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Performant Healthcare Inc (PHLT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue rose 29% YoY to $37.8M, driving a return to GAAP profitability with net income of $2.1M and operating income of $2.6M, reflecting strength in both eligibility-based and claims-based programs .
  • Both revenue and EPS materially beat Wall Street consensus: revenue $37.8M actual vs $31.1M consensus*, and diluted EPS $0.06 vs ($0.04) consensus* .
  • The quarter was overshadowed by the announced definitive agreement to be acquired by Machinify for $7.75 per share cash; the company canceled its Q2 earnings call and withdrew all FY25 guidance .
  • Adjusted EBITDA improved to $6.17M with notable operating leverage vs prior year, supported by commercial program ramp and scope expansions .

What Went Well and What Went Wrong

  • What Went Well

    • Commercial momentum: healthcare revenue grew 35% YoY; claims-based +44% and eligibility-based +27% YoY in Q2, driven by prior implementations and scope expansions with commercial programs .
    • Profitability inflection: GAAP net income of $2.1M and adjusted EBITDA of $6.17M vs $0.55M prior-year quarter, indicating improved scale and efficiency .
    • Management emphasis on growth drivers (prior quarters): “increase full-year adjusted EBITDA and revenue guidance” and strong commercial implementations and pipeline (Q1 CFO/CEO) .

  • What Went Wrong

    • Guidance visibility removed: Company withdrew all FY25 guidance and canceled the Q2 call due to the Machinify transaction, limiting forward commentary .
    • Non-healthcare revenue runoff: Customer Care/Outsourced Services revenue fell to $0.0M in Q2 after service cessation in Q1 2025, eliminating a historical revenue stream .
    • Program/regulatory concentration risks persist: RAC Region 5 expires in 2025 and large-client/contract concentration creates ongoing revenue risk .

Financial Results

Recent quarterly performance

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$34.8 $33.3 $37.8
Income (Loss) from Operations ($M)($0.7) $0.15 $2.64
Net Income (Loss) ($M)($0.5) ($0.08) $2.08
Diluted EPS ($)($0.01) $0.00 $0.03
Adjusted EBITDA ($M)$3.12 $3.32 $6.17

Estimate comparison (Q2 2025)

MetricConsensusActual
Revenue ($M)$31.12*$37.80
Diluted EPS ($)($0.04)*$0.06
# of Estimates (Revenue / EPS)4 / 4*—

Values marked with * retrieved from S&P Global.

Segment revenue mix

Segment ($M)Q2 2024Q1 2025Q2 2025
Eligibility-based$14.26 $16.08 $18.09
Claims-based$13.66 $17.10 $19.71
Healthcare Total$27.93 $33.19 $37.80
Customer Care / Outsourced Services$1.44 $0.08 $0.00
Total Revenue$29.36 $33.27 $37.80

KPI snapshot (non-GAAP)

KPI ($M)Q4 2024Q1 2025Q2 2025
Adjusted EBITDA$3.12 $3.32 $6.17
Adjusted Net Income (Loss)$1.32 $1.21 $4.78

Note: Non-GAAP reconciliations provided in the respective filings .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Healthcare RevenueFY 2025$133–$135M (raised in Q1 2025) Withdrawn (Aug 1) Withdrawn
Adjusted EBITDAFY 2025$9–$10M (raised in Q1 2025) Withdrawn (Aug 1) Withdrawn
Prior baseline (initial 2025 guide)FY 2025Revenue $131–$135M; Adj. EBITDA $8–$9M (Mar) ——

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Commercial client growthCEO cited 18% commercial growth in 2024; >100 implementations since 2022; targeting margin expansion with Project Turing . Q1: 13 commercial programs implemented; backlog and pipeline healthy .Healthcare revenue +35% YoY; growth tied to prior implementations and scope expansions .Positive momentum continues.
Technology/AI initiativesProject Turing and tech investments to expand margins .Capitalized tech assets; depreciation detail and continued software investment (capex) .Ongoing investment.
Government contracts / regulatoryNY State Medicaid RAC to commence in 2025; CMS RAC Regions 1/2 awarded; Region 5 DMEPOS expires in 2025 .No change in awards; reiteration of Region 5 expiry and contract risks .Mixed: stable footprint; Region 5 expiry risk.
Business mix shiftCustomer Care/Outsourced declining in 2024 .Customer Care/Outsourced now $0 in Q2 (cessation in Q1) .Fully transitioned to healthcare services.
M&A/StrategicNo prior M&A; focus on organic/commercial growth .Definitive agreement to be acquired by Machinify; $7.75 cash per share .Transformational change.

Management Commentary

  • CEO (Q1): “Our first quarter revenue and profitability exceeded expectations…We saw solid growth across both government and commercial clients…implemented 13 commercial programs, estimated to contribute between $4.5 million and $5.0 million in annualized revenue at steady state.”
  • CFO (Q1): “The strong start to the year gives us confidence to increase full-year adjusted EBITDA and revenue guidance…We expect 2025 healthcare revenues of $133–$135 million and adjusted EBITDA of $9–$10 million.”
  • CEO (Q4/Full-year 2024): “Commercial clients…expanded from 28% to over 57% of healthcare revenue…investments in technology…support our goal of achieving a 20% adjusted EBITDA margin target with the continued success of Project Turing.”
  • Q2 update: Company canceled its Q2 call and withdrew guidance due to the Machinify transaction .

Q&A Highlights

  • The Q2 earnings call was canceled following the Machinify merger announcement; no Q&A occurred .

Estimates Context

  • Performant beat consensus on both revenue and EPS: $37.8M actual revenue vs $31.1M consensus*, and $0.06 diluted EPS vs ($0.04) consensus* .
  • With guidance withdrawn and a pending (subsequently completed) sale at $7.75 per share, near-term estimate revisions are likely to focus on close timing and deal-related accounting rather than standalone FY25/26 fundamentals .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Strong operating momentum: 35% YoY healthcare growth in Q2, with commercial program ramp and scope expansions driving mix and operating leverage .
  • Profitability inflection: Operating income of $2.6M and adjusted EBITDA of $6.17M underscore underlying scale benefits vs last year .
  • Strategic outcome: Definitive agreement to be acquired by Machinify for $7.75 per share cash; call canceled and guidance withdrawn, shifting focus to deal close and regulatory approvals .
  • Risk watch: Contract concentration and regulatory dynamics (e.g., RAC Region 5 expiry in 2025) remain structural considerations until deal close .
  • Execution signals: Continued tech investment (software, NLP assets) and commercial client expansion support medium-term margin potential cited in prior commentary, though near-term public-company KPIs will cease post-close .