10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-28000

PRGX Global, Inc.

(Exact name of registrant as specified in its charter)

Georgia	58-2213805
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
600 Galleria Parkway	30339-5986
Suite 100	(Zip Code)
Atlanta, Georgia
(Address of principal executive offices)

Registrant’s telephone number, including area code: (770) 779-3900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

¨  Large accelerated filer	ý	Accelerated filer
¨  Non-accelerated filer     (Do not check if a smaller reporting company)	¨	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  ý

Common shares of the registrant outstanding at August 5, 2015 were 24,115,152.

PRGX GLOBAL, INC.

FORM 10-Q

For the Quarter Ended June 30, 2015

INDEX

	Page No.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)	1
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	1
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2015 and 2014	1
Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	2
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	3
Notes to Condensed Consolidated Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
Item 4. Controls and Procedures	26
Part II. Other Information
Item 1. Legal Proceedings	27
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 4. Mine Safety Disclosures	27
Item 5. Other Information	27
Item 6. Exhibits	28
Signatures	29

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenue	$	37,289		$	41,981		$	70,421		$	79,882
Operating expenses:
Cost of revenue	24,920			29,944			48,698			58,776
Selling, general and administrative expenses	9,387			11,037			17,556			21,013
Depreciation of property and equipment	1,304			1,586			2,596			3,268
Amortization of intangible assets	754			902			1,500			1,805
Total operating expenses	36,365			43,469			70,350			84,862
Operating income (loss)	924			(1,488		)	71			(4,980		)
Foreign currency transaction (gains) losses on short-term intercompany balances	(416		)	(163		)	1,276			(148		)
Interest expense (income), net	(53		)	(43		)	(95		)	11
Income (loss) before income taxes	1,393			(1,282		)	(1,110		)	(4,843		)
Income tax expense	296			186			751			299
Net income (loss)	$	1,097		$	(1,468	)	$	(1,861	)	$	(5,142	)
Basic earnings (loss) per common share (Note B)	$	0.04		$	(0.05	)	$	(0.07	)	$	(0.17	)
Diluted earnings (loss) per common share (Note B)	$	0.04		$	(0.05	)	$	(0.07	)	$	(0.17	)
Weighted-average common shares outstanding (Note B):
Basic	26,497			29,733			26,446			29,945
Diluted	26,553			29,733			26,446			29,945

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015			2014
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Foreign currency translation adjustments	183		577			152			507
Comprehensive income (loss)	$	1,280	$	(891	)	$	(1,709	)	$	(4,635	)

See accompanying Notes to Condensed Consolidated Financial Statements.

1

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

	June 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents (Note E)	$	19,682		$	25,735
Restricted cash	162			53
Receivables:
Contract receivables, less allowances of $1,984 in 2015 and $2,243 in 2014:
Billed	26,845			32,373
Unbilled	1,690			2,809
	28,535			35,182
Employee advances and miscellaneous receivables, less allowances of $782 in 2015 and $692 in 2014	1,630			1,993
Total receivables	30,165			37,175
Prepaid expenses and other current assets	4,252			3,421
Total current assets	54,261			66,384
Property and equipment	57,861			56,174
Less accumulated depreciation and amortization	(46,096		)	(43,954		)
Property and equipment, net	11,765			12,220
Goodwill	13,043			13,036
Intangible assets, less accumulated amortization of $35,560 in 2015 and $33,973 in 2014	7,932			9,439
Noncurrent portion of unbilled receivables	825			1,196
Other assets	561			507
Total assets	$	88,387		$	102,782
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	7,130		$	7,397
Accrued payroll and related expenses	11,508			15,415
Refund liabilities	5,080			5,393
Deferred revenue	1,821			2,173
Other current liabilities	282			—
Total current liabilities	25,821			30,378
Noncurrent refund liabilities	726			857
Other long-term liabilities	531			561
Total liabilities	27,078			31,796
Commitments and contingencies (Note H)
Shareholders’ equity (Note B):
Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares; 24,615,200 shares issued and outstanding at June 30, 2015 and 26,762,861 shares issued and outstanding at December 31, 2014	246			268
Additional paid-in capital	582,121			590,067
Accumulated deficit	(522,773		)	(520,912		)
Accumulated other comprehensive income	1,715			1,563
Total shareholders’ equity	61,309			70,986
Total liabilities and shareholders’ equity	$	88,387		$	102,782

See accompanying Notes to Condensed Consolidated Financial Statements.

2

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(1,861	)	$	(5,142	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	4,096			5,073
Amortization of deferred loan costs	—			39
Stock-based compensation expense	3,149			2,004
Deferred income taxes	191			(418		)
Foreign currency transaction (gains) losses on short-term intercompany balances	1,276			(148		)
Changes in operating assets and liabilities:
Restricted cash	(109		)	(137		)
Billed receivables	4,903			360
Unbilled receivables	1,490			7,372
Prepaid expenses and other current assets	(513		)	248
Other assets	31			(7		)
Accounts payable and accrued expenses	(234		)	(659		)
Accrued payroll and related expenses	(4,133		)	(2,243		)
Refund liabilities	(444		)	(979		)
Deferred revenue	(351		)	229
Noncurrent compensation obligations	—			184
Other long-term liabilities	(9		)	76
Net cash provided by operating activities	7,482			5,852
Cash flows from investing activities:
Purchases of property and equipment, net of disposal proceeds	(2,197		)	(2,333		)
Net cash used in investing activities	(2,197		)	(2,333		)
Cash flows from financing activities:
Payment of deferred loan costs	—			(91		)
Restricted stock repurchased from employees for withholding taxes	(280		)	(491		)
Proceeds from option exercises	45			2,328
Payments of deferred acquisition consideration	—			(1,978		)
Repurchase of common stock	(10,340		)	(10,998		)
Net cash used in financing activities	(10,575		)	(11,230		)
Effect of exchange rates on cash and cash equivalents	(763		)	378
Net decrease in cash and cash equivalents	(6,053		)	(7,333		)
Cash and cash equivalents at beginning of period	25,735			43,700
Cash and cash equivalents at end of period	$	19,682		$	36,367
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	14		$	48
Cash paid during the period for income taxes, net of refunds received	$	449		$	1,377

See accompanying Notes to Condensed Consolidated Financial Statements.

3

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A – Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) of PRGX Global, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Except as otherwise indicated or unless the context otherwise requires, “PRGX,” “we,” “us,” “our” and the “Company” refer to PRGX Global, Inc. and its subsidiaries. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2014.

New Accounting Standards

A summary of the new accounting standards issued by the Financial Accounting Standards Board (“FASB”) and included in the Accounting Standards Codification (“ASC”) that apply to PRGX is set forth below:

FASB ASC Update No. 2015-03. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”). ASU 2015-03 simplifies presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual periods beginning after December 15, 2015 with early adoption permitted. The guidance also requires retrospective application to all prior periods presented. We are currently evaluating the impact of ASU 2015-03 on our consolidated financial statements.

FASB ASC Update No. 2014-15. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and related disclosure requirements. ASU 2014-15 is effective for annual periods beginning after December 15, 2016 with early adoption permitted. We do not expect the adoption of ASU 2014-15 to have a material impact on our consolidated financial statements.

FASB ASC Update No. 2014-09. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange for those goods or services. ASU 2014-09 allows for adoption using either of two methods; retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of application recognized at the date of initial adoption. It is effective for annual periods beginning after December 15, 2016. Early adoption is not permitted. On July 9, 2015, the FASB voted to approve a one-year deferral of the effective date of ASU 2014-09. The FASB expects to issue its final ASU formally amending the effective date by the end of the third quarter of 2015. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements.

4

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note B – Earnings (Loss) Per Common Share

The following tables set forth the computations of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2015 and 2014 (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
Basic earnings (loss) per common share:	2015		2014			2015			2014
Numerator:
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Denominator:
Weighted-average common shares outstanding	26,497		29,733			26,446			29,945
Basic earnings (loss) per common share	$	0.04	$	(0.05	)	$	(0.07	)	$	(0.17	)

	Three Months Ended June 30,					Six Months Ended June 30,
Diluted earnings (loss) per common share:	2015		2014			2015			2014
Numerator:
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Denominator:
Weighted-average common shares outstanding	26,497		29,733			26,446			29,945
Incremental shares from stock-based compensation plans	56		—			—			—
Denominator for diluted earnings (loss) per common share	26,553		29,733			26,446			29,945
Diluted earnings (loss) per common share	$	0.04	$	(0.05	)	$	(0.07	)	$	(0.17	)

For the three and six months ended June 30, 2015, weighted-average common shares outstanding excludes from the computation of diluted earnings (loss) per common share antidilutive shares underlying options that totaled 3.5 million shares. For the three and six months ended June 30, 2014, weighted-average common shares outstanding excludes from the computation of diluted earnings (loss) per common share antidilutive shares underlying options that totaled 3.8 million shares and antidilutive Performance Units related to the Company's 2006 Management Incentive Plan that totaled less than 0.1 million shares. As a result of the net loss for the three months ended June 30, 2014 and the six months ended June 30, 2015 and June 30, 2014, all shares underlying stock options and Performance Units were considered antidilutive for such periods. The number of common shares used in the basic and diluted earnings (loss) per common share computations include nonvested restricted shares of 0.4 million and 0.5 million for the three and six months ended June 30, 2015 and 2014, respectively, and nonvested restricted share units that we consider to be participating securities of 1.4 million and 0.1 million for the three and six months ended June 30, 2015 and 2014, respectively.

We repurchased 1,046,828 shares of our common stock during the three months ended June 30, 2015 for $4.9 million, and 2,176,760 shares of our common stock during the six months ended June 30, 2015 for $10.3 million. We repurchased 1,697,560 shares of our common stock during the three months ended June 30, 2014 for $11.0 million, and 1,704,260 shares of our common stock during the six months ended June 30, 2014 for $11.0 million.

Pursuant to exercises of outstanding stock options, we issued no shares of our common stock in the three months ended June 30, 2015 and 12,863 shares of our common stock having a value of less than $0.1 million in the six months ended June 30, 2015. We issued 41,071 shares of our common stock having a value of less than $0.1 million in the three months ended June 30, 2014 and 604,585 shares of our common stock having a value of $2.3 million in the six months ended June 30, 2014. Stock option exercises during the six-month period ended June 30, 2014 primarily consisted of exercises by a former executive officer of the Company.

In partial satisfaction of a business acquisition obligation, we issued 187,620 shares of our common stock having a value of $1.3 million in the six months ended June 30, 2014. There were no shares issued to satisfy business acquisition obligations in the six months ended June 30, 2015.

5

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note C – Stock-Based Compensation

The Company currently has two stock-based compensation plans: (1) the 2006 Management Incentive Plan (“2006 MIP”) and (2) the 2008 Equity Incentive Plan (“2008 EIP”) (collectively, the “Plans”). We describe the Plans in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2014. For all periods presented herein, awards outside the Plans are referred to as inducement awards.

2008 EIP Awards and Inducement Awards

Stock options granted under the 2008 EIP generally have a term of seven years and vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors. The following table summarizes stock option grants during the six months ended June 30, 2015 and 2014:

Grantee Type	# of Options Granted	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
2015
Director	249,273	1 year or less	$	4.49	$	2.44
Director	17,092	3 years	$	3.99	$	1.33
Employee inducements (1)	135,000	3 years	$	5.51	$	1.42
2014
Director	51,276	1 year or less	$	6.45	$	1.89
Employee group (2)	1,480,000	3 years	$	6.99	$	1.81

(1) The Company granted non-qualified stock options outside its existing stock-based compensation plans in the first six months of 2015 to three employees in connection with the employees joining the Company.

(2) The exercise price for these options is $6.36 for the options that vest on June 27, 2015, $6.99 for the options that vest on June 27, 2016 and $7.63 for the options that vest on June 27, 2017.

Nonvested stock awards, including both restricted stock and restricted stock units, granted under the 2008 EIP generally are nontransferable until vesting and the holders are entitled to receive dividends with respect to the nonvested shares. Prior to vesting, the grantees of restricted stock are entitled to vote the shares, but the grantees of restricted stock units are not entitled to vote the shares. Generally, nonvested stock awards with time-based vesting criteria vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors. Nonvested stock awards with performance-based vesting criteria vest in accordance with specific performance criteria associated with the awards. The following table summarizes nonvested stock awards granted during the six months ended June 30, 2015 and 2014:

Grantee Type	# of Shares Granted	Vesting Period	Weighted Average Grant Date Fair Value
2015
Director	4,273	1 year or less	$	4.02
Director	17,092	3 years	$	3.99
Employee group (1)	1,325,000	2 years	$	4.00
Employee inducements (2)	10,000	3 years	$	5.29
2014
Director group	51,276	1 year or less	$	6.45
Employee group	120,000	3 years	$	6.36

(1) The Company granted nonvested performance-based stock awards (restricted stock units) in the first quarter of 2015 to eight executive officers.

(2) The Company granted nonvested stock awards (restricted stock) outside its existing stock-based compensation plans in the first quarter of 2015 to two employees in connection with the employees joining the Company.

