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PRGX Global, Inc. Announces Third Quarter 2012 Financial Results

PRGX Global, Inc. Announces Third Quarter 2012 Financial Results

Operating Highlights

  *Year-over-year revenue growth for the third consecutive quarter and 11 of
    last 12 quarters
  *Q3 2012 Adjusted EBITDA of $8.8 million represents 27% growth over Q3
    2011; 16% growth over Q2 2012
  *YTD 2012 Adjusted EBITDA of $23.2 million represents 29% growth over same
    period in 2011
  *New Services segment revenue grew 19% over Q3 2011
  *Won third Medicaid agency recovery audit contract

ATLANTA, Oct. 29, 2012 (GLOBE NEWSWIRE) -- PRGX Global, Inc. (Nasdaq:PRGX),
the world's leading provider of recovery audit services and the pioneer in
Profit Discovery™, today announced its unaudited financial results for the
third quarter and nine months ended September 30, 2012.

"I am pleased to report our third consecutive quarter of both sequential and
year-over-year growth in revenues and Adjusted EBITDA. The global PRGX team
continues to deliver on the promise of Profit Discovery for our clients and
for our investors," said Romil Bahl, president and chief executive officer.

"Year-over-year quarterly revenue growth was led by our New Services segment
and by our Recovery Audit Services – Americas segment, which increased
revenues more than 19% and 7%, respectively. Our third reporting segment,
Recovery Audit Services – Europe Asia/Pacific, did not deliver to our
expectations, and we are focusing significant management attention to ensure
this region performs to its potential," continued Bahl.

"Our bottom line continued to grow faster than the top line, as our Service
Delivery Model Redesign program continues to leverage our global operations.
We have delivered Adjusted EBITDA growth of 27% compared to the same quarter
last year, highlighted by the reduction of cost of revenue from 65.9% to
62.3%. It's worth noting that our New Services segment of Healthcare Claims
Recovery Audit and Profit Optimization services reduced absolute cost of
revenue while delivering the 19% top line growth," concluded Bahl.

Consolidated Results for Three Months Ended September 30, 2012

Consolidated revenues for the third quarter of 2012 increased 0.6% to $52.1
million compared to $51.8 million in the same prior year period. After
adjusting for changes in foreign exchange rates, consolidated revenues for the
third quarter of 2012 increased 2.4% compared to the same period in 2011.

  Recovery Audit Services – Americas revenues for the third quarter of 2012
  increased 7.3% to $33.2 million compared to $31.0 million in the same period
  in the prior year. On a constant dollar basis, adjusted for changes in
  foreign exchange rates, Recovery Audit Services – Americas revenues for the
  third quarter increased by 8.8% compared to the same period in 2011.

  Recovery Audit Services – Europe Asia/Pacific revenues for the third quarter
  of 2012 decreased 21.4% to $11.4 million compared to $14.5 million in the
  same period in the prior year. On a constant dollar basis, adjusted for
  changes in foreign exchange rates, Recovery Audit Services – Europe
  Asia/Pacific revenues for the third quarter decreased by 18.4% compared to
  the same period in 2011. These results reflect the adverse impact of both
  the current European economic climate and audit-specific timing issues.

  New Services revenues for the third quarter of 2012 increased 19.0% to $7.4
  million compared to $6.3 million in the same period in the prior year. The
  New Services segment represents Healthcare Claims Recovery Audit services
  and our Profit Optimization services.

Total cost of revenues for the third quarter of 2012 were $32.5 million, or
62.3% of revenue, compared to $34.1 million, or 65.9% of revenue, in the same
period in the prior year. SG&A for the third quarter of 2012 was $13.2
million, or 25.4% of revenue, compared to $12.4 million, or 24.0% of revenue
in the third quarter of 2011. Depreciation and amortization expenses were $3.1
million in the third quarter of 2012 compared to $2.7 million in the prior
year third quarter.

Net earnings for the third quarter of 2012 were $2.6 million, or $0.10 per
basic and diluted share, compared to net earnings of $0.4 million, or $0.02
per basic and diluted share, for the same period in 2011. Net cash provided by
operating activities for the third quarter of 2012 was $11.5 million compared
to $2.6 million in the third quarter of 2011. Working capital improvements
since June 30, 2012 accounted for $4.5 million of the third quarter 2012 cash
increase. Third quarter 2011 results included working capital changes that
used $3.4 million of cash. Cash generated from operations before working
capital changes amounted to $7.0 million in the 2012 third quarter, a $1.1
million increase from the same period in 2011.

