Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35628

PERFORMANT FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						20-0484934
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Performant Financial Corporation

900 South Pine Island Road, Suite 150

Plantation, FL 33324

(925) 960-4800

(Address, including zip code and telephone number, including area code of registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☒

Emerging growth company

☐

Non-accelerated filer

Smaller reporting company

☒

o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $.0001 per share	PFMT	The Nasdaq Stock Market LLC

The number of shares of Common Stock outstanding as of November 8, 2023 was 76,874,970.

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PERFORMANT FINANCIAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2023

INDEX


		Page
PART I—Financial Information

Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets — September 30, 2023 (unaudited) and December 31, 2022	1
	Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	2
	Consolidated Statements of Changes in Stockholders' Equity — Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2023 and 2022 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Disclosure Controls and Procedures	29

PART II—Other Information		31

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

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PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except par value amounts)


	September 30, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	17,308	$	23,384
Restricted cash	81		81
Trade accounts receivable	14,129		15,794
Contract assets	6,850		11,460

Prepaid expenses and other current assets	3,104		3,665
Income tax receivable	516		3,123

Total current assets	41,988		57,507
Property, equipment, and leasehold improvements, net	9,790		10,897

Goodwill	47,372		47,372


Right-of-use assets	646		2,057
Other assets	914		1,000
Total assets	$	100,710	$	118,833
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of notes payable, net of unamortized debt issuance costs of $78 and $17, respectively	$	1,672	$	983
Accrued salaries and benefits	5,643		6,938
Accounts payable	872		1,262
Other current liabilities	2,147		2,252

Contract liabilities	500		438
Estimated liability for appeals and disputes	906		1,106
Lease liabilities	333		1,228
Total current liabilities	12,073		14,207
Notes payable, net of current portion and unamortized debt issuance costs of $423 and $316, respectively	9,077		18,184


Lease liabilities	326		1,076
Other liabilities	903		881
Total liabilities	22,379		34,348
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2023 and December 31, 2022 respectively; issued and outstanding 76,875 and 75,505 shares at September 30, 2023 and December 31, 2022, respectively	8		7
Additional paid-in capital	144,880		142,261
Accumulated deficit	(66,557)		(57,783)
Total stockholders’ equity	78,331		84,485
Total liabilities and stockholders’ equity	$	100,710	$	118,833

See accompanying notes to consolidated financial statements.

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PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	29,962	$	27,178	$	81,176	$	79,942
Operating expenses:
Salaries and benefits	22,980		21,759		67,139		63,101
Other operating expenses	7,632		7,733		22,077		23,945

Total operating expenses	30,612		29,492		89,216		87,046
Loss from operations	(650)		(2,314)		(8,040)		(7,104)
Gain on sale of certain recovery contracts	—		—		3		382
Gain on sale of land and buildings	—		1,120		—		1,120
Interest expense	(423)		(277)		(1,188)		(648)
Interest income	86		—		86		—
Loss before provision for income taxes	(987)		(1,471)		(9,139)		(6,250)
Provision for (benefit from) income taxes	(407)		(11)		(365)		52
Net loss	$	(580)	$	(1,460)	$	(8,774)	$	(6,302)
Net loss per share
Basic	$	(0.01)	$	(0.02)	$	(0.12)	$	(0.09)
Diluted	$	(0.01)	$	(0.02)	$	(0.12)	$	(0.09)
Weighted average shares
Basic	76,454		74,021		75,907		72,480
Diluted	76,454		74,021		75,907		72,480

See accompanying notes to consolidated financial statements.

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PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)


	Three Months Ended September 30, 2023									Three Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total		Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total
	Shares	Amount								Shares	Amount
Balances at beginning of period	76,088	$	7	$	143,890	$	(65,977)	$	77,920	73,818	$	7	$	140,506	$	(56,088)	$	84,425
Common stock issued under stock plans, net of shares withheld for employee taxes	787	1		(139)		—		(138)		394	—		—		—		—
Stock-based compensation expense	—	—		1,129		—		1,129		—	—		931		—		931



Net loss	—	—		—		(580)		(580)		—	—		—		(1,460)		(1,460)
Balances at end of period	76,875	$	8	$	144,880	$	(66,557)	$	78,331	74,212	$	7	$	141,437	$	(57,548)	$	83,896


	Nine Months Ended September 30, 2023									Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total		Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total
	Shares	Amount								Shares	Amount
Balances at beginning of period	75,505	$	7	$	142,261	$	(57,783)	$	84,485	69,281	$	7	$	133,662	$	(51,246)	$	82,423
Common stock issued under stock plans, net of shares withheld for employee taxes	1,370	1		(196)		—		(195)		1,068	—		—		—		—
Stock-based compensation expense	—	—		2,815		—		2,815		—	—		2,212		—		2,212


Proceeds from exercise of stock options	—	—		—		—		—		3,863	—		5,563		—		5,563


Net loss	—	—		—		(8,774)		(8,774)		—	—		—		(6,302)		(6,302)
Balances at end of period	76,875	$	8	$	144,880	$	(66,557)	$	78,331	74,212	$	7	$	141,437	$	(57,548)	$	83,896

See accompanying notes to consolidated financial statements.

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PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(8,774)	$	(6,302)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on disposal of assets and impairment of long-lived assets	258		40

Depreciation and amortization	3,805		3,355
Right-of-use assets amortization	1,411		841

Stock-based compensation	2,815		2,212
Interest expense from debt issuance costs	256		71


Gain on sale of certain recovery contracts	(3)		(382)
Gain on sale of land and buildings	—		(1,120)
Changes in operating assets and liabilities:
Trade accounts receivable	1,665		4,958
Contract assets	4,610		(1,622)
Prepaid expenses and other current assets	561		682
Income tax receivable	2,607		(52)
Other assets	86		(7)
Accrued salaries and benefits	(1,295)		(1,944)
Accounts payable	(390)		(339)
Contract liabilities and other current liabilities	(43)		(1,515)

Estimated liability for appeals, disputes, and refunds	(200)		(42)
Lease liabilities	(1,645)		(997)
Other liabilities	23		(19)
Net cash provided by (used in) operating activities	5,747		(2,182)
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements	(2,956)		(2,198)
Proceeds from sale of certain recovery contracts	3		382
Proceeds from sales of property, equipment, and leasehold improvements	—		4,934
Net cash (used in) provided by investing activities	(2,953)		3,118
Cash flows from financing activities:
Repayment of notes payable	(8,250)		(375)

Debt issuance costs paid	(424)		(2)
Taxes paid related to net share settlement of stock awards	(196)		—
Proceeds from exercise of warrants	—		5,563




Net cash (used in) provided by financing activities	(8,870)		5,186
Net (decrease) increase in cash, cash equivalents and restricted cash	(6,076)		6,122
Cash, cash equivalents and restricted cash at beginning of period	23,465		19,550
Cash, cash equivalents and restricted cash at end of period	$	17,389	$	25,672
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	17,308	$	25,591
Restricted cash	81		81
Total cash, cash equivalents and restricted cash at end of period	$	17,389	$	25,672






Supplemental disclosures of cash flow information:
Cash (received) paid for income taxes	$	(2,904)	$	267
Cash paid for interest	$	1,084	$	449

See accompanying notes to consolidated financial statements.

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PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

(a) Basis of Presentation and Organization

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim unaudited consolidated financial statements furnished herein include all adjustments necessary (consisting only of normal recurring adjustments) for a fair presentation of our financial position at September 30, 2023, and December 31, 2022, the results of our operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. Interim financial statements are prepared on a basis consistent with our annual consolidated financial statements. The interim financial statements included herein should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2022.

Performant Financial Corporation (the "Company", "we", or "our") is a leading provider of technology-enabled audit, recovery and analytics services in the United States with a focus in the healthcare payment integrity services industry. The Company works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits or COB) services to identify improper payments. The Company engages clients in both government and commercial markets. Clients of the Company typically operate in complex and highly regulated environments and contract for their payment integrity needs in order to reduce losses on improper healthcare payments. The Company also has a call center which serves clients with multifaceted consumer engagement needs. The Company historically worked in recovery markets such as defaulted student loans, tax receivables, and commercial recovery.

The Company’s consolidated financial statements include the operations of Performant Financial Corporation (Performant), its wholly-owned subsidiary Performant Business Services, Inc. (PBS), and PBS's wholly-owned subsidiaries Performant Recovery, Inc. (PRI), dba Performant Healthcare Solutions, and Performant Technologies, LLC (PTL). Performant is a Delaware corporation headquartered in California and was formed in 2003. PBS is a Nevada corporation founded in 1997. PRI is a California corporation founded in 1976. PTL is a California limited liability company that was formed in 2004. All intercompany balances and transactions have been eliminated in consolidation.

The Company is managed and operated as one business, with a single management team that reports to the Chief Executive Officer.

The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, primarily accounts receivable, contract assets, goodwill, right-of-use assets, estimated liability for appeals and disputes, lease liabilities, other liabilities, provision for income taxes, and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues. Actual amounts may differ from amounts presently estimated.

(b) Revenues, Accounts Receivable, Contract Assets, Contract Liabilities, Estimated Liability for Appeals and Disputes

The Company generally derives its revenues primarily from providing audit, recovery, and analytics services. Revenues are recognized upon completion of these services for its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company determines revenue recognition through the following steps:

•Identification of the contract with a customer.

•Identification of the performance obligations in the contract.

•Determination of the transaction price.

•Allocation of the transaction price to the performance obligations in the contract.

•Recognition of revenue when, or as, the performance obligations are satisfied.

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The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company’s contracts generally contain a single performance obligation, delivered over time as a series of services that are substantially the same and have the same pattern of transfer to the client, as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct.

The Company’s contracts are composed primarily of variable consideration. Fees earned under the Company’s audit and recovery service contracts consist primarily of contingency fees based on a specified percentage of the amount the Company enables its clients to recover. The contingency fee percentage for a particular recovery depends on the type of recovery or claim facilitated.

The Company generally either applies the as-invoiced practical expedient where its right to consideration corresponds directly to its right to invoice its clients, or the variable consideration allocation exception where the variable consideration is attributable to one or more, but not all, of the services promised in a series of distinct services that form part of a single performance obligation. As such the Company has elected the optional exemptions related to the as-invoiced practical expedient and the variable consideration allocation exception whereby the disclosure of the amount of transaction price allocated to the remaining performance obligations is not required.

The Company estimates variable consideration only if it can reasonably measure the progress toward complete satisfaction of the performance obligation using an output method based on reliable information, and recognizes such revenue over the performance period only if it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Any change made to the measure of progress toward complete satisfaction of our performance obligation is recorded as a change in estimate. The Company exercises judgment to estimate the amount of constraint on variable consideration based on the facts and circumstances of the relevant contract operations and availability and reliability of data. The Company reviews the constraint on variable consideration quarterly. While the Company believes the estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the amount of variable consideration recognized.

For contracts that contain a refund right, the Company estimates its refund liability for each claim, as needed, and recognizes revenue net of such estimate.

Under certain contracts, consideration can include periodic performance-based bonuses which can be awarded based on the Company’s performance under the specific contract. These performance-based bonuses are considered variable and may be constrained by the Company until there is not a risk of a significant reversal.

The Company has applied the as-invoiced practical expedient or the variable consideration allocation exception to contracts with performance obligations that have an average remaining duration of less than a year.

For healthcare claims audit contracts, the Company may recognize revenue upon delivering its findings from claims audits, when sufficient reliable information is available for estimating the variable consideration earned based on an output metric that reasonably measures the Company's satisfaction of its performance obligation.

For eligibility-based or COB contracts, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to its clients.

For customer care / outsourced services clients, the Company recognizes revenues based on the volume of processed transactions or the quantity of labor hours provided.

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The following table presents revenue disaggregated by category (in thousands) for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Eligibility-based	$	18,165	$	13,142	$	44,776	$	39,773
Claims-based	10,325		10,377		30,535		28,866
Healthcare Total	28,490		23,519		75,311		68,639
Recovery	—		41		33		166
Customer Care / Outsourced Services	1,472		3,618		5,832		11,137
Total Revenues	$	29,962	$	27,178	$	81,176	$	79,942

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in cash used in operating activities in the consolidated statements of cash flows. The Company determines the allowance for doubtful accounts by specific identification. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $0 as of September 30, 2023 and December 31, 2022.

Contract assets were $6.9 million and $11.5 million as of September 30, 2023 and December 31, 2022, respectively. Contract assets relate to the Company’s rights to consideration for services completed but not invoiced at the reporting date, and receipt of payment is conditional upon factors other than the passage of time.

Contract assets primarily consist of commissions the Company estimates it has earned from claims audit findings submitted to healthcare clients. Changes in contract assets result from additional consideration earned for services provided, offset by amounts invoiced during the period.

Contract assets are recorded to accounts receivable when the Company's right to payment becomes unconditional, which is generally when healthcare providers have paid our clients. There was no impairment loss related to contract assets for the three and nine months ended September 30, 2023 and 2022.

Contract liabilities totaled $0.5 million and $0.4 million as of September 30, 2023 and December 31, 2022, respectively.

Healthcare providers of our clients have the right to appeal claims audit findings and may pursue additional appeals if the initial appeal is found in favor of healthcare clients. For COB contracts, insurance companies or other responsible parties may dispute the Company’s findings regarding our clients not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $0.9 million as of September 30, 2023 and $1.1 million as of December 31, 2022. This represents the Company’s best estimate of the amount probable of being refunded to the Company’s healthcare clients.

At September 30, 2023, prepaid expenses and other current assets were $3.1 million and included approximately $2.3 million related to prepaid software licenses and maintenance agreements, $0.1 million for prepaid insurance, and $0.7 million for various other prepaid expenses. At December 31, 2022, prepaid expenses and other current assets were $3.7 million and included approximately $1.5 million related to prepaid software licenses and maintenance agreements, $1.8 million for prepaid insurance, and $0.4 million for various other prepaid expenses.

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(d) Impairment of Goodwill and Long-Lived Assets

The balance of goodwill was $47.4 million as of September 30, 2023 and $47.4 million as of December 31, 2022, which was net of accumulated impairment loss of $34.2 million. Goodwill is reviewed for impairment at least annually in December or as certain events or conditions arise during the year. The Company may first assess qualitative factors for indicators of impairment to determine whether it is necessary to perform the quantitative goodwill impairment test. Based on management’s assessment, there were no indicators of impairment and therefore there was no goodwill impairment during the three and nine months ended September 30, 2023.

If a quantitative assessment of goodwill is required, goodwill is considered impaired when the carrying value of the Company, as one reporting unit, exceeds its fair value. The amount of impairment loss is measured as the difference between the carrying value and the fair value of the reporting unit. Impairment testing is based upon the best information available and estimates of fair value which incorporate assumptions marketplace participants would use in making their estimates of fair value. Significant assumptions and estimates are required, including, but not limited to, our market capitalization, projecting future cash flows and other assumptions, to estimate the fair value of the reporting unit.

Long-lived assets and intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment during the three and nine months ended September 30, 2023.

(e) Other Current Liabilities

As of September 30, 2023, other current liabilities primarily included $1.7 million for services received for which we have not received an invoice, and $0.4 million for estimated workers' compensation claims incurred but not reported, third party fees, and accrued interest under our MUFG Credit Agreement (as defined below in Note 3). As of December 31, 2022, other current liabilities primarily included $1.8 million for services received for which we have not received an invoice, and $0.5 million for accrued interest under our MUFG Credit Agreement, estimated workers' compensation claims incurred but not reported and third party fees and equipment financing payables.

(f) New Accounting Pronouncements

In February 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” This ASU provides updated guidance on how an entity should measure credit losses on financial instruments, including trade receivables, held at the reporting date. The amendments make each Topic easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. It also addresses transition and open effective date information for Topic 842. ASU 2016-13, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 (collectively, “ASC 326”) are effective for public entities for fiscal years beginning after December 15, 2019, except for Smaller Reporting Companies. This ASU is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company's adoption of this ASU had no impact on our financial position, results of operations, or cash flows.

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2. Property, Equipment, and Leasehold Improvements

Property, equipment, and leasehold improvements consist of the following at September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023		December 31, 2022

Building and leasehold improvements	$	3,703	$	3,785
Furniture and equipment	3,091		3,094
Computer hardware and software	77,604		76,906
	84,398		83,785
Less accumulated depreciation and amortization	(74,608)		(72,888)
Property, equipment and leasehold improvements, net	$	9,790	$	10,897

Depreciation and amortization expense was $1.3 million and $1.1 million for the three months ended September 30, 2023 and 2022, respectively, and $3.8 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively.

3. Notes Payable

On October 27, 2023, the Company entered into a new credit agreement (the "New Credit Agreement" as defined below in Note 8).

As of September 30, 2023 and December 31, 2022, $11.3 million and $19.5 million, respectively, was outstanding under the Company's credit agreement with MUFG Union Bank, N.A. (as amended the "MUFG Credit Agreement"). The Company’s interest rate under the MUFG Credit Agreement at September 30, 2023 and December 31, 2022 was 11.5% and 7.5%, respectively.

