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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2020
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission File Number 0-28000
PRGX
Global, Inc.
(Exact name of registrant as specified in its
charter)
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Georgia |
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58-2213805 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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600 Galleria Parkway |
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30339-5986 |
Suite 100 |
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(Zip Code) |
Atlanta, Georgia
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(Address of principal executive offices) |
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Registrant’s
telephone number, including area code:
(770) 779-3900
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90
days. Yes ☒ No ¨
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). Yes ☒ No ¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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¨ Large accelerated filer
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☒ |
Accelerated filer |
¨
Non-accelerated filer
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☒ |
Smaller reporting company |
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☐ |
Emerging growth company |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
¨
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Exchange
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, no par value |
PRGX |
Nasdaq Global Select Market |
Common shares of the registrant outstanding at July 31, 2020
were 23,612,686.
PRGX GLOBAL, INC.
FORM 10-Q
For the Quarter Ended June 30, 2020
INDEX
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Page No. |
Part I.
Financial Information
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Part II.
Other Information
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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Three Months
Ended June 30, |
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Six Months
Ended June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
Revenue, net |
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$ |
39,011 |
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$ |
41,974 |
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$ |
75,850 |
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$ |
80,778 |
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Operating expenses: |
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Cost of revenue |
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20,584 |
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26,312 |
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43,118 |
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51,547 |
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Selling, general and administrative expenses |
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14,726 |
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15,748 |
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28,190 |
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29,665 |
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Depreciation of property, equipment and software assets |
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1,965 |
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2,381 |
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4,106 |
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4,584 |
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Amortization of intangible assets |
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828 |
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872 |
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1,657 |
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1,734 |
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Total operating expenses |
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38,103 |
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45,313 |
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77,071 |
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87,530 |
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Operating income (loss) from continuing operations |
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908 |
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(3,339) |
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(1,221) |
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(6,752) |
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Foreign currency transaction (gains) losses on short-term
intercompany balances |
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(819) |
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(77) |
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637 |
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129 |
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Interest expense, net |
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303 |
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592 |
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645 |
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1,065 |
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Other loss (income) |
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2 |
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11 |
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2 |
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(8) |
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Income (loss) from
continuing operations before income tax |
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1,422 |
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(3,865) |
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(2,505) |
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(7,938) |
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Income tax expense |
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1,004 |
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311 |
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960 |
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479 |
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Net income (loss) from continuing operations |
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$ |
418 |
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$ |
(4,176) |
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$ |
(3,465) |
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$ |
(8,417) |
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Discontinued operations: |
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Loss from discontinued operations |
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$ |
— |
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$ |
(103) |
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$ |
— |
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$ |
(258) |
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Net loss from discontinued operations |
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$ |
— |
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$ |
(103) |
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$ |
— |
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$ |
(258) |
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Net income (loss) |
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$ |
418 |
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$ |
(4,279) |
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$ |
(3,465) |
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$ |
(8,675) |
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Basic income (loss) per common share (Note 2): |
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Basic income (loss) from continuing operations |
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$ |
0.02 |
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$ |
(0.18) |
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$ |
(0.15) |
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$ |
(0.37) |
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Basic loss from discontinued operations |
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— |
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— |
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— |
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(0.01) |
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Total basic income (loss) per common share |
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$ |
0.02 |
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$ |
(0.18) |
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$ |
(0.15) |
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$ |
(0.38) |
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Diluted income (loss) per common share (Note 2): |
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Diluted income (loss) from continuing operations |
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$ |
0.02 |
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$ |
(0.18) |
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$ |
(0.15) |
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$ |
(0.37) |
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Diluted loss from discontinued operations |
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— |
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— |
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— |
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(0.01) |
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Total diluted income (loss) per common share |
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$ |
0.02 |
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$ |
(0.18) |
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$ |
(0.15) |
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$ |
(0.38) |
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Weighted-average common shares outstanding (Note 2): |
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Basic |
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22,606 |
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22,763 |
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22,542 |
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22,687 |
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Diluted |
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22,716 |
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22,763 |
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22,542 |
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22,687 |
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See accompanying Notes to Condensed Consolidated Financial
Statements.
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
(Unaudited)
(In thousands)
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Three Months
Ended June 30, |
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Six Months
Ended June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
Net income (loss) |
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$ |
418 |
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$ |
(4,279) |
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$ |
(3,465) |
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$ |
(8,675) |
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Foreign currency translation adjustments, net of tax |
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748 |
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(269) |
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(1,200) |
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244 |
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Comprehensive income (loss) |
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$ |
1,166 |
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$ |
(4,548) |
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$ |
(4,665) |
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$ |
(8,431) |
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See accompanying Notes to Condensed Consolidated Financial
Statements.
