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PRGX Global, Inc. Announces Fourth Quarter and Full Year 2014 Financial Results

ATLANTA, March 3, 2015 (GLOBE NEWSWIRE) -- PRGX Global, Inc. (Nasdaq:PRGX), the world's leading provider of accounts payable recovery audit services and the pioneer in Profit Discovery™, today announced its unaudited financial results for the fourth quarter and year ended December 31, 2014.

"The PRGX global team delivered another quarter of sequential Adjusted EBITDA growth despite continued revenue challenges in our core recovery audit business," said Ron Stewart, president and chief executive officer. "Our Q4 Adjusted EBITDA results were in line with expectations as we made solid progress on rationalizing our overall expense structure."

"In our Recovery Audit business, our claims production volume is increasing and we have a healthy backlog of new client spend to audit going into 2015; our challenge is to effectively manage rate and other pressures to maximize revenue generation," said Mr. Stewart.

"As we continued to transition the Company throughout 2014 in an effort to realign and focus on future growth opportunities, I am particularly encouraged by the traction we are gaining with clients in Contract Compliance and Adjacent Services. We have added new global clients and continue to make progress in our emerging growth offerings which leverage our best-in-class data technology platform and experience for the benefit of our clients," concluded Mr. Stewart.

Consolidated Results for the Three Months Ended December 31, 2014

Fourth quarter 2014 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) was $6.4 million, or 15.4% of revenue, compared to the fourth quarter 2013 Adjusted EBITDA of $6.9 million, or 14.9% of revenue. This represents a 3% year-over-year improvement in quarterly Adjusted EBITDA as a percentage of revenue. Compared to the third quarter 2014 Adjusted EBITDA of $5.6 million, or 13.1% of revenue, the fourth quarter 2014 Adjusted EBITDA as a percentage of revenue increased 17.4%. Schedule 3 attached to this press release provides a reconciliation of net income (loss) to each of EBIT (Earnings Before Interest and Taxes), EBITDA and Adjusted EBITDA.

Consolidated revenue for the fourth quarter of 2014 decreased 11.2% to $41.3 million compared to $46.5 million for the same period last year. Adjusted for changes in foreign exchange rates, consolidated fourth quarter 2014 revenue decreased 8.4% compared to the same period in 2013.

Total cost of revenue for the fourth quarter of 2014 was $28.5 million, or 69.0% of revenue, compared to $30.2 million, or 65.0% of revenue, in the same period last year. This increase in cost of revenue as a percentage of revenue was primarily driven by lower revenue in the fourth quarter of 2014 coupled with continued investment in new growth platforms. On a constant dollar basis, adjusted for changes in foreign exchange rates, total cost of revenue for the fourth quarter of 2014 improved approximately $0.7 million, compared to the third quarter of 2014. SG&A expenses for the fourth quarter of 2014 decreased 33.6% to $9.3 million, compared to $14.0 million in the same period last year. Depreciation and amortization expenses were $2.4 million in the fourth quarter of 2014, compared to $3.3 million in the prior year fourth quarter. There were no impairment charges during the fourth quarter of 2014, whereas there were $4.2 million in impairment charges for the fourth quarter of 2013 due to the impairment of certain long-lived assets.

Net loss for the fourth quarter of 2014 was $(2.1) million, or $(0.08) per basic and diluted share, compared to a net loss of $(6.4) million, or $(0.22) per basic and diluted share, for the same period in 2013.

Net cash provided by operating activities for the fourth quarter of 2014 was $2.9 million, compared to $8.1 million in the fourth quarter of the prior year.

Consolidated Results for the Year Ended December 31, 2014

Consolidated revenue for the year ended December 31, 2014 decreased 15.9% to $164.2 million, compared to $195.2 million in the prior year. Excluding the decrease in Healthcare Claims Recovery Audit Services (HCRA) revenue, which represented approximately $14.3 million of the year-over-year change, the decrease was 9.4%. On a constant dollar basis, adjusted for changes in foreign exchange rates, consolidated revenue for the year ended December 31, 2014 decreased 15.1% compared to the year ended December 31, 2013 and excluding the HCRA revenue decreased 8.6%.