On December 17, 2021, the Company entered into a credit agreement with MUFG Union Bank, N.A. The MUFG Credit Agreement includes a $20 million term loan commitment, which was fully advanced at closing and a $15 million revolving loan commitment. Subject to certain customary exceptions, the obligations under the MUFG Credit Agreement are, or will be, guaranteed by each of the Company’s existing and future, direct or indirect, domestic subsidiaries. The obligations of the Company under the MUFG Credit Agreement are secured by liens on substantially all of the assets of the Company and each of its domestic subsidiaries that are guarantors under the MUFG Credit Agreement.

On March 13, 2023, the Company entered into a First Amendment to the MUFG Credit Agreement (the “First Amendment”) to amend the MUFG Credit Agreement to, among other things, terminate the revolving loan commitment in full and to establish a new maturity date of December 31, 2024 for the term loan. As a result of the First Amendment to the MUFG Credit Agreement, the Company does not have any further borrowing capacity under the MUFG Credit Agreement. In connection with the First Amendment, the Company voluntarily prepaid $7.5 million of the outstanding principal of the term loan.

Pursuant to the MUFG Credit Agreement, after giving effect to the First Amendment described above, the Company is required to repay the aggregate outstanding principal amount of the term loan under the MUFG Credit Agreement in quarterly installments commencing March 31, 2022 in an amount that would result in amortization of (a) 2.5% of the original term loan principal in the first full year following commencement of amortization, (b) 5.0% of the original term loan principal in the second full year following commencement of amortization, and (c) 10.0% of the original term loan principal in the third full year following commencement of amortization. In addition, the Company must make mandatory prepayments of the term loan principal under the MUFG Credit Agreement with the net cash proceeds received in connection with certain specified events, including certain asset sales, casualty and condemnation events (subject to customary reinvestment rights). Any remaining outstanding principal balance of the term loan under the MUFG Credit Agreement is repayable on the maturity date. Amounts repaid or prepaid by the Company with respect to the term loan under the MUFG Credit Agreement cannot be reborrowed.

Under the MUFG Credit Agreement, after giving effect to the First Amendment described above, the term loan generally may bear interest based on term SOFR (the secured overnight financing right) or a prime rate, as applicable, plus an applicable margin based on the Company’s leverage ratio each quarter that may range between 2.50% per annum and 4.00% per annum, in the case of term SOFR loans and between 1.50% per annum and 3.00% per annum in the case of base rate loans. The prime rate was approximately 8.5% as of September 30, 2023. In addition, a commitment fee based on the unused availability if there are outstanding revolving loan commitments is also payable which may vary from 0.30% per annum to 0.50% per annum, also

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based on the Company’s leverage ratio, however, the revolving commitment was terminated in connection with the First Amendment described above.

The MUFG Credit Agreement contains certain customary representations, warranties, and affirmative and negative covenants of the Company and its subsidiaries that restrict the Company’s and its subsidiaries’ ability to take certain actions, including, incurrence of indebtedness, creation of liens, making certain investments, mergers or consolidations, dispositions of assets, assignments, sales or transfers of equity in subsidiaries, repurchase or redemption of capital stock, entering into certain transactions with affiliates, or changing the nature of the Company’s business. The MUFG Credit Agreement, after giving effect to the First Amendment described above, also contains financial covenants, which require the Company to maintain, as of the last day of each fiscal quarter commencing (a) as of September 30, 2023, a total leverage ratio of not greater than (i) 10.00 to 1.00, (b) as of December 31, 2023 and as of the last day of each fiscal quarter thereafter, (i) a total leverage ratio of not greater than 2.50 to 1.00, and (ii) a fixed charge coverage ratio of not less than 1.20 to 1.00 and (c) prior to the earlier December 31, 2023 and the date that the Company’s leverage ratio is not greater than 2.50 to 1.00 and its fixed charge coverage ratio is not less than 1.20 to 1.00, a minimum amount of unrestricted cash subject to a perfected security interest in favor of MUFG Union Bank, N.A. more specifically set forth in the MUFG Credit Agreement. The obligations under the MUFG Credit Agreement may be accelerated or the commitments terminated upon the occurrence of events of default under the MUFG Credit Agreement, which include payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control, and other customary events of default.

Other than the terms relating to the First Amendment as set forth above, the terms of the original MUFG Credit Agreement remained in full force and effect as of September 30, 2023.

As a result of the New Credit Agreement, the terms of the MUFG Credit Agreement are no longer in effect as of October 27, 2023. Refer to Subsequent Events in Note 8 for details.

Outstanding debt obligations were as follows (in thousands):


	September 30, 2023		December 31, 2022
Principal amount	$	11,250	$	19,500
Less unamortized discount and issuance costs	(501)		(333)
Notes payable, net of unamortized discount and issuance costs	10,749		19,167
Less current maturities, net of unamortized discount and issuance costs	(1,672)		(983)
Long-term notes payable, net of current maturities and unamortized discount and issuance costs	$	9,077	$	18,184

The following is a schedule, by years, of maturities of notes payable as of September 30, 2023 (in thousands):


Year Ending December 31,	Amount
Remainder of 2023	$	250
2024	11,000



Total notes payable	$	11,250

4. Leases

The Company has entered into various non-cancelable operating lease agreements for office facilities and equipment with lease periods expiring between 2023 and 2028. Certain of these arrangements have free rent periods and/or escalating rent payment provisions. As such, the Company recognizes rent expense under such arrangements on a straight-line basis. Some leases include options to renew. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Operating lease expense was $0.2 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, and $0.7 million and $1.6 million for the nine months ended September 30, 2023 and 2022, respectively.

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Supplemental other information related to operating leases were as follows:


	September 30, 2023	December 31, 2022
Weighted Average Remaining Lease Term (in years)	2.7	2.2
Weighted Average Discount Rate	5.3%	6.2%

Supplemental cash flow information related to operating leases were as follows:

September 30,
2023

September 30,
2022

Cash paid for amounts included in the measurement of operating lease liabilities

$0.2 million

$0.5 million

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2023 (in thousands):


Year Ending December 31,	Amount
Remainder of 2023	$	189
2024	$	212
2025	$	139
2026	$	61
2027	$	60
2028	$	52
Total undiscounted cash flows	$	713
Less imputed interest	$	(54)
Present value of lease liabilities	$	659

5. Stock-Based Compensation

(a) Stock Options

Total stock-based compensation expense charged as salaries and benefits expense in the consolidated statements of operations was $1.1 million and $0.9 million for the three months ended September 30, 2023 and 2022 respectively, and $2.8 million and $2.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The following table sets forth a summary of the Company's stock option activity for the nine months ended September 30, 2023:


	Outstanding Options	Weighted average exercise price per share		Weighted average remaining contractual life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022	250,000	$	10.31	0.90	$	20
Granted	—	—			—
Forfeited	(178,000)	12.16			—
Exercised	—	—			—
Outstanding at September 30, 2023	72,000	$	5.74	2.80	$	5
Vested, exercisable, expected to vest(1) at September 30, 2023	72,000	$	5.74	2.80	$	5
Exercisable at September 30, 2023	72,000	$	5.74	2.80	$	5

(1) Options expected to vest reflect an estimated forfeiture rate.

The Company recognizes share-based compensation costs as expense on a straight-line basis over the option vesting period, which generally is four years. As of September 30, 2023, all options have vested and there was no unrecognized compensation costs.

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(b) Restricted Stock Units and Performance Stock Units

The following table summarizes restricted stock unit and performance stock unit activity for the nine months ended September 30, 2023:


	Number of Awards	Weighted average grant date fair value per share
Outstanding at December 31, 2022	3,904,606	$	2.85
Granted	2,235,207	2.49
Forfeited	(136,806)	3.37
Vested and converted to shares, net of units withheld for taxes	(1,369,862)	2.46
Units withheld for taxes	(82,991)	2.26
Outstanding at September 30, 2023	4,550,154	$	2.78
Expected to vest at September 30, 2023	4,004,172	$	2.78

Restricted stock units and performance stock units granted under the Performant Financial Corporation Amended and Restated 2012 Stock Incentive Plan generally vest over periods between one year and four years.

As of September 30, 2023, there was approximately $10.5 million of total unrecognized compensation cost related to unvested restricted stock units granted to employees. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately three years.

6. Income Taxes

The Company's effective income tax rate was 4% for the nine months ended September 30, 2023 and (1)% for the nine months ended September 30, 2022. The primary driver of the effective income tax rate as of September 30, 2023 is the benefits realized related to the recognition of previously unrecognized tax benefits as a result of an audit closing, receipt of interest on tax refunds during the quarter, and overall losses from operations for the nine months ended September 30, 2023, for which no benefit is recognized due to valuation allowance. The primary driver of the effective income tax rate as of September 30, 2022 was the overall losses from operations for the nine months ended September 30, 2022, for which no benefit is recognized due to valuation allowance.

The Company files income tax returns with the U.S. federal government and various state jurisdictions. The Company operates in a number of state and local jurisdictions, most of which have never audited our records. Accordingly, the Company is subject to state and local income tax examinations based upon the various statutes of limitations in each jurisdiction. For tax years before 2018, the Company has been subject to examination and assessment to the extent of net operating losses carryback refunds requested. The federal examination by the Internal Revenue Service for the 2018 tax year concluded in July of 2023. As of September 30, 2023, the Company no longer has any ongoing audits.

7. Net Income (Loss) per Share

For the three and nine months ended September 30, 2023 and 2022, basic net income (loss) per share is calculated by dividing net income (loss) by the sum of the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of common stock and dilutive common share equivalents outstanding during the period. Common share equivalents consist of stock options, restricted stock units, performance stock units, and warrants. When there is a loss in the period, dilutive common share equivalents are excluded from the calculation of diluted earnings per share, as their effect would be anti-dilutive. For example, for the nine months ended September 30, 2023 and 2022, respectively, diluted weighted average shares outstanding are the same as basic average shares outstanding. When there is net income in the period, the Company excludes stock options, restricted stock units, performance stock units, and warrants from the calculation of diluted earnings per share when their combined exercise price and unamortized fair value exceeds the average market price of the Company's common stock because their effect would be anti-dilutive.

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The following table reconciles the basic to diluted weighted average shares outstanding using the treasury stock method (shares in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average shares outstanding – basic	76,454	74,021	75,907	72,480
Dilutive effect of stock options	—	—	—	—
Weighted average shares outstanding – diluted	76,454	74,021	75,907	72,480

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share, as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (shares in thousands):


	September 30, 2023	September 30, 2022
Options to purchase common stock	72	250
RSUs	4,550	4,024
Warrants outstanding	—	2,447
Total	4,622	6,721

8. Subsequent Events

The Company has evaluated subsequent events through the date these consolidated financial statements are filed with the Securities and Exchange Commission and identified the following event, which did not require adjustments to the consolidated financial statements.

On October 27, 2023 (the “Closing Date”), the Company entered into a new credit agreement with Wells Fargo Bank, National Association (the “New Credit Agreement”). The New Credit Agreement includes a $25 million revolving loan commitment, subject to borrowing base limitations based on a percentage of applicable eligible receivables and contract assets, of which $5.0 million was advanced on the Closing Date. A portion of the revolving loan commitment of up to $2.5 million is available for the issuance of letters of credit. Subject to certain customary exceptions, the Company’s existing and future, direct or indirect, domestic subsidiaries will be jointly and severally obligated as borrowers or guarantors for the obligations under the New Credit Agreement. The obligations of the Company under the New Credit Agreement are secured by liens on substantially all of the assets of the Company and each of its existing subsidiaries (and subject to customary exceptions, will be secured by the assets of future subsidiaries).

The New Credit Agreement matures on October 27, 2026. A portion of the proceeds from the initial borrowing under the New Credit Agreement were used by the Company, together with cash on hand, to refinance its MUFG Credit Agreement (Note 3), and to pay fees and expenses in connection with the New Credit Agreement.

The Company may, at its option, prepay borrowings under the New Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances). Borrowings under the New Credit Agreement are also subject to mandatory prepayment in the event that outstanding borrowings and letter of credit usage exceed the lesser of the aggregate revolving loan commitments and the borrowing base then in effect.

The Company may also increase commitments under the New Credit Agreement in an aggregate principal amount of up to $10 million by obtaining additional commitments from lenders, subject to obtaining commitments from any participating lenders and certain other conditions. Under the New Credit Agreement, loans generally may bear interest based on term SOFR (the secured overnight financing right) or an annual base rate, as applicable, plus, in each case, an applicable margin based on the Company’s average borrowing availability each quarter under the New Credit Agreement that may range between 2.50% per annum and 3.00% per annum, in the case of term SOFR loans and between 1.50% per annum and 2.00% per annum in the case of base rate loans. In addition, a commitment fee of 0.50% per annum based on unused availability of the credit facility is also payable.

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incurrence of indebtedness, creation of liens, making certain investments, mergers or consolidations, dispositions of assets, assignments, sales or transfers of equity in subsidiaries, repurchase or redemption of capital stock, entering into certain transactions with affiliates, or changing the nature of the Company’s business. The New Credit Agreement also contains financial covenants, which require the Company to maintain a minimum amount of liquidity and a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00, provided that the fixed charge coverage ratio is only applicable when borrowing availability falls below a certain threshold. The obligations under the New Credit Agreement may be accelerated or the commitments terminated upon the occurrence of events of default under the New Credit Agreement, which include payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control, and other customary events of default.

On the Closing Date, the Company terminated the MUFG Credit Agreement. As a result, all outstanding obligations of the Company under the MUFG Credit Agreement have been paid.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with our consolidated financial statements (unaudited) and related notes included elsewhere in this report. This report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” under Item 1A of Part II of this report. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements include, but are not limited to, statements about our ability to generate revenue following long implementation periods associated with new customer contracts; the high level of revenue concentration among our largest customers; our client relationships and our ability to maintain such client relationships; many of our customer contracts are subject to periodic renewal, are not exclusive, do not provide for committed business volumes; downturns in domestic or global economic conditions and other macroeconomic factors; our ability to generate sufficient cash flows to fund our ongoing operations and other liquidity needs; our ability to hire and retain employees with specialized skills that are required for our healthcare business; anticipated trends and challenges in our business and competition in the markets in which we operate; the impact of COVID-19 on our business and operations, opportunities and expectations for the markets in which we operate; our ability to maintain compliance with the covenants in our debt agreements; the adaptability of our technology platform to new markets and processes; failure of our or third parties' operating systems and technology infrastructure could disrupt our operation and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that we possess; our growth strategy of expanding in our existing markets and considering strategic alliances or acquisitions; maintaining, protecting and enhancing our intellectual property; our expectations regarding future expenses; expected future financial performance; and our ability to comply with and adapt to industry regulations and compliance demands. The forward-looking statements in this report speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

We provide technology-enabled audit, recovery, and analytics services in the United States primarily to the healthcare industry. We work with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits or COB) services to identify improper payments. We engage clients in both government and commercial markets. Our clients typically operate in complex and highly regulated environments and contract for their payment integrity needs in order to reduce losses on improper healthcare payments. We also have a call center which serves clients with complex consumer engagement needs.

Our revenue model is generally success-based as we earn fees based on the aggregate amount of funds that we enable our clients to recover from our services. Our services do not require significant upfront investments by our clients and we offer our clients the opportunity to recover significant funds that may otherwise be lost. Because our model is based upon the success of our efforts, our business objectives are aligned with those of our clients and we are generally not reliant on their spending budgets.

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Sources of Revenues

We derive a substantial portion of our revenues from services provided to our clients in the healthcare market. We also derive revenues from our outsourced call center services.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Eligibility-based	$	18,165	$	13,142	$	44,776	$	39,773
Claims-based	10,325		10,377		30,535		28,866
Healthcare Total	28,490		23,519		75,311		68,639
Recovery	—		41		33		166
Customer Care / Outsourced Services	1,472		3,618		5,832		11,137
Total Revenues	$	29,962	$	27,178	$	81,176	$	79,942

Healthcare Revenues

We derive revenues from both commercial and government clients by providing healthcare payment integrity services, which include claims-based and eligibility-based services. Revenues earned under claims-based contracts in the healthcare market are driven by auditing, identifying, and sometimes recovering improperly paid claims through both automated and manual review of such claims. Eligibility-based services, which may also be referred to as coordination-of-benefits or COB, involve identifying and recovering payments in situations where our client should not be the primary payer of healthcare claims because a member has other forms of insurance coverage. We are paid contingency fees by our clients based on a percentage of the dollar amount of improper claims recovered as a result of our efforts. The revenues we recognize are net of our estimate of claims that may be overturned by appeal or disputed following payment by the provider.

For our healthcare business, our business strategy is focused on utilizing our technology-enabled services platform to provide claims-based, eligibility-based, and analytical services for healthcare payers. Revenues from our healthcare services were $75.3 million for the nine months ended September 30, 2023 compared to revenues of $68.6 million from our healthcare services during for the nine months ended September 30, 2022.

In October 2017, we were awarded the national exclusive Medicare Secondary Payer, Commercial Payment Center (MSP) contract by the centers for Medicare and Medicaid Services (CMS). In December 2022, we were re-awarded this MSP contract, which commenced in March 2023. This contract has a six-year term, consisting of one base year and five additional one-year options.

Under this MSP contract, we are responsible for coordination-of-benefits claims, which includes identifying and recovering payments in situations where Medicare should not be the primary payer of healthcare claims because a beneficiary has other forms of insurance coverage, such as through an employer group health plan or certain other payers.

