ATLANTA, March 07, 2019 (GLOBE NEWSWIRE) -- PRGX Global, Inc. (Nasdaq: PRGX), a global leader in Recovery Audit and Spend Analytics services, today announced its unaudited financial results for the fourth quarter and year ended December 31, 2018.  

Highlights

  • Revenue from continuing operations of $49.6 million for the fourth quarter of 2018, representing growth of 5.4% year-over-year (8.1% on a constant dollar basis), the tenth consecutive quarter of growth
  • Net Income from continuing operations for the fourth quarter of $5.9 million for 2018, representing growth of 5.0% year-over-year
  • Adjusted EBITDA from continuing operations of $10.9 million for the fourth quarter of 2018, representing growth of 16.9% year-over-year (23.4% on a constant dollar basis)
  • Providing 2019 annual guidance of year-over-year revenue growth in the range of 8% to 10% and Adjusted EBITDA growth in the range of 14% to 18%
 
  For the Three Months Ended December 31,
  20182017% Change
 Selected Financial Data (dollars in thousands)   
 Revenue    
 Recovery Audit Services - Americas 32,24431,4812.4%
 Recovery Audit Services - Europe/Asia-Pacific 15,86314,9316.2%
 Adjacent Services 1,526662130.5%
 Total 49,63347,0745.4%
 Net income from continuing operations 5,9335,6525.0%
    
 Non-GAAP Financial Measures   
 Adjusted EBITDA from continuing operations 10,8699,30016.9%
   
  For the Twelve Months Ended December 31,
  20182017% Change
 Selected Financial Data (dollars in thousands)   
 Revenue    
 Recovery Audit Services - Americas 115,920113,1222.5%
 Recovery Audit Services - Europe/Asia-Pacific 49,52644,37211.6%
 Adjacent Services 6,3304,12653.4%
 Total 171,776161,6206.3%
 Net income from continuing operations 3,3514,556-26.4%
    
 Non-GAAP Financial Measures   
 Adjusted EBITDA from continuing operations 24,67321,34515.6%
  

“2018 was another strong year for PRGX.  We delivered growth in revenue and Adjusted EBITDA for the third year in a row, while growing our sales pipeline, enhancing our technology platform, expanding our go-to-market team and significantly increasing our contract compliance and UK audit teams.  Further, our fourth quarter revenue reached the highest level in five years.  I was especially pleased with the continued progress in our Adjacent Services segment,” said Ron Stewart, president and chief executive officer.

“Looking ahead, we have great confidence in our growth trajectory for the coming year. We enter 2019 with expected incremental revenue from engagements signed in 2018, several early wins in 2019, and a robust pipeline of additional new business opportunities.  Based on our strong momentum, we are projecting 2019 year-over-year revenue growth in the range of 8% to 10% and Adjusted EBITDA growth in the range of 14% to 18%,” concluded Stewart.

Consolidated Results from Continuing Operations for the Three Months Ended December 31, 2018

Consolidated revenue from continuing operations for the fourth quarter of 2018 was $49.6 million, compared to $47.1 million for the same period in 2017, an increase of 5.4%.  Fourth quarter 2018 revenue from the Recovery Audit Services segments was $48.1 million compared to $46.4 million in the prior year, and from the Adjacent Services segment was $1.5 million compared to $0.7 million in 2017.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 8.1% in the fourth quarter of 2018 compared to the same period in the prior year.  

Total cost of revenue from continuing operations for the fourth quarter of 2018 was $26.5 million, or 53.4% of revenue, compared to $26.7 million, or 56.8% of revenue, for the same period in the prior year, representing a 3.4% improvement as a percentage of revenue.

Selling, general and administrative expenses from continuing operations for the fourth quarter of 2018 were $13.9 million compared to $12.8 million in the prior year period. 

Consolidated net income from continuing operations for the fourth quarter of 2018 was $5.9 million, or $0.26 per basic and diluted share, compared to net income of $5.7 million, or $0.26 per basic and diluted share, for the same period in 2017.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the fourth quarter of 2018 was $10.9 million, or 21.9% of revenue, compared to Adjusted EBITDA of $9.3 million, or 19.8% of revenue, for the fourth quarter of 2017, an increase of $1.6 million or 16.9%.  Schedule 3 attached to this press release provides a reconciliation of net income (loss) to each of EBIT (Earnings Before Interest and Taxes), EBITDA and Adjusted EBITDA.  On a constant dollar basis adjusted for changes in foreign exchange rates, Adjusted EBITDA increased by 23.4% in the fourth quarter of 2018 compared to the same period in the prior year.  

