10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________

FORM 10-K/A

Amendment No. 1

(Mark One)

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

For the fiscal year ended December 31, 2017

OR

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

For the transition period from to

Commission File Number 0-28000

PRGX Global, Inc.

(Exact name of registrant as specified in its charter)

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, No Par Value	The NASDAQ Stock Market LLC (The Nasdaq Global Select Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act.   Yes  ¨    No  ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes  ¨    No  ý

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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

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

¨  Large accelerated filer	ý	Accelerated filer	¨	Non-accelerated filer	¨	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 ☐

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

The aggregate market value, as of June 30, 2017, of common shares of the registrant held by non-affiliates of the registrant was approximately $130.1 million, based upon the last sales price reported that date on The Nasdaq Global Select Market of $6.50 per share. (Aggregate market value is estimated solely for the purposes of this report and shall not be construed as an admission for the purposes of determining affiliate status.)

Common shares of the registrant outstanding at February 28, 2018 were 22,401,917.

Documents Incorporated by Reference

Part III: Portions of Registrant’s Proxy Statement relating to the Company’s 2018 Annual Meeting of Shareholders.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of PRGX Global, Inc. for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on March 13, 2018 (the “Original Filing”).

     PRGX Global, Inc. is filing this Amendment for the sole purpose of inserting the conformed signatures of our independent registered public accounting firm on their Reports of Independent Registered Public Accounting Firm with respect to the audited financial statements and internal control over financial reporting included in the Original Filing, which conformed signatures were inadvertently omitted. Accordingly, Item 8 and Item 9A of Part II of the Original Filing are being amended hereby solely to reflect these conformed signatures. 

In accordance with Rule 12b-15 of the Securities Exchange Act of 1934, as amended, this Amendment includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, dated as of the filing date of this Amendment.

 No other changes were made to the Original Filing. For ease of reference, the entire Form 10-K, including all other exhibits filed therewith, is included with this Amendment.

PRGX GLOBAL, INC.

FORM 10-K

December 31, 2017

INDEX

	Page No.
Part I
Item 1. Business	1
Item 1A. Risk Factors	8
Item 1B. Unresolved Staff Comments	15
Item 2. Properties	15
Item 3. Legal Proceedings	15
Item 4. Mine Safety Disclosures	15
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6. Selected Financial Data	18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	36
Item 8. Financial Statements and Supplementary Data	37
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	76
Item 9A. Controls and Procedures	76
Item 9B. Other Information	78
Part III
Item 10. Directors, Executive Officers and Corporate Governance	79
Item 11. Executive Compensation	79
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters	79
Item 13. Certain Relationships and Related Transactions, and Director Independence	80
Item 14. Principal Accountant Fees and Services	80
Part IV
Item 15. Financial Statement Schedules, Exhibits	81
Item 16. Form 10-K Summary	86
Signatures	87

Cautionary Statement Regarding Forward-Looking Statements

The following discussion includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are at times identified by words such as “plans,” “intends,” “expects,” or “anticipates” and words of similar effect and include statements regarding the Company’s financial and operating plans and goals. These forward-looking statements include any statements that cannot be assessed until the occurrence of a future event or events. 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.

These forward-looking statements are subject to risks, uncertainties and other factors, including but not limited to those discussed herein and below under Item 1A “Risk Factors.” Many of these risks are outside of our control and could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that could lead to material changes in our performance may include, but are not limited to:

• our ability to successfully execute our recovery audit growth strategy;

• our continued dependence on our largest clients for significant revenue;

• the use of internal recovery audit groups by our clients, reducing the amount of recoveries available to us;

• commoditization of our services and the effects of rate reductions;

• the significant control that our clients have over assertion or acceptance of recovery audit claims against their suppliers and the corresponding impact on our revenue;

• changes to Medicare and Medicaid recovery audit contractor (“RAC”) programs administered by the Centers for Medicare and Medicaid Services (“CMS”) and other government agencies, and our role in the national Medicare RAC program, the results of operations of which are reported in our discontinued operations;

• revenue that does not meet expectations or justify costs incurred;

• our ability to develop material sources of new revenue in addition to revenue from our core accounts payable recovery audit services;

• changes in the market for our services;

• client and vendor bankruptcies and financial difficulties;

• our ability to retain and attract qualified personnel and effectively manage our global workforce;

• our ability to protect and maintain the competitive advantage of our proprietary technology and intellectual property rights;

• our reliance on operations outside the U.S. for a significant portion of our revenue;

• our ability to effectively manage foreign currency fluctuations;

• the highly competitive environments in which our recovery audit services and Adjacent Services businesses operate and the resulting pricing pressure on those businesses;

• our ability to integrate recent and future acquisitions;

• our ability to realize operational cost savings and the transformation severance and related expenses we may incur to generate these savings;

• uncertainty in the global credit markets;

• our ability to maintain compliance with the financial and non-financial covenants in our financing arrangements;

• our tax positions and other factors, including the enactment of the Tax Cuts and Jobs Act in December 2017, that could affect our effective income tax rate or our ability to use our existing deferred tax assets;

• our ability to operate in compliance with changing data privacy requirements;

• our ability to comply with a variety of foreign laws and regulations, such as those relating to data protection and employment, as well as U.S. laws affecting operations outside of the United States;

• a cyber-security incident involving the misappropriation, loss or unauthorized disclosure or use of client data or other confidential information of our clients;

• effects of changes in accounting policies, standards, guidelines or principles;

• terrorist acts, acts of war and other factors over which we have little or no control; or

• our ability to effectively develop, maintain, operate and improve our proprietary technology platforms and applications.

i

Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all such factors.

ii

PART I

ITEM 1. Business

PRGX Global, Inc., together with its subsidiaries, is a global leader in recovery audit and spend analytics services, providing services within our clients' Source-to-Pay ("S2P") business processes. Our services include recovery audit, spend analytics and supplier information management ("SIM") services. We are based in the United States of America (“U.S.”) and serve clients in more than 30 countries. PRGX Global, Inc. was incorporated in the State of Georgia in 1996. At the heart of our client services portfolio is the core capability of mining client data to deliver “actionable insights.” Actionable insights allow our clients to improve their financial performance by reducing costs, improving business processes, managing risks and increasing profitability.

The vast majority of our revenue comes from recovery audit, a service based on the mining of a tremendous amount of our clients’ purchasing-related data, looking for overpayments made to their third-party suppliers. PRGX is the world's leading provider of accounts payable recovery audit services principally to large businesses and government agencies with high volumes of transactions and complex pricing arrangements with vendors. We provide services to 75% of the top 20 global retailers and over 30% of the top 50 companies in the Fortune 500. We earn the largest portion of our revenue from our retail clients. Recovery audit in the retail industry is a mature service offering and we have been serving a number of our clients for decades. Pricing of merchandise for resale in the retail industry is extremely complex due to the high volume of promotions, allowances and rebates provided by suppliers. The second largest portion of our business is referred to within the recovery audit business as “commercial.” Commercial recovery auditing is the delivery of recovery audit services to industries other than retail, such as telecommunications, automotive and industrial manufacturing, resources, financial services, and transportation. Recovery audit in the industries represented within commercial is typically less complex in terms of vendor pricing structure, scope of purchase transactions made available for audit and depth of audit programs within individual companies. “Contract compliance” auditing is a specific type of recovery auditing which is more heavily utilized by commercial clients and is expected to be a growing part of our business. This service offering focuses on auditing complex supplier billings against large services, construction and licensing contracts, and is relevant to a large portion of our client base. We continue to innovate through technological advances, new enhancements to our proprietary technology audit tools and expanded service offerings, including spend analytics and SIM services. These services target client functional and process areas where we have established expertise, enabling us to provide services to finance, merchandising and procurement executives to improve working capital, optimize purchasing leverage in vendor pricing negotiations, improve insight into product margin and true cost of goods for resale, identify and manage risks associated with vendor compliance, improve quality of vendor master data and improve visibility and diagnostics of direct and indirect spend. These service offerings are increasingly important to our business and are applicable to clients in both retail and commercial industries.

PRGX is unique in that we are a global recovery audit services provider, serving clients in over 30 countries across a multitude of industries. We conduct our operations through three reportable segments: Recovery Audit Services - Americas, Recovery Audit Services - Europe/Asia-Pacific and Adjacent Services. The Recovery Audit Services - Americas segment represents recovery audit services we provide in the U.S., Canada and Latin America and is our largest segment in terms of clients served and revenue generated. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services we provide in Europe, Asia and the Pacific region and is responsible for a significant portion of our revenue. Our Adjacent Services segment includes services provided to our clients in any country. We report the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the three reportable segments in Corporate Support. For additional financial information relating to our reporting segments, see Note 2 - Operating Segments and Related Information of our Consolidated Financial Statements included in Item 8 of this Form 10-K.

In October 2016, we announced that we had entered into agreements to acquire Cost & Compliance Associates, LLC and Cost & Cost Compliance Associates Limited (together, “C&CA"), a commercial recovery audit and contract compliance firm with operations in the U.S. and the U.K., and Lavante, Inc. (“Lavante”), a Software-as-a-Service ("SaaS")-based SIM and recovery audit services firm based in San Jose, California. The Lavante acquisition closed in October 2016 and the C&CA acquisition closed in February 2017.

As of December 31, 2015, the Company discontinued its Healthcare Claims Recovery Audit ("HCRA") business. PRGX has 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.

1

The Recovery Audit Industry and PRGX

Many businesses and government agencies generate substantial volumes of payment transactions involving multiple vendors, numerous discounts and allowances, fluctuating prices and complex pricing arrangements or rate structures. Although these entities correctly process the vast majority of payment transactions, errors occur in a small percentage of transactions. These errors include, but are not limited to, missed or inaccurate discounts, allowances and rebates, vendor pricing errors, erroneous coding and duplicate payments. Many factors contribute to the errors, including communication failures between the purchasing and accounts payable departments, complex pricing arrangements or rate structures, personnel turnover and changes in information and accounting systems. In the aggregate, these transaction errors can represent meaningful amounts of reduced cash flow and lost profits for these entities. Recovery auditing is a business service focused on finding overpayments created by these errors. These audits are either accounts payable audits or contract compliance audits and entail comprehensive and customized data acquisition from the client, frequently including purchasing, receiving, point-of-sale, pricing and deal documentation, emails, and payment data.

PRGX, like most companies in the recovery audit services industry, generates the majority of its revenue through contingent fee arrangements, sharing a pre-determined percentage of successful claims or “recoveries” generated from an audit. There are certain recovery audit services or types of audits that are billed as a fixed fee or on a time and materials basis, but the vast majority of our revenue is generated through contingent fee contracts.

Recovery audit clients generally recover claims by either (a) taking credits against outstanding payables or future purchases from the involved vendors or service providers, or (b) receiving refund checks directly from those vendors or service providers. Industry practice generally dictates the manner in which a client receives the benefit for a recovery audit claim. In many cases, we must satisfy client-specific procedural guidelines before we can submit recovery audit claims for client approval.

Contracts with recovery audit clients generally vary in length from one year to three years, with some being evergreen. Most of our recovery audit contracts provide that the client may terminate the contract without cause prior to the completion of the term of the agreement by providing relatively short prior written notice of termination.

As businesses have evolved, PRGX and the recovery audit industry have evolved with them, innovating processes, error identification tools, and claim types to maximize recoveries. The following are a number of factors impacting recovery auditing:

•Data Capture and Availability. Businesses increasingly are using technology to manage complex procurement and accounts payable systems in an effort to realize greater operating efficiencies. Many businesses worldwide communicate with vendors electronically - whether by Electronic Data Interchange (“EDI”) or the Internet - to exchange inventory and sales data, transmit purchase orders, submit invoices, forward shipping and receiving information and remit payments. These systems capture more detailed data, which should further inform transactional reviews by recovery auditors.

•Increased Role of Email Documentation in Client Transaction Data. Clients and vendors increasingly document transaction terms in email correspondence that is not integrated into their financial or merchant deal systems, which increases opportunities for errors. To efficiently identify these errors, recovery audit firms must use sophisticated technology-based tools that are able to ingest and search through massive volumes of emails to identify potential errors that then are investigated by the auditors. A comprehensive recovery audit requires the effective use of technology-based email search tools and techniques.

•Increasing Number of Auditable Claim Categories. Traditionally, the focus of a recovery audit was on a simple, or “disbursement,” claim type, such as the duplicate payment of invoices. Enhancements to accounts payable software, particularly large enterprise software solutions used by many large companies, have reduced the extent to which these companies make simple disbursement errors. However, the introduction of creative vendor discount programs, complex pricing arrangements and activity-based incentives has led to an increase in auditable transactions and potential sources of error. These transactions are complicated to audit, as the underlying transaction data is difficult to access and recognizing mistakes can be complex. Recovery audit firms such as PRGX with significant industry-specific expertise and sophisticated technology are best equipped to audit these complicated claim categories.

•Globalization. As the operations of business enterprises become increasingly multi-national, they often seek service providers with a global reach. Sophistication in systems and processes varies markedly across the global network of suppliers which further drives the need for our services. PRGX serves clients in more than 30 countries and we believe we are the recovery audit service provider best suited to deliver multi-national audits.

•Significant Promotional Activity. Trade promotion spending is substantial within the retail trade and significant sums are being spent in categories with numerous transactions and a high potential for errors, such as scan downs, or discounts at the point of sale. Because of the high volume of trade promotion within retail, there are significant opportunities for mistakes and, therefore, auditable claims.

2

•Technology Platform. The ability to efficiently and cost effectively ingest large volumes of structured and unstructured data is critical to providing best in class recovery audit services. We believe we have developed the most sophisticated and highest performing large data processing infrastructure system in our industry. This system is based on the Hadoop open source technology standard and allows us to effectively process and manage our clients’ data in large scale volumes and at superior speeds. We are achieving significant acceleration in data processing speeds for both structured and unstructured data sets, which supports our efforts to accelerate audit results and transform our core audit processes.

We expect the evolution of the recovery audit industry to continue. In particular, we expect that the industry will continue to move towards the electronic capture and presentation of data, more automated, centralized processing and auditing closer to the time of the payment transaction.

Adjacent Services

Our Adjacent Services business, targets client functional and process areas where we have established expertise, enabling us to provide services to our clients' finance, merchandising and procurement functions to improve working capital, optimize purchasing leverage in vendor pricing negotiations, improve insight into product margin and true cost of goods for resale, identify and manage risks associated with vendor compliance, improve quality of vendor master data and improve visibility and diagnostics of direct and indirect spend. Our Adjacent Services include our global PRGX OPTIX^TM analytics solution and our Lavante SIM^TM services offering, which also includes the CIPS Sustainability Index ("CSI") offered in the United Kingdom through our strategic alliance with the Chartered Institute of Purchasing & Supply ("CIPS"). As our clients’ supplier base, data volumes and complexity levels continue to grow, we are using our deep data management experience to develop new actionable insight solutions, compliance-related tools, analytics solutions and data transformation services. Taken together, our deep understanding of our clients’ S2P data and our Adjacent Services solutions provide multiple routes to help our clients achieve greater profitability.

Clients

PRGX provides its services principally to large businesses and government agencies having a tremendous volume of payment transactions and complex procurement environments. Retailers continue to constitute the largest part of our client and revenue base. Our five largest clients contributed to our revenue from continuing operations by approximately 36.6% in 2017, 37.3% in 2016 and 34.5% in 2015. We have one client, The Kroger Co., that accounted for approximately 12% of our revenue from continuing operations in 2017 and approximately 11% of our revenue from continuing operations in 2016, while no client accounted for 10% or more of our revenue from continuing operations in 2015.

