Operating Segments and Related Information

9 Months Ended

Sep. 30, 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 was 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 and nine months ended September 30, 2013 has been revised to reflect the change in reportable segments. Segment information for the three and nine months ended September 30, 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 September 30, 2014
Revenue	$	28,550	$	10,708		$	3,586		$	144		$	—		$	42,988
Net income (loss)															$	(239	)
Income tax expense															554
Interest expense (income), net															(44		)
EBIT	$	7,155	$	(151	)	$	(265	)	$	(1,133	)	$	(5,335	)	271
Depreciation of property and equipment	1,111		150			145			22			—			1,428
Amortization of intangible assets	500		299			96			—			—			895
EBITDA	8,766		298			(24		)	(1,111		)	(5,335		)	2,594
Foreign currency transaction (gains) losses on short-term intercompany balances	208		1,192			—			—			(179		)	1,221
Transformation severance and related expenses	44		7			18			26			318			413
Stock-based compensation	—		—			—			—			1,405			1,405
Adjusted EBITDA	$	9,018	$	1,497		$	(6	)	$	(1,085	)	$	(3,791	)	$	5,633

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services		Corporate Support			Total
Three Months Ended September 30, 2013
Revenue	$	32,365		$	12,009		$	3,625		$	5,404	$	—		$	53,403
Net income (loss)															$	4,877
Income tax expense															1,029
Interest expense (income), net															75
EBIT	$	9,418		$	1,987		$	(351	)	$	621	$	(5,694	)	5,981
Depreciation of property and equipment	1,414			124			167			329		—			2,034
Amortization of intangible assets	698			323			183			—		—			1,204
EBITDA	11,530			2,434			(1		)	950		(5,694		)	9,219
Foreign currency transaction (gains) losses on short-term intercompany balances	(80		)	(574		)	—			—		18			(636		)
Acquisition-related charges (benefits)	662			—			44			—		—			706
Transformation severance and related expenses	20			56			81			4		—			161
Stock-based compensation	—			—			—			—		1,304			1,304
Adjusted EBITDA	$	12,132		$	1,916		$	124		$	954	$	(4,372	)	$	10,754

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Nine Months Ended September 30, 2014
Revenue	$	80,377	$	32,792	$	8,150		$	1,551		$	—		$	122,870
Net income (loss)														$	(5,381	)
Income tax expense														853
Interest expense (income), net														(33		)
EBIT	$	16,632	$	1,309	$	(3,607	)	$	(4,785	)	$	(14,110	)	(4,561		)
Depreciation of property and equipment	3,612		445		463			176			—			4,696
Amortization of intangible assets	1,501		911		288			—			—			2,700
EBITDA	21,745		2,665		(2,856		)	(4,609		)	(14,110		)	2,835
Foreign currency transaction (gains) losses on short-term intercompany balances	164		1,079		—			—			(170		)	1,073
Acquisition-related charges (benefits)	—		—		249			—			—			249
Transformation severance and related expenses	510		569		396			431			446			2,352
Stock-based compensation	—		—		—			—			3,409			3,409
Adjusted EBITDA	$	22,419	$	4,313	$	(2,211	)	$	(4,178	)	$	(10,425	)	$	9,918

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services		Corporate Support			Total
Nine Months Ended September 30, 2013
Revenue	$	87,999	$	33,796		$	10,705		$	16,209	$	—		$	148,709
Net income (loss)														$	6,211
Income tax expense														1,671
Interest expense (income), net														(89		)
EBIT	$	21,643	$	2,354		$	(1,998	)	$	1,476	$	(15,682	)	7,793
Depreciation of property and equipment	4,138		362			476			1,093		—			6,069
Amortization of intangible assets	2,094		1,171			547			—		—			3,812
EBITDA	27,875		3,887			(975		)	2,569		(15,682		)	17,674
Foreign currency transaction (gains) losses on short-term intercompany balances	143		(199		)	—			—		2			(54		)
Acquisition-related charges (benefits)	987		(900		)	144			—		—			231
Transformation severance and related expenses	100		593			81			4		—			778
Stock-based compensation	—		—			—			—		3,777			3,777
Adjusted EBITDA	$	29,105	$	3,381		$	(750	)	$	2,573	$	(11,903	)	$	22,406