Consolidated Results from Continuing Operations for the Year Ended December 31, 2018

Consolidated revenue from continuing operations for the year ended December 31, 2018 was $171.8 million, compared to $161.6 million in 2017, an increase of 6.3%. Revenue from the Recovery Audit Services segments was $165.4 million compared to $157.5 million in the prior year, and from the Adjacent Services segment was $6.3 million compared to $4.1 million in 2017. On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 6.5% for the year ended December 31, 2018, compared to the prior year.

Total cost of revenue from continuing operations for the year ended December 31, 2018 was $104.8 million, or 61.0% of revenue, compared to $102.1 million, or 63.1% of revenue, in 2017, an improvement of 2.1% as a percentage of revenue.

Selling, general and administrative expenses from continuing operations for the year ended December 31, 2018 were $50.5 million, compared to $46.9 million in the prior year.  

Consolidated net income from continuing operations for the year ended December 31, 2018 was $3.4 million, or $0.14 per basic and diluted share, compared to net income of $4.6 million, or $0.21 per basic and diluted share, for the prior year.

Adjusted EBITDA from continuing operations for the year ended December 31, 2018 was $24.7 million, or 14.4% of revenue, compared to Adjusted EBITDA of $21.3 million, or 13.2% of revenue, for the prior year, an increase of $3.3 million or 15.6%.  Schedule 3 attached to this press release provides a reconciliation of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.  On a constant dollar basis adjusted for changes in foreign exchange rates, Adjusted EBITDA increased by 17.7% for the year ended December 31, 2018, compared to the same period in the prior year.

Cash Flow and Liquidity

Net cash provided by operating activities for the fourth quarter of 2018 was $6.0 million, compared to $9.9 million in the fourth quarter of the prior year, and $2.4 million for the year ended December 31, 2018 compared to $13.5 million in in the prior year. 

At December 31, 2018, the Company had unrestricted cash and cash equivalents of $14.0 million, and borrowings of $21.6 million against its $30.0 million revolving credit facility.

Stock Repurchase Program

Since the February 2014 announcement of the Company’s stock repurchase program, as of December 31, 2018, the Company has repurchased 9.1 million shares.  The Company repurchased approximately 0.4 million shares of its outstanding common stock for an aggregate cost of $4.1 million in the year ended December 31, 2018.   

Fourth Quarter Earnings Call

As previously announced, management will hold a conference call later today at 5:00 PM (Eastern time) to discuss the Company’s fourth quarter and full year 2018 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 4791596.

This teleconference will also be audiocast on the Internet at www.prgx.com (click on "Events & Presentations" under "Investors"). A replay of the audiocast will be available at the same location on www.prgx.com beginning approximately two hours after the conclusion of the live audiocast, extending through June 30, 2019. Please note that the Internet audiocast is “listen-only.” Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded from www.microsoft.com/en-us/downloads.

About PRGX

PRGX Global, Inc. is a global leader in Recovery Audit and Spend Analytics services.  With over 1,500 employees, the Company serves clients in more than 30 countries and provides its services to 80% of the top 15 global retailers and over 25% of the top 50 companies in the Fortune 500. PRGX delivers more than $1 billion in cash flow improvement for its clients each year.  The creator of the recovery audit industry more than 40 years ago, PRGX continues to innovate through technology and expanded service offerings.  In addition to Recovery Audit, the Company provides Contract Compliance, Spend Analytics and Supplier Information Management services to improve clients’ financial performance and manage risk. For additional information on PRGX, please visit www.prgx.com.