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
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June 30, |
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December 31, |
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2020 |
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2019 |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
21,061 |
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$ |
14,982 |
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Restricted cash |
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123 |
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46 |
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Receivables: |
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Contract receivables, less allowances of $1,379 in 2020 and $1,781
in 2019
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Billed |
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32,748 |
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38,201 |
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Unbilled |
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3,312 |
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4,911 |
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36,060 |
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43,112 |
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Employee advances and miscellaneous receivables, net |
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740 |
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704 |
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Total receivables |
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36,800 |
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43,816 |
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Prepaid expenses and other current assets |
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4,062 |
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5,582 |
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Total current assets |
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62,046 |
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64,426 |
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Property, equipment and software |
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66,950 |
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63,557 |
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Less accumulated depreciation and amortization |
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(47,813) |
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(45,811) |
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Property, equipment and software, net |
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19,137 |
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17,746 |
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Operating lease right-of-use assets (Note 9) |
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11,044 |
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10,969 |
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Goodwill |
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14,962 |
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15,070 |
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Intangible assets, less accumulated amortization of $48,206 in 2020
and $47,097 in 2019
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9,714 |
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11,506 |
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Unbilled receivables |
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865 |
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1,282 |
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Deferred income taxes |
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3,636 |
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3,921 |
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Other assets |
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531 |
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546 |
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Total assets |
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$ |
121,935 |
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$ |
125,466 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
2,094 |
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$ |
4,326 |
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Accrued payroll and related expenses |
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14,070 |
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12,951 |
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Current portion of operating lease liabilities (Note 9) |
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4,077 |
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3,717 |
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Refund liabilities |
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4,152 |
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4,513 |
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Deferred revenue |
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1,970 |
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2,217 |
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Current portion of debt (Note 5) |
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— |
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17 |
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Total current liabilities |
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26,363 |
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27,741 |
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Long-term debt (Note 5) |
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36,650 |
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36,603 |
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Long-term operating lease liabilities (Note 9) |
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7,368 |
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7,435 |
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Refund liabilities |
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21 |
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9 |
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Deferred income taxes (Note 8) |
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628 |
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628 |
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Total liabilities |
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71,030 |
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72,416 |
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Commitments and contingencies (Note 7) |
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Shareholders’ equity (Note 2): |
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Common stock, no par value; $.01 stated value per share. Authorized
50,000,000 shares; 23,612,686 shares issued and outstanding at June
30, 2020 and 23,369,433 shares issued and outstanding at
December 31, 2019
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236 |
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234 |
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Additional paid-in capital |
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584,922 |
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582,404 |
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Accumulated deficit |
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(532,641) |
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(529,176) |
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Accumulated other comprehensive loss |
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(1,612) |
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(412) |
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Total shareholders’ equity |
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50,905 |
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53,050 |
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Total liabilities and shareholders' equity |
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$ |
121,935 |
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$ |
125,466 |
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See accompanying Notes to Condensed Consolidated Financial