6

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2006 MIP Performance Units

On June 19, 2012, seven executive officers of the Company were granted 154,264 Performance Units under the 2006 MIP, comprising all of the then remaining available awards under the 2006 MIP. The awards had an aggregate grant date fair value of $1.2 million and vest ratably over three years. Upon vesting, the Performance Units were settled by the issuance of Company common stock equal to 60% of the number of Performance Units being settled and the payment of cash in an amount equal to 40% of the fair market value of that number of shares of common stock equal to the number of Performance Units being settled. During the six months endedJune 30, 2015, an aggregate of 16,530 Performance Units were settled, which resulted in the issuance of 9,918 shares of common stock and cash payments of less than $0.1 million. There were 6,198 and 13,222 shares issued during the second quarters of 2015 and 2014, respectively. Since the June 19, 2012 grant date to June 30, 2015, an aggregate of 137,740 Performance Units were settled by two current executive officers and four former executive officers, and 16,524 Performance Units were forfeited by one former executive officer and currently are available to be granted. Such settlements resulted in the issuance of 79,356 shares of common stock and cash payments totaling $0.3 million. As of June 30, 2015, no Performance Units were outstanding.

Performance-Based Restricted Stock Units

On March 30, 2015, eight executive officers of the Company were granted 1,325,000 performance-based restricted stock units (“PBUs”) under the 2008 EIP. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 50% of the number of PBUs being settled and the payment of cash in an amount equal to 50% of the fair market value of that number of shares of common stock equal to the number of PBUs being settled. The PBUs vest and become payable based on the cumulative adjusted EBITDA that the Company (excluding the Healthcare Claims Recovery Audit business) achieves for the two-year performance period ending December 31, 2016. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 200% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 200% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

Selling, general and administrative expenses for the three months ended June 30, 2015 and 2014 include $2.0 million and $1.0 million, respectively, related to stock-based compensation charges. Selling, general and administration expenses for the six months ended June 30, 2015 and 2014 include $3.1 million and $2.0 million, respectively, related to stock-based compensation charges. At June 30, 2015, there was $9.0 million of unrecognized stock-based compensation expense related to stock options, restricted stock awards and restricted stock unit awards, which we expect to recognize over a weighted-average period of 1.64 years. The unrecognized stock-based compensation expense related to restricted stock unit awards with performance vesting criteria is based on our estimate of both the number of shares of the Company's common stock that will ultimately be issued and cash payments that will be made when the restricted stock units are settled.

7

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note D – Operating Segments and Related Information

We 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 represents data transformation, data analytics and associated 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.

8

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Segment information for the three and six months ended June 30, 2015 and 2014 (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 June 30, 2015
Revenue	$	25,350		$	9,950		$	1,695		$	294		$	—		$	37,289
Net income (loss)																$	1,097
Income tax expense																296
Interest expense (income), net																(53		)
EBIT	$	6,505		$	1,796		$	(1,041	)	$	(727	)	$	(5,193	)	1,340
Depreciation of property and equipment	979			153			162			10			—			1,304
Amortization of intangible assets	441			280			33			—			—			754
EBITDA	7,925			2,229			(846		)	(717		)	(5,193		)	3,398
Foreign currency transaction (gains) losses on short-term intercompany balances	(179		)	(246		)	1			—			8			(416		)
Transformation severance and related expenses	108			203			14			211			26			562
Stock-based compensation	—			—			—			—			2,017			2,017
Adjusted EBITDA	$	7,854		$	2,186		$	(831	)	$	(506	)	$	(3,142	)	$	5,561

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Three Months Ended June 30, 2014
Revenue	$	27,029		$	12,382		$	2,281		$	289		$	—		$	41,981
Net loss																$	(1,468	)
Income tax expense																186
Interest expense (income), net																(43		)
EBIT	$	5,393		$	1,359		$	(1,768	)	$	(1,646	)	$	(4,663	)	(1,325		)
Depreciation of property and equipment	1,245			149			158			34			—			1,586
Amortization of intangible assets	501			305			96			—			—			902
EBITDA	7,139			1,813			(1,514		)	(1,612		)	(4,663		)	1,163
Foreign currency transaction (gains) losses on short-term intercompany balances	(154		)	(40		)	—			—			31			(163		)
Acquisition-related charges (benefits)	—			—			230			—			—			230
Transformation severance and related expenses	458			483			235			250			128			1,554
Stock-based compensation	—			—			—			—			983			983
Adjusted EBITDA	$	7,443		$	2,256		$	(1,049	)	$	(1,362	)	$	(3,521	)	$	3,767

9

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Six Months Ended June 30, 2015
Revenue	$	47,767	$	19,255	$	2,958		$	441		$	—		$	70,421
Net loss														$	(1,861	)
Income tax expense														751
Interest expense (income), net														(95		)
EBIT	$	10,583	$	1,354	$	(1,926	)	$	(1,429	)	$	(9,787	)	(1,205		)
Depreciation of property and equipment	1,948		306		319			23			—			2,596
Amortization of intangible assets	882		553		65			—			—			1,500
EBITDA	13,413		2,213		(1,542		)	(1,406		)	(9,787		)	2,891
Foreign currency transaction (gains) losses on short-term intercompany balances	258		1,072		1			—			(55		)	1,276
Transformation severance and related expenses	164		268		30			211			35			708
Stock-based compensation	—		—		—			—			3,149			3,149
Adjusted EBITDA	$	13,835	$	3,553	$	(1,511	)	$	(1,195	)	$	(6,658	)	$	8,024

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Six Months Ended June 30, 2014
Revenue	$	51,827		$	22,084		$	4,564		$	1,407		$	—		$	79,882
Net loss																$	(5,142	)
Income tax expense																299
Interest expense (income), net																11
EBIT	$	9,477		$	1,460		$	(3,342	)	$	(3,652	)	$	(8,775	)	(4,832		)
Depreciation of property and equipment	2,501			295			318			154			—			3,268
Amortization of intangible assets	1,001			612			192			—			—			1,805
EBITDA	12,979			2,367			(2,832		)	(3,498		)	(8,775		)	241
Foreign currency transaction (gains) losses on short-term intercompany balances	(44		)	(113		)	—			—			9			(148		)
Acquisition-related charges (benefits)	—			—			249			—			—			249
Transformation severance and related expenses	466			562			378			405			128			1,939
Stock-based compensation	—			—			—			—			2,004			2,004
Adjusted EBITDA	$	13,401		$	2,816		$	(2,205	)	$	(3,093	)	$	(6,634	)	$	4,285

10

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note E – Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less from date of purchase. We place our temporary cash investments with high credit quality financial institutions. At times, certain investments may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit or otherwise may not be covered by FDIC insurance. Some of our cash and cash equivalents are held at banks in jurisdictions outside the U.S. that have restrictions on transferring such assets outside of these countries on a temporary or permanent basis. Such restricted net assets are not significant in comparison to our consolidated net assets.

Our cash and cash equivalents included short-term investments of approximately $3.3 million as of June 30, 2015 and $12.2 million as of December 31, 2014, of which approximately $1.7 million and $2.5 million, respectively, were held at banks outside of the United States, primarily in Brazil and Canada.

Note F – Debt

On January 19, 2010, we entered into a four-year revolving credit and term loan agreement (the “2010 Credit Agreement”) with SunTrust Bank (“SunTrust”). Subsequent modifications of the 2010 Credit Agreement were entered into with SunTrust. Most recently, on December 23, 2014, we entered into an amended and restated revolving credit agreement (the “Credit Facility”) with SunTrust. The Credit Facility, and provisions of the 2010 Credit Agreement where applicable, is guaranteed by the Company and all of its material domestic subsidiaries and secured by substantially all of the assets of the Company.

The amount available for borrowing under the Credit Facility is $20.0 million, and as of June 30, 2015 we had no outstanding borrowings. With the Credit Facility provision of a fixed applicable margin of 1.75% plus a specified index rate based on one-month LIBOR, the interest rate that would have applied at June 30, 2015 had any borrowings been outstanding was approximately 1.93%. We also must pay a commitment fee of 0.25% per annum, payable quarterly, on the unused portion of the Credit Facility.

The Credit Facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports, maintenance of existence, and transactions with affiliates. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets or declare or pay dividends on its capital stock. The financial covenants included in the Credit Facility, among other things, limit the amount of capital expenditures the Company can make, set forth maximum leverage and net funded debt ratios for the Company and a minimum fixed charge coverage ratio, and also require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the Credit Facility includes customary events of default. The Company was in compliance with the covenants in its Credit Facility as of June 30, 2015.

Note G – Fair Value of Financial Instruments

We state cash equivalents at cost, which approximates fair market value. The carrying values for receivables from clients, unbilled services, accounts payable, deferred revenue and other accrued liabilities reasonably approximate fair market value due to the nature of the financial instrument and the short term maturity of these items.

We had no debt outstanding as of June 30, 2015 and December 31, 2014. We consider the factors used in determining the fair value of debt to be Level 3 inputs (significant unobservable inputs).

We had no business acquisition obligations as of June 30, 2015 and December 31, 2014. We determine the estimated fair values of business acquisition obligations based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment to be made. The discount rate that we use to value the liability is based on specific business risk, cost of capital, and other factors. We consider these factors to be Level 3 inputs (significant unobservable inputs).

Note H – Commitments and Contingencies

Legal Proceedings

We are party to a variety of legal proceedings arising in the normal course of business. While the results of these proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

11

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note I – Income Taxes

Reported income tax expense in each period primarily results from taxes on the income of foreign subsidiaries. The effective tax rates generally differ from the expected tax rate due primarily to the Company’s deferred tax asset valuation allowance on the domestic earnings and taxes on income of foreign subsidiaries.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service in the U.S. and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

We apply a “more-likely-than-not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We refer to GAAP for guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with FASB ASC 740, our policy for recording interest and penalties associated with tax positions is to record such items as a component of income before income taxes. A number of years may elapse before a particular tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments also varies by tax jurisdiction.

Note J – Subsequent Events

None.

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We conduct our operations through four reportable segments: Recovery Audit Services - Americas, Recovery Audit Services - Europe/Asia-Pacific, Adjacent Services and Healthcare Claims Recovery Audit Services. The Recovery Audit Services - Americas segment represents recovery audit services (other than Healthcare Claims Recovery Audit Services) we provide in the U.S., Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services (other than Healthcare Claims Recovery Audit Services) we provide in Europe, Asia and the Pacific region. The Adjacent Services segment represents data transformation, data analytics and associated advisory services. The Healthcare Claims Recovery Audit Services segment represents recovery audit services that involve the identification of overpayments and underpayments made by healthcare payers to healthcare providers such as hospitals and physicians’ practices and includes services we provide as a subcontractor to three of the four prime contractors in the Medicare Recovery Audit Contractor program (the “Medicare RAC program”) of the Centers for Medicare and Medicaid Services (“CMS”). We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the four reportable segments in Corporate Support.

Recovery auditing is a business service focused on finding overpayments created by errors in payment transactions, such as missed or inaccurate discounts, allowances and rebates, vendor pricing errors, erroneous coding and duplicate payments. Generally, we earn our recovery audit revenue by identifying overpayments made by our clients, assisting our clients in recovering the overpayments from their vendors, and collecting a specified percentage of the recoveries from our clients as our fee. The fee percentage we earn is based on specific contracts with our clients that generally also specify: (a) time periods covered by the audit; (b) the nature and extent of services we are to provide; and (c) the client’s responsibilities to assist and cooperate with us. Clients generally recover claims by either taking credits against outstanding payables or future purchases from the relevant vendors, or receiving refund checks directly from those vendors. The manner in which a claim is recovered by a client is often dictated by industry practice. In addition, many clients establish client-specific procedural guidelines that we must satisfy prior to submitting claims for client approval. Our recovery audit business also includes contract compliance services which focus on auditing supplier billings against large and complex services, construction and licensing contracts. Such services include verification of the accuracy of third party reporting, appropriateness of allocations and other charges in cost or revenue sharing types of arrangements, adherence to contract covenants and other risk mitigation requirements and numerous other reviews and procedures to assist our clients with proper monitoring and enforcement of the obligations of their contractors. For some services we provide, such as certain of our services in our Adjacent Services segment, we earn our compensation in the form of a fixed fee, a fee per hour, or a fee per other unit of service.

We earn the vast majority of our recovery audit revenue from clients in the retail industry due to many factors, including the high volume of transactions and the complicated pricing and allowance programs typical in this industry. Changes in consumer spending associated with economic fluctuations generally impact our recovery audit revenue to a lesser degree than they affect individual retailers due to several factors, including:

• Diverse client base – our clients include a diverse mix of discounters, grocery, pharmacy, department and other stores that tend to be impacted to varying degrees by general economic fluctuations, and even in opposite directions from each other depending on their position in the market and their market segment;

• Motivation – when our clients experience a downturn, they frequently are more motivated to use our services to recover prior overpayments to make up for relatively weaker financial performance in their own business operations;

• Nature of claims – the relationship between the dollar amount of recovery audit claims identified and client purchases is non-linear. Claim volumes are generally impacted by purchase volumes, but a number of other factors may have an even more significant impact on claim volumes, including new items being purchased, changes in discount, rebate, marketing allowance and similar programs offered by vendors and changes in a client’s or a vendor’s information processing systems; and

• Timing – the client purchase data on which we perform our recovery audit services is historical data that typically reflects transactions between our clients and their vendors that took place 3 to 15 months prior to the data being provided to us for audit. As a result, we generally experience a delayed impact from economic changes that varies by client and the impact may be positive or negative depending on the individual clients’ circumstances.

