ATLANTA, Nov. 02, 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 third quarter and nine months ended September 30, 2017.

"We are pleased to report a fifth consecutive quarter of growth from continuing operations, with revenue growth of 19% and Adjusted EBITDA increasing over 31% on a year-over-year constant dollar basis. Our core recovery audit business continues to perform well, with year-over-year growth in every region around the world on a constant dollar basis.  Adjacent services revenue for the quarter grew 33% on a constant dollar year-over-year basis," said Ron Stewart, president and chief executive officer.  "We recently announced a multi-year SaaS technology and managed services contract based on our Lavante SIM platform.  This solution underscores our competitive advantage resulting from integrating recovery audit data and knowledge with market-leading technology applications to deliver expanded client value on a large scale."

"Driven by our improved recovery audit performance and growing portfolio of services, we are seeing increased activity with both current and prospective clients, which is supporting a growing pipeline of opportunities.  Based on three solid quarters of performance and our outlook for the fourth quarter, 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 September 30, 2017

Consolidated revenue from continuing operations for the third quarter of 2017 was $42.5 million, compared to $35.1 million for the same period last year, an increase of 20.8%.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 19.2% in the third 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 18.9% in the third quarter of 2017 compared to the same period in 2016.  Third quarter 2017 revenue from the Adjacent Services segment was $0.9 million compared to $0.7 million in 2016, an increase of 35.7%. 

Total cost of revenue from continuing operations for the third quarter of 2017 was $26.7 million, or 62.8% of revenue, compared to $22.3 million, or 63.7% of revenue, in the same period last year. 

SG&A expenses from continuing operations for the third quarter of 2017 were $12.2 million, compared to $9.9 million in the prior year period.  The increase in SG&A expenses was primarily attributable to operating costs associated with the Lavante and Cost & Compliance Associates ("C&CA") acquired businesses that were not in the prior year, and increased stock-based compensation.

Consolidated net income from continuing operations for the third quarter of 2017 was $1.1 million, or $0.05 per basic and diluted share, compared to net income of $2.1 million, or $0.10 per basic and diluted share, for the same period in 2016. The year-over-year change was primarily driven by an increase in income tax expense in 2017 compared to 2016.  In 2016, the Company released its valuation allowance in New Zealand generating a one-time tax benefit in the period.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the third quarter of 2017 was $6.4 million, or 15.1% of revenue, compared to Adjusted EBITDA of $4.7 million, or 13.5% of revenue, in the third quarter of 2016, an increase of $1.7 million or 35.3%.  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 Nine Months Ended September 30, 2017

Consolidated revenue from continuing operations for the nine months ended September 30, 2017 was $114.5 million, compared to $101.7 million for the same period last year, an increase of 12.7%.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 13.0% in the nine months ended September 30, 2017, compared to the same period in the prior year.  On a constant dollar basis, revenue from the Recovery Audit Services segments increased 12.4% in the nine months ended September 30, 2017 compared to the same period in 2016.  On a constant dollar basis, revenue from the Adjacent Services segment increased 34.8% for the nine months ended September 30, 2017 compared to the same period in 2016.

Total cost of revenue from continuing operations for the nine months ended September 30, 2017 was $75.3 million, or 65.7% of revenue, compared to $67.4 million, or 66.3% of revenue, in the same period last year.

SG&A expenses from continuing operations for the nine months ended September 30, 2017 were $34.1 million, compared to $28.4 million in the prior year period.  The increase in SG&A expenses was primarily attributable to operating costs associated with the Lavante and C&CA acquired businesses that were not in the prior year, and increased stock-based compensation.

Consolidated net loss from continuing operations for the nine months ended September 30, 2017 was $1.1 million, or $0.05 per basic and diluted share, compared to net income of $2.0 million, or $0.09 per basic and diluted share, for the same period in 2016.

Adjusted EBITDA from continuing operations for the nine months ended September 30, 2017 was $12.0 million, or 10.5% of revenue, compared to Adjusted EBITDA of $10.2 million, or 10.0% of revenue, for the same period in the prior year, an increase of $1.8 million or 17.2%.  Schedule 3 attached to this press release provides a reconciliation of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

Cash Flow and Liquidity

Net cash provided by operating activities for the third quarter of 2017 was $2.3 million compared to $0.7 million in the third quarter of the prior year, and $3.6 million for the nine months ended September 30, 2017 compared to $6.2 million in the same period in the prior year. 

