Richard Zubek - IR Lisa Im - CEO Hakan Orvell - CFO.

Edward Caso - Wells Fargo Securities Michael Tarkan - Compass Point Anjaneya Singh - Credit Suisse Richard Close - Avondale Partners Oscar Turner - Suntrust Toby Wann - Obsidian Research Group Michael Cohen - Opportunistic Research.

Greetings, and welcome to the Performant Financial First Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Richard Zubek with Investor Relations. Thank you, Mr. Zubek, You may begin..

Thank you, operator. Good afternoon, everyone. By now, you should have received the copy of the earnings release for the Company's first quarter 2015 results. If you have not, a copy is available on our website www.performantcorp.com. Today's speakers are Lisa Im, Chief Executive Officer and Hakan Orvell, Chief Financial Officer.

Before we begin, I'd like to remind you that some of the comments made on today's call including our financial guidance are forward-looking statements. These statements are subject to the risks and uncertainties including those described in the Company's filings with the SEC. Actual results may differ materially from those described during the call.

In addition, all forward-looking statements are made as of today and the Company does not undertake to update any forward-looking statements based on new circumstances or revised expectations.

Also, non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release. I’d now like to turn the call over to Lisa Im.

Lisa?.

Thanks, Rich. Good afternoon everyone, and thank you for joining us for our earnings call. For Q1, we reported overall revenue and adjusted EBITDA of $38.6 million and $4.1 million, representing the year-over-year decline of approximately $20 million and $13.3 million respectively.

These results were consistent with our more recent guidance and are primarily attributable to the ongoing delay in the CMS contract renewal process and guarantee agency rehabilitation fee reductions that took us back in the second half of 2014.

Although we anticipate Q1 will be the softest quarter of 2015, there are number of strong data points we will cover on today's call that give us confidence about our ability to meet or even exceed our previously provided financial guidance for 2015.

Furthermore, we have been aggressively executing on our business strategy to drive performance despite the industry headwinds, including we are demonstrating our ability to grow in new areas. Now we are doing just that in the commercial healthcare state, we I will talk about in a minute.

We are aggressively increasing our productivity, for example, during the first quarter, our student lending productivity defined as the number of borrowers entering rehabilitation agreements, increased materially over plan as a result of work for improvement we have implemented over the last several months.

Finally, we've completed a meaningful cost reduction which combined with our increased student lending productivity or expected to have a strong positive impact to our results in the bad part of this year.

For the quarter, student lending revenues were $27.1 million, this is approximately $12 million lower from the first quarter of 2014, of which pricing reductions accounted for about $5 million and $7 million of the decrease resulted primarily from borrowers choosing IBR rehabilitation versus low consolidation which will stir as the tailwind to support our rehabilitation revenues in the fourth quarter of 2015.

As a reminder our guarantee agency clients incorporated to use of income based repayment as the means to rehabilitate defaulted borrowers effective July 1, 2014. This allows many more borrowers qualify for affordable rehabilitation payments.

Beginning in the second half of this year, we anticipate, this will help mitigate the revenue decline, resulted from the changes to the rehabilitation fee structure from our guarantee agency client and volume growth and productivity will help off deck the decreases.

The Department of Education previously advised us of their intention to issue extensions to one of more vendors after April 21, 2015. We understand the five vendors did receive an extension as yet, we do not have confirmation from the Department of Education nor have we received an extension.

However, we have received placements through April 21 which are well over the sequential and prior year quarters. We believe that the Department of Education will announce the new contract award in the very near future and we do not believe that the lack of an extension means that we are less likely to receive one of the new contract awards.

Our result on the most important measures for such selection, recovery of student loan and size of managed portfolio, position us well for a re-compete award.

As we think about 2015 results it is important to understand that we receive a record high level of student loan placements in Q1, these placements total $2.2 billion and are a result of increases from a number of clients including Department of Education and represented increase in placements of 28% from Q4 2014 and 51% from Q1 of 2014.

As I said earlier we also saw a strong above planned increase in rehabilitation productivity. The combination of both increased Q1 placement and strong Q1 recovery productivity will have a complementary impact which support our student lending result in the latter part of 2015 and provides momentum into 2016.

