Performant Financial Corporation (PFMT) Bundle
Understanding Performant Financial Corporation (PFMT) Revenue Streams
Understanding Performant Financial Corporation’s Revenue Streams
As of September 30, 2024, the total revenues for the company were $88.2 million, reflecting an increase of approximately $7.0 million, or 9%, compared to $81.2 million for the same period in 2023.
Breakdown of Primary Revenue Sources
The revenue streams can be categorized as follows:
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Eligibility-based Services | $16,070 | $18,165 | ($2,095) | (12%) |
| Claims-based Services | $14,217 | $10,325 | $3,892 | 38% |
| Healthcare Total | $30,287 | $28,490 | $1,797 | 6% |
| Customer Care / Outsourced Services | $1,232 | $1,472 | ($240) | (16%) |
| Total Revenues | $31,519 | $29,962 | $1,557 | 5% |
For the nine months ended September 30, 2024, the revenue from healthcare services was $84.0 million, up $8.7 million, or 12%, from $75.3 million in the same period of 2023.
Year-over-Year Revenue Growth Rate
Year-over-year growth has been illustrated in the following table:
| Period | Total Revenue (in thousands) | Year-over-Year Change (in thousands) | Percentage Change |
|---|---|---|---|
| Q3 2024 | $31,519 | $1,557 | 5% |
| Q3 2023 | $29,962 | - | - |
| 9M 2024 | $88,215 | $7,039 | 9% |
| 9M 2023 | $81,176 | - | - |
Contribution of Different Business Segments to Overall Revenue
The contributions of different business segments to overall revenue are as follows:
| Segment | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) | Contribution Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Eligibility-based Services | $43,722 | $44,776 | ($1,054) | (2%) |
| Claims-based Services | $40,290 | $30,535 | $9,755 | 32% |
| Customer Care / Outsourced Services | $4,203 | $5,832 | ($1,629) | (28%) |
Analysis of Significant Changes in Revenue Streams
The most significant change in revenue streams is observed in the claims-based services, which saw a substantial increase of 32% for the nine months ended September 30, 2024, compared to the same period in 2023. Conversely, eligibility-based services experienced a decrease of 2% during the same period.
A Deep Dive into Performant Financial Corporation (PFMT) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated based on total revenues of $88.2 million and total operating expenses of $97.0 million, leading to a gross profit of $(8.8 million).
Operating Profit Margin: For the same period, the operating profit margin reflected a loss from operations of $(8.8 million), resulting in an operating profit margin of -(9.95)%.
Net Profit Margin: The net loss for the nine months ended September 30, 2024, was $(9.4 million), leading to a net profit margin of -(10.65)%.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | (9.95)% | (8.45)% | -1.50% |
| Operating Profit Margin | (9.95)% | (8.50)% | -1.45% |
| Net Profit Margin | (10.65)% | (8.50)% | -2.15% |
Trends in Profitability: Over the past year, net loss increased by 7%, from $(8.8 million) to $(9.4 million), indicating a downward trend in profitability.
Comparison with Industry Averages: The average net profit margin for the industry is approximately 5%, highlighting a significant gap in profitability for the company.
Operational Efficiency: The company’s operational efficiency is reflected in its operating expenses, which totaled $97.0 million for the nine months ended September 30, 2024, a 9% increase from $89.2 million in the previous year.
Cost management remains a challenge, as salaries and benefits increased to $73.7 million from $67.1 million, representing a 10% rise. Other operating expenses also saw a 6% increase.
| Expense Type | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Salaries and Benefits | $73.7 million | $67.1 million | +10% |
| Other Operating Expenses | $23.3 million | $22.1 million | +5.4% |
| Total Operating Expenses | $97.0 million | $89.2 million | +9% |
The increase in operating expenses has outpaced revenue growth, which was 9% for the period. This imbalance highlights the need for improved cost management strategies to enhance profitability metrics moving forward.
In summary, the company has experienced challenges in profitability, with margins significantly below industry averages and increasing operational costs impacting overall financial health.
Debt vs. Equity: How Performant Financial Corporation (PFMT) Finances Its Growth
Debt vs. Equity: How Performant Financial Corporation Finances Its Growth
As of September 30, 2024, Performant Financial Corporation reported total liabilities of $26.6 million and total stockholders' equity of $75.2 million, resulting in a debt-to-equity ratio of 0.35. This ratio is significantly below the industry average of approximately 1.0, indicating a conservative approach to leveraging.
The company's long-term debt stood at $8.0 million under a revolving Credit Agreement established on October 27, 2023, which has a commitment of $25 million. The annual interest rate for this debt was reported at 8.0% as of September 30, 2024.
In terms of recent debt activity, Performant Financial Corporation has utilized a portion of its credit facility, with $8.0 million drawn down and $14.0 million available for future borrowings. The company’s ability to access this credit is underpinned by compliance with financial covenants, including maintaining a minimum liquidity level and a consolidated fixed charge coverage ratio.
