen our operations, but also positioned us to capture significant market opportunities.
Sami: While this year has been atypical due to the impact of increased security breaches and the conservatism surrounding the election, we have successfully managed the business to maintain guidance with our in our range. Despite these challenges we have fulfilled our commitments showcasing the resilience and adaptability of our team.
Simeon Kohl: Despite these challenges, we have fulfilled our commitments, showcasing the resilience and adaptability of our team and business strategy.
Sami: And business strategy with the momentum we've built an exceptional team we have in place I am confident in our ability to continue delivering strong results and creating long term value for our stakeholders with that I'll hand, it over to Rohit <unk>, our chief financial officer for a discussion of the financials broke it. Thanks.
Simeon Kohl: With the momentum we've built and the exceptional team we have in place, I am confident in our ability to continue delivering strong results and creating long-term value for our stakeholders.
Rohit Ramchandani: With that, I'll hand it over to Rohit Ramchandani, our Chief Financial Officer, for a discussion of the financials.
Rohit Ramchandani: Rohit. Thanks, Sam. Another solid quarter of results amidst all the uncertainties from this past year. In the third quarter, 2024, our total company revenues were $31.5 million, which included health care revenues of $30.3 million, delivering year-over-year growth of 5% and 6% respectively. Our customer care outsourced services business accounted for $1.2 million of the revenue during the quarter, a decline from the previous year. As Sim mentioned, we are adapting to reduce services in this market. While this line of business was projected to generate approximately $7 million in annual revenue, its estimated impact on performance bottom line has always been minimal.
Sami: Tim.
Rohit: Another solid quarter of results admit amidst all the uncertainties from this past year.
Sami: In the third quarter 2024, our total company revenues were $31 5 million, which included healthcare revenues of $33 million delivering year over year growth of 5% and 6% respectively.
Sami: Our customer care outsource services business accounted for $1 2 million of the revenue during the quarter a decline from the previous year.
Speaker Change: As Tim mentioned, we are adapting to reduce services in this market.
Speaker Change: While this line of business was projected to generate approximately $7 million in annual revenue.
Speaker Change: Estimated impact on performance bottom line has always been minimal.
Rohit Ramchandani: As Sim mentioned, the continuous tumultuous changes in expectation have made this market difficult to plan for and operate in. With a decision to pull back, the run rate revenue for the remaining services in this line of business in the quarter ahead is expected to be less than a quarter of previous expectation. There will be corresponding impacts on near-term margins, but again, as Sim mentioned, we anticipate those will be minimal and have no impact on our overall margin expansion strategy.
Speaker Change: Tim mentioned, the continuous tumultuous changes in expectation I've made this market difficult to plan for and operate in.
Speaker Change: The decision to pull back the run rate revenue for the remaining services in this line of business in the quarter ahead is expected to be less than a quarter of previous expectation.
Speaker Change: There will be corresponding impacts on near term margins, but again as Tim mentioned, we anticipate those will be minimal and have no impact on our overall margin expansion strategy.
Rohit Ramchandani: healthcare remains our sole growth strategy, and we remain excited about the long term prospects of this business. Our third quarter health care revenue grew 6% year over year and through the first nine months of the year, we've grown 12% compared to the prior year period. These healthcare results continue to demonstrate our ability to gain market share and scale new opportunities. Within healthcare, our claims-based business, also known as claims auditing, led the way with revenues of $14.2 million in the quarter. Our claims-based business has grown over 30 percent both in the third quarter and through the first nine months of the year when compared to the prior year period.
Speaker Change: Health care remains our sole growth strategy and we remain excited about the long term prospects of this business.
Speaker Change: Our third quarter healthcare revenue grew 6% year over year and through the first nine months of the year, we've grown 12% compared to the prior year period.
Speaker Change: These health care results continue to demonstrate our ability to gain market share and scale new opportunities.
Speaker Change: Within healthcare our claim space business also known as claims auditing led the way with revenues of $14 2 million in the quarter.
Speaker Change: Our clients base business has grown over 30% both in the third quarter and through the first nine months of the year when compared to the prior year period.
Rohit Ramchandani: Once again, both our government and commercial clients contributed to this growth. In particular, our commercial claims-based portfolio showed strong KPIs, helping to offset the impacts from election-related tamp downs in the governmental RAC program. Eligibility revenues for the quarter were $16.1 million, representing a decrease of roughly 12% in comparison to last year. In the third quarter of 2023, we mentioned a large implementation which resulted in meaningful initial revenue as a result of a back sweep, leading to a known difficult comp year-over-year for eligibility revenues. We currently do not see any meaningful indication of weakness in this market, and we continue to expect growth, both in the near term and long term.
Speaker Change: Once again, both our government and commercial clients contributing to this growth in particular, our commercial claims based portfolio showed strong kpis, helping to offset the impacts from election related tamped down and the governmental rack programs.