At September 30, 2017, the Company had unrestricted cash and cash equivalents of $11.9 million, and borrowings of $13.6 million against its $35.0 million revolving credit facility.

As of October 31, 2017, the Company had approximately 22.4 million shares of common stock outstanding.

Third 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 third 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 7396677.

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, 2018. 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 1,500 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 level of client and prospect interest in the Company's services, 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.

CONTACT: PRGX Global, Inc. investor-relations@prgx.com Phone: 770-779-3011
 
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,
          2017       2016       2017       2016  
                     
Revenue   $ 42,467     $ 35,137     $ 114,546     $ 101,661  
Operating expenses:              
  Cost of revenue   26,675       22,367       75,306       67,444  
  Selling, general and administrative expenses   12,189       9,883       34,149       28,351  
  Depreciation of property and equipment   1,133       1,376       3,462       3,824  
  Amortization of intangible assets   722       393       2,166       1,182  
  Total operating expenses   40,719       34,019       115,083       100,801  
                     
  Operating income (loss)   1,748       1,118       (537 )     860  
                     
Foreign currency transaction gains              
  on short-term intercompany balances   (418 )     (165 )     (1,927 )     (976 )
Interest expense (income), net   142       (14 )     227       (55 )
Other loss (income)   17       (168 )     (177 )     (140 )
  Income from continuing operations before income taxes   2,007       1,465       1,340       2,031  
                         
Income tax expense (benefit)   930       (685 )     2,436       (21 )
                     
  Net income (loss) from continuing operations $ 1,077     $ 2,150     $ (1,096 )   $ 2,052  
                     
Discontinued operations:              
(Loss) income from discontinued operations $ (344 )   $ 133     $ (1,029 )   $ (914 )
Other (income) loss   -       -       -       -  
Income tax expense (benefit)   -       -       -       -  
  Net (loss) income from discontinued operations   (344 )     133       (1,029 )     (914 )
                     
  Net income (loss) $ 733     $ 2,283     $ (2,125 )   $ 1,138  
                     
Basic earnings (loss) per common share:              
Basic from continuing operations $ 0.05     $ 0.10     $ (0.05 )   $ 0.09  
Basic from discontinued operations   (0.02 )     0.01       (0.05 )     (0.04 )
Total basic earnings (loss) per common share $ 0.03     $ 0.11     $ (0.10 )   $ 0.05  
                     
Diluted earnings (loss) per common share:              
Diluted from continuing operations $ 0.05     $ 0.10     $ (0.05 )   $ 0.09  
Diluted from discontinued operations   (0.02 )     0.01       (0.05 )     (0.04 )
Total diluted earnings (loss) per common share $ 0.03     $ 0.11     $ (0.10 )   $ 0.05  
                     
Weighted average common shares outstanding:              
  Basic     22,498       21,847       22,225       22,084  
  Diluted   22,761       21,874       22,225       22,114  
                     

 
   
SCHEDULE 2  
PRGX Global, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
(Amounts in thousands)  
(Unaudited)  
                     
              September 30,   December 31,  
                2017       2016    
                     
      ASSETS    
Current assets:              
  Cash and cash equivalents     $ 11,932     $ 15,723    
  Restricted cash         109       47    
  Receivables:              
    Contract receivables, net     35,015       31,464    
    Employee advances and miscellaneous receivables, net     2,263       2,184    
      Total receivables       37,278       33,648    
                     
  Prepaid expenses and other current assets     4,837       3,363    
      Total current assets       54,156       52,781    
                     
Property and equipment, net       15,369       12,236    
Goodwill           22,824       13,823    
Intangible assets, net       8,840       10,998    
Deferred income taxes       2,212       2,269    
Other assets         1,149       1,367    
      Total assets     $ 104,550     $ 93,474    
                     
