Operating Segments and Related Information

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Operating Segments and Related Information

Operating Segments and Related Information

Beginning with the first quarter of 2014, we present the former New Services segment as two separate segments: Adjacent Services, which were formerly referred to as Profit Optimization services, and Healthcare Claims Recovery Audit Services. We now conduct our operations through the following four reportable segments:

Recovery Audit Services – Americas represents recovery audit services (other than Healthcare Claims 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 (other than Healthcare Claims Recovery Audit services) provided in Europe, Asia and the Pacific region.

Adjacent Services (formerly known as Profit Optimization services) represents data transformation and financial advisory services.

Healthcare Claims Recovery Audit Services represents recovery audit services for healthcare claims, which consist primarily of services provided under subcontracts related to the Medicare Recovery Audit Contractor program.

Additionally, Corporate Support includes the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the four reportable segments.

We evaluate the performance of our reportable segments based upon revenue and measures of profit or loss we refer to as EBITDA and Adjusted EBITDA. We define 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. We do not have any inter-segment revenue.

Segment information for the three months ended March 31, 2013 has been revised to reflect the change in reportable segments. Segment information for the three months ended March 31, 2014 and 2013 (in thousands) is as follows:

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Three Months Ended March 31, 2014
Revenue	$	24,798	$	9,702		$	2,283		$	1,118		$	—		$	37,901
Net loss															$	(3,674	)
Income tax expense															113
Interest expense, net															54
EBIT	$	4,084	$	101		$	(1,574	)	$	(2,006	)	$	(4,112	)	(3,507		)
Depreciation of property and equipment	1,256		146			160			120			—			1,682
Amortization of intangible assets	500		307			96			—			—			903
EBITDA	5,840		554			(1,318		)	(1,886		)	(4,112		)	(922		)
Foreign currency transaction (gains) losses on short-term intercompany balances	110		(73		)	—			—			(22		)	15
Acquisition-related charges	—		—			19			—			—			19
Transformation severance and related expenses	8		79			143			155			—			385
Stock-based compensation	—		—			—			—			1,021			1,021
Adjusted EBITDA	$	5,958	$	560		$	(1,156	)	$	(1,731	)	$	(3,113	)	$	518

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Three Months Ended March 31, 2013
Revenue	$	26,242	$	11,017		$	3,943		$	3,899		$	—		$	45,101
Net loss															$	(497	)
Income tax expense															56
Interest income, net															(217		)
EBIT	$	5,454	$	441		$	(311	)	$	(850	)	$	(5,392	)	(658		)
Depreciation of property and equipment	1,368		112			155			373			—			2,008
Amortization of intangible assets	698		396			182			—			—			1,276
EBITDA	7,520		949			26			(477		)	(5,392		)	2,626
Foreign currency transaction (gains) losses on short-term intercompany balances	52		306			—			—			(1		)	357
Acquisition-related charges (benefits)	10		(732		)	56			—			—			(666		)
Stock-based compensation	—		—			—			—			1,318			1,318
Adjusted EBITDA	$	7,582	$	523		$	82		$	(477	)	$	(4,075	)	$	3,635