Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), a leading provider of technology-enabled recovery and related analytics services in the United States, today reported the following financial results for its third quarter ended September 30, 2020:

Third quarter Financial Highlights

• Total revenues of $36.2 million, compared to revenues of $35.9 million in the prior year period
• Net income of approximately $2.0 million, or $0.04 per diluted share, compared to a net loss of $8.1 million, or $(0.15) per diluted share, in the prior year period.
• Adjusted net income was $3.2 million, or $0.06 per diluted share, compared to an adjusted net loss of $7.3 million or $(0.14) per diluted share in the prior year period
• Adjusted EBITDA of $3.8 million, compared to $(3.1) million in the prior year period

Third quarter 2020 Results

Total revenues in the third quarter were $36.2 million, an increase of $0.3 million, or 1% from revenues of $35.9 million in the prior year period. Healthcare revenues in the third quarter of 2020 were $17.6 million, an increase of $6.8 million, or 63%, from revenues of $10.8 million in the prior year period. Recovery revenues in the third quarter were $15.4 million, a decrease of $5.5 million, or 26%, from revenues of $20.9 million in the prior year period. Revenues from our Customer Care / Outsourced Services in the third quarter were $3.2 million, a decrease of $1.0 million, or 24%, from revenues of $4.2 million in the prior year period.

Net income for the third quarter was $2.0 million, or $0.04 per share on a diluted basis, compared to net loss of $8.1 million, or $(0.15) per share on a diluted basis, in the prior year period. Adjusted net income for the third quarter was $3.2 million, or $0.06 per share on a diluted basis, compared to an adjusted net loss of $7.3 million, or $(0.14) per diluted share, in the prior year period. Adjusted EBITDA for the third quarter was $3.8 million as compared to $(3.1) million in the prior year period.

As of September 30, 2020, the Company had cash, cash equivalents and restricted cash of approximately $17.3 million.

Business Commentary and Outlook

“Our results in the third quarter reflect the resiliency of our businesses as well as our overall management of operational workflows throughout this pandemic,” stated Lisa Im, CEO of Performant. “COVID-19 continues to affect multiple aspects of our business. Within Healthcare, the pandemic related disruption were limited to our audit work. Within Recovery, we received work stoppage requests from multiple clients, and the U.S. Federal government has suspended the involuntary collections of payments for student loans originated by the Department of Education through December 31,2020. Thankfully, the majority of these work stoppages across our Healthcare and Recovery businesses, with the exception of the moratorium on student loans collections, were lifted during the third quarter, and we have resumed ramping back up with most of these clients.”

“Furthermore, we recently announced, and are excited about the progress we have made with our Premium Accuracy offering, a Medicare Secondary Payer (MSP) service for Medicare Advantage Plans. With over four million lives already under contract, we anticipate that figure to grow as additional payers are attracted to our exceptional speed to savings, which is made possible by the combination of our proprietary platform and extensive knowledge in the Medicare Secondary Payer space,” continued Im.

Note Regarding Use of Non-GAAP Financial Measures

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

Earnings Conference Call

The Company will hold a conference call to discuss its third quarter 2020 results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company’s website at investors.performantcorp.com. The conference call is also available by dialing 877-705-6003 (domestic) or 201-493-6725 (international).

A replay of the call will be available on the Company's website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13712903. The telephonic replay will be available approximately three hours after the call, through November 17, 2020.

About Performant Financial Corporation

Performant helps government and commercial organizations enhance revenue and contain costs by preventing, identifying and recovering waste, improper payments and defaulted assets. Performant is a leading provider of these services in several industries, including healthcare, student loans and government. Performant has been providing recovery audit services for more than nine years to both commercial and government clients, including serving as a Recovery Auditor for the Centers for Medicare and Medicaid Services.

Powered by a proprietary analytic platform and workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our outlook for revenues, net income (loss), and adjusted EBITDA in 2020 and beyond. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the material adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition as well as on the business operations and financial performance of many of our customers, that the Company may not have sufficient cash flows from operations to fund ongoing operations and other liquidity needs, that the Company’s indebtedness could adversely affect its business and financial condition and could reduce the funds available for other purposes and the failure to comply with covenants contained in its credit agreement could result in an event of default that could adversely affect its results of operations, that the Company faces a long period to implement a new contract which may result in the incurring of expenses before the receipt of revenues from new client relationships, the high level of revenue concentration among the Company's largest customers and any termination in the Company’s relationship with any of our significant clients would result in a material decline in our revenues, that many of the Company's customer contracts are subject to periodic renewal, are not exclusive, do not provide for committed business volumes and may be changed or terminated unilaterally and on short notice, that the Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, that continuing limitations on the scope of our audit activity under our RAC contracts have significantly reduced our revenue opportunities with this client, that the U.S. federal government accounts for a significant portion of the Company's revenues, that future legislative and regulatory changes may have significant effects on the Company's business, that failure of the Company's or third parties' operating systems and technology infrastructure could disrupt the operation of the Company's business and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company's financial condition and operating results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's annual report on Form 10-K for the year ended December 31, 2019 and subsequently filed reports on Forms 10-Q and 8-K. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations.

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