Speaker Change: Eligibility revenues for the quarter were $16 1 million, representing a decrease of roughly 12% in comparison to last year.
Speaker Change: In the third quarter of 2023, we mentioned a large implementation, which resulted in meaningful initial revenue as a result of a back suite, leading to a known difficult comp year over year for eligibility revenues.
Speaker Change: Currently do not see any meaningful indication of weakness in this market and we continue to expect growth both in the near term and long term.
Rohit Ramchandani: And though admittedly not the best way to analyze our business, I do note 17% sequential quarterly growth in eligibility revenue. As we think about 2024 thus far compared to the previous year, our commercial clients are scaling well and slightly offset by our mature relationship with CMS MSP, now on its second CRC contract. A portion of our commercial eligibility success is stemming from a further enhanced product suite as a result of some of the early achievements of Project TORN. As we look toward the building blocks of future growth, we continue to build off the momentum of our record commercial implementations in 2023.
Speaker Change: And though admittedly not the best way to analyze our business I do note, 17% sequential quarterly growth in eligibility revenues.
Speaker Change: As we think about 2024, thus far compared to the previous year, our commercial clients are scaling well and slightly offset by our mature relationship with CMS MSP now on its second CRC contract.
Speaker Change: A portion of our commercial eligibility success stemming from a further enhanced product suite as a result of some of the early achievements of project Turing.
Speaker Change: As we look toward the building blocks for future growth, we continue to build off the momentum of our record commercial implementations in 2023.
Rohit Ramchandani: We have implemented 32 programs year-to-date, which collectively currently are expected to deliver $13 to $14 million in annualized revenues at steady state. We are encouraged by the high volume of programs amongst new and existing clients, particularly considering how sticky these opportunities can be. While these are slightly below internal expectations, we are encouraged by the continued wins in traction. As Sim mentioned, clients are balancing other priorities and pressure testing their information security posture following the change cyber breach earlier this year. We still currently expect our 2024 implementations to clear the $18 million hurdle we set in estimated annualized revenues from last year's implementations, in spite of these external factors.
Speaker Change: We have implemented 32 programs year to date, which collectively currently are expected to deliver $13 million to $14 million in annualized revenues at steady state.
Speaker Change: We are encouraged by the high volume programs amongst new and existing clients, particularly considering how sticky these opportunities can be.
Speaker Change: While these are slightly below internal expectations. We are encouraged by the continued wins and traction as Sam mentioned clients are balancing other priorities and pressure testing their information security posture. Following the change cyber breach earlier this year.
Speaker Change: We still currently expect our 2024 implementations to clear the $18 million hurdle, we sat in estimated annualized revenues from last year's implementations in spite of these external factors.
Rohit Ramchandani: Fifting to operating expenses, these represented $33.7 million in the third quarter, or roughly $3 million ahead of the prior year. This was primarily driven by increased spending to scale implementations, IT investments related to project touring in our acquisition, and investments in our sales and business development teams that we discussed earlier this year. We are encouraged by all of these investments in the roadmap of project touring, including its early indicators of proving out the ability to drive incremental margin gain. With that, we are pleased to report a positive adjusted EBITDA of $2 million in the third quarter, approximately flat to the prior year period as expected.
Speaker Change: Shifting to operating expenses. These represented $33 7 million in the third quarter or roughly $3 million ahead of the prior year.
Speaker Change: This was primarily driven by increased spending to scale implementations.
Speaker Change: Investments related to project Turing and our acquisition and investments in our sales and business development teams that we discussed earlier this year we.
Speaker Change: We are encouraged by all of these investments and the roadmap of project journey, including its early indicators of proving out the ability to drive incremental margin gain.
Speaker Change: With that we are pleased to report a positive adjusted EBITDA of $2 million in the third quarter approximately flat to the prior year period as expected.
Rohit Ramchandani: Achieving this alongside the increased investments in 2024 compared to last year was no small feat, and I'd also like to thank the performant team members for all their contributions toward this achievement. The nine-month year-to-date adjusted EBITDA comparison is also showing well at roughly $2.5 million ahead of the prior year. We've talked about remaining focused on these operational efficiencies without compromising our opportunity to expand top-line growth.
Speaker Change: Achieving this alongside the increased investments in 2024 compared to last year was no small feat and I would also like to thank the performance team members for all their contributions toward this achievement.
Speaker Change: The nine month year to date adjusted EBITDA comparison is also showing well at roughly $2 $5 million ahead of the prior year.
Speaker Change: We've talked about remaining focused on these operational efficiencies without compromising our opportunity expand topline growth.