Forward-Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company's overall condition and growth prospects and the Company’s expectations regarding its 2019 financial performance.   Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. Risks that could affect the Company's future performance include revenue that does not meet expectations or justify costs incurred, the Company's ability to develop material sources of new revenue in addition to revenue from its core recovery audit services, changes in the market for the Company's services, the Company's ability to retain and attract qualified personnel, the Company's ability to integrate recent and future acquisitions, uncertainty in the credit markets, the Company's ability to maintain compliance with its financial covenants, client bankruptcies, loss of major clients, and other risks generally applicable to the Company's business. For a discussion of other risk factors that may impact the Company's business, please see the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

Non-GAAP Financial Measures

EBIT, EBITDA and Adjusted EBITDA are all "non-GAAP financial measures" presented as supplemental measures of the Company's performance.  They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP.  The Company believes these measures provide additional meaningful information in evaluating its performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes.  In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company's secured credit facility.  However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company's results as reported under GAAP.  In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that, as described above, the adjustments may vary from period to period and in the future the Company will incur expenses such as those used in calculating these measures.  The Company's presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items.  Schedule 3 to this press release provides a reconciliation of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

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


 
SCHEDULE 1    
PRGX Global, Inc. and Subsidiaries    
Condensed Consolidated Statements of Operations    
(Amounts in thousands, except per share data)    
(Unaudited)    
        
        
 Three Months Twelve Months
 Ended December 31, Ended December 31,
  2018   2017   2018   2017 
        
Revenue, net of refund liabilities$  49,633  $  47,074  $  171,776  $  161,620 
Operating expenses:       
Cost of revenue   26,493     26,746     104,825     102,052 
Selling, general and administrative expenses   13,862     12,792     50,456     46,941 
Depreciation of property, equipment and software assets   2,074     1,107     7,370     4,569 
Amortization of intangible assets   871     1,468     3,395     3,634 
Acquisition-related adjustments loss (income)    12     (2,283)    (1,628)    (2,283)
Total operating expenses   43,312     39,830     164,418     154,913 
        
Operating income from continuing operations   6,321     7,244     7,358     6,707 
        
Foreign currency transaction losses (gains)       
on short-term intercompany balances   272     (263)    1,002     (2,190)
Interest expense, net   363     1,312     1,663     1,539 
Other loss (income)   5     17     21     (160)
Income from continuing operations before income taxes   5,681     6,178     4,672     7,518 
        
Income tax (benefit) expense   (252)    526     1,321     2,962 
        
Net income from continuing operations$  5,933  $  5,652  $  3,351  $  4,556 
        
Discontinued operations:       
Income (loss) from discontinued operations   1,926     (343)    1,242     (1,372)
Income tax expense   -      -      -      -  
Net income (loss) from discontinued operations   1,926     (343)    1,242     (1,372)
        
Net income$  7,859  $  5,309  $  4,593  $  3,184 
        
Basic income (loss) per common share:       
Basic income from continuing operations$  0.26  $  0.26  $  0.14  $  0.21 
Basic income (loss) from discontinued operations 0.08   (0.02)  0.06   (0.06)
Total basic income per common share$  0.34  $  0.24  $  0.20  $  0.15 
        
Diluted income (loss) per common share:       
Diluted income from continuing operations$  0.26  $  0.26  $  0.14  $  0.21 
Diluted income (loss) from discontinued operations 0.08   (0.02)  0.06   (0.06)
Total diluted income per common share$  0.34  $  0.24  $  0.20  $  0.15 
        
Weighted average common shares outstanding:       
Basic   23,036     22,017     22,811     21,937 
Diluted   23,619     22,303     23,434     22,111 
        

 

 

 
SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
     
     
     
     
  December 31, December 31,
   2018   2017 
     
 ASSETS        
Current assets:    
 Cash and cash equivalents$  13,973  $  18,823 
 Restricted cash    46     51 
 Receivables:    
 Contract receivables, net   46,865     38,767 
 Employee advances and miscellaneous receivables, net   567     1,665 
 Total receivables   47,432     40,432 
     
 Prepaid expenses and other current assets    3,144     4,608 
 Total current assets   64,595     63,914 
     
Property, equipment and software, net    22,028     17,478 
Goodwill    17,531     17,648 
Intangible assets, net    14,945     18,478 
Deferred income taxes    2,895     1,538 
Other assets    2,169     1,162 
 Total assets $  124,163  $  120,218 
     
     
 LIABILITIES AND SHAREHOLDERS' EQUITY       
Current liabilities:    
 Accounts payable and accrued expenses $  7,515  $  8,548 
 Accrued payroll and related expenses    15,073     13,078 
 Refund liabilities    6,497     7,864 
 Deferred revenue    2,428     1,431 
 Current portion of long-term debt    21,601     48 
 Current portion of long-term incentive compensation liability    -      5,116 
 Current portion of business acquisition obligations    4,162     3,759 
 Total current liabilities   57,276     39,844 
     