Switching to healthcare where our total healthcare revenues in the first quarter of 2015 were $5.3 million which is down $8.3 million versus the prior year period. This difference is a reflection of the wind down of the original CMS contract but is partially offset by stronger revenues from our commercial healthcare customers.

Within our commercial healthcare business we continue to strengthen our market position and expand our pipeline of new clients and have stated to realize sound revenue growth. Commercial healthcare revenues were $2.1 million in the first quarter.

Recently we announced the Cambia Health Solution a member of the Blue Cross Blue Shield Association serving over $2 million members operating in Oregon, Idaho, Utah, and Washington, selected performance to audit its durable medical equipment, home health and hospice and home infusion claims.

While this contract is expected to have a fairly small impact to total revenues in 2015 because it is in [nap up] mode, it is further evidence of our ability to expand our service offerings in the commercial healthcare market.

We're excited about the ongoing potential of our commercial business and are actively working to expand our work with other players that would allow us to add work as we identify opportunities to reduce cost for these clients.

Unfortunately at this time, there are no meaningful updates regarding the timing of the new CMS recovery audit contracts award. With that I'd like to turn the call over to Hakan to walk you through the financials.

Hakan?.

Thank you, Lisa and good afternoon everyone. Today, we're reporting results for the first quarter with revenues of approximately 38.6 million, net loss of 4.4 million, or a loss of 0.09 per share, and adjusted EBITDA of 4.1 million.

In an effort to provide you with greater visibility into our results that going forward we've decided to provide you with breakdown of our top line results within both are student lending and healthcare businesses.

Beginning with our student lending business, revenues totaled 27.1 million, a decline of 12.4 million compared to the first quarter of last year.

During the quarter the department of education accounted for 11.7 million of revenues while guaranty agencies generated 15.3, these amount represents declines of 200,000 and 12.2 million respectively when compared to the first quarter of 2014.

As we discussed on our last call, we expected our student lending revenues to be negatively impacted by the revised loan rehabilitation pricing structures, put in place by our DA clients effective last July, the increased documentation requirements to qualify borrowers for the rehabilitation process and the movement from loan restructuring fees to rehabilitation fees.

This is an [absence] a shifting revenue recognition as loan rehabilitation fees require nine months of time of the payment.

During the first quarter, student loan placements were $2.2 billion, which is a significant increase from $1.4 billion we received in the first quarter of 2014 and $1.7 billion in placements we received in the fourth quarter of 2014.

Placements were strong from both the department of education, which accounted for 48% of the loan placements as well as guarantee agencies where we're received high placements from a number of our clients.

We're encouraged by the strong level of loan placements and productivity in the first quarter and the positive implications it should have on our operating results for the second half of 2015. Our healthcare revenues in the first quarter were 5.3 million compared to 13.6 million in the first quarter of last year.

Revenue from our work with the Centers for Medicare & Medicaid was 3.2 million, while our commercial healthcare business generated 2.1 million, during the first quarter of 2014, we generated 13.2 million from our work with CMS and at that time no meaningful commercial healthcare revenue.

As you can see the decrease in healthcare revenues continues to primarily be a function of the delayed CMS contract renewal process. Revenues from other markets in the first quarter were 6.2 million compared to 5.6 million in the prior year period. This increase is primarily as a result of a tax amnesty program we conducted in Q4 2014 and Q1 2015.

Moving to our expenses, salaries and benefits expense in the first quarter were 23.7 million, a decrease of 4.3% compared to 24.8 million in the prior year period, primarily due to reduce staffing related to the RAC contract.

Other operating expense for the quarter was 19.2 million, a decrease of 5.3% compared to the first quarter of 2014, primarily due to borrowing related costs. We're focused on improving our productivity, executing on our business development initiatives and forcefully engaging in the expense restructuring.

We completed an additional cost restricting initiative during the quarter and reduce that in non-correction areas, including a number of management positions. We included the associated determination cost and adjusted EBITDA. We also executed on a lining other cost to the current revenue level.

As we've discussed previously a significant portion of our expenses are highly variable in nature and as such there are other adjustments that can be made as necessary to achieve our objective. We're balancing this with a focus on building long-term revenue; we're currently on track with our plan and expectations for the year.

Additionally, we have a number of add backs to bank covenants calculations that provides us with further caution. This benefit in Q1 was approximately $3 million and we will have this benefit for several quarters.

