ATLANTA, Oct. 27, 2020 (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 third quarter and nine months ended September 30, 2020.

Quarterly Highlights

  • Revenue of $41.5 million, which was positively impacted by approximately $0.5 million from a weaker U.S. dollar compared to the same period last year.
  • Net income from continuing operations of $3.0 million compared to a net loss of $1.5 million in the same period last year
  • Adjusted EBITDA from continuing operations of $9.3 million, the highest third quarter Adjusted EBITDA in seven years and a 67.2% increase compared to the third quarter of 2019
  • Increasing 2020 annual Adjusted EBITDA guidance for the second time this year to approximately $32 million
 For the Three Months
Ended September 30,
 For the Nine Months
Ended September 30,
Selected Financial Data (dollars in thousands)2020 2019 % Change 2020 2019 % Change
            
Revenue           
Recovery Audit Services - Americas$28,026 $29,987  -6.5% $81,211  $86,295  -5.9%
Recovery Audit Services - Europe/Asia-Pacific12,651 10,803  17.1% 33,593  32,398  3.7%
Adjacent Services855 1,500  -43.0% 2,578  4,375  -41.1%
Total$41,532 $42,290  -1.8% $117,382  $123,068  -4.6%
Net income (loss) from continuing operations3,034 (1,542) 296.8% (431) (9,959) 95.7%
            
Non-GAAP Financial Measures           
Adjusted EBITDA from continuing operations$9,349 $5,592  67.2% $20,372  $10,181  100.1%

“As we have done consistently throughout 2020, we again delivered on our promises of fiscal discipline, improved productivity and expanded operating leverage during the third quarter. As a result, we’re pleased to be announcing the highest third quarter Adjusted EBITDA in seven years and the highest third quarter Adjusted EBITDA margin percentage in over ten years. During the quarter, we also made solid progress executing strategic initiatives that we believe will usher in the next generation of PRGX,” said Ron Stewart, President and Chief Executive Officer.

“With over 75 percent of our revenue coming from clients providing essential goods and services, our resilient client base has supported these strong financial results. As a result of our year-to-date financial performance and our outlook for the rest of the year, we are increasing our 2020 Adjusted EBITDA guidance for the second time this year to approximately $32 million,” concluded Stewart.

Unaudited Consolidated Results from Continuing Operations for the Three Months Ended September 30, 2020

Consolidated revenue for the third quarter of 2020 was $41.5 million, compared to $42.3 million for the same period in 2019, a decrease of 1.8%. Third quarter 2020 revenue from the Recovery Audit Services segments was $40.7 million compared to $40.8 million in the third quarter of the prior year, and from the Adjacent Services segment was $0.9 million compared to $1.5 million in 2019. On a constant dollar basis adjusted for changes in foreign exchange rates, revenue decreased by 2.9% in the third quarter of 2020 compared to the same period in the prior year.

Total cost of revenue from continuing operations for the third quarter of 2020 was $20.8 million, or 50.1% of revenue, compared to total cost of revenue from continuing operations of $25.5 million, or 60.4% of revenue, for the same period in the prior year.

Selling, general and administrative expenses from continuing operations for the third quarter of 2020 were $13.8 million compared to selling, general and administrative expenses from continuing operations of $13.5 million in the prior year period.

Consolidated net income from continuing operations for the third quarter of 2020 was $3.0 million, or $0.13 per basic and diluted share, compared to consolidated net loss from continuing operations of $1.5 million, or $(0.07) per basic and diluted share, for the same period in 2019.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the third quarter of 2020 was $9.3 million, or 22.5% of revenue, compared to Adjusted EBITDA from continuing operations of $5.6 million, or 13.2% of revenue, for the third quarter of 2019, an increase of $3.8 million or 67.2%.

Schedule 4 attached to this press release provides a reconciliation of net income (loss) to each of Earnings Before Interest and Taxes (EBIT), Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA.

Unaudited Consolidated Results from Continuing Operations for the Nine Months Ended September 30, 2020

Consolidated revenue for the nine months ended September 30, 2020 was $117.4 million, compared to $123.1 million for the same period in 2019, a decrease of 4.6%. For the nine months ended September 30, 2020, revenue from the Recovery Audit Services segments was $114.8 million compared to $118.7 million in the prior year, and from the Adjacent Services segment was $2.6 million compared to $4.4 million in 2019. On a constant dollar basis adjusted for changes in foreign exchange rates, revenue decreased by 3.8% for the nine months ended September 30, 2020 compared to the same period in the prior year.

Total cost of revenue from continuing operations for the nine months ended September 30, 2020 was $63.9 million, or 54.5% of revenue, compared to total cost of revenue from continuing operations of $77.1 million, or 62.6% of revenue, for the same period in the prior year.

