ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
¨ Large accelerated filer | ý | Accelerated filer | ||
¨ Non-accelerated filer (Do not check if a smaller reporting company) | ¨ | Smaller reporting company | ||
¨ | Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
Page No. | |
Part I. Financial Information | |
Part II. Other Information | |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | $ | 38,510 | $ | 35,291 | $ | 72,079 | $ | 66,524 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 25,605 | 23,431 | 48,631 | 45,077 | ||||||||||||
Selling, general and administrative expenses | 11,424 | 9,620 | 21,960 | 18,468 | ||||||||||||
Depreciation of property and equipment | 1,109 | 1,216 | 2,329 | 2,448 | ||||||||||||
Amortization of intangible assets | 722 | 395 | 1,444 | 789 | ||||||||||||
Total operating expenses | 38,860 | 34,662 | 74,364 | 66,782 | ||||||||||||
Operating income (loss) from continuing operations | (350 | ) | 629 | (2,285 | ) | (258 | ) | |||||||||
Foreign currency transaction losses (gains) on short-term intercompany balances | (957 | ) | 196 | (1,509 | ) | (811 | ) | |||||||||
Interest expense (income), net | 48 | (12 | ) | 85 | (41 | ) | ||||||||||
Other expense (income) | 5 | 18 | (194 | ) | 28 | |||||||||||
Income (loss) from continuing operations before income taxes | 554 | 427 | (667 | ) | 566 | |||||||||||
Income tax expense | 879 | 460 | 1,506 | 664 | ||||||||||||
Net loss from continuing operations | $ | (325 | ) | $ | (33 | ) | $ | (2,173 | ) | $ | (98 | ) | ||||
Discontinued operations (Note D): | ||||||||||||||||
Loss from discontinued operations | (349 | ) | (559 | ) | (685 | ) | (1,046 | ) | ||||||||
Other loss (income) | — | — | — | — | ||||||||||||
Income tax expense (benefit) | — | — | — | — | ||||||||||||
Net loss from discontinued operations | (349 | ) | (559 | ) | (685 | ) | (1,046 | ) | ||||||||
Net loss | $ | (674 | ) | $ | (592 | ) | $ | (2,858 | ) | $ | (1,144 | ) | ||||
Basic loss per common share (Note B): | ||||||||||||||||
Basic loss from continuing operations | $ | (0.01 | ) | $ | — | $ | (0.10 | ) | $ | — | ||||||
Basic loss from discontinued operations | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | ||||||||
Total basic loss per common share | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.13 | ) | $ | (0.05 | ) | ||||
Diluted loss per common share (Note B) | ||||||||||||||||
Diluted loss from continuing operations | $ | (0.01 | ) | $ | — | $ | (0.10 | ) | $ | — | ||||||
Diluted loss from discontinued operations | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | ||||||||
Total diluted loss per common share | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.13 | ) | $ | (0.05 | ) | ||||
Weighted-average common shares outstanding (Note B): | ||||||||||||||||
Basic | 22,227 | 21,969 | 22,087 | 22,202 | ||||||||||||
Diluted | 22,227 | 21,969 | 22,087 | 22,202 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss | $ | (674 | ) | $ | (592 | ) | $ | (2,858 | ) | $ | (1,144 | ) | ||||
Foreign currency translation adjustments | (569 | ) | (118 | ) | (294 | ) | (487 | ) | ||||||||
Comprehensive loss | $ | (1,243 | ) | $ | (710 | ) | $ | (3,152 | ) | $ | (1,631 | ) |
June 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,870 | $ | 15,723 | ||||
Restricted cash | 161 | 47 | ||||||
Receivables: | ||||||||
Contract receivables, less allowances of $1,071 in 2017 and $799 in 2016: | ||||||||
Billed | 30,081 | 29,186 | ||||||
Unbilled | 1,689 | 2,278 | ||||||
31,770 | 31,464 | |||||||
Employee advances and miscellaneous receivables, less allowances of $351 in 2017 and $500 in 2016 | 2,097 | 2,184 | ||||||
Total receivables | 33,867 | 33,648 | ||||||
Prepaid expenses and other current assets | 4,563 | 3,363 | ||||||
Total current assets | 51,461 | 52,781 | ||||||
Property and equipment | 68,256 | 63,325 | ||||||
Less accumulated depreciation and amortization | (53,880 | ) | (51,089 | ) | ||||
Property and equipment, net | 14,376 | 12,236 | ||||||
Goodwill | 22,803 | 13,823 | ||||||
Intangible assets, less accumulated amortization of $37,977 in 2017 and $36,128 in 2016 | 9,560 | 10,998 | ||||||
Noncurrent portion of unbilled receivables | 815 | 854 | ||||||
Deferred income taxes | 2,228 | 2,269 | ||||||
Other assets | 325 | 513 | ||||||
Total assets | $ | 101,568 | $ | 93,474 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 8,917 | $ | 7,299 | ||||
Accrued payroll and related expenses | 12,688 | 13,868 | ||||||
Refund liabilities | 7,615 | 7,900 | ||||||
Deferred revenue | 1,682 | 1,330 | ||||||
Current portion of debt (Note E) | — | 3,600 | ||||||
Business acquisition obligations | 2,079 | 2,078 | ||||||
Total current liabilities | 32,981 | 36,075 | ||||||
Long-term debt (Note E) | 13,600 | — | ||||||
Noncurrent refund liabilities | 714 | 804 | ||||||
Other long-term liabilities | 2,393 | 4,205 | ||||||
Total liabilities | 49,688 | 41,084 | ||||||
Commitments and contingencies (Note G) | ||||||||
Shareholders’ equity (Note B): | ||||||||
Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares; 22,394,990 shares issued and outstanding at June 30, 2017 and 21,845,920 shares issued and outstanding at December 31, 2016 | 224 | 218 | ||||||
Additional paid-in capital | 577,754 | 575,118 | ||||||
Accumulated deficit | (526,091 | ) | (523,233 | ) | ||||
Accumulated other comprehensive income (loss) | (7 | ) | 287 | |||||
Total shareholders’ equity | 51,880 | 52,390 | ||||||
Total liabilities and shareholders’ equity | $ | 101,568 | $ | 93,474 |
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (2,858 | ) | $ | (1,144 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,777 | 3,244 | ||||||
Amortization of deferred loan costs | 20 | — | ||||||
Stock-based compensation expense | 3,254 | 1,799 | ||||||
Loss on sale of fixed assets | — | 14 | ||||||
Deferred income taxes | — | (267 | ) | |||||
Foreign currency transaction (gains) losses on short-term intercompany balances | (1,509 | ) | (811 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Restricted cash | (114 | ) | (96 | ) | ||||
Billed receivables | 1,518 | 2,077 | ||||||
Unbilled receivables | 636 | 190 | ||||||
Prepaid expenses and other current assets | (850 | ) | (510 | ) | ||||
Other assets | 328 | (44 | ) | |||||
Accounts payable and accrued expenses | 2,270 | 1,105 | ||||||
Accrued payroll and related expenses | (1,988 | ) | (442 | ) | ||||
Refund liabilities | (377 | ) | 109 | |||||
Deferred revenue | 351 | 17 | ||||||
Other long-term liabilities | (3,182 | ) | 221 | |||||
Net cash provided by operating activities | 1,276 | 5,462 | ||||||
Cash flows from investing activities: | ||||||||
Business acquisition, net of cash acquired | (10,128 | ) | — | |||||
Purchases of property and equipment, net of disposal proceeds | (4,049 | ) | (2,138 | ) | ||||
Net cash used in investing activities | (14,177 | ) | (2,138 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from term loan | 10,000 | — | ||||||
Payment of deferred loan cost | (157 | ) | — | |||||
Restricted stock repurchased from employees for withholding taxes | (60 | ) | (143 | ) | ||||