Statements.
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
(Unaudited)
(In thousands, except share data)
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Common Stock |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Deficit |
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Accumulated Other Comprehensive Loss |
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Total Shareholders' Equity |
Balance at March 31, 2020 |
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23,595,079 |
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$ |
236 |
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$ |
583,161 |
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$ |
(533,059) |
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$ |
(2,360) |
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$ |
47,978 |
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Net income |
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— |
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— |
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— |
|
|
418 |
|
|
— |
|
|
418 |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
748 |
|
|
748 |
|
Issuances of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share awards |
|
30,769 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Restricted shares remitted by employees for taxes |
|
(27,977) |
|
|
— |
|
|
(115) |
|
|
— |
|
|
— |
|
|
(115) |
|
Restricted stock unit settlement |
|
17,519 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Forfeited restricted share awards |
|
(2,704) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation expense |
|
— |
|
|
— |
|
|
1,876 |
|
|
— |
|
|
— |
|
|
1,876 |
|
Balance at June 30, 2020 |
|
23,612,686 |
|
|
$ |
236 |
|
|
$ |
584,922 |
|
|
$ |
(532,641) |
|
|
$ |
(1,612) |
|
|
$ |
50,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019 |
|
23,438,058 |
|
|
$ |
234 |
|
|
$ |
581,356 |
|
|
$ |
(519,852) |
|
|
$ |
(508) |
|
|
$ |
61,230 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(4,279) |
|
|
— |
|
|
(4,279) |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(269) |
|
|
(269) |
|
Issuances of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share awards |
|
183,403 |
|
|
2 |
|
|
(2) |
|
|
— |
|
|
— |
|
|
— |
|
Restricted shares remitted by employees for taxes |
|
(38,304) |
|
|
— |
|
|
(246) |
|
|
— |
|
|
— |
|
|
(246) |
|
Stock option exercises |
|
35,319 |
|
|
— |
|
|
170 |
|
|
— |
|
|
— |
|
|
170 |
|
Restricted stock unit settlement |
|
17,517 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Forfeited restricted share awards |
|
(24,590) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation expense |
|
— |
|
|
— |
|
|
1,704 |
|
|
— |
|
|
— |
|
|
1,704 |
|
Balance at June 30, 2019 |
|
23,611,403 |
|
|
$ |
236 |
|
|
$ |
582,982 |
|
|
$ |
(524,131) |
|
|
$ |
(777) |
|
|
$ |
58,310 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
(Unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total Shareholders' Equity |
Balance at December 31, 2019 |
|
23,369,433 |
|
|
$ |
234 |
|
|
$ |
582,404 |
|
|
$ |
(529,176) |
|
|
$ |
(412) |
|
|
$ |
53,050 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(3,465) |
|
|
— |
|
|
(3,465) |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,200) |
|
|
(1,200) |
|
Issuances of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share awards |
|
429,269 |
|
|
4 |
|
|
(4) |
|
|
— |
|
|
— |
|
|
— |
|
Restricted shares remitted by employees for taxes |
|
(112,020) |
|
|
(1) |
|
|
(397) |
|
|
— |
|
|
— |
|
|
(398) |
|
Restricted stock unit settlement |
|
61,521 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Forfeited restricted share awards |
|
(31,655) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Repurchase of common stock |
|
(103,862) |
|
|
(1) |
|
|
(283) |
|
|
— |
|
|
— |
|
|
(284) |
|
Stock-based compensation expense |
|
— |
|
|
— |
|
|
3,202 |
|
|
— |
|
|
— |
|
|
3,202 |
|
Balance at June 30, 2020 |
|
23,612,686 |
|
|
$ |
236 |
|
|
$ |
584,922 |
|
|
$ |
(532,641) |
|
|
$ |
(1,612) |
|
|
$ |
50,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018 |
|
23,186,258 |
|
|
$ |
232 |
|
|
$ |
582,574 |
|
|
$ |
(515,456) |
|
|
$ |
(1,021) |
|
|
$ |
66,329 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(8,675) |
|
|
— |
|
|
(8,675) |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
244 |
|
|
244 |
|
Issuances of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share awards |
|
516,955 |
|
|
5 |
|
|
(5) |
|
|
— |
|
|
— |
|
|
— |
|
Restricted shares remitted by employees for taxes |
|
(99,885) |
|
|
(1) |
|
|
(749) |
|
|
— |
|
|
— |
|
|
(750) |
|
Stock option exercises |
|
45,380 |
|
|
— |
|
|
221 |
|
|
— |
|
|
— |
|
|
221 |
|
Performance-based restricted stock unit settlement |
|
203,524 |
|
|
2 |
|
|
(2) |
|
|
— |
|
|
— |
|
|
— |
|
Restricted stock unit settlement |
|
27,516 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Forfeited restricted share awards |
|
(24,590) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Repurchase of common stock |
|
(243,755) |
|
|
(2) |
|
|
(2,226) |
|
|
|
|
|
|
(2,228) |
|
Stock-based compensation expense |
|
— |
|
|
— |
|
|
3,169 |
|
|
— |
|
|
— |
|
|
3,169 |
|
Balance at June 30, 2019 |
|
23,611,403 |
|
|
$ |
236 |
|
|
$ |
582,982 |
|
|
$ |
(524,131) |
|
|
$ |
(777) |
|
|
$ |
58,310 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
|
Net loss |
|
$ |
(3,465) |
|
|
$ |
(8,675) |
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
Depreciation and amortization |
|
5,763 |
|
|
6,318 |
|
Operating lease right-of-use asset expense |
|
2,195 |
|
|
2,248 |
|
Amortization of deferred loan costs |
|
48 |
|
|
117 |
|
Noncash interest expense |
|
643 |
|
|
— |
|
Stock-based compensation expense |
|
3,196 |
|
|
3,046 |
|
Foreign currency transaction losses on short-term intercompany
balances |
|
637 |
|
|
129 |
|
Deferred income taxes |
|
338 |
|
|
— |
|
Changes in operating assets and liabilities |
|
|
|
|
Billed receivables |
|
4,550 |
|
|
6,593 |
|
Unbilled receivables |
|
2,018 |
|
|
(851) |
|
Prepaid expenses and other current assets |
|
1,438 |
|
|
(1,296) |
|
Operating lease liabilities |
|
(1,979) |
|
|
— |
|
Other assets |
|
(53) |
|
|
(1,567) |
|
Accounts payable and accrued expenses |
|
(3,890) |
|
|
(2,930) |
|
Accrued payroll and related expenses |
|
1,326 |
|
|
(4,970) |
|
Refund liabilities |
|
(270) |
|
|
(314) |
|
Deferred revenue |
|
(224) |
|
|
(292) |
|
Net cash provided by (used in) operating activities |
|
12,271 |
|
|
(2,444) |
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property, equipment and software, net of disposal
proceeds |
|
(5,620) |
|
|
(7,640) |
|
Net cash used in investing activities |
|
(5,620) |
|
|
(7,640) |
|
Cash flows from financing activities: |
|
|
|
|
Repayments of credit facility |
|
(38,000) |
|
|
(3,000) |
|
Proceeds from credit facility |
|
38,000 |
|
|
14,400 |
|
Payment of deferred loan costs |
|
— |
|
|
(394) |
|
Payment of earnout liability related to business
acquisitions |
|
— |
|
|
(479) |
|
Restricted stock repurchased from employees for withholding
taxes |
|
(398) |
|
|
(750) |
|
Repurchases of common stock |
|
(284) |
|
|
(2,228) |
|
Proceeds from option exercises |
|
— |
|
|
221 |
|
Net cash (used in) provided by financing activities |
|
(682) |
|
|
7,770 |
|
Effect of exchange rates on cash and cash equivalents |
|
187 |
|
|
(55) |
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
6,156 |
|
|
(2,369) |
|
Cash, cash equivalents and restricted cash at beginning of
period |
|
15,028 |
|
|
14,019 |
|
Cash, cash equivalents and restricted cash at end of
period |
|
$ |
21,184 |
|
|
$ |
11,650 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
Cash paid during the period for interest |
|
$ |
716 |
|
|
$ |
385 |
|
Cash paid during the period for income taxes, net of refunds
received |
|
$ |
804 |
|
|
$ |
1,638 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying Condensed Consolidated Financial Statements
(Unaudited) of PRGX Global, Inc. and its wholly-owned subsidiaries
have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP") for
interim financial information and with the instructions for the
Quarterly Report on Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and six-month
periods ended June 30, 2020 are not necessarily indicative of
the results that may be expected for the year ending
December 31, 2020.