Adjusted EBITDA for the third quarter of 2012 was $8.8 million compared to
$6.9 million of Adjusted EBITDA for the same period in 2011. The 2012 third
quarter Adjusted EBITDA was earnings before interest, taxes, depreciation and
amortization (EBITDA) excluding a charge of $1.8 million related to
stock-based compensation, $0.5 million of transformation severance and related
expenses, a $0.1 million charge for acquisition obligations classified as
compensation, and $0.3 million of foreign currency gains on intercompany
balances. The comparable Adjusted EBITDA amount for the third quarter of 2011
excludes from EBITDA for such period a $1.5 million charge for stock-based
compensation, $0.2 million of transformation severance and related expenses, a
$0.1 million charge for acquisition obligations classified as compensation and
$1.1 million of foreign currency losses on intercompany balances. Schedule 3
attached to this press release provides a reconciliation of net earnings to
each of EBIT (earnings before interest and taxes), EBITDA and Adjusted EBITDA.

Consolidated Results for Nine Months Ended September 30, 2012

Consolidated revenues for the nine months ended September 30, 2012 increased
1.4% to $155.4 million compared to $153.2 million in the same prior year
period. After adjusting for changes in foreign exchange rates, consolidated
revenues for the nine months ended September 30, 2012 increased 3.6% compared
to the same period in 2011.

  Recovery Audit Services – Americas revenues for the nine months ended
  September 30, 2012 increased 4.1% to $91.6 million compared to $88.0 million
  in the same period in the prior year. On a constant dollar basis, adjusted
  for changes in foreign exchange rates, Recovery Audit Services – Americas
  revenues for the nine month period increased by 5.8% compared to the same
  period in 2011.

  Recovery Audit Services – Europe Asia/Pacific revenues for the nine months
  ended September 30, 2012 decreased 13.1% to $39.1 million compared to $45.0
  million in the same period in the prior year. On a constant dollar basis,
  adjusted for changes in foreign exchange rates, Recovery Audit Services –
  Europe Asia/Pacific revenues for the nine month period decreased by 9.3%
  compared to the same period in 2011. As was the case for the third quarter,
  revenues for the first nine months of 2012 were adversely impacted by both
  the current European economic climate and audit-specific timing issues.

  New Services revenues for the nine months ended September 30, 2012 increased
  22.2% to $24.6 million compared to $20.2 million in the same period in the
  prior year.

Total cost of revenues for the nine months ended September 30, 2012 were
$100.0 million, or 64.3% of revenue, compared to $103.2 million, or 67.4% of
revenue, in the same period in the prior year. SG&A for the nine months ended
September 30, 2012 was $38.6 million, or 24.8% of revenue, compared to $37.1
million, or 24.2% of revenue in the same period in the prior year.
Depreciation and amortization expenses were $10.0 million for the nine months
ended September 30, 2012 compared to $7.4 million in the same period in the
prior year. The increases in depreciation and amortization expenses are
primarily attributable to the additional amortization charges resulting from
the BSI acquisition in December 2011 and associate migrations in the UK
completed in January and June of 2012.

Net earnings for the nine months ended September 30, 2012 were $3.9 million,
or $0.15 per basic and diluted share, compared to net earnings of $1.5
million, or $0.06 per basic and diluted share, for the same period in 2011.
Net cash provided by operating activities for the nine months ended September
30, 2012 was $12.4 million compared to $12.7 million in the same period last
year.

Adjusted EBITDA for the nine months ended September 30, 2012 was $23.2 million
compared to $18.1 million of Adjusted EBITDA for the same period in 2011. The
nine months ended September 30, 2012 Adjusted EBITDA was earnings before
interest, taxes, depreciation and amortization (EBITDA) excluding a charge of
$4.5 million related to stock-based compensation, $1.0 million of
transformation severance and related expenses, a $0.3 million charge for
acquisition obligations classified as compensation, $0.6 million in costs
relating to an overtime pay claim, and $0.2 million of foreign currency gains
on intercompany balances. The comparable Adjusted EBITDA amount for the nine
months ended September 30, 2011 excludes from EBITDA for such period a $3.7
million charge for stock-based compensation, $1.3 million of transformation
severance and related expenses, a $0.3 million charge for acquisition
obligations classified as compensation and $0.2 million of foreign currency
losses on intercompany balances. Schedule 3 attached to this press release
provides a reconciliation of net earnings to each of EBIT, EBITDA and Adjusted
EBITDA.