Selling, general and administrative expenses from continuing operations for the nine months ended September 30, 2020 were $41.9 million compared to selling, general and administrative expenses from continuing operations of $43.2 million in the prior year period.

Consolidated net loss from continuing operations for the nine months ended September 30, 2020 was $0.4 million, or $(0.02) per basic and diluted share, compared to consolidated net loss from continuing operations of $10.0 million, or $(0.44) per basic and diluted share, for the same period in 2019.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the nine months ended September 30, 2020 was $20.4 million, or 17.4% of revenue, compared to Adjusted EBITDA from continuing operations of $10.2 million, or 8.3% of revenue, for the same period in 2019, an increase of $10.2 million or 100.1%.

Schedule 4 attached to this press release provides a reconciliation of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

Cash Flow and Liquidity

Net cash provided by operating activities for the third quarter of 2020 was $10.1 million, compared to $5.7 million in the third quarter of the prior year and net cash provided by operating activities was $22.3 million for the nine months ended September 30, 2020 compared to $3.2 million in the same period in the prior year.

At September 30, 2020, the Company had unrestricted cash and cash equivalents of $22.6 million, and borrowings of $31.0 million against its $60.0 million revolving credit facility.

Guidance

For 2020, Adjusted EBITDA from continuing operations is expected to be approximately $32 million.

Third 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 third quarter 2020 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 2971617.

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 March 31, 2021. 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 helps companies spot value in their source-to-pay processes that other sophisticated solutions didn’t get to before. Having identified more than 300 common points of leakage, we help companies reach wider, dig deeper, and act faster to get more value out of their source-to-pay data. We pioneered this industry nearly 50 years ago, and today we help clients in more than 30 countries take back $1.2 billion in annual cash flow. It’s why 75% of top global retailers and a third of the largest companies in the Fortune 500 rely on us. 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 2020 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 impact of the COVID-19 pandemic on the Company or its clients,
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 execute on its profitability improvement efforts, 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 4 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
Ended September 30,
 Nine Months
Ended September 30,
 2020 2019 2020 2019
Revenue, net$41,532  $42,290  $117,382  $123,068 
Operating expenses:       
Cost of revenue20,813  25,539  63,931  77,086 
Selling, general and administrative expenses13,751  13,544  41,941  43,209 
Depreciation of property, equipment and software assets1,295  2,648  5,401  7,232 
Amortization of intangible assets830  864  2,487  2,598 
Impairment charges553    553   
Acquisition-related adjustment income  (250)   (250)
Total operating expenses37,242  42,345  114,313  129,875 
Operating income (loss) from continuing operations4,290  (55) 3,069  (6,807)
Foreign currency transaction (gains) losses on short-term intercompany balances(418) 905   219  1,034 
Interest expense, net216  376   861  1,441 
Other loss (income)2  4  4  (4)
Income (loss) from continuing operations before income tax4,490  (1,340) 1,985  (9,278)
Income tax expense1,456  202  2,416  681 
Net income (loss) from continuing operations$3,034  $(1,542) $(431) $(9,959)
Discontinued operations:       
Income from discontinued operations  900    642 
Net income from discontinued operations  900    642 
        
Net income (loss)$3,034  $(642) $(431) $(9,317)
        
Basic income (loss) per common share:       
Basic income (loss) from continuing operations$0.13  $(0.07) $(0.02) $(0.44)
Basic income from discontinued operations  0.04    0.03 
Total basic income (loss) per common share$0.13  $(0.03) $(0.02) $(0.41)
Diluted income (loss) per common share:       
Diluted income (loss) from continuing operations$0.13  $(0.07) $(0.02) $(0.44)
Diluted income from discontinued operations  0.04    0.03 
Total diluted income (loss) per common share$0.13  $(0.03) $(0.02) $(0.41)
Weighted average common shares outstanding:       
Basic22,695  22,770  22,597  22,715 
Diluted23,018  22,770  22,597  22,715 



SCHEDULE 2 
PRGX Global, Inc. and Subsidiaries 
Condensed Consolidated Balance Sheets 
(Amounts in thousands) 
(Unaudited)
    