Some organizations (primarily large retailers) maintain internal recovery audit departments to recover certain types of payment errors and identify opportunities to reduce costs. Despite having such internal resources, many companies also retain independent recovery audit firms, such as PRGX, due to their specialized knowledge, capabilities and focused technologies. In the U.S., Canada, the United Kingdom, France, Mexico, Brazil, and Australia, large retailers routinely engage independent recovery audit firms as a standard business practice. It is typical in the retail industry for large firms to engage a primary audit firm at one contingency fee rate and a secondary firm to audit behind the primary at a higher rate. Our commercial recovery audit clients are typically Fortune 1000 companies in industries other than retail and with multi-billion dollars of purchase transactions to be audited. These clients range from large multi-national manufacturing and resource companies, to large regional or national telecommunications and financial services institutions to global high tech software organizations. The audit specialty practice of contract compliance is a specific type of recovery auditing which is more heavily utilized by commercial clients and is expected to be a growing part of our business. This service offering focuses on auditing complex supplier billings against large services, construction and licensing contracts, and is relevant to a large portion of our client base.

3

The PRGX Strategy

PRGX is a global leader in recovery audit and spend analytics services. We provide recovery audit and other S2P services, including, spend analytics and SIM services. We principally offer these services to large businesses and government agencies having a tremendous volume of payment transactions and complex procurement environments. We plan to achieve revenue growth and higher profitability through the following strategy:

1.Grow and improve our core recovery audit business;

2.Differentiate our service offerings and capabilities;

3.Create adjacent service offerings, including SaaS solutions; and

4.Expand into new high potential industries and geographies.

Grow and improve our core recovery audit business

We continue to be the industry leader by introducing innovative concepts and audit processes. In addition, we are deploying global best practices and rolling out world class enhancements to our proprietary technology audit tools to drive deeper recoveries and enable next generation audit concepts. We expect to achieve our objectives through process redesign coupled with investing in our technology infrastructure and aggressively rolling out new technologies across our global audits.

Differentiate our service offerings and capabilities

We plan to differentiate our service offerings and capabilities through enhancing our current services and implementing innovations such as:

• Audit acceleration. Our clients are constantly seeking to accelerate the audit process to deliver audit results closer to the time of the transaction to increase recovery yields, provide a greater opportunity to address process errors, and reduce supplier abrasion. We believe that our deep and broad business process experience across thousands of audits, together with our enhanced and new technology initiatives will put us in a unique position to achieve superior results for our clients.

• Global audit best practice programs. Our global programs take advantage of our operations that span over 30 countries to provide true global audit capabilities to multi-national companies. This unique perspective gives our clients visibility to their business practice variations around the world and creates value for our clients by allowing them to see their data in new ways.

Create adjacent and high value service offerings

We will continue to focus on new service offerings that complement our existing services and provide increased value to our customers.

Our Adjacent Services offerings, including PRGX OPTIX and Lavante SIM services, target client functional and process areas where we have established expertise, enabling us to provide services to support our clients' finance, merchandising and procurement functions. These services can be project-based (advisory services), which are typically billed on a rates and hours basis, or subscription-based (typically SaaS offerings), which are billed on a monthly basis. The Adjacent Services offerings assist our clients in improving many aspects of their businesses, including working capital, optimization of purchasing leverage in vendor pricing negotiations, improved insight into product margin and true cost of goods for resale, identification and management of risks associated with vendor compliance, improved quality of vendor master data and improved visibility and diagnostics of direct and indirect spend.

Expand into new high potential industries and geographies

Our plans include continuing to build our commercial recovery audit practice, which serves industries outside of retail in order to reduce our industry concentration. We have organized the commercial recovery audit practice into industry verticals such as resources, telecommunications, financial services and manufacturing, and are building focused practice areas with targeted service offerings for each industry.

4

Technology

PRGX uses advanced, proprietary information systems and processes and a large-scale technology infrastructure to conduct its audits of clients’ payment transactions. The ability to efficiently and cost effectively ingest large volumes of structured and unstructured data is critical to providing best in class recovery audit and spend analytics services. We believe we have developed the most sophisticated and highest performing large data processing infrastructure system in the recovery audit industry. This system is based on the Hadoop open source technology standard and allows us to effectively process and manage our clients’ data. We are achieving significant acceleration in data processing speeds for both structured and unstructured data sets, which supports our efforts to accelerate audit results, transform core audit processes and deliver actionable spend analytics insights.

We believe that our proprietary technology and processes serve as important competitive advantages over both our principal competitors and our clients’ internal recovery audit functions. To sustain these competitive advantages, we continually invest in technology initiatives to deliver innovative solutions that improve both the effectiveness and efficiency of our services.

We design our data acquisition, data processing and data management processes with the objectives of maximizing efficiencies and productivity and maintaining the highest standards of transaction auditing and spend analytics accuracy. We also maintain sophisticated and highly reliable security standards and tools to protect all data under our control. At the beginning of a typical recovery audit or spend analytics engagement, we use a dedicated staff of data acquisition specialists and proprietary tools to acquire a wide array of transaction data from the client for the time period under review. We typically receive this data by secured electronic transmissions, digital media or paper. For paper-based data, we use a custom, proprietary imaging technology to scan the paper into electronic format. Upon receipt of the data, we secure, catalog, back up and convert it into standard, readable formats using third party and proprietary audit technology.

Our technology professionals clean and map massive volumes of structured and unstructured client data, primarily using high performance database and storage technologies, into standardized layouts at one of our secure data processing facilities. We also generate statistical reports to verify the completeness and accuracy of the data.

We then process the data using proprietary algorithms (business rules) leveraging our decades of experience to help uncover patterns or potential problems in clients’ various transactions or transactional streams. We deliver this processed data to our auditors who, using our proprietary audit software, sort, filter and search the data to validate and identify actual transaction errors. We also maintain a secure database of audit information with the ability to query on multiple variables, including claim categories, industry codes, vendors and audit years, to facilitate the identification of additional recovery opportunities and provide recommendations for process improvements to clients.

Once we identify and validate transaction errors, we present the information to clients for approval and submission to vendors as “claims.” We offer a proprietary web-based claim presentation and collaboration tool to help the client view, approve and submit claims to vendors.

In providing our spend analytics services, we use proprietary algorithms and technologies to clean and classify a client’s vendor spend data down to the line item level. We then are able to present this information to the client as a multi-dimensional data cube over a web-based interface. We believe these proprietary algorithms and technologies provide us with a competitive advantage over many of our competitors.

As part of our Adjacent Services we offer the PRGX OPTIX suite of analytics tools. The PRGX OPTIX suite facilitates S2P business decisions through actionable, data-enabled insights that are delivered through four primary modules - Product, Payment, Spend and Supplier.  Each of these modules is powered by the core PRGX OPTIX platform that provides the ability to process and visualize S2P data delivered via a SaaS interface. In addition to the PRGX OPTIX suite, we offer SIM services through our proprietary Lavante SIM platform. The Lavante SIM platform is designed to enable supplier master data harmonization, on-boarding, compliance with regulatory and client specified standards and requirements, as well as an enterprise level view of supplier performance. Lavante SIM is offered as a SaaS-based technology solution.

5

Competition

Accounts Payable Recovery Audit Services

We believe that the principal providers of domestic and international accounts payable recovery audit services in major markets worldwide consist of PRGX, two substantial competitors, and numerous other smaller competitors. The smaller recovery audit firms generally do not possess multi-country service capabilities and advanced technology infrastructure necessary to support our clients' large and complex purchasing and accounts payable operations. In addition, many of these firms have limited resources and may lack the experience and knowledge of national promotions, seasonal allowances and current recovery audit practices. As a result, we believe that compared to most other firms providing accounts payable recovery audit services, PRGX has competitive advantages based on its domestic and international presence, well-trained and experienced professionals, and advanced technology.

While we believe that PRGX has the greatest depth and breadth of audit expertise, data and technology capabilities, scale and global presence in the industry, we face competition from the following:

Client Internal Recovery Audit Departments. A number of large retailers (particularly those in the discount, grocery and drug store sectors) have developed an internal recovery audit process to review transactions prior to turning them over to external recovery audit firms. The scale and scope of these client internal organizations varies by client based on their level of in-house expertise and investment in required tools and technologies. Regardless of the level of recoveries made by internal recovery audit departments, virtually all large retail clients retain at least one (primary), and frequently two (primary and secondary), external recovery audit firms to capture errors not identified by their internal recovery audit departments.

Other Accounts Payable Recovery Audit Firms. The competitive landscape in the recovery audit industry is comprised of:

• Full-service accounts payable recovery audit firms. We believe that only two companies other than PRGX offer a full suite of U.S. and international recovery audit services;

• A large number of smaller accounts payable recovery firms which have a limited client base and which use less sophisticated tools to mine disbursement claim categories at low contingency rates. These firms are most common in the U.S. and U.K. markets. Competition in most international markets, if any, typically comes from small niche providers;

• Firms, including one of our two substantial competitors, that offer a hybrid of audit software tools and training for use by internal audit departments, or general accounts payable process improvement enablers; and

• Firms with specialized skills focused on recovery audit services for discrete sectors such as sales and use tax, telecom, freight or real estate.

Other Providers of Recovery Audit Services. The major international accounting firms provide recovery audit services; however, we believe their practices tend to be primarily focused on tax-related services.

Adjacent Services

Our Adjacent Services business faces competition from global and regional consulting firms; well-known ERP software vendors; procurement-specific software and SaaS providers and smaller, very specialized analytics providers. These competitors generally compete on the basis of the breadth of services, market reputations and integration with other services. We believe that we differentiate ourselves from our competitors through our in-depth knowledge of our clients’ data, systems, and purchasing processes, along with advanced and specialized technology tools.

Hiring, Training and Compensation of Personnel

Many of our auditors and other professionals formerly held finance-related management positions in the industries we serve. Training primarily is provided in the field by our experienced professionals enabling newly hired personnel to develop and refine their skills and improve productivity. We also use various other training materials such as process manuals and documented policies and procedures to supplement the field training provided by our experienced professionals. We periodically upgrade our training programs based on feedback from auditors and changing industry protocols. Many of our professionals participate in one of our incentive compensation plans that link their compensation to the financial performance of their service offering(s).

6

Proprietary Rights

From time to time, we develop new software and methodologies that replace or enhance existing proprietary software and methodologies. We rely primarily on trade secret and copyright protection for our proprietary software and other proprietary information. We capitalize the costs incurred for the development of computer software that will be sold, leased, or otherwise marketed or that will be used in our operations beginning when technological feasibility has been established. We consider the costs associated with developing or replacing methodologies to be research and development costs and we expense them as incurred. Research and development costs, including the amortization of amounts previously capitalized, were approximately $2.2 million in 2017, $3.5 million in 2016 and $3.0 million in 2015.

We own or have rights to various trademarks, trade names and copyrights, including U.S. and foreign registered trademarks and trade names and U.S. registered copyrights, that are valuable assets and important to our business. We monitor the status of our copyright and trademark registrations to maintain them in force and renew them as appropriate. The duration of our active trademark registrations varies based upon the relevant statutes in the applicable jurisdiction, but generally endure for as long as they are used. The duration of our active copyright registrations similarly varies based on the relevant statutes in the applicable jurisdiction, but generally endure for the full statutory period. Our trademarks and trade names are of significant importance and include, but are not limited to, the following: PRGX®, Thrive in the Data™, Discover Your Hidden Profits^®, Profit Discovery™,  Lavante^®, Lavante SIM™,  PRGX OPTIX™, PRGX MailTrax™, PRGX MerchTrax™, PRGX APTrax™, PRGX AuditTrax™, PRGX ClaimTrax™,  PRGX SpendTrax™, GET™, and imDex™.

Regulation

Various aspects of our business, including, without limitation, our data flows and our data acquisition, processing and reporting protocols, are subject to extensive and frequently changing governmental regulation in the U.S. and the numerous other countries around the world where we operate. These regulations include extensive data protection and privacy requirements. In the U.S., we are subject to the provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) with respect to information regarding our employees, as well as our discontinued HCRA business. Internationally, we must comply with the European data protection requirements including the newly adopted General Data Protection Regulation ("GDPR"), which goes into effect in May 2018, as well as with data protection laws that exist in many of the other countries where we serve clients. Failure to comply with such regulations may, depending on the nature of the noncompliance, result in the termination or loss of contracts, the imposition of contractual damages, civil sanctions, and damage to our reputation or in certain circumstances, criminal penalties.

Employees

As of December 31, 2017, PRGX had approximately 1,500 employees, of whom approximately 600 were in the U.S. The majority of our employees are involved in our recovery audit business.

Website

PRGX makes available free of charge on its website, www.prgx.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. PRGX makes all filings with the Securities and Exchange Commission ("SEC") available on its website no later than the close of business on the date the filing was made. In addition, investors can access our filings with the Securities and Exchange Commission at www.sec.gov.

We also post certain corporate governance materials, including our Board of Directors committee charters and our Code of Conduct and Code of Ethics For Senior Financial Officers, on our website under the heading “Corporate Governance” on the “Investors” page. From time to time, we may update the corporate governance materials on our website as necessary to comply with rules issued by the SEC or NASDAQ, or as desirable to further the continued effective and efficient governance of our Company.

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ITEM 1A. Risk Factors

We must successfully execute our growth strategy in order to increase our revenue, and must control our costs in order to maintain profitability.

Over time, our clients tend to resolve recurring transaction processing deficiencies. In addition, many of our clients have an internal staff that audits the transactions before we do. As the skills, experience and resources of our clients' internal recovery audit staffs improve, they will identify many overpayments themselves and reduce some of our audit recovery opportunities. In addition, our revenues are potentially impacted by competitive rate pressures, our dependency on clients to approve our claims on a timely basis, changes in audit scope by our clients and occasional loss of clients or movement from primary to secondary position. We must continually innovate new audit concepts, improve audit execution, develop new clients and successfully execute our own growth strategy in order to increase our revenue and avoid losses in our business.

We depend on our largest clients for significant revenue, so losing a major client could adversely affect our revenue and liquidity.

We generate a significant portion of our revenue from our largest clients. Our five largest clients collectively accounted for 36.6% of our revenue from continuing operations in 2017, 37.3% of our revenue from continuing operations in 2016 and 34.5% of our revenue from continuing operations in 2015. We have one client, The Kroger Co., that accounted for approximately 12% of our revenue from continuing operations in 2017 and approximately 11% of our revenue from continuing operations in 2016. No client accounted for 10% or more of our revenue from continuing operations in 2015. If we lose any of our major clients, our results of operations and liquidity could be materially and adversely affected.

Although we continually seek to diversify our client base, we may be unable to offset the effects of an adverse change in one of our key client relationships. For example, if our existing clients elect not to renew their contracts with us at the expiration of the current terms of those contracts, or reduce the services they purchase thereunder, our recurring revenue base will be reduced, which could have a material adverse effect on our business, financial position, results of operations, and cash flows. In addition, we could lose clients if: (i) they cancel their agreements with us; (ii) we fail to win a competitive bid at the time of contract renewal; (iii) the financial condition of any of our clients deteriorates; or (iv) our clients are acquired by, or acquire, companies with which we do not have contracts. Any of these could materially and adversely affect our business, financial position, results of operations, and cash flows.

Our strategy may not be successful.

As discussed in Item 1 “The PRGX Strategy,” our objectives are to achieve revenue growth and higher profitability by growing and improving our core recovery audit business, differentiating our service offerings and capabilities, creating adjacent service offerings (including SaaS solutions) and expanding into new high potential industries and geographies. These efforts are ongoing, and the results of our efforts will not be known until sometime in the future. Successful execution of our strategy requires sustained management focus, innovation, organization and coordination over time, as well as success in building relationships with third parties. If we are unable to execute our strategy successfully, our business, financial position, results of operations and cash flows could be adversely affected. In addition, execution of our strategy will require material investments and additional costs that may not yield incremental revenue and improved financial performance as planned.