Debt Issuances and Credit Ratings
Performant Financial Corporation's credit agreement is secured by liens on substantially all its assets, which provides a safety net for lenders. The Credit Agreement allows for flexible borrowing options, and the company may request increases in commitments up to an additional $10 million. The company has no current credit ratings reported, but its prudent management of debt suggests a focus on maintaining financial health and stability.
Balancing Debt Financing and Equity Funding
Performant Financial Corporation has adopted a balanced approach to financing its growth, primarily utilizing both debt and equity. The company has issued 78,291 shares of common stock as of September 30, 2024. The additional paid-in capital amounted to $149.9 million, while the accumulated deficit was ($74.7 million). This indicates that while the company has funded its growth through equity, it is also mindful of maintaining a sustainable debt level.
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Liabilities | $26.6 million | $18.3 million |
| Total Stockholders' Equity | $75.2 million | $80.7 million |
| Debt-to-Equity Ratio | 0.35 | 0.23 |
| Long-term Debt | $8.0 million | $5.0 million |
| Available Borrowings | $14.0 million | $20.0 million |
| Annual Interest Rate | 8.0% | 8.1% |
The strategic balance between debt and equity financing helps Performant Financial Corporation manage its growth while mitigating financial risk, ensuring that the company remains well-positioned in a competitive market.
Assessing Performant Financial Corporation (PFMT) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The liquidity position of the company can be evaluated through its current and quick ratios. As of September 30, 2024, the current ratio stands at 5.43 (calculated as current assets of $78.3 million divided by current liabilities of $14.4 million). The quick ratio, which excludes inventory from current assets, is approximately 5.31, indicating a strong ability to meet short-term obligations.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was $63.9 million as of September 30, 2024, reflecting an increase from $65.5 million at the end of 2023. This trend showcases a consistent ability to manage short-term financial health effectively.
Cash Flow Statements Overview
The cash flow statements reveal critical insights into the liquidity situation. For the nine months ended September 30, 2024:
- Operating cash flow was $3.4 million, a decrease from $5.7 million in the same period of 2023.
- Investing activities showed a cash outflow of $5.7 million, primarily for capital expenditures.
- Financing activities resulted in a net cash inflow of $2.8 million, mainly due to additional borrowings.
Overall, the cash flow from operating activities indicates a healthy operational performance despite the increase in capital expenditures.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $7.8 million in cash and cash equivalents, slightly up from $7.3 million at the end of 2023. Furthermore, the company maintains a $25 million revolving credit facility with $14 million available for borrowing, providing an additional liquidity cushion. However, the 8.0% interest rate on outstanding loans presents a potential concern for long-term financial sustainability.
| Liquidity Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Assets | $78.3 million | $73.8 million |
| Current Liabilities | $14.4 million | $8.3 million |
| Current Ratio | 5.43 | 8.89 |
| Quick Ratio | 5.31 | 8.65 |
| Working Capital | $63.9 million | $65.5 million |
| Cash and Cash Equivalents | $7.8 million | $7.3 million |
Is Performant Financial Corporation (PFMT) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze its price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will look at stock price trends, dividend yield and payout ratios, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The company's P/E ratio is a critical metric for evaluating its stock price relative to its earnings. As of September 30, 2024, the net loss per share was $0.12 for the nine months ended September 30, 2024. Given this loss, the P/E ratio is not applicable as earnings are negative.
Price-to-Book (P/B) Ratio
The P/B ratio compares the company's market value to its book value. As of September 30, 2024, total stockholders' equity was $75.238 million, and total liabilities were $26.605 million, resulting in a book value per share of approximately $0.96 (calculated from total equity divided by shares outstanding of 78.291 million). If the current stock price is $2.50, the P/B ratio would be 2.60.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another important valuation metric. As of September 30, 2024, the enterprise value (EV) can be calculated as follows:
- Market capitalization: $195.73 million (assuming a stock price of $2.50 and shares outstanding of 78.291 million).
- Total debt: $8 million (outstanding under the Credit Agreement).
- Cash and cash equivalents: $7.775 million.
Thus, EV = Market Cap + Total Debt - Cash = $195.73 million + $8 million - $7.775 million = $195.955 million.
Adjusted EBITDA for the nine months ended September 30, 2024, is approximately $5.244 million. Therefore, the EV/EBITDA ratio is 37.39.
Stock Price Trends
The stock price has shown fluctuations over the last 12 months. For example, the stock price was approximately $2.30 in October 2023 and reached a peak of $3.00 in January 2024 before settling around $2.50 in September 2024.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, indicating a dividend yield of 0%. The payout ratio is also not applicable due to the absence of earnings.
