×

PRGX Global, Inc. Announces Third Quarter 2015 Financial Results

ATLANTA, Oct. 27, 2015 (GLOBE NEWSWIRE) -- PRGX Global, Inc. (Nasdaq:PRGX), the world’s leading provider of accounts payable recovery audit services, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2015.

“After two quarters of solid Adjusted EBITDA performance in 2015, we experienced several challenges which impacted our third quarter financial results. However, our core recovery audit business remains strong as we continue to build and invest in our growth platforms,” said Ron Stewart, president and chief executive officer.

“While claims production in the core business increased year-over-year, we experienced delays in converting claims to revenue. Additionally, a large client bankruptcy and lags in onboarding several new clients impacted our revenue for the quarter. The EBITDA impact of this revenue decline was partially offset by our consistently improving cost management performance,” continued Mr. Stewart.

“We are encouraged by the meaningful engagements underway in all three of our growth platforms and the other significant adjacent services opportunities under development with several of our large clients. In anticipation of significant future revenue streams we invested approximately $1.8 million in these services during the quarter,” concluded Mr. Stewart.

Consolidated Results for the Three Months Ended September 30, 2015

Consolidated revenue for the third quarter of 2015 was $33.9 million, compared to $43.0 million for the same period last year, a decrease of 21.2%. Adjusted for changes in foreign exchange rates, consolidated third quarter 2015 revenue decreased 15.7% compared to the same period in 2014. Excluding the Chicago-based consulting business divested in October 2014 and the Healthcare Claims Recovery Audit (“HCRA”) business, which the Company is in the process of exiting, and adjusted for changes in foreign exchange rates, consolidated third quarter 2015 revenue decreased 13.7% compared to the same period in 2014.

Total operating expenses for the third quarter of 2015 were $34.6 million, compared to $41.5 million, in the same period last year, a decrease of $6.9 million, which represents a 16.6% improvement. This decrease in total operating expenses was primarily driven by improving operational processes while right-sizing the Company’s cost structure.

Total cost of revenue for the third quarter of 2015 was $24.4 million, or 71.9% of revenue, compared to $28.7 million, or 66.7% of revenue, in the same period last year, for a 7.8% increase as a percentage of revenue.

SG&A expenses for the third quarter of 2015 were $8.5 million, compared to $10.5 million in same period last year, an improvement of 19.1%.

Consolidated net loss for the third quarter of 2015 was $(3.4) million, or $(0.14) per basic and diluted share, compared to a net loss of $(0.2) million, or $(0.01) per basic and diluted share, for the same period in 2014. Included in the third quarter 2015 net loss is $0.6 million of foreign currency transaction losses on intercompany balances, compared to $1.2 million of such losses for the same period in 2014. Also included in the third quarter 2015 net loss is a non-cash loss of $1.6 million on the sale of certain non-core assets related to a document service offering purchased as part of the Business Strategy, Inc. acquisition in 2011.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the third quarter of 2015 was $3.3 million, or 9.7% of revenue, compared to Adjusted EBITDA of $5.6 million, or 13.1% of revenue, in the third quarter 2014. Improvements in the Company’s cost management performance partially offset the impact of the decline in consolidated revenue on Adjusted EBITDA. 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.

Net cash provided by operating activities for the third quarter of 2015 was $4.9 million, compared to $1.3 million in the third quarter of the prior year.

Consolidated Results for the Nine Months Ended September 30, 2015

Consolidated revenue for the nine months ended September 30, 2015 was $104.3 million, compared to $122.9 million for the same period last year, a decrease of 15.1%. Adjusted for changes in foreign exchange rates, consolidated revenue for the nine months ended September 30, 2015 decreased 9.6% compared to the same period in 2014. Excluding the Chicago-based consulting business divested in October 2014 and HCRA, and adjusted for changes in foreign exchange rates, consolidated revenue for the nine months ended September 30, 2015 decreased 6.3% compared to the same period in 2014.