                     
      LIABILITIES AND SHAREHOLDERS' EQUITY  
Current liabilities:              
  Accounts payable and accrued expenses   $ 7,669     $ 7,299    
  Accrued payroll and related expenses     14,801       13,868    
  Refund liabilities and deferred revenue     9,496       9,230    
  Short-term debt         48       3,600    
  Other current liabilities       2,077       2,078    
      Total current liabilities     34,091       36,075    
                     
Refund liabilities         775       804    
Long-term debt         13,677       -    
Other long-term liabilities       2,389       4,205    
      Total liabilities       50,932       41,084    
                     
Shareholders' equity:            
  Common stock         224       218    
  Additional paid-in capital       578,695       575,118    
  Accumulated deficit       (525,358 )     (523,233 )  
  Accumulated other comprehensive income (loss)     57       287    
      Total shareholders' equity     53,618       52,390    
                     
      Total liabilities and shareholders' equity   $ 104,550     $ 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   Nine Months
        Ended September 30,   Ended September 30,
          2017       2016       2017       2016  
Reconciliation of net loss to EBIT, EBITDA                
  and Adjusted EBITDA:                
                     
Net income (loss)   $ 733     $ 2,283     $ (2,125 )   $ 1,138  
                     
  Income tax expense (benefit)     930       (685 )     2,436       (21 )
  Interest expense (income), net     142       (14 )     227       (55 )
                     
EBIT       1,805       1,584       538       1,062  
                     
  Depreciation of property and equipment     1,135       1,381       3,468       3,835  
  Amortization of intangible assets     722       393       2,166       1,182  
                     
EBITDA     3,662       3,358       6,172       6,079  
                     
  Foreign currency transaction gains                
  on short-term intercompany balances     (418 )     (165 )     (1,927 )     (976 )
  Other loss (income)     17       (168 )     (177 )     (140 )
  Transformation severance and related                
  expenses     692       138       1,592       1,233  
  Stock-based compensation     2,107       1,424       5,362       3,224  
                     
Adjusted EBITDA   $ 6,060     $ 4,587     $ 11,022     $ 9,420  
                     
Adjusted EBITDA from continuing operations   $ 6,402     $ 4,731     $ 12,045     $ 10,269  
Adjusted EBITDA from discontinued operations   $ (342 )   $ (144 )   $ (1,023 )   $ (849 )
                     
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,    
          2017       2016       2017       2016      
Cash flows from operating activities:                  
  Net Income (loss) $ 733     $ 2,283       (2,125 )   $ 1,138      
                         
                         
  Adjustments to reconcile net income (loss) to net cash                  
    provided by operating activities:                  
      Depreciation and amortization   1,855       1,773       5,628       5,017      
      Stock-based compensation expense   2,107       1,425       5,362       3,224      
      Foreign currency transaction gains on                  
      short-term intercompany balances   (418 )     (165 )     (1,927 )     (976 )    
      (Increase) decrease in receivables   (2,867 )     (2,736 )     (714 )     (469 )    
      Increase (decrease) in accounts payable, accrued                  
      payroll and other accrued expenses   (2,319 )     589       (2,035 )     1,253      
      Other, primarily changes in assets and liabilities   3,191       (2,457 )     (632 )     (3,013 )    
      Net cash provided by operating activities   2,282       712       3,557       6,174      
                         
Cash flows from investing activities:                  
  Purchases of property and equipment, net of disposals   (2,390 )     (2,510 )     (6,433 )     (4,648 )    
  Acquisition of businesses, net of cash acquired   -       -       (10,128 )     -      
      Net cash used in investing activities   (2,390 )     (2,510 )     (16,561 )     (4,648 )    
                         
Cash flows from financing activities:                  
  Repurchase of common stock   -       (104 )     -       (3,762 )    
  Borrowing under line of credit   -       -       10,000       -      
  Other, net   -       (75 )     605       (86 )    
      Net cash provided by (used in) financing activities   -       (179 )     10,605       (3,848 )    
                         
Effect of exchange rates on cash and cash equivalents   (830 )     (27 )     (1,392 )     370      
                      `  
      Net (decrease) increase in cash and cash equivalents   (938 )     (2,004 )     (3,791 )     (1,952 )    
                         
Cash and cash equivalents at beginning of period   12,870       15,174       15,723       15,122      
                         