Analyst Consensus
As of the latest reports, analysts have a consensus rating of Hold on the stock, reflecting a cautious outlook based on the company's recent financial performance and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Net Loss) |
| P/B Ratio | 2.60 |
| EV/EBITDA Ratio | 37.39 |
| Stock Price (September 2024) | $2.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Performant Financial Corporation (PFMT)
Key Risks Facing Performant Financial Corporation
The financial health of Performant Financial Corporation is influenced by various internal and external risk factors. Understanding these risks is crucial for investors looking to gauge the company's stability and potential for growth.
Industry Competition
The company operates in a highly competitive industry where numerous players vie for market share, leading to pressure on pricing and profit margins. As of September 30, 2024, the company reported total revenues of $88.2 million for the nine months ended September 30, 2024, an increase of 9% from $81.2 million in the same period in 2023. However, the competitive landscape may threaten future revenue growth if the company cannot differentiate its services effectively.
Regulatory Changes
Regulatory changes in the healthcare and financial sectors can significantly impact business operations. The company's revenues from eligibility-based services decreased by 2% to $43.7 million for the nine months ended September 30, 2024. This decline highlights the potential adverse effects of changing regulations that may impact service demand.
Market Conditions
Broader economic conditions, including inflation and consumer spending patterns, can affect the company's financial performance. The average interest rate on the company's outstanding loans was 8.0% as of September 30, 2024. Fluctuations in interest rates can impact the cost of borrowing and, subsequently, profitability.
Operational Risks
Operational risks include potential disruptions in service delivery, technology failures, and supply chain issues. The company reported a net loss of $9.4 million for the nine months ended September 30, 2024, an increase of 7% compared to the same period in 2023. Such losses can stem from operational inefficiencies or unexpected expenses that hinder performance.
Financial Risks
Financial risks encompass liquidity issues and debt management challenges. The company had total liabilities of $26.6 million as of September 30, 2024. The Credit Agreement allows for a revolving loan commitment of $25 million, with $8.0 million outstanding as of the same date. Any inability to meet financial covenants or manage debt effectively may lead to increased borrowing costs or restrictions on operational flexibility.
Strategic Risks
The company's strategy may face challenges if it cannot adapt to market changes or capitalize on new opportunities. The increase in total operating expenses to $97.0 million for the nine months ended September 30, 2024, signifies a 9% rise compared to $89.2 million in the previous year. High operational costs can dilute margins and impact strategic initiatives.
Mitigation Strategies
To address these risks, the company has implemented various mitigation strategies, including diversifying its service offerings and enhancing operational efficiencies. The management is focused on maintaining compliance with financial covenants to avoid default risks associated with the Credit Agreement. As of September 30, 2024, the company was compliant with all covenants.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | High competition affecting pricing and margins | Revenue growth of 9% to $88.2 million |
| Regulatory Changes | Impact on demand for services | Eligibility-based services revenue decreased 2% |
| Market Conditions | Economic fluctuations affecting borrowing costs | Average interest rate of 8.0% |
| Operational Risks | Disruptions affecting service delivery | Net loss of $9.4 million |
| Financial Risks | Liquidity and debt management challenges | Total liabilities of $26.6 million |
| Strategic Risks | Challenges in adapting to market changes | Operating expenses increased by 9% |
Future Growth Prospects for Performant Financial Corporation (PFMT)
Future Growth Prospects for Performant Financial Corporation
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers that are expected to enhance its market position and revenue generation capabilities:
- Product Innovations: Continuous development of healthcare services and technology solutions, including recent investments in natural language processing and advanced domain analytics.
- Market Expansions: Targeting new markets and expanding existing services to increase customer base and service offerings.
- Acquisitions: Strategic acquisitions to bolster technological capabilities and enhance service delivery.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenues reached $88.2 million, marking a 9% increase compared to $81.2 million for the same period in 2023. Healthcare revenues specifically grew by 12%, totaling $84.0 million for the same period.
| Period | Total Revenues (in millions) | Healthcare Revenues (in millions) | % Growth (Total Revenues) | % Growth (Healthcare Revenues) |
|---|---|---|---|---|
| 2024 (9 months) | $88.2 | $84.0 | 9% | 12% |
| 2023 (9 months) | $81.2 | $75.3 | - | - |
Strategic Initiatives or Partnerships That May Drive Future Growth
Recent strategic initiatives include:
- Entering into a new credit agreement with Wells Fargo Bank, providing a $25 million revolving loan commitment to support growth initiatives.
- Investments in technology to enhance operational efficiency and service delivery, including a focus on data security enhancements.
Competitive Advantages That Position the Company for Growth
The company’s competitive advantages include:
- Established relationships with key healthcare providers and government contracts, notably the CMS RAC Region 2 contract.
- Strong technological infrastructure supporting the delivery of advanced analytics and healthcare solutions.
- Robust financial backing through recent credit facilities, with $14.0 million in additional borrowings available under the credit agreement as of September 30, 2024.
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Updated on 16 Nov 2024
Resources:
- Performant Financial Corporation (PFMT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Performant Financial Corporation (PFMT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Performant Financial Corporation (PFMT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.