As a result, we're comfortable with our ability to maintain compliance with our bank covenants during this transitional period in a business and preferably do so without taking actions that are harmful to our growth initiative.

For the first quarter of 2015, our reported net loss was 4.4 million or loss of $0.09 per share compared to net income of 6.3 million or $0.13 per diluted share in the prior year period.

Adjusted net loss in the first quarter was 0.5 million or a loss of $0.01 per diluted share compared to adjusted net income of 7.6 million or $0.15 per diluted share in the prior year period. Fully diluted weighted average outstanding shares were 49.4 million shares in the first quarter of 2015.

Our adjusted EBITDA in the first quarter was $4.1 million compared to $17.4 million in the same period last year. Our effective annual tax rate during the first quarter was 34.7% compared to 41.6% in the same period last year. Cash flow from operating activities for quarter ended March 31, 2015 were $1.5 million.

Turning to our balance sheet, as of March 31, 2015, we had cash and cash equivalents of $77.3 million. Our total outstanding debt as of March 31 was $109.3 million. The sequential decrease in outstanding debt reflects continued payments on our long-term debt. With that, let me now turn the call back to Lisa for some concluding remarks..

Thanks, Hakan. Our reported results in the first quarter do not fully reflect the hard and considerable effort to our employees. In our suited landing operation we have one the busiest and most productive quarter in our company's history we helped more borrowers and to rehabilitation agreement in Q1 than any other quarter in the company's.

As I eluted to earlier this performance is above our plan level and should positively impact 2015 fourth quarter results. We are not adjusting our prior 2015 guidance at this time which was revenue of 150 million to 160 million and adjusted EBITDA between 20 million and 22 million.

However if we continue to execute above plan we should see above plan positive impact in the quarters to come. Moreover as Hakan stated coming out of Q1 we are even more comfortable with our ability to achieve results that are appropriately above our bank covenants and position us for continued growth.

With that I'd like to open up the call for questions..

[Operator Instruction] Our first question is from Edward Caso with Wells Fargo Securities. Please proceed with your question..

Can you just remind us with the -- it sounded like you haven’t got any placement since April 21. What the lag factor is -- I thought it was like six months or so and you talked about an uptick in the outlook in Q4 but wouldn’t that be about the time that the placements was rolled of as far as benefit was concern..

Actually no Ed I'm going to led Hakan speaks to the specific timeline because I think you got some of the details behind that..

If you look at the rehabilitation process it's a nine month process and if you look at the placements that we receive here during this quarter and it was significant placement that we received here during Q1 that would have the benefit as we look at the latter part of this year.

And as it relates specifically to ED placements we received a large placement as scheduled in April and again they placed with us twice a quarter. So was typically right at the end of the month, so that's what we are still waiting for word on as for as when the [made placement] will be made..

And can you remind that was the durable medical equipment category that was announced wasn’t it for rack can you update us on that. .

I think in our last we updated to the best of our knowledge we saw the process it is under corrective actions but we've hear nothing else from it. So it's still undecided at this time Ed..

Thank you. .

But I think as we mentioned in today's call the contract awards that we have with [Cambia] is really specifically on dribble medical equipment home health hospice and home infusion claims. So I think when we show our results that are pretty compelling we're able to gain traction in the market..

The next question comes from Michael Tarkan of Compass Point. Please go ahead. .

Thanks for taking my questions and thanks for the new disclosers around the underlying revenue item.

Just firstly on the cost reduction can you quantify the impact of that I know you have the break in [what it effects] this quarter but just overall how much expense savings you expect to receive?.

Sure let me make a couple of comments first. As we have stated previously with you all, our cost are highly variable in nature and we can quickly make adjustments as net to safely achieve our objective and we've been thoughtful with this again with an eye of making sure that we are not impacting our long term revenue growth.

But as we look at and as we compare our total cost in Q1 versus last year it is lower by about $6 million and again that’s adjusting for obviously the lower revenue trends that we've seen [indiscernible].

Specifically as we look at Q1 we executed on additional reductions in [indiscernible] approximately $3 million from an annualized perspective and again this will benefit us in future quarters. Salaries and related of that represented about 2.5 million of this reduction..