Rohit Ramchandani: A great example of top-line growth is the New York State RAC win. I've previously talked about how government opportunities will have a stair-step function in revenue due to their size and immediate scope. We believe at SteadyState, the New York RAT contract can indeed generate double-digit millions in annual revenue. We are hesitant to provide a more definitive range until we can work more closely with the New York-only team to understand the specifics of their program scope and implementation, something that we've begun to do now. We will endeavor to provide updates as this implementation progresses. With the support of our $25 million credit facility at Wells Fargo, we strategically manage to a lower cash balance and draw on the facility as needed.
Speaker Change: Great example of top line growth is the New York State rack win.
Speaker Change: I've previously talked about how government opportunities, we'll have a stair step function in revenue due to their size and immediate scope. We believe steady state New York rack contract can indeed generate double digit millions in annual revenues.
Speaker Change: We are hesitant to provide a more definitive range until we can work more closely with the New York <unk> team to understand the specifics of their program scope and implementation something that we've begun to do now.
Speaker Change: We will endeavor to provide updates as this implementation progresses.
Speaker Change: With the support of our $25 million credit facility with Wells Fargo, we strategically manage to a lower cash balance and draw on the facility as needed. We remain focused on managing our business to support strategic organic investments and meet ongoing working capital needs for implementations within our current capital framework as we approach our goal.
Rohit Ramchandani: We remain focused on managing our business to support strategic organic investments and meet ongoing working capital needs for implementations within our current capital framework as we approach our goal of self-sustaining cash flow.
Speaker Change: Of self sustaining cash flows.
Rohit Ramchandani: Reflecting on the first nine months of 2024, Performant has executed on our operational initiatives to drive efficiencies, we've scaled new and existing clients, we've implemented new opportunities, and we were awarded the New York State RAC contract for a second time, opening the doors to a new state Medicaid market for Performant. We have executed on what we can control. We've successfully navigated what we cannot. And I'm so proud of the team and their efforts to get us here. As Sim discussed, there are some industry challenges that have impacted our commercial clients' decision timing and conservatism within our government clients due to the tumultuous election season.
Speaker Change: Reflecting on the first nine months of 2024 performance has executed on our operational initiatives to drive efficiencies, we've scaled new and existing clients. We have implemented new opportunities and we were awarded the New York State rack contract for a second time opening the doors to our new state Medicaid market for performance.
Speaker Change: We have executed on what we can control we've successfully navigated what we cannot and I am so proud of the team and their efforts to get us here.
Speaker Change: As Sam discussed there are some industry challenges that have impacted our commercial clients' decision timing and conservatism within our government clients due to the tumultuous election season, we do find it prudent to continue articulating some of these less predictable market factors that directly and indirectly impact our business they'll remain very strongly positioned.
Rohit Ramchandani: We do find it prudent to continue articulating some of these less predictable market factors that directly and indirectly impact our business, though remain very strongly positioned with our overall portfolio of client relationships.
Speaker Change: Our overall portfolio of client relationships.
Rohit Ramchandani: With that, we are pleased to reiterate our guidance for 2024 health care revenues to be in the range of $117 to $122 million and for the full year 2024 adjusted EBITDA to be in the range of $4 to $5 million. Our ability to deliver within the range of goals established early in the year, in spite of industry challenges, continues to make me confident in our position and approach. Accordingly, we will continue our efforts to make investments to improve our efficiency and to support the scale and long-term growth of our numerous contract wins.
Speaker Change: With that we are pleased to reiterate our guidance for 2020 for healthcare revenues to be in the range of $117 million to $122 million.
Speaker Change: And for the full year 2024, adjusted EBITDA to be in the range of $4 million to $5 million.
Speaker Change: Our ability to deliver within the range of goals established early in the year in spite of industry challenges continues to make me confident in our position and approach. Accordingly, we will continue our efforts to make investments to improve our efficiency and to support the scale and long term growth of our numerous contract wins.
Operator: Operator, would you please open up the lines for questions? Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2.
Speaker Change: Operator would you please open up the lines for questions.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone you will hear a prompt that your hand has been raised should you wish to decline from the polling process. Please press star followed by the number too.
Kyle Bauser: If you are using a speaker phone, please make sure to lift your handset before pressing Your first question comes from the line of Kyle Bauser from B Reilly Securities, please go ahead.
Speaker Change: If you are using a speaker phone please make sure to lift your handset before pressing any keys.
Speaker Change: Your first question comes from the line of Kyle Boser from B Riley Securities. Please go ahead.
Kyle Bauser: Great.
Kyle Bauser: I send Rohit and Jon, thank you for taking my question. Maybe I'll start with the state business, Medicaid. So, nice New York contract win that is set to begin early next year, I think in April. And you mentioned at steady state, this could generate double digit millions, which is great. Can you, given this is a new opportunity set and you're just starting this new vertical, can you talk about any expectations on how long it might take to kind of hit steady state and operationalize?
Kyle Boser: Great I say and Rohit John Thank you for taking my questions here.
