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Performant Financial Corporation Announces Financial Results for Third Quarter 2021

11/09/2021

LIVERMORE, Calif.--(BUSINESS WIRE)-- Performant Financial Corporation (Nasdaq: PFMT), (the "Company"), a leading provider of technology-enabled audit, recovery, and related analytics services in the United States with a focus in the healthcare payment integrity services industry, today reported the following financial results for its third quarter ended September 30, 2021:

Third Quarter Financial Highlights

  • Total revenues of $28.6 million, compared to revenues of $36.2 million in the prior year period.
  • Net loss of approximately $1.7 million, or $(0.03) per diluted share, compared to net income of $2.0 million, or $0.04 per diluted share, in the prior year period.
  • Adjusted net income was $0.1 million, or $0.00 per diluted share, compared to adjusted net income of $3.2 million or $0.06 per diluted share in the prior year period.
  • Adjusted EBITDA of $2.7 million, compared to $3.8 million in the prior year period.

Third Quarter 2021 Results

Total revenues in the third quarter were $28.6 million, a decrease of $7.6 million, or 21% from revenues of $36.2 million in the prior year period. Healthcare revenues in the third quarter of 2021 were $20.0 million, an increase of $2.4 million, or 14%, from revenues of $17.6 million in the prior year period. Within Healthcare, claims-based services revenue in the third quarter of 2021 was $7.3 million, while revenue from eligibility-based services in the third quarter was $12.7 million.

Recovery revenues in the third quarter were $5.5 million, a decrease of $9.9 million, or 64%, from revenues of $15.4 million in the prior year period. Revenues from our Customer Care / Outsourced Services in the third quarter were $3.1 million, a decrease of $0.1 million, or 3%, from revenues of $3.2 million in the prior year period.

Net loss for the third quarter was $1.7 million, or $(0.03) per share on a diluted basis, compared to net income of $2.0 million, or $0.04 per share on a diluted basis, in the prior year period. Adjusted net income for the third quarter was $0.1 million, or $0.00 per share on a diluted basis, compared to adjusted net income of $3.2 million, or $0.06 per diluted share, in the prior year period. Adjusted EBITDA for the third quarter was $2.7 million as compared to $3.8 million in the prior year period.

As of September 30, 2021, the Company had cash, cash equivalents, and restricted cash of approximately $53.5 million.

Equity Offering

On August 20, 2021, the Company completed a registered public offering of 12,103,750 shares of common stock, which resulted in the Company receiving net proceeds of approximately $42.6 million. The Company intends to use the net proceeds from this offering for working capital and other general corporate purposes, which may include the repayment of outstanding indebtedness.

Business Commentary and Outlook

“Our third quarter showcased the strength of our technology platform and demonstrated our ability to continue to increase our healthcare market share by winning business away from legacy providers, despite a challenging operating environment. From a macro perspective, core hospital utilization rates have still not returned to pre-COVID levels, and the delays that have impacted the healthcare industry are showing flow-down impact on our operations. In light of these delays amongst other movements we've updated our 2021 healthcare revenue guidance to a range of $77 - $80 million with nearly double digit EBITDA for the full year,” stated Lisa Im, CEO of Performant.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share. 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 income (loss) to net income (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 income (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 income (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 income (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.

Earnings Conference Call

The Company will hold a conference call to discuss its third quarter 2021 results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company’s website at investors.performantcorp.com. The conference call is also available by dialing 877-344-8082 (domestic) or 213-992-4618 (international).

A replay of the call will be available on the Company's website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 147424. The telephonic replay will be available approximately three hours after the call, through November 16, 2021.

About Performant Financial Corporation

Performant provides technology-enabled audit, recovery, and analytics services in the United States with a focus in the healthcare payment integrity industry. Performant works with healthcare payers through claims auditing and eligibility-based (also known as coordination-of-benefits) services to identify improper payments. The Company engages clients in both government and commercial markets. The Company also has a call center which serves clients with complex consumer engagement needs. 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.

Powered by a proprietary analytic platform and workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.

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 revenues, net income (loss), and adjusted EBITDA in 2020 and beyond. 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, the material adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition as well as on the business operations and financial performance of many of our customers, that the Company may not have sufficient cash flows from operations 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 incurring 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, 2020 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.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share amounts)

 

 

September 30,
2021

 

December 31,
2020

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

51,323

 

 

$

16,043

 

Restricted cash

2,203

 

 

2,253

 

Trade accounts receivable, net of allowance for doubtful accounts of $49 and $49, respectively

18,203

 

 

23,216

 

Contract assets

4,950

 

 

4,466

 

Prepaid expenses and other current assets

2,539

 

 

3,784

 

Income tax receivable

3,453

 

 

4,758

 

Total current assets

82,671

 

 

54,520

 

Property, equipment, and leasehold improvements, net

16,280

 