Moving on to lending revenue it sounds like things are running a little bit ahead of expectations, I think you don’t want to update guidance right now but with the large placement in the first quarter I know it takes nine months is it fair to say that if things go according to plan that lending revenue won't necessarily be down 20% year-over-year..

[I think I should say] assumption yes, this is a significant placement that we would receive that would benefit us not only as we look at Q4 but also give us momentum into Q1. .

The other benefits for institute of lending also is as we talk about in last call we had some disruptions to productivity for a few months what we figured out how to retool our process for the new regulatory requirements that came into effect July 1, 2014 and it took us time to do that.

But what we saw in Q1 also in terms of overall productivity on just per person basis we saw a great productivity improvement which we hope will continually believe will continue. But we want to see some continuous of that before we feel comfortable of that we've got complete traction on that. .

Understood and then lastly I know it's a fluid situation. But give any sense us to when that ED contract may get awarded here in second quarter as a possibility now that the protests have been dismissed. And then along those lines any sense as to how many vendors will be included under the new contract. Thank you. .

So on the award we also have heard the same thing you’ve heard that they was like to award in the second quarter as to as possible. I do believe that one of the protest at GAO side shows that one of the protest will be ruled on May 11 certainly GAO could rule earlier than that.

But that is the drop that date; we believe that if it go to that date that department of that would like to make the award shortly thereafter.

We do not know how many award department is that intends to make we can speculate as to what their objectives are and believe that’s based on their really very recent and heavy focus on compliance and experience working with students.

We believe that they will be very selective in the vendors then they could with again compliancing a very heavy focus..

The next question comes from Anjaneya Singh of Credit Suisse. Please go ahead. .

First on just wanted to touch on students loans again. Have you anticipated this level of student's loan placement volume in Q1 it seems like you're pretty optimistic on the back half of the year on IBR and productivity? And you also commented that this would be the softest quarter of the year.

Wondering if you can just can just help us understand why your big guidance has this perhaps if you can help us understand what sort of risk may prevent you from executing on or above plan. .

As Lisa mentioned earlier what we are looking for is to again to see continuing momentum and traction on the productivity increases that we have.

And at this point we feel good about the traction that we have in we feel good about the revenue trend that we are seeing, but we are holding off on making any changes to guidance at this particular time that again feel very good about the momentum that we’re seeing and the impact the positive impact that is large basin that particularly we'll have in the later part of the year..

And rolling into 2015 because when we look at placement timing we didn’t get it all in January we can take throughout the quarter with different clients placing it different times of the quarter.

So we do anticipate continued productivity we just wanted to make sure that we have we are in the process completely dialed in and feeling very good about our productivity levels having increased on a more long term basis.

So we’re seeing good improvement, we feel very good about productivity in the first quarter and we think our workforce has -- our employees have worked very, very hard and it shows. But we like to continue to see some strong results as we move to I think probably at least the next few months..

Yes in addition to that what we are seeing is royalties on the healthcare side. We're seeing kind of good and traction there both on the rack side revenues coming through as expected and as you look at also on the commercial healthcare we saw a meaningful increase versus prior quarters.

Again we’re just feeling good about the traction that we’re seeing with the commercial healthcare growth and being on plan for our expectations here for the year..

Also on expenses just to go back on that and I realized you've seen a nice decrease in expenses year-over-year. But it seems like the past three quarters expenses have been pretty flat.

Could you just help us reconcile that are you sort of -- have you run through your course of efficiencies how much more do you think can be rationalized at this stage..

What you're looking at on the expense side is there is some extraordinary cause that are in this quarter versus priors and maybe we can talk about in the Q1 expenses versus last quarter in Q4, so the expenses that we're offset by 2.3 million about 1.9 million of that relates to the [indiscernible] acquisition that we have into some adjustment to EBITDA but then also as we've looked at this particular quarter at in Q1 as based on the strong production activities that we had, we have the additional incentive compensation of about 600,000 and we also have from the timing perspective, we have [payroll] taxes they're more front loaded in the -- so as you compare Q4 to Q1 and you are getting impact there for about additional 400,000 and so that's about $1 million worth but I would say it's extraordinary cost in Q1 that as not necessarily will materialize for future quarters.

And then we also have the restructuring charge based on the reductions that we did during Q1 of 700,000 that is incorporated into the operating cost for Q1. Again a few moving parts, that we are looking at there in total operating cost..