In 2016, CMS awarded two new Medicare Recovery Audit Contractor (RAC) contracts to us, for audit Regions 1 and 5. The RAC contract award for Region 1 allows us to continue our audit of payments under Medicare’s Part A and Part B for all provider types other than Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) and home health and hospice within an 11 state region in the Northeast and Midwest. The Region 5 RAC contract provides for the post-payment review of DMEPOS and home health and hospice claims on a nation-wide basis.

In March 2021, CMS re-awarded the Region 1 RAC contract to us after a competitive procurement process. This contract has an eight-and-a-half year term.

In January 2022, we were awarded the indefinite delivery, indefinite quantity contract by the U.S. Department of Health and Human Services, Office of the Inspector General (HHS OIG), which has a base term of one year and four additional one-year options, the first of which has been exercised. Under this contract, we provide medical review and consultative services associated with the oversight activities of the HHS OIG, primarily assessing services and claims for Medicare fee-for-service payments for Part A and Part B. This contract was awarded via a full-and-open competitive procurement.

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In November 2022, we were re-awarded the Medicare RAC contract for Region 2. This contract allows us to audit payments under Medicare’s Part A and Part B for all provider types other than DMEPOS and home health and hospice within a 14 state region in the Midwest and South. This contract was initially awarded to us through a procurement process in March 2022, and following a voluntary corrective action process that was initiated by CMS, the agency re-affirmed its initial contract award, which commenced in August 2023. This contract has an initial eight-and-a-half-year term.

The scope of services that we provide to our healthcare clients continues to expand as we continue to implement new programs for existing and new healthcare clients. We believe this growth trend should continue as our suite of payment integrity services and our customer relationships continue to mature. We currently anticipate that our healthcare revenues will drive the majority of our overall revenue growth.

Recovery Revenues

During 2021, we sold certain of our non-healthcare recovery contracts and decided not to renew or restart existing contracts in the recovery market, nor pursue new non-healthcare recovery contracts. Accordingly, revenues from recovery markets such as defaulted student loans and tax receivables were de minimis.

Customer Care / Outsourced Services Revenues

We derive revenues from our first party call center and other outsourced services. Our revenues for these services include contingency fees, fees based on dedicated headcount and tasks completed on behalf of our clients.

Costs and Expenses

We generally report two categories of operating expenses: salaries and benefits and other operating expense. Salaries and benefits expenses consist primarily of salaries and performance incentives paid and benefits provided to our employees. Other operating expenses include expenses related to our use of subcontractors, other production related expenses, including costs associated with data processing, retrieval of medical records, printing and mailing services, amortization and other outside services, as well as general corporate and administrative expenses.

Factors Affecting Our Operating Results

Our results of operations are influenced by a number of factors, including costs associated with commencing new contracts, claim recovery volume, contingency fees, regulatory matters, client contract cancellation and macroeconomic factors.

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Costs Associated with Commencing New Contracts

When we obtain an engagement with a new client or a new contract with an existing client, it typically takes a long period of time to plan our services in detail, which includes integrating our technology, processes and resources with the client’s operations and hiring new employees, before we receive any revenues from the new client or new contract. Due to the upfront costs we incur in connection with the implementation of new contracts, which may not be recoverable in the event of contract termination, and the delays we face in recognizing initial revenue from any such new contracts, our profitability can be negatively impacted by any delays associated with new contract implementations. Our clients may also experience delays in obtaining approvals or managing protests from unsuccessful bidders or delays associated with system implementations, as we had experienced before with certain clients. If we are not able to pay the upfront expenses out of cash from operations or availability of borrowings under our lending arrangements, we may need to scale back our operations or alter our business plans, either of which could have a negative effect on future revenues that we may earn under any such new client or new contract engagements.

Claims Recovery Volume

The number of claims that we are allowed or permitted to audit on behalf of our healthcare clients within our claims-based services has a direct impact on our revenues. Most of our contracts in our claims-based services permit our clients to unilaterally change the amount of claims that we are able to audit on the client’s behalf at any given time. Further, the type and scale of claims which are deemed permissible for us to audit by certain of our healthcare clients may change from time-to-time. Non-permissible claims may result from client product lines which are determined by our clients to be out of scope of our audit services, claims related to excluded providers or excluded provider groups, changes in policy, or other factors such as geographies disrupted by natural disasters or a global pandemic like the COVID-19 pandemic. For example, the COVID-19 pandemic had a negative impact on overall hospital utilization rates in the United States. This negative impact on overall hospital utilization rates has caused delays with the healthcare industry as a whole, which in turn has had a negative impact on our healthcare business.

The level of claims volume provided by our healthcare clients also impacts the revenues we earn from our eligibility-based services. To the extent the claim recovery volume that we are allowed or permitted to audit on behalf of our healthcare clients is negatively impacted by any of the factors set forth above, our revenues and results of operations will be adversely impacted.

Contingency Fees

Our revenues consist primarily of contract-based contingency fees. The contingency fee percentages that we earn are set by our clients or agreed upon during the bid process and may change from time to time either under the terms of existing contracts or pursuant to the terms of contract renewals. Changes in contingency fee percentages set by our clients may have a material effect on our revenues and results of operations.

Regulatory Matters

Each of the markets which we serve is highly regulated. Accordingly, changes in regulations that affect the types of receivables and claims that we are able to service or audit or the manner in which any such receivables and claims can be recovered will affect our revenues and results of operations.

In addition, our entry into the healthcare market was facilitated by the passage of the Tax Relief and Health Care Act of 2006, which mandated CMS to contract with private firms to audit Medicare claims in an effort to increase the recovery of improper Medicare payments. Any changes to the regulations that affect the Medicare program or the audit and recovery of Medicare claims could have a significant impact on our revenues and results of operations.

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Client Contract Cancellation or Non-Renewal

We derive a substantial portion of our revenues from contracts with a limited number of our largest clients. Substantially all of our contracts (i) entitle our clients to unilaterally terminate their contractual relationship with us at any time without penalty and (ii) are subject to competitive procurement or renewal processes from time to time. Our revenues could decline if we lose one or more of our significant clients, either due to a contract cancellation or our inability to be awarded a new contract in connection with a competitive renewal process. Further, our revenues could be negatively impacted if one or more of our significant clients decides to limit the amount of claims that we are allowed to audit or reduces the level of placements provided under an existing contract, or if the terms of compensation for our services change under any existing contracts, or if any of our significant clients is acquired by an entity that does not wish to continue use our services.

Macroeconomic Factors

A variety of macroeconomic factors may influence our business and results of operations. These macroeconomic factors include fluctuations in Medicare expenditures or claims made to private healthcare providers resulting from changes in healthcare costs or the healthcare industry taken as a whole, as well as changes to fiscal budgets of federal, state and local governments as a result of general economic weakness and lower tax revenues.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period-to-period. Accordingly, actual results could differ significantly from the estimates made by our management. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Revenue Recognition

We derive our revenues primarily from providing audit, recovery, and analytics services. Revenues are recognized upon completion of these services for our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

We determine revenue recognition through the following steps:

•Identification of the contract with a customer.

•Identification of the performance obligations in the contract.

•Determination of the transaction price.

•Allocation of the transaction price to the performance obligations in the contract.

•Recognition of revenue when, or as, the performance obligations are satisfied.

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Our contracts generally contain a single performance obligation, delivered over time as a series of services that are substantially the same and have the same pattern of transfer to a client, as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct.

Our contracts are composed primarily of variable consideration. Fees earned under our audit and recovery service contracts consist primarily of contingency fees based on a specified percentage of the amount we enable our clients to recover. The contingency fee percentage for a particular recovery depends on the type of recovery or claim facilitated.

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We generally either apply the as-invoiced practical expedient, where our right to consideration corresponds directly to our right to invoice our clients, or the variable consideration allocation exception, where the variable consideration is attributable to one or more, but not all, of the services promised in a series of distinct services that form part of a single performance obligation. As such, we have elected the optional exemptions related to the as-invoiced practical expedient and the variable consideration allocation exception, whereby the disclosure of the amount of transaction price allocated to the remaining performance obligations is not required.

We estimate variable consideration only if we can reasonably measure our progress toward complete satisfaction of the performance obligation using an output method based on reliable information, and recognize such revenue over the performance period only if it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Any change made to the measure of progress toward complete satisfaction of our performance obligation is recorded as a change in estimate. We exercise judgment to estimate the amount of constraint on variable consideration based on the facts and circumstances of the relevant contract operations and availability and reliability of data. We review the constraint on variable consideration quarterly. While we believe the estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the amount of variable consideration.

For contracts that contain a refund right, these amounts are considered variable consideration, and we estimate our refund liability for each claim and recognize revenue net of such estimate.

Under certain contracts, consideration can include periodic performance-based bonuses which can be awarded based on our performance under the specific contract. These performance-based awards are considered variable and may be constrained by us until there is not a risk of a material reversal.

We have applied the as-invoiced practical expedient and the variable consideration allocation exception to contracts with performance obligations that have an average remaining duration of less than a year.

For healthcare claims audit contracts, we may recognize revenue upon delivering our findings from claims audits, when sufficient reliable information is available for estimating the variable consideration earned based on an output metric that reasonably measures the Company's satisfaction of its performance obligation.

For eligibility-based or COB contracts, we recognize revenue when insurance companies or other responsible parties have remitted payments to our clients.

For customer care / outsourced services clients, we recognize revenue based on the volume of processed transactions or the quantity of labor hours provided.

Contract assets totaled $6.9 million and $11.5 million as of September 30, 2023 and December 31, 2022, respectively. Contract assets relate to our right to consideration for services completed but not invoiced at the reporting date, and receipt of payment is conditional upon factors other than the passage of time.

Contract assets primarily consist of commissions that we estimate we have earned from claims audit findings submitted to healthcare clients. Changes in contract assets result from additional consideration earned for services provided, offset by amounts invoiced during the period.

Contract assets are recorded to accounts receivable when our right to payment becomes unconditional, which is generally when healthcare providers or payers have paid our clients. There was no impairment loss related to contract assets for the three and nine months ended September 30, 2023 and 2022.

Contract liabilities totaled $0.5 million and $0.4 million as of September 30, 2023 and December 31, 2022, respectively.

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Healthcare providers of our clients have the right to appeal claims audit findings and may pursue additional appeals if the initial appeal is found in favor of healthcare clients. For COB contracts, insurance companies or other responsible parties may dispute our findings regarding our clients not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $0.9 million as of September 30, 2023 and $1.1 million as of December 31, 2022. This represents our best estimate of the amount probable of being refunded to our healthcare clients.

Recent Accounting Pronouncements

See "New Accounting Pronouncements" in Note 1(f) of the Consolidated Financial Statements included in Part I - Item 1 of this report.

Results of Operations

Three Months Ended September 30, 2023 compared to the Three Months Ended September 30, 2022

The following table represents our historical operating results for the periods presented:


	Three Months Ended September 30,
	2023		2022		$ Change		% Change
	(in thousands)
Consolidated Statement of Operations Data:
Revenues	$	29,962	$	27,178	$	2,784	10	%
Operating expenses:
Salaries and benefits	22,980		21,759		(1,221)		(6)	%
Other operating expenses	7,632		7,733		101		1	%

Total operating expenses	30,612		29,492		(1,120)		4	%
Loss from operations	(650)		(2,314)		1,664		72	%

Gain on sale of land and buildings	—		1,120		(1,120)		100	%
Interest expense	(423)		(277)		(146)		(53)	%
Interest income	86		—		86		—	%
Loss before provision for income taxes	(987)		(1,471)		484		33	%
(Benefit from) Provision for income taxes	(407)		(11)		396		(3,600)	%
Net loss	$	(580)	$	(1,460)	$	880	60	%

Revenues

Total revenues were $30.0 million for the three months ended September 30, 2023, an increase of approximately $2.8 million, or 10%, compared to total revenues of $27.2 million for the three months ended September 30, 2022.

Healthcare revenues were $28.5 million for the three months ended September 30, 2023, representing an increase of $5.0 million, or 21%, compared to the three months ended September 30, 2022. Revenues from eligibility-based services during the three months ended September 30, 2023 were $18.2 million, or 38% higher than the three months ended September 30, 2022. Revenues from claims-based services during the three months ended September 30, 2023 were $10.3 million, or 1% lower than the three months ended September 30, 2022. The increase in healthcare revenues was primarily driven by statements of work implemented for our commercial customers.

Customer Care / Outsourced Services revenues were approximately $1.5 million, representing a decrease of $2.1 million, or 59%, compared to the three months ended September 30, 2022. The change was due to a decrease in demand for our outsourced services.

Salaries and Benefits

Salaries and benefits expense was $23.0 million for the three months ended September 30, 2023, an increase of $1.2 million, or 6%, compared to salaries and benefits expense of $21.8 million for the three months ended September 30, 2022. The increase in salaries and benefits expense was in support of the continued growth of our healthcare services.

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Other Operating Expenses

Other operating expenses were $7.6 million for the three months ended September 30, 2023, compared to $7.7 million for the three months ended September 30, 2022. This slight decrease in other operating expenses was primarily due to a decrease in lease expenses.

Gain on Sale of Land and Buildings

Gain from the sale of land and buildings was $1.1 million for the three months ended September 30, 2022. We sold two office buildings and the related land that were previously utilized by employees working on recovery contracts.

Loss from Operations

As a result of the factors described above, loss from operations was $0.7 million for the three months ended September 30, 2023, compared to loss from operations of $2.3 million for the three months ended September 30, 2022.

Interest Expense

Interest expense was $0.4 million during the three months ended September 30, 2023, compared to $0.3 million for the three months ended September 30, 2022, representing a decrease of approximately $0.1 million. This decrease in interest expense is primarily due to a lower principal balance offset by a higher interest rate during the three months ended September 30, 2023.

Income Taxes

We recognized an income tax expense of $407 thousand for the three months ended September 30, 2023, compared to an income tax expense of $11 thousand for the three months ended September 30, 2022. Our effective income tax rate was 41% and 1% for the three months ended September 30, 2023 and 2022, respectively. The primary driver of the effective income tax rate for the three months ended September 30, 2023 is the benefits realized related to the recognition of previously unrecognized tax benefits as a result of an audit closing, receipt of interest on tax refunds during the quarter, and overall losses from operations for the same period for which no benefit is recognized due to valuation allowance. The primary driver of the effective income tax rate for the three months ended September 30, 2022 was the overall losses from operations for the three months ended September 30, 2022 for which no benefit is recognized due to recognition of a full valuation allowance.

Net Loss

As a result of the factors described above, net loss was $0.6 million for the three months ended September 30, 2023, which represented a decrease in net loss of approximately $0.9 million, or 60%, compared to net loss of $1.5 million for the three months ended September 30, 2022.

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Nine months ended September 30, 2023 compared to the Nine months ended September 30, 2022

The following table represents our historical operating results for the periods presented:


	Nine Months Ended September 30,
	2023		2022		$ Change		% Change
	(in thousands)
Consolidated Statement of Operations Data:
Revenues	$	81,176	$	79,942	$	1,234	2	%
Operating expenses:
Salaries and benefits	67,139		63,101		(4,038)		(6)	%
Other operating expenses	22,077		23,945		1,868		8	%

Total operating expenses	89,216		87,046		(2,170)		(2)	%
Loss from operations	(8,040)		(7,104)		(936)		(13)	%
Gain on sale of certain recovery contracts	3		382		(379)		(99)	%
Gain on sale of land and buildings	—		1,120		(1,120)		(100)	%
Interest expense	(1,188)		(648)		(540)		(83)	%
Interest income	86		—		86		—	%
Loss before provision for income taxes	(9,139)		(6,250)		(2,889)		(46)	%
(Benefit from) Provision for income taxes	(365)		52		417		802	%
Net loss	$	(8,774)	$	(6,302)	$	(2,472)	(39)	%

Revenues

Total revenues were $81.2 million for the nine months ended September 30, 2023, an increase of approximately 2%, compared to total revenues of $79.9 million for the nine months ended September 30, 2022.

Healthcare revenues were $75.3 million for the nine months ended September 30, 2023, representing an increase of $6.7 million, or 10%, compared to the nine months ended September 30, 2022. This increase in healthcare revenues was primarily driven by statements of work implemented for our commercial customers. Revenues from claims-based services during the nine months ended September 30, 2023 were $1.7 million higher than revenues for the nine months ended September 30, 2022. Revenues from eligibility-based services during the nine months ended September 30, 2023 were $5.0 million higher than revenues for the nine months ended September 30, 2022.

Recovery revenues were $33 thousand for the nine months ended September 30, 2023, compared to $166 thousand during the nine months ended September 30, 2022.

Customer Care / Outsourced Services revenues were approximately $5.8 million for the nine months ended September 30, 2023 compared to $11.1 million for the nine months ended September 30, 2022. The change was due to decreased demand for our outsourced services.

Salaries and Benefits

Salaries and benefits expense was $67.1 million for the nine months ended September 30, 2023, an increase of $4.0 million, or 6%, compared to salaries and benefits expense of $63.1 million for the nine months ended September 30, 2022. The increase in salaries and benefits expense was primarily driven by a change in the composition of our employee base to support the growth in our healthcare services, partially offset by a reduction in headcount for our customer care / outsourced services.

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Other Operating Expenses

Other operating expenses were $22.1 million for the nine months ended September 30, 2023, compared to other operating expenses of $23.9 million for the nine months ended September 30, 2022. The decrease in other operating expenses was primarily due to lower lease expenses and a decrease in communication and postage expenses.