While the net impact of the economic environment on our recovery audit revenue is difficult to determine or predict, we believe that for the foreseeable future, our revenue will remain at a level that will not have a significant adverse impact on our liquidity, and we have taken steps to mitigate the adverse impact of an economic downturn on our revenue and overall financial health. These steps include devoting substantial efforts to develop an improved service delivery model to enable us to more cost

13

effectively serve our clients. Further, we continue to pursue our ongoing growth strategy to expand our business beyond our core recovery audit services to retailers by growing the portion of our business that provides recovery audit services to enterprises other than retailers, such as our offerings to commercial clients; contract compliance service offerings; expansion into new industry verticals, such as oil and gas; and growth within our Adjacent Services segment.

Our Adjacent Services business targets client functional and process areas where we have established expertise, enabling us to provide services to finance and procurement executives to improve working capital, optimize purchasing leverage in vendor pricing negotiations, improve insight into product margin and true cost of goods for resale, identify and manage risks associated with vendor compliance, improve quality of vendor master data and improve visibility and diagnostics of direct and indirect spend. As our clients’ data volumes and complexity levels continue to grow, we are using our deep data management experience to develop new actionable insight solutions, as well as to develop custom analytics and data transformation services. Taken together, our deep understanding of our clients’ procure-to-pay data and our technology-based solutions provide multiple routes to help our clients achieve greater profitability.

During 2013, auditing under our current Medicare RAC program subcontracts became subject to significant additional restrictions imposed by CMS on all Medicare recovery auditors, including deadlines for requesting medical records from providers and submitting claims and the types of claims that may be audited. These restrictions began to limit our Medicare RAC program revenue in the third quarter of 2013 and had a significant negative impact on our fourth quarter 2013 and annual 2014 Medicare RAC program revenue. For a number of reasons, including the significant uncertainties and financial risks inherent in the Medicare RAC program, we withdrew from the Medicare RAC program rebid process in February 2014. On April 28, 2015, the Company announced its decision to exit its Healthcare Claims Recovery Audit Services business due to the continued challenges in the Medicare RAC business and our lack of a diversified client base in that segment. The Company will likely incur employee termination and other exit costs as a result of this strategic decision. In connection with certain Medicare RAC program overpayment findings under appeal, CMS has proposed to settle with hospitals willing to withdraw such appeals by offering to pay the hospitals 68% of the original inpatient claim paid amount for all eligible claims that they have billed to Medicare. Although we have accrued an estimated liability for our fee repayment obligations under the Medicare RAC program subcontracts, such accrual is based on our historical experience with appeals. As a subcontractor, we are not a party to communications with CMS regarding the settlement; however, we have been in communication with the prime contractors regarding the proposal and its financial impact remains uncertain at this time. Our financial condition and results of operations could be adversely affected if we are required to return Medicare RAC program fees substantially in excess of our accrued liability.

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. We include a reconciliation of net loss to each of EBIT, EBITDA and Adjusted EBITDA and a calculation of Adjusted EBITDA by segment below in “–Adjusted EBITDA”.

14

Results of Operations

The following table sets forth the percentage of revenue represented by certain items in the Company’s Condensed Consolidated Statements of Operations (Unaudited) for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Operating expenses:
Cost of revenue	66.8		71.3		69.2		73.6
Selling, general and administrative expenses	25.2		26.3		24.9		26.3
Depreciation of property and equipment	3.5		3.8		3.7		4.1
Amortization of intangible assets	2.0		2.2		2.1		2.2
Total operating expenses	97.5		103.6		99.9		106.2
Operating income (loss)	2.5		(3.6	)	0.1		(6.2	)
Foreign currency transaction (gains) losses on short-term intercompany balances	(1.1	)	(0.4	)	1.8		(0.2	)
Interest expense (income), net	(0.1	)	(0.1	)	(0.1	)	—
Income (loss) before income taxes	3.7		(3.1	)	(1.6	)	(6.0	)
Income tax expense	0.8		0.4		1.1		0.4
Net income (loss)	2.9	%	(3.5	)%	(2.7	)%	(6.4	)%

Three and Six Months Ended June 30, 2015 Compared to the Corresponding Period of the Prior Year

Revenue. Revenue was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Recovery Audit Services – Americas	$	25,350	$	27,029	$	47,767	$	51,827
Recovery Audit Services – Europe/Asia-Pacific	9,950		12,382		19,255		22,084
Adjacent Services	1,695		2,281		2,958		4,564
Healthcare Claims Recovery Audit Services	294		289		441		1,407
Total	$	37,289	$	41,981	$	70,421	$	79,882

Total revenue decreased for the three months ended June 30, 2015 by $4.7 million, or 11.2%, compared to the same period in 2014. Total revenue decreased for the six months ended June 30, 2015 by $9.5 million, or 11.8%, compared to the same period in 2014.

Below is a discussion of our revenue for our four reportable segments.

Recovery Audit Services – Americas revenue decreased by $1.7 million, or 6.2%, for the second quarter of 2015 compared to the second quarter of 2014. For the six months ended June 30, 2015, revenue decreased by $4.1 million, or 7.8%, compared to the same period in the prior year. One of the factors contributing to changes in our reported revenue is the strength of the U.S. dollar relative to foreign currencies. Changes in the average value of the U.S. dollar during the period relative to foreign currencies negatively impacted our reported revenue for the reported periods. On a constant dollar basis, adjusted for changes in foreign exchange (“FX”) rates, revenue for the second quarter of 2015decreased by 3.1% compared to a decrease of 6.2% as reported and decreased by 4.8% during the first six months of 2015 compared to a decrease of 7.8% as reported.

In addition to the impact of the change in FX rates, the year over year net decrease in our Recovery Audit Services – Americas revenue in the three and six months ended June 30, 2015 was due to a number of factors. Revenue at our existing clients declined 6.9% in the three-month period and 8.0% in the six-month period primarily due to lower contingency fee rates

15

at several clients and a change in position from primary auditor to secondary auditor at a large client. Partially offsetting these declines, revenue increased 3.8% and 3.2% in the three and six-month periods, respectively, due to new clients.

Recovery Audit Services – Europe/Asia-Pacific revenue decreased by $2.4 million, or 19.6%, for the three months ended June 30, 2015 compared to the same period in 2014. For the six months ended June 30, 2015, revenue decreased by $2.8 million, or 12.8%, compared to the same period in the prior year. The changes in the value of the U.S. dollar relative to foreign currencies in Europe, Asia and the Pacific region negatively impacted reported revenue for the second quarter and first six months of 2015 compared to the same periods in 2014. On a constant dollar basis, adjusted for changes in FX rates, revenue decreased by 6.9% for the second quarter of 2015 and increased by 0.1% during the first six months of 2015 compared to the same periods in 2014. The 6.9% net decrease on a constant dollar basis for the three-month period included net decreases in revenue of 7.5% attributable to existing clients and 1.9% attributable to cyclical clients. These decreases were partially offset by a net increase in revenue of 2.8% attributable to new clients. The 0.1% net increase in revenue on a constant dollar basis for the six-month period included a net increase of 3.5% for new clients which was partially offset by decreases in revenue of 2.1% attributable to existing clients and 1.1% attributable to cyclical clients.

Adjacent Services revenue decreased by $0.6 million, or 25.7%, for the three months ended June 30, 2015 and decreased$1.6 million, or 35.2%, for the six months ended June 30, 2015 compared to the same periods in 2014 primarily due to the sale of our Chicago, Illinois-based consulting practice on October 1, 2014.

Healthcare Claims Recovery Audit Services revenue for the three months ended June 30, 2015 was essentially unchanged when compared to the same period in 2014 and decreased$1.0 million for the six months ended June 30, 2015 when compared to the first half of 2014. The decrease in revenue in the six-month period is primarily due to reduced auditing under the Medicare RAC program. On April 28, 2015, the Company announced its decision to exit its Healthcare Claims Recovery Audit Services business.

Cost of Revenue (“COR”). COR consists principally of commissions and other forms of variable compensation we pay to our auditors based primarily on the level of overpayment recoveries and/or profit margins derived therefrom, fixed auditor salaries, compensation paid to various types of hourly support staff and salaries for operational and client service managers for our recovery audit services and our Adjacent Services businesses. COR also includes other direct and indirect costs incurred by these personnel, including office rent, travel and entertainment, telephone, utilities, maintenance and supplies and clerical assistance. A significant portion of the components comprising COR is variable and will increase or decrease with increases or decreases in revenue.

COR was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Recovery Audit Services – Americas	$	15,162	$	17,074	$	30,133	$	33,074
Recovery Audit Services – Europe/Asia-Pacific	6,607		8,673		13,044		16,090
Adjacent Services	2,342		2,849		4,101		5,884
Healthcare Claims Recovery Audit Services	809		1,348		1,420		3,728
Total	$	24,920	$	29,944	$	48,698	$	58,776

COR as a percentage of revenue for Recovery Audit Services – Americas was 59.8% and 63.2% for the three months ended June 30, 2015 and 2014, respectively, and 63.1% and 63.8% for the six months ended June 30, 2015 and 2014, respectively. The decrease in COR as a percentage of revenue for the three and six months ended June 30, 2015 compared to the same periods in 2014 is primarily due to our enhanced focus on operational efficiencies and cost reductions.

COR as a percentage of revenue for Recovery Audit Services – Europe/Asia-Pacific was 66.4% and 70.0% for the three months ended June 30, 2015 and 2014, respectively, and 67.7% and 72.9% for the six months ended June 30, 2015 and 2014, respectively. The decrease in COR as a percentage of revenue for the three and six months ended June 30, 2015 compared to the same periods in 2014 is primarily due to our operational and cost improvements.

COR as a percentage of revenue for Recovery Audit Services – Europe/Asia-Pacific is generally higher than COR as a percentage of revenue for Recovery Audit Services – Americas primarily due to differences in service delivery models, scale and geographic fragmentation. The Recovery Audit Services – Europe/Asia-Pacific segment generally serves fewer clients in each geographic market and on average generates lower revenue per client than those served by the Company’s Recovery Audit Services – Americas segment.

16

COR as a percentage of revenue for Adjacent Services was 138.2% and 124.9% for the three months ended June 30, 2015 and 2014, respectively, and 138.6% and 128.9% for the six months ended June 30, 2015 and 2014, respectively. COR declined 17.8% and 30.3% in the three and six months ended June 30, 2015, respectively, compared to the same periods in 2014 due primarily to the sale of the Chicago, Illinois-based consulting practice on October 1, 2014. Partially offsetting the declines in COR for the three months ended June 30, 2015 compared to the same period in 2014 are increased costs for the use of outside contractors.

Healthcare Claims Recovery Audit Services COR relates primarily to costs associated with the Medicare RAC program subcontracts. COR decreased $0.5 million and $2.3 million for the three and six-month periods ended June 30, 2015, respectively, compared to the same periods in 2014 due primarily to personnel reductions and reduced direct costs associated with the Medicare RAC program such as costs for medical records and other costs associated with the generation of claims. These reductions were not sufficient to enable us to achieve revenue in excess of COR for our services under the Medicare RAC program, resulting in COR exceeding revenue in the 2015 periods.

Selling, General and Administrative Expenses (“SG&A”). SG&A expenses for all segments other than Corporate Support include the expenses of sales and marketing activities, information technology services and allocated corporate data center costs, human resources, legal, accounting, administration, foreign currency transaction gains and losses other than those relating to short-term intercompany balances and gains and losses on asset disposals. Corporate Support SG&A represents the unallocated portion of SG&A expenses which are not specifically attributable to our segment activities and include the expenses of information technology services, the corporate data center, human resources, legal, accounting, treasury, administration and stock-based compensation charges.

SG&A expenses were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Recovery Audit Services – Americas	$	2,442	$	2,970	$	3,963	$	5,818
Recovery Audit Services – Europe/Asia-Pacific	1,360		1,936		2,926		3,740
Adjacent Services	198		946		398		1,512
Healthcare Claims Recovery Audit Services	202		553		427		1,177
Subtotal for reportable segments	4,202		6,405		7,714		12,247
Corporate Support	5,186		4,632		9,843		8,766
Total	$	9,388	$	11,037	$	17,557	$	21,013

Recovery Audit Services – Americas SG&A decreased by $0.5 million, or 17.8%, for the three months ended June 30, 2015 and decreased by $1.9 million, or 31.9%, for the six months ended June 30, 2015 compared to the same periods in 2014 due primarily to lower compensation expense that resulted from our transformation efforts and reductions in bad debt expense.

Recovery Audit Services – Europe/Asia-Pacific SG&A decreased$0.6 million, or 29.8%, in the three months ended June 30, 2015 and decreased$0.8 million, or 21.8%, in the six months ended June 30, 2015 compared to the same periods in 2014. These decreases are primarily due to an increase in the value of the U.S. dollar relative to foreign currencies in Europe, Asia and the Pacific region between the 2015 and 2014 periods. On a constant dollar basis, adjusted for changes in foreign currency rates, SG&A decreased by $0.4 million for the three and six months ended June 30, 2015 compared to the same periods in 2014.