Except as otherwise indicated or unless the context otherwise
requires, “PRGX,” “we,” “us,” “our” and the “Company” refer to PRGX
Global, Inc. and its subsidiaries. For further information, refer
to the Consolidated Financial Statements and the related Notes
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2019.
Significant Accounting Policies
A summary of the Company's significant accounting policies is
included in Note 1 of the “Notes to Consolidated Financial
Statements” contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2019. The Company did not
experience any significant changes during the quarter ended June
30, 2020 in any of the Critical Accounting Policies from those
contained in the Company's Form 10-K for the year ended December
31, 2019.
COVID-19
In December 2019, a novel strain of coronavirus was first
identified, and in March 2020, the World Health Organization
categorized COVID-19, the disease resulting from this coronavirus
strain, as a pandemic. To help control the spread of the virus and
protect the health and safety of our employees and customers, many
of the Company's teams worldwide have been working remotely since
the middle of March.
The Company evaluates the recoverability of goodwill annually in
the fourth quarter of each year or sooner if events or changes in
circumstances indicate that the carrying amount may exceed its fair
value. The impairment test performed in the fourth quarter of 2019
indicated significant excess fair value over carrying value for the
Recovery Audit Services reporting units. The Company evaluated
whether there were indicators of impairment as of June 30, 2020 as
a result of COVID-19 conditions including deterioration in the
macro-economic environment and the volatility in our share price.
While there were negative macro-economic factors, the positive
evidence outweighed the negative evidence of the fair value of our
reporting units more likely than not exceeding the carrying amount
of those units as of June 30, 2020. Further, since the negative
financial impacts on the Company from the COVID-19 pandemic have
not been significant to date, COVID-19 considerations do not
significantly affect the assumptions underpinning our long-term
revenue and cash flow growth rates, operating models and business
strategies. Therefore, the Company did not consider the COVID-19
pandemic to require an interim quantitative goodwill impairment
analysis. As a result, no impairment charges for goodwill and
indefinite-lived intangible assets were recorded during the three
and six months ended June 30, 2020.
The Company also evaluated its remaining assets, particularly
accounts receivable. The allowance for doubtful accounts is
calculated based on historical experience and various other
information available. The Company also assessed incremental risks
due to the COVID-19 pandemic on our customers' financial viability.
The Company did not experience a significant deterioration of its
accounts receivable portfolio during the quarter ended June 30,
2020. The Company will continue to monitor the collectability of
its accounts receivable balances.
The Company received an immaterial amount of COVID-19-related rent
concessions for certain office space leases in the second quarter
of 2020. Consistent with updated guidance from the Financial
Accounting Standards Board (“FASB”) in April 2020, the Company
elected to treat COVID-19-related rent concessions as variable
rent. While the Company is having ongoing conversations with
landlords, it does not expect significant concessions for the
remainder of the year.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”), which among other
things, provides employer payroll tax credits for wages paid to
employees who are unable to work during the COVID-19 pandemic and
options to defer payroll tax payments. Based on evaluation of the
CARES Act, the Company is deferring qualified payroll and other tax
payments as permitted by the CARES Act.
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The full extent of the future impact of COVID-19 on the Company’s
operations is uncertain. Such events, including a prolonged or
recurring outbreak, are generally outside of our control and could
have a material adverse impact on our business, operating results
and financial conditions in future reporting periods.
Impact of Recently Issued Accounting Standards
A summary of the new accounting standards issued by the FASB and
included in the Accounting Standards Codification ("ASC") that
apply to PRGX is included below:
Adopted by the Company in Fiscal Year 2020
FASB ASU 2018-13 -
In August 2018, the FASB issued Accounting Standards Update ("ASU")
2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to
the Disclosure Requirements for Fair Value
Measurement,
which adds and modifies certain disclosure requirements for fair
value measurements. Under the new guidance, entities will no longer
be required to disclose the amount of and reasons for transfers
between Level 1 and Level 2 of the fair value hierarchy, or
valuation processes for Level 3 fair value measurements. However,
public companies are required to disclose the range and weighted
average of significant unobservable inputs used to develop Level 3
fair value measurements, and related changes in unrealized gains
and losses included in other comprehensive income. Certain
provisions of the ASU must be applied retrospectively, while others
must be applied prospectively. The Company adopted this ASU on
January 1, 2020. The adoption of this ASU did not have a material
impact on the Company's condensed consolidated financial
statements.
FASB ASU 2018-15
- In August 2018, the FASB issued ASU No. 2018-15,
Intangibles—Goodwill and Other—Internal-Use Software (Subtopic
350-40): Customer’s Accounting for Implementation Costs Incurred in
a Cloud Computing Arrangement That Is a Service
Contract,
which aligns the requirements for capitalizing implementation costs
incurred in a hosting arrangement that is a service contract with
the requirements for capitalizing implementation costs incurred to
develop or obtain internal-use software. The Company adopted this
ASU prospectively on January 1, 2020. The adoption of this ASU did
not have a material impact on the Company's condensed consolidated
financial statements.