Okay, got it. One final one from me, on the commercial healthcare plan, could you just the update us on what their ramp looks like.

I think you have mentioned that they did about 700,000 in revenue in January, I'm wondering how the rest of Q1 unfolded perhaps [primarily] Q2 transit and good share and what sort of margins are they contributing to the business of this stage, if you can speak to us on a quantitative basis perhaps just on a higher level -- trying to get a sense of their margins versus that of your business in more normalized today.

First it was, if you look at the commercial healthcare revenue in Q1, we did about $2 million in revenue, Q4 we did a 1 million, again we've very glad to see as they get doubling of the revenue.

And as we've discussed in the last earnings call, we anticipate the commercial healthcare revenue to be around 10 million as the earning, it's in the growth mode. So, as you look at from a margin perspective, obviously we're incurring cost price to recognizing revenue.

So, we're not seeing the normalized margins that we expect here in the long-term but as we look at it overall, I mean it's a positive margin but again it's in an investment phase that we are in right now as we growing that healthcare revenue..

The next question comes from [indiscernible] of Morgan Stanley. Please go ahead..

Just wanted to know, do you have any more color on why the volumes were so high in education? Is this more to fast that you're getting as a -- you're getting a larger share in DOE with some of the providers that on faster contracts in Q1 and or maybe hire share to -- is there any kind of color on the volume increase?.

It's actually a little bit of all of what you've mentioned. One is definitely increase share, secondly as you mentioned department of education did end the relationship with five vendors. So, clearly some of that volume is a flow through as well.

And on [guarantee] agency side, we have position, we have strong relationship, we have competitive improvements that we've made as well and in our competitive contracts we're actually across the board seeing very strong results. But department of education specifically for those items..

And then I'm looking at the 44% drop in the GA revenue year-over-year, could you break that down on how much was fee changes, how much was potentially delayed revenue from the IBR, the new IBR volume and then also -- I know you mentioned, you documentation delays last year? And it sounds like 5 million was from pricing -- I assume that -- may be some color on that drop there.

That's correct, the decrease that we've experienced in starting at July of last year to about $5 million in quarter but that's one component and then as we discussed in the last earnings call, we have had a shift of revenue where by based on the IBR, we have more borrowers opting for that path to restore the deposit status versus loan restructuring and so that has been a meaningful shift that we've experienced here over the past quarters.

And that's the loan restructuring process is much sure that cost is issued between one month to three months versus rehabilitation, which is nine months process. You looking at a shift of revenue there So those activities primary issues related to the dropping guarantee agency revenue that we saw this quarter versus the same quarter last earnings..

So, I think, there wasn't the fee decrease is probably due to the shift of revenue from rehabilitation too are to rehabilitation?.

That's correct and then as we've mentioned as well, we have had the new documentation requirements that going to be impact in July 1st this year. So that's having bit of shift of revenue impact as well as we're again going through the process or getting all that documentation there.

And again all of this is not large revenues that shifting revenue out. .

Okay. I don't know, if I have that half-off earlier, but did you mentioned the Medicare extension revenue is that expected to stay about the same for the year should that drop off over the year or how do you think about the pace of that medical expense in revenue of quarter to quarter.

Yes, we have revenues, as I am sure you have heard of just north of $3 million of this quarter and that’s what we expect under the current scope for upcoming quarters as well. What we are in discussions with [the manage staff] was to getting at wider scope of auditing.

But at this point that scope has not been increased in any meaningful manner so I think the guidance that we gave earlier in the year is what we still expect. .

And then lastly on the extension system the other education providers risk receive, is there any more color you can give us on some of the terms of those extensions that the other firms receive in terms of how long were the extensions for or any other details there?.

We have not actually been able to get ED to confirm Department of Education to confirm as yet. So we're speculating and if we get anything in terms of communication from department of that will certainly let you know..

The next question comes from S.K. Prasad Borra of Goldman Sachs. Please go ahead..

This Jordan on for S.K. What was the fall through of the PA's ex acquisition? What are the options are you exploring in terms of diversifying your revenues here..

As you know we are continuing to grow and our growth rate on healthcare is encouraging because again we're ramping up on many of these contracts. We're winning new contracts we’re also continuing to look at various different types of acquisitions and so in organic expansion is certainly not out of the picture we're going be very thoughtful.