Adjacent Services SG&A decreased$0.7 million, or 79.1%, in the three months ended June 30, 2015 and decreased$1.1 million, or 73.7%, in the six months ended June 30, 2015 compared to the same periods in 2014. These decreases are primarily due to lower compensation, travel and office-related expenses that declined as a result of personnel reductions that were made as we rationalized our service offerings in this segment.

Healthcare Claims Recovery Audit Services SG&A decreased$0.4 million, or 63.5%, in the three months ended June 30, 2015 and decreased$0.8 million, or 63.7%, in the six months ended June 30, 2015 compared to the same periods in 2014. These decreases are primarily due to reductions in overhead charges and occupancy costs that resulted from staff reductions in this segment necessitated by the decline in Healthcare Claims Recovery Audit Services revenue.

Corporate Support SG&A increased$0.6 million, or 12.0%, for the three months ended June 30, 2015 and increased$1.1 million, or 12.3%, for the six months ended June 30, 2015 compared to the same periods in 2014. These increases are primarily

17

due to increases in equity compensation expenses and costs associated with our information technology infrastructure initiatives.

Depreciation of property and equipment. Depreciation of property and equipment was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Recovery Audit Services – Americas	$	979	$	1,245	$	1,948	$	2,501
Recovery Audit Services – Europe/Asia-Pacific	153		149		306		295
Adjacent Services	162		158		319		318
Healthcare Claims Recovery Audit Services	10		34		23		154
Total	$	1,304	$	1,586	$	2,596	$	3,268

The overall decrease in depreciation relates primarily to the mix and timing of our capital expenditures and the associated useful lives for such purchases.

Amortization of intangible assets. Amortization of intangible assets was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Recovery Audit Services – Americas	$	441	$	501	$	882	$	1,001
Recovery Audit Services – Europe/Asia-Pacific	280		305		553		612
Adjacent Services	33		96		65		192
Total	$	754	$	902	$	1,500	$	1,805

The decreases in amortization expense for the three months ended June 30, 2015 and six months ended June 30, 2015 compared to the same periods in 2014 are primarily due to the end of the finite lives of certain intangible assets, added no new intangible assets since 2013, and the disposition of intangible assets as a result of the sale of our Chicago, Illinois-based consulting practice on October 1, 2014. We have not recorded any amortization of intangible assets in our Healthcare Claims Recovery Audit Services segment because there have been no business acquisitions in this segment. Unless we complete an acquisition in any of our reportable segments in 2015, we anticipate that amortization expense will continue to decrease in 2015 compared to 2014.

Foreign Currency Transaction (Gains) Losses on Short-Term Intercompany Balances. Foreign currency transaction gains and losses on short-term intercompany balances result from fluctuations in the exchange rates for foreign currencies and the U.S. dollar and the impact of these fluctuations, primarily on balances payable by our foreign subsidiaries to their U.S. parent. Substantial changes from period to period in foreign currency exchange rates may significantly impact the amount of such gains and losses. The strengthening of the U.S. dollar relative to other currencies results in recorded losses on short-term intercompany balances receivable from our foreign subsidiaries while the relative weakening of the U.S. dollar results in recorded gains. In the three months ended June 30, 2015 and 2014, we recorded foreign currency transaction gains of $0.4 million and $0.2 million, respectively, on short-term intercompany balances. In the six months ended June 30, 2015 we recorded $1.3 million in foreign currency transaction losses compared to $0.1 million in foreign currency gains in the same period in 2014.

Net Interest Expense (Income). Net interest income was less than $0.1 million for the three and six months ended June 30, 2015. We recorded net interest income of less than $0.1 million for the three months ended June 30, 2014 and net interest expense of less than $0.1 million for the six months ended June 30, 2014.

Income Tax Expense. Our income tax expense amounts as reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) do not reflect amounts that normally would be expected due to several factors. The most significant of these factors is that for U.S. tax reporting purposes we have net operating loss carryforwards and other tax attributes which created deferred tax assets on our balance sheet. We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. Generally, these factors result in our recording no net income tax expense or benefit relating to our operations in the United States. Reported income tax expense for the three and six months ended June 30, 2015 and 2014 primarily resulted from taxes on the income of certain of our foreign subsidiaries.

18

Adjusted EBITDA. 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.

Reconciliations of net income (loss) to each of EBIT, EBITDA and Adjusted EBITDA for the periods included in this report are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income (loss)	$	1,097		$	(1,468	)	$	(1,861	)	$	(5,142	)
Income tax expense	296			186			751			299
Interest expense (income), net	(53		)	(43		)	(95		)	11
EBIT	1,340			(1,325		)	(1,205		)	(4,832		)
Depreciation of property and equipment	1,304			1,586			2,596			3,268
Amortization of intangible assets	754			902			1,500			1,805
EBITDA	3,398			1,163			2,891			241
Foreign currency transaction (gains) losses on short-term intercompany balances	(416		)	(163		)	1,276			(148		)
Acquisition-related charges	—			230			—			249
Transformation severance and related expenses	562			1,554			708			1,939
Stock-based compensation	2,017			983			3,149			2,004
Adjusted EBITDA	$	5,561		$	3,767		$	8,024		$	4,285

Transformation severance and related expenses decreased$1.0 million for the three months ended June 30, 2015 and $1.2 million for the six months ended June 30, 2015 compared to the same periods in 2014. Transformation severance and related expenses fluctuate with staff reductions and lease expenses associated with vacating office space across all segments in order to reduce our cost structure.

Stock-based compensation increased$1.0 million, or 105.2%, for the three months ended June 30, 2015 and $1.1 million, or 57.1%, compared to the same periods in 2014 due to higher expenses associated with equity awards granted during the 2015 fiscal year.

19

We include a detailed calculation of Adjusted EBITDA by segment in Note D of “Notes to Consolidated Financial Statements” in Item 1 of this Form 10-Q. A summary of Adjusted EBITDA by segment for the three and six months ended June 30, 2015 and 2014 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Recovery Audit Services – Americas	$	7,854		$	7,443		$	13,835		$	13,401
Recovery Audit Services – Europe/Asia-Pacific	2,186			2,256			3,553			2,816
Adjacent Services	(831		)	(1,049		)	(1,511		)	(2,205		)
Healthcare Claims Recovery Audit Services	(506		)	(1,362		)	(1,195		)	(3,093		)
Subtotal for reportable segments	8,703			7,288			14,682			10,919
Corporate Support	(3,142		)	(3,521		)	(6,658		)	(6,634		)
Total	$	5,561		$	3,767		$	8,024		$	4,285

Recovery Audit Services – Americas Adjusted EBITDA increased $0.4 million, or 5.5%, in the three months ended June 30, 2015 and $0.4 million, or 3.2%, for the six months ended June 30, 2015 compared to the same periods in 2014 due to improvements in COR and SG&A expenses as a percentage of revenue.

Recovery Audit Services – Europe/Asia-Pacific Adjusted EBITDA for the three months ended June 30, 2015 was essentially unchanged compared to the same period in 2014. Adjusted EBITDA increased $0.7 million, or 26.2%, for the six months ended June 30, 2015 compared to the same period in 2014. This increase is due to greater reductions in COR and SG&A expenses than revenue for the six month period.

Adjacent Services Adjusted EBITDA improved $0.2 million for the three months ended June 30, 2015 and $0.7 million for the six months ended June 30, 2015 compared to the same periods in 2014. Excluding the impact of the sale of the Chicago-Illinois based consulting practice on October 1, 2014, the improvement in Adjusted EBITDA for both periods is primarily due to a decrease in SG&A expenses.

Healthcare Claims Recovery Audit Services Adjusted EBITDA improved $0.9 million, or 62.8%, for the three months ended June 30, 2015 and $1.9 million, or 61.4%, for the six months ended June 30, 2015 compared to the same periods in 2014. These improvements are due to reductions in COR and SG&A expenses that exceeded the reductions in revenue.

Corporate Support Adjusted EBITDA improved by $0.4 million, or 10.8%, for the three months ended June 30, 2015 compared to the same period in 2014. This increase in Adjusted EBITDA is due primarily to reduced legal and health insurance costs which were partially offset by increased expenses associated with our information technology infrastructure initiatives. Adjusted EBITDA for the six-month period ended June 30, 2015 was essentially unchanged compared to the same period in 2014.

Liquidity and Capital Resources

As of June 30, 2015, we had $19.7 million in cash and cash equivalents, of which $5.3 million was held in U.S. bank accounts, and no borrowings outstanding against our $20.0 million revolving credit facility.

Operating Activities. Net cash provided by operating activities was $7.5 million and $5.9 million during the six months ended June 30, 2015 and 2014, respectively. These amounts consist of two components, specifically, net loss adjusted for certain non-cash items (such as depreciation, amortization, stock-based compensation expense, and deferred income taxes) and changes in assets and liabilities, primarily working capital, as follows (in thousands):

	Six Months Ended June 30,
	2015			2014
Net loss	$	(1,861	)	$	(5,142	)
Adjustments for certain non-cash items	8,712			6,550
	6,851			1,408
Changes in operating assets and liabilities	631			4,444
Net cash provided by operating activities	$	7,482		$	5,852

20

The change in net cash provided by operating activities resulted primarily from reductions in COR and SG&A expenses in excess of revenue reductions, the net effect of which significantly improved operating income. In addition to the improved operating income, there was also a small improvement in working capital. We include an itemization of these changes in our Condensed Consolidated Statements of Cash Flows (Unaudited) in Item 1 of this Form 10-Q.

Investing Activities. Net cash used for property and equipment capital expenditures was $2.2 million and $2.3 million during the six months ended June 30, 2015 and 2014, respectively. These capital expenditures primarily related to investments we made to upgrade our information technology infrastructure.

Capital expenditures are discretionary and we currently expect to continue to make capital expenditures to enhance our information technology infrastructure and proprietary audit tools in 2015. Should we experience changes in our operating results, we may alter our capital expenditure plans.

Financing Activities. Net cash used by financing activities was $10.6 million for the six months ended June 30, 2015 and $11.2 million for the same period in 2014. The decrease in net cash used by financing activities in the six months ended June 30, 2015 compared to same period in 2014 is primarily due to the payment of deferred acquisition consideration in 2014 and the reduced cost of repurchased common stock in the 2015 period.

Secured Credit Facility

On January 19, 2010, we entered into a four-year revolving credit and term loan agreement with SunTrust Bank (“SunTrust”). The SunTrust credit facility initially consisted of a $15.0 million committed revolving credit facility and a $15.0 million term loan. The SunTrust term loan required quarterly principal payments of $0.8 million beginning in March 2010, and a final principal payment of $3.0 million due in January 2014 that we paid in December 2013. The SunTrust credit facility is guaranteed by the Company and all of its material domestic subsidiaries and secured by substantially all of the assets of the Company.

On January 17, 2014, we entered into an amendment of the SunTrust credit facility that increased the committed revolving credit facility from $15.0 million to $25.0 million, lowered the applicable margin to a fixed rate of 1.75%, eliminated the provision limiting availability under the revolving credit facility based on eligible accounts receivable, increased our stock repurchase program limits, and extended the scheduled maturity of the revolving credit facility to January 16, 2015 (subject to earlier termination as provided therein).

On December 23, 2014, we entered into an amendment of the SunTrust credit facility that reduced the committed revolving credit facility from $25.0 million to $20.0 million. The credit facility bears interest at a rate per annum comprised of a specified index rate based on one-month LIBOR, plus an applicable margin (1.75% per annum). The credit facility includes two financial covenants (a maximum leverage ratio and a minimum fixed charge coverage ratio) that apply only if we have borrowings under the credit facility that arise or remain outstanding during the final 30 calendar days of any fiscal quarter. These financial covenants also will be tested, on a modified pro forma basis, in connection with each new borrowing under the credit facility. This amendment also extends the scheduled maturity of the revolving credit facility to December 23, 2017 and lowered the commitment fee to 0.25% per annum, payable quarterly, on the unused portion of the revolving credit facility.

As of June 30, 2015, we had no outstanding borrowings under the SunTrust credit facility. With the provision of a fixed applicable margin of 1.75% per the amendment of the SunTrust credit facility, the interest rate that would have applied at June 30, 2015 had any borrowings been outstanding was approximately 1.93%.

The SunTrust credit facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports, maintenance of existence, and transactions with affiliates. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets or declare or pay dividends on its capital stock. The financial covenants included in the SunTrust credit facility, among other things, limit the amount of capital expenditures the Company can make, set forth maximum leverage and net funded debt ratios for the Company and a minimum fixed charge coverage ratio, and also require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the SunTrust credit facility includes customary events of default.

We believe that we will have sufficient borrowing capacity and cash generated from operations to fund our capital and operational needs for at least the next twelve months.

