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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Performant Issues Statement Regarding Schedule 13D Filing

February 28, 2020 GMT

LIVERMORE, Calif., Feb. 28, 2020 (GLOBE NEWSWIRE) -- Performant Financial Corporation (Nasdaq:PFMT),(“the Company”), a provider of technology-enabled recovery and related analytics services, today issued the following statement in response to the Schedule 13D filed today with the U.S. Securities and Exchange Commission by 22NW Fund, LP:

The Performant Board of Directors and management team maintains open and ongoing discussions with all our shareholders, and we value any opinions and feedback that furthers our goal of growing our business and delivering increased shareholder value. We are aligned with and committed to acting in the best interests of the Company’s shareholders, which is perhaps best evidenced by the significant ownership stakes across our Board of Directors and management. Furthermore, as the Company’s largest shareholder, Parthenon DCS has not divested any shares of the Company since 2014.

We would like to thank 22NW Fund, LP for sharing its concerns. However, as we communicated to them and which was referenced in their Schedule 13D filing, the material non-public information specified by 22NW Fund, LP in its Schedule 13D filing is either inaccurate or incomplete and based on dated information.

To that end, on February 26, 2020, we issued a press release that provided an update on adjusted EBITDA guidance for the fourth quarter of 2019 and initial 2020 annual guidance ranges for revenue and adjusted EBITDA. As referenced in that press release, we anticipate reporting strong operational results in the fourth quarter of 2019 with revenue in the range of $43 million to $44 million and adjusted EBITDA in the range of $6.0 and $6.5 million. Furthermore, we believe these strong results will continue into 2020 as demonstrated by our current full-year 2020 revenue and adjusted EBITDA guidance ranges of $170 million to $180 million and $12 million to $15 million, respectively.

As it relates to our long-term targets, we continue to be committed to our goal of achieving annual revenues of $200 million with 20% margins. However, we are excited about growth opportunities in front of us that may require additional investment from time to time. Should the right opportunity to invest in a significant and differentiated product offering that may fuel growth in our top line and expand margins present itself, we may consider that type of investment.

The Performant Board of Directors and management team would like to thank all of our shareholders for their continued patience and understanding during our continued transformation. We are committed to growing value and acting in the best interests of our shareholders.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA and adjusted net loss. These measures are not in accordance with accounting principles generally accepted in the United States of America (US GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net loss to net loss determined in accordance with US GAAP are included in the “Reconciliation of Non-GAAP Results” table at the end of this press release. We have included adjusted EBITDA and adjusted net loss in this press release 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 loss 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 loss has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under US GAAP. In particular, many of the adjustments to our US GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

About Performant Financial Corporation

Performant Financial Corporation is a leading provider of technology-enabled recovery and related analytics services. The Company’s services help identify and recover delinquent or defaulted assets and improper payments for various government, healthcare and financial services markets in the United States. The Company was founded in 1976 and is headquartered in Livermore, California. To learn more about Performant Financial, please visit https://www.performantcorp.com

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our outlook for EBITDA in 2019 and 2020. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, that the Company may not have sufficient cash flows from operations or the availability of funds under its credit agreement to fund ongoing operations and other liquidity needs, that the Company’s indebtedness could adversely affect its business and financial condition and could reduce the funds available for other purposes and the failure to comply with covenants contained in its credit agreement could result in an event of default that could adversely affect its results of operations, that the Company faces a long period to implement a new contract which may result in the incurrence of expenses before the receipt of revenues from new client relationships, the high level of revenue concentration among the Company’s largest customers and any termination in the Company’s relationship with any of our significant clients would result in a material decline in our revenues, that many of the Company’s customer contracts are subject to periodic renewal, are not exclusive, do not provide for committed business volumes and may be changed or terminated unilaterally and on short notice, that the Company may not be able to manage its potential growth effectively, that the Company faces significant competition in all of its markets, that continuing limitations on the scope of our audit activity under our RAC contracts have significantly reduced our revenue opportunities with this client, that the U.S. federal government accounts for a significant portion of the Company’s revenues, that future legislative and regulatory changes may have significant effects on the Company’s business, that failure of the Company’s or third parties’ operating systems and technology infrastructure could disrupt the operation of the Company’s business and the threat of breach of the Company’s security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company’s financial condition and operating results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s annual report on Form 10-K for the year ended December 31, 2018 and subsequently filed reports on Forms 10-Q and 8-K. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations.

Contact Information: Richard Zubek Investor Relations 925-960-4988investors@performantcorp.com

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Results (In thousands) (Unaudited) We are providing the following preliminary estimates of our financial results for the three months ended December 31, 2019 and year ended December 31, 2020: Nine Months Three Months Ended Twelve Months Ended Ended September December 31, December 31, 30, 2019 2019 2020 -------------------- Actual Estimate Estimate ---------- ------------------ -------------------- Adjusted EBITDA: Net income (loss) $ (22,958) $ 2,982 to 2,987 $ (2,960) to (3,945) Provision for (benefit from) income taxes 412 (800) to (750) 0 to 1,000 Interest expense 5,260 2,300 to 2,350 8,000 to 9,000 Interest income (33) (5) to (10) (40) to (55) Client contract termination settlement (1) — (677) — Non-core operating expenses (2) 309 — — Earnout mark-to-market (3) (1,086) (100) to (300) — Depreciation and amortization 6,698 1,800 to 1,850 6,000 to 7,000 Impairment of goodwill (4) — 0 to 500 — Stock based compensation 1,743 500 to 550 1,000 to 2,000 ---------- ------------------ -------------------- Adjusted EBITDA $ (9,655) $ 6,000 to 6,500 $ 12,000 to 15,000 - -------- ------------------ --------------------

(1) Represents a contract termination settlement from the Department of Education in 2019.

(2) Represents professional fees related to strategic corporate development activities.

(3) Represents the change from prior reporting periods in the fair value of the potential earnout consideration payable to ECMC group in connection with the Premiere acquisition.

(4) Represents potential goodwill impairment charge in 2019.