PRGX Global, Inc. (Nasdaq:PRGX), a global leader in Recovery Audit and Spend Analytics services, today announced its unaudited financial results for the first quarter ended March 31, 2017.

“We delivered another solid quarter, increasing revenue from continuing operations by 9.3% on a year-over-year constant dollar basis, as we continued to execute on our long-term strategy. Importantly, our largest business, retail recovery audit, had its fourth consecutive quarter of year-over-year revenue growth on a constant dollar basis. In addition, our adjacent services revenue increased by over 200% on a year-over-year constant dollar basis,” said Ron Stewart, president and chief executive officer of PRGX.

“In February, we successfully closed the acquisition of Cost & Compliance Associates and have made excellent progress integrating their team into our organization. We also recently announced the release of our PRGX OPTIX™ analytics suite and are very pleased with the level of interest from our client base,” continued Stewart.

“Based on our Q1 results and strong momentum, we remain confident that we will meet our previous 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 March 31, 2017

Consolidated revenue from continuing operations for the first quarter of 2017 was $33.6 million, compared to $31.2 million for the same period last year, an increase of 7.5%.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 9.3% in the first 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 6.2% in the first quarter of 2017 compared to the same period in 2016.  On a constant dollar basis, first quarter 2017 revenue from the Adjacent Services segment was $1.4 million, an increase of 236.0% compared to the same period in 2016.

Total cost of revenue from continuing operations for the first quarter of 2017 was $23.0 million, or 68.6% of revenue, compared to $21.6 million, or 69.3% of revenue, in the same period last year, a 0.7% improvement. 

SG&A expenses from continuing operations for the first quarter of 2017 were $10.5 million, compared to $8.8 million in the prior year period.  The increase in SG&A expenses was primarily attributable to Lavante operating costs that were not in the prior year, and increased stock-based compensation.

Consolidated net loss from continuing operations for the first quarter of 2017 was $1.8 million, or $0.08 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 first quarter of 2017 was $2.1 million, or 6.4% of revenue, compared to Adjusted EBITDA of $2.0 million, or 6.5% of revenue, in the first 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.

On February 23, 2017, the Company announced that it had completed its acquisition of substantially all of the assets of Cost & Compliance Associates (C&CA), a commercial Recovery Audit and Contract Compliance firm with operations in the US and the UK.  The results of C&CA operations subsequent to the acquisition date have been included in first quarter operating results.

Cash Flow and Liquidity

Net cash used by operating activities for the first quarter of 2017 was $3.3 million, compared to $4.9 million of cash provided by operating activities in the first quarter of the prior year. 

At March 31, 2017, the Company had unrestricted cash and cash equivalents of $11.6 million, and borrowings of $13.6 million against its $20.0 million revolving credit facility.

Stock Repurchase Program

Since the February 2014 announcement of the Company’s stock repurchase program, as of March 31, 2017, the Company has repurchased 8.6 million shares, or 28.7% of its common stock outstanding on the date of the announcement.  No repurchases of stock were made during the first quarter of 2017.   As of April 20, 2017, the Company had approximately 22.1 million shares of common stock outstanding.

First 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 first 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 10006589.

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 June 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 20% 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, the Company 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 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.

This news release was distributed by GlobeNewswire, www.globenewswire.comCONTACT: 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  
  Ended March 31,  
    2017       2016    
     
Revenue     $   33,569     $   31,233    
Operating expenses:            
  Cost of revenue         23,026         21,646    
  Selling, general and administrative expenses       10,536         8,848    
  Depreciation of property and equipment         1,220         1,232    
  Amortization of intangible assets         722         394    
  Total operating expenses         35,504         32,120    
               
  Operating income (loss)         (1,935 )       (887 )  
               
Foreign currency transaction (gains) losses            
  on short-term intercompany balances         (552 )       (1,007 )  
Interest expense (income), net         37         (29 )  
Other (income) loss         (199 )       10    
  Income (loss) from continuing operations before income taxes     (1,220 )       139    
               