21

Stock Repurchase Program

On February 21, 2014, our Board of Directors authorized a stock repurchase program under which we may repurchase up to $10.0 million of our common stock from time to time through March 31, 2015. On March 25, 2014, our Board of Directors authorized a $10.0 million increase to the stock repurchase program. On October 24, 2014, our Board of Directors authorized a

$20.0 million increase to the stock repurchase program, increasing the total stock repurchase program since its inception to

$40.0 million, and extended the duration of the program to December 31, 2015. From the February 2014 announcement of the Company’s current stock repurchase program through June 30, 2015, the Company has repurchased 5.8 million shares, or 19.2%, of its common stock outstanding on the date of the announcement, for an aggregate cost of $33.0 million, leaving $7.0 million available for future purchases. For the six months ended June 30, 2015, we repurchased 2.1 million shares under this plan for an aggregate cost of $10.3 million. These shares were retired and accounted for as a reduction to Shareholders' equity in the Condensed Consolidated Balance Sheet (Unaudited). Direct costs incurred to acquire the shares are included in the total cost of the shares.

Subsequent to June 30, 2015 through August 5, 2015, we repurchased an additional 1.0 million shares for $4.2 million. The timing and amount of future repurchases, if any, will depend upon the Company’s stock price, the amount of the Company’s available cash, regulatory requirements, and other corporate considerations. The Company may initiate, suspend or discontinue purchases under the stock repurchase program at any time.

Off-Balance Sheet Arrangements

As of June 30, 2015, the Company did not have any material off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of the SEC’s Regulation S-K.

22

Critical Accounting Policies

We describe the Company’s significant accounting policies in Note 1 of Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. We consider certain of these accounting policies to be “critical” to the portrayal of the Company’s financial position and results of operations, as they require the application of significant judgment by management. As a result, they are subject to an inherent degree of uncertainty. We identify and discuss these “critical” accounting policies in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Management bases its estimates and judgments on historical experience and on various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, management evaluates its estimates and judgments, including those considered “critical”. Management has discussed the development, selection and evaluation of accounting estimates, including those deemed “critical,” and the associated disclosures in this Form 10-Q with the Audit Committee of the Board of Directors.

23

Forward-Looking Statements

Some of the information in this Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which statements involve substantial risks and uncertainties including, without limitation, statements regarding: (1) future results of operations or of the Company’s financial condition, (2) the adequacy of the Company’s current working capital and other available sources of funds, (3) the Company's goals and plans for the future, including its strategic initiatives and growth opportunities, (4) expectations regarding future revenue trends, and (5) the expected impact of the Company’s decision to exit the Company's Healthcare Claims Recovery Audit Services business. All statements that cannot be assessed until the occurrence of a future event or events should be considered forward-looking. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” or similar words. Risks and uncertainties that may potentially impact these forward-looking statements include, without limitation, those set forth under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and its other periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

There may be events in the future, however, that the Company cannot accurately predict or over which the Company has no control. The risks and uncertainties listed in this section, as well as any cautionary language in this Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of any of the events denoted above as risks and uncertainties and elsewhere in this Form 10-Q could have a material adverse effect on our business, financial condition and results of operations.

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Market Risk. Our reporting currency is the U.S. dollar, although we transact business in various foreign locations and currencies. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we provide our services. Our operating results are exposed to changes in exchange rates between the U.S. dollar and the currencies of the other countries in which we operate. When the U.S. dollar strengthens against other currencies, the value of foreign functional currency revenue decreases. When the U.S. dollar weakens, the value of the foreign functional currency revenue increases. Overall, we are a net receiver of currencies other than the U.S. dollar and, as such, benefit from a weaker dollar. We therefore are adversely affected by a stronger dollar relative to major currencies worldwide. During the three months ended June 30, 2015, we recognized $2.2 million of operating income from operations located outside the U.S., virtually all of which was originally accounted for in currencies other than the U.S. dollar. Upon translation into U.S. dollars, such operating income would increase or decrease, assuming a hypothetical 10% change in weighted-average foreign currency exchange rates against the U.S. dollar, by $0.2 million for the three months ended June 30, 2015. We currently do not have any arrangements in place to hedge our foreign currency risk.

Interest Rate Risk. Our interest income and expense are sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on our cash equivalents as well as interest paid on amounts outstanding under our revolving credit facility, if any. As of June 30, 2015, we had no borrowings outstanding against our $20.0 million revolving credit facility. Interest on our revolving credit facility is payable monthly and accrues at an index rate using the one-month LIBOR rate plus an applicable margin of 1.75%. Assuming full utilization of the revolving credit facility, a hypothetical 100 basis point change in interest rates applicable to the revolver would result in an approximate $0.6 million change in annual pre-tax income.

25

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2015.

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

26

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are party to a variety of legal proceedings arising in the normal course of business. While the results of these proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes in the risks facing the Company as described in the Company’s Form 10-K for the year ended December 31, 2014.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s current credit facility prohibits the payment of any cash dividends on the Company’s capital stock.

The following table sets forth information regarding the purchases of the Company’s equity securities made by or on behalf of the Company or any affiliated purchaser (as defined in Exchange Act Rule 10b-18) during the three-month period ended June 30, 2015:

2015	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
					(millions of dollars)
April 1 - April 30	5,243	$	4.24	—	—
May 1 - May 31	1,046,828	$	4.63	1,046,828
June 1 - June 30	48,405	$	4.29	—	—
	1,100,476	$	4.62	1,046,828	$	6.9

(a) Shares purchased during the quarter include shares surrendered by employees to satisfy tax withholding obligations upon vesting of restricted stock and shares from the Company's stock repurchase program.

(b) On February 21, 2014, our Board of Directors authorized a stock repurchase program under which we may repurchase up to $10.0 million of our common stock from time to time through March 31, 2015. On March 25, 2014, our Board of Directors authorized a $10.0 million increase to the stock repurchase program, bringing the total amount of its common stock that the Company may repurchase under the program to $20.0 million. On October 24, 2014, our Board of Directors authorized a $20.0 million increase to the stock repurchase program, increasing the total share repurchase program to $40.0 million, and extended the duration of the program to December 31, 2015. From the February 2014 announcement through June 30, 2015, the Company repurchased a total of 5,781,902 shares under this program for an aggregate purchase price of $33.1 million. The timing and amount of repurchases, if any, will depend upon the Company’s stock price, economic and market conditions, regulatory requirements, and other corporate considerations. The Company may initiate, suspend or discontinue purchases under the stock repurchase program at any time.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

27

Item 6. Exhibits

Exhibit Number	Description
3.1	Restated Articles of Incorporation of the Registrant, as amended and corrected through August 11, 2006 (restated solely for the purpose of filing with the Commission) (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on August 17, 2006).
3.1.1	Articles of Amendment of the Registrant effective January 20, 2010 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on January 25, 2010).
3.2	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on December 11, 2007).
4.1	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-K for the year ended December 31, 2001).
4.2	See Restated Articles of Incorporation and Bylaws of the Registrant, filed as Exhibits 3.1 and 3.2, respectively.
31.1	Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended June 30, 2015.
31.2	Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended June 30, 2015.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended June 30, 2015.
101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, formatted in Extensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PRGX GLOBAL, INC.
August 7, 2015	By:	/s/ Ronald E. Stewart
		Ronald E. Stewart
		President, Chief Executive Officer, Director (Principal Executive Officer)
August 7, 2015	By:	/s/ Peter Limeri
		Peter Limeri
		Chief Financial Officer and Treasurer (Principal Financial Officer)

29

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Ronald E. Stewart, certify that:

1. I have reviewed this Form 10-Q of PRGX Global, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 7, 2015	By:	/s/ Ronald E. Stewart
		Ronald E. Stewart
		President, Chief Executive Officer, Director (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Peter Limeri, certify that:

1. I have reviewed this Form 10-Q of PRGX Global, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 7, 2015	By:	/s/ Peter Limeri
		Peter Limeri
		Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PRGX Global, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald E. Stewart, President and Chief Executive Officer of the Company and I, Peter Limeri, Chief Financial Officer and Treasurer, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of the undersigned’s knowledge: (1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 7, 2015	By:	/s/ Ronald E. Stewart
		Ronald E. Stewart
		President, Chief Executive Officer, Director (Principal Executive Officer)
August 7, 2015	By:	/s/ Peter Limeri
		Peter Limeri
		Chief Financial Officer and Treasurer (Principal Financial Officer)

XML

Stock-Based Compensation (Narrative) (Details) $ in Millions			3 Months Ended		6 Months Ended		36 Months Ended
	Mar. 30, 2015 executive_officer shares	Jun. 19, 2012 USD ($) executive_officer shares	Jun. 30, 2015 USD ($) executive_officer compensation_plan shares	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) executive_officer shares	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) executive_officer shares
Stock-Based Compensation (Textual) [Abstract]
Number of stock-based compensation plans | compensation_plan			2
The Plans [Member]
Stock-Based Compensation (Textual) [Abstract]
Selling, general and administrative expenses | $			$ 2.0	$ 1.0	$ 3.1	$ 2.0
Unrecognized stock-based compensation expense related to stock options | $			$ 9.0		$ 9.0		$ 9.0
Weighted-average period for recognizing stock compensation expense			1 year 7 months 20 days
Employee Group [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting period			3 years
Employee Group [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting period						3 years
Director Group [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting period			1 year
Stock Options [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options expiration period			7 years		7 years
Stock options award vesting right			vest in equal annual increments over the vesting period
Stock Options [Member] | Director [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting period			1 year
Stock Options [Member] | Employee Group [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting period			3 years		3 years
MIP Performance Units [Member] | 2006 Management Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Number of executive officers, granted stock awards		7
Award vesting period		3 years
Total of performance units were outstanding and fully vested (shares) | shares		154,264	0		0		0
Grant date fair value awards | $		$ 1.2
Percentage of performance units (percent)			60.00%
Percentage of fair market value (percent)			40.00%
Performance units settled in period (shares) | shares					16,530		137,740
Common stock issued during period (shares) | shares					9,918		79,356
Cash payments for shares settled during period | $					$ 0.1		$ 0.3
Number of executive officers that settled performance units in period (executive officers)							2
Number of former executive officers that settled performance units in period (executive officers)							4
Performance units forfeited in period (shares) | shares							16,524
Number of former executive officers that forfeited performance units in period (executive officer)							1
Performance-based Restricted Stock Units [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options award vesting right			vest in equal annual increments over the vesting period
Performance-based Restricted Stock Units [Member] | 2006 Management Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Number of executive officers, granted stock awards	8
Total of performance units were outstanding and fully vested (shares) | shares	1,325,000
Percentage of performance units (percent)	50.00%
Percentage of fair market value (percent)	50.00%
Requisite performance period	2 years
Performance-based Restricted Stock Units [Member] | 2006 Management Incentive Plan [Member] | Threshold Performance Level [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting rights (percent)	35.00%
Performance-based Restricted Stock Units [Member] | 2006 Management Incentive Plan [Member] | Target Performance Level [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting rights (percent)	100.00%
Performance-based Restricted Stock Units [Member] | 2006 Management Incentive Plan [Member] | Maximum Performance Level [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting rights (percent)	200.00%
Performance-based Restricted Stock Units [Member] | Director [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Award vesting period			1 year
Performance-based Restricted Stock Units [Member] | Employee Group [Member] | 2008 Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Number of executive officers, granted stock awards			8		8		8
Award vesting period					2 years	3 years

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company currently has two stock-based compensation plans: (1) the 2006 Management Incentive Plan (“2006 MIP”) and (2) the 2008 Equity Incentive Plan (“2008 EIP”) (collectively, the “Plans”). We describe the Plans in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2014. For all periods presented herein, awards outside the Plans are referred to as inducement awards.

2008 EIP Awards and Inducement Awards

Stock options granted under the 2008 EIP generally have a term of seven years and vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors. The following table summarizes stock option grants during the six months ended June 30, 2015 and 2014:

Grantee Type	# of Options Granted	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
2015
Director	249,273	1 year or less	$	4.49	$	2.44
Director	17,092	3 years	$	3.99	$	1.33
Employee inducements (1)	135,000	3 years	$	5.51	$	1.42
2014
Director	51,276	1 year or less	$	6.45	$	1.89
Employee group (2)	1,480,000	3 years	$	6.99	$	1.81

(1) The Company granted non-qualified stock options outside its existing stock-based compensation plans in the first six months of 2015 to three employees in connection with the employees joining the Company.

(2) The exercise price for these options is $6.36 for the options that vest on June 27, 2015, $6.99 for the options that vest on June 27, 2016 and $7.63 for the options that vest on June 27, 2017.

Nonvested stock awards, including both restricted stock and restricted stock units, granted under the 2008 EIP generally are nontransferable until vesting and the holders are entitled to receive dividends with respect to the nonvested shares. Prior to vesting, the grantees of restricted stock are entitled to vote the shares, but the grantees of restricted stock units are not entitled to vote the shares. Generally, nonvested stock awards with time-based vesting criteria vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors. Nonvested stock awards with performance-based vesting criteria vest in accordance with specific performance criteria associated with the awards. The following table summarizes nonvested stock awards granted during the six months ended June 30, 2015 and 2014:

Grantee Type	# of Shares Granted	Vesting Period	Weighted Average Grant Date Fair Value
2015
Director	4,273	1 year or less	$	4.02
Director	17,092	3 years	$	3.99
Employee group (1)	1,325,000	2 years	$	4.00
Employee inducements (2)	10,000	3 years	$	5.29
2014
Director group	51,276	1 year or less	$	6.45
Employee group	120,000	3 years	$	6.36

(1) The Company granted nonvested performance-based stock awards (restricted stock units) in the first quarter of 2015 to eight executive officers.