Gain on Sale of Land and Buildings

Gain from the sale of land and buildings was $1.1 million for the nine months ended September 30, 2022. We sold two office buildings and the related land that were previously utilized by employees working on recovery contracts.

Loss from Operations

As a result of the factors described above, loss from operations was $8.0 million for the nine months ended September 30, 2023, compared to loss from operations of $7.1 million for the nine months ended September 30, 2022.

Interest Expense

Interest expense was $1.2 million for the nine months ended September 30, 2023, compared to $0.6 million for the nine months ended September 30, 2022, representing an increase of $0.5 million. This increase in interest expense is primarily due to a higher interest rate offset by a lower principal balance during the nine months ended September 30, 2023.

Income Taxes

We recognized an income tax benefit of $365 thousand for the nine months ended September 30, 2023, compared to an income tax expense of $52 thousand for the nine months ended September 30, 2022. Our effective income tax rate was 4% for the nine months ended September 30, 2023, and (1)% for the nine months ended September 30, 2022. The primary driver of the effective income tax rate for the nine months ended September 30, 2023 is the benefits realized related to the recognition of previously unrecognized tax benefits as a result of an audit closing, receipt of interest on tax refunds during the quarter, and overall losses from operations for the same period for which no benefit is recognized due to valuation allowance. The primary driver of the effective tax rate for the nine months ended September 30, 2022 was the overall losses from operations for the nine months ended September 30, 2022 for which no benefit is recognized due to recognition of a full valuation allowance for the same period.

Net Loss

As a result of the factors described above, net loss was $8.8 million for the nine months ended September 30, 2023, which represented an increase in net loss of approximately $2.5 million, or 39%, compared to net loss of $6.3 million for the nine months ended September 30, 2022.

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Adjusted EBITDA and Adjusted Net Income

To provide investors with additional information regarding our financial results, we have disclosed in the table below adjusted EBITDA and adjusted net income, both of which are non-U.S. GAAP financial measures. We have provided a reconciliation below of adjusted EBITDA to net income and adjusted net income to net income, the most directly comparable U.S. GAAP financial measure to these non-U.S. GAAP financial measures.

We have included adjusted EBITDA and adjusted net income in this report 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 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 has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•adjusted EBITDA does not reflect interest expense on our indebtedness;

•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•adjusted EBITDA does not reflect tax payments;

•adjusted EBITDA and adjusted net income do not reflect the potentially dilutive impact of equity-based compensation;

•adjusted EBITDA and adjusted net income do not reflect the impact of certain non-operating expenses resulting from matters we do not consider to be indicative of our core operating performance; and

•other companies may calculate adjusted EBITDA and adjusted net income differently than we do, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider adjusted EBITDA and adjusted net income alongside other financial performance measures, including net income and our other U.S. GAAP results. The following tables present a reconciliation of adjusted EBITDA and adjusted net income for each of the periods indicated:

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Adjusted EBITDA:
Net income (loss)	$	(580)	$	(1,460)	$	(8,774)	$	(6,302)
Provision for (benefit from) income taxes	(407)		(11)		(365)		52
Interest expense (1)	423		277		1,188		648
Interest income	(86)		—		(86)		—
Stock-based compensation	1,129		931		2,815		2,212
Depreciation and amortization	1,293		1,095		3,805		3,355



Severance expenses (3)	64		10		246		189
Other (4)	5		3		34		(373)

Gain on sale of land and buildings (6)	$	—	$	(1,120)	$	—	$	(1,120)

Adjusted EBITDA	$	1,841	$	(275)	$	(1,137)	$	(1,339)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Adjusted Net Income (Loss):
Net income (loss)	$	(580)	$	(1,460)	$	(8,774)	$	(6,302)
Stock-based compensation	1,129		931		2,815		2,212

Amortization of debt issuance costs (2)	134		23		256		71



Severance expenses (3)	64		10		246		189
Other (4)	5		3		34		(373)

Gain on sale of land and buildings (6)	—		—		—		(1,120)

Tax adjustments (5)	(366)		(42)		(921)		(269)
Adjusted net income (loss)	$	386	$	(1,655)	$	(6,344)	$	(5,592)

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2021		2022
	(in thousands)				(in thousands)
Adjusted Net Income (Loss) Per Diluted Share:
Net income (loss)	$	(580)	$	(1,460)	$	(8,774)	$	(6,302)
Plus: Adjustment items per reconciliation of adjusted net income (loss)	966		(195)		2,430		710
Adjusted net income (loss)	$	386	$	(1,655)	$	(6,344)	$	(5,592)
Adjusted net income (loss) per diluted share	$	0.01	$	(0.02)	$	(0.08)	$	(0.08)
Diluted average shares outstanding (7)	76,830		74,021		75,907		72,480

(1)Represents interest expense and amortization of debt issuance costs related to our MUFG Credit Agreement.

(2)Represents amortization of debt issuance costs related to our MUFG Credit Agreement.

(3)Represents severance expenses incurred in connection with a reduction in force for our non-healthcare recovery services.

(4)Represents professional fees related to strategic corporate development activities and gain on sale of certain non-healthcare recovery contracts in prior years.

(5)Represents tax adjustments assuming a marginal tax rate of 27.5% at full profitability.

(6)Represents gain on the sale of land and two office buildings in September of 2022.

(7)While net loss for the three months ended September 30, 2023 is ($580), the computation of adjusted net income (loss) results in adjusted net income of $386. Therefore, the calculation of the adjusted earnings per diluted share for the three months ended September 30, 2023 includes dilutive common share equivalents of 376 added to the basic weighted average shares of 76,454.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations, and cash and cash equivalents on hand. Cash and cash equivalents, which includes restricted cash and consists primarily of cash on deposit with banks, totaled $17.4 million as of September 30, 2023 compared to $23.5 million as of December 31, 2022. The $6.1 million decrease in the balance of our cash and cash equivalents from December 31, 2022 to September 30, 2023, was primarily due to $8.9 million used in financing activities and $3.0.million used in investing activities, offset by $5.7 million provided by operating activities. The $8.9 million in cash used in financing activities was primarily the result of $7.5 million in prepayment of outstanding principal in connection with an amendment to our MUFG Credit Agreement in March of 2023.

On October 27, 2023, we entered into a new credit agreement among the Company and its subsidiaries party thereto, as borrowers, the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent(the “New Credit Agreement”). The New Credit Agreement includes a $25 million revolving loan commitment, subject to borrowing base limitations based on a percentage of applicable eligible receivables and contract assets, of which $5.0 million was advanced upon closing. A portion of the proceeds from the initial borrowing under the New Credit Agreement were used by the Company, together with cash on hand, to pay off our outstanding notes payable balance as of September 30, 2023 under the credit agreement dated as of December 17, 2021 with MUFG Union Bank, N.A.(the “MUFG Credit Agreement”). The MUFG Credit Agreement originally included a $20 million term loan commitment, which was then amended on March 13, 2023 when we voluntarily prepaid $7.5 million of the outstanding principal of the term loan.

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Our New Credit Agreement contains, and any agreements to refinance our debt likely will contain, certain financial covenants, including the maintenance of minimum amount of liquidity and a consolidated fixed charge coverage ratio, as well as restrictive covenants that require us to limit our ability to incur additional debt, including to finance future operations or other capital needs, and to engage in other activities that we may believe are in our long-term best interests, including to dispose of or acquire assets. Conditions may change, however, for a variety of reasons in the future that may affect our ability to maintain compliance with our financial or restrictive covenants. Our failure to comply with these financial covenants or the restrictive covenants may result in an event of default, which, if not cured or waived, could accelerate the maturity of our indebtedness or result in modifications to our credit terms.

Cash flows from operating activities

Cash provided by operating activities was $5.7 million for the nine months ended September 30, 2023, primarily as a result of a decrease in accounts receivable, contract assets, and income tax receivable during the period, offset by a decrease in accrued salaries and benefits and accounts payable. Cash used in operating activities was $2.2 million for the nine months ended September 30, 2022, primarily as a result of changes in accrued salaries and benefits, contract liabilities, and other current liabilities during the period.

Cash flows from investing activities

Cash used in investing activities of $3.0 million for the nine months ended September 30, 2023 primarily related to capital expenditures for information technology, data storage, hardware, telecommunication systems and security enhancements to our information technology systems. Cash provided by investing activities for the nine months ended September 30, 2022 was $3.1 million, primarily related to proceeds from the sale of land and buildings, offset by capital expenditures for information technology, data storage, hardware, telecommunication systems and security enhancements to our information technology systems.

Cash flows from financing activities

Cash used in financing activities of $8.9 million for the nine months ended September 30, 2023 was primarily attributable to repayments of notes payable during the period. Cash provided by financing activities for the nine months ended September 30, 2022 was $5.2 million, primarily attributable to $5.6 million in proceeds from the exercise of warrants by ECMC, offset by $0.4 million in repayments of notes payable.

Notes Payable

As of September 30, 2023, $11.3 million was outstanding under the MUFG Credit Agreement (refer to Note 3 in Part I, Item 1 Notes to the Consolidated Financial Statements). The Company’s annual interest rate at September 30, 2023 was 11.5%.

On October 27, 2023, we entered into the New Credit Agreement with Wells Fargo Bank, National Association that includes a $25 million revolving loan commitment, subject to borrowing base limitations based on a percentage of applicable eligible receivables and contract assets, of which $5.0 million was advanced upon closing. A portion of the revolving loan commitment of up to $2.5 million is available for the issuance of letters of credit. Subject to certain customary exceptions, the Company’s existing and future, direct or indirect, domestic subsidiaries will be jointly and severally obligated as borrowers or guarantors for the obligations under the New Credit Agreement. The obligations of the Company under the New Credit Agreement are secured by liens on substantially all of the assets of the Company and each of its existing subsidiaries (and subject to customary exceptions, will be secured by the assets of future subsidiaries).

The New Credit Agreement matures on October 27, 2026. A portion of the proceeds from the initial borrowing under the New Credit Agreement were used by the Company, together with cash on hand, to refinance our MUFG Credit Agreement, and to pay fees and expenses in connection with the New Credit Agreement.

As a result of the New Credit Agreement, the terms of the MUFG Credit Agreement are no longer in effect as of October 27, 2023.

Under the New Credit Agreement, the Company may, at its option, prepay borrowings, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances). Borrowings under the New Credit Agreement are also subject to mandatory prepayment in the event that outstanding borrowings and letters of credit usage exceed the lesser of the aggregate revolving loan commitments and the borrowing base then in effect.

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The New Credit Agreement contains certain customary representations, warranties, and affirmative and negative covenants of the Company and its subsidiaries that restrict the Company’s and its subsidiaries’ ability to take certain actions, including, incurrence of indebtedness, creation of liens, making certain investments, mergers or consolidations, dispositions of assets, assignments, sales or transfers of equity in subsidiaries, repurchase or redemption of capital stock, entering into certain transactions with affiliates, or changing the nature of the Company’s business. The New Credit Agreement also contains financial covenants, which require the Company to maintain a minimum amount of liquidity and a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00, provided that the fixed charge coverage ratio is only applicable when borrowing availability falls below a certain threshold. The obligations under the New Credit Agreement may be accelerated or the commitments terminated upon the occurrence of events of default under the New Credit Agreement, which include payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control, and other customary events of default.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold or issue financial instruments for trading purposes. We conduct all of our business in U.S. currency and therefore do not have any material direct foreign currency risk. We do have exposure to changes in interest rates with respect to the borrowings under our senior secured credit facility, which bear interest at a variable rate based on SOFR or Prime. For example, if the interest rate on our borrowings increased 100 basis points (1%), our annual interest expense would increase by approximately $0.1 million.

We currently hold our excess cash in an operating account, which is swept into a money market account on an overnight basis, where returns may reflect current interest rates.

As a result, market interest rate changes will impact both our interest expense and interest income. This impact, if applicable, will depend on variables such as the magnitude of interest rate changes and the level of our borrowings under our credit facility or excess cash balances.

ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and the Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable not absolute, assurance of achieving the desired control objectives. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing internal controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management, with the participation of our Chief Executive Officer and our Chief Accounting Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act, and concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2023.

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As described in Item 9A of our Annual Report on the Form 10-K for the year ended December 31, 2022, management identified control deficiencies related to the design and operation of information technology general controls (“ITGCs”) around user access and change management for certain information technology (“IT”) systems which resulted in a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness did not result in any material misstatement of our consolidated financial statements for the periods presented. Subsequent to the identification of the material weakness, we performed supplemental procedures and found no evidence of improper changes or changes with direct or consequential impact on internal controls over financial reporting.

The process of designing and implementing effective internal control measures to improve the Company’s internal controls over financial reporting and to remediate this material weakness is underway. Our efforts include modifying ITGCs over user access and change management, enhancing our documentation to evidence execution of these ITGCs, and implementing additional controls designed to detect issues that could arise over users with elevated access rights. We plan to complete such enhancements in 2023.

We believe that these actions, collectively, will remediate the material weakness. However, the material weakness cannot be considered remediated until the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot provide assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the third quarter of 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various legal proceedings that arise from our normal business operations. These actions generally derived from student loan recovery services we provided historically, and generally assert claims for violations of the Fair Debt Collection Practices Act or similar federal and state consumer credit laws. While litigation is inherently unpredictable, we believe that none of these legal proceedings, individually or collectively, will have a material adverse effect on our financial condition or our results of operations.

ITEM 1A. RISK FACTORS

Our business, financial condition, results of operations and liquidity are subject to various risks and uncertainties, including those described below, and as a result, the trading price of our common stock could decline.

Risks Related to Our Business

We typically face a long period to start up a new contract which may cause us to incur expenses before we receive revenues from new clients or new contract relationships.

If we are successful in obtaining an engagement with a new client or a new contract with an existing client, we typically have a long implementation period in which the services are planned in detail and we integrate our technology, processes and resources with the client’s operations. If we enter into a contract with a new client, we typically will not receive revenues until implementation is completed and work under the contract actually begins, which can be a substantial period of time. Our clients may also experience delays in obtaining approvals or managing protests from unsuccessful bidders, or delays associated with technology or system implementations, such as the delays experienced with the implementation of our RAC contracts with CMS. We incur significant expenses associated with new contracts before we receive corresponding revenues under any such new contract, because we operate under a model in which we generally hire employees to provide services to a new client once a contract is signed and otherwise incur significant upfront implementation expenses. If we are not able to pay the upfront expenses for commencing new contracts out of cash from operations or availability of cash on hand or borrowings under our lending arrangements, we may be required to scale back our operations or alter our business plans to account for cash shortages, either of which could prevent us from earning future revenues under any such new client or contract engagements. Further, if we are not successful in maintaining contractual commitments after the expenses we incur during our typically long implementation cycle, our cash flows and results of operations could be adversely affected.

Revenues generated from a limited number of our largest clients represent a substantial majority of our revenues. Any termination of or deterioration in our relationship with any of our significant clients would result in a decline in our revenues.

We derive a substantial portion of our revenues from a limited number of our largest clients. Substantially all of our contracts (i) entitle our clients to unilaterally terminate their contractual relationship with us at any time without penalty and (ii) are subject to competitive procurement or renewal processes from time to time. Further, substantially all of our contracts allow our clients to unilaterally change the amount of work available to us. If one of our largest clients terminates any of our existing contracts, or chooses not to renew an existing contract in connection with a competitive procurement or renewal process, our revenues and results of operations may be materially harmed. Further, if one of our significant clients decides to limit the amount of claims that we are allowed to audit or if the terms of compensation for our services change or if there is a reduction in the level of placements provided by any of these clients, our revenues could decline, which would harm our business, financial condition and results of operations. Lastly, our revenues could be adversely affected if one of our significant clients is acquired by an entity that does not wish to continue to use our services.

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Many of our contracts with our clients are not exclusive and do not commit our clients to provide specified volumes of business. In addition, the terms of these contracts may be changed unilaterally and on short notice by our clients. As a consequence, there is no assurance that we will be able to maintain our revenues and operating results.

Many of our existing contracts enable our clients to terminate their contractual relationship with us at any time without penalty, potentially leading to loss of business or renegotiation of terms. Further, most of our contracts allow our clients to unilaterally change the amount of work available to us or the payment terms at any given time. In addition, many of our contracts are not exclusive, with our clients retaining multiple service providers with whom we must continue to compete for additional work. Therefore, despite our contractual relationships with our clients, our contracts do not provide assurance that we will generate a minimum amount of revenues or that we will receive a specific volume of work. For example, in March 2020, CMS paused medical review activities under our then current RAC contracts related to the COVID-19 pandemic, which were later resumed in August 2020. Further, the Public Health Emergency declared by U.S. Department of Health and Human Services which recently expired as of May 2023 restricted us from auditing claims which related to COVID-19 or other respiratory designations under our RAC contracts. These pauses in medical review activities under our RAC contracts had a negative impact on our revenues and results of operations. If any of our clients modify terms of service, including the success fees we are able to earn, or any of these clients establish more favorable relationships with our competitors, our future revenues may be adversely affected.

Our ability to derive revenues under our current healthcare contracts will depend in part on the number and types of potentially improper claims that we are allowed to audit or otherwise pursue by our clients, and our results of operations may be harmed if the scope of claims that we are allowed to pursue and be compensated for is limited.