Proceeds from option exercises | 821 | 132 | ||||||
Repurchase of common stock | — | (3,658 | ) | |||||
Net cash provided by (used in) financing activities | 10,604 | (3,669 | ) | |||||
Effect of exchange rates on cash and cash equivalents | (556 | ) | 397 | |||||
Net (decrease) increase in cash and cash equivalents | (2,853 | ) | 52 | |||||
Cash and cash equivalents at beginning of period | 15,723 | 15,122 | ||||||
Cash and cash equivalents at end of period | $ | 12,870 | $ | 15,174 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for interest | $ | 149 | $ | 15 | ||||
Cash paid during the period for income taxes, net of refunds received | $ | 731 | $ | 385 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Basic earnings (loss) per common share: | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | ||||||||||||||||
Net loss from continuing operations | $ | (325 | ) | $ | (33 | ) | $ | (2,173 | ) | $ | (98 | ) | ||||
Net loss from discontinued operations | $ | (349 | ) | $ | (559 | ) | $ | (685 | ) | $ | (1,046 | ) | ||||
Denominator: | ||||||||||||||||
Weighted-average common shares outstanding | 22,227 | 21,969 | 22,087 | 22,202 | ||||||||||||
Basic loss per common share from continuing operations | $ | (0.01 | ) | $ | — | $ | (0.10 | ) | $ | — | ||||||
Basic loss per common share from discontinued operations | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.05 | ) | ||||
Total basic loss per common share | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.13 | ) | $ | (0.05 | ) |
Options | Shares | Weighted- Average Exercise Price (Per Share) | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value ($ 000’s) | |||||||||
Outstanding at January 1, 2017 | 3,420,385 | $ | 6.26 | 4.3 years | $ | 1,204 | |||||||
Granted(1) | 445,566 | 6.20 | |||||||||||
Exercised | (167,460 | ) | 4.90 | $ | 239 | ||||||||
Forfeited | (373,004 | ) | 6.36 | ||||||||||
Expired | (34,273 | ) | 4.39 | ||||||||||
Outstanding at June 30, 2017 | 3,291,214 | $ | 6.33 | 4.6 years | $ | 1,519 | |||||||
Exercisable at June 30, 2017 | 2,602,893 | $ | 6.49 | 3.7 years | $ | 981 |
Nonvested stock | Shares | Weighted Average Grant Date Fair Value (Per Share) | |||||
Nonvested at January 1, 2017 | 3,893,050 | $ | 4.37 | ||||
Granted(1) | 792,930 | 6.32 | |||||
Vested | (28,334 | ) | 6.36 | ||||
Forfeited | (2,364,728 | ) | 4.03 | ||||
Nonvested at June 30, 2017 | 2,292,918 | $ | 5.36 |
Results of Discontinued Operations | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenue, net | $ | — | $ | (4 | ) | $ | — | $ | (15 | ) | |||||
Cost of sales | 342 | 451 | 676 | 840 | |||||||||||
Selling, general and administrative expense | 5 | 100 | 5 | 184 | |||||||||||
Depreciation and amortization | 2 | 4 | 4 | 7 | |||||||||||
Loss from discontinued operations before income taxes | $ | (349 | ) | $ | (559 | ) | $ | (685 | ) | $ | (1,046 | ) | |||
Income tax expense | — | — | — | — | |||||||||||
Net loss from discontinued operations | $ | (349 | ) | $ | (559 | ) | $ | (685 | ) | $ | (1,046 | ) |
Recovery Audit Services – Americas | Recovery Audit Services – Europe/Asia- Pacific | Adjacent Services | Corporate Support | Total | ||||||||||||||||
Three Months Ended June 30, 2017 | ||||||||||||||||||||
Revenue | $ | 26,553 | $ | 10,773 | $ | 1,184 | $ | — | $ | 38,510 | ||||||||||
Net loss from continuing operations | (325 | ) | ||||||||||||||||||
Income tax expense | 879 | |||||||||||||||||||
Interest expense (income), net | 48 | |||||||||||||||||||
EBIT | $ | 5,586 | $ | 3,057 | $ | (1,913 | ) | $ | (6,128 | ) | $ | 602 | ||||||||
Depreciation of property and equipment | 779 | 152 | 178 | — | 1,109 | |||||||||||||||
Amortization of intangible assets | 328 | — | 394 | — | 722 | |||||||||||||||
EBITDA | $ | 6,693 | $ | 3,209 | $ | (1,341 | ) | $ | (6,128 | ) | $ | 2,433 | ||||||||
Other expense (income) | — | — | 5 | — | 5 | |||||||||||||||
Foreign currency transaction (gains) losses on short-term intercompany balances | (78 | ) | (937 | ) | (2 | ) | 60 | (957 | ) | |||||||||||
Transformation severance and related expenses | 187 | 82 | 45 | 1 | 315 | |||||||||||||||
Stock-based compensation | — | — | — | 1,688 | 1,688 | |||||||||||||||
Adjusted EBITDA | $ | 6,802 | $ | 2,354 | $ | (1,293 | ) | $ | (4,379 | ) | $ | 3,484 |
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 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 | ||||||||||||||||
Six Months Ended June 30, 2017 | ||||||||||||||||||||
Revenue | $ | 50,936 | $ | 18,604 | $ | 2,539 | $ | — | $ | 72,079 | ||||||||||
Net loss from continuing operations | (2,173 | ) | ||||||||||||||||||
Income tax expense | 1,506 | |||||||||||||||||||
Interest expense (income), net | 85 | |||||||||||||||||||
EBIT | $ | 11,571 | $ | 3,466 | $ | (3,655 | ) | $ | (11,964 | ) | $ | (582 | ) | |||||||
Depreciation of property and equipment | 1,689 | 292 | 348 | — | 2,329 | |||||||||||||||
Amortization of intangible assets | 657 | — | 787 | — | 1,444 | |||||||||||||||
EBITDA | $ | 13,917 | $ | 3,758 | $ | (2,520 | ) | $ | (11,964 | ) | $ | 3,191 | ||||||||
Other expense (income) | (193 | ) | (1 | ) | (194 | ) | ||||||||||||||
Foreign currency transaction (gains) losses on short-term intercompany balances | (241 | ) | (1,189 | ) | (4 | ) | (75 | ) | (1,509 | ) | ||||||||||
Transformation severance and related expenses | 264 | 221 | 45 | 369 | 899 | |||||||||||||||
Stock-based compensation | — | — | — | 3,254 | 3,254 | |||||||||||||||
Adjusted EBITDA | $ | 13,940 | $ | 2,790 | $ | (2,672 | ) | $ | (8,417 | ) | $ | 5,641 |
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 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 |
Pricing Level | Leverage Ratio | Applicable Margin for LIBOR Index Rate Loans | Applicable Margin for Base Rate Loans | Applicable Percentage for Commitment Fee |
I | Less than 1.25:1.00 | 2.25% per annum | 1.25% per annum | 0.250% per annum |
II | Greater than or equal to 1.25:1.00 but less than 1.75:1.00 | 2.50% per annum | 1.50% per annum | 0.375% per annum |
III | Greater than or equal to 1.75:1.00 | 2.75% per annum | 1.75% per annum | 0.375% per annum |
Accounts receivable, net | $ | 1,611 | ||
Unbilled revenue | 8 | |||
Commissions receivable | 48 | |||
Prepaid expenses | 78 | |||
Goodwill | 8,801 | |||
Net fixed assets | 323 | |||
Other current assets | 12 | |||
Total assets | 10,881 | |||
Accounts payable | 342 | |||
Accrued commissions | 507 | |||
Taxes payable | 44 | |||
Total liabilities | 893 | |||
Total purchase price | $ | 9,988 |
Revenue (in thousands) | $ | 4,650 | ||
Earnings from operations (in thousands) | $ | 1,242 |
Six months ended | ||||||||
June 30, 2017 | June 30, 2016 | |||||||
Revenue from continuing operations (pro forma) | $ | 72,918 | $ | 73,919 | ||||
Income (loss) from continuing operations (pro forma) | $ | (2,843 | ) | $ | 1,145 |
Cash and cash equivalents | $ | 28 | ||
Account receivables | 207 | |||
Other current assets | 92 | |||
Goodwill | 2,286 | |||
Intangible assets | 6,178 | |||
Fixed assets | 98 | |||
Total assets | 8,889 | |||
Accounts payable | 121 | |||
Deferred revenue | 370 | |||
Other current liabilities | 757 | |||