(2) The Company granted nonvested stock awards (restricted stock) outside its existing stock-based compensation plans in the first quarter of 2015 to two employees in connection with the employees joining the Company.

2006 MIP Performance Units

On June 19, 2012, seven executive officers of the Company were granted 154,264 Performance Units under the 2006 MIP, comprising all of the then remaining available awards under the 2006 MIP. The awards had an aggregate grant date fair value of $1.2 million and vest ratably over three years. Upon vesting, the Performance Units were settled by the issuance of Company common stock equal to 60% of the number of Performance Units being settled and the payment of cash in an amount equal to 40% of the fair market value of that number of shares of common stock equal to the number of Performance Units being settled. During the six months endedJune 30, 2015, an aggregate of 16,530 Performance Units were settled, which resulted in the issuance of 9,918 shares of common stock and cash payments of less than $0.1 million. There were 6,198 and 13,222 shares issued during the second quarters of 2015 and 2014, respectively. Since the June 19, 2012 grant date to June 30, 2015, an aggregate of 137,740 Performance Units were settled by two current executive officers and four former executive officers, and 16,524 Performance Units were forfeited by one former executive officer and currently are available to be granted. Such settlements resulted in the issuance of 79,356 shares of common stock and cash payments totaling $0.3 million. As of June 30, 2015, no Performance Units were outstanding.

Performance-Based Restricted Stock Units

On March 30, 2015, eight executive officers of the Company were granted 1,325,000 performance-based restricted stock units (“PBUs”) under the 2008 EIP. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 50% of the number of PBUs being settled and the payment of cash in an amount equal to 50% of the fair market value of that number of shares of common stock equal to the number of PBUs being settled. The PBUs vest and become payable based on the cumulative adjusted EBITDA that the Company (excluding the Healthcare Claims Recovery Audit business) achieves for the two-year performance period ending December 31, 2016. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 200% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 200% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

Selling, general and administrative expenses for the three months ended June 30, 2015 and 2014 include $2.0 million and $1.0 million, respectively, related to stock-based compensation charges. Selling, general and administration expenses for the six months ended June 30, 2015 and 2014 include $3.1 million and $2.0 million, respectively, related to stock-based compensation charges. At June 30, 2015, there was $9.0 million of unrecognized stock-based compensation expense related to stock options, restricted stock awards and restricted stock unit awards, which we expect to recognize over a weighted-average period of 1.64 years. The unrecognized stock-based compensation expense related to restricted stock unit awards with performance vesting criteria is based on our estimate of both the number of shares of the Company's common stock that will ultimately be issued and cash payments that will be made when the restricted stock units are settled.

XML

Debt (Details) - 2010 Credit Agreement [Member] - SunTrust Bank [Member] - USD ($)		6 Months Ended
	Jan. 19, 2010	Jun. 30, 2015
Line of Credit Facility [Line Items]
Period of term loan and the revolving credit facility	4 years
Committed revolving credit facility		$ 20,000,000
Revolving credit facility outstanding		$ 0
Debt Instrument, Interest Rate at Period End		1.93%
Revolving Credit facility commitment fee (percent)		0.25%
LIBOR [Member]
Line of Credit Facility [Line Items]
Revolving Credit facility and Term Loan interest rate (percent)		1.75%

XML

Cash and Cash Equivalents (Details) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Line of Credit Facility [Line Items]
Cash and cash equivalents included short-term investments	$ 3.3	$ 12.2
Foreign Banks [Member]
Line of Credit Facility [Line Items]
Cash and cash equivalents included short-term investments	$ 1.7	$ 2.5

XML

Fair Value of Financial Instruments (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Bank Loan Obligations [Member]
Fair Value of Financial Instruments (Textual) [Abstract]
Fair value of long term debt	$ 0	$ 0
Business Acquisition Obligations [Member]
Fair Value of Financial Instruments (Textual) [Abstract]
Fair value of long term debt	$ 0	$ 0

XML

Earnings Per Common Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings (Loss) Per Common Share

Earnings (Loss) Per Common Share

The following tables set forth the computations of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2015 and 2014 (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
Basic earnings (loss) per common share:	2015		2014			2015			2014
Numerator:
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Denominator:
Weighted-average common shares outstanding	26,497		29,733			26,446			29,945
Basic earnings (loss) per common share	$	0.04	$	(0.05	)	$	(0.07	)	$	(0.17	)

	Three Months Ended June 30,					Six Months Ended June 30,
Diluted earnings (loss) per common share:	2015		2014			2015			2014
Numerator:
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Denominator:
Weighted-average common shares outstanding	26,497		29,733			26,446			29,945
Incremental shares from stock-based compensation plans	56		—			—			—
Denominator for diluted earnings (loss) per common share	26,553		29,733			26,446			29,945
Diluted earnings (loss) per common share	$	0.04	$	(0.05	)	$	(0.07	)	$	(0.17	)

For the three and six months ended June 30, 2015, weighted-average common shares outstanding excludes from the computation of diluted earnings (loss) per common share antidilutive shares underlying options that totaled 3.5 million shares. For the three and six months ended June 30, 2014, weighted-average common shares outstanding excludes from the computation of diluted earnings (loss) per common share antidilutive shares underlying options that totaled 3.8 million shares and antidilutive Performance Units related to the Company's 2006 Management Incentive Plan that totaled less than 0.1 million shares. As a result of the net loss for the three months ended June 30, 2014 and the six months ended June 30, 2015 and June 30, 2014, all shares underlying stock options and Performance Units were considered antidilutive for such periods. The number of common shares used in the basic and diluted earnings (loss) per common share computations include nonvested restricted shares of 0.4 million and 0.5 million for the three and six months ended June 30, 2015 and 2014, respectively, and nonvested restricted share units that we consider to be participating securities of 1.4 million and 0.1 million for the three and six months ended June 30, 2015 and 2014, respectively.

We repurchased 1,046,828 shares of our common stock during the three months ended June 30, 2015 for $4.9 million, and 2,176,760 shares of our common stock during the six months ended June 30, 2015 for $10.3 million. We repurchased 1,697,560 shares of our common stock during the three months ended June 30, 2014 for $11.0 million, and 1,704,260 shares of our common stock during the six months ended June 30, 2014 for $11.0 million.

Pursuant to exercises of outstanding stock options, we issued no shares of our common stock in the three months ended June 30, 2015 and 12,863 shares of our common stock having a value of less than $0.1 million in the six months ended June 30, 2015. We issued 41,071 shares of our common stock having a value of less than $0.1 million in the three months ended June 30, 2014 and 604,585 shares of our common stock having a value of $2.3 million in the six months ended June 30, 2014. Stock option exercises during the six-month period ended June 30, 2014 primarily consisted of exercises by a former executive officer of the Company.

In partial satisfaction of a business acquisition obligation, we issued 187,620 shares of our common stock having a value of $1.3 million in the six months ended June 30, 2014. There were no shares issued to satisfy business acquisition obligations in the six months ended June 30, 2015.

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Revenue	$ 37,289	$ 41,981	$ 70,421	$ 79,882
Operating expenses:
Cost of revenue	24,920	29,944	48,698	58,776
Selling, general and administrative expenses	9,387	11,037	17,556	21,013
Depreciation of property and equipment	1,304	1,586	2,596	3,268
Amortization of intangible assets	754	902	1,500	1,805
Total operating expenses	36,365	43,469	70,350	84,862
Operating income (loss)	924	(1,488)	71	(4,980)
Foreign currency transaction (gains) losses on short-term intercompany balances	(416)	(163)	1,276	(148)
Interest expense (income), net	(53)	(43)	(95)	11
Income (loss) before income taxes	1,393	(1,282)	(1,110)	(4,843)
Income tax expense	296	186	751	299
Net income (loss)	$ 1,097	$ (1,468)	$ (1,861)	$ (5,142)
Basic earnings (loss) per common share (Note B) (usd per share)	$ 0.04	$ (0.05)	$ (0.07)	$ (0.17)
Diluted earnings (loss) per common share (Note B) (usd per share)	$ 0.04	$ (0.05)	$ (0.07)	$ (0.17)
Weighted-average common shares outstanding (Note B):
Basic (shares)	26,497	29,733	26,446	29,945
Diluted (shares)	26,553	29,733	26,446	29,945

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net income (loss)	$ (1,861)	$ (5,142)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	4,096	5,073
Amortization of deferred loan costs	0	39
Stock-based compensation expense	3,149	2,004
Deferred income taxes	191	(418)
Foreign currency transaction (gains) losses on short-term intercompany balances	1,276	(148)
Changes in operating assets and liabilities:
Restricted cash	(109)	(137)
Billed receivables	4,903	360
Unbilled receivables	1,490	7,372
Prepaid expenses and other current assets	(513)	248
Other assets	31	(7)
Accounts payable and accrued expenses	(234)	(659)
Accrued payroll and related expenses	(4,133)	(2,243)
Refund liabilities	(444)	(979)
Deferred revenue	(351)	229
Noncurrent compensation obligations	0	184
Other long-term liabilities	(9)	76
Net cash provided by operating activities	7,482	5,852
Cash flows from investing activities:
Purchases of property and equipment, net of disposal proceeds	(2,197)	(2,333)
Net cash used in investing activities	(2,197)	(2,333)
Cash flows from financing activities:
Payment of deferred loan costs	0	(91)
Restricted stock repurchased from employees for withholding taxes	(280)	(491)
Proceeds from option exercises	45	2,328
Payments of deferred acquisition consideration	0	(1,978)
Repurchase of common stock	(10,340)	(10,998)
Net cash used in financing activities	(10,575)	(11,230)
Effect of exchange rates on cash and cash equivalents	(763)	378
Net decrease in cash and cash equivalents	(6,053)	(7,333)
Cash and cash equivalents at beginning of period	25,735	43,700
Cash and cash equivalents at end of period	19,682	36,367
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	14	48
Cash paid during the period for income taxes, net of refunds received	$ 449	$ 1,377

XML

Earnings Per Common Share (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share and Other Significant Changes in Shares [Line Items]
Number of common shares in the basic and diluted earnings per common share (shares)	400,000	500,000	400,000	500,000
Nonvested restricted share (shares)	1,400,000	100,000	1,400,000	100,000
Stock issued for exercise of options, shares	0	41,071	12,863	604,585
Stock issued for exercise of options, value		$ 0.1	$ 0.1	$ 2.3
Business Strategy, Inc. [Member]
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share and Other Significant Changes in Shares [Line Items]
Business combination, consideration paid in common stock, shares			0	187,620
Business combination, consideration paid in common stock, value				$ 1.3
Non-qualified Option [Member]
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share and Other Significant Changes in Shares [Line Items]
Weighted average shares outstanding excludes anti-dilutive shares underlying options (shares) (less than 0.1 million)	3,500,000	3,800,000	3,500,000	3,800,000
Performance Unit [Member]
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share and Other Significant Changes in Shares [Line Items]
Weighted average shares outstanding excludes anti-dilutive shares underlying options (shares) (less than 0.1 million)		100,000		100,000
Common Stock [Member]
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share and Other Significant Changes in Shares [Line Items]
Common stock repurchased, shares	1,046,828	1,697,560	2,176,760	1,704,260
Common stock repurchased, value	$ 4.9	$ 11.0	$ 10.3	$ 11.0

XML

Stock-Based Compensation (Nonvested Stock Awards) (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2015 executive_officer shares	Jun. 30, 2015 executive_officer employee $ / shares shares	Jun. 30, 2014 $ / shares shares
Director group [Member]
Summary of nonvested stock awards granted
Vesting Period	1 year
Employee [Member]
Summary of nonvested stock awards granted
Vesting Period	3 years
2008 Equity Incentive Plan [Member] | Director, Group 2 [Member]
Summary of nonvested stock awards granted
Vesting Period		3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 1.33
2008 Equity Incentive Plan [Member] | Employee [Member]
Summary of nonvested stock awards granted
Vesting Period			3 years
Weighted Average Grant Date Fair Value (usd per share)			$ 1.81
Number of employees, granted stock awards | employee		3
2008 Equity Incentive Plan [Member] | Employee inducement [Member]
Summary of nonvested stock awards granted
Vesting Period		3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 1.42
Restricted Stock and Restricted Stock Units [Member]
Summary of nonvested stock awards granted
No. of Shares Granted (shares) | shares	0
Restricted Stock and Restricted Stock Units [Member] | 2008 Equity Incentive Plan [Member] | Director group [Member]
Summary of nonvested stock awards granted
Grantee Type		Director
No. of Shares Granted (shares) | shares		4,273	51,276
Vesting Period		1 year or less	1 year or less
Weighted Average Grant Date Fair Value (usd per share)		$ 4.02	$ 6.45
Restricted Stock and Restricted Stock Units [Member] | 2008 Equity Incentive Plan [Member] | Director, Group 2 [Member]
Summary of nonvested stock awards granted
Grantee Type		Director
No. of Shares Granted (shares) | shares		17,092
Vesting Period		3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 3.99
Restricted Stock and Restricted Stock Units [Member] | 2008 Equity Incentive Plan [Member] | Employee [Member]
Summary of nonvested stock awards granted
Grantee Type		Employee group (1)
No. of Shares Granted (shares) | shares		1,325,000	120,000
Vesting Period		2 years	3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 4.00	$ 6.36
Number of executive officers, granted stock awards | executive_officer	8	8
Restricted Stock and Restricted Stock Units [Member] | 2008 Equity Incentive Plan [Member] | Employee inducement [Member]
Summary of nonvested stock awards granted
Grantee Type		Employee inducements (2)
No. of Shares Granted (shares) | shares		10,000
Vesting Period		3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 5.29
Number of employees, granted stock awards | employee		2

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) of PRGX Global, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Except as otherwise indicated or unless the context otherwise requires, “PRGX,” “we,” “us,” “our” and the “Company” refer to PRGX Global, Inc. and its subsidiaries. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2014.