Our acquisitions, investments, partnerships and strategic alliances may require significant resources and/or result in significant unanticipated losses, costs or liabilities.

Acquisitions have contributed and are expected to continue to contribute to our revenue. Although we cannot predict our rate of growth as the result of acquisitions with complete accuracy, we believe that additional acquisitions, investments and strategic alliances will be important to our growth strategy.

We may finance future acquisitions by issuing additional equity and/or debt. The issuance of additional equity in connection with any such transaction could be substantially dilutive to existing shareholders. The issuance of additional debt could increase our leverage substantially. In addition, announcement or implementation of future transactions by us or others could have a material effect on the price of our common stock. We could face financial risks associated with incurring significant debt. Additional debt may reduce our liquidity, curtail our access to financing markets, impact our standing with credit agencies and increase the cash flow required for debt service. Any incremental debt incurred to finance an acquisition could also place significant constraints on the operation of our business.

Furthermore, any future acquisitions of businesses or facilities could entail a number of additional risks, including:

•problems with effective integration of acquired operations;

•the inability to maintain key pre-acquisition business relationships;

•increased operating costs;

•the diversion of our management team from our other operations;

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•problems with regulatory agencies;

•exposure to unanticipated liabilities;

•difficulties in realizing projected efficiencies, synergies and cost savings; and

•changes in our credit rating and financing costs.

The terms of our credit facility place restrictions on us, which create risks of default and reduce our flexibility.

Our current credit facility contains a number of affirmative, negative, and financial covenants that may limit our ability to take certain actions and require us to comply with specified financial ratios and other performance covenants. No assurance can be provided that we will not violate the covenants of our secured credit facility in the future. If we are unable to comply with our financial covenants in the future, our lenders could pursue their contractual remedies under the credit facility, including requiring the immediate repayment in full of all amounts outstanding, if any. Additionally, we cannot be certain that, if the lenders demanded immediate repayment of any amounts outstanding, we would be able to secure adequate or timely replacement financing on acceptable terms or at all.

Our ability to make payments due on debt we may have outstanding will depend upon our future operating performance, which is subject to general economic and competitive conditions and to financial, business and other factors, many of which we cannot control. If the cash flow from our operating activities is insufficient to make these payments, we may take actions such as delaying or reducing capital expenditures, attempting to restructure or refinance our debt, selling assets or operations or seeking additional equity capital. Some or all of these actions may not be sufficient to allow us to service our debt obligations and we could be required to file for bankruptcy. Further, we may be unable to take any of these actions on satisfactory terms, in a timely manner or at all. In addition, our credit agreements may limit our ability to take several of these actions. Our failure to generate sufficient funds to pay our debts or to undertake any of these actions successfully could materially and adversely affect our business, financial position, results of operations and cash flows.

We have incurred and will continue to incur significant costs in connection with our discontinued HCRA services business.

As of December 31, 2015, we discontinued the HCRA services business, but will continue to incur significant costs as it winds down. There are complex regulations governing many healthcare payments and recoupments, including a multi-layered scheme for provider appeals of overpayment determinations under the Medicare RAC program. These regulations, the terms of the Company’s contracts and the complexity of Medicare and other healthcare data, systems and processes, generally make it more difficult and costly to exit this portion of our business. Finally, while we maintain reserves on our balance sheet, any appeals settlements which require us to repay a significant portion of our historical fees could materially and adversely impact our results of operations and cash flow.

We may be unable to protect and maintain the competitive advantage of our proprietary technology and intellectual property rights.

Our operations could be materially and adversely affected if we are not able to protect our proprietary software, audit techniques and methodologies, and other proprietary intellectual property rights. We generally rely on a combination of trade secret and copyright laws, nondisclosure and other contractual arrangements and technical measures to protect our proprietary rights. Although we presently hold U.S. registered copyrights on certain of our proprietary technology and certain U.S. and foreign registered trademarks, we may be unable to obtain similar protection on our other intellectual property. In addition, our foreign registered trademarks may not receive the same enforcement protection as our U.S. registered trademarks.

Additionally, to protect our confidential and trade secret information, we generally enter into nondisclosure agreements with our employees, consultants, clients and potential clients. We also limit access to, and distribution of, our proprietary information. Nevertheless, we may be unable to deter misappropriation or unauthorized dissemination of our proprietary information, detect unauthorized use and take appropriate steps to enforce our intellectual property rights. In spite of the level of care taken to protect our intellectual property, there is no guarantee that our sensitive proprietary information will not be improperly accessed or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology.

We could be subjected to claims of intellectual property infringement.

Although we are not aware of any infringement of our services and products on the intellectual property rights of others, the potential for intellectual property infringement claims continually increases as the universe of intellectual property continues to rapidly expand, and we are subject to the risk that someone else will assert a claim against us for violating their intellectual property rights. Any claim for intellectual property infringement, even if not meritorious, could be expensive to defend. If we were held liable for infringing third party intellectual property rights, we could incur substantial damage awards, and potentially be required to cease using the technology, produce non-infringing technology or obtain a license to use such technology. Such potential liabilities or increased costs could be material to us.

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Cyber-security incidents, including data security breaches or computer viruses, could harm our business by disrupting our delivery of services, damaging our reputation or exposing us to liability.

We receive, process, store and transmit, often electronically, the confidential data of our clients and others. Unauthorized access to our computer systems or stored data could result in the theft or improper disclosure of confidential information, the deletion or modification of records or could cause interruptions in our operations. These cyber-security risks increase when we transmit information from one location to another, including transmissions over the Internet or other electronic networks. Despite implemented security measures, our facilities, systems and procedures, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, software viruses, misplaced or lost data, programming and/or human errors or other similar events which may disrupt our delivery of services or expose the confidential information of our clients and others. Any security breach involving the misappropriation, loss or other unauthorized disclosure or use of confidential information of our clients or others, whether by us or a third party, could (i) subject us to civil and criminal penalties, (ii) have a negative impact on our reputation, (iii) expose us to liability to our clients, third parties or government authorities, (iv) cause our present and potential clients to choose another service provider, and (v) cause us to incur significant remediation costs. Any of these developments could have a material adverse effect on our business, results of operations, financial position, and cash flows.

Our ability to deliver our SaaS solutions is dependent on the development and maintenance of the infrastructure of the Internet by third parties.

The infrastructure of the Internet consists of multiple fragmented networks. Multiple third-party organizations run this infrastructure together under the governance of the Internet Corporation for Assigned Numbers and Names (ICANN) and the Internet Assigned Numbers Authority under the stewardship of ICANN. The Internet has experienced outages and other delays resulting from damage to portions of infrastructure, denial-of-service attacks or related cyber incidents, and the Internet could face outages and delays in the future. These outages and delays could reduce the level of Internet usage or result in fragmentation of the Internet, resulting in multiple separate networks lacking interconnection. These scenarios are outside of our control and could impair the delivery of our SaaS solutions to our clients. Resulting interruptions in our SaaS solutions or the ability of our clients to access our SaaS solutions could result in a loss of potential or existing clients and harm our business.

Our software and SaaS solutions may not be error-free and could result in claims of breach of contract and liabilities.

Our software and SaaS solutions are very complex and may not be error-free, especially when first released. Although we perform extensive testing, the failure of any solution to operate in accordance with its specifications, documentation or applicable license agreement could require us to correct the deficiency. If such deficiency cannot be corrected in accordance with the relevant contract for services, the deficiency could constitute a material breach of the contract allowing for the contract’s termination and possibly subjecting us to liability. Also, we sometimes indemnify our clients against third-party infringement claims and certain other losses. If such claims for indemnification are made, even if they are without merit, they could be expensive to resolve. A significant judgment against us could have a material adverse impact on us.

Operational failures in our data processing facilities could harm our business and reputation.

An interruption of our SaaS hosting facilities or other data processing services, including an interruption caused by damage or destruction of communication lines or physical facilities or a failure of data processing equipment, could result in a loss of clients, difficulties in obtaining new clients and a reduction in revenue. In addition, we also may be liable to third parties or our clients because of such interruption. These risks would increase with longer service interruptions. Despite any disaster recovery and business continuity plans and precautions we have implemented (including insurance) to protect against the effects of service delivery interruptions, such interruptions could result in a material adverse effect on our business, results of operations, financial position, and cash flows.

Our investment of substantial capital in information technology systems, and a failure to successfully implement such systems could adversely affect our business.

We have invested and continue to invest substantial amounts in the development and implementation of information technology systems. Although investments are carefully planned, there can be no assurance that such systems will justify the related investments. If we fail to realize the benefits expected from our information technology system investments, or if we fail to do so within the envisioned time frame, it could have an adverse effect on our results of operations, financial position, and cash flows.

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Client and vendor bankruptcies and financial difficulties could reduce our earnings.

Our clients generally operate in intensely competitive environments and, accordingly, bankruptcy filings by our clients are not uncommon. Bankruptcy filings by our large clients or the significant vendors who supply them or unexpectedly large vendor claim chargebacks lodged against one or more of our larger clients could have a materially adverse effect on our financial condition, results of operations, and cash flows. Similarly, our inability to collect our accounts receivable due to other financial difficulties of one or more of our large clients could adversely affect our financial position, results of operations, and cash flows.

Economic conditions which adversely impact our clients and their vendors in the retail industry in the United Kingdom and Europe may continue to have a negative impact on our revenue. Specifically, client liquidity and the liquidity of client vendors can have a significant impact on claim production, the claim approval process, and the ability of clients to offset or otherwise make recoveries from their vendors.

If a client files for bankruptcy, we could be subject to an action to recover certain payments received in the 90 days prior to the bankruptcy filing known as “preference payments.” If we are unsuccessful in defending against such claims, we would be required to make unbudgeted cash payments which could strain our financial liquidity, and our earnings would be reduced.

Our failure to retain the services of key members of our management team and highly skilled personnel could adversely impact our operations and financial performance.

Our future success depends largely on the efforts and skills of our management team, including our executive officers and other key employees. As such, we have entered into employment agreements with key members of our management team. While these employment agreements include limits on the ability of key employees to directly compete with us in the future, nothing prevents them from leaving our Company. We also do not maintain “key person” life insurance policies on any of our executive officers or other key employees. Thus, we may have to incur costs to replace such employees if we were to lose their services, and our ability to execute our business strategy could be impaired if we are unable to replace such employees in a timely manner.

In addition, it is especially challenging to attract and retain highly qualified skilled auditors and other professionals in an industry where competition for skilled personnel is intense. Accordingly, our future performance also depends, in part, on the ability of our management team to work together effectively, manage our workforce, and retain highly qualified personnel.

We rely on operations outside the U.S. for a significant portion of our revenue and are increasingly dependent on operations outside the U.S. for supporting our operations globally.

Operations outside the U.S. generated 42.2% of our annual revenue from continuing operations in 2017, 42.6% in 2016 and 41.8% in 2015. These international operations are subject to numerous risks, including:

• greater exposure to the possibility of economic instability, the disruption of operations from labor and political disturbances, expropriation or war in the international markets we serve;

• difficulties in staffing and managing foreign operations and in collecting accounts receivable;

• fluctuations in currency exchange rates, particularly weaknesses in the British pound, the euro, the Canadian dollar, the Mexican peso, the Brazilian real, the Australian dollar, the Indian rupee and other currencies of countries in which we transact business, which could result in currency translations that materially reduce our revenue and earnings;

• costs associated with adapting our services to our foreign clients’ needs;

• unexpected changes in regulatory requirements and laws;

• expenses and legal restrictions associated with transferring earnings from our foreign subsidiaries to us;

• difficulties in complying with a variety of foreign laws and regulations, such as those relating to data protection and employment, as well as U.S. laws affecting operations outside of the United States;

• business interruptions due to widespread disease, actual or potential terrorist activities, or other catastrophes;

• reduced or limited protection of our intellectual property rights;

• longer accounts receivable cycles; and

• competition with large or state-owned enterprises or regulations that effectively limit our operations and favor local competitors.

Because we expect a significant portion of our revenue to continue to come from operations outside the U.S., and expect to continue transitioning certain of our operations to locations outside the U.S., the occurrence of any of these events could materially and adversely affect our business, financial position, results of operations, and cash flows.

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In 2017, our European operations accounted for 20.4% of our consolidated revenue from continuing operations. There have been continuing concerns and uncertainties regarding the stability of certain European economies. A continued decline in the economic conditions in Europe may materially and adversely affect our operations both in Europe and on a consolidated basis.

Furthermore, in 2010 we began transitioning certain of our core data processing and other functions to locations outside the U.S., including India, where approximately 20% of our employees were located on December 31, 2017. While our operations in India have been key to serving clients more efficiently and cost-effectively under our improved service delivery model, India has from time to time experienced instances of civil unrest and hostilities with neighboring countries. Geopolitical conflicts, military activity, terrorist attacks, or other political uncertainties in the future could adversely affect the Indian economy by disrupting communications and making business operations and travel more difficult, which may have a material adverse effect on our ability to deliver services from India. Disruption of our Indian operations could materially and adversely affect our profitability and our ability to execute our growth strategy.

Our business operates in highly competitive environments and is subject to pricing pressure.

The environments in which our business operates are highly competitive, with numerous other recovery audit firms and other service providers. In addition, many of our recovery audit clients have developed their own internal recovery audit capabilities. As a result of competition among the providers of these services and the availability of certain recovery audit services from clients’ internal audit departments, our business is subject to intense rate pressure. Our Adjacent Services business also has numerous competitors varying in size, market strength and specialization, many of whom have established and well-known franchises and brands. Intense price competition faced by all of our service lines could negatively impact our profit margins and have a potential adverse effect on our business, financial position, results of operations, and cash flows.

Our client contracts generally contain provisions under which the client may terminate our services prior to the completion of the agreement.

Many of our client contracts provide that the client may terminate the contract without cause prior to the end of the term of the agreement by providing us with relatively short prior written notice of the termination. As a result, the existence of contractual relationships with our clients is not an assurance that we will continue to provide services for our clients through the entire term of their respective agreements. If clients representing a significant portion of our revenue terminated their agreements unexpectedly, we may not, in the short-term, be able to replace the revenue and income from such contracts and this would have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, client contract terminations also could harm our reputation within the industry which could negatively impact our ability to obtain new clients.

Our charges to earnings resulting from acquisition, restructuring and integration costs may materially adversely affect the market value of our common stock.

We account for the completion of our acquisitions using the purchase method of accounting. We allocate the total estimated purchase prices to net tangible assets, amortizable intangible assets and indefinite-lived intangible assets, and based on their fair values as of the date of completion of the acquisitions, record the excess of the purchase price over those fair values as goodwill. Our financial results, including earnings per share, could be adversely affected by a number of financial adjustments required in purchase accounting including the following:

• we will incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection with acquisitions during such estimated useful lives;

• we will incur additional depreciation expense as a result of recording purchased tangible assets; and

• to the extent the value of goodwill or intangible assets becomes impaired, we may be required to incur material charges relating to the impairment of those assets.

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Our failure to comply with applicable governmental privacy laws and regulations in the U.S. and internationally could substantially impact our business, operations, financial position, and cash flows. Additionally, compliance with the laws and regulations relating to the handing of personal data may impede our ability to provide services in certain jurisdictions and may result in increased costs.