 September 30,
2020
 December 31,
2019
ASSETS   
Current assets:   
Cash and cash equivalents$22,625  $14,982 
Restricted cash121  46 
Receivables:   
Contract receivables, net38,763  43,112 
Employee advances and miscellaneous receivables, net995  704 
Total receivables39,758  43,816 
Prepaid expenses and other current assets3,586  5,582 
Total current assets66,090  64,426 
Property, equipment and software, net20,566  17,746 
Operating lease right-of-use assets10,226  10,969 
Goodwill15,027  15,070 
Intangible assets, net8,963  11,506 
Deferred income taxes3,689  3,921 
Other assets1,584  1,828 
Total assets$126,145  $125,466 
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and accrued expenses$4,462  $4,326 
Accrued payroll and related expenses17,148  12,951 
Current portion of operating lease liabilities4,117  3,717 
Refund liabilities4,443  4,513 
Deferred revenue1,821  2,217 
Current portion of long-term debt  17 
Total current liabilities31,991  27,741 
Long-term debt30,673  36,603 
Long-term operating lease liabilities6,482  7,435 
Refund liabilities64  9 
Deferred income taxes628  628 
Total liabilities69,838  72,416 
Shareholders’ equity:   
Common stock236  234 
Additional paid-in capital586,876  582,404 
Accumulated deficit(529,607) (529,176)
Accumulated other comprehensive income(1,198) (412)
Total shareholders’ equity56,307  53,050 
Total liabilities and shareholders’ equity$126,145  $125,466 



SCHEDULE 3 
PRGX Global, Inc. and Subsidiaries 
Condensed Consolidated Statements of Cash Flows 
(Amounts in thousands) 
(Unaudited)
 
 Three Months
Ended September 30,
 Nine Months
Ended September 30,
 2020 2019 2020 2019
Cash flows from operating activities:       
Net income (loss)$3,034  $(642) $(431) $(9,317)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:       
Impairment charges553    553   
Depreciation and amortization2,125  3,512  7,888  9,830 
Operating lease right-of-use asset expense905  1,115  3,100  3,363 
Amortization of deferred loan costs23  4  71  121 
Noncash interest expense205  707  205  707 
Stock-based compensation expense1,959  527  5,155  3,573 
Change in fair value of contingent consideration  (250)   (250)
Foreign currency transaction (gains) losses on short-term intercompany balances(418) 905  219  1,034 
Deferred income taxes(87) 4  250  4 
Changes in operating assets and liabilities       
Billed receivables(2,790) 2,203  1,760  8,796 
Unbilled receivables326  1,402  2,343  551 
Prepaid expenses and other current assets288  316  1,726  (980)
Operating lease liabilities(933)   (2,912)  
Other assets22  (1,757) (30) (3,324)
Accounts payable and accrued expenses1,842  (1,187) (1,405) (4,117)
Accrued payroll and related expenses2,890  1,456  4,216  (3,514)
Refund liabilities288  (2,123) 19  (2,437)
Deferred revenue(154) (540) (378) (832)
Net cash provided by operating activities10,078  5,652  22,349  3,208 
Cash flows from investing activities:       
Purchases of property, equipment and software, net of disposal proceeds(2,701) (4,039) (8,321) (11,679)
Net cash used in investing activities(2,701) (4,039) (8,321) (11,679)
Cash flows from financing activities:       
Repayments of credit facility(6,000) (5,000) (44,000) (8,000)
Proceeds from credit facility  8,000  38,000  22,400 
Payment of deferred loan costs      (394)
Payment of earnout liability related to business acquisitions  (3,750)   (4,229)
Restricted stock repurchased from employees for withholding taxes(6) (10) (404) (760)
Repurchases of common stock  (1,984) (284) (4,212)
Proceeds from option exercises      221 
Net cash (used in) provided by financing activities(6,006) (2,744) (6,688) 5,026 
Effect of exchange rates on cash and cash equivalents191  718  378  663 
Net increase (decrease) in cash, cash equivalents and restricted cash1,562  (413) 7,718  (2,782)
Cash, cash equivalents and restricted cash at beginning of period21,184  11,650  15,028  14,019 
Cash, cash equivalents and restricted cash at end of period$22,746  $11,237  $22,746  $11,237 
Supplemental disclosure of cash flow information:       
Cash paid during the period for interest$298  $343  $1,014  $728 
Cash paid during the period for income taxes, net of refunds received$682  $2,116  $1,486  $2,118 



