ATLANTA, Aug. 01, 2017 (GLOBE NEWSWIRE) -- PRGX Global, Inc. (Nasdaq:PRGX), a global leader in Recovery Audit and Spend Analytics services, today announced its unaudited financial results for the second quarter and six months ended June 30, 2017.

"We are pleased to report our fourth consecutive quarter of growth in revenue from continuing operations, delivering 10.4% growth on a year-over-year constant dollar basis.  We also continue to successfully execute on our long-term strategy of growing our core recovery audit business while expanding our client value proposition into analytics and supplier information management services. We are starting to see positive client response to our Lavante SIM™ services and signed several contracts during the quarter.  In addition, after announcing the PRGX OPTIX™ analytics suite in February, we experienced positive client traction with five active engagements in Q2. We are encouraged by the growing pipeline of opportunities with new and existing clients in our adjacent services business," said Ron Stewart, president and chief executive officer of PRGX.

"Our global recovery audit business also delivered another solid quarter, led by our global commercial recovery audit business, which achieved year-over-year organic growth of 52.4% driven by growth in every region of the world," continued Stewart.

"Based on our Q2 results and continued momentum, we remain confident that we will meet our 2017 guidance of year-over-year double digit revenue and Adjusted EBITDA growth on a constant dollar basis," concluded Stewart. 

Consolidated Results from Continuing Operations for the Three Months Ended June 30, 2017

Consolidated revenue from continuing operations for the second quarter of 2017 was $38.5 million, compared to $35.3 million for the same period last year, an increase of 9.1%.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 10.4% in the second quarter of 2017, compared to the same period in the prior year.  On a constant dollar basis, revenue from the Recovery Audit Services segments increased 11.6% in the second quarter of 2017 compared to the same period in 2016.  Second quarter 2017 revenue from the Adjacent Services segment was $1.2 million compared to $1.5 million in 2016. 

Total cost of revenue from continuing operations for the second quarter of 2017 was $25.6 million, or 66.5% of revenue, compared to $23.4 million, or 66.4% of revenue, in the same period last year. 

SG&A expenses from continuing operations for the second quarter of 2017 were $11.4 million, compared to $9.6 million in the prior year period.  The increase in SG&A expenses was primarily attributable to Lavante and C&CA operating costs that were not in the prior year, and increased stock-based compensation.

Consolidated net loss from continuing operations for the second quarter of 2017 was $0.3 million, or $0.01 per basic and diluted share, compared to a net loss of less than $0.1 million, or $0.00 per basic and diluted share, for the same period in 2016.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the second quarter of 2017 was $3.5 million, or 9.0% of revenue, compared to Adjusted EBITDA of $3.5 million, or 9.9% of revenue, in the second quarter 2016.  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 Results from Continuing Operations for the Six Months Ended June 30, 2017

Consolidated revenue from continuing operations for the six months ended June 30, 2017 was $72.1 million, compared to $66.5 million for the same period last year, an increase of 8.4%.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 9.8% in the six months ended June 30, 2017, compared to the same period in the prior year.  On a constant dollar basis, revenue from the Recovery Audit Services segments increased 8.9% in the six months ended June 30, 2017 compared to the same period in 2016.  On a constant dollar basis, revenue from the Adjacent Services segment increased 39.4% for the six months ended June 30, 2017 compared to the same period in 2016.

Total cost of revenue from continuing operations for the six months ended June 30, 2017 was $48.6 million, or 67.5% of revenue, compared to $45.1 million, or 67.8% of revenue, in the same period last year.

SG&A expenses from continuing operations for the six months ended June 30, 2017 were $22.0 million, compared to $18.5 million in the prior year period.  The increase in SG&A expenses was primarily attributable to Lavante and C&CA operating costs that were not in the prior year, and increased stock-based compensation.

Consolidated net loss from continuing operations for the six months ended June 30, 2017 was $2.2 million, or $0.10 per basic and diluted share, compared to a net loss of $0.1 million, or $0.00 per basic and diluted share, for the same period in 2016.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the six months ended June 30, 2017 was $5.6 million, or 7.8% of revenue, compared to Adjusted EBITDA of $5.5 million, or 8.3% of revenue, for the same period in the prior year.  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.