Total operating expenses for the nine months ended September 30, 2015 were $105.0 million, compared to $126.4 million in the same period last year, a decrease of $21.4 million, which represents a 16.9% improvement.

Total cost of revenue for the nine months ended September 30, 2015 was $73.1 million, or 70.0% of revenue, compared to $87.5 million, or 71.2% of revenue, in the same period last year, for a 1.7% improvement as a percentage of revenue.

SG&A expenses for the nine months ended September 30, 2015 were $26.0 million, compared to $31.5 million in same period last year, an improvement of 17.4%.

Consolidated net loss for the nine months ended September 30, 2015 was $(5.3) million, or $(0.20) per basic share and diluted share, compared to a net loss of $(5.4) million, or $(0.18) per basic and diluted share, for the same period in 2014. Included in the net loss for the nine months ended September 30, 2015 is $1.9 million of foreign currency transaction losses on intercompany balances, compared to $1.1 million of such losses for the same period in 2014. Also included in the net loss for the nine months ended September 30, 2015, is the previously mentioned non-cash net loss of $1.6 million on the sale of certain non-core assets related to a document service offering purchased as part of the Business Strategy, Inc. acquisition in 2011.

Adjusted EBITDA for the nine months ended September 30, 2015 was $11.3 million, or 10.8% of revenue, compared to Adjusted EBITDA of $9.9 million, or 8.1% of revenue, in the same period in the prior year. This represents a 34.2% year-over-year improvement in nine month Adjusted EBITDA as a percentage of revenue. Schedule 3 attached to this press release provides a reconciliation of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

Net cash provided by operating activities for the nine months ended September 30, 2015 was $12.4 million, compared to $7.1 million in the same period in the prior year.

Liquidity

At September 30, 2015, the Company had unrestricted cash and cash equivalents of $15.7 million, no borrowings against its $20.0 million revolving credit facility, and no bank debt outstanding.

Stock Repurchase Program

During the third quarter of 2015 the Company repurchased 1.7 million shares of its outstanding common stock for an aggregate cost of $6.9 million completing the previously announced $40 million repurchase program. Since the February 2014 announcement of the Company’s stock repurchase program, the Company has repurchased 7.5 million shares, or 25.0% of its common stock outstanding on the date of the announcement. Earlier this month, the Company’s Board of Directors approved a $10 million increase in the program and extended the duration of the program to December 31, 2016. As of October 23, 2015, the Company had 22.9 million shares of common stock outstanding.

Third 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 third quarter 2015 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 62978652.

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 January 31, 2016. 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. 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 and growth prospects, the strength of the Company’s core recovery audit business, and the Company’s investments in, and opportunities associated with, its growth platforms. 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 13, 2015. 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 Nine Months
Ended September 30, Ended September 30,
2015 2014 2015 2014
Revenue $ 33,923 $ 42,988 $ 104,344 $ 122,870
Operating expenses:
Cost of revenue 24,387 28,681 73,085 87,457
Selling, general and administrative expenses 8,487 10,492 26,043 31,505
Depreciation of property and equipment 1,262 1,428 3,858 4,696
Amortization of intangible assets 517 895 2,017 2,700
Total operating expenses 34,653 41,496 105,003 126,358
Operating income (loss) (730) 1,492 (659) (3,488)
Foreign currency transaction (gains) losses on short-term intercompany balances 654 1,221 1,930 1,073
Interest expense (income), net (8) (44) (103) (33)
Other (income) loss 1,612 - 1,612 -
Income (loss) before income taxes (2,988) 315 (4,098) (4,528)
Income tax expense 421 554 1,172 853
Net income (loss)$ (3,409) $ (239) $ (5,270) $ (5,381)
Basic earnings (loss) per common share$ (0.14) $ (0.01) $ (0.20) $ (0.18)
Diluted earnings (loss) per common share$ (0.14) $ (0.01) $ (0.20) $ (0.18)
Weighted average common shares outstanding:
Basic 25,167 27,744 26,015 29,203
Diluted 25,167 27,744 26,015 29,203


SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
September 30, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 15,673 $ 25,735
Restricted cash 98 53
Receivables:
Contract receivables, net 25,543 35,182
Employee advances and miscellaneous receivables, net 1,781 1,993
Total receivables 27,324 37,175
Prepaid expenses and other current assets 3,141 3,421
Total current assets 46,236 66,384
Property and equipment, net 11,340 12,220
Goodwill 11,589 13,036
Intangible assets, net 7,131 9,439
Deferred income taxes 234 36
Other assets 1,419 1,667
Total assets $ 77,949 $ 102,782
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,437 $ 7,397
Accrued payroll and related expenses 12,103 15,415
Refund liabilities and deferred revenue 6,047 7,566
Other current liabilities 254 -
Total current liabilities 24,841 30,378
Other long-term liabilities 1,934 1,418
Total liabilities 26,775 31,796
Shareholders' equity:
Common stock 229 268
Additional paid-in capital 576,256 590,067
Accumulated deficit (526,182) (520,912)
Accumulated other comprehensive income 871 1,563
Total shareholders' equity 51,174 70,986
Total liabilities and shareholders' equity $ 77,949 $ 102,782


SCHEDULE 3
PRGX Global, Inc. and Subsidiaries
Reconciliation of Net Income (Loss) to EBIT, EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2015 2014 2015 2014
Reconciliation of net loss to EBIT, EBITDA and Adjusted EBITDA:
Net income (loss) $ (3,409) $ (239) $ (5,270) $ (5,381)
Income tax expense 421 554 1,172 853
Interest expense (income), net (8) (44) (103) (33)
EBIT (2,996) 271 (4,201) (4,561)
Depreciation of property and equipment 1,262 1,428 3,858 4,696
Amortization of intangible assets 517 895 2,017 2,700
EBITDA (1,217) 2,594 1,674 2,835
Foreign currency transaction (gains) losses on short-term intercompany balances 654 1,221 1,930 1,073
Acquisition-related charges - - - 249
Transformation severance and related expenses 845 413 1,554 2,352
Loss on sale/disposal of assets 1,612 - 1,612 -
Stock-based compensation 1,381 1,405 4,530 3,409
Adjusted EBITDA $ 3,275 $ 5,633 $ 11,300 $ 9,918
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 Nine Months
Ended September 30, Ended September 30,
2015 2014 2015 2014
Cash flows from operating activities:
Net loss$ (3,409) $ (239) $ (5,270) $ (5,381)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,779 2,323 5,875 7,396
Amortization of deferred debt costs (100) 28 (100) 67
Loss on sale of assets 1,561 - 1,561 -
Stock-based compensation expense 1,381 1,405 4,530 3,409
Foreign currency transaction (gains) losses on short-term intercompany balances 654 1,221 1,930 1,073
Decrease in receivables 2,265 (2,573) 8,658 5,159
Increase (decrease) in accounts payable, accrued payroll and other accrued expenses 1,479 (987) (3,683) (4,639)
Other, primarily changes in assets and liabilities (729) 100 (1,138) 46
Net cash provided by operating activities 4,881 1,278 12,363 7,130
Cash flows from investing activities:
Purchases of property and equipment, net of disposals (972) (1,241) (3,169) (3,574)
Net cash used in investing activities (972) (1,241) (3,169) (3,574)
Cash flows from financing activities:
Repurchase of common stock (6,921) (9,002) (17,261) (20,000)
Other, net (31) 142 (266) (90)
Net cash (used in) provided by financing activities (6,952) (8,860) (17,527) (20,090)
Effect of exchange rates on cash and cash equivalents (966) (1,251) (1,729) (873)
Net (decrease) increase in cash and cash equivalents (4,009) (10,074) (10,062) (17,407)
Cash and cash equivalents at beginning of period 19,682 36,367 25,735 43,700
Cash and cash equivalents at end of period$ 15,673 $ 26,293 $ 15,673 $ 26,293


SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 Change 2015 2014 Change
Revenue
Recovery Audit Services - Americas $ 23,981 $ 28,550 $ (4,569) $ 71,748 $ 80,377 $ (8,629)
Recovery Audit Services - Europe/Asia-Pacific 8,052 10,708 (2,656) 27,307 32,792 (5,485)
Adjacent Services 1,332 3,586 (2,254) 4,290 8,150 (3,860)
Healthcare Claims Recovery Audit Services 558 144 414 999 1,551 (552)
Total $ 33,923 $ 42,988 $ (9,065) $ 104,344 $ 122,870 $ (18,526)
Cost of revenue
Recovery Audit Services - Americas $ 15,139 $ 17,074 $ 1,935 $ 45,272 $ 50,148 $ 4,876
Recovery Audit Services - Europe/Asia-Pacific 5,883 7,608 1,725 18,927 23,698 4,771
Adjacent Services 2,485 3,284 799 6,586 9,168 2,582
Healthcare Claims Recovery Audit Services 880 715 (165) 2,300 4,443 2,143
Total $ 24,387 $ 28,681 $ 4,294 $ 73,085 $ 87,457 $ 14,372
Selling, general and administrative expenses
Recovery Audit Services - Americas $ 1,810 $ 2,502 $ 692 $ 5,773 $ 8,320 $ 2,547
Recovery Audit Services - Europe/Asia-Pacific 1,322 1,610 288 4,248 5,350 1,102
Adjacent Services 129 326 197 527 1,838 1,311
Healthcare Claims Recovery Audit Services 203 540 337 630 1,717 1,087
Corporate 5,023 5,514 491 14,865 14,280 (585)
Total $ 8,487 $ 10,492 $ 2,005 $ 26,043 $ 31,505 $ 5,462
Depreciation of property and equipment
Recovery Audit Services - Americas $ 947 $ 1,111 $ 164 $ 2,895 $ 3,612 $ 717
Recovery Audit Services - Europe/Asia-Pacific 148 150 2 454 445 (9)
Adjacent Services 160 145 (15) 479 463 (16)
Healthcare Claims Recovery Audit Services 7 22 15 30 176 146
Total $ 1,262 $ 1,428 $ 166 $ 3,858 $ 4,696 $ 838
Amortization of intangible assets
Recovery Audit Services - Americas $ 437 $ 500 $ 63 $ 1,319 $ 1,501 $ 182
Recovery Audit Services - Europe/Asia-Pacific 47 299 252 600 911 311
Adjacent Services 33 96 63 98 288 190
Total $ 517 $ 895 $ 378 $ 2,017 $ 2,700 $ 683
Operating income (loss)
Recovery Audit Services - Americas $ 5,648 $ 7,363 $ (1,715) $ 16,489 $ 16,796 $ (307)
Recovery Audit Services - Europe/Asia-Pacific 652 1,041 (389) 3,078 2,388 690
Adjacent Services (1,475) (265) (1,210) (3,400) (3,607) 207
Healthcare Claims Recovery Audit Services (532) (1,133) 601 (1,961) (4,785) 2,824
Corporate (5,023) (5,514) 491 (14,865) (14,280) (585)
Total $ (730) $ 1,492 $ (2,222) $ (659) $ (3,488) $ 2,829
Adjusted EBITDA
Recovery Audit Services - Americas $ 7,133 $ 9,018 $ (1,885) $ 20,968 $ 22,419 $ (1,451)
Recovery Audit Services - Europe/Asia-Pacific 847 1,497 (650) 4,400 4,313 87
Adjacent Services (1,282) (6) (1,276) (2,793) (2,211) (582)
Healthcare Claims Recovery Audit Services (53) (1,085) 1,032 (1,248) (4,178) 2,930
Corporate (3,370) (3,791) 421 (10,027) (10,425) 398
Total $ 3,275 $ 5,633 $ (2,358) $ 11,300 $ 9,918 $ 1,382
* 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 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.


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

Source:PRGX Global, Inc.