Performant Healthcare, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Performant Financial Corp's third 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. This call is being recorded on Wednesday, November 6th, 2024. I would now like to turn the conference over to John Bozzuto, 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 2024 results. If you have not, a copy is available on the investor relations portion of our website. Joining me on today's call are Simeon 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, 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. I would now like to turn the call over to Simeon Cole. Tim?

Thank you, John. 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 healthcare 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. 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. Year to date, we've implemented 32 programs that we currently expect to deliver between $13 and $14 million of annualized revenue at SteadyState. Our journey began with our first healthcare 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. 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. 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 three, four, and five by the end of the year. 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 RFP's outcome. RAC regions three and four, which encompass the western and southeast 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 nears. Turning to the state Medicaid market, we've recently made inroads into this space, which we estimate to be a $300 million to $500 million annual revenue opportunity across both audit and TPL services. In early September, we were 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 performance the RAC opportunity following a protest from the incumbent after our initial award in 2023, which led to the RFP being reissued. This reinforces our ability to successfully navigate and withstand protests when replacing a longstanding 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. Staying on the state market, in Q3, we sponsored the NAMPE conference, which gave us an opportunity to hear from many state Medicaid programs to better understand current gaps. For those unfamiliar, NAMPE 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. 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. 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. Scale 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 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. 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. 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. We believe focusing entirely on this healthcare market opportunity continues to be in the best interest of our shareholders. Rohit will dive into some of the financial updates and implications associated with de-emphasizing these services. 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 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. Despite these challenges, we have fulfilled our commitments, showcasing the resilience and adaptability of our team and business strategy. 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. With that, I'll hand it over to Rohit Ramchandani, our Chief Financial Officer, for a discussion of the financials. Rohit.