Accounting Standards Not Yet Adopted
FASB ASU 2016-13
- In June 2016, the FASB issued ASU 2016-13,
Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments,
which requires entities to record expected credit losses for
certain financial instruments, including trade receivables, as an
allowance that reflects the entity's current estimate of credit
losses expected to be incurred. ASU 2016-13 is effective for annual
periods beginning after December 15, 2022, including interim
periods within those annual periods, and early adoption is
permitted. The Company is currently evaluating the effect that the
adoption of this standard will have on the Company's condensed
consolidated financial statements.
FASB ASU 2019-12 -
In December 2019, the FASB issued ASU No.
2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income
Taxes,
which simplifies accounting for income taxes, changes the
accounting for certain income tax transactions and makes certain
improvements to the codification. These amendments will be
effective for fiscal years and interim periods within those fiscal
years, beginning after December 15, 2020, with early adoption
permitted. The Company is currently evaluating the new standard to
determine the impact it will have on the Company’s condensed
consolidated financial statements.
FASB ASU 2020-04
- In March 2020, the FASB issued ASU No. 2020-04,
Facilitation of the Effects of Reference Rate Reform on Financial
Reporting, which
provides optional expedients and exceptions for applying GAAP to
contracts, hedging relationships and other transactions affected by
the discontinuation of the London Interbank Offered Rate (LIBOR)
and other interbank offered rates. Companies may adopt this
guidance at any time but no later than December 31, 2022. The
Company is currently evaluating the new standard to determine the
impact it will have on the Company’s condensed consolidated
financial statements.
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
(2) Net Income (Loss) Per Common Share
The following table sets forth the computations of basic and
diluted net income (loss) per common share for the three and six
months ended June 30, 2020 and 2019 (in thousands, except per
share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended June 30, |
|
|
|
Six Months
Ended June 30, |
|
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations |
|
$ |
418 |
|
|
$ |
(4,176) |
|
|
$ |
(3,465) |
|
|
$ |
(8,417) |
|
Net loss from discontinued operations |
|
$ |
— |
|
|
$ |
(103) |
|
|
$ |
— |
|
|
$ |
(258) |
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
22,606 |
|
|
22,763 |
|
|
22,542 |
|
|
22,687 |
|
Effect of dilutive securities from stock-based compensation
plans |
|
110 |
|
|
— |
|
|
— |
|
|
— |
|
Weighted-average diluted common shares outstanding |
|
22,716 |
|
|
22,763 |
|
|
22,542 |
|
|
22,687 |
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share from continuing
operations |
|
$ |
0.02 |
|
|
$ |
(0.18) |
|
|
$ |
(0.15) |
|
|
$ |
(0.37) |
|
Basic net loss per common share from discontinued
operations |
|
— |
|
|
— |
|
|
— |
|
|
(0.01) |
|
Total basic net income (loss) per common share |
|
$ |
0.02 |
|
|
$ |
(0.18) |
|
|
$ |
(0.15) |
|
|
$ |
(0.38) |
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per common share from continuing
operations |
|
$ |
0.02 |
|
|
$ |
(0.18) |
|
|
$ |
(0.15) |
|
|
$ |
(0.37) |
|
Diluted loss per common share from discontinued
operations |
|
— |
|
|
— |
|
|
— |
|
|
(0.01) |
|
Total diluted income (loss) per common share |
|
$ |
0.02 |
|
|
$ |
(0.18) |
|
|
$ |
(0.15) |
|
|
$ |
(0.38) |
|
|
|
|
|
|
|
|
|
|
Anti-dilutive securities excluded from diluted net income (loss)
per share calculation |
|
4,011 |
|
|
4,277 |
|
|
4,120 |
|
|
4,277 |
|
(3) Stock-Based Compensation
The Company has two stock-based compensation plans under which
outstanding equity awards have been granted, the 2008 Equity
Incentive Plan ("2008 EIP") and the 2017 Equity Incentive
Compensation Plan ("2017 EICP") (collectively, the "Plans"). No
additional awards may be granted under the 2008 EIP. Awards granted
outside of the Plans are referred to as inducement
awards.
During the three
months ended June 30, 2020, equity awards were granted to
non-employee directors, and in the six months ended June 30, 2020,
equity awards were granted to non-employee directors and certain
key employees. The awards included restricted stock, restricted
stock units, and performance-based restricted stock units
("PBUs").
Summary of Grant Activity
The following is a
summary of grant activity for the three and six months ended
June 30, 2020 (in thousands, except number of
awards):
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|
|
Six Months Ended June 30, 2020 |
|
|
|
# of Awards Granted |
|
Grant Date Fair Value |
|
# of Awards Granted |
|
Grant Date Fair Value |
Restricted stock |
30,769 |
|
|
$ |
120 |
|
|
429,269 |
|
|
$ |
1,830 |
|
Restricted stock units |
123,076 |
|
|
480 |
|
|
142,076 |
|
|
562 |
|
PBUs |
— |
|
|
— |
|
|
659,301 |
|
|
2,828 |
|
|
153,845 |
|
|
$ |
600 |
|
|
1,230,646 |
|
|
$ |
5,220 |
|
The awards granted in the three months ended June 30, 2020 had
the following terms:
•The
restricted stock and restricted stock units vest one year from
grant date.