Total liabilities | 1,248 | |||
Total purchase price | $ | 3,809 |
Fair values at October 31, 2016 | Remaining useful lives (in months) | |||||
Trademarks | $ | 163 | 48 | |||
Patents | 114 | 12 | ||||
Software | 5,901 | 48 | ||||
Total intangible assets | $ | 6,178 |
Six months ended June 30, 2016 | ||||
Revenue from continuing operations (pro forma) | $ | 67,891 | ||
Loss from continuing operations (pro forma) | $ | (2,982 | ) |
• | Diverse client base - our clients include a diverse mix of discounters, grocery, online, 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 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. |
• | We already have the clients' spend data - we serve a large and impressive list of very large, multinational companies in our core recovery audit business, which requires access to and processing of these clients' detailed S2P data on a daily, weekly or at least periodic basis; |
• | We know the clients' spend data and underlying processes - the work we do in recovery audit requires that we fully understand our clients’ systems, buying practices, receiving and payment procedures, as well as their suppliers’ contracting, performance and billing practices; |
• | We take a different perspective in analyzing the clients' spend data - we look "horizontally" across our clients' processes and organizational structures versus "vertically", which is how most companies are organized and enterprise resource planning systems are designed; and |
• | Our contingent fee recovery audit value proposition minimizes our clients' cost of entry and truly aligns us with our clients. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Operating expenses: | ||||||||||||
Cost of revenue | 66.5 | 66.4 | 67.5 | 67.8 | ||||||||
Selling, general and administrative expenses | 29.7 | 27.3 | 30.5 | 27.8 | ||||||||
Depreciation of property and equipment | 2.9 | 3.4 | 3.2 | 3.7 | ||||||||
Amortization of intangible assets | 1.9 | 1.1 | 2.0 | 1.2 | ||||||||
Total operating expenses | 101.0 | 98.2 | 103.2 | 100.5 | ||||||||
Operating income (loss) | (1.0 | ) | 1.8 | (3.2 | ) | (0.5 | ) | |||||
Foreign currency transaction (gains) losses on short-term intercompany balances | (2.5 | ) | 0.6 | (2.1 | ) | (1.2 | ) | |||||
Interest expense (income), net | 0.1 | — | 0.1 | — | ||||||||
Other expense (income) | — | — | (0.3 | ) | — | |||||||
Income (loss) before income taxes | 1.4 | 1.2 | (0.9 | ) | 0.7 | |||||||
Income tax expense | 2.3 | 1.3 | 2.1 | 1.0 | ||||||||
Net loss | (0.8 | )% | (0.1 | )% | (3.0 | )% | (0.3 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Recovery Audit Services – Americas | $ | 26,553 | $ | 25,122 | $ | 50,936 | $ | 46,689 | ||||||||
Recovery Audit Services – Europe/Asia-Pacific | 10,773 | 8,698 | 18,604 | 17,947 | ||||||||||||
Adjacent Services | 1,184 | 1,471 | 2,539 | 1,888 | ||||||||||||
Total | $ | 38,510 | $ | 35,291 | $ | 72,079 | $ | 66,524 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Recovery Audit Services – Americas | $ | 17,324 | $ | 15,614 | $ | 32,602 | $ | 29,938 | ||||||||
Recovery Audit Services – Europe/Asia-Pacific | 6,717 | 6,261 | 12,903 | 12,373 | ||||||||||||
Adjacent Services | 1,564 | 1,556 | 3,126 | 2,766 | ||||||||||||
Total | $ | 25,605 | $ | 23,431 | $ | 48,631 | $ | 45,077 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Recovery Audit Services – Americas | $ | 2,615 | $ | 2,171 | $ | 4,658 | $ | 4,310 | ||||||||
Recovery Audit Services – Europe/Asia-Pacific | 1,786 | 1,608 | 3,133 | 3,138 | ||||||||||||
Adjacent Services | 959 | 216 | 2,130 | 336 | ||||||||||||
Subtotal for reportable segments | 5,360 | 3,995 | 9,921 | 7,784 | ||||||||||||
Corporate Support | 6,064 | 5,625 | 12,039 | 10,684 | ||||||||||||
Total | $ | 11,424 | $ | 9,620 | $ | 21,960 | $ | 18,468 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Recovery Audit Services – Americas | $ | 779 | $ | 936 | $ | 1,689 | $ | 1,928 | ||||||||
Recovery Audit Services – Europe/Asia-Pacific | 152 | 140 | 292 | 238 | ||||||||||||
Adjacent Services | 178 | 140 | 348 | 282 | ||||||||||||
Total | $ | 1,109 | $ | 1,216 | $ | 2,329 | $ | 2,448 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Recovery Audit Services – Americas | $ | 328 | $ | 373 | $ | 657 | $ | 745 | ||||||||
Recovery Audit Services – Europe/Asia-Pacific | — | — | — | — | ||||||||||||
Adjacent Services | 394 | 22 | 787 | 44 | ||||||||||||
Total | $ | 722 | $ | 395 | $ | 1,444 | $ | 789 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss | $ | (674 | ) | $ | (592 | ) | $ | (2,858 | ) | $ | (1,144 | ) | ||||
Income tax expense | 879 | 460 | 1,506 | 664 | ||||||||||||
Interest expense (income), net | 48 | (12 | ) | 85 | (41 | ) | ||||||||||
EBIT | 253 | (144 | ) | (1,267 | ) | (521 | ) | |||||||||
Depreciation of property and equipment | 1,113 | 1,219 | 2,333 | 2,455 | ||||||||||||
Amortization of intangible assets | 722 | 395 | 1,444 | 789 | ||||||||||||
EBITDA | 2,088 | 1,470 | 2,510 | 2,723 | ||||||||||||
Foreign currency transaction (gains) losses on short-term intercompany balances | (957 | ) | 196 | (1,509 | ) | (811 | ) | |||||||||
Transformation severance and related expenses | 314 | 557 | 899 | 1,095 | ||||||||||||
Other income (loss) | 5 | 18 | (194 | ) | 28 | |||||||||||
Stock-based compensation | 1,688 | 1,035 | 3,254 | 1,799 | ||||||||||||
Adjusted EBITDA | $ | 3,138 | $ | 3,276 | $ | 4,960 | $ | 4,834 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Recovery Audit Services – Americas | $ | 6,802 | $ | 7,613 | $ | 13,940 | $ | 12,861 | ||||||||
Recovery Audit Services – Europe/Asia-Pacific | 2,354 | 855 | 2,790 | 2,532 | ||||||||||||
Adjacent Services | (1,293 | ) | (301 | ) | (2,672 | ) | (1,214 | ) | ||||||||
Subtotal for reportable segments | 7,863 | 8,167 | 14,058 | 14,179 | ||||||||||||
Corporate Support | (4,379 | ) | (4,667 | ) | (8,417 | ) | (8,642 | ) | ||||||||
Total | $ | 3,484 | $ | 3,500 | $ | 5,641 | $ | 5,537 |
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Net loss | $ | (2,858 | ) | $ | (1,144 | ) | ||
Adjustments for certain non-cash items | 5,522 | 4,232 | ||||||
2,664 | 3,088 | |||||||
Changes in operating assets and liabilities | (1,388 | ) | 2,374 | |||||
Net cash provided by operating activities | $ | 1,276 | $ | 5,462 |
2017 | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||
(millions of dollars) | ||||||||||||||
April 1 - April 30 | $ | — | — | $ | — | |||||||||
May1 - May 31 | $ | — | — | $ | — | |||||||||
June 1 - June 30 | 6,113 | $ | 6.35 | — | $ | — | ||||||||
6,113 | $ | 6.35 | — | $ | 15.5 |
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. | ||
10.1 | Tenth Loan Documents Modification Agreement, entered into as of May 4, 2017 by and among PRGX Global, Inc. and PRGX USA, Inc., as borrowers, the subsidiaries of PRGX Global, Inc. signatory thereto, as guarantors, and SunTrust Bank, as administrative agent, the sole lender and issuing bank(incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-Q filed on May 9, 2017). | ||
10.2 | Employment Agreement between the Registrant and Daryl T. Rolley dated May 8, 2017. | ||