And as we’ve stated in the past make sure that it is good for shareholders. So we're continuing to look at different ways that we can accelerate our growth in the market and expand our product services as well..

And then on the tax rate I saw that decline in the quarter. Any update on optimizing your tax structure. Thank you. .

Sure effective tax rate you saw this quarter is 34.7. As you look at from an annual perspective its 36.6 and some of the impact that we are dealing with, with this quarter was lower than the prior year is due to the minimum and state taxes that some of the states have.

And then also as you are looking at results that are lower obviously that’s drive a lower tax rate as well..

The next question comes from Richard Close of Avondale Partners. Please go ahead. .

Just want to be clear on the department of education contracts or extensions. I believe you said there is five vendors then expanded in April. And then also I believe you mentioned that there were five vendors with contracts that I guess terminated and then you're sitting in the middle here and haven’t heard anything.

Are there other people that are in your boat as well or maybe some additional details around that?.

Yes there are other vendors that are in a similar situation to us to our knowledge there are seven other vendors that are similarly situated and we’re still waiting to hear an official comment from the department of education or communication we have not have that..

I hate that as can just speculate on those thinking – but is there any reason on the top of your head that you think maybe they would expand some and not others and what would be the thought process there?.

Well I am going to speculate that there is a transition in the contract management office. I think there were some decisions maybe set in motion that are just being carried out. We do believe and our work with the department has been consistent over 25 years. The department of education is logical about the way they want their borrowers treated.

They're logical about the way they want to continue experience vendor to who are compliance and who have a focus on compliance and have a vast amount of experience working with defaulted student loan borrower.

So I would speculate that department of education historically has active in a very rational and thoughtful manner with respect to continuing experienced vendors who can in a very compliant service their defaulted borrowers.

So I am speculating that they will take some logical and rational views on how they continue vendors who have that kind of experience..

And then with the respect to the compliance do you have any statistics that rank you guys versus other vendors or anything like that that you can share with us?.

We don’t have statistics from the department of education. What we do have is a very focused compliance program in our organization, as you know, we've worked in this environment for decades and so we have a very-very heavy focus on compliance. We have internal compliance organization that audits all of our employees.

We ensure that our scripting and our outreach with defaulted borrowers aligns with what our clients want from a brand standpoint as well as a compliance standpoint. We monitor CFPB, we have a very-very exhaustive and extensive compliance program.

It's very important to us, because we know it's important to our clients and Richard we've worked with these clients many of them for over 30 years. But we don’t have any published statistics that we are even privy to. So that's the best we have..

And just a clarification on the April 21st comment, I think Hakan that you made. So you're saying that you guys have received here in the second quarter, in April, you received some placements.

When would you expect next placement to come? By the end of May or end of June?.

We would expect something in June..

Okay, if we can shift to healthcare just a little bit, with respect to the pipeline under commercial.

Is there any clarity or any additional details you can give us to hang our head on with respect to the growth opportunities, it's a nice new contract that you were able to announce with Cambia but anything else that you can talk to us about?.

I think specifically related to contract, as you know, because we have the master servicing agreements with our large payers, we continue to develop on statements of work and contracts underneath those.

We have many of them in productions, numbers that we feel good about this year are not new contracts we have to go get, but just implementation and continued execution. In the meantime, we do have our sales folks very focused on outreach to the commercial payer market.

As you can see from the announcement that we made with Cambia we can certainly, we have the capabilities that we think are very compelling, prepared towards continue to develop those with respect to the Master Servicing Agreements, we've not got any approvals to announce new contracts from our client, but we can tell you that we're continuing to have growth trends that we feel very good about as move forward through this year and of course as we look beyond this year as well..

Okay. And final question, just to be clear, Hakan, on the maybe the one timers in the quarter that you said wouldn't necessarily repeat going forward to the rest of this year, I think there was a 400,000 number, $1 million number, $700,000, something along those lines.

Has all that come out of G&A?.

It will all come out of the sellers and related will be the 700,000 which is the restructuring charge that we pay out. And then as you look at payer tax and salary compensation that would be also add up salaries to relate in..

The next question is from Oscar Turner of Suntrust. Please go ahead..