Liquidity

At September 30, 2012, the Company had unrestricted cash and cash equivalents
of $19.9 million and had no borrowings against its revolving credit facility.
Bank debt outstanding at quarter end was $6.8 million, which represented the
outstanding balance on a variable rate term loan due quarterly through 2014.

Third Quarter Earnings Call

As previously announced, management will hold a conference call tomorrow
morning at 8:30 AM (Eastern time) to discuss the Company's third quarter 2012
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 41146141.

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 beginning approximately two
hours after the conclusion of the live audiocast, extending through January
31, 2013. Please note that the Internet audiocast is "listen-only." Microsoft
Windows Media Player is required to access the live audiocast and the replay.
Media Player can be downloaded from www.microsoft.com/windows/mediaplayer.

About PRGX Global, Inc.

Headquartered in Atlanta, Georgia, PRGX Global, Inc. is the world's leading
provider of recovery audit services. With over 1,600 employees, the Company
operates and serves clients in more than 30 countries and provides its
services to over 75% of the top 30 global retailers. PRGX is also pioneering
Profit Discovery™, a unique combination of audit, analytics and advisory
services that improves client financial performance. For additional
information, please visit PRGX at www.prgx.com.

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 earnings to each of EBIT, EBITDA and Adjusted EBITDA.

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 financial condition and revenue and
Adjusted EBITDA growth, and the success of its growth strategies and expansion
into new markets.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 revenues that do not meet expectations or
justify costs incurred, the Company's ability to develop material sources of
new revenue in addition to revenues 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, changes to Medicare and Medicaid
recovery audit contractor programs, 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 15, 2012. The
Company disclaims any obligation or duty to update or modify these
forward-looking statements.

SCHEDULE 1
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
(Unaudited)
                                                                
                                                                
                                    Three Months        Nine Months
                                    Ended September 30, Ended September 30,
                                    2012      2011      2012       2011
                                                                
Revenues                             $52,087 $51,751 $ 155,394 $153,173
Operating expenses:                                              
Cost of revenues                     32,461   34,125   99,991    103,242
Selling, general and administrative  13,242   12,417   38,575    37,144
expenses
Depreciation of property and         1,716    1,464    4,808     3,859
equipment
Amortization of intangible assets    1,431    1,277    5,217     3,527
Total operating expenses             48,850   49,283   148,591   147,772
                                                                
Operating income                     3,237    2,468    6,803     5,401
                                                                
Foreign currency transaction (gains)
losseson short-term intercompany    (348)    1,055    (190)     176
balances
Interest expense, net                515      398      1,548     1,223
Earnings before income taxes         3,070    1,015    5,445     4,002
                                                                
Income tax expense                   505      593      1,586     2,498
                                                                
Net earnings                         $2,565  $422    $3,859   $1,504
                                                                
                                                                
Basic earnings per common share      $0.10   $0.02   $0.15    $0.06
                                                                
Diluted earnings per common share    $0.10   $0.02   $0.15    $0.06
                                                                
Weighted average common shares                                   
outstanding:
Basic                                25,541   24,744   25,370    24,510
Diluted                              26,250   25,213   25,942    24,901
                                                                

SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
                                                            
                                                            
                                               September 30, December 31,
                                               2012          2011
                                                            
ASSETS                                                                     
Current assets:                                              
Cash and cash equivalents                       $19,863     $20,337
Restricted cash                                 123          64
Receivables:                                                 
Contract receivables, net                       45,020       40,624
Employee advances and miscellaneous             1,247        1,343
receivables, net
Total receivables                               46,267       41,967
                                                            
Prepaid expenses and other current assets       4,437        5,594
Total current assets                            70,690       67,962
                                                            