31.1 | Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended June 30, 2017. | ||
31.2 | Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended June 30, 2017. | ||
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, 2017. | ||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
PRGX GLOBAL, INC. | |||
August 8, 2017 | By: | /s/ Ronald E. Stewart | |
Ronald E. Stewart | |||
President, Chief Executive Officer, Director (Principal Executive Officer) | |||
August 8, 2017 | By: | /s/ Peter Limeri | |
Peter Limeri | |||
Chief Financial Officer and Treasurer (Principal Financial Officer) |
August 8, 2017 | By: | /s/ Ronald E. Stewart | ||||
Ronald E. Stewart | ||||||
President, Chief Executive Officer, Director (Principal Executive Officer) |
August 8, 2017 | By: | /s/ Peter Limeri | ||||
Peter Limeri | ||||||
Chief Financial Officer and Treasurer (Principal Financial Officer) |
August 8, 2017 | By: | /s/ Ronald E. Stewart | ||||
Ronald E. Stewart | ||||||
President, Chief Executive Officer, Director (Principal Executive Officer) | ||||||
August 8, 2017 | By: | /s/ Peter Limeri | ||||
Peter Limeri | ||||||
Chief Financial Officer and Treasurer (Principal Financial Officer) |
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2017 |
Aug. 04, 2017 |
|
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, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 22,386,990 |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||
Net loss | $ (674) | $ (592) | $ (2,858) | $ (1,144) |
Foreign currency translation adjustments | (569) | (118) | (294) | (487) |
Comprehensive loss | $ (1,243) | $ (710) | $ (3,152) | $ (1,631) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowances for contract receivables | $ 1,071 | $ 799 |
Allowances for employee advances and miscellaneous receivables | 351 | 500 |
Accumulated amortization on intangible assets | $ 37,977 | $ 36,128 |
Common stock, par value (usd per share) | ||
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) | 22,394,990 | 21,845,920 |
Common stock, shares outstanding (shares) | 22,394,990 | 21,845,920 |
Basis of Presentation |
6 Months Ended |
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Jun. 30, 2017 | |
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 ("GAAP") 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 GAAP 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 and six month periods ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 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 Notes thereto included in the Company’s Form 10-K for the year ended December 31, 2016. 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. 2017-04 - In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard removes the second step of the two step test used to determine an impairment of goodwill. Under the new standard, an entity only compares the fair value of the reporting unit to the carrying amount, including goodwill, and records the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard will become effective for the Company beginning January 1, 2020. The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures. FASB ASC Update No. 2016-02 - In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842). The standard requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The standard requires lessors to classify leases as either sales-type, finance or operating. A sales-type lease occurs if the lessor transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing lease. If the lessor does not convey risks and rewards or control, an operating lease results. The standard will become effective for the Company beginning January 1, 2019. The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures. FASB ASC Update No. 2014-9 and additional updates - In May 2014, the FASB issued an accounting standards update with new guidance on recognizing revenue from contracts with customers. The standards update outlines a single comprehensive model for an entity to utilize to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that will be received in exchange for the goods and services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses and determining if a company is the principal or agent in a revenue arrangement. The standard will become effective for the Company beginning January 1, 2018. We have substantially completed our evaluation of significant contracts and are currently assessing the impact of adopting the standards update on our consolidated financial statements. We will continue our evaluation of the standards update through the date of adoption. |
Earnings (Loss) Per Common Share |
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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, 2017 and 2016 (in thousands, except per share data):
For all periods presented, basic and diluted net loss per share is the same, as any additional common stock equivalents would be anti-dilutive. For the three and six months ended June 30, 2017 and 2016, weighted-average common shares outstanding excludes from the computation of diluted earnings (loss) per common share anti-dilutive shares underlying options that totaled 3.3 million and 3.4 million shares, respectively. In addition, we excluded 1.9 million and 2.7 million of restricted stock units from the calculation of weighted-average diluted common shares outstanding for the three and six months ended June 30, 2017 and 2016, respectively, which would have been anti-dilutive due to the net loss in those periods. We repurchased no shares of our common stock under our stock repurchase program during the three and six months ended June 30, 2017. During the three and six months ended June 30, 2016, we repurchased 0.2 million and 0.9 million shares of our common stock for $1.0 million and $3.6 million, respectively, under our stock repurchase program. Pursuant to exercises of outstanding stock options, we issued 82,993 shares of our common stock having a value of approximately $0.4 million in the three months ended June 30, 2017 and 167,460 shares of our common stock having a value of approximately $0.8 million in the six months ended June 30, 2017. In connection with stock option exercises, we issued no shares of our common stock in the three months ended June 30, 2016 and 46,896 shares of our common stock having a value of approximately $0.1 million in the six months ended June 30, 2016. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company has two stock-based compensation plans, the 2008 Equity Incentive Plan ("2008 EIP") and the 2017 Equity Incentive Compensation Plan ("2017 EICP") of which only the 2008 EIP has awards that were outstanding in the relevant periods. We describe the 2008 EIP in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2016. For all periods presented herein, awards outside any shareholder-approved plan are referred to as inducement awards. At the 2017 annual meeting of the Company's shareholders, held on June 27, 2017, the shareholders approved the 2017 EICP. Under the 2017 EICP, the Company may grant awards that include stock options (both incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, deferred stock, restricted stock units, performance units, performance shares, dividend equivalents, bonus shares, and other stock based or cash based awards. The maximum number of shares of common stock that may be issued pursuant to awards under the 2017 EICP is 3,400,000 shares plus the number of shares of common stock subject to awards granted under the 2008 EIP that were outstanding when the 2017 EICP became effective and that thereafter again become available for grant. However, the total number of shares of common stock that may be delivered pursuant to the exercise of incentive stock options granted under the 2017 EICP shall not exceed 3,400,000 shares. No additional awards may be granted under the 2008 EIP after approval by the Company's shareholders of the 2017 EICP on June 27, 2017. 2008 EIP Awards and Inducement Awards Stock options, including those granted under the 2008 EIP and inducement awards, 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 activity for the six months ended June 30, 2017.
(1) During the six months ended June 30, 2017, 320,000 options were granted to employees as inducements for employment and 125,566 options were granted to the members of our Board of Directors. The weighted-average grant date fair value of options granted was $3.01 per share for the six months ended June 30, 2017. Nonvested stock awards, (restricted stock and restricted stock units), including those granted under the 2008 EIP and inducement awards, 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 award activity during the six months ended June 30, 2017.
(1) Includes grants to members of our board of directors of 29,920 shares of restricted stock and 21,259 restricted stock units, inducement grants of 41,000 shares of restricted stock and 59,000 performance-based restricted stock units, and grants to employees under the 2008 EIP of 310,139 shares of restricted stock, 56,812 restricted stock units, and 274,800 performance-based restricted stock units during the six months ended June 30, 2017. On March 30, 2017, six executive officers and six other senior leaders of the Company were granted 274,800 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 100% of the number of PBUs being settled. The PBUs vest and become payable based on revenue and the cumulative adjusted EBITDA that the Company (excluding the Healthcare Claims Recovery Audit business) achieves for the two-year performance period ending December 31, 2018. At the threshold performance level, 35% of the PBUs will become vested and payable and at the target performance level, 100% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that will 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 100% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level). During May 2017, one executive officer and one senior leader of the Company were granted a total of 59,000 PBUs as inducement grants on substantially the same terms as the grant of PBUs made on March 30, 2017. The PBUs granted during the six months ended June 30, 2017 and during 2016 were expensed at the target performance level based upon management's estimates for the three and six months ended June 30, 2017 and 2016. Selling, general and administrative expenses for the six months ended June 30, 2017 and 2016 include $3.2 million and $1.8 million, respectively, related to stock-based compensation charges. At June 30, 2017, there was $7.9 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 1.8 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. |
Operating Segments and Related Information |
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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, spend analytics, PRGX OPTIXTM, SIM services 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 GAAP. Discontinued operations information for the three and six months ended June 30, 2017 and 2016 is as follows:
We evaluate the performance of our reportable segments based upon revenue and measures of profit or loss referred 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, 2017 and 2016 (in thousands) is as follows:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Debt | Debt 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. Prior to the January 2014 amendment to the SunTrust credit facility described below, amounts available under the SunTrust revolver were based on eligible accounts receivable and other factors. Interest on both the revolver and term loan was payable monthly and accrued at an index rate using the one-month LIBOR rate, plus an applicable margin as determined by the loan agreement. The applicable interest rate margin varied from 2.25% per annum to 3.5% per annum, dependent on our consolidated leverage ratio, and was determined in accordance with a pricing grid under the SunTrust loan agreement. We also paid a commitment fee of 0.5% per annum, payable quarterly, on the unused portion of the $15.0 million SunTrust revolving credit facility. 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 and extended the scheduled maturity of the revolving credit facility to January 16, 2015 (subject to earlier termination as provided therein). We also paid a commitment fee of 0.5% per annum, payable quarterly, on the unused portion of the SunTrust revolving credit facility through the next amendment date. 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 (which was set at 1.75% per annum pursuant to this amendment). The index rate is determined as of the first business day of each calendar month with the provision of a fixed applicable margin of 1.75% per the amendment of the SunTrust credit facility. The credit facility included two financial covenants (a maximum leverage ratio and a minimum fixed charge coverage ratio) that would apply only if we had borrowings under the credit facility that arose or remained 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 extended 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. The weighted-average interest rate for the commitment fee due on the revolving credit facility was 0.25% in 2016 and 2015. On December 21, 2016, we entered into an amendment of the SunTrust credit facility in order to clarify certain definitions and other terms of the facility. On October 31, 2016, the Company borrowed $3.6 million from its credit facility to finance the acquisition of Lavante, Inc. On February 27, 2017 the Company borrowed $10.0 million from its credit facility to finance the acquisition of substantially all of the assets of Cost & Compliance Associates, LLC and Cost & Compliance Associates Limited. Total borrowings outstanding as of June 30, 2017 were $13.6 million. On May 4, 2017, we entered into an amendment of the SunTrust credit facility, that, among other things, (i) increased the aggregate principal amount of the committed revolving credit facility from $20.0 million to $35.0 million through December 31, 2018, which will be reduced to $30.0 million thereafter, (ii) extended the maturity date of the credit facility to December 31, 2019, (iii) added