Cash and cash equivalents at end of period $ 11,932     $ 13,170     $ 11,932     $ 13,170      
                         

 
   
SCHEDULE 5  
PRGX Global, Inc. and Subsidiaries  
Results by Operating Segment *  
(Amounts in thousands)  
(Unaudited)  
                             
    Three Months Ended     Nine Months Ended  
    Sept 30,     Sept 30,  
                             
      2017       2016     Change       2017       2016     Change  
Revenue                          
  Recovery Audit Services - Americas $ 30,705     $ 25,719     $ 4,986       $ 81,641     $ 72,408     $ 9,233    
  Recovery Audit Services - Europe/Asia-Pacific   10,837       8,736       2,101         29,441       26,683       2,758    
  Adjacent Services   925       682       243         3,464       2,570       894    
  Total $ 42,467     $ 35,137     $ 7,330       $ 114,546     $ 101,661     $ 12,885    
                             
Cost of revenue                          
  Recovery Audit Services - Americas $ 18,552     $ 14,787     $ 3,765       $ 51,154     $ 44,737     $ 6,417    
  Recovery Audit Services - Europe/Asia-Pacific   6,650       6,284       366         19,553       18,657       896    
  Adjacent Services   1,473       1,296       177         4,599       4,050       549    
  Total $ 26,675     $ 22,367     $ 4,308       $ 75,306     $ 67,444     $ 7,862    
                             
Selling, general and administrative expenses                          
  Recovery Audit Services - Americas $ 2,662     $ 2,132     $ 530       $ 7,320     $ 6,434     $ 886    
  Recovery Audit Services - Europe/Asia-Pacific   2,114       1,265       849         5,247       4,402       845    
  Adjacent Services   910       321       589         3,040       666       2,374    
  Corporate Support   6,503       6,165       338         18,542       16,849       1,693    
  Total $ 12,189     $ 9,883     $ 2,306       $ 34,149     $ 28,351     $ 5,798    
                             
Depreciation of property and equipment                          
  Recovery Audit Services - Americas $ 789     $ 935     $ (146 )     $ 2,478     $ 2,863     $ (385 )  
  Recovery Audit Services - Europe/Asia-Pacific   161       141       20         453       379       74    
  Adjacent Services   183       300       (117 )       531       582       (51 )  
  Total $ 1,133     $ 1,376     $ (243 )     $ 3,462     $ 3,824     $ (362 )  
                             
Amortization of intangible assets                          
  Recovery Audit Services - Americas $ 329     $ 373     $ (44 )     $ 986     $ 1,118     $ (132 )  
  Recovery Audit Services - Europe/Asia-Pacific   -       -       -         -       -       -    
  Adjacent Services   393       20       373         1,180       64       1,116    
  Total $ 722     $ 393     $ 329       $ 2,166     $ 1,182     $ 984    
                             
Operating income (loss)                          
  Recovery Audit Services - Americas $ 8,373     $ 7,492     $ 881       $ 19,703     $ 17,256     $ 2,447    
  Recovery Audit Services - Europe/Asia-Pacific   1,912       1,046       866         4,188       3,246       942    
  Adjacent Services   (2,034 )     (1,255 )     (779 )       (5,886 )     (2,792 )     (3,094 )  
  Corporate Support   (6,503 )     (6,165 )     (338 )       (18,542 )     (16,849 )     (1,693 )  
  Total $ 1,748     $ 1,118     $ 630       $ (537 )   $ 860     $ (1,398 )  
                             
Adjusted EBITDA                          
  Recovery Audit Services - Americas $ 9,540     $ 8,894     $ 646       $ 23,480     $ 21,754     $ 1,726    
  Recovery Audit Services - Europe/Asia-Pacific   2,433       1,376       1,057         5,223       3,908       1,315    
  Adjacent Services   (1,198 )     (797 )     (401 )       (3,870 )     (2,008 )     (1,862 )  
  Corporate Support   (4,373 )     (4,742 )     369         (12,788 )     (13,385 )     597    
  Total $ 6,402     $ 4,731     $ 1,671       $ 12,045     $ 10,269     $ 1,776    
                             
* 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.