We are subject to extensive and evolving federal, state and foreign privacy laws and regulations. Changes in privacy laws or regulations or new interpretations of existing laws or regulations could have a substantial effect on our business, financial condition and results of operations. Failure to comply with such regulations could result in the termination or loss of contracts, the imposition of contractual damages, civil sanctions, damage to the Company’s reputation, or in certain circumstances, criminal penalties, any of which could have a material adverse effect on our results of operations, financial position, cash flows, business and prospects. Determining compliance with such regulations is complicated by the fact that the interpretations of these laws and regulations by governing regulatory authorities and the courts evolve over time, and many of the provisions of such laws and regulations are open to a wide range of interpretations. There can be no assurance that we are or have been in compliance with all applicable existing laws and regulations or that we will be able to comply with new laws or regulations.

With respect to trans-border data flows from the European Economic Area, or EEA, we are certified under the U.S.-European Union Privacy Shield Framework, as agreed to by the U.S. Department of Commerce and the European Union (“EU”), as a means to legally transfer European personal information from Europe to the United States; however, it is possible that the U.S.-European Union Privacy Shield Framework may be challenged in EU courts and there is some uncertainty regarding its future validity and our ability to rely on it for EU to U.S. data transfers. In addition, despite our Privacy Shield certification and extensive efforts to maintain the privacy, integrity and controlled use of confidential information, including personally identifiable information, through a combination of hardware, software, and physical security, coupled with strong internal data security processes, procedures and controls that we believe meet or exceed relevant laws, regulations and industry best practices, we may experience hesitancy, reluctance, or refusal by European or multi-national clients to use our services due to the potential risk exposure they may face as a result of their data being transferred outside of the European Union.

Further, in 2016, the EU adopted a new law governing data protection practices and privacy called the General Data Protection Regulation (“GDPR”), which becomes effective in May 2018. GDPR is a redesign of the European Data Protection Directive 95/46/EC and is intended to boost the online and offline privacy rights of individuals. GDPR will implement more stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, increased requirements to correct or erase an individual’s information upon request, mandatory data breach notification requirements and higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. The GDPR will also significantly increase penalties for non-compliance.

Laws are also increasingly aimed at the use of personal information for marketing purposes, such as the EU’s e-Privacy Directive, and the country-specific regulations that implement that directive. Such laws and regulations are also subject to new and differing interpretations and may be inconsistent among jurisdictions.

The EU’s e-Privacy Directive, the EU-U.S. Privacy Shield Framework, the GDPR and other regulations could reduce demand for our services or restrict our ability to store and process data or, in some cases, impact our ability to offer our services in certain locations or our customers' ability to deploy our solutions globally. Failure to provide adequate privacy protections and maintain compliance with the new data privacy laws, including the EU-U.S. Privacy Shield framework and the GDPR, could have a material adverse effect on our financial condition and results of operations.

Federal tax reform in the United States could adversely affect our business and financial condition.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the United States. The Company is still in the process of analyzing the Tax Act and its possible effects on the Company. The Tax Act includes a number of provisions, including the lowering of the U.S. corporate tax rate from 35% to 21%, the elimination of U.S. tax on foreign earnings (subject to certain exceptions), one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, limitation of the tax deduction for interest expense, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. While there are benefits, there is also substantial uncertainty regarding the overall impact and details of the Tax Act. The intended and unintended consequences of the Tax Act on our business and on holders of our common stock is uncertain and could be adverse. The Company anticipates that the impact of the Tax Act may be material to our business, financial condition and results of operations.

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Certain ownership changes may limit our ability to use our net operating losses.

We have substantial tax loss and credit carry-forwards for U.S. federal income tax purposes. On December 30, 2016, the Company experienced an ownership change as defined under Section 382 of the Internal Revenue Code (“IRC”). This ownership change resulted in an annual IRC Section 382 limitation that limits the use of certain tax attribute carry-forwards and also resulted in the write-off of certain deferred tax assets and the related valuation allowances that the Company recorded in. The Company has performed its assessment and has determined that $87.3 million of the gross federal net operating losses and $62.9 million of gross state net operating losses outstanding as of December 30, 2016 will be available for use going forward. If a future ownership change occurs and limits our ability to use our historical net operating loss carryforwards, it could have a material adverse impact on our business, financial position and results of operations by increasing our future tax obligations.

Certain of our tax positions may be subject to challenge by the Internal Revenue Service and other tax authorities, and if successful, these challenges could increase our future tax liabilities and expense.

For U.S. federal income tax purposes, as well as local country tax purposes in the jurisdictions where we operate, from time to time we take positions under provisions of applicable tax law that are subject to varying interpretations. Certain of our tax positions may be subject to challenge by the applicable taxing authorities, including, in the U.S., the Internal Revenue Service. If our tax positions are successfully challenged, our future tax liabilities and expense could significantly increase.

While we believe that our tax positions are proper based on applicable law and we believe that it is more likely than not that we would prevail with respect to challenges to these positions, we can make no assurances that we would prevail if our positions are challenged or that business economics would justify the mounting of a legal defense against such challenges. If our tax positions are successfully challenged by the U.S. or non-U.S. taxing authorities, it could increase our future tax liabilities and expense and have a material adverse impact on our financial position, results of operations and cash flows.

We may have exposure to additional income tax liabilities or additional costs if the U.S. government changes certain U.S. tax rules or other tax laws applicable to U.S. corporations doing business in foreign jurisdictions.

We are a U.S. corporation that conducts business both in the U.S. and in foreign jurisdictions. From time to time, proposals for changes to tax and other laws are made that may negatively impact U.S. corporations doing business in foreign jurisdictions, including proposals for tax reform. While the scope of future changes remains unclear, proposed changes might include limiting the ability of U.S. corporations to deduct certain expenses attributable to offshore earnings, modifying the foreign tax credit rules and taxing currently certain transfers of intangible assets offshore or imposing other economic disincentives to doing business outside of the U.S. The enactment of some or all of these proposals could increase the Company’s effective tax rate or otherwise adversely affect our profitability.

Future impairment of goodwill, other intangible assets and long-lived assets would reduce our future earnings.

As of December 31, 2017, the Company’s goodwill and other intangible assets totaled $36.1 million. We must perform periodic assessments to determine whether some portion, or all, of our goodwill, intangible assets and other long-lived assets are impaired. Our most recent assessment showed no impairment to our goodwill, intangible assets and other long-lived assets, but future impairment testing could result in a determination that our goodwill, other intangible assets or our other long-lived assets have been impaired. Future adverse changes in the business environment or in our ability to perform audits successfully and compete effectively in our markets or the discontinuation of our use of certain of our intangible or other long-lived assets could result in impairment which could materially adversely impact future earnings.

Our articles of incorporation, bylaws and Georgia law may inhibit a change of control that shareholders may favor.

Our articles of incorporation, bylaws and Georgia law contain provisions that may delay, deter or inhibit a future acquisition of PRGX that is not approved by our Board of Directors. This could occur even if our shareholders receive attractive offers for their shares or if a substantial number, or even a majority, of our shareholders believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring us to negotiate with and obtain the approval of our Board of Directors in connection with the transaction. Provisions that could delay, deter or inhibit a future acquisition include the following:

• a classified Board of Directors;

• the requirement that our shareholders may only remove directors for cause;

• specified requirements for calling special meetings of shareholders;

• the ability of the Board of Directors to consider the interests of various constituencies, including our employees, clients and creditors and the local community, in making decisions; and

• the ability of the Board of Directors to issue shares of preferred stock with such designations, powers, preferences and rights as it determines, without any further vote or action by our shareholders.

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Our stock price has been and may continue to be volatile.

Our common stock is currently traded on The Nasdaq Global Select Market. The trading price of our common stock has been and may continue to be subject to large fluctuations. For example, for the year ended December 31, 2017, our stock traded as high as $7.90 per share and as low as $5.35 per share. Our stock price may increase or decrease in response to a number of events and factors, including:

•future announcements concerning us, key clients or competitors;

•variations in operating results and liquidity;

•changes in financial estimates and recommendations by securities analysts;

•developments with respect to technology or litigation;

•changes in applicable laws and regulations;

•the operating and stock price performance of other companies that investors may deem comparable to our

Company;

•acquisitions and financings; and

•sales and purchases of our stock by insiders.

Fluctuations in the stock market, generally, also impact the volatility of our stock price. Finally, general economic conditions and stock market movements may adversely affect the price of our common stock, regardless of our operating performance.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Our principal executive offices are located in approximately 58,000 square feet of office space in Atlanta, Georgia. We have subleased approximately 3,000 square feet of our principal executive office space to independent third parties. In January 2014, we amended the lease for our principal executive offices to extend the term through December 31, 2021, reduce the lease payment for 2014, and reduce the space under lease to approximately 58,000 square feet effective January 1, 2015. This space is used by our Recovery Audit Services - Americas and Adjacent Services segments and is the primary location of our Corporate Support personnel. Our various operating units lease numerous other parcels of operating space elsewhere in the U.S. and in the various other countries in which we currently conduct our business.

Excluding the lease for our principal executive offices, the majority of our real property leases are individually less than five years in duration. See Contractual Obligations and Other Commitments in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Form 10-K and Note 6 of “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Form 10-K for a discussion of costs we may incur in the future to the extent we (i) reduce our office space capacity or (ii) commit to, or occupy, new properties in the locations in which we operate.

ITEM 3. Legal Proceedings

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

ITEM 4. Mine Safety Disclosures

Not applicable.

15

PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded under the symbol “PRGX” on The Nasdaq Global Select Market (Nasdaq). The Company has not paid cash dividends on its common stock since it became a public company in 1996 and does not intend to pay cash dividends in the foreseeable future. Moreover, restrictive covenants included in our secured credit facility specifically prohibit payment of cash dividends. As of February 28, 2018, there were 104 holders of record of our common stock and management believes there are approximately 2,165 beneficial holders of our common stock. The following table sets forth, for the quarters indicated, the range of high and low sales prices for the Company’s common stock as reported by Nasdaq during 2017 and 2016.

2017 Calendar Quarter	High		Low
1st Quarter	$	6.59	$	5.35
2nd Quarter	7.25		5.90
3rd Quarter	7.30		5.40
4th Quarter	7.90		6.62
2016 Calendar Quarter	High		Low
1st Quarter	$	4.90	$	3.04
2nd Quarter	5.81		4.56
3rd Quarter	5.50		4.58
4th Quarter	6.20		4.25

Issuer Purchases of Equity Securities

There were no purchases of the Company's equity securities made by or on behalf of the Company or any affiliated purchaser (as defined in Exchange Act Rule 10b-18) during the three-month period ended December 31, 2017.

16

Performance Graph

Set forth below is a line graph presentation comparing the cumulative shareholder return on our common stock, on an indexed basis, against cumulative total returns of The Nasdaq Composite Index and the RDG Technology Composite Index. The graph assumes that the value of the investment in the common stock in each index was $100 on December 31, 2012 and shows total return on investment for the period beginning December 31, 2012 through December 31, 2017, assuming reinvestment of any dividends. Notwithstanding anything to the contrary set forth in any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this Annual Report on Form 10-K, in whole or in part, the Performance Graph presented below shall not be incorporated by reference into any such filings.

Cumulative Total Return
	12/12	12/13	12/14	12/15	12/16	12/17
PRGX Global, Inc.	100.00	104.19	88.68	57.67	91.47	110.08
NASDAQ Composite	100.00	141.63	162.09	173.33	187.19	242.29
RDG Technology Composite	100.00	132.51	155.05	161.00	181.12	247.79

17

ITEM 6. Selected Financial Data

The following table sets forth selected financial data from continuing operations for the Company as of and for each of the five years in the period ended December 31, 2017. The following data reflects the business acquisitions that we have completed through December 31, 2017. We have included the results of operations for these acquired businesses in our results of operations since the date of their acquisitions. We have derived this historical consolidated financial data from our Consolidated Financial Statements and Notes thereto, which have been audited by our Independent Registered Public Accounting Firm. The Consolidated Balance Sheets as of December 31, 2017 and 2016, and the related Consolidated Statements of Operations, Comprehensive Income (Loss), Shareholders’ Equity and Cash Flows for each of the years in the three-year period ended December 31, 2017 and the report of the Independent Registered Public Accounting Firm thereon are included in Item 8 of this Form 10-K.

The data presented below should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K and other financial information appearing elsewhere in this Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Certain reclassifications have been made to the prior periods to conform to the current period presentation.

	Years Ended December 31, (1)
	2017			2016			2015			2014			2013
	(In thousands, except per share data)
Revenue, net	$	161,620		$	140,844		$	138,302		$	161,552		$	178,268
Operating expenses:
Cost of revenue	102,052			91,299			93,169			110,890			112,853
Selling, general and administrative expenses	46,941			39,399			32,284			38,581			46,143
Depreciation of property and equipment	4,569			5,033			5,317			6,025			6,783
Amortization of intangible assets	3,634			1,832			2,458			3,531			4,997
Acquisition-related adjustments	(2,283		)	—			—			—			—
Impairment charges	—			—			—			—			2,773
Total operating expenses	154,913			137,563			133,228			159,027			173,549
Operating income from continuing operations	6,707			3,281			5,074			2,525			4,719
Foreign currency transaction (gains) losses on short-term intercompany balances	(2,190		)	84			2,165			2,003			(13		)
Interest expense (income), net	1,539			(153		)	(190		)	(77		)	(77		)
Other (income) loss	(160		)	(121		)	1,191			57			—
Net income from continuing operations before income tax	7,518			3,471			1,908			542			4,809
Income tax expense (2)	2,962			1,242			369			3,241			2,755
Net income (loss) from continuing operations	$	4,556		$	2,229		$	1,539		$	(2,699	)	$	2,054
Basic earnings (loss) per common share	$	0.21		$	0.10		$	0.06		$	(0.09	)	$	0.07
Diluted earnings (loss) per common share	$	0.21		$	0.10		$	0.06		$	(0.09	)	$	0.07

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	December 31,
	2017		2016		2015		2014		2013
Balance Sheet Data (consolidated): (3)	(In thousands)
Cash and cash equivalents	$	18,823	$	15,723	$	15,122	$	25,735	$	43,700
Working capital	24,070		16,706		21,641		36,006		50,506
Total assets	120,218		93,474		80,391		102,782		132,829
Long-term debt, excluding current installments	13,526		—		—		—		—
Total shareholders' equity	$	60,314	$	52,390	$	52,415	$	70,986	$	93,828

(1) Data for all years prior to 2015 has been restated in order to reflect only continuing operations.

(2) The taxes recorded for 2014 were primarily related to the recording of a valuation allowance on the future use of net losses in our U.K. operations. The high effective tax rate relative to the U.S. federal statutory rate in 2013 is due to taxes on income of foreign subsidiaries with no benefit recognized for losses incurred in the U.S. due to the Company having a deferred tax asset valuation allowance. See Note 1 (i) and Note 7 of “Notes to Consolidated Financial Statements” included in Item 8 of this Form 10-K.

(3) Data in this table reflects the balance sheet amounts for both continuing and discontinued operations.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

PRGX Global, Inc. is a global leader in recovery audit and spend analytics, providing services within our clients' Source-to-Pay ("S2P") business processes. At the heart of our client services portfolio is the core capability of mining client data to deliver "actionable insights." Actionable insights allow our clients to improve their cash flow and profitability by reducing costs, improving business processes and managing risks.

Our services include recovery audit, spend analytics and supplier information management ("SIM") services. We serve clients in more than 30 countries and conduct our operations through three reportable segments: Recovery Audit Services - Americas, Recovery Audit Services - Europe/Asia-Pacific and Adjacent Services. The Recovery Audit Services - Americas segment represents recovery audit services we provide in the U.S., Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services we provide in Europe, Asia and the Pacific region. The Adjacent Services segment includes advisory, analytics and SIM services, as well as our PRGX OPTIX suite of analytics tools. We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the three reportable segments in Corporate Support.