Kyle Boser: Maybe I'll start with the date business Medicaid.
Speaker Change: Nice New York contract.
Speaker Change: That is set to begin early next year I think in April and you mentioned that at steady state this could generate.
Speaker Change: Double digit millions, which is great.
Speaker Change: Can you give me this is a new opportunity set and then you are just starting this new vertical can you talk about any expectations on how long it might take to kind of hit steady state and and operationalize that contract.
Kyle Bauser: Hi to Kyle, thanks. As we stand today, I think we anticipate it will follow generally the normal course we typically describe with commercial clients and other of that two to three year ramp cycle to a full steady state. That being said, we will update that as we progress forward, as if we do end up with a more motivated client, similar to what we experienced a bit on the implementation with RAC Region 2. There could be avenues to compress that, which we'll certainly be looking to tackle, but just don't know today. Yeah, Kyle, and I think just one add-on to that is if you think about our solution suite and ultimately our product offering, all this is kind of a new market, state-based market for us.
Speaker Change: Thank you Karl Thanks.
Speaker Change: As we stand today I think we anticipated will follow generally the normal course, we typically describe with commercial clients and other.
Speaker Change: That two to three year ramp cycle to a full steady state.
Speaker Change: That being said we.
Speaker Change: We will update that as we progress forward as if we do end up with a more motivated client similar to what we experienced a bit on the implementation with rack region too there could be avenues to compress that which will certainly be looking to tackle I just don't know today.
Speaker Change: Yes, Kyle and I think this one out.
Speaker Change: Want to add onto that is if you think about our solutions suite and ultimately our product offering all of this is a kind of a new market state based market for US. We have spent a significant amount of time and I think it is a big factor of the of the win in New York in terms of our qualifications working with large national Medicaid managed care plans. So.
Kyle Bauser: We have spent a significant amount of time, and I think it was a big factor of the win in New York in terms of our qualifications, working with large national Medicaid managed care plans. So, you know, our product offering absolutely applies, and we have a significant amount of experience, and so a new market for us, but not in terms of our experience and our product suite in terms of how we think about applying.
Speaker Change: Our product offering absolutely applies and we have a significant amount of experience and so a new market for us, but not in terms of our experience in our product suite in terms of how we think about applying it.
Kyle Bauser: Got it, appreciate that.
Speaker Change: Got it I appreciate that and maybe sticking on this topic.
Kyle Bauser: Maybe just sticking on this topic, and maybe this is a little bit of an unknown as well, but do you expect the margins to kind of be similar at SteadyState to your existing federal and commercial business? And then part two of that is, Sim, you mentioned getting some great feedback at NAMPY and how Performant can differentiate from the current marketplace. Any specific color on gaps that Performant can address would be Yeah, sure.
Speaker Change: And maybe this is a little bit of a non known as well, but do you expect the margin to kind of be similar at steady state to your existing federal and commercial business and then part two of that is Sam you mentioned getting some great feedback it Nancy.
Speaker Change: And how performing can differentiate from the current marketplace.
Speaker Change: Any specific color on gaps that performance Ken addressed what maybe appreciate it.
Rohit Ramchandani: Rohit, why don't you take the first one and I'll tackle the second. Exactly. Yes, on the margin front, I mean, the quick answer is yes, we do anticipate it to be a similar margin profile with some of our other opportunities, similar to how we've talked about some of the CMS programs, you know, government typically gets a better fee rate, but then the efficacy of our results turning into those dollars is typically higher with government contracts. So we expect it to net out to similar to what we currently have in the portfolio. Yeah, and then feedback, Kyle, that we're hearing from other Medicaid agencies, state directors, etc.
Speaker Change: Yes sure.
Speaker Change: The first one and I'll tackle second exactly.
Speaker Change: Yes on the margin front I mean, the quick answer is yes, we do anticipate it to be a similar margin profile of some of our other opportunities.
Speaker Change: How we've talked about.
Speaker Change: Some of the CNS programs government typically gets a better fee rate, but in the efficacy of our results turning into those dollars is typically higher.
Speaker Change: With government contracts and we expect it to net out to similar to what we currently have in the portfolio.
Speaker Change: Yes, and then feedback Kyle.
Kyle Boser: We're hearing from from other Medicaid agencies, the directors et cetera.
Simeon Kohl: Really, it's frankly quite similar to another WIN theme that we had in New York, and that's just what Performant brings to the table in terms of innovation. As I shared in my prepared remarks, you know, this has been an industry that's largely been served by a single program integrity vendor for the last 10, 15 years. It's really taken a cookie cutter approach, and as we've shared consistently, Performant really looks at everyone's business quite uniquely. So, whether it's a large national plan, a regional payer, a government entity, etc., we believe that there has to be more customized approach available to address just the particular needs of those particular markets.
