PRGX Global, Inc. Announces Second Quarter 2015 Financial Results


ATLANTA, July 28, 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 second quarter and six months ended June 30, 2015.

“I’m pleased to report that PRGX continues to deliver strong growth in Adjusted EBITDA, which increased by 48% in the second quarter and 87% in the first half of the year compared to the same periods in 2014,” said Ron Stewart, president and chief executive officer. “This improvement was primarily attributable to our core business, where we continue to demonstrate steady progress in audit operations, coupled with improved financial discipline.”

“Our transformation program remains on track. We continue to strengthen our client relationships, invest in our growth platforms, and build out our industry-leading technology infrastructure. Combined, these initiatives further strengthen our core business while adding new service offerings that increase the value we provide our clients,” concluded Mr. Stewart.

Consolidated Results for the Three Months Ended June 30, 2015

Second quarter 2015 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) was $5.6 million, or 14.9% of revenue, compared to Adjusted EBITDA of $3.8 million, or 9.0% of revenue, in the second quarter 2014. This represents a 65.6% year-over-year improvement in quarterly 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 (Earnings Before Interest and Taxes), EBITDA and Adjusted EBITDA.

Consolidated revenue for the second quarter of 2015 was $37.3 million, compared to $42.0 million for the same period last year, a decrease of 11.2%. Adjusted for changes in foreign exchange rates, consolidated second quarter 2015 revenue decreased 5.3% 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 second quarter 2015 revenue decreased 2.8% compared to the same period in 2014.

Total operating expenses for the second quarter of 2015 were $36.4 million, compared to $43.5 million, in the same period last year, a decrease of $7.1 million, which represents a 16.3% 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 second quarter of 2015 was $24.9 million, or 66.8% of revenue, compared to $29.9 million, or 71.3% of revenue, in the same period last year, for a 6.3% improvement.  

SG&A expenses for the second quarter of 2015 were $9.4 million, compared to $11.0 million in same period last year, an improvement of 14.9%.

Consolidated net income for the second quarter of 2015 was $1.1 million, or $0.04 per basic and diluted share, compared to a net loss of $(1.5) million, or $(0.05) per basic and diluted share, for the same period in 2014. Included in the second quarter 2015 net income is $0.4 million of foreign currency transaction gains on intercompany balances, compared to $0.2 million for the same period in 2014.

Net cash provided by operating activities for the second quarter of 2015 was $2.1 million, compared to $2.9 million in the second quarter of the prior year.

Consolidated Results for the Six Months Ended June 30, 2015

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the six months ended June 30, 2015 was $8.0 million, or 11.4% of revenue, compared to Adjusted EBITDA of $4.3 million, or 5.4% of revenue, in the same period in the prior year. This represents a 111.1% year-over-year improvement in six 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 (Earnings Before Interest and Taxes), EBITDA and Adjusted EBITDA.

Consolidated revenue for the six months ended June 30, 2015 was $70.4 million, compared to $79.9 million for the same period last year, a decrease of 11.8%. Adjusted for changes in foreign exchange rates, consolidated revenue for the six months ended June 30, 2015 decreased 6.5% 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 six months ended June 30, 2015 decreased 2.5% compared to the same period in 2014.

Total operating expenses for the six months ended June 30, 2015 were $70.4 million, compared to $84.9 million in the same period last year, a decrease of $14.5 million, which represents a 17.1% improvement.

Total cost of revenue for the six months ended June 30, 2015 was $48.7 million, or 69.2% of revenue, compared to $58.8 million, or 73.6% of revenue, in the same period last year, for a 6.0% improvement as a percentage of revenue.  

SG&A expenses for the six months ended June 30, 2015 were $17.6 million, compared to $21.0 million in same period last year, an improvement of 16.2%.

Consolidated net loss for the six months ended June 30, 2015 was $(1.9) million, or $(0.07) per basic share and diluted share, compared to a net loss of $(5.1) million, or $(0.17) per basic and diluted share, for the same period in 2014. Included in the net loss for the six months ended June 30, 2015 is $1.3 million of foreign currency transaction losses on intercompany balances, compared to $0.1 million of foreign currency transaction gains on intercompany balances for the same period in 2014.

Net cash provided by operating activities for the six months ended June 30, 2015 was $7.5 million, compared to $5.8 million in the same period in the prior year.

Liquidity

At June 30, 2015, the Company had unrestricted cash and cash equivalents of $19.7 million, no borrowings against its revolving credit facility, and no bank debt outstanding.

Stock Repurchase Program

During the second quarter of 2015 the Company repurchased 1.0 million shares of its outstanding common stock for an aggregate cost of $4.8 million. From the February 2014 announcement of the Company’s current stock repurchase program through July 25, 2015, the Company has repurchased 5.8 million shares, or 19.2% of its common stock outstanding on the date of the announcement, for an aggregate cost of $33.0 million. As of July 25, 2015, the Company had 24.6 million shares of common stock outstanding.

Second 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 second 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 79207859.

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 September 30, 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 and growth prospects, the strength of the Company’s core recovery audit business, 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 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.