Recovery auditing is a business service focused on finding overpayments created by errors in payment transactions, such as missed or inaccurate discounts, allowances and rebates, vendor pricing errors, erroneous coding and duplicate payments. Recovery audit services are part of the broader S2P services market space, focused on the payment side of the S2P market.

Generally, we earn our recovery audit revenue on a contingent fee basis by identifying overpayments made by our clients, assisting our clients in recovering the overpayments from their vendors, and collecting a specified percentage of the recoveries from our clients as our fee. The fee percentage we earn is based on specific contracts with our clients that generally also specify: (a) time periods covered by the audit; (b) the nature and extent of services we are to provide; and (c) the client’s responsibilities to assist and cooperate with us. Clients generally recover claims by either taking credits against outstanding payables or future purchases from the relevant vendors, or receiving refund checks directly from those vendors. The manner in which a claim is recovered by a client is often dictated by industry practice. In addition, many clients establish client-specific procedural guidelines that we must satisfy prior to submitting claims for client approval. Our recovery audit business also includes contract compliance services which focus on auditing complex supplier billings against large services, construction and licensing contracts, and is relevant to a large portion of our client base. Such services include verification of the accuracy of third party reporting, appropriateness of allocations and other charges in cost or revenue sharing types of arrangements, adherence to contract covenants and other risk mitigation requirements and numerous other reviews and procedures to assist our clients with proper monitoring and enforcement of the obligations of their contractors. Services in our Adjacent Services segment can be project-based (advisory services), which are typically billed on a rates and hours basis, or subscription-based (typically SaaS offerings), which are billed on a monthly basis.

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

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

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

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

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

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We have processes in place to mitigate the financial impact arising from fluctuations in our businesses. These processes include reviewing and monitoring financial and operational results through our internal reporting, devoting substantial efforts to develop an improved service delivery model to enable us to more cost effectively serve our clients, and maintaining the flexibility to control the compensation-related portions of our cost structure.

While the net impact of the economic environment on our recovery audit revenue is difficult to determine or predict, we believe that for the foreseeable future, our revenue will remain at a level that will allow us to continue investing in our growth strategy. Included in our growth strategy are our investments in developing and enhancing our technology platforms and improved operational processes within our recovery audit business. In addition, we continue to pursue the expansion of our business beyond retail recovery audit services by growing the portion of our business that provides recovery audit services to enterprises other than retailers; growing our contract compliance service offerings; expanding into new industry verticals, such as telecommunications, manufacturing and resources; and growing our Adjacent Services which includes our global PRGX OPTIXanalytics solutions and our SIM services offering. We believe that our recovery audit business uniquely positions us to create value for clients and gives us a competitive advantage over other players in the broader S2P market for four fundamental reasons:

• 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.

As our clients’ data volumes and complexity levels continue to grow, we are using our deep data management experience to develop new actionable insight solutions, as well as to develop custom analytics and data transformation services. Taken together, our deep understanding of our clients’ S2P data and our technology-based solutions provide multiple routes to help our clients achieve greater profitability. Our Adjacent Services business targets client functional and process areas where we have established expertise, enabling us to provide services to finance, merchandising and procurement executives to improve working capital, reduce supplier discrepancies, optimize purchasing leverage in vendor pricing negotiations, improve insight into product margin and true cost of goods for resale, identify and manage risks associated with vendor compliance, improve quality of vendor master data and improve visibility and diagnostics of direct and indirect spend.

In an effort to accelerate our growth and expand our technology offerings within Adjacent Services, during the fourth quarter of 2016, we acquired Lavante, Inc. ("Lavante"), a SaaS-based SIM and recovery audit services firm based in San Jose, California. We have included the results of Lavante from the date of acquisition through December 31, 2017 in our Consolidated Statement of Operations.

In the first quarter of 2017, we completed the acquisition of substantially all of the assets of Cost & Compliance Associates, LLC and Cost & Compliance Associates Limited (collectively, "C&CA"), a commercial recovery audit and contract compliance firm with operations in the U.S. and the UK. The C&CA acquisition was immediately accretive to our profitability, significantly increased our market share within the commercial industry and brought a rich set of global clients and a skilled and experienced workforce. We have included the results of C&CA from the date of acquisition through December 31, 2017 in our Consolidated Statement of Operations.

In 2017, we continued to enhance our PRGX OPTIX suite of analytics tools with multiple improvements to the features and functionality. The PRGX OPTIX suite facilitates S2P business decisions through actionable, data-enabled insights that are delivered through four primary modules - Product, Payment, Spend and Supplier. Each of these modules is powered by the core PRGX OPTIX platform that provides the ability to process and visualize S2P data delivered via a SaaS interface.

In the fourth quarter of 2017, we announced a multi-year SaaS technology and managed services contract based on our Lavante SIM platform, which we refer to as our Deduction Management solution. We believe this solution highlights our competitive advantage resulting from integrating recovery audit data and knowledge with market leading technology applications to deliver expanded client value.

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Discontinued Operations

As of December 31, 2015, the Company discontinued its HCRA business. PRGX entered into agreements with third parties to fulfill its Medicare 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.

Results from Continuing Operations

The discussions and financial results in the Item 7 reflect our continuing operations.

The following table sets forth the percentage of revenue represented by certain items in our Consolidated Statements of Operations for the periods indicated:

	Years Ended December 31,
	2017		2016		2015
Revenue, net	100.0	%	100.0	%	100.0	%
Operating expenses:
Cost of revenue	63.1		64.8		67.4
Selling, general and administrative expenses	29.0		28.0		23.3
Depreciation of property and equipment	2.8		3.6		3.8
Amortization of intangible assets	2.3		1.3		1.8
Acquisition-related adjustments	(1.4	)	—		—
Total operating expenses	95.8		97.7		96.3
Operating income from continuing operations	4.2		2.3		3.7
Foreign currency transaction (gains) losses on short-term intercompany balances	(1.3	)	0.1		1.6
Interest expense (income), net	1.0		(0.1	)	(0.1	)
Other (income) loss	(0.1	)	(0.1	)	0.9
Net income from continuing operations before income tax	4.6		2.4		1.3
Income tax expense	1.8		0.9		0.3
Net income from continuing operations	2.8	%	1.5	%	1.0	%

Year Ended December 31, 2017 Compared to Prior Years from Continuing Operations

Revenue, net. Revenue, net was as follows (in thousands):

	Years Ended December 31,
	2017		2016		2015
Recovery Audit Services – Americas	$	113,122	$	99,861	$	97,009
Recovery Audit Services – Europe/Asia-Pacific	44,372		37,335		36,264
Adjacent Services	4,126		3,648		5,029
Total	$	161,620	$	140,844	$	138,302

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Consolidated revenue from continuing operations increased by $20.8 million, or 14.8%, in 2017 compared to 2016, and increased by $2.5 million, or 1.8%, in 2016 compared to 2015. On an organic basis (excluding C&CA and, for the first three quarters of 2017, Lavante), our revenue increased 6.0% in 2017 compared to 2016. Our 2017 consolidated year over year growth was led by our global retail and commercial recovery audit businesses, which are the largest of our recovery audit businesses. We experienced some changes in our reported revenue based on the strength of the U.S. dollar relative to foreign currencies. On a constant dollar basis, adjusted for changes in foreign exchange ("FX") rates, consolidated revenue increased 14.1% in 2017 compared to 2016 and increased 4.5% in 2016 compared to 2015. On a constant dollar basis, we organically grew our revenue 5.5% in 2017 compared to 2016. Below is a discussion of our revenue for our three reportable segments.

Recovery Audit Services - Americas revenue increased $13.3 million, or 13.3%, in 2017 compared to 2016 and increased $2.8 million, or 2.9%, in 2016 compared to 2015. On an organic basis, our revenue increased by 4.6% in 2017 compared to 2016. The 2017 year over year growth was led by our retail and commercial recovery audit businesses, which are the largest of our recovery audit businesses. Changes in the value of the U.S. dollar relative to currencies in Canada and Latin America positively impacted reported revenue in 2017 and negatively impacted reported revenue in 2016. On a constant dollar basis, adjusted for changes in FX rates, 2017 revenue increased 12.9% compared to 2016 and increased 3.9% in 2016 compared to 2015. On a constant dollar basis, we organically grew our revenue by 4.3% in 2017 compared to 2016. The growth in our Recovery Audit Services - Americas revenue in 2017 and 2016 was due to a number of factors including stronger claims conversion, the implementation of acceleration and maturity model programs, increased staffing at certain audits, and enhancements to our proprietary audit technologies. This growth was partially offset by continued rate pressures.

Recovery Audit Services - Europe/Asia-Pacific revenue increased $7.0 million, or 18.8%, in 2017 compared to 2016 and increased $1.1 million, or 3.0% in 2016, compared to 2015. On an organic basis, our revenue increased by 10.4% in 2017 compared to 2016. The revenue growth over the past two years was primarily driven by stronger claims conversion, the implementation of acceleration and maturity model programs, increased staffing at certain audits and enhancements to our proprietary audit technologies. This growth was partially offset by continued rate pressures. Changes in the value of the U.S. dollar relative to currencies in Europe, Asia, and the Pacific positively impacted reported revenue in 2017 and negatively impacted reported revenue in 2016. On a constant dollar basis, adjusted for changes in FX rates, 2017 revenue increased by 17.5% compared to 2016 and 2016 revenue increased by 9.6% compared to 2015. On a constant dollar basis, Recovery Audit Services - Europe/Asia-Pacific organic revenue increased 9.2% in 2017 compared to 2016.

Adjacent Services revenue increased by $0.5 million, or 13.1%, in 2017 compared to 2016 and decreased $1.4 million, or 27.5%, in 2016 compared to 2015. The increase in revenue in 2017 compared to 2016 was due to new advisory work and the launch of the Lavante SIM-based Deduction Management contract announced in the fourth quarter of 2017. The decline in revenue in 2016 compared to 2015 was primarily due to the delay in starting certain projects within our pipeline.

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

COR was as follows (in thousands):

	Years Ended December 31,
	2017		2016		2015
Recovery Audit Services – Americas	$	68,963	$	60,706	$	60,214
Recovery Audit Services – Europe/Asia-Pacific	26,930		24,802		25,424
Adjacent Services	6,159		5,791		7,531
Total	$	102,052	$	91,299	$	93,169

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COR as a percentage of revenue for Recovery Audit Services - Americas was 61.0% in 2017, 60.8% in 2016 and 62.1% in 2015. We continue to invest in our various growth and other strategic initiatives, and include portions of these costs in Recovery Audit Services - Americas COR. COR for Recovery Audit Services - Americas increased 13.6% in 2017 compared to 2016 and increased 0.8% in 2016 compared to 2015. In 2017, Recovery Audit Services - Americas COR included Lavante and C&CA business expenses and certain transformation charges which were not included in 2016. On an organic basis and excluding transformation expenses, our 2017 COR improved by 1.4% compared to 2016. On a constant dollar basis, adjusted for changes in FX rates, COR in 2017 improved by 1.5% compared to 2016. The improvement in COR as a percentage of revenue in 2016 compared to 2015 was primarily due to the increase in revenues and the positive financial impact of operational process improvements, partially offset by costs associated with senior leadership and audit staff personnel that were not in place in prior periods.

COR as a percentage of revenue for Recovery Audit Services - Europe/Asia-Pacific was 60.7% in 2017, 66.4% in 2016 and 70.1% in 2015. In 2017, Recovery Audit Services - Europe/Asia-Pacific COR included C&CA business expenses and certain transformation charges which were not included in 2016.  COR as a percentage of revenue improved 5.7% in 2017 compared to 2016 and COR as a percentage of revenue improved 3.7% in 2016 compared to 2015. The improvements were primarily related to the increase in revenue and the positive financial impact of operational improvements, partially offset by expenses associated with senior leadership and audit staff personnel that were not in place in prior periods.  On an organic basis and excluding transformation expenses, our 2017 COR improved by 5.6%.  On a constant dollar basis, adjusted for changes in FX rates, COR in 2017 improved by 5.5% compared to 2016.  The improvement in COR as a percentage of revenue for 2016 compared to 2015 was primarily due to the increase in revenues and the impact of transforming our operational processes

Adjacent Services COR is primarily related to our continued investments in personnel whom we are hiring to either sell or assist with service delivery. COR as a percentage of revenue decreased to 149.3% in 2017 from 158.7% in 2016, which was an increase from 149.8% in 2015. The reduction in Adjacent Services COR as a percentage of revenue in 2017 is primarily due to our increase in revenue and lower service delivery costs.

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

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

	Years Ended December 31,
	2017		2016		2015
Recovery Audit Services – Americas	$	9,410	$	8,421	$	7,685
Recovery Audit Services – Europe/Asia-Pacific	6,586		5,442		5,487
Adjacent Services	3,735		1,469		662
Subtotal for reportable segments	19,731		15,332		13,834
Corporate Support	27,210		24,067		18,450
Total	$	46,941	$	39,399	$	32,284

Recovery Audit Services - Americas SG&A expenses increased11.7% in 2017 compared to 2016 and increased9.6% in 2016 compared to 2015. The increase in 2017 was primarily due to expenses associated with the Lavante and C&CA acquisitions that were not included in the prior year amounts. However, as a percentage of revenue basis, 2017 was basically unchanged compared to 2016. The increase in 2016 compared to 2015 was primarily due to higher personnel and bad debt costs.

Recovery Audit Services - Europe/Asia-Pacific SG&A expenses increased21.0% in 2017 compared to 2016 after decreasing 0.8% in 2016 compared to 2015. The increase in 2017 was primarily associated with expenses related to the C&CA acquisition which were not included in the prior year amounts. However, as a percentage of revenue basis, 2017 was basically unchanged compared to 2016.  The decrease in 2016 compared to 2015 was due mainly to lower transformation and facilities costs.

24

Adjacent Services SG&A expenses increased $2.3 million in 2017 compared to 2016 due mainly to three quarters of expenses related to the Lavante acquisition which were not included in the prior year amounts. Adjacent Services SG&A expenses increased $0.8 million in 2016 compared to 2015 due mainly to investments in personnel and the inclusion of one quarter of Lavante operating expenses.

Corporate Support SG&A expenses include stock-based compensation charges of $7.1 million in 2017, $5.1 million in 2016 and $3.9 million in 2015. Excluding stock-based compensation charges, Corporate Support SG&A expenses increased6.4% in 2017 compared to 2016 and increased30.4% in 2016 compared to 2015. The increase in 2017 compared to 2016 was due primarily to increased sales and marketing personnel, incentive-based compensation expenses, and the costs associated with business acquisition activity. The increase in 2016 compared to 2015 was due mainly to increases in the business acquisition activity, increased personnel, incentive based compensation expenses, and U.S. healthcare insurance benefit claim costs.

Acquisition-Related Adjustments included an adjustment to earnout consideration of acquired businesses in 2017 for $2.3 million. 

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

	Years Ended December 31,
	2017		2016		2015
Recovery Audit Services – Americas	$	3,165	$	3,750	$	4,036
Recovery Audit Services – Europe/Asia-Pacific	599		529		647
Adjacent Services	805		755		634
Total	$	4,569	$	5,034	$	5,317

Depreciation expense declined in 2017 and 2016 primarily as a result of the reduced level of capital purchases in 2015, 2016 and 2017 when compared to prior periods, which reduced the amount of depreciation to be recorded as those assets became fully depreciated.