SCHEDULE 4 
PRGX Global, Inc. and Subsidiaries 
Reconciliation of Net Income (Loss) to EBIT, EBITDA and Adjusted EBITDA 
(Amounts in thousands) 
(Unaudited)
 Three Months
Ended September 30,
 Nine Months
Ended September 30,
 2020 2019 2020 2019
Reconciliation of net income (loss) to EBIT, EBITDA and Adjusted EBITDA:       
Net income (loss)$3,034  $(642) $(431) $(9,317)
Income tax expense1,456  202  2,416  681 
Interest expense, net216  376  861  1,441 
EBIT4,706  (64) 2,846  (7,195)
Depreciation of property, equipment and software assets1,295  2,648  5,401  7,232 
Amortization of intangible assets830  864  2,487  2,598 
EBITDA6,831  3,448  10,734  2,635 
Impairment charges553    553   
Foreign currency transaction (gains) losses on short-term intercompany balances(418) 905  219  1,034 
Acquisition-related adjustment income  (250)   (250)
Transformation, severance, and other expenses422  1,858  2,401  3,835 
Investigation and settlement of employment matter    1,306   
Other loss (income)2  4  4  (4)
Stock-based compensation1,959  527  5,155  3,573 
Adjusted EBITDA$9,349  $6,492  $20,372  $10,823 
Adjusted EBITDA from continuing operations$9,349  $5,592  $20,372  $10,181 
Adjusted EBITDA from discontinued operations$  $900  $  $642 

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 5 
PRGX Global, Inc. and Subsidiaries 
Results by Operating Segment * 
(Amounts in thousands) 
(Unaudited)
 
 Three Months
Ended September 30,
 Nine Months
Ended September 30,
 2020 2019 Change 2020 2019 Change
Revenue, net           
Recovery Audit Services - Americas$28,026  $29,987  $(1,961) $81,211  $86,295  $(5,084)
Recovery Audit Services - Europe/Asia-Pacific12,651  10,803  1,848  33,593  32,398  1,195 
Adjacent Services855  1,500  (645) 2,578  4,375  (1,797)
Total$41,532  $42,290  $(758) $117,382  $123,068  $(5,686)
Cost of revenue           
Recovery Audit Services - Americas$14,193  $17,201  $(3,008) $44,527  $49,140  $(4,613)
Recovery Audit Services - Europe/Asia-Pacific6,324  6,661  (337) 18,323  20,576  (2,253)
Adjacent Services296  1,677  (1,381) 1,081  7,370  (6,289)
Total$20,813  $25,539  $(4,726) $63,931  $77,086  $(13,155)
Selling, general and administrative expenses           
Recovery Audit Services - Americas$1,943  $3,464  $(1,521) $6,170  $10,490  $(4,320)
Recovery Audit Services - Europe/Asia-Pacific1,209  1,801  (592) 3,758  6,553  (2,795)
Adjacent Services(29) 172  (201) (82) 1,081  (1,163)
Corporate10,628  8,107  2,521  32,095  25,085  7,010 
Total$13,751  $13,544  $207  $41,941  $43,209  $(1,268)
Depreciation of property, equipment and software assets           
Recovery Audit Services - Americas$1,120  $2,191  $(1,071) $4,835  $5,872  $(1,037)
Recovery Audit Services - Europe/Asia-Pacific162  176  (14) 486  520  (34)
Adjacent Services13  281  (268) 80  840  (760)
Total$1,295  $2,648  $(1,353) $5,401  $7,232  $(1,831)
Amortization of intangible assets           
Recovery Audit Services - Americas$408  $437  $(29) $1,224  $1,313  $(89)
Recovery Audit Services - Europe/Asia-Pacific43  41  2  126  126   
Adjacent Services379  386  (7) 1,137  1,159  (22)
Total$830  $864  $(34) $2,487  $2,598  $(111)
Impairment charges           
Adjacent Services$553  $  $553  $553  $  $553 
Total$553  $  $553  $553  $  $553 
Acquisition-related adjustments           
Corporate$  $(250) $250  $  $(250) $250 
Total$  $(250) $250  $  $(250) $250 
Operating income (loss)           
Recovery Audit Services - Americas$10,362  $6,694  $3,668  $24,455  $19,480  $4,975 
Recovery Audit Services - Europe/Asia-Pacific4,913  2,124  2,789  10,900  4,623  6,277 
Adjacent Services(357) (1,016) 659  (191) (6,075) 5,884 
Corporate(10,628) (7,857) (2,771) (32,095) (24,835) (7,260)
Total$4,290  $(55) $4,345  $3,069  $(6,807) $9,876 
Adjusted EBITDA from continuing operations           
Recovery Audit Services - Americas$11,938  $9,976  $1,962  $31,577  $27,697  $3,880 
Recovery Audit Services - Europe/Asia-Pacific5,317  2,481  2,836  12,100  5,654  6,446 
Adjacent Services588  (18) 606  1,706  (3,122) 4,828 
Corporate(8,494) (6,847) (1,647) (25,011) (20,048) (4,963)
Total$9,349  $5,592  $3,757  $20,372  $10,181  $10,191 

* 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 advisory services, spend analytics and supplier information management services.