The awards granted in the six months ended June 30, 2020 had
the following terms:
•398,500
shares of the restricted stock vest over three years in
approximately equal annual installments and 30,769 shares of the
restricted stock vest one year from grant date.
•123,076
restricted stock units vest one year from grant date and 19,000
restricted stock units vest over three years in approximately equal
annual installments.
•The
vesting of the PBUs is subject to the satisfaction of certain
specified financial performance conditions for the two-year
performance period ending on December 31, 2021. PBUs that vest will
be settled in shares of the Company's common stock. Stock-based
compensation expense for these PBUs is being recognized at the
target level of financial performance, as if 100% of the awards
will vest. The Company reevaluates this likelihood on a quarterly
basis.
Additional Information
As of June 30, 2020, there were approximately 1.8 million
shares available for future grant under the 2017 EICP.
Stock-based compensation expense for the three months ended
June 30, 2020 and 2019 was $1.9 million and $1.7 million,
respectively, and $3.2 million and $3.0 million for the
six months ended June 30, 2020 and 2019, respectively, and is
included in
Selling, general and administrative expenses
in the Company's Condensed Consolidated Statements of Operations.
As of June 30, 2020, there was $8.6 million of unrecognized
stock-based compensation expense related to the Company's
outstanding equity awards which will be recognized over
approximately 1.7 years.
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
(4) Operating Segments and Related Information
The Company conducts its operations through the following three
reportable segments:
Recovery Audit Services – Americas
represents recovery audit services provided in the United States of
America (“U.S.”), Canada and Latin America.
Recovery Audit Services – Europe/Asia-Pacific
represents recovery audit services provided in Europe, Asia and the
Pacific region.
Adjacent Services
represents data transformation, spend analytics and associated
advisory services.
The unallocated portion of corporate selling, general and
administrative expenses not specifically attributable to the three
reportable segments is included in
Corporate Support.
Discontinued Operations
There was no activity in the Company's discontinued operations
segment for the three and six months ended June 30, 2020. The
following table presents the discontinued operations of the
Healthcare Claims Recovery Audit ("HCRA") services business in the
Consolidated Statements of Operations, for the three and six months
ended June 30, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months
Ended June 30, |
|
|
2019 |
|
2019 |
Revenue, net |
|
$ |
— |
|
|
$ |
— |
|
Cost of sales |
|
96 |
|
|
245 |
|
Selling, general and administrative expense |
|
7 |
|
|
13 |
|
Depreciation and amortization |
|
— |
|
|
— |
|
Loss from discontinued operations before income taxes |
|
$ |
(103) |
|
|
$ |
(258) |
|
Income tax expense |
|
— |
|
|
— |
|
Loss from discontinued operations |
|
$ |
(103) |
|
|
$ |
(258) |
|
The following table presents the discontinued operations of the
HCRA services business in the Consolidated Statements of Cash
Flows, for the six months ended June 30, 2019 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2019 |
Net cash (used in) provided by operating activities |
|
$ |
(258) |
|
Net cash (used in) provided by investing activities |
|
— |
|
Net cash (used in) provided by financing activities |
|
— |
|
Decrease in cash and cash equivalents |
|
$ |
(258) |
|
The Company evaluates the performance of its reportable segments
based upon revenue and measures of profit or loss referred to as
EBITDA and Adjusted EBITDA. The Company defines Adjusted EBITDA as
earnings from continuing operations before interest and taxes
(“EBIT”), adjusted for depreciation and amortization (“EBITDA”),
and then further adjusted for unusual and other significant items
that management views as distorting the operating results of the
various segments from period to period. Such adjustments include
restructuring charges, stock-based compensation, bargain purchase
gains, acquisition-related charges and benefits (acquisition
transaction costs, acquisition obligations classified as
compensation, and fair value adjustments to acquisition-related
contingent consideration), tangible and intangible asset impairment
charges, certain litigation costs and litigation settlements,
certain severance charges and foreign currency transaction gains
and losses on short-term intercompany balances viewed by management
as individually or collectively significant. The Company does not
have any inter-segment revenue.