Income tax expense         627         204    
               
  Net income (loss) from continuing operations   $   (1,847 )   $   (65 )  
               
Discontinued operations:            
Income (loss) from discontinued operations         (336 )       (487 )  
Other (income) loss         -          -     
Income tax expense (benefit)         -          -     
  Net income (loss) from discontinued operations     (336 )       (487 )  
               
  Net income (loss)     $   (2,183 )   $   (552 )  
               
Basic earnings (loss) per common share:            
Basic from continuing operations         (0.08 )       (0.00 )  
Basic from discontinued operations         (0.02 )       (0.02 )  
Total basic earnings (loss) per common share         (0.10 )       (0.02 )  
               
Diluted earnings (loss) per common share:            
Diluted from continuing operations         (0.08 )       (0.00 )  
Diluted from discontinued operations         (0.02 )       (0.02 )  
Total diluted earnings (loss) per common share       (0.10 )       (0.02 )  
               
Weighted average common shares outstanding:          
  Basic         21,945         22,438    
  Diluted         21,945         22,438    
               

 

SCHEDULE 2  
PRGX Global, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
(Amounts in thousands)  
(Unaudited)  
                     
                     
                     
                     
              March 31,   December 31,  
                2017       2016    
                     
      ASSETS   
Current assets:              
  Cash and cash equivalents     $   11,535     $   15,723    
  Restricted cash           102         47    
  Receivables:              
    Contract receivables, net       31,516         31,464    
    Employee advances and miscellaneous receivables, net       2,020         2,184    
      Total receivables         33,536         33,648    
                     
  Prepaid expenses and other current assets       3,291         3,363    
      Total current assets         48,464         52,781    
                     
Property and equipment, net         12,562         12,236    
Goodwill             22,364         13,823    
Intangible assets, net         10,278         10,998    
Deferred income taxes         2,259         2,269    
Other assets           894         1,367    
      Total assets      $   96,821     $   93,474    
                     
                     
      LIABILITIES AND SHAREHOLDERS' EQUITY  
Current liabilities:              
  Accounts payable and accrued expenses   $   6,250     $   7,299    
  Accrued payroll and related expenses       10,871         13,868    
  Refund liabilities         7,718         9,230    
  Short-term debt           13,600         3,600    
  Other current liabilities         3,497         2,078    
      Total current liabilities       41,936         36,075    
                     
Refund Liabilities           746         804    
Other long-term liabilities         2,557         4,205    
      Total liabilities         45,239         41,084    
                     
Shareholders' equity:            
  Common stock           221         218    
  Additional paid-in capital         575,215         575,118    
  Accumulated deficit         (525,416 )       (523,233 )  
  Accumulated other comprehensive income       562         287    
      Total shareholders' equity       50,582         52,390    
                     
       Total liabilities and shareholders' equity    $   95,821     $   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
      Ended March 31,
        2017       2016  
Reconciliation of net loss to EBIT, EBITDA      
  and Adjusted EBITDA:      
           
Net income (loss) $   (2,183 )   $   (552 )
           
  Income tax expense     627         204  
  Interest expense (income), net     37         (29 )
           
EBIT       (1,519 )       (377 )
           
  Depreciation of property and equipment     1,220         1,236  
  Amortization of intangible assets     722         394  
           
EBITDA     423         1,253  
           
  Foreign currency transaction (gains) losses     (552 )       (1,007 )
  on short-term intercompany balances      
  Transformation severance and related     585         537  
  expenses      
  Other Gains and Losses     (199 )       10  
  Stock-based compensation     1,566         764  
           
Adjusted EBITDA $   1,823     $   1,557  
           
Adjusted EBITDA from continuing operations $   2,157     $   2,037  
Adjusted EBITDA from discontinued operations $   (334 )   $   (480 )
           
           
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
          Ended March 31,
            2017       2016  
Cash flows from operating activities:        
  Net loss   $   (2,183 )   $   (552 )
 