This news release was distributed by GlobeNewswire, www.globenewswire.com

 

SCHEDULE 1
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
            
         
 Three Months Six Months 
 Ended June 30, Ended June 30, 
  2015   2014   2015   2014  
         
Revenue $  37,289  $  41,981  $  70,421  $  79,882  
Operating expenses:        
 Cost of revenue   24,920     29,944     48,698     58,776  
 Selling, general and administrative expenses   9,387     11,037     17,556     21,013  
 Depreciation of property and equipment   1,304     1,586     2,596     3,268  
 Amortization of intangible assets   754     902     1,500     1,805  
 Total operating expenses   36,365     43,469     70,350     84,862  
            
 Operating income (loss)   924     (1,488)    71     (4,980) 
            
Foreign currency transaction (gains) losses        
 on short-term intercompany balances   (416)    (163)    1,276     (148) 
Interest expense (income), net   (53)    (43)    (95)    11  
 Income (loss) before income taxes   1,393     (1,282)    (1,110)    (4,843) 
            
Income tax expense   296     186     751     299  
            
 Net income (loss)$  1,097  $  (1,468) $  (1,861) $  (5,142) 
            
Basic earnings (loss) per common share$  0.04  $  (0.05) $  (0.07) $  (0.17) 
Diluted earnings (loss) per common share$  0.04  $  (0.05) $  (0.07) $  (0.17) 
            
Weighted average common shares outstanding:        
 Basic    26,497     29,733     26,446     29,945  
 Diluted   26,553     29,733     26,446     29,945  
            

 

  
SCHEDULE 2 
PRGX Global, Inc. and Subsidiaries 
Condensed Consolidated Balance Sheets 
(Amounts in thousands) 
(Unaudited) 
           
           
       June 30, December 31, 
        2015   2014  
           
 ASSETS
 
Current assets:       
 Cash and cash equivalents  $  19,682  $  25,735  
 Restricted cash      162     53  
 Receivables:       
  Contract receivables, net    28,535     35,182  
  Employee advances and miscellaneous receivables, net    1,630     1,993  
   Total receivables     30,165     37,175  
           
 Prepaid expenses and other current assets    4,252     3,421  
   Total current assets     54,261     66,384  
           
Property and equipment, net     11,765     12,220  
Goodwill       13,043     13,036  
Intangible assets, net     7,932     9,439  
Deferred income taxes     132     36  
Other assets      1,254     1,667  
    Total assets   $  88,387  $  102,782  
           
 LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:       
 Accounts payable and accrued expenses $  7,130  $  7,397  
 Accrued payroll and related expenses    11,508     15,415  
 Refund liabilities and deferred revenue    6,901     7,566  
 Other current liabilities     282     -   
   Total current liabilities    25,821     30,378  
           
Other long-term liabilities     1,257     1,418  
   Total liabilities     27,078     31,796  
           
Shareholders' equity:      
 Common stock      246     268  
 Additional paid-in capital     582,121     590,067  
 Accumulated deficit     (522,773)    (520,912) 
 Accumulated other comprehensive income    1,715     1,563  
   Total shareholders' equity    61,309     70,986  
           
    Total liabilities and shareholders' equity  $  88,387  $  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 Six Months
    Ended June 30, Ended June 30,
     2015   2014   2015   2014 
Reconciliation of Net Income (Loss) to         
 EBIT, EBITDA and Adjusted EBITDA:        
           
Net income (loss) $  1,097  $  (1,468) $  (1,861) $  (5,142)
           
 Income tax expense    296     186     751     299 
 Interest expense (income), net    (53)    (43)    (95)    11 
           
EBIT     1,340     (1,325)    (1,205)    (4,832)
           
 Depreciation of property and equipment    1,304     1,586     2,596     3,268 
 Amortization of intangible assets    754     902     1,500     1,805 
           
EBITDA    3,398     1,163     2,891     241 
           
 Foreign currency transaction (gains) losses        
  on short-term intercompany balances    (416)    (163)    1,276     (148)
 Acquisition-related charges    -      230     -      249 
 Transformation severance and related        
  expenses    562     1,554     708     1,939 
 Stock-based compensation    2,017     983     3,149     2,004 
           
Adjusted EBITDA $  5,561  $  3,767  $  8,024  $  4,285 
           
           
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 Six Months
    Ended June 30, Ended June 30,
     2015   2014   2015   2014 
Cash flows from operating activities:       
 Net Income (Loss)$  1,097  $  (1,468) $  (1,861) $  (5,142)
 Adjustments to reconcile net loss to net cash       
   provided by operating activities:       
   Depreciation and amortization   2,058     2,488     4,096     5,073 
   Amortization of deferred debt costs   -      23     -      39 
   Stock-based compensation expense   2,017     983     3,149     2,004 
   Foreign currency transaction (gains) losses on       
     short-term intercompany balances   (416)    (163)    1,276     (148)
   Decrease in receivables   309     500     6,393     7,732 
   Increase (decrease) in accounts payable, accrued       
     payroll and other accrued expenses   (1,729)    1,331     (5,162)    (3,652)
   Other, primarily changes in assets and liabilities   (1,278)    (754)    (409)    (54)
   Net cash provided by operating activities   2,058     2,940     7,482     5,852 
           