 

17,497

 

Identifiable intangible assets, net

 

 

689

 

Goodwill

47,372

 

 

47,372

 

Right-of-use assets

3,630

 

 

5,043

 

Other assets

986

 

 

1,106

 

Total assets

$

150,939

 

 

$

126,227

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current maturities of notes payable to related party, net of unamortized debt issuance costs of $4,500 and $906, respectively

$

47,925

 

 

$

59,957

 

Accrued salaries and benefits

5,060

 

 

8,799

 

Accounts payable

829

 

 

407

 

Other current liabilities

3,295

 

 

3,841

 

Deferred revenue

 

 

867

 

Estimated liability for appeals, disputes, and refunds

2,254

 

 

1,014

 

Lease liabilities

2,105

 

 

2,327

 

Total current liabilities

61,468

 

 

77,212

 

Notes payable to related party, net of current portion and unamortized debt issuance costs of $0 and $0, respectively

 

 

 

Lease liabilities

2,029

 

 

3,442

 

Other liabilities

3,055

 

 

3,593

 

Total liabilities

66,552

 

 

84,247

 

Commitments and contingencies (note 3 and note 4)

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value. Authorized, 500,000 shares at September 30, 2021 and December 31, 2020 respectively; issued and outstanding 69,144 and 54,764 shares at September 30, 2021 and December 31, 2020, respectively

7

 

 

5

 

Additional paid-in capital

132,990

 

 

82,933

 

Accumulated deficit

(48,610

)

 

(40,958

)

Total stockholders’ equity

84,387

 

 

41,980

 

Total liabilities and stockholders’ equity

$

150,939

 

 

$

126,227

 

 

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,

 

 

2021

 

2020

 

2021

 

2020

Revenues

 

$

28,582

 

 

$

36,228

 

 

$

92,814

 

 

$

115,901

 

Operating expenses:

 

 

 

 

 

 

 

 

Salaries and benefits

 

19,686

 

 

23,522

 

 

67,071

 

 

74,493

 

Other operating expenses

 

8,781

 

 

10,813

 

 

29,896

 

 

32,075

 

Impairment of goodwill

 

 

 

 

 

 

 

27,000

 

Total operating expenses

 

28,467

 

 

34,335

 

 

96,967

 

 

133,568

 

Income (loss) from operations

 

115

 

 

1,893

 

 

(4,153

)

 

(17,667

)

Gain on sale of certain recovery contracts

 

579

 

 

 

 

2,428

 

 

 

Interest expense

 

(2,394

)

 

(1,569

)

 

(5,866

)

 

(5,827

)

Interest income

 

 

 

6

 

 

 

 

18

 

Income (loss) before provision for (benefit from) income taxes

 

(1,700

)

 

330

 

 

(7,591

)

 

(23,476

)

Provision for (benefit from) income taxes

 

(9

)

 

(1,644

)

 

61

 

 

(5,767

)

Net income (loss)

 

$

(1,691

)

 

$

1,974

 

 

$

(7,652

)

 

$

(17,709

)

Net income (loss) per share

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

 

$

0.04

 

 

$

(0.13

)

 

$

(0.33

)

Diluted

 

$

(0.03

)

 

$

0.04

 

 

$

(0.13

)

 

$

(0.33

)

Weighted average shares

 

 

 

 

 

 

 

 

Basic

 

62,127

 

 

54,684

 

 

57,512

 

 

54,299

 

Diluted

 

62,127

 

 

54,710

 

 

57,512

 

 

54,299

 

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Nine Months Ended
September 30,

 

2021

 

2020

Cash flows from operating activities:

 

 

 

Net loss

$

(7,652

)

 

$

(17,709

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Impairment of long-lived assets

718

 

 

88

 

Impairment of goodwill

 

 

27,000

 

Depreciation and amortization

3,883

 

 

4,072

 

Right-of-use assets amortization

1,413

 

 

1,886

 

Stock-based compensation

1,963

 

 

1,997

 

Interest expense from debt issuance costs

2,453

 

 

1,145

 

Earnout mark-to-market

 

 

(162

)

Gain on sale of certain recovery contracts

(2,428

)

 

 

Changes in operating assets and liabilities:

 

 

 

Trade accounts receivable

4,270

 

 

4,756

 

Contract assets

(484

)

 

(1,523

)

Prepaid expenses and other current assets and other assets

1,245

 

 

298

 

Income tax receivable

1,305

 

 

(3,555

)

Other assets

120

 

 

 

Accrued salaries and benefits

(3,739

)

 

(1,081

)

Accounts payable

422

 

 

(1,160

)

Deferred revenue and other current liabilities

(1,363

)

 

1,664

 

Estimated liability for appeals, disputes, and refunds

1,240

 

 

15

 

Lease liabilities

(1,635

)

 

(1,907

)

