Operating Segments and Related Information

9 Months Ended

Sep. 30, 2017

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 OPTIX^TM,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 nine months endedSeptember 30, 2017 and 2016 is as follows:

Results of Discontinued Operations	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2017			2016			2017			2016
Revenue	$	—		$	5		$	—		$	(11	)
Cost of sales	337			(128		)	1,013			712
Selling, general and administrative expense	5			(4		)	10			180
Depreciation and amortization	2			4			6			11
(Loss) income from discontinued operations before income taxes	$	(344	)	$	133		$	(1,029	)	$	(914	)
Income tax expense	—			—			—			—
Net (loss) income from discontinued operations	$	(344	)	$	133		$	(1,029	)	$	(914	)

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 nine months ended September 30, 2017 and 2016 (in thousands) is as follows:

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
Three Months Ended September 30, 2017
Revenue	$	30,705		$	10,837		$	925		$	—		$	42,467
Net income from continuing operations													1,077
Income tax expense													930
Interest expense (income), net													142
EBIT	$	8,539		$	2,289		$	(2,026	)	$	(6,653	)	$	2,149
Depreciation of property and equipment	789			161			183			—			1,133
Amortization of intangible assets	329			—			393			—			722
EBITDA	$	9,657		$	2,450		$	(1,450	)	$	(6,653	)	$	4,004
Other (income) loss	(11		)	—			(2		)	30			17
Foreign currency transaction (gains) losses on short-term intercompany balances	(155		)	(377		)	(6		)	120			(418		)
Transformation severance and related expenses	49			360			260			23			692
Stock-based compensation	—			—			—			2,107			2,107
Adjusted EBITDA	$	9,540		$	2,433		$	(1,198	)	$	(4,373	)	$	6,402

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
Three Months Ended September 30, 2016
Revenue	$	25,719	$	8,736		$	682		$	—		$	35,137
Net income from continuing operations												2,150
Income tax benefit												(685		)
Interest expense (income), net												(14		)
EBIT	$	7,371	$	1,274		$	(1,089	)	$	(6,105	)	$	1,451
Depreciation of property and equipment	935		141			300			—			1,376
Amortization of intangible assets	373		—			20			—			393
EBITDA	$	8,679	$	1,415		$	(769	)	$	(6,105	)	$	3,220
Other loss (income)	—		—			(168		)	—			(168		)
Foreign currency transaction losses (gains) on short-term intercompany balances	120		(227		)	1			(59		)	(165		)
Transformation severance and related expenses	95		188			139			(2		)	420
Stock-based compensation	—		—			—			1,424			1,424
Adjusted EBITDA	$	8,894	$	1,376		$	(797	)	$	(4,742	)	$	4,731

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
Nine Months Ended September 30, 2017
Revenue	$	81,641		$	29,441		$	3,464		$	—		$	114,546
Net loss from continuing operations													(1,096		)
Income tax expense													2,436
Interest expense (income), net													227
EBIT	$	20,110		$	5,754		$	(5,681	)	$	(18,616	)	$	1,567
Depreciation of property and equipment	2,478			453			531			—			3,462
Amortization of intangible assets	986			—			1,180			—			2,166
EBITDA	$	23,574		$	6,207		$	(3,970	)	$	(18,616	)	$	7,195
Other loss (income)	(11		)				(195		)	29			(177		)
Foreign currency transaction (gains) losses on short-term intercompany balances	(396		)	(1,566		)	(10		)	45			(1,927		)
Transformation severance and related expenses	313			582			305			392			1,592
Stock-based compensation	—			—			—			5,362			5,362
Adjusted EBITDA	$	23,480		$	5,223		$	(3,870	)	$	(12,788	)	$	12,045

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
Nine Months Ended September 30, 2016
Revenue	$	72,408		$	26,683		$	2,570		$	—		$	101,661
Net income from continuing operations													2,052
Income tax benefit													(21		)
Interest expense (income), net													(55		)
EBIT	$	17,364		$	4,032		$	(2,645	)	$	(16,775	)	$	1,976
Depreciation of property and equipment	2,863			379			582			—			3,824
Amortization of intangible assets	1,118			—			64			—			1,182
EBITDA	$	21,345		$	4,411		$	(1,999	)	$	(16,775	)	$	6,982
Other loss (income)	—			—			(140		)	—			(140		)
Foreign currency transaction gains on short-term intercompany balances	(108		)	(787		)	(7		)	(74		)	(976		)
Transformation severance and related expenses	516			284			138			241			1,179
Stock-based compensation	—			—			—			3,224			3,224
Adjusted EBITDA	$	21,753		$	3,908		$	(2,008	)	$	(13,384	)	$	10,269