New Accounting Standards

A summary of the new accounting standards issued by the Financial Accounting Standards Board (“FASB”) and included in the Accounting Standards Codification (“ASC”) that apply to PRGX is set forth below:

FASB ASC Update No. 2015-03. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”). ASU 2015-03 simplifies presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual periods beginning after December 15, 2015 with early adoption permitted. The guidance also requires retrospective application to all prior periods presented. We are currently evaluating the impact of ASU 2015-03 on our consolidated financial statements.

FASB ASC Update No. 2014-15. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and related disclosure requirements. ASU 2014-15 is effective for annual periods beginning after December 15, 2016 with early adoption permitted. We do not expect the adoption of ASU 2014-15 to have a material impact on our consolidated financial statements.

FASB ASC Update No. 2014-09. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange for those goods or services. ASU 2014-09 allows for adoption using either of two methods; retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of application recognized at the date of initial adoption. It is effective for annual periods beginning after December 15, 2016. Early adoption is not permitted. On July 9, 2015, the FASB voted to approve a one-year deferral of the effective date of ASU 2014-09. The FASB expects to issue its final ASU formally amending the effective date by the end of the third quarter of 2015. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements.

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
Net income (loss)	$ 1,097	$ (1,468)	$ (1,861)	$ (5,142)
Foreign currency translation adjustments	183	577	152	507
Comprehensive income (loss)	$ 1,280	$ (891)	$ (1,709)	$ (4,635)

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Standards

New Accounting Standards

A summary of the new accounting standards issued by the Financial Accounting Standards Board (“FASB”) and included in the Accounting Standards Codification (“ASC”) that apply to PRGX is set forth below:

FASB ASC Update No. 2015-03. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”). ASU 2015-03 simplifies presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual periods beginning after December 15, 2015 with early adoption permitted. The guidance also requires retrospective application to all prior periods presented. We are currently evaluating the impact of ASU 2015-03 on our consolidated financial statements.

FASB ASC Update No. 2014-15. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and related disclosure requirements. ASU 2014-15 is effective for annual periods beginning after December 15, 2016 with early adoption permitted. We do not expect the adoption of ASU 2014-15 to have a material impact on our consolidated financial statements.

FASB ASC Update No. 2014-09. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange for those goods or services. ASU 2014-09 allows for adoption using either of two methods; retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of application recognized at the date of initial adoption. It is effective for annual periods beginning after December 15, 2016. Early adoption is not permitted. On July 9, 2015, the FASB voted to approve a one-year deferral of the effective date of ASU 2014-09. The FASB expects to issue its final ASU formally amending the effective date by the end of the third quarter of 2015. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 05, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	PRGX GLOBAL, INC.
Entity Central Index Key	0001007330
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		24,115,152

XML

Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Computations of basic and diluted earnings (loss) per common share

The following tables set forth the computations of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2015 and 2014 (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
Basic earnings (loss) per common share:	2015		2014			2015			2014
Numerator:
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Denominator:
Weighted-average common shares outstanding	26,497		29,733			26,446			29,945
Basic earnings (loss) per common share	$	0.04	$	(0.05	)	$	(0.07	)	$	(0.17	)

	Three Months Ended June 30,					Six Months Ended June 30,
Diluted earnings (loss) per common share:	2015		2014			2015			2014
Numerator:
Net income (loss)	$	1,097	$	(1,468	)	$	(1,861	)	$	(5,142	)
Denominator:
Weighted-average common shares outstanding	26,497		29,733			26,446			29,945
Incremental shares from stock-based compensation plans	56		—			—			—
Denominator for diluted earnings (loss) per common share	26,553		29,733			26,446			29,945
Diluted earnings (loss) per common share	$	0.04	$	(0.05	)	$	(0.07	)	$	(0.17	)

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents (Note E)	$ 19,682	$ 25,735
Restricted cash	162	53
Contract receivables, less allowances of $1,984 in 2015 and $2,243 in 2014:
Billed	26,845	32,373
Unbilled	1,690	2,809
Receivables Net	28,535	35,182
Employee advances and miscellaneous receivables, less allowances of $782 in 2015 and $692 in 2014	1,630	1,993
Total receivables	30,165	37,175
Prepaid expenses and other current assets	4,252	3,421
Total current assets	54,261	66,384
Property and equipment	57,861	56,174
Less accumulated depreciation and amortization	(46,096)	(43,954)
Property and equipment, net	11,765	12,220
Goodwill	13,043	13,036
Intangible assets, less accumulated amortization of $35,560 in 2015 and $33,973 in 2014	7,932	9,439
Noncurrent portion of unbilled receivables	825	1,196
Other assets	561	507
Total assets	88,387	102,782
Current liabilities:
Accounts payable and accrued expenses	7,130	7,397
Accrued payroll and related expenses	11,508	15,415
Refund liabilities	5,080	5,393
Deferred revenue	1,821	2,173
Other current liabilities	282	0
Total current liabilities	25,821	30,378
Noncurrent refund liabilities	726	857
Other long-term liabilities	531	561
Total liabilities	$ 27,078	$ 31,796
Commitments and contingencies (Note H)
Shareholders’ equity (Note B):
Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares; 24,615,200 shares issued and outstanding at June 30, 2015 and 26,762,861 shares issued and outstanding at December 31, 2014	$ 246	$ 268
Additional paid-in capital	582,121	590,067
Accumulated deficit	(522,773)	(520,912)
Accumulated other comprehensive income	1,715	1,563
Total shareholders’ equity	61,309	70,986
Total liabilities and shareholders' equity	$ 88,387	$ 102,782

XML

Debt

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Debt

Debt

On January 19, 2010, we entered into a four-year revolving credit and term loan agreement (the “2010 Credit Agreement”) with SunTrust Bank (“SunTrust”). Subsequent modifications of the 2010 Credit Agreement were entered into with SunTrust. Most recently, on December 23, 2014, we entered into an amended and restated revolving credit agreement (the “Credit Facility”) with SunTrust. The Credit Facility, and provisions of the 2010 Credit Agreement where applicable, is guaranteed by the Company and all of its material domestic subsidiaries and secured by substantially all of the assets of the Company.

The amount available for borrowing under the Credit Facility is $20.0 million, and as of June 30, 2015 we had no outstanding borrowings. With the Credit Facility provision of a fixed applicable margin of 1.75% plus a specified index rate based on one-month LIBOR, the interest rate that would have applied at June 30, 2015 had any borrowings been outstanding was approximately 1.93%. We also must pay a commitment fee of 0.25% per annum, payable quarterly, on the unused portion of the Credit Facility.

The Credit Facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports, maintenance of existence, and transactions with affiliates. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets or declare or pay dividends on its capital stock. The financial covenants included in the Credit Facility, among other things, limit the amount of capital expenditures the Company can make, set forth maximum leverage and net funded debt ratios for the Company and a minimum fixed charge coverage ratio, and also require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the Credit Facility includes customary events of default. The Company was in compliance with the covenants in its Credit Facility as of June 30, 2015.

XML

Cash and Cash Equivalents

6 Months Ended

Jun. 30, 2015

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less from date of purchase. We place our temporary cash investments with high credit quality financial institutions. At times, certain investments may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit or otherwise may not be covered by FDIC insurance. Some of our cash and cash equivalents are held at banks in jurisdictions outside the U.S. that have restrictions on transferring such assets outside of these countries on a temporary or permanent basis. Such restricted net assets are not significant in comparison to our consolidated net assets.

Our cash and cash equivalents included short-term investments of approximately $3.3 million as of June 30, 2015 and $12.2 million as of December 31, 2014, of which approximately $1.7 million and $2.5 million, respectively, were held at banks outside of the United States, primarily in Brazil and Canada.

XML

Stock-Based Compensation (Options) (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015 employee $ / shares shares	Jun. 30, 2014 $ / shares shares
Employee [Member]
Summary of stock option grants
Vesting Period	3 years
2008 Equity Incentive Plan [Member] | Director [Member]
Summary of stock option grants
Grantee Type		Director
No. of Options Granted (shares) | shares		249,273	51,276
Vesting Period		1 year or less	1 year or less
Weighted Average Exercise Price (usd per share)		$ 4.49	$ 6.45
Weighted Average Grant Date Fair Value (usd per share)		$ 2.44	$ 1.89
2008 Equity Incentive Plan [Member] | Director, Group 2 [Member]
Summary of stock option grants
Grantee Type		Director
No. of Options Granted (shares) | shares		17,092
Vesting Period		3 years
Weighted Average Exercise Price (usd per share)		$ 3.99
Weighted Average Grant Date Fair Value (usd per share)		$ 1.33
2008 Equity Incentive Plan [Member] | Employee inducement [Member]
Summary of stock option grants
Grantee Type		Employee inducements (1)
No. of Options Granted (shares) | shares		135,000
Vesting Period		3 years
Weighted Average Exercise Price (usd per share)		$ 5.51
Weighted Average Grant Date Fair Value (usd per share)		$ 1.42
2008 Equity Incentive Plan [Member] | Employee [Member]
Summary of stock option grants
No. of Options Granted (shares) | shares			1,480,000
Vesting Period			3 years
Weighted Average Exercise Price (usd per share)			$ 6.99
Weighted Average Grant Date Fair Value (usd per share)			1.81
Number of employees, granted stock awards | employee		3
2008 Equity Incentive Plan [Member] | Employee [Member] | Vesting Date, June 27, 2015 [Member]
Summary of stock option grants
Weighted Average Exercise Price (usd per share)			6.36
2008 Equity Incentive Plan [Member] | Employee [Member] | Vesting Date, June 27, 2016 [Member]
Summary of stock option grants
Weighted Average Exercise Price (usd per share)			6.99
2008 Equity Incentive Plan [Member] | Employee [Member] | Vesting Date, June 27, 2017 [Member]
Summary of stock option grants
Weighted Average Exercise Price (usd per share)			$ 7.63

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock option grants

The following table summarizes stock option grants during the six months ended June 30, 2015 and 2014:

Grantee Type	# of Options Granted	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
2015
Director	249,273	1 year or less	$	4.49	$	2.44
Director	17,092	3 years	$	3.99	$	1.33
Employee inducements (1)	135,000	3 years	$	5.51	$	1.42
2014
Director	51,276	1 year or less	$	6.45	$	1.89
Employee group (2)	1,480,000	3 years	$	6.99	$	1.81

(1) The Company granted non-qualified stock options outside its existing stock-based compensation plans in the first six months of 2015 to three employees in connection with the employees joining the Company.

Summary of nonvested stock awards granted

The following table summarizes nonvested stock awards granted during the six months ended June 30, 2015 and 2014:

Grantee Type	# of Shares Granted	Vesting Period	Weighted Average Grant Date Fair Value
2015
Director	4,273	1 year or less	$	4.02
Director	17,092	3 years	$	3.99
Employee group (1)	1,325,000	2 years	$	4.00
Employee inducements (2)	10,000	3 years	$	5.29
2014
Director group	51,276	1 year or less	$	6.45
Employee group	120,000	3 years	$	6.36

(1) The Company granted nonvested performance-based stock awards (restricted stock units) in the first quarter of 2015 to eight executive officers.

(2) The Company granted nonvested stock awards (restricted stock) outside its existing stock-based compensation plans in the first quarter of 2015 to two employees in connection with the employees joining the Company.

XML

Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Reported income tax expense in each period primarily results from taxes on the income of foreign subsidiaries. The effective tax rates generally differ from the expected tax rate due primarily to the Company’s deferred tax asset valuation allowance on the domestic earnings and taxes on income of foreign subsidiaries.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service in the U.S. and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

We apply a “more-likely-than-not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We refer to GAAP for guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with FASB ASC 740, our policy for recording interest and penalties associated with tax positions is to record such items as a component of income before income taxes. A number of years may elapse before a particular tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments also varies by tax jurisdiction.

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

We state cash equivalents at cost, which approximates fair market value. The carrying values for receivables from clients, unbilled services, accounts payable, deferred revenue and other accrued liabilities reasonably approximate fair market value due to the nature of the financial instrument and the short term maturity of these items.

We had no debt outstanding as of June 30, 2015 and December 31, 2014. We consider the factors used in determining the fair value of debt to be Level 3 inputs (significant unobservable inputs).

We had no business acquisition obligations as of June 30, 2015 and December 31, 2014. We determine the estimated fair values of business acquisition obligations based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment to be made. The discount rate that we use to value the liability is based on specific business risk, cost of capital, and other factors. We consider these factors to be Level 3 inputs (significant unobservable inputs).