Kyle Boser: Really it's frankly quite similar to another win theme that we had in New York and that's just what performance brings to the table in terms of innovation as I shared in my prepared remarks. This has been an industry. That's largely been served by a by a single program integrity vendor for the last 10 15 years. It has really taken a cookie cutter approach.
Kyle Boser: And as we've shared consistently performance really looks at everyone's business quite uniquely so whether it's a large national plan of regional payer a government entity et cetera. We believe that there has to be more customized approach available to address just the particular needs of those particular mark.
Simeon Kohl: And so, we talked a lot about innovation. It was something that New York State built into part of their evaluation to bring things to the table that they weren't aware of in terms of how we might be able to move the program integrity needle. And so, that was something that, again, I think was a big part of the WIN theme for us in New York State, and something that's been resonating as we've talked to other Medicaid directors around their future.
Kyle Boser: And so.
Speaker Change: We talked a lot about innovation it was <unk>.
Speaker Change: That New York State built into part of their evaluation to bring things to the table that they didnt. They werent aware of in terms of how we might be able to move the program integrity needle and so that was something that again I think it was a big part of the wind theme for Us in New York State and something that's been resonating as we've talked to other Medicaid directors around their future.
Speaker Change: Plants.
Simeon Kohl: Great, appreciate that, Clare. Maybe if I could just sneak in one more. In terms of the commercial side of the business, you've had 32 implementations year-to-date compared to 41 last year and 21 the year before and 23 in 2021. Do you have a number of active programs in place since presumably some of these projects have been completed? Thank you. We don't have a sort of disclosed number of active programs, but if you're tracking, you know, as you mentioned and alluded to those years of mentioning how many we've been adding and the fact that we generally haven't lost a client, you know, that number is certainly 100 plus in terms of number of programs across the board and growing, which we're excited to see.
Speaker Change: Great I appreciate that color and maybe if I could just sneak in one more in terms of the commercial side of the business you had 32 implementations year to date.
Speaker Change: Compared to 41 last year and 21 the year before in 2003 and 2021.
Speaker Change: Do you have a number of active programs in place and presumably some of these.
Speaker Change: <unk> had been completed thank you.
Speaker Change: Yeah.
Speaker Change: We.
Speaker Change: We don't have a sort of disclose number of active programs, but if you're tracking as you mentioned and alluded to those years of mentioning how many we've been adding in the fact that we generally haven't lost a client that number is certainly 100 plus in terms of number of programs across the board and growing which we're excited to see.
Speaker Change: Okay.
Kyle Bauser: Sounds great. Well, thanks for taking my questions and for all the updates here.
Speaker Change: Sounds great well, thanks for taking my questions.
Speaker Change: For all the updates here.
Kyle Bauser: Thanks, Kyle.
Speaker Change: Thanks Carl.
Jacob Stephan: Your next question is from the line of Jacob Stephan from Lake Street, your line is now open. Hey, good afternoon, guys. Thanks for taking my question. Maybe just focusing on some of the, you know, sales cycle delays that you guys have talked to on the commercial side, you know, kind of what point did you start to see some of these delays? Was this, you know, recently? And then maybe if you could just kind of help us think about what you're seeing at, you know, a month into Q4 here.
Speaker Change: Your next.
Speaker Change: Western is from the line of Jacobs Steven from Lake Street. Your line is now open.
Steven Jacobs: Hey, good afternoon, guys. Thanks for taking my question.
Speaker Change: Maybe just focusing on some of the sales cycle delays that you guys could talk to on the commercial side.
Speaker Change: Kind of what point do you start to see some of these delays was.
Speaker Change: Recently, and then maybe if you could just kind of help us think about what youre seeing.
Speaker Change: A month into Q4 here.
Simeon Kohl: Yeah, happy to address that. That's a good question. So we've seen it for a little bit now, certainly following The change, you know, the change data breach, I think, you know, more and more as payers have become a bit more cautious, you know, in terms of security. So, in some cases, it's led to kind of a more comprehensive security views, and that's for both new and existing vendors. And so, as a result, decisions on a few of our pipeline opportunities have been delayed. And we've also seen some implementations have kind of been put on hold as the payers just take their time to kind of complete the expanded reviews.
Speaker Change: Yes happy to address that that's a good question. So we've seen it for a little bit now certainly following.
Speaker Change: The change.
Speaker Change: The change data breach I think more and more as payers have become a bit more cautious.
Speaker Change: In terms of security. So in some cases led to kind of a more comprehensive security views and thats for both new and existing vendors and so as a result of decisions on a few of our pipeline opportunities have been delayed and we've also seen some implementations have kind of been put on hold as the payers just take your time to kind of complete the expanded reviews.