Long-term debt    -      13,526 
Business acquisition obligations    -      5,135 
Refund liabilities    100     957 
Other long-term liabilities    458     442 
 Total liabilities   57,834     59,904 
     
Shareholders' equity:    
 Common stock    232     224 
 Additional paid-in capital   582,574     580,032 
 Accumulated deficit    (515,456)    (520,049)
 Accumulated other comprehensive income    (1,021)    107 
 Total shareholders' equity   66,329     60,314 
     
 Total liabilities and shareholders' equity $  124,163  $  120,218 
     

 

 

 SCHEDULE 3
PRGX Global, Inc. and Subsidiaries
Reconciliation of Net Income (Loss) to EBIT, EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
        
        
 Three Months Twelve Months
 Ended December 31, Ended December 31,
  2018   2017   2018   2017 
Reconciliation of net income to EBIT, EBITDA       
 and Adjusted EBITDA:       
        
Net income$  7,859  $  5,309  $  4,593  $  3,184 
        
 Income tax (benefit) expense   (252)    526     1,321     2,962 
 Interest expense, net   363     1,312     1,663     1,539 
        
EBIT   7,970     7,147     7,577     7,685 
        
 Depreciation of property, equipment and software assets   2,074     1,109     7,371     4,577 
 Amortization of intangible assets   871     1,468     3,395     3,634 
        
EBITDA   10,915     9,724     18,343     15,896 
        
 Foreign currency transaction losses (gains)       
 on short-term intercompany balances   272     (263)    1,002     (2,190)
 Acquisition-related adjustments loss (income)   12     (2,283)    (1,628)    (2,283)
 Transformation and severance expenses   694     74     3,122     1,666 
 Other loss (income)   5     17     21     (160)
 Stock-based compensation   897     1,690     5,056     7,052 
        
Adjusted EBITDA$  12,795  $  8,959  $  25,916  $  19,981 
        
Adjusted EBITDA from continuing operations$  10,869  $  9,300  $  24,673  $  21,345 
Adjusted EBITDA from discontinued operations$  1,926  $  (341) $  1,243  $  (1,364)
        

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   Twelve Months 
  Ended December 31,   Ended December 31, 
  2018   2017   2018   2017 
 Cash flows from operating activities:        
 Net income$  7,859  $  5,309  $  4,593  $  3,184 
        
 Adjustments to reconcile net income to net cash 
   provided by operating activities: 
       
 Depreciation and amortization    2,946     2,575     10,766     8,203 
 Amortization of deferred loan costs    -     9     53     85 
 Deferred income taxes    (1,490)    731     (1,321)    731 
 Stock-based compensation expense    897     1,690     5,056     7,052 
 Changes in fair value of contingent consideration    12     (2,283)    (1,628)    (2,283)
 Foreign currency transaction losses (gains) on        
  short-term intercompany balances    272     (263)    1,002     (2,190)
 Long-term incentive compensation payout    -     -     (6,378)    - 
 Increase in receivables    (10,181)    (3,705)    (9,631)    (4,418)
 Increase in accounts payable, accrued        
  payroll and other accrued expenses    5,367     2,109     (855)    1,790 
 Other, primarily changes in assets and liabilities    237     3,731     774     1,306 
 Net cash provided by operating activities    5,919     9,903     2,431     13,460 
        
 Cash flows from investing activities:        
 Purchases of property and equipment, net of disposals    (2,499)    (2,922)    (10,398)    (9,355)
 Acquistion of businesses, net of cash acquired    -     -     19     (10,128)
 Net cash used in investing activities    (2,499)    (2,922)    (10,379)    (19,483)
        
 Cash flows from financing activities:        
 Net borrowings under line of credit    4,000     -     8,000     10,000 
 Payment of earnout liability related to business acquisitions    -     -     (4,000)    - 
 Other, net   (3,807)    378     (966)    983 
 Net cash provided by financing activities    193     378     3,034     10,983 
        
 Effect of exchange rates on cash and cash equivalents    (123)    (468)    64     (1,860)
        