Cash flows from investing activities:       
 Purchases of property and equipment, net of disposals   (1,081)    (1,489)    (2,197)    (2,333)
   Net cash used in investing activities   (1,081)    (1,489)    (2,197)    (2,333)
           
Cash flows from financing activities:       
 Repurchase of common stock   (4,852)    (10,958)    (10,340)    (10,998)
 Other, net   (229)    (352)    (235)    (232)
   Net cash used in financing activities   (5,081)    (11,310)    (10,575)    (11,230)
           
Effect of exchange rates on cash and cash equivalents   398     529     (763)    378 
           
   Net decrease in cash and cash equivalents   (3,706)    (9,330)    (6,053)    (7,333)
           
Cash and cash equivalents at beginning of period   23,388     45,697     25,735     43,700 
           
Cash and cash equivalents at end of period$  19,682  $  36,367  $  19,682  $  36,367 
           

 

 
SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
              
              
   Three Months Ended Six Months Ended
   June 30, June 30,
              
    2015   2014  Change  2015   2014  Change
Revenue            
 Recovery Audit Services - Americas $  25,350  $  27,029  $  (1,679) $  47,767  $  51,827  $  (4,060)
 Recovery Audit Services - Europe/Asia-Pacific     9,950     12,382     (2,432)    19,255     22,084     (2,829)
 Adjacent Services    1,695     2,281     (586)    2,958     4,564     (1,606)
 Healthcare Claims Recovery Audit Services    294     289     5     441     1,407     (966)
 Total $  37,289  $  41,981  $  (4,692) $  70,421  $  79,882  $  (9,461)
              
Cost of revenue            
 Recovery Audit Services - Americas $  15,162  $  17,074  $  1,912  $  30,133  $  33,074  $  2,941 
 Recovery Audit Services - Europe/Asia-Pacific     6,607     8,673     2,066     13,044     16,090     3,046 
 Adjacent Services    2,342     2,849     507     4,101     5,884     1,783 
 Healthcare Claims Recovery Audit Services    809     1,348     539     1,420     3,728     2,308 
 Total $  24,920  $  29,944  $  5,024  $  48,698  $  58,776  $  10,078 
              
Selling, general and administrative expenses            
 Recovery Audit Services - Americas $  2,442  $  2,970  $  528  $  3,963  $  5,818  $  1,855 
 Recovery Audit Services - Europe/Asia-Pacific     1,360     1,936     576     2,926     3,740     814 
 Adjacent Services    198     946     748     398     1,512     1,114 
 Healthcare Claims Recovery Audit Services    202     553     351     427     1,177     750 
 Corporate    5,185     4,632     (553)    9,842     8,766     (1,076)
 Total $  9,387  $  11,037  $  1,650  $  17,556  $  21,013  $  3,457 
              
Depreciation of property and equipment            
 Recovery Audit Services - Americas $  979  $  1,245  $  266  $  1,948  $  2,501  $  553 
 Recovery Audit Services - Europe/Asia-Pacific     153     149     (4)    306     295     (11)
 Adjacent Services    162     158     (4)    319     318     (1)
 Healthcare Claims Recovery Audit Services    10     34     24     23     154     131 
 Total $  1,304  $  1,586  $  282  $  2,596  $  3,268  $  672 
              
Amortization of intangible assets            
 Recovery Audit Services - Americas $  441  $  501  $  60  $  882  $  1,001  $  119 
 Recovery Audit Services - Europe/Asia-Pacific     280     305     25     553     612     59 
 Adjacent Services    33     96     63     65     192     127 
 Total $  754  $  902  $  148  $  1,500  $  1,805  $  305 
              
Operating income (loss)            
 Recovery Audit Services - Americas $  6,326  $  5,239  $  1,087  $  10,841  $  9,433  $  1,408 
 Recovery Audit Services - Europe/Asia-Pacific     1,550     1,319     231     2,426     1,347     1,079 
 Adjacent Services    (1,040)    (1,768)    728     (1,925)    (3,342)    1,417 
 Healthcare Claims Recovery Audit Services    (727)    (1,646)    919     (1,429)    (3,652)    2,223 
 Corporate    (5,185)    (4,632)    (553)    (9,842)    (8,766)    (1,076)
 Total $  924  $  (1,488) $  2,412  $  71  $  (4,980) $  5,051 
              
Adjusted EBITDA            
 Recovery Audit Services - Americas $  7,854  $  7,443  $  411  $  13,835  $  13,401  $  434 
 Recovery Audit Services - Europe/Asia-Pacific     2,186     2,256     (70)    3,553     2,816     737 
 Adjacent Services    (831)    (1,049)    218     (1,511)    (2,205)    694 
 Healthcare Claims Recovery Audit Services    (506)    (1,362)    856     (1,195)    (3,093)    1,898 
 Corporate    (3,142)    (3,521)    379     (6,658)    (6,634)    (24)
 Total $  5,561  $  3,767  $  1,794  $  8,024  $  4,285  $  3,739 
              
* 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.
 

            

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