Operating Segments and Related Information

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Operating Segments and Related Information

Operating Segments and Related Information

We conduct our operations through the following three 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.

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

During the fourth quarter of 2015, PRGX entered into agreements with third parties to fulfill its Medicare recovery audit contractor ("RAC") program subcontract obligations to audit Medicare payments and provide support for claims appeals and assigned its remaining Medicaid contract to another party. The Company will continue to incur certain expenses while the current Medicare RAC contracts are still in effect. As a result, the Healthcare Claims Recovery Audit services business has been reported as Discontinued Operations in accordance with US GAAP.

Discontinued operations information for the three months ended June 30, 2016 and 2015 is as follows:

Results of Discontinued Operations
(in thousands)
	2016		2015
Revenue, net	(4	)	294
Cost of sales	451		809
Selling, general and administrative expense	100		202
Depreciation and amortization	4		10
Loss from discontinued operations before income taxes	(559	)	(727	)
Income tax expense	—		—
Net loss from discontinued operations	(559	)	(727	)

Discontinued operations information for the six months ended June 30, 2016 and 2015 is as follows:

Results of Discontinued Operations
(in thousands)
	2016		2015
Revenue, net	(15	)	441
Cost of sales	840		1,420
Selling, general and administrative expense	184		427
Depreciation and amortization	7		23
Loss from discontinued operations before income taxes	(1,046	)	(1,429	)
Income tax expense	—		—
Net loss from discontinued operations	(1,046	)	(1,429	)

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, 2016 and 2015 (in thousands) is as follows:

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
Three Months Ended June 30, 2016
Revenue	$	25,122	$	8,698	$	1,471		$	—		$	35,291
Net income (loss) from continuing operations											$	(33	)
Income tax expense											460
Interest expense (income), net											(12		)
EBIT	$	5,998	$	505	$	(488	)	$	(5,600	)	415
Depreciation of property and equipment	936		140		140			—			1,216
Amortization of intangible assets	373		—		22			—			395
EBITDA	7,307		645		(326		)	(5,600		)	2,026
Other expense (income)					18						18
Foreign currency transaction (gains) losses on short-term intercompany balances	30		185		7			(26		)	196
Transformation severance and related expenses	276		25		—			(76		)	225
Stock-based compensation	—		—		—			1,035			1,035
Adjusted EBITDA	$	7,613	$	855	$	(301	)	$	(4,667	)	$	3,500

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
Three Months Ended June 30, 2015
Revenue	$	25,350		$	9,950		$	1,695		$	—		$	36,995
Net income (loss) from continuing operations													$	1,824
Income tax expense													296
Interest expense (income), net													(53		)
EBIT	$	6,505		$	1,796		$	(1,041	)	$	(5,193	)	2,067
Depreciation of property and equipment	979			153			162			—			1,294
Amortization of intangible assets	441			280			33			—			754
EBITDA	7,925			2,229			(846		)	(5,193		)	4,115
Foreign currency transaction (gains) losses on short-term intercompany balances	(179		)	(246		)	1			8			(416		)
Transformation severance and related expenses	108			203			14			26			351
Stock-based compensation	—			—			—			2,017			2,017
Adjusted EBITDA	$	7,854		$	2,186		$	(831	)	$	(3,142	)	$	6,067

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
Six Months Ended June 30, 2016
Revenue	$	46,689		$	17,947		$	1,888		$	—		$	66,524
Net income (loss) from continuing operations													$	(98	)
Income tax expense													664
Interest expense (income), net													(41		)
EBIT	$	9,996		$	2,759		$	(1,574	)	$	(10,656	)	525
Depreciation of property and equipment	1,928			238			282			—			2,448
Amortization of intangible assets	745			—			44			—			789
EBITDA	12,669			2,997			(1,248		)	(10,656		)	3,762
Other expense (income)							28						28
Foreign currency transaction (gains) losses on short-term intercompany balances	(228		)	(561		)	6			(28		)	(811		)
Transformation severance and related expenses	420			96			—			243			759
Stock-based compensation	—			—			—			1,799			1,799
Adjusted EBITDA	$	12,861		$	2,532		$	(1,214	)	$	(8,642	)	$	5,537

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
Six Months Ended June 30, 2015
Revenue	$	47,767	$	19,255	$	2,958		$	—		$	69,980
Net income (loss) from continuing operations											$	(432	)
Income tax expense											751
Interest expense (income), net											(95		)
EBIT	$	10,583	$	1,354	$	(1,926	)	$	(9,787	)	224
Depreciation of property and equipment	1,948		306		319			—			2,573
Amortization of intangible assets	882		553		65			—			1,500
EBITDA	13,413		2,213		(1,542		)	(9,787		)	4,297
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			35			497
Stock-based compensation	—		—		—			3,149			3,149
Adjusted EBITDA	$	13,835	$	3,553	$	(1,511	)	$	(6,658	)	$	9,219