Cash Flow and Liquidity

Net cash provided by operating activities for the second quarter of 2017 was $4.6 million compared to $0.5 million in the second quarter of the prior year, and $1.3 million for the six months ended June 30, 2017 compared to $5.5 million in the same period in the prior year. 

At June 30, 2017, the Company had unrestricted cash and cash equivalents of $12.9 million, and borrowings of $13.6 million against its $35.0 million revolving credit facility.

As of July 21, 2017, the Company had approximately 22.4 million shares of common stock outstanding.

Second Quarter Earnings Call

As previously announced, management will hold a conference call later today at 5:00 PM (Eastern time) to discuss the Company's second quarter 2017 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 36852087.

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, 2017. 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

PRGX Global, Inc. is a global leader in Recovery Audit and Spend Analytics services.  With over 1,400 employees, the Company serves clients in more than 30 countries and provides its services to 75% of the top 20 global retailers and over 30% of the top 50 companies in the Fortune 500. PRGX delivers more than $1 billion in cash flow improvement for its clients each year. The creator of the recovery audit industry more than 40 years ago, PRGX continues to innovate through technology and expanded service offerings. In addition to Recovery Audit, PRGX provides Contract Compliance, Spend Analytics and Supplier Information Management services to improve clients' financial performance and manage risk. For additional information on PRGX, please visit  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 Company's execution of its business strategy, the Company's progress in integrating recent acquisitions, the level of client interest in the PRGX OPTIX analytics suite and Lavante SIM solution, and the Company's expectations regarding its ability to achieve its 2017 guidance.  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, 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 16, 2017.  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   Six Months
  Ended June 30,   Ended June 30,
    2017       2016       2017       2016  
               
Revenue   $ 38,510     $ 35,291     $ 72,079     $ 66,524  
Operating expenses:              
  Cost of revenue   25,605       23,431       48,631       45,077  
  Selling, general and administrative expenses   11,424       9,620       21,960       18,468  
  Depreciation of property and equipment   1,109       1,216       2,329       2,448  
  Amortization of intangible assets   722       395       1,444       789  
  Total operating expenses   38,860       34,662       74,364       66,782  
                     
  Operating income (loss)   (350 )     629       (2,285 )     (258 )
                     
Foreign currency transaction (gains) losses              
  on short-term intercompany balances   (957 )     196       (1,509 )     (811 )
Interest expense (income), net   48       (12 )     85       (41 )
Other (income) loss   5       18       (194 )     28  
  Income (loss) from continuing operations before income taxes   554       427       (667 )     566  
                     
Income tax expense   879       460       1,506       664  
                     
  Net income (loss) from continuing operations $ (325 )   $ (33 )   $ (2,173 )   $ (98 )
                     
Discontinued operations:              
Income (loss) from discontinued operations $ (349 )   $ (559 )   $ (685 )   $ (1,046 )
Other (income) loss   -       -       -       -  
Income tax expense (benefit)   -       -       -       -  
  Net income (loss) from discontinued operations   (349 )     (559 )     (685 )     (1,046 )
                     
  Net income (loss) $ (674 )   $ (592 )   $ (2,858 )   $ (1,144 )
               
Basic earnings (loss) per common share:              
Basic from continuing operations $ (0.01 )   $ (0.00 )   $ (0.10 )   $ (0.00 )
Basic from discontinued operations   (0.02 )     (0.03 )     (0.03 )     (0.05 )
Total basic earnings (loss) per common share $ (0.03 )   $ (0.03 )   $ (0.13 )   $ (0.05 )
                     
Diluted earnings (loss) per common share:              
Diluted from continuing operations $ (0.01 )   $ (0.00 )   $ (0.10 )   $ (0.00 )
Diluted from discontinued operations   (0.02 )     (0.03 )     (0.03 )     (0.05 )
Total diluted earnings (loss) per common share $ (0.03 )   $ (0.03 )   $ (0.13 )   $ (0.05 )
                     
Weighted average common shares outstanding:              
  Basic     22,227       21,969       22,087       22,202  
  Diluted   22,227       21,969       22,087       22,202  
                     

 
SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
                   
                   
              June 30,   December 31,
                2017       2016  
                   
      ASSETS  
Current assets:            
  Cash and cash equivalents     $ 12,870     $ 15,723  
  Restricted cash         161       47  
  Receivables:            
    Contract receivables, net     31,770       31,464  
    Employee advances and miscellaneous receivables, net     2,097       2,184  
      Total receivables       33,867       33,648  
                   