customary provisions to reflect European Union “bail-in” directive compliance language, and (iv) modified the financial covenants applicable to the Company during the remaining term of the credit facility by (A) revising the maximum leverage ratio and minimum fixed charge coverage ratio and (B) adding an additional financial covenant requiring the Company to maintain a minimum amount of consolidated adjusted EBITDA. In addition, the applicable margin used to determine the interest rate per annum on outstanding borrowings under the credit facility, and the ongoing commitment fee payable on the unused portion of the revolving credit facility commitment, both of which previously had been fixed percentages per annum, have been amended and both now will vary based upon our quarterly leverage ratio calculation under the SunTrust credit facility. The applicable margin per annum on interest accruing on all borrowings under the credit facility outstanding on or after May 4, 2017, and the applicable percentage per annum commitment fee accruing on and after that date, respectively will be determined as follows:
As of June 30, 2017 there was $13.6 million in debt outstanding under the revolving SunTrust facility that will be due December 31, 2019. The amount available for additional borrowing under the SunTrust credit facility was $21.4 million as of June 30, 2017. Based on the terms of the credit facility, as amended, the applicable interest rate at June 30, 2017 was approximately 3.50%. As of June 30, 2017 we were required to pay a commitment fee of 0.25% per annum, payable quarterly, on the unused portion of the revolving SunTrust credit facility. 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 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 a minimum amount of consolidated EBITDA. In addition, the credit facility includes customary events of default. The Company was in compliance with the covenants in the SunTrust credit facility as of June 30, 2017. |
Fair Value of Financial Instruments |
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Jun. 30, 2017 | |
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 receivables, 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 record bank debt, if any, as of the period end date based on the effective borrowing rate and repayment terms when originated. As of June 30, 2017, we had $13.6 million in bank debt outstanding, and we had no bank debt outstanding as of June 30, 2016. We believe the carrying value of the bank debt approximates its fair value. We considered the factors used in determining the fair value of this debt to be Level 3 inputs (significant unobservable inputs). We had $4.0 million of business acquisition obligations as of June 30, 2017, and no such obligations as of June 30, 2016. Our business acquisition obligations represent the estimated fair value of the deferred consideration and projected earn-out payments due as of the end of the recording period. We determine the estimated fair value of business acquisition obligations based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment(s) 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). We state certain assets at fair value on a nonrecurring basis as required by GAAP. Generally, these assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. |
Commitments and Contingencies |
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Jun. 30, 2017 | |
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. |
Income Taxes |
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Jun. 30, 2017 | |
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. |
Business Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination Disclosure | Business Acquisitions Cost & Compliance Associates In February 2017, we completed the acquisition of substantially all of the assets of Cost & Compliance Associates, LLC and Cost & Compliance Associates Limited (collectively “C&CA”). C&CA is a commercial recovery audit and contract compliance firm with operations in the U.S. and the UK. At the closing of the transaction, we paid approximately $10.0 million in cash. In addition, we may be required to pay earnout consideration in cash over a period of two years, based on the performance of the acquired business and our contract compliance business following closing. The aggregate consideration we may be required to pay in connection with this acquisition cannot exceed $18.0 million. We have recorded C&CA’s assets and liabilities acquired based on our preliminary estimates of their fair values as of the acquisition date. The estimated fair value of C&CA assets acquired and resulting goodwill are subject to adjustment as we finalize our fair value analysis. We expect to complete our fair value determinations no later than the fourth quarter of 2017. There may be differences compared to those amounts reflected in our consolidated financial statements as of June 30, 2017 as we finalize our fair value analysis and such changes could be material. Based on our preliminary estimates, the purchase price exceeded the aggregate estimated fair value of the acquired assets at the acquisition date by $8.8 million, which amount has been allocated and recognized as goodwill within our Recovery Audit Services - Americas business segment. None of the goodwill associated with the acquisition is deductible for income tax purposes and, as such, no deferred taxes have been recorded related to goodwill. The preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed is presented below (in thousands):
We are still reviewing the valuation of the C&CA acquisition, in particular the value of any potential earnout due to C&CA, the value and useful lives of any long-lived assets acquired from C&CA and any potential deferred tax assets or liabilities associated with the valuation. The revenue and earnings from continuing operations of C&CA from the acquisition date through June 30, 2017 are presented below and included in our consolidated statements of operations. These amounts are not necessarily indicative of the results of operations that C&CA would have realized if it had continued to operate as a stand-alone company during the period presented, primarily due to costs that are now reflected in our unallocated corporate costs and not allocated to C&CA.
As required by ASC 805, the following unaudited pro forma statements of operations for the six months ended June 30, 2017 and 2016 give effect to the C&CA acquisition as if it had been completed on January 1, 2016. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been during the periods presented had the C&CA acquisition been completed on January 1, 2016. In addition, the unaudited pro forma financial information does not purport to project future operating results. This information is preliminary in nature and subject to change based on final purchase price adjustments. The pro forma statements of operations do not reflect: (1) any anticipated synergies (or costs to achieve synergies) or (2) the impact of non-recurring items directly related to the C&CA acquisition.