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

	Years Ended December 31,
	2017		2016		2015
Recovery Audit Services – Americas	$	1,919	$	1,477	$	1,728
Recovery Audit Services – Europe/Asia-Pacific	142		—		600
Adjacent Services	1,573		355		130
Total	$	3,634	$	1,832	$	2,458

Generally, we amortize the customer relationship and trademark intangible assets we record in connection with an acquisition on an accelerated basis over six years or longer, and we amortize non-compete agreements and trade names on a straight-line basis over five years or less. This methodology results in higher amortization immediately following an acquisition, and declining expense in subsequent periods. Our most recent acquisitions prior to December 31, 2017 include C&CA in February 2017 (Recovery Audit Services - Americas and Recovery Audit Services Europe, Asia Pacific), Lavante in October 2016 (Adjacent Services), the SIM services business acquired from Global Edge, LLC and certain affiliated companies (collectively, "Global Edge") in December 2015 (Adjacent Services), Business Strategy, Inc. and substantially all the assets of an affiliated company (collectively, "BSI") in December 2011 (Recovery Audit Services - Americas), the associate migrations in 2011 and 2012 (Recovery Audit Services Europe, Asia Pacific), and Etesius Limited and TJG Holdings LLC in 2010 (Adjacent Services). Amortization expense increased in our recovery audit segments in 2017 as a result of the amortization charges associated with the C&CA acquisition and decreased in 2016 compared to the prior year as we did not complete a material acquisition in these segments in that year. Similarly, Adjacent Services amortization increased in 2017 due to the amortization of certain assets acquired in the acquisition of Lavante.

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Foreign Currency Transaction (Gains) Losses on Short-Term Intercompany Balances. Foreign currency transaction gains and losses on short-term intercompany balances result from fluctuations in the exchange rates between foreign currencies and the U.S. dollar and the impact of these fluctuations, primarily on balances payable by our foreign subsidiaries to their U.S. parent. Substantial changes from period to period in foreign currency exchange rates may significantly impact the amount of such gains and losses. The strengthening of the U.S. dollar relative to other currencies results in recorded losses on short-term intercompany balances receivable from our foreign subsidiaries while the relative weakening of the U.S. dollar results in recorded gains.

The U.S. dollar generally weakened relative to the local currencies of certain of our foreign subsidiaries in 2017, and strengthened in 2016 and 2015, resulting in our recording net foreign currency gain in 2017 of $2.2 million and losses on short-term intercompany balances of less than $0.1 million and $2.2 million in 2016 and 2015.

Net Interest Expense (Income). Net interest expense was $1.5 million in 2017 due to increased borrowings associated with our acquisitions and the accretion of contingent payments associated with our acquisitions. Net interest income was $0.2 million in each of 2016 and 2015 due to reductions in interest accruals on uncertain tax positions.

Income Tax Expense. Our reported effective tax rates on earnings approximated 39.4% in 2017, 35.8% in 2016, and 19.3% in 2015. Reported income tax expense in each year primarily results from taxes on the income of foreign subsidiaries. We have recorded a deferred tax asset valuation allowance that effectively eliminates income tax expense or benefit relating to our U.S. operations. The tax rate for 2016 reflects the impact of the release of the valuation allowance offsetting certain deferred tax assets in New Zealand and Singapore. The tax rate for 2015 reflects the impact of the release of the valuation allowance offsetting certain deferred tax assets in Australia.

Together with the reversal of interest expense accruals, the total net reduction to our reserves for uncertain tax positions based on changes in accruals was $0.5 million in 2017, $0.1 million in 2016, and $0.2 million in 2015.

As of the end of each of the past three years, management determined that based on all available evidence, deferred tax asset valuation allowances of $34.8 million in 2017, $50.1 million in 2016 and $45.6 million in 2015 were appropriate.

As of December 31, 2017, we had approximately $81.7 million of U.S. federal loss carry-forwards available to reduce future U.S. federal taxable income. The U.S. federal loss carry-forwards expire between 2025 and 2035. As of December 31, 2017, we had approximately $65.0 million of state loss carry-forwards available to reduce future state taxable income. The state loss carry-forwards expire between 2021 and 2036 and are subject to certain limitations.  The U.S. federal and state loss carry-forwards at December 31, 2017, reflect adjustments for prior period write-downs associated with ownership changes.

On December 30, 2016, the Company experienced an ownership change as defined under Section 382 of the Internal Revenue Code (“IRC”). This ownership change resulted in an annual IRC Section 382 limitation that limits the use of certain tax attribute carry-forwards and also resulted in the write-off of certain deferred tax assets and the related valuation allowances that the Company recorded in 2017. The loss carry-forwards outstanding as of December 30, 2016 are subject to an annual base usage limitation of $2.7 million. The Company has performed its assessment and has determined that $87.3 million of the gross federal net operating losses outstanding as of December 30, 2016 will be available for use going-forward.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act"), was signed into law making significant changes to the Internal Revenue Code. The new legislation contains several key provisions that affect us including, but not limited to, the lowering of the U.S. corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings. As a result of the Tax Act, we have recorded one-time adjustments for the re-measurement of deferred tax assets and liabilities. Given our U.S. valuation allowance, the Act does not materially impact our income tax provision or balance sheet. Additionally, in December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be incomplete though we have recorded provisional amounts in the consolidated financial statements. We expect to complete our analysis within the measurement period in accordance with SAB 118.

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Non-GAAP Financial Measures

We evaluate the performance of our operating segments based upon revenue and measures of profit or loss we refer to as EBITDA and Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest and taxes (“EBIT”), adjusted for depreciation and amortization (“EBITDA”), and then 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, severance charges and foreign currency transaction gains and losses on short-term intercompany balances viewed by management as individually or collectively significant.

EBIT, EBITDA and Adjusted EBITDA are all “non-GAAP financial measures” presented as supplemental measures of the Company’s performance. They are not presented in accordance with accounting principles generally accepted in the United States ("GAAP"). We believe these measures provide additional meaningful information in evaluating its performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in our secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, the adjustments may vary from period to period and in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items.

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

EBIT, EBITDA, and Adjusted EBITDA

	Years Ended December 31,
	2017			2016			2015
Net income (loss)	$	3,184		$	905		$	(3,226	)
Income tax expense	2,962			1,242			369
Interest expense, net	1,539			(153		)	(190		)
EBIT	7,685			1,994			(3,047		)
Depreciation of property and equipment	4,577			5,047			5,352
Amortization of intangible assets	3,634			1,832			2,458
EBITDA	15,896			8,873			4,763
Foreign currency transaction (gains) losses on short-term intercompany balances	(2,190		)	84			2,165
Acquisition-related adjustments	(2,283		)	—			—
Transformation severance and related expenses	1,666			1,383			2,299
Other (income) loss	(160		)	(121		)	1,191
Stock-based compensation	7,052			5,123			3,926
Adjusted EBITDA	$	19,981		$	15,342		$	14,344
Adjusted EBITDA from continuing operations	$	21,345		$	16,598		$	18,024

Acquisition-related adjustments included an adjustment to earnout consideration associated with business acquisitions.

Transformation severance and related expenses increased $0.3 million in 2017 compared to 2016 and decreased $0.9 million in 2016 compared to 2015. The increase in 2017 was a result of certain sales and operational positions that were permanently eliminated. The expense reduction in 2016 was due to reduced restructuring activities in 2016 relative to the prior year.

Other (income) loss includes a non-cash loss of $1.6 million in 2015 due to divesting certain assets from a document service offering purchased as part of the BSI acquisition in 2011.

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Stock-based compensation increased $1.9 million, or 37.7%, in 2017 compared to 2016 due to the issuance in 2017 of performance-based equity grants whose value fluctuates with our stock price, and the appreciation of our stock price during the year. Stock-based compensation increased $1.2 million, or 30.5%, in 2016 compared to 2015 due primarily to the completion of the expense recognition period for prior year equity grants that exceeded the recognized expense for new grants in 2016 and the appreciation of our stock price during the year.

Adjusted EBITDA by Segment

We include a detailed calculation of Adjusted EBITDA by segment in Note 2 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K. A summary of Adjusted EBITDA by segment for the years ended December 31, 2017, 2016, and 2015 is as follows (in thousands):

	Years Ended December 31,
	2017			2016			2015
Recovery Audit Services – Americas	$	35,062		$	31,251		$	29,431
Recovery Audit Services – Europe/Asia-Pacific	11,511			7,403			5,942
Adjacent Services	(5,448		)	(3,354		)	(3,134		)
Subtotal for reportable segments	41,125			35,300			32,239
Corporate Support	(19,780		)	(18,702		)	(14,215		)
Total for continuing operations	$	21,345		$	16,598		$	18,024

Adjusted EBITDA in 2017 was $21.3 million, an increase of $4.7 million, or 28.6%, compared to 2016 Adjusted EBITDA of $16.6 million. Adjusted EBITDA in 2016 decreased by $1.4 million, or 7.9%, compared to $18.0 million in 2015.

Recovery Audit Services - Americas Adjusted EBITDA increased12.2% in 2017 compared to 2016 and increased6.2% in 2016 compared to 2015. The 2017 increase resulted primarily from increased revenue, including revenue from the C&CA acquired business, and other operational improvements implemented during the year. On an organic basis, 2017 Adjusted EBITDA in this segment increased by 8.2% compared to 2016. The increase in 2016 as compared to 2015 was primarily due to increased revenue that exceeded the associated increases in COR and SG&A expenses.

Recovery Audit Services - Europe/Asia-Pacific Adjusted EBITDA increased55.5% in 2017 compared to 2016. The 2017 increase resulted primarily from increased revenue, including revenue from the C&CA acquired business, and other operational improvements implemented during the year. On an organic basis, 2017 Adjusted EBITDA in this segment increased by 43.5% compared to 2016. Adjusted EBITDA in this segment increased24.6% in 2016 compared to 2015 as a result of increased revenue that exceeded the associated increases in COR and SG&A expenses.

Adjacent Services Adjusted EBITDA declined62.4% in 2017 compared to 2016 and declined7.0% in 2016 compared to 2015. The 2017 results are primarily related to Lavante operating costs that were included for the first three quarters in 2017, but not included in the first three quarters of 2016.  On an organic basis, 2017 Adjusted EBITDA in this segment increased by 22.3% compared to 2016.  The decline in 2016 compared to 2015 was due to revenue in each period declining at a faster rate than COR and SG&A expenses.

Corporate Support Adjusted EBITDA declined by $1.1 million, or 5.8%, in 2017 compared to 2016 due mainly to the increases in stock-based compensation expense, sales and marketing personnel and costs associated with business acquisition activities. Corporate Support Adjusted EBITDA declined by $4.5 million, or 31.6%, in 2016 compared to 2015 due mainly to increased U.S. healthcare benefit costs, the addition of sales personnel, increases in incentive compensation expenses and increased legal costs associated with business acquisition activities. On an organic basis, Adjusted EBITDA in this segment declined by 6.2% in 2017 compared to 2016.

Liquidity and Capital Resources

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

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As of December 31, 2017, we had $18.8 million in cash and cash equivalents and borrowings under our revolving credit facility totaling $13.6 million. As of December 31, 2017, the revolver had $21.4 million of availability for borrowings and the Company was in compliance with the covenants in its SunTrust credit facility. We amended the SunTrust credit facility in January 2014, December 2014, December 2016 and May 2017 as further described in Secured Credit Facility below.

The $18.8 million in cash and cash equivalents as of December 31, 2017 includes $5.0 million held in the U.S., $1.8 million held in Canada, and $12.0 million held in other foreign jurisdictions, primarily in the United Kingdom, Australia, New Zealand, Mexico, and Brazil. Certain foreign jurisdictions restrict the amount of cash that can be transferred to the U.S. or impose taxes and penalties on such transfers of cash. To the extent we have excess cash in foreign locations that could be used in, or is needed by, our operations in the U.S., we may incur significant penalties and/or taxes to repatriate these funds. Generally, we have not provided deferred taxes on the undistributed earnings of international subsidiaries as we consider these earnings to be permanently reinvested. However, we do not consider the earnings of our Brazilian subsidiary to be permanently invested, and have provided deferred taxes relating to the potential repatriation of the funds held in Brazil.

Operating Activities. Net cash provided by operating activities was $13.5 million in 2017, $10.1 million in 2016 and $13.5 million in 2015. These amounts consist of two components, specifically, net income (loss) adjusted for certain non-cash items (such as depreciation, amortization, stock-based compensation expense, impairment charges, and deferred income taxes) and changes in assets and liabilities, primarily working capital, as follows (in thousands):

	Years Ended December 31,
	2017			2016			2015
Net income (loss)	$	3,184		$	905		$	(3,226	)
Adjustments for certain non-cash items	12,813			11,307			15,112
	15,997			12,212			11,886
Changes in operating assets and liabilities	(2,537		)	(2,094		)	1,567
Net cash provided by operating activities	$	13,460		$	10,118		$	13,453

The increase in net cash provided by operating activities in 2017 compared to 2016 is primarily the result of net income improvements together with decreased accounts receivable and increased accounts payable and accruals. The decrease in net cash provided by operating activities in 2016 compared to 2015 is primarily the result of the use of working capital through increased accounts receivable and reduced accounts payable and accruals that offset the net income and non-cash item improvements.

We include an itemization of these changes in our Consolidated Statements of Cash Flows in Part II, Item 8 of this Form 10-K.

We have one client, The Kroger Co., that accounted for approximately 12% of our revenue in 2017 and approximately 11% of our revenue in 2016. No client accounted for 10% or more of our revenue in 2015. The loss of any one of our major clients would negatively impact our operating cash flows and would potentially have a material adverse impact on our liquidity.

Investing Activities. Net cash used for capital expenditures was $9.4 million in 2017, $5.9 million in 2016 and $4.5 million in 2015. These capital expenditures primarily related to acquisitions and investments we made to upgrade our information technology infrastructure, develop our proprietary audit technologies, and develop our SaaS Solutions.

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

In addition to capital expenditures, we completed the acquisition of C&CA during the first quarter of 2017, and borrowed $10.0 million under the SunTrust revolver to fund the payment of the closing consideration.

Business Acquisitions and Divestitures

We made several business acquisitions over the past few years, each of which is discussed more fully in Note 12 - Business Acquisitions and Divestitures in “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K. Following is a summary of recent business acquisition and divestiture activities impacting our liquidity and capital resources in the past three years.

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In February 2017, we completed the acquisition of C&CA, a commercial recovery audit and contract compliance business with operations in the U.S. and the UK for a net purchase price of $15.9 million. C&CA assets consist primarily of customer contracts.

In October 2016, we completed the acquisition of Lavante, a SaaS-based supplier of SIM and recovery audit services, for a net purchase price of $3.7 million. Lavante’s assets consist primarily of its proprietary software applications and customer contracts.

In December 2015, we acquired the SIM business of Global Edge for a purchase price valued at $0.7 million.

In August 2015, we divested certain assets from a document service offering purchased as part of the BSI acquisition in 2011.We did not receive any initial cash payments at closing of the transaction and recognized a non-cash loss on the sale of $1.6 million, which we recognized in Other loss in the Consolidated Statements of Operations. We may receive certain earn-out consideration based on a percentage of 2016 revenue recognized by the buyer from the clients transferred in connection with the disposition. The revenue sharing percentage ranges from 10% to 30% based on the type of solution or service delivered.

Financing Activities. Net cash used by financing activities was $11.0 million in 2017, $0.1 million in 2016 and $18.4 million in 2015. In 2017, there were no repurchases of common stock under our stock repurchase program. In 2016 and 2015, the net cash used by financing activities was $3.8 million and $18.1 million, respectively (see Stock Repurchase Program below).