Other liabilities

(445

)

 

2,168

 

Net cash provided by operating activities

1,286

 

 

17,992

 

Cash flows from investing activities:

 

 

 

Purchase of property, equipment, and leasehold improvements

(2,695

)

 

(2,862

)

Proceeds from sale of certain recovery contracts

3,171

 

 

 

Net cash provided by (used) in investing activities

476

 

 

(2,862

)

Cash flows from financing activities:

 

 

 

Repayment of notes payable

(8,438

)

 

(2,588

)

Debt issuance costs paid

(150

)

 

 

Taxes paid related to net share settlement of stock awards

(633

)

 

(260

)

Proceeds from exercise of stock options

41

 

 

 

Proceeds from public offering, net of costs

42,648

 

 

 

Net cash provided by (used in) financing activities

33,468

 

 

(2,848

)

Net increase in cash, cash equivalents and restricted cash

35,230

 

 

12,282

 

Cash, cash equivalents and restricted cash at beginning of period

18,296

 

 

4,995

 

Cash, cash equivalents and restricted cash at end of period

$

53,526

 

 

$

17,277

 

 

 

 

 

Reconciliation of the Consolidated Statements of Cash Flows to the

Consolidated Balance Sheets:

 

 

 

Cash and cash equivalents

$

51,323

 

 

$

15,655

 

Restricted cash

2,203

 

 

1,622

 

Total cash, cash equivalents and restricted cash at end of period

$

53,526

 

 

$

17,277

 

 

 

 

 

Non-cash financing activities:

 

 

 

Recognition of earnout shares issued

$

801

 

 

$

 

Recognition of warrants associated with notes payable

$

5,237

 

 

$

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid (received) for income taxes

$

(683

)

 

$

(2,280

)

Cash paid for interest

$

3,413

 

 

$

4,616

 

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Results

(In thousands, except per share amount)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(in thousands)

 

(in thousands)

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,691

)

 

$

1,974

 

 

$

(7,652

)

 

$

(17,709

)

Provision for (benefit from) income taxes

 

(9

)

 

(1,644

)

 

61

 

 

(5,767

)

Interest expense (1)

 

2,394

 

 

1,569

 

 

5,866

 

 

5,827

 

Interest income

 

 

 

(6

)

 

 

 

(18

)

Stock-based compensation

 

540

 

 

657

 

 

1,963

 

 

1,997

 

Depreciation and amortization

 

843

 

 

1,277

 

 

3,883

 

 

4,072

 

Impairment of goodwill (4)

 

 

 

 

 

 

 

27,000

 

Impairment of long-lived assets

 

 

 

 

 

636

 

 

 

Earnout mark-to-market (5)

 

 

 

 

 

 

 

(162

)

Severance expenses (6)

 

380

 

 

 

 

1,876

 

 

 

Non-core operating expenses (7)

 

775

 

 

 

 

2,683

 

 

 

Gain on sale of certain recovery contracts (8)

 

(579

)

 

 

 

(2,428

)

 

 

Adjusted EBITDA

 

$

2,653

 

 

$

3,827

 

 

$

6,888

 

 

$

15,240

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(in thousands)

 

(in thousands)

Adjusted Net Income (Loss):

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,691

)

 

$

1,974

 

 

$

(7,652

)

 

$

(17,709

)

Stock-based compensation

 

540

 

 

657

 

 

1,963

 

 

1,997

 

Amortization of intangible assets (2)

 

72

 

 

58

 

 

689

 

 

176

 

Amortization of debt issuance costs (3)

 

1,320

 

 

249

 

 

2,453

 

 

1,145

 

Impairment of goodwill (4)

 

 

 

 

 

 

 

27,000

 

Impairment of long-lived assets

 

 

 

 

 

636

 

 

 

Earnout mark-to-market (5)

 

 

 

 

 

 

 

(162

)

Severance expenses (6)

 

380

 

 

 

 

1,876

 

 

 

Non-core operating expenses (7)

 

775

 

 

 

 

2,683

 

 

 

Gain on sale of certain recovery contracts (8)

 

(579

)

 

 

 

(2,428

)

 

 

Tax adjustments (9)

 

(690

)

 

265

 

 

(2,165

)

 

(8,293

)

Adjusted net income (loss)

 

$

127

 

 

$

3,203

 

 

$

(1,945

)

 

$

4,154

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(in thousands)

 

(in thousands)

Adjusted Net Income (Loss) Per Diluted Share:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,691

)

 

$

1,974

 

 

$

(7,652

)

 

$

(17,709

)

Plus: Adjustment items per reconciliation of adjusted net income (loss)

 

1,818

 

 

1,229

 

 

5,707

 

 

21,863

 

Adjusted net income (loss)

 

$

127

 

 

$

3,203

 

 

$

(1,945

)

 

$

4,154

 

Adjusted net income (loss) per diluted share

 

$

 

 

$

0.06

 

 

$

(0.03

)

 

$

0.08

 

Diluted average shares outstanding (10)

 

67,948

 

 

54,710

 

 

57,512

 

 

54,363

 

(1)

Represents interest expense and amortization of debt issuance costs related to our Credit Agreement.