  Prepaid expenses and other current assets     4,563       3,363  
      Total current assets       51,461       52,781  
                   
Property and equipment, net       14,376       12,236  
Goodwill           22,803       13,823  
Intangible assets, net       9,560       10,998  
Deferred income taxes       2,228       2,269  
Other assets         1,140       1,367  
      Total assets     $ 101,568     $ 93,474  
                   
                   
      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:            
  Accounts payable and accrued expenses   $ 8,917     $ 7,299  
  Accrued payroll and related expenses     12,688       13,868  
  Refund liabilities and deferred revenue     9,297       9,230  
  Short-term debt         -       3,600  
  Other current liabilities       2,079       2,078  
      Total current liabilities     32,981       36,075  
                   
Refund liabilities         714       804  
Long-term debt         13,600       -  
Other long-term liabilities       2,393       4,205  
      Total liabilities       49,688       41,084  
                   
Shareholders' equity:          
  Common stock         224       218  
  Additional paid-in capital       577,754       575,118  
  Accumulated deficit       (526,091 )     (523,233 )
  Accumulated other comprehensive income (loss)     (7 )     287  
      Total shareholders' equity     51,880       52,390  
                   
      Total liabilities and shareholders' equity   $ 101,568     $ 93,474  
                   

 
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,
          2017       2016       2017       2016  
Reconciliation of net loss to EBIT, EBITDA                
  and Adjusted EBITDA:                
                     
Net income (loss)   $ (674 )   $ (592 )   $ (2,858 )   $ (1,144 )
                     
  Income tax expense     879       460       1,506       664  
  Interest expense (income), net     48       (12 )     85       (41 )
                     
EBIT       253       (144 )     (1,267 )     (521 )
                     
  Depreciation of property and equipment     1,113       1,219       2,333       2,455  
  Amortization of intangible assets     722       395       1,444       789  
                     
EBITDA     2,088       1,470       2,510       2,723  
                     
  Foreign currency transaction (gains) losses                
  on short-term intercompany balances     (957 )     196       (1,509 )     (811 )
  Other gains and losses     5       18       (194 )     28  
  Transformation severance and related                
  expenses     314       557       899       1,095  
  Stock-based compensation     1,688       1,035       3,254       1,799  
                     
Adjusted EBITDA   $ 3,138     $ 3,276     $ 4,960     $ 4,834  
                     
Adjusted EBITDA from continuing operations   $ 3,484     $ 3,500     $ 5,641     $ 5,537  
Adjusted EBITDA from discontinued operations   $ (346 )   $ (224 )   $ (681 )   $ (703 )
                     
                     
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,
          2017       2016       2017       2016  
Cash flows from operating activities:              
  Net Income (loss) $ (674 )   $ (592 )   $ (2,858 )   $ (1,144 )
       
       
  Adjustments to reconcile net loss to net cash              
    provided by operating activities:              
      Depreciation and amortization   1,833       1,600       3,777       3,244  
      Stock-based compensation expense   1,688       1,026       3,254       1,799  
      Foreign currency transaction (gains) losses on              
      short-term intercompany balances   (957 )     196       (1,509 )     (811 )
      (Increase)/Decrease in receivables   116       (816 )     2,153       2,267  
      Increase (decrease) in accounts payable, accrued              
      payroll and other accrued expenses   4,436       (692 )     282       663  
      Other, primarily changes in assets and liabilities   (1,825 )     (178 )     (3,823 )     (556 )
                                     
      Net cash provided by operating activities   4,617       544       1,276       5,462  
                     
Cash flows from investing activities:              
  Purchases of property and equipment, net of disposals   (2,549 )     (1,115 )     (4,049 )     (2,138 )
  Business Acquisition   12       -       (10,128 )     -  
      Net cash used in investing activities   (2,537 )     (1,115 )     (14,177 )     (2,138 )
                     
Cash flows from financing activities:              
  Repurchase of common stock   -       (1,034 )     -       (3,658 )
  Borrowing under line of credit   -       -       10,000      
  Other, net   222       (95 )     604       (11 )
      Net cash (used in) provided by financing activities   222       (1,129 )     10,604       (3,669 )
                     
Effect of exchange rates on cash and cash equivalents   (967 )     1,175       (556 )     397  
                     