Total cost of revenue for the year ended December 31, 2014 was $116.0 million, a reduction of $10.1 million compared to $126.1 million in 2013. As a percentage of revenue, cost of revenue was 70.6% for the year ended December 31, 2014, compared to 64.6% in the prior year. The largest contributors to this increase in the cost of revenue as a percentage of revenue were the decline in revenue in the Recovery Audit Services segments and reduced auditing under the Medicare RAC program. SG&A expenses for the year ended December 31, 2014 were $40.8 million, compared to $49.2 million in the same period in the prior year, an improvement of $8.4 million. Depreciation and amortization expenses were $9.7 million for the year ended December 31, 2014, compared to $13.2 million in the prior year.

Adjusted EBITDA for the year ended December 31, 2014 was $16.3 million or 9.9% of revenue, compared to $29.4 million or 15.0% of revenue for 2013, a decline of $13.1 million, of which $5.0 million is attributable to the HCRA segment.

Net loss for the year ended December 31, 2014 was $(7.5) million, or $(0.26) per basic and diluted share, compared to a net loss of $(0.2) million, or $(0.01) per basic and diluted share in the prior year.

Net cash provided by operating activities for the year ended December 31, 2014 was $10.0 million compared to $18.4 million in the prior year.

Liquidity

As of December 31, 2014, the Company had unrestricted cash and cash equivalents of $25.7 million, with $10.2 million held in the U.S. and the remainder held outside the U.S. The Company has no borrowings against its revolving credit facility and no debt outstanding.

Stock Repurchase Program

During the fourth quarter of 2014, the Company repurchased approximately 0.5 million shares of its outstanding common stock for an aggregate cost of $2.7 million. Since the February 2014 announcement of the Company's stock repurchase program through February 27, 2015, the Company has repurchased 4.2 million shares, or 14.1% of its common stock outstanding as of the date of the announcement. As of February 27, 2015, the Company had 26.1 million shares of common stock outstanding.

Fourth Quarter Earnings Call

As previously announced, management will hold a conference call later this morning at 8:30 AM (Eastern time) to discuss the Company's fourth quarter 2014 financial results. To access the conference call, listeners in the U.S. and Canada should dial (877) 755-7423 at least 5 minutes prior to the start of the conference. Listeners outside the U.S. and Canada should dial (678) 894-3069. To be admitted to the call, listeners should use passcode 78920789.

This teleconference will also be audiocast on the Internet at www.prgx.com (click on "Events & Presentations" under "Investors"). A replay of the audiocast will be available at the same location on www.prgx.com beginning approximately two hours after the conclusion of the live audiocast, extending through March 31, 2015. Please note that the Internet audiocast is "listen-only." Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded from www.microsoft.com/windows/mediaplayer.

About PRGX Global, Inc.

Headquartered in Atlanta, Georgia, PRGX Global, Inc. is the world's leading provider of accounts payable recovery audit services. With over 1,400 employees, the Company operates and serves clients in more than 30 countries and provides its services to over 75% of the top 20 global retailers. PRGX is also pioneering Profit Discovery, a unique combination of audit, analytics and advisory services that improves client financial performance. For additional information, please visit PRGX at www.prgx.com.

Forward-Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company's overall condition, growth initiatives and prospects, the Company's claims production volume and expectations regarding backlog of spend to audit, the Company's efforts to rationalize its expense structure, and the long term business objectives for the Company. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. Risks that could affect the Company's future performance include revenue that does not meet expectations or justify costs incurred, the Company's ability to develop material sources of new revenue in addition to revenue from its core recovery audit services, changes in the market for the Company's services, the Company's ability to retain and attract qualified personnel, changes to Medicare and Medicaid recovery audit contractor programs and the effects of the Company's decision to withdraw from the Medicare RAC rebid process, the Company's ability to integrate recent and future acquisitions, uncertainty in the credit markets, the Company's ability to maintain compliance with its financial covenants, client bankruptcies, loss of major clients, and other risks generally applicable to the Company's business. For a discussion of other risk factors that may impact the Company's business, please see the Company's filings with the Securities and Exchange Commission, including its Form 10-K filed on March 14, 2014. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