 Net change in cash and cash equivalents    3,490     6,891     (4,850)    3,100 
        
 Cash and cash equivalents at beginning of period    10,483     11,932     18,823     15,723 
        
 Cash and cash equivalents at end of period $  13,973  $  18,823  $  13,973  $  18,823 
        

 

 

 
SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
              
              
  Three Months Ended  Twelve Months Ended
  December 31,  December 31,
              
   2018   2017  Change   2018   2017  Change
Revenue, net of refund liabilities            
 Recovery Audit Services - Americas$  32,244  $  31,481  $  763   $  115,920  $  113,122  $  2,798 
 Recovery Audit Services - Europe/Asia-Pacific    15,863     14,931     932      49,526     44,372     5,154 
 Adjacent Services   1,526     662     864      6,330     4,126     2,204 
 Total$  49,633  $  47,074  $  2,559   $  171,776  $  161,620  $  10,156 
              
Cost of revenue            
 Recovery Audit Services - Americas$  17,031  $  17,809  $  (778)  $  69,897  $  68,963  $  934 
 Recovery Audit Services - Europe/Asia-Pacific    7,216     7,377     (161)     27,767     26,930     837 
 Adjacent Services   2,246     1,560     686      7,161     6,159     1,002 
 Total$  26,493  $  26,746  $  (253)  $  104,825  $  102,052  $  2,773 
              
Selling, general and administrative expenses          
 Recovery Audit Services - Americas$  3,103  $  2,090  $  1,013   $  11,849  $  9,410  $  2,439 
 Recovery Audit Services - Europe/Asia-Pacific    1,796     1,339     457      7,439     6,586     853 
 Adjacent Services   262     695     (433)     1,685     3,735     (2,050)
 Corporate**   8,713     6,385     2,328      27,855     24,927     2,928 
 Total$  13,874  $  10,509  $  3,365   $  48,828  $  44,658  $  4,170 
              
Depreciation of property, equipment and software assets         
 Recovery Audit Services - Americas$  1,669  $  687  $  982   $  5,545  $  3,165  $  2,380 
 Recovery Audit Services - Europe/Asia-Pacific    171     146     25      683     599     84 
 Adjacent Services   234     274     (40)     1,142     805     337 
 Total$  2,074  $  1,107  $  967   $  7,370  $  4,569  $  2,801 
              
Amortization of intangible assets            
 Recovery Audit Services - Americas$  446  $  933  $  (487)  $  1,664  $  1,919  $  (255)
 Recovery Audit Services - Europe/Asia-Pacific    36     142     (106)     172     142     30 
 Adjacent Services   389     393     (4)     1,559     1,573     (14)
 Healthcare Claims Recovery Audit Services   -      -      -       -        -  
 Total$  871  $  1,468  $  (597)  $  3,395  $  3,634  $  (239)
              
Operating income (loss)            
 Recovery Audit Services - Americas$  9,995  $  9,962  $  33   $  26,965  $  29,665  $  (2,700)
 Recovery Audit Services - Europe/Asia-Pacific    6,644     5,927     717      13,465     10,115     3,350 
 Adjacent Services   (1,605)    (2,260)    655      (5,217)    (8,146)    2,929 
 Corporate   (8,713)    (6,385)    (2,328)     (27,855)    (24,927)    (2,928)
 Total$  6,321  $  7,244  $  (923)  $  7,358  $  6,707  $  651 
              
Adjusted EBITDA            
 Recovery Audit Services - Americas$  12,326  $  11,582  $  744   $  35,118  $  35,062  $  56 
 Recovery Audit Services - Europe/Asia-Pacific    7,046     6,288     758      15,514     11,511     4,003 
 Adjacent Services   (982)    (1,578)    596      (2,450)    (5,448)    2,998 
 Corporate   (7,521)    (6,992)    (529)     (23,509)    (19,780)    (3,729)
 Total$  10,869  $  9,300  $  1,569   $  24,673  $  21,345  $  3,328 
              


* The Recovery Audit Services - Americas segment represents recovery audit services provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services provided in Europe, Asia and the Pacific region. The Adjacent Services segment represents spend analytics and supplier information management services.

** Corporate - Includes acquisition-related adjustments of $12,000 loss that increased expenses in the three months ended December 31, 2018, and
of $1.6 million income that reduced expenses in the twelve months ended December 31, 2018.