Our revenues under our current healthcare contracts depend in part on the number and types of potentially improper claims that we are allowed to audit or otherwise pursue on behalf of our clients. For example, under CMS’s Medicare recovery audit program, RAC contractors have not been permitted to seek the recovery of an improper claim unless that particular type of claim has been pre-approved by CMS to ensure compliance with applicable Medicare payment policies, as well as national and local coverage determinations. As work under the first RAC contract progressed, CMS placed increasing restrictions on the scope of audits permitted by RAC contractors and these restrictions have not been relaxed under our current RAC contracts. Accordingly, the long-term growth of revenues we derive under our three existing RAC contracts, or any additional contracts we may enter into with CMS, will depend on the scope of improper claims that CMS allows us to pursue and our ability to successfully identify improper claims within the permitted scope.

In addition, our commercial healthcare clients also have the ability to unilaterally restrict or expand the type and volume of claims we are allowed to audit or otherwise provide services. Any future limitations on the type or volume of claims that we are permitted to audit or otherwise review on behalf of our clients in the healthcare market could have a material negative impact on our business, financial condition and results of operations.

Our indebtedness could adversely affect our business and financial condition and reduce the funds available to us for other purposes, and our failure to comply with the covenants contained in our New Credit Agreement could result in an event of default that could adversely affect our results of operations.

Our ability to make scheduled payments under our New Credit Agreement and to fund our other liquidity needs depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control, such as the recent global economic downturn as the result of the COVID-19 pandemic. We cannot make assurances that we will maintain a level of cash flows from operating activities or other capital resources sufficient to permit us to pay the principal and interest on our indebtedness and to fund our other liquidity needs. If our cash flows and capital resources are insufficient to fund our debt service obligations and allow us to maintain compliance with the covenants under our New Credit Agreement or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, alter our business plans, curtail the services we provide to our current or future clients, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot ensure that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including our New Credit Agreement with Wells Fargo Bank, National Association. If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable, and foreclose against the assets securing our borrowings and we could be forced into bankruptcy or liquidation.

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Our New Credit Agreement contains, and any agreements to refinance our debt likely will contain, certain financial and restrictive covenants that limit our ability to incur additional debt, including to finance future operations or other capital needs, and to engage in other activities that we may believe are in our long-term best interests, including to dispose of or acquire assets. Our failure to comply with these covenants may result in an event of default, which, if not cured or waived, could accelerate the maturity of our indebtedness or result in modifications to our credit terms. If our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned.

The U.S. federal government accounts for a significant portion of our revenues, and any loss of business from, or change in our relationship with the U.S. federal government would result in a significant decrease in our revenues and operating results.

We have historically derived and are likely to continue to derive a significant portion of our revenues from the U.S. federal government. We currently hold five contracts with agencies of the U.S. federal government within our healthcare business. The continuation and exercise of renewal options on our U.S. federal government contracts and any new U.S. federal government contracts are, among other things, contingent upon succeeding within competitive bidding processes, changes in federal government spending, the availability of adequate funding for the applicable federal government agency, or other regulatory changes, such as the pause in activities under our RAC contracts in 2020 as a result of the COVID-19 pandemic, could adversely affect our financial performance. The loss of business from the U.S. federal government, or significant policy changes or financial pressures within the agencies of the U.S. federal government that we serve would result in a significant decrease in our revenues, which would adversely affect our business, financial condition and results of operations.

Downturns in domestic or global economic conditions and other macroeconomic factors could harm our business and results of operations.

Various macroeconomic factors influence our business and results of operations. These include overall healthcare spending in the U.S. and the volume of healthcare claims that we audit on behalf of our clients, which are both impacted by domestic and global economic conditions, rates of unemployment and similar factors, movements in interest rates, and changes in healthcare costs, governmental policies toward Medicare expenditures or the healthcare industry taken as a whole. Changes in the overall economy could lead to a reduction in overall recovery rates by our clients, which in turn could adversely affect our business, financial condition and results of operations. For example, our business and the businesses of our customers have been/were materially and adversely affected by recent inflationary trends and the impact of the COVID-19 pandemic which have caused, and may continue to cause, a slowdown in global economic activity, which has resulted in a significant negative impact on our financial condition and results of operations. Political tensions resulting in economic instability, such as due to military activity or civil hostilities among Russia and Ukraine and the related response, including sanctions or other restrictive actions, by the United States and/or other countries, or other similar events, may have an adverse impact on our business, financial condition, and results of operations.

We may not have sufficient cash flows from operations or availability of funds under our lending arrangements to fund our ongoing operations and our other liquidity needs, which could adversely affect our business and financial condition.

Our ability to fund our business plans, capital expenditures and to fund our other liquidity needs depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control and the availability of cash on hand and borrowings under our existing lending facility. We cannot make assurances that we will maintain a level of cash flows from operating activities sufficient to permit us to fund our ongoing and planned business operations and to fund our other liquidity needs. If we are required to obtain borrowings to fund our ongoing or future business operations, there can be no assurance that we will be successful in obtaining such borrowings or upon terms that are acceptable to us. While we believe our financial projections are attainable, there can be no assurances that our financial results will be recognized in a timeframe necessary to meet our ongoing cash requirements. If our cash flows and capital resources are insufficient to fund our planned business operations or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, alter our business plans, curtail the services we provide to our current or future clients, sell assets or operations, seek additional capital or restructure or refinance our indebtedness, any of which could have an adverse effect on our financial condition and results of operations.

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We may not be able to manage our potential growth effectively and our results of operations could be negatively affected.

We believe our RAC contracts, MSP CRC contract, and other commercial healthcare contracts continue to provide the opportunity for growth in our business. However, our focus on growth and the expansion of our healthcare and other businesses may place additional demands on our management, operations and financial resources and will require us to incur additional expenses. We cannot be sure that we will be able to manage our performance under any significant new contracts effectively. In order to successfully perform under any significant new contracts, our expenses will increase to recruit, train and manage additional qualified employees and subcontractors and to expand and enhance our administrative infrastructure and continue to improve our management, financial and information systems and controls. If we cannot manage our growth effectively, our expenses may increase, and our results of operations could be negatively affected.

The growth of our healthcare business will require us to hire and retain employees with specialized skills and failure to do so could harm our ability to grow our business.

The growth of our healthcare business will depend in part on our ability to recruit, train and manage additional qualified employees. Our healthcare-related operations require us to hire registered nurses and experts in Medicare coding. Finding, attracting and retaining employees with these skills is a critical component of providing our healthcare-related recovery and audit services, and our inability to staff these operations appropriately represents a risk to our healthcare service offering and associated revenues. An inability to hire qualified personnel, particularly to serve our healthcare clients, may restrain the growth of our business.

We face significant competition in connection with obtaining, retaining and performing under our client contracts, and an inability to compete effectively in the future could harm our relationships with our clients, which would impact our ability to maintain our revenues and operating results.

We operate in highly competitive markets and face significant competition from other companies in providing our services and sourcing contracts with new clients or new contracts with existing clients. Accordingly, maintaining high levels of service under our contracts, and doing so in a cost-effective manner, are important factors in our ability to maintain existing contracts and obtain new contracts and grow our revenues and net income. Any failure to achieve these objectives could result in the loss of existing contractual relationships either by a client’s decision to terminate existing contractual relationship or in connection with a competitive contract re-bidding process, or the inability to obtain new client contracts, any of which could harm our business, financial condition and results of operations. Some of our current and potential competitors in the markets in which we operate may have greater financial, marketing, technological or other resources than we do. The ability of any of our competitors and potential competitors to adopt new and effective technology to better serve our markets may allow them to gain market strength. Increasing levels of competition in the future could result in lower fees, lower volumes of contracted services or higher costs for resources. Any inability to compete effectively in the markets that we serve could adversely affect our business, financial condition and results of operations.

Public health pandemics such as the novel coronavirus (COVID-19) pandemic have adversely affected and could adversely affect our business, results of operations and financial condition.

Our business and the businesses of our customers are exposed to risks associated with public health pandemics, such as the COVID-19 pandemic that has caused, and may continue to cause, the global slowdown in economic activity. The ultimate impact of any such epidemic or pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited to: governmental and business actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic and actions taken in response on global and regional economies and economic activity; the availability of federal, state or local funding programs; general economic uncertainty and financial market volatility; global economic conditions and levels of economic growth; and the pace of economic recovery when any such pandemic subsides.

As a result of the economic hardships caused by the COVID-19 pandemic, certain of our customers have chosen and may continue to choose to delay the services that we provide, and additional customers may choose to similarly delay the audit and recovery services that we provide, either of which could have a material negative impact on our revenues and results of operations. In addition, the COVID-19 pandemic has also had a negative impact on overall hospital utilization rates in the United States. This negative impact on overall hospital utilization rates has caused delays with the healthcare industry as a whole, which in turn has had a negative impact on our healthcare business. Any additional disruptions to the services that we provide to our customers as a result of the COVID-19 pandemic, or as a result of any future pandemics, could result in a negative impact on our revenues and results of operations.

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Further, a prolonged period of generating lower cash flows from operations as a result of the COVID-19 pandemic could adversely affect our financial condition and the achievement of our strategic objectives. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding, which could adversely affect our business, financial position and results of operations. While we believe our financial projections are attainable, there can be no assurances that our financial results will be recognized in a timeframe necessary to meet our ongoing cash requirements.

Our results of operations may fluctuate on a quarterly or annual basis and cause volatility in the price of our stock.

Our revenues and operating results could vary significantly from period-to-period and may fail to match our past performance because of a variety of factors, some of which are outside of our control. Any of these factors could cause the price of our common stock to fluctuate. Factors that could contribute to the variability of our operating results include, but are not limited to, the following:

• the schedules of government agencies for awarding contracts;

• our ability to maintain contractual commitments after the expenses we incur during our typically long implementation cycle for new customer contracts;

• our ability to successfully identify improper Medicare claims and the number and type of potentially improper claims that CMS authorizes us to pursue under our RAC contracts;

• our ability to continue to generate revenues under our private healthcare contracts;

• the loss or gain of significant clients or changes in the contingency fee rates or other significant terms of our business arrangements with our significant clients;

• technological and operational issues that may affect our clients and regulatory changes in the markets we service; and

• general industry and macroeconomic conditions.

A failure of our operating systems or technology infrastructure, or those of our third-party vendors and subcontractors, could disrupt the operation of our business.

A failure of our operating systems or technology infrastructure, or those of our third-party vendors and subcontractors, could disrupt our operations. Our operating systems and technology infrastructure are susceptible to damage or interruption from various causes, including acts of God and other natural disasters, power losses, computer systems failures, Internet and telecommunications or data network failures, global health crises, operator error, computer viruses, losses of and corruption of data and similar events. The occurrence of any of these events could result in interruptions, delays or cessations in service to our clients, reduce the attractiveness of our recovery services to current or potential clients and adversely impact our financial condition and results of operations. While we have backup systems in many of our operating facilities, an extended outage of utility or network services may harm our ability to operate our business. Further, the situations we plan for and the amount of insurance coverage we maintain for losses as result of failures of our operating systems and infrastructure may not be adequate in any particular case.

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If our security measures are breached or fail and unauthorized access is obtained to our clients’ confidential data, our services may be perceived as insecure, the attractiveness of our services to current or potential clients may be reduced, and we may incur significant liabilities.

Our services involve the storage and transmission of confidential information relating to our clients and their customers, including health, financial, credit, payment and other personal or confidential information. Although our data security procedures are designed to protect against unauthorized access to confidential information, our computer systems, software and networks may be vulnerable to unauthorized access and disclosure of our clients’ confidential information. Further, we may not effectively adapt our security measures to evolving security risks, address the security and privacy concerns of existing or potential clients as they change over time, or be compliant with federal, state, and local laws and regulations with respect to securing confidential information. Unauthorized access to confidential information relating to our clients and their customers could lead to reputational damage which could deter our clients and potential clients from selecting our services, or result in termination of contracts with those clients affected by any such breach, regulatory action, and claims against us.

Our business is increasingly dependent on critical, complex, and interdependent information technology (IT) systems, including internet-based systems, some of which are managed or hosted by third parties, to support business processes as well as internal and external communications. The size and complexity of our IT systems make us potentially vulnerable to IT system breakdowns, malicious intrusion, and computer viruses, which may result in the impairment of our ability to operate our business effectively. In addition, having a significant portion of our employees work remotely due to the COVID-19 pandemic can strain our information technology infrastructure, which may affect our ability to operate effectively, may make us more susceptible to communications disruptions, and expose us to greater cybersecurity risks.

In the event of any unauthorized access to personal or other confidential information, we may be required to expend significant resources to investigate and remediate vulnerabilities in our security procedures, and we may be subject to fines, penalties, litigation costs, and financial losses that are either not insured against or not fully covered through any insurance maintained by us. If one or more of such failures in our security and privacy measures were to occur, our business, financial condition and results of operations could suffer.

If our software vendors or utility and network providers fail to deliver or perform as expected our business operations could be adversely affected.

Our recovery services depend in part on third-party providers, including software vendors and utility and network providers. Our ability to service our clients depends on these third-party providers meeting our expectations and contractual obligations in a timely and effective manner. Our business could be materially and adversely affected, and we might incur significant additional liabilities, if the services provided by these third-party providers do not meet our expectations or if they terminate or refuse to renew their relationships with us on similar contractual terms.

Litigation may result in substantial costs of defense, damages or settlement, any of which could subject us to significant costs and expenses.

We are party to lawsuits in the normal course of business, particularly in connection with our student loan recovery services. For example, we are regularly subject to claims that we have violated the guidelines and procedures that must be followed under federal and state laws in communicating with consumer debtors. We may not ultimately prevail or otherwise be able to satisfactorily resolve any pending or future litigation, which may result in substantial costs of defense, damages or settlement. In the future, we may be required to alter our business practices or pay substantial damages or settlement costs as a result of litigation proceedings, which could adversely affect our business operations and results of operations.

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If we are unable to adequately protect our proprietary technology, our competitive position could be harmed, or we could be required to incur significant costs to enforce our rights.

The success of our business depends in part upon our proprietary technology platform. We rely on a combination of copyright, trademark, and trade secret laws, as well as on confidentiality procedures and non-compete agreements, to establish and protect our proprietary technology rights. The steps we have taken to deter misappropriation of our proprietary technology may be insufficient to protect our proprietary information. In particular, we may not be able to protect our trade secrets, know-how and other proprietary information adequately. Although we use reasonable efforts to protect this proprietary information and technology, our employees, consultants and other parties may unintentionally or willfully disclose our information or technology to competitors. Enforcing a claim that a third party illegally obtained and is using any of our proprietary information or technology is expensive and time consuming, and the outcome is unpredictable. We rely, in part, on nondisclosure, confidentiality and invention assignment agreements with our employees, consultants and other parties to protect our trade secrets, know-how and other intellectual property and proprietary information. These agreements may not be self-executing, or they may be breached, and we may not have adequate remedies for such breach. Moreover, third parties may independently develop similar or equivalent proprietary information or otherwise gain access to our trade secrets, know-how and other proprietary information. Any infringement, misappropriation or other violation of our patents, trademarks, copyrights, trade secrets, or other intellectual property rights could adversely affect any competitive advantage we currently derive or may derive from our proprietary technology platform and we may incur significant costs associated with litigation that may be necessary to enforce our intellectual property rights.

Claims by others that we infringe their intellectual property could force us to incur significant costs or revise the way we conduct our business.

Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. Any party asserting that we infringe, misappropriate or violate their intellectual property rights may force us to defend ourselves, and potentially our clients, against the alleged claim. These claims and any resulting lawsuit, if successful, could be time-consuming and expensive to defend, subject us to significant liability for damages or invalidation of our proprietary rights, prevent us from operating all or a portion of our business or force us to redesign our services or technology platform or cause an interruption or cessation of our business operations, any of which could adversely affect our business and operating results. In addition, any litigation relating to the infringement of intellectual property rights could harm our relationships with current and prospective clients. The risk of such claims and lawsuits could increase if we increase the size and scope of our services in our existing markets or expand into new markets.

Risks Related to Regulations and Legislation

We identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in the future, or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial results, which could result in loss of investor confidence and adversely impact our stock price.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Act and other applicable securities rules and regulations. In particular, we are subject to reporting obligations under Section 404 of the Sarbanes-Oxley Act that require us to include a management report on our internal control over financial reporting in our annual report, which contains management’s assessment of the effectiveness of our internal control over financial reporting, and are further required to adhere to the auditor attestation requirements with respect to the to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act.

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Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, during the fourth quarter of fiscal 2022, management identified a material weakness in the design and operation of internal control related to information technology general controls (ITGCs) in the areas of user access and program change-management over certain information technology (IT) systems that support our financial reporting processes. We have begun the process of designing and implementing measures to improve our internal controls over financial reporting and to remediate this material weakness. While there can be no assurance that our efforts will be successful, we plan to remediate this material weakness during fiscal 2023. Our ability to comply with the annual internal control report requirements will depend on the effectiveness of our financial reporting and data systems and controls across our company. We expect these systems and controls to involve significant expenditures and to may become more complex as our business grows. To effectively manage this complexity, we will need to continue to improve our operational, financial, and management controls, and our reporting systems and procedures. Our inability to successfully remediate our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or any failure to implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations or result in material misstatements in our financial statements, which could limit our liquidity and access to capital markets, adversely affect our business and investor confidence in our financial statements, and adversely impact our stock price.