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings

We are party to a variety of legal proceedings arising in the normal course of business. While the results of these proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

None.

XML

Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net income (loss)	$ 1,097	$ (1,468)	$ (1,861)	$ (5,142)
Denominator:
Weighted-average common shares outstanding (shares)	26,497	29,733	26,446	29,945
Basic earnings (loss) per common share (usd per share)	$ 0.04	$ (0.05)	$ (0.07)	$ (0.17)
Numerator:
Net income (loss)	$ 1,097	$ (1,468)	$ (1,861)	$ (5,142)
Denominator:
Weighted-average common shares outstanding (shares)	26,497	29,733	26,446	29,945
Incremental shares from stock-based compensation plans (shares)	56	0	0	0
Denominator for diluted earnings (loss) per common share (shares)	26,553	29,733	26,446	29,945
Diluted earnings (loss) per common share (usd per share)	$ 0.04	$ (0.05)	$ (0.07)	$ (0.17)

XML

Operating Segments and Related Information (Details Textual)	6 Months Ended
	Jun. 30, 2015 segment
Segment Reporting [Abstract]
Number of reportable segments	4

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Allowances for contract receivables	$ 1,984	$ 2,243
Allowances for employee advances and miscellaneous receivables	782	692
Accumulated amortization on intangible assets	$ 35,560	$ 33,973
Common stock, par value (usd per share)	$ 0	$ 0
Common stock, stated value per share (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	50,000,000	50,000,000
Common stock, shares issued (shares)	24,615,200	26,762,861
Common stock, shares outstanding (shares)	24,615,200	26,762,861

XML

Operating Segments and Related Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Operating Segments and Related Information

Operating Segments and Related Information

We 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 represents data transformation, data analytics and associated 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 six months ended June 30, 2015 and 2014 (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 June 30, 2015
Revenue	$	25,350		$	9,950		$	1,695		$	294		$	—		$	37,289
Net income (loss)																$	1,097
Income tax expense																296
Interest expense (income), net																(53		)
EBIT	$	6,505		$	1,796		$	(1,041	)	$	(727	)	$	(5,193	)	1,340
Depreciation of property and equipment	979			153			162			10			—			1,304
Amortization of intangible assets	441			280			33			—			—			754
EBITDA	7,925			2,229			(846		)	(717		)	(5,193		)	3,398
Foreign currency transaction (gains) losses on short-term intercompany balances	(179		)	(246		)	1			—			8			(416		)
Transformation severance and related expenses	108			203			14			211			26			562
Stock-based compensation	—			—			—			—			2,017			2,017
Adjusted EBITDA	$	7,854		$	2,186		$	(831	)	$	(506	)	$	(3,142	)	$	5,561

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Three Months Ended June 30, 2014
Revenue	$	27,029		$	12,382		$	2,281		$	289		$	—		$	41,981
Net loss																$	(1,468	)
Income tax expense																186
Interest expense (income), net																(43		)
EBIT	$	5,393		$	1,359		$	(1,768	)	$	(1,646	)	$	(4,663	)	(1,325		)
Depreciation of property and equipment	1,245			149			158			34			—			1,586
Amortization of intangible assets	501			305			96			—			—			902
EBITDA	7,139			1,813			(1,514		)	(1,612		)	(4,663		)	1,163
Foreign currency transaction (gains) losses on short-term intercompany balances	(154		)	(40		)	—			—			31			(163		)
Acquisition-related charges (benefits)	—			—			230			—			—			230
Transformation severance and related expenses	458			483			235			250			128			1,554
Stock-based compensation	—			—			—			—			983			983
Adjusted EBITDA	$	7,443		$	2,256		$	(1,049	)	$	(1,362	)	$	(3,521	)	$	3,767

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Six Months Ended June 30, 2015
Revenue	$	47,767	$	19,255	$	2,958		$	441		$	—		$	70,421
Net loss														$	(1,861	)
Income tax expense														751
Interest expense (income), net														(95		)
EBIT	$	10,583	$	1,354	$	(1,926	)	$	(1,429	)	$	(9,787	)	(1,205		)
Depreciation of property and equipment	1,948		306		319			23			—			2,596
Amortization of intangible assets	882		553		65			—			—			1,500
EBITDA	13,413		2,213		(1,542		)	(1,406		)	(9,787		)	2,891
Foreign currency transaction (gains) losses on short-term intercompany balances	258		1,072		1			—			(55		)	1,276
Transformation severance and related expenses	164		268		30			211			35			708
Stock-based compensation	—		—		—			—			3,149			3,149
Adjusted EBITDA	$	13,835	$	3,553	$	(1,511	)	$	(1,195	)	$	(6,658	)	$	8,024

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Six Months Ended June 30, 2014
Revenue	$	51,827		$	22,084		$	4,564		$	1,407		$	—		$	79,882
Net loss																$	(5,142	)
Income tax expense																299
Interest expense (income), net																11
EBIT	$	9,477		$	1,460		$	(3,342	)	$	(3,652	)	$	(8,775	)	(4,832		)
Depreciation of property and equipment	2,501			295			318			154			—			3,268
Amortization of intangible assets	1,001			612			192			—			—			1,805
EBITDA	12,979			2,367			(2,832		)	(3,498		)	(8,775		)	241
Foreign currency transaction (gains) losses on short-term intercompany balances	(44		)	(113		)	—			—			9			(148		)
Acquisition-related charges (benefits)	—			—			249			—			—			249
Transformation severance and related expenses	466			562			378			405			128			1,939
Stock-based compensation	—			—			—			—			2,004			2,004
Adjusted EBITDA	$	13,401		$	2,816		$	(2,205	)	$	(3,093	)	$	(6,634	)	$	4,285

XML

Operating Segments and Related Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Revenue	$ 37,289	$ 41,981	$ 70,421	$ 79,882
Net income (loss)	1,097	(1,468)	(1,861)	(5,142)
Income tax expense	296	186	751	299
Interest expense (income), net	(53)	(43)	(95)	11
EBIT	1,340	(1,325)	(1,205)	(4,832)
Depreciation of property and equipment	1,304	1,586	2,596	3,268
Amortization of intangible assets	754	902	1,500	1,805
EBITDA	3,398	1,163	2,891	241
Foreign currency transaction (gains) losses on short-term intercompany balances	(416)	(163)	1,276	(148)
Acquisition-related charges (benefits)		230		249
Transformation severance and related expenses	562	1,554	708	1,939
Stock-based compensation	2,017	983	3,149	2,004
Adjusted EBITDA	5,561	3,767	8,024	4,285
Recovery Audit Services - Americas [Member]
Segment Reporting Information [Line Items]
Revenue	25,350	27,029	47,767	51,827
EBIT	6,505	5,393	10,583	9,477
Depreciation of property and equipment	979	1,245	1,948	2,501
Amortization of intangible assets	441	501	882	1,001
EBITDA	7,925	7,139	13,413	12,979
Foreign currency transaction (gains) losses on short-term intercompany balances	(179)	(154)	258	(44)
Acquisition-related charges (benefits)		0		0
Transformation severance and related expenses	108	458	164	466
Adjusted EBITDA	7,854	7,443	13,835	13,401
Recovery Audit Services - Europe/Asia-Pacific [Member]
Segment Reporting Information [Line Items]
Revenue	9,950	12,382	19,255	22,084
EBIT	1,796	1,359	1,354	1,460
Depreciation of property and equipment	153	149	306	295
Amortization of intangible assets	280	305	553	612
EBITDA	2,229	1,813	2,213	2,367
Foreign currency transaction (gains) losses on short-term intercompany balances	(246)	(40)	1,072	(113)
Acquisition-related charges (benefits)		0		0
Transformation severance and related expenses	203	483	268	562
Adjusted EBITDA	2,186	2,256	3,553	2,816
Adjacent Services [Member]
Segment Reporting Information [Line Items]
Revenue	1,695	2,281	2,958	4,564
EBIT	(1,041)	(1,768)	(1,926)	(3,342)
Depreciation of property and equipment	162	158	319	318
Amortization of intangible assets	33	96	65	192
EBITDA	(846)	(1,514)	(1,542)	(2,832)
Foreign currency transaction (gains) losses on short-term intercompany balances	1		1
Acquisition-related charges (benefits)		230		249
Transformation severance and related expenses	14	235	30	378
Adjusted EBITDA	(831)	(1,049)	(1,511)	(2,205)
Healthcare Claims Recovery Audit Services [Member]
Segment Reporting Information [Line Items]
Revenue	294	289	441	1,407
EBIT	(727)	(1,646)	(1,429)	(3,652)
Depreciation of property and equipment	10	34	23	154
EBITDA	(717)	(1,612)	(1,406)	(3,498)
Transformation severance and related expenses	211	250	211	405
Adjusted EBITDA	(506)	(1,362)	(1,195)	(3,093)
Corporate Segment [Member]
Segment Reporting Information [Line Items]
EBIT	(5,193)	(4,663)	(9,787)	(8,775)
EBITDA	(5,193)	(4,663)	(9,787)	(8,775)
Foreign currency transaction (gains) losses on short-term intercompany balances	8	31	(55)	9
Transformation severance and related expenses	26	128	35	128
Stock-based compensation	2,017	983	3,149	2,004
Adjusted EBITDA	$ (3,142)	$ (3,521)	$ (6,658)	$ (6,634)

XML

Operating Segments and Related Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment information

Segment information for the three and six months ended June 30, 2015 and 2014 (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 June 30, 2015
Revenue	$	25,350		$	9,950		$	1,695		$	294		$	—		$	37,289
Net income (loss)																$	1,097
Income tax expense																296
Interest expense (income), net																(53		)
EBIT	$	6,505		$	1,796		$	(1,041	)	$	(727	)	$	(5,193	)	1,340
Depreciation of property and equipment	979			153			162			10			—			1,304
Amortization of intangible assets	441			280			33			—			—			754
EBITDA	7,925			2,229			(846		)	(717		)	(5,193		)	3,398
Foreign currency transaction (gains) losses on short-term intercompany balances	(179		)	(246		)	1			—			8			(416		)
Transformation severance and related expenses	108			203			14			211			26			562
Stock-based compensation	—			—			—			—			2,017			2,017
Adjusted EBITDA	$	7,854		$	2,186		$	(831	)	$	(506	)	$	(3,142	)	$	5,561

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Three Months Ended June 30, 2014
Revenue	$	27,029		$	12,382		$	2,281		$	289		$	—		$	41,981
Net loss																$	(1,468	)
Income tax expense																186
Interest expense (income), net																(43		)
EBIT	$	5,393		$	1,359		$	(1,768	)	$	(1,646	)	$	(4,663	)	(1,325		)
Depreciation of property and equipment	1,245			149			158			34			—			1,586
Amortization of intangible assets	501			305			96			—			—			902
EBITDA	7,139			1,813			(1,514		)	(1,612		)	(4,663		)	1,163
Foreign currency transaction (gains) losses on short-term intercompany balances	(154		)	(40		)	—			—			31			(163		)
Acquisition-related charges (benefits)	—			—			230			—			—			230
Transformation severance and related expenses	458			483			235			250			128			1,554
Stock-based compensation	—			—			—			—			983			983
Adjusted EBITDA	$	7,443		$	2,256		$	(1,049	)	$	(1,362	)	$	(3,521	)	$	3,767

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Six Months Ended June 30, 2015
Revenue	$	47,767	$	19,255	$	2,958		$	441		$	—		$	70,421
Net loss														$	(1,861	)
Income tax expense														751
Interest expense (income), net														(95		)
EBIT	$	10,583	$	1,354	$	(1,926	)	$	(1,429	)	$	(9,787	)	(1,205		)
Depreciation of property and equipment	1,948		306		319			23			—			2,596
Amortization of intangible assets	882		553		65			—			—			1,500
EBITDA	13,413		2,213		(1,542		)	(1,406		)	(9,787		)	2,891
Foreign currency transaction (gains) losses on short-term intercompany balances	258		1,072		1			—			(55		)	1,276
Transformation severance and related expenses	164		268		30			211			35			708
Stock-based compensation	—		—		—			—			3,149			3,149
Adjusted EBITDA	$	13,835	$	3,553	$	(1,511	)	$	(1,195	)	$	(6,658	)	$	8,024

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
Six Months Ended June 30, 2014
Revenue	$	51,827		$	22,084		$	4,564		$	1,407		$	—		$	79,882
Net loss																$	(5,142	)
Income tax expense																299
Interest expense (income), net																11
EBIT	$	9,477		$	1,460		$	(3,342	)	$	(3,652	)	$	(8,775	)	(4,832		)
Depreciation of property and equipment	2,501			295			318			154			—			3,268
Amortization of intangible assets	1,001			612			192			—			—			1,805
EBITDA	12,979			2,367			(2,832		)	(3,498		)	(8,775		)	241
Foreign currency transaction (gains) losses on short-term intercompany balances	(44		)	(113		)	—			—			9			(148		)
Acquisition-related charges (benefits)	—			—			249			—			—			249
Transformation severance and related expenses	466			562			378			405			128			1,939
Stock-based compensation	—			—			—			—			2,004			2,004
Adjusted EBITDA	$	13,401		$	2,816		$	(2,205	)	$	(3,093	)	$	(6,634	)	$	4,285