  Adjustments to reconcile net loss to net cash        
     provided by operating activities:        
      Depreciation and amortization       1,944         1,644  
      Stock-based compensation expense       1,566         773  
      Foreign currency transaction (gains) losses on        
        short-term intercompany balances       (552 )       (1,007 )
      Decrease in receivables       2,037         3,083  
      Decrease in accounts payable, accrued        
        payroll and other accrued expenses       (4,155 )       1,355  
      Other, primarily changes in assets and liabilities       (1,998 )       (378 )
 
      Net cash provided by operating activities       (3,341 )       4,918  
               
Cash flows from investing activities:        
  Purchases of property and equipment, net of disposals       (1,500 )       (1,023 )
  Business Acquisition       (10,140 )       -   
      Net cash used in investing activities       (11,640 )       (1,023 )
               
Cash flows from financing activities:        
  Repurchase of common stock       -          (2,624 )
  Borrowing under line of credit       10,000         -   
  Other, net       382         84  
      Net cash (used in) provided by financing activities       10,382         (2,540 )
               
Effect of exchange rates on cash and cash equivalents       411         (778 )
               
      Net (decrease) increase in cash and cash equivalents       (4,188 )       577  
               
Cash and cash equivalents at beginning of period       15,723         15,122  
               
Cash and cash equivalents at end of period   $   11,535     $   15,699  
               

 

SCHEDULE 5  
PRGX Global, Inc. and Subsidiaries  
Results by Operating Segment *  
(Amounts in thousands)  
(Unaudited)  
                 
                 
    Three Months Ended    
    March 31,    
                 
      2017       2016     Change    
Revenue              
  Recovery Audit Services - Americas $   24,383     $   21,567     $   2,816      
  Recovery Audit Services - Europe/Asia-Pacific      7,831         9,249         (1,418 )    
  Adjacent Services     1,355         417         938      
  Total $   33,569     $   31,233     $   2,336      
                 
Cost of revenue              
  Recovery Audit Services - Americas $   15,278     $   14,324     $   (954 )    
  Recovery Audit Services - Europe/Asia-Pacific      6,186         6,112         (74 )    
  Adjacent Services     1,562         1,210         (352 )    
  Total $   23,026     $   21,646     $   (1,380 )    
                 
Selling, general and administrative expenses              
  Recovery Audit Services - Americas $   2,043     $   2,139     $   96      
  Recovery Audit Services - Europe/Asia-Pacific      1,347         1,530         183      
  Adjacent Services     1,171         120         (1,051 )    
  Corporate     5,975         5,059         (916 )    
  Total $   10,536     $   8,848     $   (1,688 )    
                 
Depreciation of property and equipment              
  Recovery Audit Services - Americas $   910     $   992     $   82      
  Recovery Audit Services - Europe/Asia-Pacific      140         98         (42 )    
  Adjacent Services     170         142         (28 )    
  Total $   1,220     $   1,232     $   12      
                 
Amortization of intangible assets              
  Recovery Audit Services - Americas $ 329     $   372     $ 43      
  Recovery Audit Services - Europe/Asia-Pacific      -          -          -       
  Adjacent Services   393         22         (371 )    
  Total $   722     $   394     $   (328 )    
                 
Operating income (loss)              
  Recovery Audit Services - Americas $   5,823     $   3,740     $  2,083      
  Recovery Audit Services - Europe/Asia-Pacific    158         1,509         (1,351 )    
  Adjacent Services   (1,941 )       (1,077 )       (864 )    
  Corporate   (5,975 )       (5,059 )     (916 )    
  Total $   (1,935 )   $   (887 )   $   (1,048 )    
                 
Adjusted EBITDA              
  Recovery Audit Services - Americas $   7,138     $   5,248     $   1,890      
  Recovery Audit Services - Europe/Asia-Pacific      436         1,677         (1,241 )    
  Adjacent Services     (1,379 )       (913 )       (466 )    
  Corporate     (4,038 )       (3,975 )       (63 )    
  Total $ 2,157     $   2,037     $   120      
                 
* The Recovery Audit Services - Americas segment represents recovery audit services provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents 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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