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Performant Financial Up on Beat, Outlook

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With its fourth-quarter 2013 operating earnings of 17 cents per share exceeding the Zacks Consensus Estimate by 3 cents, Performant Financial Corporation (PFMT - Free Report) has now delivered three consecutive quarters of positive surprises. Results in the quarter also improved 31% year over year.

Shares of Performant Financial gained nearly 5.4% to close at $7.62 on Mar 3 following the company’s announcement of impressive fourth-quarter results on Feb 27.

Net income in the reported quarter came in at 16 cents per share, improving 33% year over year.

An improved top line drove the outperformance in the quarter.

Performant Financial delivered earnings per share of 83 cents for full year 2013 on revenues of $255.3 million. While the top line rose 21.5% year over year, the bottom line increased 33.9%. Net income of 74 cents per share surged 68% year over year.

Behind the Headlines

Total revenue at Performant Financial grossed nearly $60 million in the quarter, improving 7.1% year over year. Results figured ahead of the Zacks Consensus Estimate by $1 million.

While Student Lending revenues improved 22.8%, Healthcare revenues fell 30.3% (due to contract and patient constraints). Other revenues increased 15% year over year.

Total operating expense scaled up 5.6% year over year to $44.2 million, attributable to higher salaries and benefits as well as other operating expenses.

Adjusted earnings before income taxes, interest expenses, interest income, depreciation and amortization (EBITDA) improved 11.7% year over year to $19.4 million.

Interest expense decreased 8.8% year over year to $2.8 million.

Financial Update

Performant Financial exited 2013 with cash and cash equivalents of $81.9 million, increasing substantially from $37.8 million as of Dec 31, 2012.

Cash flow from operating activities came in at $61.2 million in 2013, surging almost 65% over 2012.

Notes payable at the company were $122.5 million at the end of 2013, down 10.4% year over year.

Looking Forward

Performant Financial expects 2014 operational results to be weighed on by the new CMS Recovery Audit Contractor award and limitations pertaining to the recovery activities pending the new contract award.

Performant Financial expects to generate $200 to $240 million in revenues in 2014. It envisions adjusted EBITDA for the year to range between $47 million and $55 million.

Zacks Rank

Performant Financial presently holds a Zacks Rank #4 (Sell).

Performance of Other Business Service Providers

SouFun Holdings Ltd. (SFUN - Free Report) reported fourth-quarter operating earnings of $1.41 per share, which outpaced the Zacks Consensus Estimate by 34.5%. Results surged 86% year over year.

Rentrak Corp. delivered fourth-quarter 2013 operating loss of 3 cents per share, narrower than the Zacks Consensus Estimate loss of 13 cents and the year-ago loss of 15 cents per share.

Viad Corp. (VVI - Free Report) posted fourth-quarter loss per share of 20 cents, wider than the Zacks Consensus Estimate loss of 17 cents but narrower than the loss of 34 cents per share incurred in the year-ago quarter.

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