Non-GAAP Financial Measures

EBIT, EBITDA and Adjusted EBITDA are all "non-GAAP financial measures" presented as supplemental measures of the Company's performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating its performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company's secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company's results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that, as described above, the adjustments may vary from period to period and in the future the Company will incur expenses such as those used in calculating these measures. The Company's presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. Schedule 3 to this press release provides a reconciliation of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

SCHEDULE 1
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Twelve Months
Ended December 31, Ended December 31,
2014 2013 2014 2013
Revenue $ 41,322 $ 46,507 $164,192 $195,216
Operating expenses:
Cost of revenue 28,502 30,239 115,959 126,102
Selling, general and administrative expenses 9,283 13,974 40,788 49,200
Depreciation of property and equipment 1,520 2,162 6,216 8,231
Amortization of intangible assets 831 1,185 3,531 4,997
Impairment charges -- 4,207 -- 4,207
Total operating expenses 40,136 51,767 166,494 192,737
Operating income (loss) 1,186 (5,260) (2,302) 2,479
Foreign currency transaction (gains) losses on short-term intercompany balances 930 41 2,003 (13)
Interest expense (income), net (44) 12 (77) (77)
Other (income) loss 57 -- 57 --
Income (loss) before income taxes 243 (5,313) (4,285) 2,569
Income tax expense 2,388 1,084 3,241 2,755
Net income (loss) $ (2,145) $ (6,397) $ (7,526) $ (186)
Basic earnings (loss) per common share $ (0.08) $ (0.22) $ (0.26) $ (0.01)
Diluted earnings (loss) per common share $ (0.08) $ (0.22) $ (0.26) $ (0.01)
Weighted average common shares outstanding:
Basic 27,237 29,447 28,707 29,169
Diluted 27,237 29,447 28,707 29,169
SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
December 31, December 31,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 25,735 $ 43,700
Restricted cash 53 57
Receivables:
Contract receivables, net 35,182 38,079
Employee advances and miscellaneous receivables, net 1,993 2,242
Total receivables 37,175 40,321
Prepaid expenses and other current assets 3,421 3,917
Total current assets 66,384 87,995
Property and equipment, net 12,220 13,994
Goodwill 13,036 13,686
Intangible assets, net 9,439 13,582
Deferred income taxes 36 1,701
Other assets 1,667 1,871
Total assets $ 102,782 $ 132,829
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 7,397 $ 10,809
Accrued payroll and related expenses 15,415 15,415
Refund liabilities and deferred revenue 7,566 8,109
Business acquisition obligations -- 3,156
Total current liabilities 30,378 37,489
Other long-term liabilities 1,418 1,512
Total liabilities 31,796 39,001
Shareholders' equity:
Common stock 268 294
Additional paid-in capital 590,067 604,806
Accumulated deficit (520,912) (513,386)
Accumulated other comprehensive income 1,563 2,114
Total shareholders' equity 70,986 93,828
Total liabilities and shareholders' equity $ 102,782 $ 132,829
SCHEDULE 3
PRGX Global, Inc. and Subsidiaries
Reconciliation of Net Income (Loss) to EBIT, EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
Three Months Twelve Months
Ended December 31, Ended December 31,
2014 2013 2014 2013
