Performant Healthcare, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Performance Financial Corp. Third Quarter 2023 Earnings Conference Call. At this time, all lines are in this learning mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Tuesday, August 8, 2023. I would now like to turn the conference over to John Bizzuto, Head of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone. By now, you should have received a copy of the earnings release for the company's third quarter 2023 results. If you have not, a copy is available on the investor relations portion of our website. On today's call will be Simian Cole, 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, our forward-looking statements, These statements are subject to risks and uncertainties, including those described in the company's filings with 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. directly comparable gap measures in the table attached to our press release. I would now like to turn the call over to Simi and Cole.

Sim? Thank you, John. Good afternoon, everyone, and thank you for joining us for our earnings call. During the third quarter of 2023, we continue to see our vision as a pure-play healthcare organization come to fruition. We are driven by a singular purpose, and that is to transform the healthcare ecosystem by addressing over $300 billion and payment integrity waste. Our mission is to partner with payers to develop innovative solutions that redirect these funds toward enhancing patient care and well-being. This past quarter, that translated into successful completion of another 12 commercial implementations while contributing strong top and bottom line growth. One of the key reasons for our success has been our ability to attract and retain top talent We shifted our culture and values as we transitioned from a debt recovery business to a healthcare organization, taking care to share our corporate vision, which has attracted the best in the business. Our roster now includes experienced leaders from large national payers, government programs, healthcare providers, and other healthcare focused technology organizations. The galvanizing quality amongst this team is the desire to make a difference. We've all personally witnessed this waste, and we understand that by strategizing and reducing it, we can significantly redirect these funds toward improving patient care. Our team has forged strong partnerships as our mission resonates with the broader healthcare community. In the third quarter, we had the pleasure of presenting alongside Priory Health to highlight the value of performance partnership with CAQH. As a reminder, The partnership with CAQH gives Performant access to extensive eligibility data, which, supplemented with our proprietary data and services, provides differentiated value and more material ROI to our mutually supported clients. Building on our client-centric approach, in the third quarter, we hosted Performant's second customer advisory board. This board was established to connect key clients with peers to facilitate discussions on common pain points, and create actionable solutions. This three-day meeting was incredibly successful with increased engagement and feedback, such as hearing about how pain points of other health plans gave participants momentum to move internal health plan initiatives forward. We are proud of the partnership we have built with industry leaders and clients, and much of that success hinges on our results-driven team. This approach has led to a strong sales pipeline. In the third quarter, we completed 12 commercial implementations, bringing our 2023 total to date to 34 compared to 21 implementations in all of 2022. This feat could not be achieved without instituting significant operational rigor into our implementation process. As we shared on previous calls, one of our initiatives is to improve efficiency and reduce the time to market for our implementations. You can see through the first three quarters we have performed well. The greater efficiency that we drive toward our path to revenue, the more we can focus our resources on scaling and innovating. Our sales strategy has been focused on growth in the commercial market as we estimate that well over half of payment integrity waste lies within managed care organizations. Our success within these commercial markets continues to be evidenced by our strong cadence of implementations. One of many effective strategies has been to target commercial clients in jurisdictions where we already have a government presence. Our government presence has been our longstanding backbone as we manage three of five CMS RAC regions, the Health and Human Services OIG contract, and the CMS Medicare Secondary Payer CRC contract. Looking holistically at our government business, we have a strong federal presence in both claims and eligibility-based services. In early October, we announced our first state Medicaid win, further bolstering our government backbone. The New York State Medicaid Recovery Audit Contract was awarded based on an open and competitive RFP process. Performance demonstrated that it would deliver the best value and quality, and a key catalyst to us winning this contract was our ability to consistently perform and innovate for our longstanding federal government partners. It should be noted that the incumbent vendor has filed a protest, and as a result, the New York State OSC will render a determination on the protest in the coming months. We have experience working through similar situations, as earlier this year, CMS affirmed their decision to choose Performant as their RAC Region 2 contractor after a protest from the incumbent vendor. Similar to RAC Region 2, we will actively engage in the protest to validate New York State's decision that performance drives the best overall value for the state's Medicaid RAC program. We are very excited about this win and the opportunity to prove ourselves in the state Medicaid market. Looking at the macro landscape, we have two impactful trends to address. First is the end of the public health emergency as of May 11th of this year. And the second is the continued uptick in normalization of healthcare utilization. During the PHE, CMS restricted us from requesting claims with a COVID-19 or certain other related codes, such as those with a respiratory designation. The end of this emergency now gives us the ability to select claim codes previously restricted by the PHE that we believe contain a payment error. There was a chance we'd get a look back at claims that were historically excluded during the PHE itself. However, that does not seem likely at this stage. The normalization of healthcare services and costs is another macro tailwind, as we've seen many for-profit payers and providers report that healthcare utilization has normalized as elective procedures have returned and pricing has begun to catch up to the cost structure. We have also seen a shift towards outpatient procedures. These macro trends bode well for us, as a majority of our revenue is predicated on contingency fees of client savings that we identify. As cost of services increase, performance savings dollars and associated contingency fees should also increase. Additionally, many of our audit products support outpatient procedures, neatly aligning us with these macro trends. Turning to our results, healthcare revenues in the third quarter of 2023 grew 21% year over year, mainly driven by our commercial clients. Our eligibility-based revenue grew 38%, as new clients and contracts ramped. In particular, we saw significant growth in our commercial clients as our mature government contract was a drag in the overall eligibility growth rate. Our claims or audit-based revenue was flat in the quarter. The government relationships were a drag on the performance due to the impacts from the PHE. There are two factors at play here. First, looking at the comparable prior year period, although we were unable to audit more recent restricted claims, we enjoyed the benefit of the three-year look-back. This means we were able to audit those restricted claims that had dates of service prior to the PHE. In the current year, that three-year look-back funnel has become nonexistent, which drives a more difficult year-over-year comparison. This is further exacerbated by the timing ramp. By way of example, for available claims that had a date of service on May 12th, we wouldn't be able to see and request those claims until July at the earliest to then go through the audit and validation process before any revenue could be recognized. We believe we will start to see this revenue normalized towards the end of the fourth quarter. On a positive government note, EMS RAC Region 2 is now operational and began to generate revenue in the third quarter. We were able to implement this contract incredibly quickly as we commenced work in November of last year and we were already generating initial revenues. Our speed to market has become a competitive differentiator as we prove our clients ROI thesis. Once again, in our claims-based business, commercial led the way as contracts ramped and efficiency gains took shape. For instance, when working with more seasoned clients, we often employ the analogy of evaluating adapting the factory's workflow. Even if a particular workflow has been in place for years, we aim to approach it with a fresh perspective, seeking opportunities to enhance the overall efficiency. We undertook this process earlier in the year for a select group of larger audit-based clients, and we are already witnessing the dividends it pays through the optimization of workflows, data feeds, and client collaboration and communication. In aggregate, despite some of the short-term macro impacts of our government work, We are encouraged by the growth prospects for these contracts. Government contracts serve as performance backbone given their size, visibility, and extended term. They also bolster our credibility when selling to commercial clients. Before I hand the call off to Rohit to go over the results of the quarter, I wanted to reiterate how proud I am of our team. We have made the transition to a pure play healthcare organization while navigating the dynamic COVID-19 landscape. The investments we've made to build our talented workforce and streamline processes are yielding substantial return, enabling us to not only foster new business opportunities, but also execute on existing client expansion. With that, I'll hand it over to Rohit Ramchandani, our Chief Financial Officer, for a discussion of our financials. Rohit?