PRGX Global, Inc.
Aug 1, 2017

PRGX Global, Inc. Announces Second Quarter 2017 Financial Results

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.
 

 

CONTACT: PRGX Global, Inc.

investor-relations@prgx.com

Phone: 770-779-3011

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Source: PRGX Global, Inc.

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