Lavante In October 2016, we acquired Lavante, Inc. ("Lavante"), a SaaS-based supplier of SIM and recovery audit services firm, for a net purchase price of $3.8 million. Lavante’s assets consist primarily of its proprietary software applications. We have recorded Lavante's assets acquired and liabilities assumed based on our preliminary estimates of their fair values at the acquisition date. The determination of the fair values of the assets acquired and liabilities assumed (and the related determination of estimated lives of depreciable and amortizable tangible and identifiable intangible assets) requires significant judgment and estimates. The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows. The estimated fair values of Lavante's assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as we finalize our fair value analysis. We expect to complete our fair value determinations no later than the fourth quarter of 2017. We do not currently expect our fair value determinations to change materially; however, there may be differences compared to those amounts reflected in our consolidated financial statements as of December 31, 2016 as we finalize our fair value analysis and such changes could be material. Based on our preliminary estimates, the purchase price exceeded the aggregate estimated fair value of the acquired assets and assumed liabilities by $2.3 million, which amount has been allocated and recognized as goodwill within our Adjacent Service business segment. None of the goodwill associated with the acquisition is deductible for income tax purposes and, as such, no deferred taxes have been recorded related to goodwill. The preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed is presented below (in thousands):
Our estimates of the fair values of identifiable intangible assets are presented below (in thousands):
In general, intangible assets include trade names, trademarks, copyrights, patents, customer contacts and/or relationships, developed technology (computer software), technological know-how, and brand names. When estimating the value of such assets, we consider the future income stream associated with the specific asset, taking into account the asset's estimated remaining life, average annual anticipated rate of return, and market rates of return. Often, an income approach such as a multi-period excess earnings model or distributor model will be used. We may also consider the market price of comparable assets recently sold or the asking prices for similar assets currently for sale. This methodology involves researching the industry to determine if comparable companies pay or receive royalties for rights associated with the use of the asset. The royalty rates charged or received are then used as valuation benchmarks. The relief from royalty method is often used in the valuation of assets involving fair royalty rates (e.g., trademarks, patents, etc.). The cost approach analyzes the current cost to re-create or duplicate an asset minus the decrease in value due to the passage of time or obsolescence. For example, when valuing a trademark (when it is not the primary asset acquired), we calculate the costs that would have been incurred over the years in establishing consumer recognition and perception of quality, service and reliability. We also consider the legal costs incurred in registering the asset. As required by ASC 805, the following unaudited pro forma statements of operations for the six months ended June 30, 2016 give effect to the Lavante acquisition as if it had been completed on January 1, 2016. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been during the period presented had the Lavante acquisition been completed on January 1, 2016. In addition, the unaudited pro forma financial information does not purport to project future operating results. This information is preliminary in nature and subject to change based on final purchase price adjustments. The pro forma statements of operations do not reflect: (1) any anticipated synergies (or costs to achieve synergies) or (2) the impact of non-recurring items directly related to the Lavante acquisition.
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Basis of Presentation (Policies) |
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Jun. 30, 2017 | |
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. 2017-04 - In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard removes the second step of the two step test used to determine an impairment of goodwill. Under the new standard, an entity only compares the fair value of the reporting unit to the carrying amount, including goodwill, and records the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard will become effective for the Company beginning January 1, 2020. The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures. FASB ASC Update No. 2016-02 - In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842). The standard requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The standard requires lessors to classify leases as either sales-type, finance or operating. A sales-type lease occurs if the lessor transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing lease. If the lessor does not convey risks and rewards or control, an operating lease results. The standard will become effective for the Company beginning January 1, 2019. The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures. FASB ASC Update No. 2014-9 and additional updates - In May 2014, the FASB issued an accounting standards update with new guidance on recognizing revenue from contracts with customers. The standards update outlines a single comprehensive model for an entity to utilize to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that will be received in exchange for the goods and services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses and determining if a company is the principal or agent in a revenue arrangement. The standard will become effective for the Company beginning January 1, 2018. We have substantially completed our evaluation of significant contracts and are currently assessing the impact of adopting the standards update on our consolidated financial statements. We will continue our evaluation of the standards update through the date of adoption. |
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 receivables, 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 record bank debt, if any, as of the period end date based on the effective borrowing rate and repayment terms when originated. As of June 30, 2017, we had $13.6 million in bank debt outstanding, and we had no bank debt outstanding as of June 30, 2016. We believe the carrying value of the bank debt approximates its fair value. We considered the factors used in determining the fair value of this debt to be Level 3 inputs (significant unobservable inputs). We had $4.0 million of business acquisition obligations as of June 30, 2017, and no such obligations as of June 30, 2016. Our business acquisition obligations represent the estimated fair value of the deferred consideration and projected earn-out payments due as of the end of the recording period. We determine the estimated fair value of business acquisition obligations based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment(s) 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). We state certain assets at fair value on a nonrecurring basis as required by GAAP. Generally, these assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. |
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. |
Earnings (Loss) Per Common Share (Tables) |
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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, 2017 and 2016 (in thousands, except per share data):
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock options, activity | The following table summarizes stock option activity for the six months ended June 30, 2017.
(1) During the six months ended June 30, 2017, 320,000 options were granted to employees as inducements for employment and 125,566 options were granted to the members of our Board of Directors. The weighted-average grant date fair value of options granted was $3.01 per share for the six months ended June 30, 2017. |
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Summary of nonvested stock awards granted | The following table summarizes nonvested stock award activity during the six months ended June 30, 2017.
(1) Includes grants to members of our board of directors of 29,920 shares of restricted stock and 21,259 restricted stock units, inducement grants of 41,000 shares of restricted stock and 59,000 performance-based restricted stock units, and grants to employees under the 2008 EIP of 310,139 shares of restricted stock, 56,812 restricted stock units, and 274,800 performance-based restricted stock units during the six months ended June 30, 2017. |
Operating Segments and Related Information (Tables) |
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Schedule of discontinued operations information | Discontinued operations information for the three and six months ended June 30, 2017 and 2016 is as follows:
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Segment information | Segment information for the three and six months ended June 30, 2017 and 2016 (in thousands) is as follows:
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Debt (Tables) |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Schedule of Debt Terms | The applicable margin per annum on interest accruing on all borrowings under the credit facility outstanding on or after May 4, 2017, and the applicable percentage per annum commitment fee accruing on and after that date, respectively will be determined as follows:
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Business Acquisitions (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost & Compliance Associates [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of recognized identified assets acquired and liabilities assumed | The preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed is presented below (in thousands):
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Business acquisition, pro forma information | The revenue and earnings from continuing operations of C&CA from the acquisition date through June 30, 2017 are presented below and included in our consolidated statements of operations. These amounts are not necessarily indicative of the results of operations that C&CA would have realized if it had continued to operate as a stand-alone company during the period presented, primarily due to costs that are now reflected in our unallocated corporate costs and not allocated to C&CA.