Simeon Kohl: Jacob, we definitely see this as temporary, however, and don't have any concerns in terms of its long-term impact on our relationships with existing clients or current prospects. And in many ways, it's important to note that as a government contractor, we are held to an exceptionally high standard when it comes to security framework and controls. And, you know, look, no doubt some of the delays are a bit frustrating. We've been able to absolutely manage them through, as Rohit's mentioned, but it's actually provided us with a valuable opportunity to kind of demonstrate just how robust our security credentials and controls are.
Speaker Change: <unk>.
Speaker Change: Jacob we definitely see this as temporary however, and don't have any concerns in terms of its long term impact on our relationships with existing clients or current prospects and in many ways. It's important to note that as a government contractor. We are held to an exceptionally high standard when it comes to security framework and.
Speaker Change: <unk> and no.
Speaker Change: No doubt some of the delays are a bit frustrating and we've been able to absolutely manage them through us as Robert has mentioned, but it is actually provided us with a valuable opportunity to kind of demonstrate just just how robust our security credentials and controls are.
Simeon Kohl: And we're convinced this is going to further reinforce our competitive advantage and serve as yet another kind of key differentiator for us as we move forward.
Speaker Change: And we're convinced this is going to further reinforce our competitive advantage and serve as yet another key differentiator for us as we move forward.
Jacob Stephan: Okay, that's helpful. But kind of just one more around kind of the same topic here.
Speaker Change: Okay.
Speaker Change: Helpful.
Speaker Change: Kind of just one more around kind of the same topic here.
Simeon Kohl: Do you see any kind of difficulties filling up kind of, you know, the top of the funnel? It sounds like a lot of the decisions were just delayed. But you know, what is the, you know, kind of top of the funnel look like? And are our, you know, customers still interested in, you know, pursuing things just initially? Yeah, no, absolutely. Just no impact to the top of the funnel. Just, you know, somewhere in the, you know, in the sales cycle where we had anticipated, we'd be getting close to a decision, you know, you have a few opportunities where those have been paused.
Speaker Change: Do you see any kind of difficulty is filling up.
Speaker Change: The top of the funnel it sounds like a lot of the decisions were just delayed.
Speaker Change: What is the kind of top of the funnel look like in our.
Speaker Change: Our customers still interested in <unk>.
Speaker Change: Assuming things just.
Speaker Change: Just initially.
Speaker Change: Yeah, no absolutely just no impact to the top of the funnel.
Speaker Change: Just.
Speaker Change: A somewhere in the in the sales cycle, where we had anticipated we'd be getting close to a decision a few opportunities where those have been paused and we saw similar with some of the implementation just to allow the payers to kind of complete those expanded reviews and I think as we talk about the pipeline in general look whether whether a lowered stars rating increase.
Simeon Kohl: And we saw, you know, similar with some of the implementation, just to allow the payers to kind of complete those expanded reviews. And I think as we talk about the pipeline in general, look, whether a lowered STARS rating, increased utilization, or a decrease in payers kind of Medicaid population, as a result of the recent redetermination process. Now, these all are headwinds to payers' bottom line, which in turn, in many cases, you know, creates potential opportunities for cost containment vendors like Performant. And we're absolutely seeing the same in context of a very healthy sales pipeline.
Speaker Change: <unk> utilization or a decrease in payers kind of Medicaid population as a result of the the recent redetermination process. Now. These are all are headwinds to payers bottoms bottom line, which which in turn in many cases creates potential opportunities for cost containment vendors like performance and we're absolutely seeing the same in context of a very.
Speaker Change: <unk> healthy sales pipeline.
Simeon Kohl: Okay. Just the last one for me, you know, you guys mentioned RFPs going out for 3, 4, and 5. Obviously, you guys have 5. What is kind of the, you know, size differential look like between 3 and 4? And, you know, how many could this be to the top line? Yeah, you know, I don't think we disclose those specifically, but just to give you some context, RAC Region 4 is a 16-state region that includes California. And comparatively, RAC Region 3 is an eight-state region. I think one of its primary states is Florida. So I think historically, if you just go look at the figures, RAC Region 4 is probably one of, if not the largest RAC A and B region.
Speaker Change: Okay.
Speaker Change: Just last one for me you guys mentioned rfps going out for three or four and five obviously you guys have five.
Speaker Change: What is kind of the size differential look like between three and four.
Speaker Change: How many could this be.
Speaker Change: To the top line.
Speaker Change: Yeah.
Speaker Change: I don't think we disclosed those specifically, but just to give you. Some context rack region. Four is our 16 state region that includes California.
Speaker Change: And comparatively rack region three is in each state region I think one of its primary states as is Florida.
Speaker Change: So I think historically if you just go look at the figures rack region for us probably one of if not the largest rack ANV region.
Simeon Kohl: And then RAC Region 3, probably somewhere close to our regions 1 or 2 for context. Okay, yeah, that's very helpful.
