2023-03-21 22:48:24 ET
Summary
- Last week, the company reported mixed fourth quarter and full-year 2022 results with core Healthcare revenues slightly above expectations and profitability coming in below management's original guidance.
- Due to a number of near-term headwinds, core Healthcare revenue growth is expected to decrease from 2022 levels while profitability will continue to be impacted by required growth investments.
- Ongoing lack of profitability required the company to proactively amend its credit agreement with MUFG. In exchange for some limited covenant relief, available liquidity has been substantially reduced.
- Assuming execution in line with management's projections, liquidity should remain sufficient over the course of the year, but the company won't be able to afford any major hick-ups, particularly with the implementation of the long-contested CMS RAC Region 2 contract now close at hand.
- Considering near-term execution risks, renewed growth headwinds, ongoing profitability issues, and substantially reduced liquidity, risk/reward has become increasingly unfavorable for investors. Given these issues, I am downgrading Performant Financial's shares to "Sell" from "Hold".
For further details see:
Performant Financial Faces Multiple Near-Term Headwinds - Sell