Future legislative or regulatory changes affecting the markets in which we operate could impair our business and operations.

The markets in which we operate are highly regulated, and any future changes in the regulatory landscape could have a material effect on our business and financial condition. For example, the Medicare program, is a subject of significant legislative and regulatory focus, and we cannot anticipate how future changes in government policy may affect our business and operations. Any future changes in the legislation and regulations that govern these markets, may require us to adapt our business to the new circumstances and we may be unable to do so in a manner that does not adversely affect our business and operations.

We are subject to extensive regulations regarding the use and disclosure of confidential personal information and failure to comply with these regulations could cause us to incur liabilities and expenses.

We are subject to a wide array of federal and state laws and regulations regarding the use and disclosure of confidential personal information and security. For example, the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended, and related state laws subject us to substantial restrictions and requirements with respect to the use and disclosure of the personal health information that we obtain in connection with our contracts with CMS and we must establish administrative, physical and technical safeguards to protect the confidentiality of this information. Similar protections extend to the type of personal financial and other information we acquire from our student loan, state tax and federal receivables clients. We are required to notify affected individuals and government agencies of data security breaches involving protected health and certain personally identifiable information. These laws and regulations also require that we develop, implement and maintain written, comprehensive information security programs containing safeguards that are appropriate to protect personally identifiable information or health information against unauthorized access, misuse, destruction or modification. Federal law generally does not preempt state law in the area of protection of personal information, and as a result we must also comply with state laws and regulations. Regulation of privacy, data use and security require that we incur significant expenses, which could increase in the future as a result of additional regulations, all of which adversely affects our results of operations. Failure to comply with these laws and regulations can result in penalties and in some cases expose us to civil lawsuits.

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Our legacy student loan recovery business is subject to extensive regulation and consumer protection laws and our failure to comply with these regulations and laws may subject us to liability and result in significant costs.

Our student loan recovery business is subject to regulation and oversight by various state and federal agencies, particularly in the area of consumer protection. The Fair Debt Collection Practices Act (FDCPA), and related state laws provide specific guidelines that we must follow in communicating with holders of student loans and regulates the manner in which we can recover defaulted student loans. Some state attorney generals have been active in this area of consumer protection regulation. We are subject, and may be subject in the future, to inquiries and audits from state and federal regulators, as well as frequent litigation from private plaintiffs regarding compliance under the FDCPA and related state regulations. We are also subject to the Fair Credit Reporting Act (FCRA), which regulates consumer credit reporting and may impose liability on us to the extent adverse credit information reported to a credit bureau is false or inaccurate. Our compliance with the FDCPA, FCRA and other federal and state regulations that affect our student loan recovery business may result in significant costs, including litigation costs. We are also subject to regulations promulgated by the United States Consumer Financial Protection Bureau (CFPB), which, among other things, establishes regulations regarding consumer financial protection laws. In addition, the CFPB has investigatory and enforcement authority with respect to whether persons are engaged in unlawful acts or practices in connection with the collection of consumer debts.

Risks Related to our Common Stock

The price of our common stock could be volatile, and you may not be able to sell your shares at or above the public offering price.

Since our initial public offering in August 2012, the price of our common stock, as reported by NASDAQ Global Select Market, has ranged from a low sales price of $0.54 on June 1, 2020 to a high sales price of $14.09 on March 4, 2013. The trading price of our common stock may be significantly affected by various factors, including: quarterly fluctuations in our operating results; the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; changes in investors’ and analysts’ perception of the business risks and conditions of our business; our ability to meet the earnings estimates and other performance expectations of financial analysts or investors; unfavorable commentary or downgrades of our stock by equity research analysts; changes in our capital structure, such as future issuances of debt or equity securities; our success or failure to obtain new contract awards; lawsuits threatened or filed against us; strategic actions by us or our competitors, such as acquisitions or restructurings; new legislation or regulatory actions; changes in our relationship with any of our significant clients; fluctuations in the stock prices of our peer companies or in stock markets in general; and general economic conditions.

Our significant stockholders have the ability to influence significant corporate activities and our significant stockholders' interests may not coincide with yours.

Prescott Group Management, L.L.C., First Light Asset Management, LLC, Parthenon Capital Partners, and Mill Road Capital Management LLC beneficially owned approximately 20.5%, 12.0%, 5.2% and 4.6% of our common stock, respectively, as of September 30, 2023. As a result of their ownership, these significant stockholders have the ability to influence the outcome of matters submitted to a vote of stockholders and, through our board of directors, the ability to influence decision making with respect to our business direction and policies. Mill Road Capital Management LLC currently has a representative sitting on our Board of Directors. These significant stockholders may have interests different from our other stockholders’ interests and may vote in a manner adverse to those interests. Matters over which these significant stockholders can, directly or indirectly, exercise influence include:

• mergers and other business combination transactions, including proposed transactions that would result in our

stockholders receiving a premium price for their shares;

• other acquisitions or dispositions of businesses or assets;

• incurrence of indebtedness and the issuance of equity securities;

• repurchase of stock and payment of dividends; and

• the issuance of shares to management under our equity incentive plans.

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In addition, even though Parthenon Capital Partners does not currently have a representative sitting on our Board of Directors, Parthenon Capital Partners does have a contractual right to designate a number of directors proportionate to its stock ownership if and when Parthenon owns greater than 10% of our common stock. Further, under our amended and restated certificate of incorporation, Parthenon Capital Partners does not have any obligation to present to us, and Parthenon Capital Partners may separately pursue, corporate opportunities of which it becomes aware, even if those opportunities are ones that we would have pursued if granted the opportunity.

General Risks

We may undertake strategic transactions or other corporate restructuring that prove unsuccessful, strain or divert our resources and harm our results of operations and stock price.

We may consider strategic transactions or other corporate restructurings that could include the acquisition of other companies in our industry or in new markets, or the sale or divestiture of, or the wind down of existing portions of our business. We may not be able to successfully complete any such strategic transaction and, if completed, any such acquisition or divestiture may fail to achieve the intended financial results. We may not be able to successfully integrate any acquired businesses with our own and we may be unable to maintain our standards, controls and policies. Further, acquisitions may place additional constraints on our resources by diverting the attention of our management from other business concerns. Moreover, any acquisition may result in a potentially dilutive issuance of equity securities, the incurrence of additional debt, the amortization expenses related to intangible assets, and the potential impairment charges related to intangible assets or goodwill, all of which could adversely affect our results of operations and stock price. Further, despite any projected cost savings related to any proposed divestiture or wind down of any existing portion of our business, any such divestiture or wind down could result in an adverse effect on our revenues and results of operations.

Our business may be harmed if we lose members of our management team or other key employees.

We are highly dependent on members of our management team and other key employees and our future success depends in part on our ability to retain these people. Our inability to continue to attract and retain members of our management team and other key employees could adversely affect our business, financial condition and results of operations.

Anti-takeover provisions contained in our certificate of incorporation and bylaws could impair a takeover attempt that our stockholders may find beneficial.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include the following provisions: establishing a classified board of directors so that not all members of our board are elected at one time; providing that directors may be removed by stockholders only for cause; authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting; limiting our ability to engage in certain business combinations with any “interested stockholder,” other than Parthenon Capital Partners, for a three-year period following the time that the stockholder became an interested stockholder; requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; requiring a super majority vote for certain amendments to our amended and restated certificate of incorporation and amended and restated bylaws; and limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board, to our board of directors then in office. These provisions, alone or together, could have the effect of delaying or deterring a change in control, could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

(c)

During the three months ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of our Company adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities, whether or not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

Table of Contents

ITEM 6. EXHIBITS

(A) Exhibits:


Exhibit No.			Description

31.1			Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31.2			Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32.1(1)			Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2(1)			Certification of the Principal Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS(2)			XBRL Instance Document

101.SCH(2)			XBRL Taxonomy Extension Scheme

101.CAL(2)			XBRL Taxonomy Extension Calculation Linkbase

101.DEF(2)			XBRL Taxonomy Extension Definition Linkbase Document

101.LAB(2)			XBRL Taxonomy Extension Label Linkbase

101.PRE(2)			XBRL Taxonomy Extension Presentation Linkbase

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(1)The material contained in Exhibit 32.1 and Exhibit 32.2 is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

(2)In accordance with Rule 406T of Regulation S-T, the information furnished in these exhibits will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such exhibits will not be deemed to be incorporated by reference into any filing under the Securities Act or Exchange Act.

Table of Contents

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PERFORMANT FINANCIAL CORPORATION

Date:

November 9, 2023

By:

/s/ Simeon M. Kohl

Simeon M. Kohl

Chief Executive Officer (Principal Executive Officer)

By:

/s/ Rohit Ramchandani

Rohit Ramchandani

Chief Financial Officer

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Simeon M. Kohl, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Performant Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023


/s/ Simeon M. Kohl
Simeon M. Kohl
Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Rohit Ramchandani, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Performant Financial Corporation;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023


/s/ Rohit Ramchandani
Rohit Ramchandani
Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Simeon M. Kohl, Chief Executive Officer of Performant Financial Corporation, do hereby certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Performant Financial Corporation on Form 10-Q for the quarter ended September 30, 2023 to which this certification is attached fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Performant Financial Corporation.

Date: November 9, 2023


By:			/s/ Simeon M. Kohl
			Simeon M. Kohl
			Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Rohit Ramchandani, Chief Financial Officer (Principal Financial Officer) of Performant Financial Corporation, do hereby certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Performant Financial Corporation on Form 10-Q for the quarter ended September 30, 2023 to which this certification is attached fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Performant Financial Corporation.

Date: November 9, 2023


By:			/s/ Rohit Ramchandani
			Rohit Ramchandani
			Chief Financial Officer (Principal Financial Officer)

Cover Page - shares	9 Months Ended
Cover Page - shares	Sep. 30, 2023	Nov. 08, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	001-35628
Entity Registrant Name	PERFORMANT FINANCIAL CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-0484934
Entity Address, Address Line One	900 South Pine Island Road,
Entity Address, Address Line Two	Suite 150
Entity Address, City or Town	Plantation
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33324
City Area Code	(925)
Local Phone Number	960-4800
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Title of 12(b) Security	Common Stock, par value $.0001 per share
Trading Symbol	PFMT
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding (in shares)		76,874,970
Entity Central Index Key	0001550695
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 17,308	$ 23,384
Restricted cash	81	81
Trade accounts receivable	14,129	15,794
Contract assets	6,850	11,460
Prepaid expenses and other current assets	3,104	3,665
Income tax receivable	516	3,123
Total current assets	41,988	57,507
Property, equipment, and leasehold improvements, net	9,790	10,897
Goodwill	47,372	47,372
Right-of-use assets	646	2,057
Other assets	914	1,000
Total assets	100,710	118,833
Current liabilities:
Current maturities of notes payable, net of unamortized debt issuance costs of $78 and $17, respectively	1,672	983
Accrued salaries and benefits	5,643	6,938
Accounts payable	872	1,262
Other current liabilities	2,147	2,252
Contract liabilities	500	438
Estimated liability for appeals and disputes	906	1,106
Lease liabilities	333	1,228
Total current liabilities	12,073	14,207
Notes payable, net of current portion and unamortized debt issuance costs of $423 and $316, respectively	9,077	18,184
Lease liabilities	326	1,076
Other liabilities	903	881
Total liabilities	22,379	34,348
Commitments and contingencies (note 3 and note 4)
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2023 and December 31, 2022 respectively; issued and outstanding 76,875 and 75,505 shares at September 30, 2023 and December 31, 2022, respectively	8	7
Additional paid-in capital	144,880	142,261
Accumulated deficit	(66,557)	(57,783)
Total stockholders’ equity	78,331	84,485
Total liabilities and stockholders’ equity	$ 100,710	$ 118,833

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Debt issuance costs, current portion	$ 78	$ 17
Debt issuance costs, net of current portion	$ 423	$ 316
Common stock, par or stated value per share (in usd per share)	$ 0.0001	$ 0.0001
Common stock, authorized shares (in shares)	500,000	500,000
Common stock, issued shares (in shares)	76,875	76,875
Common stock, outstanding shares (in shares)	75,505	75,505

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Revenues	$ 29,962	$ 27,178	$ 81,176	$ 79,942
Operating expenses:
Salaries and benefits	22,980	21,759	67,139	63,101
Other operating expenses	7,632	7,733	22,077	23,945
Total operating expenses	30,612	29,492	89,216	87,046
Loss from operations	(650)	(2,314)	(8,040)	(7,104)
Gain on sale of certain recovery contracts	0	0	3	382
Gain on sale of land and buildings	0	1,120	0	1,120
Interest expense	(423)	(277)	(1,188)	(648)
Interest income	86	0	86	0
Loss before provision for income taxes	(987)	(1,471)	(9,139)	(6,250)
Provision for (benefit from) income taxes	(407)	(11)	(365)	52
Net loss	$ (580)	$ (1,460)	$ (8,774)	$ (6,302)
Net loss per share
Basic (in usd per share)	$ (0.01)	$ (0.02)	$ (0.12)	$ (0.09)
Diluted (in usd per share)	$ (0.01)	$ (0.02)	$ (0.12)	$ (0.09)
Weighted average shares
Basic (in shares)	76,454	74,021	75,907	72,480
Diluted (in shares)	76,454	74,021	75,907	72,480

Consolidated Statement of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2021		69,281
Beginning balance at Dec. 31, 2021	$ 82,423	$ 7	$ 133,662	$ (51,246)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares)		1,068
Common stock issued under stock plans, net of shares withheld for employee taxes	0
Stock-based compensation expense	2,212		2,212
Proceeds from exercise of stock options	$ 5,563		5,563
Proceeds from exercise of stock options (in shares)	3,863
Net loss	$ (6,302)			(6,302)
Ending balance (in shares) at Sep. 30, 2022		74,212
Ending balance at Sep. 30, 2022	83,896	$ 7	141,437	(57,548)
Beginning balance (in shares) at Jun. 30, 2022		73,818
Beginning balance at Jun. 30, 2022	84,425	$ 7	140,506	(56,088)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares)		394
Common stock issued under stock plans, net of shares withheld for employee taxes	0
Stock-based compensation expense	931		931
Net loss	(1,460)			(1,460)
Ending balance (in shares) at Sep. 30, 2022		74,212
Ending balance at Sep. 30, 2022	$ 83,896	$ 7	141,437	(57,548)
Beginning balance (in shares) at Dec. 31, 2022	75,505	75,505
Beginning balance at Dec. 31, 2022	$ 84,485	$ 7	142,261	(57,783)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares)		1,370
Common stock issued under stock plans, net of shares withheld for employee taxes	(195)	$ 1	(196)
Stock-based compensation expense	2,815		2,815
Proceeds from exercise of stock options	0
Net loss	$ (8,774)			(8,774)
Ending balance (in shares) at Sep. 30, 2023	75,505	76,875
Ending balance at Sep. 30, 2023	$ 78,331	$ 8	144,880	(66,557)
Beginning balance (in shares) at Jun. 30, 2023		76,088
Beginning balance at Jun. 30, 2023	77,920	$ 7	143,890	(65,977)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued under stock plans, net of shares withheld for employee taxes (in shares)		787
Common stock issued under stock plans, net of shares withheld for employee taxes	(138)	$ 1	(139)
Stock-based compensation expense	1,129		1,129
Net loss	$ (580)			(580)
Ending balance (in shares) at Sep. 30, 2023	75,505	76,875
Ending balance at Sep. 30, 2023	$ 78,331	$ 8	$ 144,880	$ (66,557)

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows from operating activities:
Net loss	$ (8,774)	$ (6,302)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on disposal of assets and impairment of long-lived assets	258	40
Depreciation and amortization	3,805	3,355
Right-of-use assets amortization	1,411	841
Stock-based compensation	2,815	2,212
Interest expense from debt issuance costs	256	71
Gain on sale of certain recovery contracts	(3)	(382)
Gain on sale of land and buildings	0	(1,120)
Changes in operating assets and liabilities:
Trade accounts receivable	1,665	4,958
Contract assets	4,610	(1,622)
Prepaid expenses and other current assets	561	682
Income tax receivable	2,607	(52)
Other assets	86	(7)
Accrued salaries and benefits	(1,295)	(1,944)
Accounts payable	(390)	(339)
Contract liabilities and other current liabilities	(43)	(1,515)
Estimated liability for appeals, disputes, and refunds	(200)	(42)
Lease liabilities	(1,645)	(997)
Other liabilities	23	(19)
Net cash provided by (used in) operating activities	5,747	(2,182)
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements	(2,956)	(2,198)
Proceeds from sale of certain recovery contracts	3	382
Proceeds from sales of property, equipment, and leasehold improvements	0	4,934
Net cash (used in) provided by investing activities	(2,953)	3,118
Cash flows from financing activities:
Repayment of notes payable	(8,250)	(375)
Debt issuance costs paid	(424)	(2)
Taxes paid related to net share settlement of stock awards	(196)	0
Proceeds from exercise of warrants	0	5,563
Net cash (used in) provided by financing activities	(8,870)	5,186
Net (decrease) increase in cash, cash equivalents and restricted cash	(6,076)	6,122
Cash, cash equivalents and restricted cash at beginning of period	23,465	19,550
Cash, cash equivalents and restricted cash at end of period	17,389	25,672
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	17,308	25,591
Restricted cash	81	81
Total cash, cash equivalents and restricted cash at end of period	17,389	25,672
Supplemental disclosures of cash flow information:
Cash (received) paid for income taxes	(2,904)	267
Cash paid for interest	$ 1,084	$ 449

Organization and Description of Business

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Organization and Description of Business

(a) Basis of Presentation and Organization

The Company is managed and operated as one business, with a single management team that reports to the Chief Executive Officer.