Speaker Change: And then Rick region, three probably somewhere close to our region's Warner our two for context.
Speaker Change: Okay got it very helpful. I appreciate it guys.
Jacob Stephan: Appreciate it, guys.
George Sutton: Sure. Your last question is from the line of George Sutton from Craig Hallam. Please go ahead. Thank you. Sim, you had mentioned the success you've had in beginning to work with many of the large commercial payers, but at the same time, you know, you start with a small market share. Can you just walk through what you anticipate to see with some of those larger players? What kind of market share opportunities exist for you over a reasonable period of time? Yeah, look, thanks, George. As we've said, even in our prepared remarks, right, we continue to do very well with all types of payers across the spectrum, certainly have a significant number of the largest payers in the land.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Your last question is from the line of George Sutton from Craig Hallum. Please go ahead.
George Sutton: Thank you Tim you had mentioned the success you've had in.
George Sutton: Beginning to work with many of the large commercial payers, but at the same time.
George Sutton: You start with a small market share can you just walk through.
George Sutton: What you anticipate to see with some of those larger players what kind of market share opportunities exist for you over.
George Sutton: A reasonable period of time.
Speaker Change: Yes look.
Speaker Change: Thanks, George as we've said even in our prepared remarks, right. We continue to do very well with.
Speaker Change: All types of payers across the spectrum certainly have a significant number of the largest payers in the land we've talked about all of these implementations, but we still think we have a very small percentage of the wallet share. If you will with those large payers.
Simeon Kohl: We've talked about all of these implementations, but we still think we have a very small percentage of the wallet share, if you will, with those large payers. We have demonstrated over and over, I don't have the particulars here, but as Rohit talks about those, you know, 100 plus whatever it is programs, many of them are part of our land and expand strategy. And so while, you know, we certainly are excited about the mid-tier opportunities, we may get more opportunities out of the gate when we sign up those for more comprehensive offerings, but we have demonstrated in every single one of our national client relationships that we have the ability to win additional business.
George Sutton: We have demonstrated over and over I don't have the particulars here, but as Rohit talks about those 100, plus whatever is programs. Many of them are part of our land and expand strategy and so while we certainly are excited about the mid tier opportunities, we may get more opportunities out of the gate when we sign up those for more comprehensive.
Speaker Change: Offerings, but we have demonstrated in every single one of our national Pi and relationships that we have the ability to win additional business and I think that's underscored by the fact that this quarter with those implementations that we talked about.
Simeon Kohl: And I think that's underscored by the fact that this quarter with those implementations that we talked about, the majority of those are with current clients. And again, you know, to us, while we like to increase logos, et cetera, many times just seeing that you have these current and existing clients continuing to expand, I think just underscores, you know, our capabilities. Because look, in some cases, we're bringing some net new capability to the payer, but in many cases, we're taking share from some of the very large established incumbents. So whether it be on a federal space with CMS and the RAC program, taking the largest state Medicaid program in New York, or taking share in these national payers, we're taking them from the key established incumbents out there.
Speaker Change: The majority of those are with current clients.
Speaker Change: And again.
Speaker Change: To us while we like to increase logos et cetera. Many times just seeing that you have.
Speaker Change: These current existing clients continuing to expand I think just underscores.
Speaker Change: Our capabilities because look in some cases, we're bringing some net new capability to the payer, but in many cases, we're taking share from some of the very large established incumbents, so whether it be on a federal space with CMS in the rack program, taking the largest state Medicaid program in New York or taking share in these Nash.
Speaker Change: <unk> payers were taking them from the key established incumbents out there. So again further indicative of just how performing can differentiate itself in terms of our offerings.
Simeon Kohl: So again, further indicative of just how performing can differentiate itself in terms of our So, you mentioned distraction relative to the election cycle, which I completely understand. Can you walk through for us what some of those distractions are that now get removed and how quickly do you think they begin to work to your favor? Yeah. So, I mean, let me first say this, because I've gotten a lot of questions on this, right? I think a change in administration, you know, could certainly have an impact on CMS priorities and policies, and certainly including the RAC program.
Speaker Change: So you mentioned distraction relative to the election cycle, which I completely understand can you walk through for us what some of those distractions are removed and how quickly do you think.
Speaker Change: Begin to work in your favor.
Speaker Change: Yeah. So let me let me first say that kind of got a lot of questions. On this right I think thats. The change in administration, you could certainly have an impact on CMS priorities.
Speaker Change: Policies, and certainly including the rack program, it's a little too early to tell on to predict any specific changes and we'll be monitoring that very closely for any early signals, but at this point don't have anything concrete but.