      Net (decrease) increase in cash and cash equivalents   1,335       (525 )     (2,853 )     52  
                     
Cash and cash equivalents at beginning of period   11,535       15,699       15,723       15,122  
                     
Cash and cash equivalents at end of period $ 12,870     $ 15,174     $ 12,870     $ 15,174  
                     

 
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,
                           
      2017       2016     Change       2017       2016     Change
Revenue                        
  Recovery Audit Services - Americas $ 26,553     $ 25,122     $ 1,431       $ 50,936     $ 46,689     $ 4,247  
  Recovery Audit Services - Europe/Asia-Pacific   10,773       8,698       2,075         18,604       17,947       657  
  Adjacent Services   1,184       1,471       (287 )       2,539       1,888       651  
  Total $ 38,510     $ 35,291     $ 3,219       $ 72,079     $ 66,524     $ 5,555  
                           
Cost of revenue                        
  Recovery Audit Services - Americas $ 17,324     $ 15,614     $ 1,710       $ 32,602     $ 29,938     $ 2,664  
  Recovery Audit Services - Europe/Asia-Pacific   6,717       6,261       456         12,903       12,373       530  
  Adjacent Services   1,564       1,556       8         3,126       2,766       360  
  Total $ 25,605     $ 23,431     $ 2,174       $ 48,631     $ 45,077     $ 3,554  
                           
Selling, general and administrative expenses                        
  Recovery Audit Services - Americas $ 2,615     $ 2,171     $ 444       $ 4,658     $ 4,310     $ 348  
  Recovery Audit Services - Europe/Asia-Pacific   1,786       1,608       178         3,133       3,138       (5 )
  Adjacent Services   959       216       743         2,130       336       1,794  
  Corporate Support   6,064       5,625       438         12,039       10,684       1,355  
  Total $ 11,424     $ 9,620     $ 1,803       $ 21,960     $ 18,468     $ 3,492  
                           
Depreciation of property and equipment                        
  Recovery Audit Services - Americas $ 779     $ 936     $ (157 )     $ 1,689     $ 1,928     $ (239 )
  Recovery Audit Services - Europe/Asia-Pacific   152       140       12         292       238       54  
  Adjacent Services   178       140       38         348       282       66  
  Total $ 1,109     $ 1,216     $ (107 )     $ 2,329     $ 2,448     $ (119 )
                           
Amortization of intangible assets                        
  Recovery Audit Services - Americas $ 328     $ 373     $ (45 )     $ 657     $ 745     $ (88 )
  Recovery Audit Services - Europe/Asia-Pacific   -       -       -         -       -       -  
  Adjacent Services   394       22       372         787       44       743  
  Total $ 722     $ 395     $ 327       $ 1,444     $ 789     $ 655  
                           
Operating income (loss)                        
  Recovery Audit Services - Americas $ 5,507     $ 6,028     $ (521 )     $ 11,330     $ 9,768     $ 1,562  
  Recovery Audit Services - Europe/Asia-Pacific   2,118       689       1,429         2,276       2,198       78  
  Adjacent Services   (1,911 )     (463 )     (1,448 )       (3,852 )     (1,540 )     (2,312 )
  Corporate Support   (6,064 )     (5,625 )     (438 )       (12,039 )     (10,684 )     (1,355 )
  Total $ (350 )   $ 629     $ (978 )     $ (2,285 )   $ (258 )   $ (2,027 )
                           
Adjusted EBITDA                        
  Recovery Audit Services - Americas $ 6,802     $ 7,613     $ (811 )     $ 13,940     $ 12,861     $ 1,079  
  Recovery Audit Services - Europe/Asia-Pacific   2,354       855       1,499         2,790       2,532       258  
  Adjacent Services   (1,293 )     (301 )     (992 )       (2,672 )     (1,214 )     (1,458 )
  Corporate Support   (4,379 )     (4,667 )     288         (8,417 )     (8,642 )     225  
  Total $ 3,484     $ 3,500     $ (16 )     $ 5,641     $ 5,537     $ 104  
                           
* The Recovery Audit Services - Americas segment represents retail, commercial and contract compliance recovery audit services provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents retail, commercial and contract compliance recovery audit services provided in Europe, Asia and the Pacific region. The Adjacent Services segment represents spend analytics and supplier information management services.
 

 
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