Performant Healthcare, Inc.

Greetings. Welcome to the Performance Financial Corporate and Third Quarter 2020 earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Richard Zubek, from Investor Relations. You may begin.

Thank you, Operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release for our Third Quarter 2020 2020 results. If you have not, a copy is available on the investor relations portion of our website. On today's call will be Lee Sam, Chief Executive Officer, and Rohit Ramchandani, Vice President of Finance and Strategy. Before we begin, I'd like to remind you that some of the comments made on today's call are forward-looking. These statements are subject to risks and uncertainties, including those described in our filings with the S&P. Actual results may differ materially from those described during the call. In addition, any forward-looking statements are made as of today, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. Also, all non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release. I would now like to turn the call over to Lisa M. Lisa?

Thank you, Rich. Good afternoon, everyone, and thank you for joining us for our earnings call. During the third quarter, we started to see the first signs of a return to normal operations since the start of the COVID-19 pandemic. We resumed auditing operations for a majority of our commercial healthcare clients in August. Similarly, the CMS RAC program also reopened under certain restrictions. And lastly, our IRF and treasury work is also back up and running. So while the full extent of the pandemic's effect on our operational and financial performance will depend on future developments, we are encouraged by strong progress to date. To that end, I am proud of the commitment that has been demonstrated by our exceptional associates and their focus on servicing our clients to the highest standards possible. Without your focus and efforts, we would not be where we are today. Thank you for all that you do and for your continued contributions to performance. As you know, our healthcare business is split between claims and eligibility-based offerings, also called coordination of benefits or third-party liability claims. As a result of the pandemic, a few of our healthcare audit customers had asked us to place short-term pauses on our activities earlier this year, which directly impacted our results in the third quarter. I am pleased to report that these temporary pauses largely ended during the third quarter and we have restarted aggressively hiring and recruiting individuals as part of our re-granting efforts in order to prepare to service those accounts to the highest standards possible. However, it is important to recognize that we will incur additional expenses as a part of our re-granting efforts, but we don't anticipate the revenue to show until Q1 of 2021. The overall cost to the healthcare system as a result of COVID-19 has been astounding, Some industry experts believe that hospitals in the U.S., in the aggregate, spend an estimated $550 million per month on things such as childcare, housing, and medical screening and treatment during the pandemic to support their frontline workers. Additionally, the American Hospital Association estimates that hospitals have already spent an additional $2.4 billion on PPE between March and June of this year. While it's unclear how much of this expense will ultimately be passed on to the patient, some healthcare industry experts are projecting that the medical cost trend for 2021 or the projected percentage increase in the cost to treat patients from one year to the next, assuming benefits remain the same, will increase somewhere between 4% and 10%. As infection rates continue to rise across the country, it is still not currently possible to predict the long-term overall impact of COVID-19 pandemic on our business. The upside for our healthcare business, however, is that when the pandemic is inevitably under more control, we expect the pent-up demand in medical care, such as elective or non-emergency outpatient procedures, will increase our opportunity to identify savings for our healthcare payer clients. It is estimated that the COVID-19 pandemic has led to record job losses, which in turn means that individuals are also losing their employer-provided health insurance coverage. However, many of these individuals will likely end up on Medicaid or a subsidized policy through an ACA exchange. As the unemployment rate in October is still double the rate from February of this year, we view these as being enduring shifts in coverage that presents positive opportunities for our audit and COV offerings. As we see the positive macro trends and continue to invest in the double-digit growth in our healthcare market revenues, we are also proud to have hired top market talent into our key positions. These leaders have come from companies in the healthcare industry, and their addition to performance attests to our meaningful growth and brand awareness. Shifting now to the recovery operations, Although this business has been more adversely impacted by the pandemic, we remain focused on building a strong diversified business on our core strengths of analytics, innovation, compliance, audit, and recovery. Based upon these unique strengths and value propositions to our clients, we believe we can capitalize on future market opportunities. As it stands today, we have resumed activity with existing borrowers on behalf of our guarantee agency clients on a limited basis. Department of Education-related clients are expected to resume full activities at the start of 2021, and we continue to monitor for any further congressional changes to that timing. Lastly, substantially all of our work for the IRS and Treasury Department has been restarted on a remote basis. As it relates to our work for the IRS, we resubmitted our rebid for the new IRS contract last week and expect the contract award announcement in February of 2021. As an incumbent with consistent bid performance under our current contract, we are confident with our position and response to this request for quote. At the end of the day, it is the continued hard work and dedication of our team that has driven our strong operational results in the midst of considerable uncertainty and disruption resulting from COVID-19. In Q3 of 2020, we had revenue growth of 1% versus Q3 of 2019, and positive EBITDA of nearly $4 million compared to an EBITDA loss of more than $3 million in the third quarter of last year. With that, I'd like to turn the call over to Rohit Ramchandani, our Vice President of Finance, and strategy to walk you through the financial results for the quarter in more detail.