Secured Credit Facility

On January 19, 2010, we entered into a four-year revolving credit and term loan agreement with SunTrust Bank (“SunTrust”). The SunTrust credit facility initially consisted of a $15.0 million committed revolving credit facility and a $15.0 million term loan. The SunTrust credit facility is guaranteed by the Company and its domestic subsidiaries and is secured by substantially all of our assets. Borrowing availability under the SunTrust revolver at December 31, 2017 was $21.4 million. As of December 31, 2017, we had $13.6 million in outstanding borrowings under the SunTrust revolver. The SunTrust term loan required quarterly principal payments of $0.8 million from March 2010 through December 2013, and a final principal payment of $3.0 million in January 2014 that we paid in December 2013.

On January 17, 2014, we entered into an amendment of the SunTrust credit facility that increased the committed 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 credit facility based on eligible accounts receivable, increased our stock repurchase program limit, and extended the scheduled maturity of the credit facility to January 16, 2015 (subject to earlier termination as provided therein). We must pay a commitment fee of 0.5% per annum, payable quarterly, on the unused portion of the $25.0 million credit facility.

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. Pursuant to the December 2014 amendment, the credit facility would bear interest at a rate per annum comprised of a specified index rate based on one-month LIBOR, plus an applicable margin (1.75% per annum). The index rate was determined as of the first business day of each calendar month. The credit facility includes two financial covenants (a maximum leverage ratio and a minimum fixed charge coverage ratio) that apply only if we have borrowings under the credit facility that arise or remain outstanding during the final 30 calendar days of any fiscal quarter. These financial covenants also will be tested, on a modified pro forma basis, in connection with each new borrowing under the credit facility. This amendment also 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.

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.

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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 amount 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 interest rate at December 31, 2017 was approximately 3.6% and the ongoing commitment fee was 0.25%.

The SunTrust credit facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports, maintenance of existence, and transactions with affiliates. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets or declare or pay dividends on its capital stock. The financial covenants included in the SunTrust credit facility, among other things, limit the amount of capital expenditures the Company can make, set forth maximum leverage and net funded debt ratios for the Company and a minimum fixed charge coverage ratio, and also require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the SunTrust credit facility includes customary events of default. As of December 31, 2017, we had $13.6 million in outstanding borrowings under the SunTrust revolver. The Company was in compliance with the covenants in its SunTrust credit facility as of December 31, 2017.

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

Stock Repurchase Program

On February 21, 2014, our Board of Directors authorized a stock repurchase program under which we could repurchase up to $10.0 million of our common stock from time to time through March 31, 2015. Since 2014, the original authorization of the stock repurchase program, the Board of Directors has modified the program from time to time to increase the repurchase limit to $60 million and extend the expiration date to December 31, 2018. We repurchased 905,403 shares of our common stock during the year ended December 31, 2016 for $3.8 million and no shares were repurchased under our stock repurchase program during the year ended December 31, 2017. In December 2017, our Board of Directors extended the duration of the program to December 31, 2018. From the February 2014 announcement of the Company’s current stock repurchase program through December 31, 2016, the Company has repurchased 8.6 million shares, or 28.7%, of its common stock outstanding on the date of the original announcement of the program, for an aggregate cost of $44.5 million. These shares were retired and accounted for as a reduction to Shareholders' equity in the Consolidated Balance Sheet. Direct costs incurred to acquire the shares are included in the total cost of the shares.

The timing and amount of future repurchases, if any, will depend upon the Company’s stock price, the amount of the Company’s available cash, regulatory requirements, and other corporate considerations. The Company may initiate, suspend or discontinue purchases under the stock repurchase program at any time.

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Contractual Obligations and Other Commitments

As discussed in “Notes to Consolidated Financial Statements” included in Item 8 of this Form 10-K, the Company has certain contractual obligations and other commitments. A summary of those commitments as of December 31, 2017 is as follows:

	Payments Due by Period (in thousands)
Contractual obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Long-term debt obligations	$	13,600	$	—	$	13,600	$	—	$	—
Interest and commitment fee on Secured Credit Facility (1)	868		434		434		—		—
Operating lease obligations	11,135		3,294		5,362		2,479		—
Payments to Messrs. Cook and Toma (2)	565		56		113		169		227
Acquisition costs for earn-out provision (3)	8,889		3,754		5,135		—		—
Severance	45		45		—		—		—
Total	$	35,102	$	7,583	$	24,644	$	2,648	$	227

(1) Represents the estimated commitment fee and interest due on the Secured Credit Facility using the interest rate as of December 31, 2017 and assuming borrowings under the SunTrust revolver of $13.6 million as of December 31, 2017. See Note 5 of the "Notes to Consolidated Financial Statements" for additional information regarding the Secured Credit Facility.

(2) Represents estimated reimbursements payable for healthcare costs incurred by these former executives.

(3) This earn-out provision is calculated using the present value of the expected (probability-weighted) payments based on the likelihood of achieving each of the financial performance targets. The total cash payments will total $10.2 million assuming that the full earn-out amount is achieved (see Note 12 of the "Notes to the Consolidated Financial Statements" for additional information).

Off-Balance Sheet Arrangements

As of December 31, 2017, the Company did not have any material off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of the SEC’s Regulation S-K.

Critical Accounting Policies

We describe our significant accounting policies in Note 1 of “Notes to Consolidated Financial Statements” included in Item 8 of this Form 10-K. Certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by management. As a result, they are subject to an inherent degree of uncertainty. We consider accounting policies that involve the use of estimates that meet both of the following criteria to be “critical” accounting policies. First, the accounting estimate requires us to make assumptions about matters that are highly uncertain at the time that the accounting estimate is made. Second, alternative estimates in the current period, or changes in the estimate that are reasonably likely in future periods, would have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

In addition to estimates that meet the “critical” estimate criteria, we also make many other accounting estimates in preparing our consolidated financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue and expenses, as well as disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, refund liabilities, accounts receivable allowance for doubtful accounts, goodwill and other intangible assets and income taxes. We base our estimates and judgments on historical experience, information available prior to the issuance of the consolidated financial statements and on various other factors that we believe to be reasonable under the circumstances. This information forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Materially different results can occur as circumstances change and additional information becomes known, including changes in those estimates not deemed “critical”.

We believe the following critical accounting policies, among others, involve our more significant estimates and judgments we used in the preparation of our consolidated financial statements. We have discussed the development and selection of accounting estimates, including those deemed “critical,” and the associated disclosures in this Form 10-K with the audit committee of the Board of Directors.

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• Revenue Recognition. We generally recognize revenue for a contractually specified percentage of amounts recovered when we have determined that our clients have received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors), and when we have met the following criteria: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectability is reasonably assured.

Additionally, for purposes of determining appropriate timing of recognition and for internal control purposes, we rely on customary business practices and processes for documenting that the criteria described in (a) through (d) above have been met. Such customary business practices and processes may vary significantly by client. On occasion, it is possible that a transaction has met all of the revenue recognition criteria described above but we do not recognize revenue, unless we can otherwise determine that criteria (a) through (d) above have been met, because our customary business practices and processes specific to that client have not been completed. The determination that we have met each of the aforementioned criteria, particularly the determination of the timing of economic benefit received by the client and the determination that collectability is reasonably assured, requires the application of significant judgment by management and a misapplication of this judgment could result in inappropriate recognition of revenue.

• Unbilled Receivables & Refund Liabilities. Unbilled receivables relate to claims for which our clients have received economic value but for which we contractually have agreed not to invoice the clients. These unbilled receivables arise when a portion of our fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after the original invoice, or a year after completion of the audit period), we invoice the unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge that we have earned this unbilled receivable at the time of the original invoice, but have agreed to defer billing the client for the related services.

Refund liabilities result from reductions in the economic value previously received by our clients with respect to vendor claims identified by us and for which we previously have recognized revenue. We satisfy such refund liabilities either by offsets to amounts otherwise due from clients or by cash refunds to clients. We compute the estimate of our refund liabilities at any given time based on actual historical refund data.

We record periodic changes in unbilled receivables and refund liabilities as adjustments to revenue.

• Goodwill, Other Intangible Assets, Long-lived Assets, and Impairment Charges. Goodwill represents the excess of the purchase price over the estimated fair market value of net identifiable assets of acquired businesses. Intangible assets are assets that lack physical substance. We evaluate the recoverability of goodwill and other intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other, in the fourth quarter of each year or sooner if events or changes in circumstances indicate that the carrying amount may exceed its fair value. This evaluation includes a preliminary assessment of qualitative factors to determine if it is necessary to perform a two-step impairment testing process. The first step identifies potential impairments by comparing the fair value of the reporting unit with its carrying value, including goodwill. If the calculated fair value of a reporting unit exceeds the carrying value, goodwill is not impaired, and the second step is not necessary. If the carrying value of a reporting unit exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying value. If the fair value is less than the carrying value, we would record an impairment charge.

We are not required to calculate the fair value of our reporting units that hold goodwill unless we determine that it is more likely than not that the fair value of these reporting units is less than their carrying values. In this analysis, we consider a number of factors, including changes in our legal, business and regulatory climates, changes in competition or key personnel, macroeconomic factors impacting our Company or our clients, our recent financial performance and expectations of future performance and other pertinent factors. Based on these analyses, we determined that it was not necessary for us to perform the two-step process. We last used independent business valuation professionals to estimate fair value in the fourth quarter of 2010 and determined that fair value exceeded carrying value for all relevant reporting units. No impairment charges were necessary based on our internal calculations in the three years ended December 31, 2017.

We review the carrying value of long-lived assets such as property and equipment for impairment when events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset. No impairment charges were necessary in the three years ended December 31, 2017.

33

• Income Taxes. Our effective tax rate is based on historical and anticipated future taxable income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining the effective tax rate and in evaluating our tax positions. Tax regulations require items to be included in the tax returns at different times than the items are reflected in the financial statements. As a result, our effective tax rate reflected in our Consolidated Financial Statements included in Item 8 of this Form 10-K is different than that reported in our tax returns. Some of these differences are permanent, such as expenses that are not deductible on our tax returns, and some are temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax returns in future years for which we have already recorded the tax benefit in our Consolidated Statements of Operations. We establish valuation allowances to reduce net deferred tax assets to the amounts that we believe are more likely than not to be realized. We adjust these valuation allowances in light of changing facts and circumstances. Deferred tax liabilities generally represent tax expense recognized in our consolidated financial statements for which payment has been deferred, or expense for which a deduction has already been taken on our tax returns but has not yet been recognized as an expense in our consolidated financial statements.

We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In determining the amount of valuation allowance to record, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods, and the implementation of tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative tax losses in recent years are the most compelling form of negative evidence we considered in this determination.

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 U.S. generally accepted accounting principles (“GAAP”) for guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. 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 before a tax assessment is raised. The number of years subject to tax assessments varies by tax jurisdictions.

• Stock-Based Compensation. We account for awards of equity instruments issued to employees and directors under the fair value method of accounting and recognize such amounts in our Consolidated Statements of Operations. We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense using the straight-line method over the service period over which we expect the awards to vest. We recognize compensation costs for awards with performance conditions based on the probable outcome of the performance conditions. We accrue compensation cost if we believe it is probable that the performance condition(s) will be achieved and do not accrue compensation cost if we believe it is not probable that the performance condition(s) will be achieved. In the event that it becomes probable that performance condition(s) will no longer be achieved, we reverse all of the previously recognized compensation expense in the period such a determination is made.

We estimate the fair value of all time-vested options as of the date of grant using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility, which we calculate based on the historical volatility of our common stock. We use a risk-free interest rate, based on the U.S. Treasury instruments in effect at the time of the grant, for the period comparable to the expected term of the option. We use the “simplified” method in estimating the expected term of options as we have concluded that our historical share option exercise experience is a less than reasonable basis upon which to estimate the expected term for our grants.

34

We estimate the fair value of awards of restricted shares and nonvested shares as being equal to the market value of the common stock on the date of the award. We classify our share-based payments as either liability-classified awards or as equity-classified awards. We remeasure liability-classified awards to fair value at each balance sheet date until the award is settled. We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. We have classified our share-based payments which are settled in our common stock as equity-classified awards and our share-based payments that are settled in cash as liability-classified awards. Compensation costs related to equity-classified awards generally are equal to the grant-date fair value of the award amortized over the vesting period of the award. The liability for liability-classified awards generally is equal to the fair value of the award as of the balance sheet date multiplied by the percentage vested at the time. We charge (or credit) the change in the liability amount from one balance sheet date to another to compensation expense.

New Accounting Standards

For information related to new and recently adopted accounting standards, see Note 1 – Summary of Significant Accounting Policies and Basis of Presentation, in “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

35

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Market Risk. Our reporting currency is the U.S. dollar, although we transact business in various foreign locations and currencies. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we provide our services. Our operating results are exposed to changes in exchange rates between the U.S. dollar and the currencies of the other countries in which we operate. When the U.S. dollar strengthens against other currencies, the value of foreign functional currency revenue decreases. When the U.S. dollar weakens, the value of the foreign functional currency revenue increases. Overall, we are a net receiver of currencies other than the U.S. dollar and, as such, benefit from a weaker dollar. We therefore are adversely affected by a stronger dollar relative to major currencies worldwide. In 2017, we recognized $18.5 million of operating income from operations located outside the U.S., virtually all of which was originally accounted for in currencies other than the U.S. dollar. Upon translation into U.S. dollars, such operating income would increase or decrease, assuming a hypothetical 10% change in weighted-average foreign currency exchange rates against the U.S. dollar, by approximately $1.9 million. We currently do not have any arrangements in place to hedge our foreign currency risk.

Interest Rate Risk. Our interest income and expense are sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on our cash equivalents as well as interest paid on amounts outstanding under our revolving credit facility, if any. We had $21.4 million of borrowing availability under our revolving credit facility as of December 31, 2017, and had $13.6 million borrowed under the facility as of that date. Interest on the amended credit facility is payable monthly and accrues at an index rate using the one-month LIBOR rate plus an applicable margin of 1.75%. Assuming full utilization of the credit facility, a hypothetical 100 basis point change in interest rates would result in an approximate $0.4 million change in annual pre-tax income.

36

ITEM 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Report of Independent Registered Public Accounting Firm	38
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015	39
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2016 and 2015	40
Consolidated Balance Sheets as of December 31, 2017 and 2016	41
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2017, 2016 and 2015	42
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015	43
Notes to Consolidated Financial Statements	44

37

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

PRGX Global, Inc. and subsidiaries

Atlanta, Georgia

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of PRGX Global, Inc. and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 13, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2006.

Atlanta, Georgia

March 13, 2018

38

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Years Ended December 31,
	2017			2016			2015
Revenue, net	$	161,620		$	140,844		$	138,302
Operating expenses:
Cost of revenue	102,052			91,299			93,169
Selling, general and administrative expenses	46,941			39,399			32,284
Depreciation of property and equipment	4,569			5,033			5,317
Amortization of intangible assets	3,634			1,832			2,458
Acquisition-related adjustments	(2,283		)	—			—
Total operating expenses	154,913			137,563			133,228
Operating income from continuing operations	6,707			3,281			5,074
Foreign currency transaction (gains) losses on short-term intercompany balances	(2,190		)	84			2,165
Interest expense	(1,785		)	(107		)	(71		)
Interest income	246			260			261
Other (income) loss	(160		)	(121		)	1,191
Net income from continuing operations before income tax	7,518			3,471			1,908
Income tax expense	2,962			1,242			369
Net income from continuing operations	$	4,556		$	2,229		$	1,539
Discontinued operations:
Loss from discontinued operations	(1,372		)	(1,324		)	(4,765		)
Income tax expense (benefit)	—			—			—
Net loss from discontinued operations	(1,372		)	(1,324		)	(4,765		)
Net income (loss)	$	3,184		$	905		$	(3,226	)
Basic earnings (loss) per common share (Note 3):
Basic earnings from continuing operations	$	0.21		$	0.10		$	0.06
Basic loss from discontinued operations	(0.06		)	(0.06		)	(0.18		)
Total basic earnings (loss) per common share	$	0.15		$	0.04		$	(0.12	)
Diluted earnings (loss) per common share (Note 3):
Diluted earnings from continuing operations	$	0.21		$	0.10		$	0.06
Diluted loss from discontinued operations	(0.06		)	(0.06		)	(0.18		)
Total diluted earnings (loss) per common share	$	0.15		$	0.04		$	(0.12	)
Weighted-average common shares outstanding (Note 3):
Basic	21,937			21,969			25,868
Diluted	22,111			22,016			25,904

See accompanying Notes to Consolidated Financial Statements.