Property and equipment, net                     19,622       18,586
Goodwill                                        13,912       13,194
Intangible assets, net                          19,719       23,406
Deferred income taxes                           901          831
Other assets                                    2,175        2,434
Total assets                                  $127,019    $126,413
                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities:                                         
Accounts payable and accrued expenses           $14,736     $15,035
Accrued payroll and related expenses            20,422       21,920
Refund liabilities and deferred revenue         8,078        8,434
Current portion of debt                         3,000        3,000
Business acquisition obligations                3,822        3,502
Total current liabilities                       50,058       51,891
                                                            
Long-term debt                                  3,750        6,000
Noncurrent business acquisition obligations     3,319        5,604
Other long-term liabilities                     3,021        3,828
Total liabilities                               60,148       67,323
                                                            
Shareholders' equity:                                        
Common stock                                    254          251
Additional paid-in capital                      577,755      574,266
Accumulated deficit                             (514,733)    (518,592)
Accumulated other comprehensive income          3,595        3,165
Total shareholders' equity                      66,871       59,090
                                                            
Total liabilities and shareholders' equity     $127,019    $126,413
                                                            

SCHEDULE 3
PRGX Global, Inc. and Subsidiaries
Reconciliation of Net Earnings to EBIT, EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
                                                              
                                                              
                         Three Months               Nine Months
                         Ended September 30,        Ended September 30,
                         2012          2011         2012         2011
Reconciliation of net
earnings to EBIT, EBITDA                                       
and Adjusted EBITDA:
                                                              
Net earnings              $2,565      $422       $3,859     $1,504
                                                              
Income tax expense        505          593         1,586       2,498
Interest expense, net     515          398         1,548       1,223
                                                              
EBIT                      3,585        1,413       6,993       5,225
                                                              
Depreciation of property  1,716        1,464       4,808       3,859
and equipment
Amortization of           1,431        1,277       5,217       3,527
intangible assets
                                                              
EBITDA                    6,732        4,154       17,018      12,611
                                                              
Foreign currency
transaction (gains)       (348)        1,055       (190)       176
losses on short-term
intercompany balances
Acquisition obligations
classified as             93           106         288         334
compensation
Transformation severance  518          170         1,036       1,267
and related expenses
Costs for overtime pay    --          --         577         --
claim
Stock-based compensation  1,839        1,461       4,479       3,663
                                                              
Adjusted EBITDA           $8,834      $6,946     $23,208    $18,051
                                                              
                                                              
EBIT, EBITDA and Adjusted EBITDA are all "non-GAAP financial measures"
presented as supplemental measures of our performance.They are not presented
in accordance with accounting principles generally accepted in the United
States, or GAAP.The Company believes these measures provide additional
meaningful information in evaluating the Company's performance over time, and
that the rating agencies and a number of lenders use EBIT, EBITDA and similar
measures for similar purposes. In addition, a measure similar to Adjusted
EBITDA is used in the restrictive covenants contained in the Company's secured
credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as
analytical tools, and you should not consider them in isolation, or as
substitutes for analysis of our results as reported under GAAP. In addition,
in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that in
the future we will incur expenses such as those used in calculating these
measures. Our presentation of these measures should not be construed as an
inference that our future results will be unaffected by unusual or
nonrecurring items.
                                                              

SCHEDULE 4
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
                                                                 
                                                                 
                                      Three Months        Nine Months
                                      Ended September 30, Ended September 30,
                                      2012      2011      2012      2011
Cash flows from operating activities:                             
Net earnings                           $2,565  $422    $3,859  $1,504
Adjustments to reconcile net earnings
to net cash providedby operating                                 
activities:
Depreciation and amortization          3,147    2,741    10,025   7,386
Amortization of deferred debt costs    46       45       137      136
Stock-based compensation expense       1,839    1,461    4,479    3,663
Foreign currency transaction (gains)
losses onshort-term intercompany      (348)    1,055    (190)    176
balances
Decrease (increase) in receivables     1,076    (434)    (3,720)  (2,172)
Increase (decrease) in accounts
payable, accruedpayroll and other     3,314    (3,713)  (2,352)  3,135
accrued expenses
Other, primarily changes in assets and (144)    983      127      (1,085)
liabilities
Net cash provided by operating         11,495   2,560    12,365   12,743
activities
                                                                 
Cash flows used in investing                                      
activities:
Business acquisitions                  --      (663)    (1,437)  (663)
Purchases of property and equipment,   (1,469)  (1,863)  (5,689)  (6,090)
net of disposals
Net cash used in investing activities  (1,469)  (2,526)  (7,126)  (6,753)
                                                                 