Reconciliation of net income (loss) to EBIT, EBITDA and Adjusted EBITDA:
Net income (loss) $ (2,145) $ (6,397) $ (7,526) $ (186)
Income tax expense 2,388 1,084 3,241 2,755
Interest expense (income), net (44) 12 (77) (77)
EBIT 199 (5,301) (4,362) 2,492
Depreciation of property and equipment 1,520 2,162 6,216 8,231
Amortization of intangible assets 831 1,185 3,531 4,997
EBITDA 2,550 (1,954) 5,385 15,720
Impairment charges -- 4,207 -- 4,207
Foreign currency transaction (gains) losses on short-term intercompany balances 930 41 2,003 (13)
Acquisition-related charges -- 371 249 602
Transformation severance and related expenses 1,698 1,766 4,050 2,544
Other (income) loss 57 -- 57 --
Stock-based compensation 1,123 2,517 4,532 6,294
Adjusted EBITDA $ 6,358 $ 6,948 $ 16,276 $ 29,354
EBIT, EBITDA and Adjusted EBITDA are all "non-GAAP financial measures" presented as supplemental measures of our performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating the Company's performance over time, and that the rating agencies and a number of lenders use EBIT, EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company's secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
SCHEDULE 4
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Months Twelve Months
Ended December 31, Ended December 31,
2014 2013 2014 2013
Cash flows from operating activities:
Net income (loss) $ (2,145) $ (6,397) $ (7,526) $ (186)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Impairment charges -- 4,207 -- 4,207
Depreciation and amortization 2,351 3,347 9,747 13,228
Amortization of deferred debt costs 37 56 104 193
Loss on sale of assets 57 -- 57 --
Stock-based compensation expense 1,123 2,517 4,532 6,294
Foreign currency transaction (gains) losses on short-term intercompany balances 930 41 2,003 (13)
Decrease (increase) in receivables (4,232) 4,894 927 6,815
Increase (decrease) in accounts payable, accrued payroll and other accrued expenses 1,166 318 (3,473) (9,895)
Other, primarily changes in assets and liabilities 3,630 (854) 3,676 (2,219)
Net cash provided by operating activities 2,917 8,129 10,047 18,424
Cash flows from investing activities:
Business (acquisitions) divestitures 1,100 -- 1,100 --
Purchases of property and equipment, net of disposals (1,135) (2,331) (4,709) (6,875)
Net cash (used in) provided by investing activities (35) (2,331) (3,609) (6,875)
Cash flows from financing activities:
Net proceeds from issuance of common stock -- -- -- 4,118
Repurchase of common stock (2,685) -- (22,685) --
Other, net 33 (3,959) (57) (8,743)
Net cash used in financing activities (2,652) (3,959) (22,742) (4,625)
Effect of exchange rates on cash and cash equivalents (788) (546) (1,661) (1,030)
Net (decrease) increase in cash and cash equivalents (558) 1,293 (17,965) 5,894
Cash and cash equivalents at beginning of period 26,293 42,407 43,700 37,806
Cash and cash equivalents at end of period $ 25,735 $ 43,700 $ 25,735 $ 43,700
SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2014 2013 Change 2014 2013 Change
Revenue
Recovery Audit Services - Americas $ 26,156 $ 30,650 $ (4,494) $ 106,533 $ 118,649 $ (12,116)
Recovery Audit Services - Europe/Asia-Pacific 11,527 12,640 (1,113) 44,319 46,436 (2,117)
Adjacent Services 2,550 2,478 72 10,700 13,183 (2,483)
Healthcare Claims Recovery Audit Services 1,089 739 350 2,640 16,948 (14,308)
Total $ 41,322 $ 46,507 $ (5,185) $ 164,192 $ 195,216 $ (31,024)
Cost of revenue