My first question is just on the Cambia deal with you now.

Just wondering what the ramping timetable is like for that deal?.

I would say, I mean as you look at these contracts, they have a rather lengthy implementation process. And when we say implementation that's also the timeframe until we start recognizing revenue.

So we start recognizing, we recognize revenue when in fact the recovery is made on the error that we have identified, so as you think about it from that perspective, again it can be a four to six month period on from the time we start working to when we have recognized revenue.

So as we stated earlier, I mean this -- we're excited about the growth that we're seeing and the additional businesses that we're winning in this area, that is, it's not expected to have a meaningful impact on our 2015 revenues..

Okay, but so four to six months would mean that it should show up second half or how should I think about that?.

Yes, that's right. It's going to be in the latter part of this year, as we're ramping up on it..

Okay, thank you, and then just one question regarding [institute loan] business. I know during the first quarter I saw there [indiscernible].

And just wondering is this potentially a factor [indiscernible] in any way? And just wondering does it particularly affect those two [indiscernible] in any way?.

Not at this time, I think that announcement was geared more towards the -- on defaulted side. At this time we're not seeing an impact and we don’t anticipate an impact..

The next question comes from Toby Wann of Obsidian Research Group. Please go ahead..

A couple of quick housekeeping items, [indiscernible] Medicare RAC license this quarter?.

The Medicare RAC, I mean what we are doing on that contract is that, we are auditing from a large pool, so [indiscernible] doesn’t place inventory without that we have a pool of claims that we are auditing again.

And so again that pool is growing however the scope of auditing that we're doing is somewhat limited based on the current scope that we're operating under in, the pool of claims they we're auditing against is still intact..

And then just a quick update on the timelines of the first half will that be finalized on the D&A [indiscernible] region?.

We don’t know when it will finalized we don’t have an indication of the date. And there isn’t a mandated deadline for CMS. So obviously as soon as we know anything we'll let you all know..

The next question comes from Michael Cohen of Opportunistic Research. Please go ahead. .

Quick question are you seeing any of the other service providers on the GA side dropping out on the basis of lighter revenue lower payment rate..

We are actually not seeing other organizations drop out. I think it was a very limited number of companies that really had extensive experience. So we don’t necessarily track some of the smaller organizations but of the larger of those two operating guaranty agencies we’ve not actually seen any dropping out. .

And then just to clarify I guess you have noted that your thoughts there were seven entities that were in your seeing boat if just want to sort of go through the map of that I think there were 22 providers before and were there five that had already been announced prior to April 1 or not announced but had been extended before April 1.

And then another five had been extended and then obviously there were five that were terminated.

That would be the way to get to seven in my -- is that correct read to the situation?.

I am sorry, so take me through your numbers again, five --.

There were 22 originally correct?.

Yes..

So five has been terminated. So that would leave 17 and then you said there were five that were added that would be 12. Have there been 10 that had been renewed all together I guess is a better way of asking the question. .

No because this not public information I cannot disclosed the actual point. But there is a certain criteria for whether department of education would consider extending any business. And so there are some vendors who would not fall into that bucket..

Being that hadn’t been terminated for say there was an additional group that won't terminated but they weren’t considered for the next round is that what you're saying. .

Yes..

And then within that bucket of seven obviously you don’t have statistics that you've been disclosed. Do you have any sense is to sort of whether you think whether you fall at the upper end of the pecking order from a compliance standpoint if you think that’s going to be the deciding factor..

No we don’t have any information on compliance and so we can't seek to that, we do have some information on some other performance and we believe we are the top end of that yet..

Okay that’s great to hear. Last question did you guys provide anywhere breakout of the operating expenses by category in terms of whether it's by Medicare or whether it's by GA or whether it's DOE related revenues..

We do not track those expenses definitely by market..

There are no further questions at this time. I would like to turn the floor back over to management for closing remark..

We want to thank you all for joining us again.

We are again very pleased where our productivity is heading we believe that all of the hard work that we’ve done over the past few months including the work of our employees, we hope that will continue into the future we're seeing very, very strong positive indications of that and feel like we've got some great momentum as we head into the back part of this year.

As Hakan mentioned we feel very comfortable with our ability to achieve results that are above our bank covenants and continue to position us for growth. So once again thank you for joining us..

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..