(b) Revenues, Accounts Receivable, Contract Assets, Contract Liabilities, Estimated Liability for Appeals and Disputes

The Company determines revenue recognition through the following steps:

•Identification of the contract with a customer.

•Identification of the performance obligations in the contract.

•Determination of the transaction price.

•Allocation of the transaction price to the performance obligations in the contract.

•Recognition of revenue when, or as, the performance obligations are satisfied.

For contracts that contain a refund right, the Company estimates its refund liability for each claim, as needed, and recognizes revenue net of such estimate.

For eligibility-based or COB contracts, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to its clients.

For customer care / outsourced services clients, the Company recognizes revenues based on the volume of processed transactions or the quantity of labor hours provided.

The following table presents revenue disaggregated by category (in thousands) for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Eligibility-based	$	18,165	$	13,142	$	44,776	$	39,773
Claims-based	10,325		10,377		30,535		28,866
Healthcare Total	28,490		23,519		75,311		68,639
Recovery	—		41		33		166
Customer Care / Outsourced Services	1,472		3,618		5,832		11,137
Total Revenues	$	29,962	$	27,178	$	81,176	$	79,942

Contract liabilities totaled $0.5 million and $0.4 million as of September 30, 2023 and December 31, 2022, respectively.

(d) Impairment of Goodwill and Long-Lived Assets

(e) Other Current Liabilities

(f) New Accounting Pronouncements

Property, Equipment, and Leasehold Improvements

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Property, Equipment, and Leasehold Improvements

Property, equipment, and leasehold improvements consist of the following at September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023		December 31, 2022

Building and leasehold improvements	$	3,703	$	3,785
Furniture and equipment	3,091		3,094
Computer hardware and software	77,604		76,906
	84,398		83,785
Less accumulated depreciation and amortization	(74,608)		(72,888)
Property, equipment and leasehold improvements, net	$	9,790	$	10,897

Notes Payable

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Notes Payable

On October 27, 2023, the Company entered into a new credit agreement (the "New Credit Agreement" as defined below in Note 8).

based on the Company’s leverage ratio, however, the revolving commitment was terminated in connection with the First Amendment described above.

Other than the terms relating to the First Amendment as set forth above, the terms of the original MUFG Credit Agreement remained in full force and effect as of September 30, 2023.

As a result of the New Credit Agreement, the terms of the MUFG Credit Agreement are no longer in effect as of October 27, 2023. Refer to Subsequent Events in Note 8 for details.

Outstanding debt obligations were as follows (in thousands):


	September 30, 2023		December 31, 2022
Principal amount	$	11,250	$	19,500
Less unamortized discount and issuance costs	(501)		(333)
Notes payable, net of unamortized discount and issuance costs	10,749		19,167
Less current maturities, net of unamortized discount and issuance costs	(1,672)		(983)
Long-term notes payable, net of current maturities and unamortized discount and issuance costs	$	9,077	$	18,184

The following is a schedule, by years, of maturities of notes payable as of September 30, 2023 (in thousands):


Year Ending December 31,	Amount
Remainder of 2023	$	250
2024	11,000



Total notes payable	$	11,250

Leases

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Leases

Supplemental other information related to operating leases were as follows:


	September 30, 2023	December 31, 2022
Weighted Average Remaining Lease Term (in years)	2.7	2.2
Weighted Average Discount Rate	5.3%	6.2%

Supplemental cash flow information related to operating leases were as follows:

September 30,
2023

September 30,
2022

Cash paid for amounts included in the measurement of operating lease liabilities

$0.2 million

$0.5 million

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2023 (in thousands):


Year Ending December 31,	Amount
Remainder of 2023	$	189
2024	$	212
2025	$	139
2026	$	61
2027	$	60
2028	$	52
Total undiscounted cash flows	$	713
Less imputed interest	$	(54)
Present value of lease liabilities	$	659

Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

(a) Stock Options

The following table sets forth a summary of the Company's stock option activity for the nine months ended September 30, 2023:


	Outstanding Options	Weighted average exercise price per share		Weighted average remaining contractual life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022	250,000	$	10.31	0.90	$	20
Granted	—	—			—
Forfeited	(178,000)	12.16			—
Exercised	—	—			—
Outstanding at September 30, 2023	72,000	$	5.74	2.80	$	5
Vested, exercisable, expected to vest(1) at September 30, 2023	72,000	$	5.74	2.80	$	5
Exercisable at September 30, 2023	72,000	$	5.74	2.80	$	5

(1) Options expected to vest reflect an estimated forfeiture rate.

(b) Restricted Stock Units and Performance Stock Units

The following table summarizes restricted stock unit and performance stock unit activity for the nine months ended September 30, 2023:


	Number of Awards	Weighted average grant date fair value per share
Outstanding at December 31, 2022	3,904,606	$	2.85
Granted	2,235,207	2.49
Forfeited	(136,806)	3.37
Vested and converted to shares, net of units withheld for taxes	(1,369,862)	2.46
Units withheld for taxes	(82,991)	2.26
Outstanding at September 30, 2023	4,550,154	$	2.78
Expected to vest at September 30, 2023	4,004,172	$	2.78

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The Company's effective income tax rate was 4% for the nine months ended September 30, 2023 and (1)% for the nine months ended September 30, 2022. The primary driver of the effective income tax rate as of September 30, 2023 is the benefits realized related to the recognition of previously unrecognized tax benefits as a result of an audit closing, receipt of interest on tax refunds during the quarter, and overall losses from operations for the nine months ended September 30, 2023, for which no benefit is recognized due to valuation allowance. The primary driver of the effective income tax rate as of September 30, 2022 was the overall losses from operations for the nine months ended September 30, 2022, for which no benefit is recognized due to valuation allowance. The Company files income tax returns with the U.S. federal government and various state jurisdictions. The Company operates in a number of state and local jurisdictions, most of which have never audited our records. Accordingly, the Company is subject to state and local income tax examinations based upon the various statutes of limitations in each jurisdiction. For tax years before 2018, the Company has been subject to examination and assessment to the extent of net operating losses carryback refunds requested. The federal examination by the Internal Revenue Service for the 2018 tax year concluded in July of 2023. As of September 30, 2023, the Company no longer has any ongoing audits.

Net Income (Loss) per Share

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Net Income (Loss) per Share

Net Income (Loss) per ShareFor the three and nine months ended September 30, 2023 and 2022, basic net income (loss) per share is calculated by dividing net income (loss) by the sum of the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of common stock and dilutive common share equivalents outstanding during the period. Common share equivalents consist of stock options, restricted stock units, performance stock units, and warrants. When there is a loss in the period, dilutive common share equivalents are excluded from the calculation of diluted earnings per share, as their effect would be anti-dilutive. For example, for the nine months ended September 30, 2023 and 2022, respectively, diluted weighted average shares outstanding are the same as basic average shares outstanding. When there is net income in the period, the Company excludes stock options, restricted stock units, performance stock units, and warrants from the calculation of diluted earnings per share when their combined exercise price and unamortized fair value exceeds the average market price of the Company's common stock because their effect would be anti-dilutive.

The following table reconciles the basic to diluted weighted average shares outstanding using the treasury stock method (shares in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average shares outstanding – basic	76,454	74,021	75,907	72,480
Dilutive effect of stock options	—	—	—	—
Weighted average shares outstanding – diluted	76,454	74,021	75,907	72,480


	September 30, 2023	September 30, 2022
Options to purchase common stock	72	250
RSUs	4,550	4,024
Warrants outstanding	—	2,447
Total	4,622	6,721

Subsequent Events	9 Months Ended
Subsequent Events	Sep. 30, 2023
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events The Company has evaluated subsequent events through the date these consolidated financial statements are filed with the Securities and Exchange Commission and identified the following event, which did not require adjustments to the consolidated financial statements. On October 27, 2023 (the “Closing Date”), the Company entered into a new credit agreement with Wells Fargo Bank, National Association (the “New Credit Agreement”). The New Credit Agreement includes a $25 million revolving loan commitment, subject to borrowing base limitations based on a percentage of applicable eligible receivables and contract assets, of which $5.0 million was advanced on the Closing Date. A portion of the revolving loan commitment of up to $2.5 million is available for the issuance of letters of credit. Subject to certain customary exceptions, the Company’s existing and future, direct or indirect, domestic subsidiaries will be jointly and severally obligated as borrowers or guarantors for the obligations under the New Credit Agreement. The obligations of the Company under the New Credit Agreement are secured by liens on substantially all of the assets of the Company and each of its existing subsidiaries (and subject to customary exceptions, will be secured by the assets of future subsidiaries). The New Credit Agreement matures on October 27, 2026. A portion of the proceeds from the initial borrowing under the New Credit Agreement were used by the Company, together with cash on hand, to refinance its MUFG Credit Agreement (Note 3), and to pay fees and expenses in connection with the New Credit Agreement. The Company may, at its option, prepay borrowings under the New Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances). Borrowings under the New Credit Agreement are also subject to mandatory prepayment in the event that outstanding borrowings and letter of credit usage exceed the lesser of the aggregate revolving loan commitments and the borrowing base then in effect. The Company may also increase commitments under the New Credit Agreement in an aggregate principal amount of up to $10 million by obtaining additional commitments from lenders, subject to obtaining commitments from any participating lenders and certain other conditions. Under the New Credit Agreement, loans generally may bear interest based on term SOFR (the secured overnight financing right) or an annual base rate, as applicable, plus, in each case, an applicable margin based on the Company’s average borrowing availability each quarter under the New Credit Agreement that may range between 2.50% per annum and 3.00% per annum, in the case of term SOFR loans and between 1.50% per annum and 2.00% per annum in the case of base rate loans. In addition, a commitment fee of 0.50% per annum based on unused availability of the credit facility is also payable. The New Credit Agreement contains certain customary representations, warranties, and affirmative and negative covenants of the Company and its subsidiaries that restrict the Company’s and its subsidiaries’ ability to take certain actions, including, incurrence of indebtedness, creation of liens, making certain investments, mergers or consolidations, dispositions of assets, assignments, sales or transfers of equity in subsidiaries, repurchase or redemption of capital stock, entering into certain transactions with affiliates, or changing the nature of the Company’s business. The New Credit Agreement also contains financial covenants, which require the Company to maintain a minimum amount of liquidity and a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00, provided that the fixed charge coverage ratio is only applicable when borrowing availability falls below a certain threshold. The obligations under the New Credit Agreement may be accelerated or the commitments terminated upon the occurrence of events of default under the New Credit Agreement, which include payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control, and other customary events of default.On the Closing Date, the Company terminated the MUFG Credit Agreement. As a result, all outstanding obligations of the Company under the MUFG Credit Agreement have been paid.

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Pay vs Performance Disclosure
Net loss	$ (580)	$ (1,460)	$ (8,774)	$ (6,302)

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2023
Trading Arrangements, by Individual
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false
Simeon Kohl [Member]
Trading Arrangements, by Individual
Arrangement Duration	731 days
Rohit Ramchandani [Member]
Trading Arrangements, by Individual
Arrangement Duration	731 days
Ian Johnston [Member]
Trading Arrangements, by Individual
Arrangement Duration	731 days

Organization and Description of Business (Policies)	9 Months Ended
Organization and Description of Business (Policies)	Sep. 30, 2023
Accounting Policies [Abstract]
Basis of Presentation and Organization	Basis of Presentation and Organization The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim unaudited consolidated financial statements furnished herein include all adjustments necessary (consisting only of normal recurring adjustments) for a fair presentation of our financial position at September 30, 2023, and December 31, 2022, the results of our operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. Interim financial statements are prepared on a basis consistent with our annual consolidated financial statements. The interim financial statements included herein should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2022. Performant Financial Corporation (the "Company", "we", or "our") is a leading provider of technology-enabled audit, recovery and analytics services in the United States with a focus in the healthcare payment integrity services industry. The Company works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits or COB) services to identify improper payments. The Company engages clients in both government and commercial markets. Clients of the Company typically operate in complex and highly regulated environments and contract for their payment integrity needs in order to reduce losses on improper healthcare payments. The Company also has a call center which serves clients with multifaceted consumer engagement needs. The Company historically worked in recovery markets such as defaulted student loans, tax receivables, and commercial recovery. The Company’s consolidated financial statements include the operations of Performant Financial Corporation (Performant), its wholly-owned subsidiary Performant Business Services, Inc. (PBS), and PBS's wholly-owned subsidiaries Performant Recovery, Inc. (PRI), dba Performant Healthcare Solutions, and Performant Technologies, LLC (PTL). Performant is a Delaware corporation headquartered in California and was formed in 2003. PBS is a Nevada corporation founded in 1997. PRI is a California corporation founded in 1976. PTL is a California limited liability company that was formed in 2004. All intercompany balances and transactions have been eliminated in consolidation. The Company is managed and operated as one business, with a single management team that reports to the Chief Executive Officer. The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, primarily accounts receivable, contract assets, goodwill, right-of-use assets, estimated liability for appeals and disputes, lease liabilities, other liabilities, provision for income taxes, and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues. Actual amounts may differ from amounts presently estimated.
Revenues, Accounts Receivable, Contract Assets, Contract Liabilities, Estimated Liability for Appeals and Disputes	Revenues, Accounts Receivable, Contract Assets, Contract Liabilities, Estimated Liability for Appeals and Disputes The Company generally derives its revenues primarily from providing audit, recovery, and analytics services. Revenues are recognized upon completion of these services for its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: •Identification of the contract with a customer. •Identification of the performance obligations in the contract. •Determination of the transaction price. •Allocation of the transaction price to the performance obligations in the contract. •Recognition of revenue when, or as, the performance obligations are satisfied. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company’s contracts generally contain a single performance obligation, delivered over time as a series of services that are substantially the same and have the same pattern of transfer to the client, as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company’s contracts are composed primarily of variable consideration. Fees earned under the Company’s audit and recovery service contracts consist primarily of contingency fees based on a specified percentage of the amount the Company enables its clients to recover. The contingency fee percentage for a particular recovery depends on the type of recovery or claim facilitated. The Company generally either applies the as-invoiced practical expedient where its right to consideration corresponds directly to its right to invoice its clients, or the variable consideration allocation exception where the variable consideration is attributable to one or more, but not all, of the services promised in a series of distinct services that form part of a single performance obligation. As such the Company has elected the optional exemptions related to the as-invoiced practical expedient and the variable consideration allocation exception whereby the disclosure of the amount of transaction price allocated to the remaining performance obligations is not required. The Company estimates variable consideration only if it can reasonably measure the progress toward complete satisfaction of the performance obligation using an output method based on reliable information, and recognizes such revenue over the performance period only if it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Any change made to the measure of progress toward complete satisfaction of our performance obligation is recorded as a change in estimate. The Company exercises judgment to estimate the amount of constraint on variable consideration based on the facts and circumstances of the relevant contract operations and availability and reliability of data. The Company reviews the constraint on variable consideration quarterly. While the Company believes the estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the amount of variable consideration recognized. For contracts that contain a refund right, the Company estimates its refund liability for each claim, as needed, and recognizes revenue net of such estimate. Under certain contracts, consideration can include periodic performance-based bonuses which can be awarded based on the Company’s performance under the specific contract. These performance-based bonuses are considered variable and may be constrained by the Company until there is not a risk of a significant reversal. The Company has applied the as-invoiced practical expedient or the variable consideration allocation exception to contracts with performance obligations that have an average remaining duration of less than a year. For healthcare claims audit contracts, the Company may recognize revenue upon delivering its findings from claims audits, when sufficient reliable information is available for estimating the variable consideration earned based on an output metric that reasonably measures the Company's satisfaction of its performance obligation. For eligibility-based or COB contracts, the Company recognizes revenue when insurance companies or other responsible parties have remitted payments to its clients. For customer care / outsourced services clients, the Company recognizes revenues based on the volume of processed transactions or the quantity of labor hours provided. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in cash used in operating activities in the consolidated statements of cash flows. The Company determines the allowance for doubtful accounts by specific identification. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $0 as of September 30, 2023 and December 31, 2022. Contract assets were $6.9 million and $11.5 million as of September 30, 2023 and December 31, 2022, respectively. Contract assets relate to the Company’s rights to consideration for services completed but not invoiced at the reporting date, and receipt of payment is conditional upon factors other than the passage of time. Contract assets primarily consist of commissions the Company estimates it has earned from claims audit findings submitted to healthcare clients. Changes in contract assets result from additional consideration earned for services provided, offset by amounts invoiced during the period. Contract assets are recorded to accounts receivable when the Company's right to payment becomes unconditional, which is generally when healthcare providers have paid our clients. There was no impairment loss related to contract assets for the three and nine months ended September 30, 2023 and 2022. Contract liabilities totaled $0.5 million and $0.4 million as of September 30, 2023 and December 31, 2022, respectively. Healthcare providers of our clients have the right to appeal claims audit findings and may pursue additional appeals if the initial appeal is found in favor of healthcare clients. For COB contracts, insurance companies or other responsible parties may dispute the Company’s findings regarding our clients not being the primary payer of healthcare claims. Total estimated liability for appeals and disputes was $0.9 million as of September 30, 2023 and $1.1 million as of December 31, 2022. This represents the Company’s best estimate of the amount probable of being refunded to the Company’s healthcare clients.
Impairment of Goodwill and Long-Lived Assets	Goodwill is reviewed for impairment at least annually in December or as certain events or conditions arise during the year. The Company may first assess qualitative factors for indicators of impairment to determine whether it is necessary to perform the quantitative goodwill impairment test. Based on management’s assessment, there were no indicators of impairment and therefore there was no goodwill impairment during the three and nine months ended September 30, 2023.If a quantitative assessment of goodwill is required, goodwill is considered impaired when the carrying value of the Company, as one reporting unit, exceeds its fair value. The amount of impairment loss is measured as the difference between the carrying value and the fair value of the reporting unit. Impairment testing is based upon the best information available and estimates of fair value which incorporate assumptions marketplace participants would use in making their estimates of fair value. Significant assumptions and estimates are required, including, but not limited to, our market capitalization, projecting future cash flows and other assumptions, to estimate the fair value of the reporting unit.Long-lived assets and intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment during the three and nine months ended September 30, 2023.
New Accounting Pronouncements	New Accounting PronouncementsIn February 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” This ASU provides updated guidance on how an entity should measure credit losses on financial instruments, including trade receivables, held at the reporting date. The amendments make each Topic easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. It also addresses transition and open effective date information for Topic 842. ASU 2016-13, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 (collectively, “ASC 326”) are effective for public entities for fiscal years beginning after December 15, 2019, except for Smaller Reporting Companies. This ASU is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company's adoption of this ASU had no impact on our financial position, results of operations, or cash flows.