As required by ASC 805, the following unaudited pro forma statements of operations for the six months ended June 30, 2017 and 2016 give effect to the C&CA acquisition as if it had been completed on January 1, 2016. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been during the periods presented had the C&CA acquisition been completed on January 1, 2016. In addition, the unaudited pro forma financial information does not purport to project future operating results. This information is preliminary in nature and subject to change based on final purchase price adjustments. The pro forma statements of operations do not reflect: (1) any anticipated synergies (or costs to achieve synergies) or (2) the impact of non-recurring items directly related to the C&CA acquisition.
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Lavante [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of recognized identified assets acquired and liabilities assumed | The preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed is presented below (in thousands):
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Business acquisition, pro forma information | As required by ASC 805, the following unaudited pro forma statements of operations for the six months ended June 30, 2016 give effect to the Lavante acquisition as if it had been completed on January 1, 2016. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been during the period presented had the Lavante acquisition been completed on January 1, 2016. In addition, the unaudited pro forma financial information does not purport to project future operating results. This information is preliminary in nature and subject to change based on final purchase price adjustments. The pro forma statements of operations do not reflect: (1) any anticipated synergies (or costs to achieve synergies) or (2) the impact of non-recurring items directly related to the Lavante acquisition.
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Schedule of finite-lived intangible assets acquired as part of business combination | Our estimates of the fair values of identifiable intangible assets are presented below (in thousands):
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Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Numerator: | ||||
Net loss from continuing operations | $ (325) | $ (33) | $ (2,173) | $ (98) |
Net loss from discontinued operations | $ (349) | $ (559) | $ (685) | $ (1,046) |
Denominator: | ||||
Weighted-average common shares outstanding (shares) | 22,227 | 21,969 | 22,087 | 22,202 |
Basic loss per common share from continuing operations (in usd per share) | $ (0.01) | $ 0.00 | $ (0.10) | $ 0.00 |
Basic loss per common share from discontinued operations (in usd per share) | (0.02) | (0.03) | (0.03) | (0.05) |
Total basic loss per common share (in dollars per share) | $ (0.03) | $ (0.03) | $ (0.13) | $ (0.05) |
Stock-Based Compensation - Narrative (Details) $ in Millions |
6 Months Ended | ||
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Jun. 30, 2017
USD ($)
compensation_plan
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Jun. 30, 2016
USD ($)
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Jun. 27, 2017
shares
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Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Number of stock-based compensation plans | compensation_plan | 2 | ||
Allocated share-based compensation expense | $ 3.2 | $ 1.8 | |
Nonvested awards compensation costs not yet recognized | $ 7.9 | ||
2017 Equity Incentive Compensation Plan [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Number of shares authorized (in shares) | shares | 3,400,000 | ||
2008 Equity Incentive Plan [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Nonvested awards, compensation costs not yet recognized, period for recognition | 1 year 9 months 18 days |
Operating Segments and Related Information - Narrative (Details) |
6 Months Ended |
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Jun. 30, 2017
segment
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Segment Reporting [Abstract] | |
Number of reportable segments | 3 |
Operating Segments and Related Information - Results of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Segment Reporting [Abstract] | ||||
Sales Revenue, Services, Net | $ 38,510 | $ 35,291 | $ 72,079 | $ 66,524 |
Revenue, net | 0 | (4) | 0 | (15) |
Cost of sales | 342 | 451 | 676 | 840 |
Selling, general and administrative expense | 5 | 100 | 5 | 184 |
Depreciation and amortization | 2 | 4 | 4 | 7 |
Loss from discontinued operations before income taxes | (349) | (559) | (685) | (1,046) |
Income tax expense | 0 | 0 | 0 | 0 |
Net loss from discontinued operations | $ (349) | $ (559) | $ (685) | $ (1,046) |
Fair Value of Financial Instruments (Details) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
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Fair Value of Financial Instruments (Textual) [Abstract] | |||
Business acquisition obligations | $ 2,079,000 | $ 2,078,000 | |
Bank Loan Obligations [Member] | |||
Fair Value of Financial Instruments (Textual) [Abstract] | |||
Fair value of long term debt | 13,600,000 | $ 0 | |
Business Acquisition Obligations [Member] | |||
Fair Value of Financial Instruments (Textual) [Abstract] | |||
Business acquisition obligations | $ 4,000,000 | $ 0 |
Business Acquisitions (Details) - USD ($) |
1 Months Ended | |||
---|---|---|---|---|
Feb. 28, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
Oct. 31, 2016 |
|
Business Acquisition [Line Items] | ||||
Goodwill | $ 22,803,000 | $ 13,823,000 | ||
Cost & Compliance Associates [Member] | ||||
Business Acquisition [Line Items] | ||||
Business combination, consideration, cash portion | $ 10,000,000 | |||
Business combination, contingent consideration term | 2 years | |||
Business combination, maximum consideration to be transferred | $ 18,000,000.0 | |||
Goodwill | 8,801,000 | |||
Business combination, goodwill expected to be deductible for tax purposes | 0 | |||
Deferred tax assets, goodwill | $ 0 | |||
Lavante [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 2,286,000 | |||
Business combination, goodwill expected to be deductible for tax purposes | 0 | |||
Deferred tax assets, goodwill | 0 | |||
Business combination, net assets recognized | $ 3,800,000 |
Business Acquisitions Acquisition Revenue and Earnings From Operations Information (Details) - USD ($) $ in Thousands |
4 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Cost & Compliance Associates [Member] | |||
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | |||
Revenue of acquiree since acquisition date, actual | $ 5 | ||
Earnings from operations of acquiree since acquisition date, actual | $ 1 | ||
Pro forma, Revenue from continuing operations | $ 72,918 | $ 73,919 | |
Pro forma, Income (loss) from continuing operations | $ (2,843) | 1,145 | |
Lavante [Member] | |||
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | |||
Pro forma, Revenue from continuing operations | 67,891 | ||
Pro forma, Income (loss) from continuing operations | $ (2,982) |
Business Acquisitions Summary of Intangible Assets Acquired (Details) - Lavante [Member] $ in Thousands |
Oct. 31, 2016
USD ($)
|
---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets acquired | $ 6,178 |
Developed Technology Rights [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets acquired | $ 5,901 |
Intangible assets acquired weighted average useful life | 48 months |
Patents [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets acquired | $ 114 |
Intangible assets acquired weighted average useful life | 12 months |
Trademarks [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets acquired | $ 163 |
Intangible assets acquired weighted average useful life | 48 months |
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