Recovery Audit Services - Americas $ 18,015 $ 16,722 $ (1,293) $ 68,163 $ 65,977 $ (2,186)
Recovery Audit Services - Europe/Asia-Pacific 7,405 8,742 1,337 31,103 34,945 3,842
Adjacent Services 2,456 2,750 294 11,624 11,931 307
Healthcare Claims Recovery Audit Services 626 2,025 1,399 5,069 13,249 8,180
Total $ 28,502 $ 30,239 $ 1,737 $ 115,959 $ 126,102 $ 10,143
Selling, general and administrative expenses
Recovery Audit Services - Americas $ 1,891 $ 3,414 $ 1,523 $ 10,211 $ 14,140 $ 3,929
Recovery Audit Services - Europe/Asia-Pacific 1,479 1,979 500 6,829 5,884 (945)
Adjacent Services 286 813 527 2,124 3,312 1,188
Healthcare Claims Recovery Audit Services 490 641 151 2,207 3,057 850
Corporate 5,137 7,127 1,990 19,417 22,807 3,390
Total $ 9,283 $ 13,974 $ 4,691 $ 40,788 $ 49,200 $ 8,412
Depreciation of property and equipment
Recovery Audit Services - Americas $ 1,099 $ 1,479 $ 380 $ 4,711 $ 5,617 $ 906
Recovery Audit Services - Europe/Asia-Pacific 147 152 5 592 514 (78)
Adjacent Services 259 176 (83) 722 652 (70)
Healthcare Claims Recovery Audit Services 15 355 340 191 1,448 1,257
Total $ 1,520 $ 2,162 $ 642 $ 6,216 $ 8,231 $ 2,015
Amortization of intangible assets
Recovery Audit Services - Americas $ 501 $ 698 $ 197 $ 2,002 $ 2,792 $ 790
Recovery Audit Services - Europe/Asia-Pacific 284 337 53 1,195 1,508 313
Adjacent Services 46 150 104 334 697 363
Total $ 831 $ 1,185 $ 354 $ 3,531 $ 4,997 $ 1,466
Impairment charges
Recovery Audit Services - Americas $ -- $ 2,702 $ 2,702 $ -- $ 2,702 $ 2,702
Recovery Audit Services - Europe/Asia-Pacific -- -- -- -- -- --
Adjacent Services -- 71 71 -- 71 71
Healthcare Claims Recovery Audit Services -- 1,434 1,434 -- 1,434 1,434
Total $ -- $ 4,207 $ 4,207 $ -- $ 4,207 $ 4,207
Operating income (loss)
Recovery Audit Services - Americas $ 4,650 $ 5,635 $ (985) $ 21,446 $ 27,421 $ (5,975)
Recovery Audit Services - Europe/Asia-Pacific 2,212 1,430 782 4,600 3,585 1,015
Adjacent Services (497) (1,482) 985 (4,104) (3,480) (624)
Healthcare Claims Recovery Audit Services (42) (3,716) 3,674 (4,827) (2,240) (2,587)
Corporate (5,137) (7,127) 1,990 (19,417) (22,807) 3,390
Total $ 1,186 $ (5,260) $ 6,446 $ (2,302) $ 2,479 $ (4,781)
Adjusted EBITDA
Recovery Audit Services - Americas $ 7,088 $ 10,849 $ (3,761) $ 29,507 $ 39,954 $ (10,447)
Recovery Audit Services - Europe/Asia-Pacific 3,359 2,461 898 7,672 5,842 1,830
Adjacent Services (170) (1,042) 872 (2,381) (1,792) (589)
Healthcare Claims Recovery Audit Services (48) (1,844) 1,796 (4,226) 729 (4,955)
Corporate (3,871) (3,476) (395) (14,296) (15,379) 1,083
Total $ 6,358 $ 6,948 $ (590) $ 16,276 $ 29,354 $ (13,078)
* The Recovery Audit Services - Americas segment represents recovery audit services, excluding Healthcare Claims Recovery Audit Services, provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services, excluding Healthcare Claims Recovery Audit Services, provided in Europe, Asia and the Pacific region. The Adjacent Services segment (formerly known as Profit Optimization services) represents financial advisory services and business analytics services. The Healthcare Claims Recovery Audit Services segment represents recovery audit services for healthcare claims, which consist primarily of services provided under subcontracts related to the Medicare Recovery Audit Contractor program.

CONTACT: PRGX Global, Inc. investor-relations@prgx.com Phone: 770-779-3011

Source:PRGX Global, Inc.