(2)

Represents amortization of intangibles related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004.

(3)

Represents amortization of debt issuance costs related to our Credit Agreement.

(4)

Represents a noncash goodwill impairment charge in 2020 mainly due to the decrease of our market capitalization in the first half of 2020.

(5)

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.

(6)

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

(7)

Represents professional fees related to strategic corporate development activities.

(8)

Represents gain on the sale of certain non-healthcare recovery contracts in 2021.

(9)

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

(10)

While net loss for the three months ended September 30, 2021 is ($1,691), the computation of adjusted net income (loss) results in adjusted net income of $127. Therefore, the calculation of the adjusted earnings per diluted share for the three months ended September 30, 2021 includes dilutive common share equivalents of 5,821 added to the basic weighted average shares of 62,127. While net income (loss) for the nine months ended September 30, 2020 was ($17,709), the computation of adjusted net income (loss) results in adjusted net income of $4,154. Therefore, the calculation of the adjusted net income per diluted share for the nine months ended September 30, 2020 includes dilutive common share equivalents of 64 added to the basic weighted average shares of 54,299.

 

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Results

(In thousands, except per share amount)

(Unaudited)

We are providing the following historical breakdown of the quarterly and annual revenue contributions under the new contribution breakdowns of our healthcare revenue results for the years ended December 31, 2019 and December 31, 2020, and six months ended June 30, 2021:

 

 

For the Three Months Ended

 

For the Year Ended

 

 

March 31, 2019

 

June 30, 2019

 

September 30, 2019

 

December 31, 2019

 

December 31, 2019

 

 

(in thousands)

Eligibility-based

 

$

7,742

 

 

$

7,042

 

 

$

8,005

 

 

$

9,987

 

 

$

32,776

 

Claims-based

 

 

1,278

 

 

 

2,221

 

 

 

2,752

 

 

 

4,301

 

 

 

10,552

 

Healthcare Total

 

 

9,020

 

 

 

9,263

 

 

 

10,757

 

 

 

14,288

 

 

 

43,328

 

Recovery

 

 

21,375

 

 

 

22,107

 

 

 

20,936

 

 

 

25,208

 

 

 

89,626

 

Customer Care /
Outsourced Services

 

 

4,481

 

 

 

4,460

 

 

 

4,210

 

 

 

4,327

 

 

 

17,478

 

Total

 

$

34,876

 

 

$

35,830

 

 

$

35,903

 

 

$

43,823

 

 

$

150,432

 

 

 

For the Three Months Ended

 

For the Year Ended

 

 

March 31, 2020

 

June 30, 2020

 

September 30, 2020

 

December 31, 2020

 

December 31, 2020

 

 

(in thousands)

Eligibility-based

 

$

10,949

 

 

$

11,292

 

 

$

13,480

 

 

$

14,126

 

 

$

49,847

 

Claims-based

 

 

6,575

 

 

 

3,301

 

 

 

4,086

 

 

 

4,739

 

 

 

18,701

 

Healthcare Total

 

 

17,524

 

 

 

14,593

 

 

 

17,566

 

 

 

18,865

 

 

 

68,548

 

Recovery

 

 

24,265

 

 

 

16,167

 

 

 

15,443

 

 

 

17,521

 

 

 

73,396

 

Customer Care /
Outsourced Services

 

 

4,099

 

 

 

3,025

 

 

 

3,219

 

 

 

3,650

 

 

 

13,993

 

Total

 

$

45,888

 

 

$

33,785

 

 

$

36,228

 

 

$

40,036

 

 

$

155,937

 

 

 

For the Three Months Ended

For the Nine Months
Ended

 

 

March 31, 2021

 

June 30, 2021

 

September 30, 2021

 

September 30, 2021

 

 

(in thousands)

Eligibility-based

 

$

7,911

 

 

$

11,577

 

 

$

12,727

 

 

$

32,215

 

Claims-based

 

 

5,375

 

 

 

7,025

 

 

 

7,280

 

 

 

19,680

 

Healthcare Total

 

 

13,286

 

 

 

18,602

 

 

 

20,007

 

 

 

51,895

 

Recovery

 

 

14,491

 

 

 

11,091

 

 

 

5,490

 

 

 

31,072

 

Customer Care /
Outsourced Services

 

 

3,613

 

 

 

3,149

 

 

 

3,085

 

 

 

9,847

 

Total

 

$

31,390

 

 

$

32,842

 

 

$

28,582

 

 

$

92,814

 

 

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

Source: Performant Financial Corporation

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