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
Segment information for the three and six months ended
June 30, 2020 and 2019 (in thousands) is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery
Audit
Services –
Americas |
|
Recovery Audit
Services –
Europe/Asia-
Pacific |
|
Adjacent
Services |
|
Corporate
Support |
|
Total |
Three Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
26,962 |
|
|
$ |
11,157 |
|
|
$ |
892 |
|
|
$ |
— |
|
|
$ |
39,011 |
|
Net income from continuing operations |
|
|
|
|
|
|
|
|
|
418 |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
1,004 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
303 |
|
EBIT |
|
$ |
8,895 |
|
|
$ |
4,426 |
|
|
$ |
24 |
|
|
$ |
(11,620) |
|
|
$ |
1,725 |
|
Depreciation of property, equipment and software |
|
1,777 |
|
|
155 |
|
|
33 |
|
|
— |
|
|
1,965 |
|
Amortization of intangible assets |
|
408 |
|
|
41 |
|
|
379 |
|
|
— |
|
|
828 |
|
EBITDA |
|
$ |
11,080 |
|
|
$ |
4,622 |
|
|
$ |
436 |
|
|
$ |
(11,620) |
|
|
$ |
4,518 |
|
Other loss |
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
2 |
|
Foreign currency transaction (gains) losses on short-term
intercompany balances |
|
(176) |
|
|
(752) |
|
|
— |
|
|
109 |
|
|
(819) |
|
Transformation, severance, and other expenses |
|
327 |
|
|
181 |
|
|
47 |
|
|
117 |
|
|
672 |
|
Investigation and settlement of employment matter |
|
— |
|
|
— |
|
|
— |
|
|
1,306 |
|
|
1,306 |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
1,876 |
|
|
1,876 |
|
Adjusted EBITDA from continuing operations |
|
$ |
11,231 |
|
|
$ |
4,051 |
|
|
$ |
483 |
|
|
$ |
(8,210) |
|
|
$ |
7,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery
Audit
Services –
Americas |
|
Recovery Audit
Services –
Europe/Asia-
Pacific |
|
Adjacent
Services |
|
Corporate
Support |
|
Total |
Three Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
28,935 |
|
|
$ |
11,836 |
|
|
$ |
1,203 |
|
|
$ |
— |
|
|
$ |
41,974 |
|
Net loss from continuing operations |
|
|
|
|
|
|
|
|
|
(4,176) |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
311 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
592 |
|
EBIT |
|
$ |
6,960 |
|
|
$ |
1,877 |
|
|
$ |
(2,914) |
|
|
$ |
(9,196) |
|
|
$ |
(3,273) |
|
Depreciation of property, equipment and software |
|
1,919 |
|
|
182 |
|
|
280 |
|
|
— |
|
|
2,381 |
|
Amortization of intangible assets |
|
438 |
|
|
48 |
|
|
386 |
|
|
— |
|
|
872 |
|
EBITDA |
|
$ |
9,317 |
|
|
$ |
2,107 |
|
|
$ |
(2,248) |
|
|
$ |
(9,196) |
|
|
$ |
(20) |
|
Other loss |
|
1 |
|
|
— |
|
|
— |
|
|
10 |
|
|
11 |
|
Foreign currency transaction (gains) losses on short-term
intercompany balances |
|
(106) |
|
|
(99) |
|
|
6 |
|
|
122 |
|
|
(77) |
|
Transformation, severance, and other expenses |
|
250 |
|
|
122 |
|
|
605 |
|
|
303 |
|
|
1,280 |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
1,662 |
|
|
1,662 |
|
Adjusted EBITDA from continuing operations |
|
$ |
9,462 |
|
|
$ |
2,130 |
|
|
$ |
(1,637) |
|
|
$ |
(7,099) |
|
|
$ |
2,856 |
|
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery Audit Services – Americas |
|
Recovery Audit Services – Europe/Asia- Pacific |
|
Adjacent Services |
|
Corporate Support |
|
Total |
Six Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
53,185 |
|
|
$ |
20,942 |
|
|
$ |
1,723 |
|
|
$ |
— |
|
|
$ |
75,850 |
|
Net loss from continuing operations |
|
|
|
|
|
|
|
|
|
(3,465) |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
960 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
645 |
|
EBIT |
|
$ |
13,373 |
|
|
$ |
5,865 |
|
|
$ |
162 |
|
|
$ |
(21,260) |
|
|
$ |
(1,860) |
|
Depreciation of property, equipment and software |
|
3,715 |
|
|
324 |
|
|
67 |
|
|
— |
|
|
4,106 |
|
Amortization of intangible assets |
|
816 |
|
|
83 |
|
|
758 |
|
|
— |
|
|
1,657 |
|
EBITDA |
|
$ |
17,904 |
|
|
$ |
6,272 |
|
|
$ |
987 |
|
|
$ |
(21,260) |
|
|
$ |
3,903 |
|
Other loss |
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
2 |
|
Foreign currency transaction (gains) losses on short-term
intercompany balances |
|
720 |
|
|
122 |
|
|
4 |
|
|
(209) |
|
|
637 |
|
Transformation, severance, and other expenses |
|
1,015 |
|
|
389 |
|
|
127 |
|
|
448 |
|
|
1,979 |
|
Investigation and settlement of employment matter |
|
— |
|
|
— |
|
|
— |
|
|
1,306 |
|
|
1,306 |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
3,196 |
|
|
3,196 |
|
Adjusted EBITDA from continuing operations |
|
$ |
19,639 |
|
|
$ |
6,783 |
|
|
$ |
1,118 |
|
|
$ |
(16,517) |
|
|
$ |
11,023 |
|
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery Audit Services – Americas |
|
Recovery Audit Services – Europe/Asia- Pacific |
|
Adjacent Services |
|
Corporate Support |
|
Total |
Six Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
56,308 |
|
|
$ |
21,595 |
|
|
$ |
2,875 |
|
|
$ |
— |
|
|
$ |
80,778 |
|
Net loss from continuing operations |
|
|
|
|
|
|
|
|
|
(8,417) |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
479 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
1,065 |
|
EBIT |
|
$ |
12,964 |
|
|
$ |
2,190 |
|
|
$ |
(5,059) |
|
|
$ |
(16,968) |
|
|
$ |
(6,873) |
|
Depreciation of property, equipment and software |
|
3,681 |
|
|
344 |
|
|
559 |
|
|
— |
|
|
4,584 |
|
Amortization of intangible assets |
|
876 |
|
|
85 |
|
|
773 |
|
|
— |
|
|
1,734 |
|
EBITDA |
|
$ |
17,521 |
|
|
$ |
2,619 |
|
|
$ |
(3,727) |
|
|
$ |
(16,968) |
|
|
$ |
(555) |
|