Organization and Description of Business (Tables)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Schedule of Disaggregated Revenue by Category

The following table presents revenue disaggregated by category (in thousands) for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Eligibility-based	$	18,165	$	13,142	$	44,776	$	39,773
Claims-based	10,325		10,377		30,535		28,866
Healthcare Total	28,490		23,519		75,311		68,639
Recovery	—		41		33		166
Customer Care / Outsourced Services	1,472		3,618		5,832		11,137
Total Revenues	$	29,962	$	27,178	$	81,176	$	79,942

Property, Equipment, and Leasehold Improvements (Tables)

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property, Equipment, and Leasehold Improvements

Property, equipment, and leasehold improvements consist of the following at September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023		December 31, 2022

Building and leasehold improvements	$	3,703	$	3,785
Furniture and equipment	3,091		3,094
Computer hardware and software	77,604		76,906
	84,398		83,785
Less accumulated depreciation and amortization	(74,608)		(72,888)
Property, equipment and leasehold improvements, net	$	9,790	$	10,897

Notes Payable (Tables)

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Schedule of Outstanding Debt

Outstanding debt obligations were as follows (in thousands):


	September 30, 2023		December 31, 2022
Principal amount	$	11,250	$	19,500
Less unamortized discount and issuance costs	(501)		(333)
Notes payable, net of unamortized discount and issuance costs	10,749		19,167
Less current maturities, net of unamortized discount and issuance costs	(1,672)		(983)
Long-term notes payable, net of current maturities and unamortized discount and issuance costs	$	9,077	$	18,184

Schedule of Maturities of Long-term Debt

The following is a schedule, by years, of maturities of notes payable as of September 30, 2023 (in thousands):


Year Ending December 31,	Amount
Remainder of 2023	$	250
2024	11,000



Total notes payable	$	11,250

Leases (Tables)

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Schedule of Lease Cost

Supplemental other information related to operating leases were as follows:


	September 30, 2023	December 31, 2022
Weighted Average Remaining Lease Term (in years)	2.7	2.2
Weighted Average Discount Rate	5.3%	6.2%

Supplemental cash flow information related to operating leases were as follows:

September 30,
2023

September 30,
2022

Cash paid for amounts included in the measurement of operating lease liabilities

$0.2 million

$0.5 million

Schedule of Maturities of Lease Liabilities

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2023 (in thousands):


Year Ending December 31,	Amount
Remainder of 2023	$	189
2024	$	212
2025	$	139
2026	$	61
2027	$	60
2028	$	52
Total undiscounted cash flows	$	713
Less imputed interest	$	(54)
Present value of lease liabilities	$	659

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Stock Option Activity

The following table sets forth a summary of the Company's stock option activity for the nine months ended September 30, 2023:


	Outstanding Options	Weighted average exercise price per share		Weighted average remaining contractual life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022	250,000	$	10.31	0.90	$	20
Granted	—	—			—
Forfeited	(178,000)	12.16			—
Exercised	—	—			—
Outstanding at September 30, 2023	72,000	$	5.74	2.80	$	5
Vested, exercisable, expected to vest(1) at September 30, 2023	72,000	$	5.74	2.80	$	5
Exercisable at September 30, 2023	72,000	$	5.74	2.80	$	5

(1) Options expected to vest reflect an estimated forfeiture rate.

Schedule of Restricted Stock Activity

The following table summarizes restricted stock unit and performance stock unit activity for the nine months ended September 30, 2023:


	Number of Awards	Weighted average grant date fair value per share
Outstanding at December 31, 2022	3,904,606	$	2.85
Granted	2,235,207	2.49
Forfeited	(136,806)	3.37
Vested and converted to shares, net of units withheld for taxes	(1,369,862)	2.46
Units withheld for taxes	(82,991)	2.26
Outstanding at September 30, 2023	4,550,154	$	2.78
Expected to vest at September 30, 2023	4,004,172	$	2.78

Net Income (Loss) per Share (Tables)

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Schedule of Reconciliation of Basic to Diluted Weighted Average Shares

The following table reconciles the basic to diluted weighted average shares outstanding using the treasury stock method (shares in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average shares outstanding – basic	76,454	74,021	75,907	72,480
Dilutive effect of stock options	—	—	—	—
Weighted average shares outstanding – diluted	76,454	74,021	75,907	72,480

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (shares in thousands):


	September 30, 2023	September 30, 2022
Options to purchase common stock	72	250
RSUs	4,550	4,024
Warrants outstanding	—	2,447
Total	4,622	6,721

Organization and Description of Business - Narrative (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2023 USD ($) segment reporting_unit	Dec. 31, 2022 USD ($)
Accounting Policies [Abstract]
Number of operating segments \| segment		1
Allowance for doubtful accounts	$ 0	$ 0	$ 0
Contract assets	6,850,000	6,850,000	11,460,000
Contract liabilities	500,000	500,000	438,000
Estimated liability for appeals	906,000	906,000	1,106,000
Prepaid expenses and other current assets	3,104,000	3,104,000	3,665,000
Prepaid expenses and other current assets, prepaid software licenses and maintenance agreement	2,300,000	2,300,000	1,500,000
Prepaid expenses and other current assets, prepaid insurance	100,000	100,000	1,800,000
Prepaid expenses and other current assets, various other prepaid expenses	700,000	700,000	400,000
Goodwill	47,372,000	47,372,000	47,372,000
Goodwill, accumulated impairment loss	34,200,000	$ 34,200,000	34,200,000
Number of reporting units \| reporting_unit		1
Non-cash impairment charge	0	$ 0
Accrued liabilities, current	1,700,000	1,700,000	1,800,000
Workers' compensation liability, incurred	$ 400,000	$ 400,000
Premium insurance financing payables			$ 500,000

Organization and Description of Business - Schedule of Disaggregated Revenue by Category (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Total Revenues	$ 29,962	$ 27,178	$ 81,176	$ 79,942
Healthcare Total
Disaggregation of Revenue [Line Items]
Total Revenues	28,490	23,519	75,311	68,639
Eligibility-based
Disaggregation of Revenue [Line Items]
Total Revenues	18,165	13,142	44,776	39,773
Claims-based
Disaggregation of Revenue [Line Items]
Total Revenues	10,325	10,377	30,535	28,866
Recovery
Disaggregation of Revenue [Line Items]
Total Revenues	0	41	33	166
Customer Care / Outsourced Services
Disaggregation of Revenue [Line Items]
Total Revenues	$ 1,472	$ 3,618	$ 5,832	$ 11,137

Property, Equipment, and Leasehold Improvements - Schedule of Property, Equipment, and Leasehold Improvements (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	$ 84,398	$ 83,785
Less accumulated depreciation and amortization	(74,608)	(72,888)
Property, equipment and leasehold improvements, net	9,790	10,897
Building and leasehold improvements
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	3,703	3,785
Furniture and equipment
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	3,091	3,094
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements, gross	$ 77,604	$ 76,906

Property, Equipment, and Leasehold Improvements - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 1,300	$ 1,100	$ 3,805	$ 3,355

Notes Payable - Narrative (Details) - USD ($) $ in Thousands			9 Months Ended
	Mar. 13, 2023	Dec. 17, 2021	Sep. 30, 2023	Dec. 31, 2022
Line of Credit Facility [Line Items]
Principal amount			$ 11,250	$ 19,500
MUFG Union Bank, N.A. \| Ratio as of September 30, 2023
Line of Credit Facility [Line Items]
Total leverage ratio			10.00
MUFG Union Bank, N.A. \| Ratio as of December 31, 2023
Line of Credit Facility [Line Items]
Total leverage ratio			2.50
Fixed charge coverage ratio			1.20
MUFG Union Bank, N.A. \| Prior to earlier of December 31, 2023
Line of Credit Facility [Line Items]
Total leverage ratio			2.50
Fixed charge coverage ratio			1.20
MUFG Union Bank, N.A. \| Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)			2.50%
Unused commitment fee percentage		0.30%
MUFG Union Bank, N.A. \| Maximum
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)			4.00%
Unused commitment fee percentage		0.50%
MUFG Union Bank, N.A. \| Base Rate \| Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)			1.50%
MUFG Union Bank, N.A. \| Base Rate \| Maximum
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)			3.00%
MUFG Union Bank, N.A. \| Prime Rate
Line of Credit Facility [Line Items]
Debt instrument interest rate floor rate			8.50%
MUFG Union Bank, N.A. \| Redemption Period One
Line of Credit Facility [Line Items]
Amortization of principal, percentage		2.50%
MUFG Union Bank, N.A. \| Redemption Period Two
Line of Credit Facility [Line Items]
Amortization of principal, percentage		5.00%
MUFG Union Bank, N.A. \| Redemption Period Three
Line of Credit Facility [Line Items]
Amortization of principal, percentage		10.00%
MUFG Union Bank, N.A. \| Redemption Period Four
Line of Credit Facility [Line Items]
Amortization of principal, percentage		10.00%
The Credit Agreement
Line of Credit Facility [Line Items]
Principal amount			$ 11,300	$ 19,500
Debt instrument, interest rate			11.50%	7.50%
Term Loan \| MUFG Union Bank, N.A.
Line of Credit Facility [Line Items]
Principal amount		$ 20,000
Debt prepayment costs	$ 7,500
Revolving Loan Commitment \| MUFG Union Bank, N.A.
Line of Credit Facility [Line Items]
Maximum borrowing capacity under credit facility		$ 15,000

Notes Payable - Schedule of Outstanding Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
Principal amount	$ 11,250	$ 19,500
Less unamortized discount and issuance costs	(501)	(333)
Notes payable, net of unamortized discount and issuance costs	10,749	19,167
Less current maturities, net of unamortized discount and issuance costs	(1,672)	(983)
Long-term notes payable, net of current maturities and unamortized discount and issuance costs	$ 9,077	$ 18,184

Notes Payable - Schedule of Maturities of Long-term Debt (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Debt Disclosure [Abstract]
Remainder of 2023	$ 250
2024	11,000
Total notes payable	$ 11,250

Leases - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Leases - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Leases [Abstract]
Operating lease expense	$ 0.2	$ 0.5	$ 0.7	$ 1.6

Leases - Schedule of Lease Cost (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Leases [Abstract]
Weighted Average Remaining Lease Term (in years)	2 years 8 months 12 days		2 years 2 months 12 days
Weighted Average Discount Rate	5.30%		6.20%
Cash paid for amounts included in the measurement of operating lease liabilities	$ 0.2	$ 0.5

Leases - Schedule of Maturities of Lease Liabilities (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2023	$ 189
2024	212
2025	139
2026	61
2027	60
2028	52
Total undiscounted cash flows	713
Less imputed interest	(54)
Present value of lease liabilities	$ 659

Stock-Based Compensation - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 1,100,000	$ 900,000	$ 2,800,000	$ 2,200,000
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vesting period			4 years
Unrecognized compensation expense	0		$ 0
Restricted Stock and Performance Stock Units \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vesting period			1 year
Restricted Stock and Performance Stock Units \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vesting period			4 years
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 10,500,000		$ 10,500,000
Unrecognized compensation expense, recognition term			3 years

Stock-Based Compensation - Schedule of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Outstanding Options
Exercised (in shares)		(3,863,000)
Options to purchase common stock
Outstanding Options
Balance at beginning of period (in shares)	250,000
Granted (in shares)	0
Forfeited (in shares)	(178,000)
Exercised (in shares)	0
Balance at end of period (in shares)	72,000		250,000
Vested, exercisable, expected to vest (in shares)	72,000
Exercisable (in shares)	72,000
Weighted average exercise price per share
Balance at beginning of period (in usd per share)	$ 10.31
Granted (in usd per share)	0
Forfeited (in usd per share)	12.16
Exercised (in usd per share)	0
Balance at end of period (in usd per share)	5.74		$ 10.31
Vested, exercisable, expected to vest (in usd per share)	5.74
Exercisable (in usd per share)	$ 5.74
Weighted average remaining contractual life (Years)
Outstanding	2 years 9 months 18 days		10 months 24 days
Vested, exercisable, expected to vest	2 years 9 months 18 days
Exercisable	2 years 9 months 18 days
Aggregate Intrinsic Value (in thousands)
Outstanding	$ 5		$ 20
Vested, exercisable, expected to vest	5
Exercisable	$ 5

Stock-Based Compensation - Schedule of Restricted Stock Activity (Details) - Restricted Stock and Performance Stock Units	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Number of Awards
Outstanding at beginning of period (in shares) \| shares	3,904,606
Granted (in shares) \| shares	2,235,207
Forfeited (in shares) \| shares	(136,806)
Vested and converted to shares, net of units withheld for taxes (in shares) \| shares	(1,369,862)
Units withheld for taxes (in shares) \| shares	(82,991)
Outstanding at end of period (in shares) \| shares	4,550,154
Expected to vest (in shares) \| shares	4,004,172
Weighted average grant date fair value per share
Outstanding at beginning of period (in usd per share) \| $ / shares	$ 2.85
Granted (in usd per share) \| $ / shares	2.49
Forfeited (in usd per share) \| $ / shares	3.37
Vested and converted to shares, net of units withheld for taxes (in usd per share) \| $ / shares	2.46
Units withheld for taxes (in usd per share) \| $ / shares	2.26
Outstanding at end of period (in usd per share) \| $ / shares	2.78
Expected to vest (in usd per share) \| $ / shares	$ 2.78

Income Taxes (Details)	9 Months Ended
Income Taxes (Details)	Sep. 30, 2023	Sep. 30, 2022
Income Tax Disclosure [Abstract]
Effective income tax rate (as a percent)	4.00%	(1.00%)

Net Income (Loss) per Share - Schedule of Reconciliation of Basic to Diluted Weighted Average Shares (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Earnings Per Share [Abstract]
Weighted average shares outstanding – basic (in shares)	76,454	74,021	75,907	72,480
Dilutive effect of stock options (in shares)	0	0	0	0
Weighted average shares outstanding – diluted (in shares)	76,454	74,021	75,907	72,480

Net Income (Loss) per Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	4,622	6,721
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	72	250
RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	4,550	4,024
Warrants outstanding
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	0	2,447

Subsequent Events (Details)	Oct. 27, 2023 USD ($)	Sep. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Subsequent Event [Line Items]
Principal amount		$ 11,250,000	$ 19,500,000
Wells Fargo Bank \| Subsequent Event
Subsequent Event [Line Items]
Fixed charge coverage ratio	1.25
New Credit Agreement \| Wells Fargo Bank \| Subsequent Event
Subsequent Event [Line Items]
Maximum borrowing capacity under credit facility	$ 25,000,000
Principal amount	5,000,000
Letters of credit	2,500,000
Aggregate principal amount	$ 10,000,000
Unused commitment fee percentage	0.50%
New Credit Agreement \| Wells Fargo Bank \| Subsequent Event \| Minimum \| SOFR
Subsequent Event [Line Items]
Basis spread on variable rate (as a percent)	2.50%
New Credit Agreement \| Wells Fargo Bank \| Subsequent Event \| Minimum \| Base Rate
Subsequent Event [Line Items]
Basis spread on variable rate (as a percent)	1.50%
New Credit Agreement \| Wells Fargo Bank \| Subsequent Event \| Maximum \| SOFR
Subsequent Event [Line Items]
Basis spread on variable rate (as a percent)	3.00%
New Credit Agreement \| Wells Fargo Bank \| Subsequent Event \| Maximum \| Base Rate
Subsequent Event [Line Items]
Basis spread on variable rate (as a percent)	2.00%

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