Simeon Kohl: It's a little too early to tell and to predict any specific changes, and we'll be monitoring that very closely for any early signals. But at this point, don't have anything concrete. But as we said, and I think, George, you point out here, you know, the RAC program plays just such an important role in safeguarding the Medicare Trust Fund. And as I highlighted in my prepared remarks, right, we're relieved to have this election cycle behind us, and it absolutely should help address some of the conservatism that we've seen over the past few quarters. And to answer your question specifically, George, look, you know, this is a critical program for CMS, no different from any other large cost containment program in another agency.
Speaker Change: As we said and I think George you pointed out here.
Speaker Change: The rack program places such an important role in safeguarding the Medicare Trust fund and as I highlighted my prepared remarks right.
Speaker Change: Relieved to have this election cycle behind us and it absolutely should help address some of the conservatism that we've seen over the past few quarters and to answer your question specifically George look this is a critical program for CMS no different from any other large cost containment program and another agency from time to time.
Simeon Kohl: You know, from time to time, you're, you know, interyear, you're challenged in having to make some tough decisions, sometimes on volume, sometimes on, you know, pushback that you might have from a lobby organization or a particular large provider with a particular topic, et cetera. And we've seen it before. It's not unique to this particular cycle. We've seen it before that during an election cycle, some of those challenging situations get kind of put on the back burner until the kind of cycle gets, you know, completed and closed. And so, we've just labeled that as a more conservative approach.
Speaker Change: Jim.
Speaker Change: Intra year, your challenge and having to make some some tough decisions sometimes on volume sometimes on.
Speaker Change: No pushback that you might have from from a lobby organization or particular large provider with with a particular topic et cetera.
Speaker Change: And we've seen it before its not unique to this particular cycle as we've seen it before that during a a election cycle. Some of those challenging situations get kind of put on the back burner.
Speaker Change: Until the kind of cycle gets complete.
Speaker Change: Completed and closed and so we've just labeled that as a more conservative approach and so all of that in aggregate.
Simeon Kohl: And so, all of that in aggregate, I think our comment that we put in terms of tamping down the program, you know, it hasn't, has had an aggregate impact on driving volume ultimately. And so, I don't think it's going to change overnight, but we certainly do believe that, you know, as the new administration gets its legs under, there'll be a new, I'm sure, HHS nominee, the secretary that'll be nominated. You'll see some of those flow downs, et cetera. And then, you know, we're just excited about people getting back to work to support the charter of the RAC program to safeguard the trust.
Speaker Change: Our comment that we put in terms of tamping down the program. It Hasnt has had an aggregate impact.
Speaker Change: On driving volume ultimately and so.
Speaker Change: I don't think its going to change overnight, but we certainly do believe that.
Speaker Change: As the new administration gets its legs under there'll be a new I'm sure HHS Nama.
Speaker Change: Nominee the secretary there'll be nominated Youll see some of those slowdowns et cetera, and then we're just excited about people getting back to work to support the charter of the rack program to safeguard the Trust fund.
George Sutton: Great.
Rohit Ramchandani: And last for me, you mentioned you have now integrated RECORDS I into your platform. I'm curious, because that's really a cost-centric benefit that you should start to see, when would we start to see those impacts flow through down the EBITDA line?
Speaker Change: Great and then last for me you mentioned you have now integrated records one into your platform I'm curious because thats really a cost centric.
Speaker Change: Benefit that you should start to see when would we start to see those impacts flow through.
Speaker Change: On the EBITDA line.
Rohit Ramchandani: Rohit, you want to tackle that? Yeah, so I think as part of the guidance we'll endeavor to put out in the beginning of next year, you'll see some of the margin expansion in our 25 expectations as a result of some of those early pieces. And I think you'll really start seeing that increment up in 26 and 27 when a lot of those projects come to fruition.
Speaker Change: Sure you want to tackle that.
Speaker Change: Yeah, So I think.
Speaker Change: As part of the guidance, we'll endeavor to put out in the beginning of next year Youll see some of the margin expansion and our 25 expectations. As a result of some of those early pieces and I think you'll really start seeing that increment up in 'twenty six 'twenty seven one a lot of those projects come to fruition.
George Sutton: And on the records one integration, right, I think we're pretty excited to have that technology now fully in our ecosystem so we can actually start plugging it in kind of to each client and really seeing those gain. Got you. Great, guys. Thank you very much. Thanks, George.
Speaker Change: On the records one integration right I think we're pretty excited to have that technology now fully in our ecosystem.
Speaker Change: So we can actually start.
Speaker Change: And kind of to each client and really seeing those gains.
Speaker Change: Okay.
Speaker Change: Got you great guys. Thank you very much.
Speaker Change: Thanks George.
George: Thanks, Eric.
Operator: Ladies and gentlemen, there are no further questions.
Speaker Change: Ladies and gentlemen, there are no further questions. This concludes today's conference call. Thank you very much for your participation you may now disconnect.
Operator: This concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Speaker Change: Okay.