Other loss (income) |
|
1 |
|
|
9 |
|
|
— |
|
|
(18) |
|
|
(8) |
|
Foreign currency transaction (gains) losses on short-term
intercompany balances |
|
(179) |
|
|
300 |
|
|
— |
|
|
8 |
|
|
129 |
|
Transformation, severance, and other expenses |
|
378 |
|
|
245 |
|
|
623 |
|
|
731 |
|
|
1,977 |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
3,046 |
|
|
3,046 |
|
Adjusted EBITDA from continuing operations |
|
$ |
17,721 |
|
|
$ |
3,173 |
|
|
$ |
(3,104) |
|
|
$ |
(13,201) |
|
|
$ |
4,589 |
|
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
(5) Debt
On March 14, 2019,
the Company, as co-borrower with PRGX USA, Inc. (“PRGX-USA” and,
collectively with the Company, the "Borrowers"), a wholly-owned
subsidiary that is the Company’s principal domestic operating
subsidiary, entered into a five-year Credit Agreement (the “BOA
Credit Facility”) with Bank of America, N.A. (“BOA”) and Synovus
Bank as the initial lenders thereunder, and with BOA as the
letter-of-credit issuer thereunder, as the swingline lender
thereunder, and as the administrative agent (the “Administrative
Agent”) for the lenders from time to time party thereto. The BOA
Credit Facility consists of a $60.0 million senior revolving credit
facility (the “Revolver”), with a $5.0 million subfacility for the
issuance of letters of credit, and a $5.0 million swingline loan
subfacility (the “Swingline Loan”). The BOA Credit Facility is
guaranteed by each of PRGX’s direct and indirect domestic
wholly-owned subsidiaries (other than PRGX-USA), except for certain
immaterial domestic subsidiaries. None of PRGX’s direct or indirect
foreign subsidiaries have guaranteed the BOA Credit Facility. The
BOA Credit Facility is secured by substantially all of the assets
of PRGX, PRGX-USA and each guarantor (including the equity
interests in substantially all of the Company’s domestic
subsidiaries and up to sixty-five percent (65%) of the equity
interests of certain of the Company’s first-tier material foreign
subsidiaries).
The BOA Credit
Facility will mature on March 14, 2024. Interest is payable
quarterly in arrears. There are no prepayment penalties in the
event the Company elects to prepay and terminate the BOA Credit
Facility prior to its scheduled maturity date, subject to breakage
and redeployment costs in certain limited
circumstances.
The Revolver bears
interest at a rate per annum comprised of a specified index rate
based on LIBOR plus an applicable interest rate margin determined
under the BOA Credit Facility. For U.S. Dollar-denominated loans
under the Revolver, at the option of the Borrowers, such loans
shall bear interest at a rate per annum equal to (x) the LIBOR
daily floating rate plus an applicable interest rate margin
determined under the BOA Credit Facility or (y) the base rate plus
the applicable interest rate margin, each as determined under the
BOA Credit Facility. Although the Company does not anticipate the
need for Swingline Loans, were any Swingline Loans to be made they
would bear interest at the base rate plus the applicable interest
rate margin for base rate loans, each as determined under the BOA
Credit Facility. The applicable interest rate margin varies from
1.50% per annum to 2.25% per annum, for LIBOR daily floating rate
loans, and from 0.50% per annum to 1.25% per annum, for loans based
on the base rate, and in either case depending on the Company’s
consolidated leverage ratio, and is determined in accordance with a
pricing grid under the BOA Credit Facility.
The BOA Credit
Facility includes customary affirmative, negative, and financial
covenants binding on the Company, including delivery of financial
statements and other reports and maintenance of existence. The
negative covenants limit the ability of the Company, among other
things, to incur debt, incur liens, make investments and sell
assets, but does provide for certain permitted repurchases of
shares of its capital stock and the declaration and payment of
certain dividends on its capital stock. The financial covenants
included in the BOA Credit Facility set forth a maximum
consolidated leverage ratio and a minimum consolidated fixed charge
coverage ratio for the Company, each which will be tested on a
quarterly basis; and with the Company having the ability to
increase the maximum leverage ratio for a limited time when needed
in connection with permitted acquisitions. In addition, the BOA
Credit Facility includes customary events of default.
As of June 30,
2020, there was $37.0 million in debt outstanding under the BOA
Credit Facility that will be due March 14, 2024. The amount
available for additional borrowing under the BOA Credit Facility
was $23.0 million as of June 30, 2020. Based on the terms of the
BOA Credit Facility, on June 30, 2020 the applicable interest rate
(inclusive of the applicable interest rate margin) for LIBOR daily
floating rate loans (the only type outstanding on June 30, 2020)
was approximately 2.18%. As of June 30, 2020, the Company was
required to pay a commitment fee of 0.25% per annum, payable
quarterly, on the unused portion of the BOA Credit
Facility.
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
(Continued)
Long-term debt as of June 30, 2020 and December 31, 2019 consists
of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
Credit facility(1)
|
$ |
37,000 |
|
|
$ |
37,000 |
|
DFC
(2)
|
(350) |
|
|