Net cash used in financing activities  (2,223)  (2,257)  (6,002)  (4,443)
                                                                 
Effect of exchange rates on cash and   223      (1,185)  289      (499)
cash equivalents
                                                                 
Net increase (decrease) in cash and    8,026    (3,408)  (474)    1,048
cash equivalents
                                                                 
Cash and cash equivalents at beginning 11,837   22,904   20,337   18,448
of period
                                                                 
Cash and cash equivalents at end of    $ 19,863 $ 19,496 $ 19,863 $ 19,496
period
                                                                 

SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
                                                                  
                                                                  
                    Three Months Ended           Nine Months Ended
                    September 30,                September 30,
                                                                  
                    2012      2011      Change   2012       2011       Change
Revenues                                                           
Recovery Audit       $33,235 $30,980 $2,255 $91,640  $87,994  $3,646
Services - Americas
Recovery Audit
Services -           11,406   14,516   (3,110) 39,122    45,021    (5,899)
Europe/Asia-Pacific
New Services         7,446    6,255    1,191   24,632    20,158    4,474
Total                $52,087 $51,751 $336   $155,394 $153,173 $2,221
                                                                  
Cost of revenues                                                   
Recovery Audit       $16,854 $16,755 $(99)  $48,876  $48,995  $119
Services - Americas
Recovery Audit
Services -           9,314    10,988   1,674   30,395    34,646    4,251
Europe/Asia-Pacific
New Services         6,293    6,382    89      20,720    19,601    (1,119)
Total                $32,461 $34,125 $1,664 $99,991  $103,242 $3,251
                                                                  
Selling, general and
administrative                                                     
expenses
Recovery Audit       $4,624  $4,641  $17    $14,711  $14,669  $(42)
Services - Americas
Recovery Audit
Services -           1,502    942      (560)   3,621     3,503     (118)
Europe/Asia-Pacific
New Services         1,084    1,124    40      3,997     3,690     (307)
Corporate            6,032    5,710    (322)   16,246    15,282    (964)
Total                $13,242 $12,417 $(825) $38,575  $37,144  $(1,431)
                                                                  
Depreciation of
property and                                                       
equipment
Recovery Audit       $1,111  $963    $(148) $3,016   $2,506   $(510)
Services - Americas
Recovery Audit
Services -           90       96       6       217       279       62
Europe/Asia-Pacific
New Services         515      405      (110)   1,575     1,074     (501)
Total                $1,716  $1,464  $(252) $4,808   $3,859   $(949)
                                                                  
Amortization of                                                    
intangible assets
Recovery Audit       $767    $575    $(192) $3,120   $1,719   $(1,401)
Services - Americas
Recovery Audit
Services -           462      488      26      1,491     1,160     (331)
Europe/Asia-Pacific
New Services         202      214      12      606       648       42
Total                $1,431  $1,277  $(154) $5,217   $3,527   $(1,690)
                                                                  
Operating income                                                   
(loss)
Recovery Audit       $9,879  $8,046  $1,833 $21,917  $20,105  $1,812
Services - Americas
Recovery Audit
Services -           38       2,002    (1,964) 3,398     5,433     (2,035)
Europe/Asia-Pacific
New Services         (648)    (1,870)  1,222   (2,266)   (4,855)   2,589
Corporate            (6,032)  (5,710)  (322)   (16,246)  (15,282)  (964)
Total                $3,237  $2,468  $769   $6,803   $5,401   $1,402
                                                                  
Adjusted EBITDA                                                    
Recovery Audit       $12,002 $9,766  $2,236 $28,988  $25,449  $3,539
Services - Americas
Recovery Audit
Services -           863      2,574    (1,711) 5,457     7,020     (1,563)
Europe/Asia-Pacific
New Services         162      (1,145)  1,307   530       (2,799)   3,329
Corporate            (4,193)  (4,249)  56      (11,767)  (11,619)  (148)
Total                $8,834  $6,946  $1,888 $23,208  $18,051  $5,157
                                                                  
*The Recovery Audit Services - Americas segment represents recovery audit
services, excluding New 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 New
Services segment represents Healthcare Claims Recovery Audit services and Profit
Optimization services.
                                                                  

CONTACT: PRGX Global, Inc.
         investor-relations@prgx.com
         Phone: 770-779-3011

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