39

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

	Years Ended December 31,
	2017			2016			2015
Net income (loss)	$	3,184		$	905		$	(3,226	)
Foreign currency translation adjustments	(180		)	(507		)	(769		)
Comprehensive income (loss)	$	3,004		$	398		$	(3,995	)

See accompanying Notes to Consolidated Financial Statements.

40

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	18,823		$	15,723
Restricted cash	51			47
Receivables:
Contract receivables, less allowances of $1,499 in 2017 and $799 in 2016
Billed	36,058			29,186
Unbilled	2,709			2,278
	38,767			31,464
Employee advances and miscellaneous receivables, less allowances of $292 in 2017 and $500 in 2016	1,665			2,184
Total receivables	40,432			33,648
Prepaid expenses and other current assets	4,608			3,363
Total current assets	63,914			52,781
Property and equipment:
Computer and other equipment	32,655			30,219
Furniture and fixtures	2,761			2,652
Leasehold improvements	3,916			3,558
Software	34,234			26,896
	73,566			63,325
Less accumulated depreciation and amortization	(56,088		)	(51,089		)
Property and equipment, net	17,478			12,236
Goodwill (Note 4)	17,648			13,823
Intangible assets, less accumulated amortization of $40,461 in 2017 and $36,128 in 2016	18,478			10,998
Unbilled receivables	894			854
Deferred income taxes (Note 7)	1,538			2,269
Other assets	268			513
Total assets	$	120,218		$	93,474
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	8,548		$	7,299
Accrued payroll and related expenses	18,194			13,868
Refund liabilities	7,864			7,900
Deferred revenue	1,431			1,330
Current portion of debt (Note 5)	48			3,600
Business acquisition obligations (Note 12)	3,759			2,078
Total current liabilities	39,844			36,075
Long-term debt (Note 5)	13,526			—
Noncurrent business acquisition obligations (Note 12)	5,135			1,926
Refund liabilities	957			804
Other long-term liabilities	442			2,279
Total liabilities	59,904			41,084
Commitments and contingencies (Notes 2, 5, 6, 9 and 10)
Shareholders’ equity (Notes 9 and 11):
Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares; 22,419,417 shares issued and outstanding at December 31, 2017 and 21,845,920 shares issued and outstanding at December 31, 2016	224			218
Additional paid-in capital	580,032			575,118
Accumulated deficit	(520,049		)	(523,233		)
Accumulated other comprehensive income	107			287
Total shareholders’ equity	60,314			52,390
Total liabilities and shareholders’ equity	$	120,218		$	93,474

See accompanying Notes to Consolidated Financial Statements.

41

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Years Ended December 31, 2017, 2016 and 2015

(In thousands, except share data)

	Common Stock					Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total Shareholders' Equity
	Shares		Amount
Balance at December 31, 2014	26,762,861		$	268		$	590,067		$	(520,912	)	$	1,563		$	70,986
Net loss	—		—			—			(3,226		)	—			(3,226		)
Foreign currency translation adjustments	—		—			—			—			(769		)	(769		)
Issuances of common stock:
Restricted share awards	23,200		—			—			—			—			—
Restricted shares remitted by employees for taxes	(17,147	)	—			(312		)	—			—			(312		)
Stock option exercises	29,128		—			91			—			—			91
2006 MIP Performance Unit settlements	9,918		—			—									—
Forfeited restricted share awards	(7,918	)	—			—			—			—			—
Repurchase of common stock	(4,118,386	)	(41		)	(18,030		)	—			—			(18,071		)
Stock-based compensation expense	—		—			3,716									3,716
Balance at December 31, 2015	22,681,656		227			575,532			(524,138		)	794			52,415
Net income	—		—			—			905			—			905
Foreign currency translation adjustments	—		—			—			—			(507		)	(507		)
Issuances of common stock:
Restricted shares remitted by employees for taxes	(20,829	)	—			(217		)	—			—			(217		)
Stock option exercises	90,496		—			320			—			—			320
Repurchases of common stock	(905,403	)	(9		)	(3,763		)	—			—			(3,772		)
Stock-based compensation expense	—		—			3,246			—			—			3,246
Balance at December 31, 2016	21,845,920		218			575,118			(523,233		)	287			52,390
Net income	—		—			—			3,184			—			3,184
Foreign currency translation adjustments	—		—			—			—			(180		)	(180		)
Issuances of common stock:
Restricted share awards	381,059		4			(4		)	—			—			—
Restricted shares remitted by employees for taxes	(15,006	)	—			(100		)	—			—			(100		)
Stock option exercises	225,043		2			1,170			—			—			1,172
Restricted stock unit settlement	10,000		—			—			—			—			—
Forfeited restricted share awards	(27,599	)	—			—			—			—			—
Stock-based compensation expense	—		—			3,848			—			—			3,848
Balance at December 31, 2017	22,419,417		$	224		$	580,032		$	(520,049	)	$	107		$	60,314

See accompanying Notes to Consolidated Financial Statements.

42

PRGX GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	2017			2016			2015
Cash flows from operating activities:
Net income (loss)	$	3,184		$	905		$	(3,226	)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	8,203			6,879			7,810
Amortization of deferred loan costs	85			60			20
Noncash interest expense	1,215			—			—
Stock-based compensation expense	7,052			5,123			3,926
Other loss from sale of assets	—			22			1,191
Foreign currency transaction (gains) losses on short-term intercompany balances	(2,190		)	84			2,165
Deferred income taxes	731			(861		)	(1,112		)
Change in fair value of contingent consideration	(2,283		)	—			—
Changes in operating assets and liabilities, net of business acquisitions:
Restricted cash	(4		)	1			5
Billed receivables	(3,949		)	(3,339		)	4,331
Unbilled receivables	(469		)	(509		)	1,305
Prepaid expenses and other current assets	(417		)	(1,506		)	705
Other assets	(57		)	(65		)	—
Accounts payable and accrued expenses	815			1,218			(1,949		)
Accrued payroll and related expenses	975			2,606			(3,595		)
Refund liabilities	115			67			2,389
Deferred revenue	101			(5		)	(784		)
Other long-term liabilities	353			(562		)	272
Net cash provided by operating activities	13,460			10,118			13,453
Cash flows from investing activities:
Business acquisition, net of cash acquired	(10,128		)	(3,669		)	(520		)
Business divestiture	—			—			783
Purchases of property and equipment, net of disposal proceeds	(9,355		)	(5,887		)	(4,482		)
Net cash used in investing activities	(19,483		)	(9,556		)	(4,219		)
Cash flows from financing activities:
Repayments of long-term debt	66			—			—
Payments for deferred loan costs	(155		)	—			(100		)
Proceeds from term loan	10,000			3,600			—
Repurchases of common stock	—			(3,772		)	(18,071		)
Restricted stock repurchased from employees for withholding taxes	(100		)	(218		)	(312		)
Proceeds from option exercises	1,172			326			91
Net cash provided by (used in) financing activities	10,983			(64		)	(18,392		)
Effect of exchange rates on cash and cash equivalents	(1,860		)	103			(1,455		)
Net increase (decrease) in cash and cash equivalents	3,100			601			(10,613		)
Cash and cash equivalents at beginning of period	15,723			15,122			25,735
Cash and cash equivalents at end of period	$	18,823		$	15,723		$	15,122
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	434		$	60		$	63
Cash paid during the period for income taxes, net of refunds received	$	2,929		$	1,407		$	1,085
Noncash investing activities:
Fair value of contingent consideration liabilities at the date of acquisition	$	5,954		$	3,834		$	—

See accompanying Notes to Consolidated Financial Statements.

43

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

(a) Description of Business and Basis of Presentation

Description of Business

The principal business of PRGX Global, Inc. and subsidiaries is providing recovery audit services to large businesses and government agencies having numerous payment transactions. PRGX also provides services adjacent to recovery audit services, including supplier information management ("SIM"), data transformation, spend analytics and associated advisory services, to a similar client base. These businesses include, but are not limited to:

• retailers such as discount, department, specialty, grocery and drug stores, and wholesalers who sell to these retailers;

• business enterprises other than retailers such as manufacturers, financial services firms, pharmaceutical companies, and resource companies such as oil and gas companies; and

• federal and state government agencies.

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. PRGX currently provides services to clients in over 30 countries across a multitude of industries.

Basis of Presentation

During the fourth quarter of 2015 we discontinued the Healthcare Claims Recovery Audit ("HCRA") business. The results of our continuing and discontinued operations for the years ended December 31, 2017, 2016 and 2015 are presented in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations.

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). Actual results could differ from those estimates.

(b) Revenue Recognition, Billed and Unbilled Receivables, and Refund Liabilities

We base our revenue on specific contracts with our clients. These contracts generally specify: (a) time periods covered by the audit; (b) nature and extent of audit services we are to provide; (c) the client’s duties in assisting and cooperating with us; and (d) fees payable to us, generally expressed as a specified percentage of the amounts recovered by the client resulting from overpayment claims identified. Clients generally recover claims either by taking credits against outstanding payables or future purchases from the involved vendors, or receiving refund checks directly from those vendors. The manner in which a claim is recovered by a client often is dictated by industry practice. In addition, many clients establish specific procedural guidelines that we must satisfy prior to submitting claims for client approval, and these guidelines are unique to each client. For some services we provide, we earn our compensation in the form of a fixed fee, a fee per hour, or a fee per other unit of service.

We generally recognize revenue for a contractually specified percentage of amounts recovered when we have determined that our clients have received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors) and when we have met the following criteria: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectability is reasonably assured. In certain limited circumstances, we will invoice a client prior to meeting all four of these criteria; in such cases, we defer the revenue until we meet all of the criteria. Additionally, for purposes of determining appropriate timing of recognition and for internal control purposes, we rely on customary business practices and processes for documenting that we have met the criteria described in (a) through (d) above. Such customary business practices and processes may vary significantly by client. On occasion, it is possible that a transaction has met all of the revenue recognition criteria described above but we do not recognize revenue, unless we can otherwise determine that criteria (a) through (d) above have been met, because our customary business practices and processes specific to that client have not been completed.

44

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Historically, there has been a certain amount of revenue with respect to which, even though we had met the requirements of our revenue recognition policy, our clients’ vendors ultimately have rejected the claims underlying the revenue. In that case, our clients may request a refund or offset of such amount even though we may have collected fees. We record any such refunds as a reduction of revenue. We provide refund liabilities for these reductions in the economic value previously received by our clients with respect to vendor claims we identified and for which we previously have recognized revenue. We compute an estimate of our refund liabilities at any given time based on actual historical refund data.

Billed receivables are stated at the amount we plan to collect and do not bear interest. We make ongoing estimates relating to the collectibility of our billed receivables and maintain a reserve for estimated losses resulting from the inability of our clients to meet their financial obligations to us. This reserve is primarily based on the level of past-due accounts based on the contractual terms of the receivables, our history of write-offs, and our relationships with, and the economic status of, our clients.

Unbilled receivables relate to claims for which clients have received economic value but for which we contractually have agreed not to submit an invoice to the clients at such time. Unbilled receivables arise when a portion of our fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after original invoice, and at other times a year after completion of the audit period), we invoice the unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge that we have earned this unbilled receivable at the time of the original invoice, but have agreed to defer billing the client for the related services.

We record periodic changes in unbilled receivables and refund liabilities as adjustments to revenue.

We derive a relatively small portion of revenue on a “fee-for-service” basis whereby billing is based upon a fixed fee, a fee per hour, or a fee per other unit of service. We recognize revenue for these types of services as we provide and invoice for them, and when criteria (a) through (d) as set forth above are met.

(c) Cash and Cash Equivalents

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

The $18.8 million in cash and cash equivalents as of December 31, 2017 includes $5.0 million held in the U.S., $1.8 million held in Canada, and $12.0 million held in other foreign jurisdictions, primarily in the United Kingdom, Australia, New Zealand, Mexico and Brazil. Our cash and cash equivalents included short-term investments of approximately $1.9 million as of December 31, 2017 and $2.2 million as of December 31, 2016, of which approximately $1.9 million and $2.2 million, respectively, were held at banks outside of the United States, primarily in Brazil and Canada.

(d) 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 December 31, 2017, we had $13.6 million in bank debt outstanding. As of December 31, 2016, we had $3.6 million in bank debt outstanding. 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 $8.9 million of business acquisition obligations as of December 31, 2017, and $4.0 million as of December 31, 2016. Our business acquisition obligations represent the fair value of deferred consideration and earn-out payments estimated to be due as of the date for which we recorded these amounts. We determine the preliminary estimated fair values based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment to be made. The discount rate that we use to value the liability is based on specific business risk, cost of capital, and other factors. We consider these factors to be Level 3 inputs (significant unobservable inputs).

We state certain assets at fair value on a nonrecurring basis as required by accounting principles generally accepted in the United States of America. Generally, these assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.

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PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(e) Property and Equipment

We report property and equipment at cost or estimated fair value at acquisition date and depreciate them over their estimated useful lives using the straight-line method. Our useful lives for fixed assets are three years for computer laptops, four years for desktops, five years for IT server, storage and network equipment, five years for furniture and fixtures and three years for purchased software. We amortize leasehold improvements using the straight-line method over the shorter of the lease term or ten years. Depreciation expense from continuing operations was $4.6 million in 2017, $5.0 million in 2016 and $5.3 million in 2015.

We review the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset. No impairment charges were necessary in the three years ended December 31, 2017.

(f) Software Development Costs

We capitalize a portion of the costs we incur related to our internal development of software that we use in our operations and amortize these costs using the straight-line method over the expected useful lives of three to seven years.

We also capitalize a portion of the costs we incur related to our internal development of software that we intend to market to others. We amortize these costs over the products’ estimated economic lives, which typically are three years, beginning when the underlying products are available for general release to clients. We review the carrying value of capitalized software development costs for impairment whenever events and circumstances indicate that the carrying value of the asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset.

We consider software development activities to be research and development costs and expense them as incurred. However, we capitalize the costs incurred for the development of computer software that will be sold, leased, or otherwise marketed or that will be used in our operations beginning when technological feasibility has been established. Research and development costs from continuing operations, including the amortization of amounts previously capitalized, were $2.2 million in 2017, $3.5 million in 2016 and $3.0 million in 2015.

(g) Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair market value of net identifiable assets of acquired businesses. We evaluate the recoverability of goodwill and other intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other, in the fourth quarter of each year or sooner if events or changes in circumstances indicate that the carrying amount may exceed its fair value. This evaluation includes a preliminary assessment of qualitative factors to determine if it is necessary to perform a two-step impairment testing process. The first step identifies potential impairments by comparing the fair value of the reporting unit with its carrying value, including goodwill. If the calculated fair value of a reporting unit exceeds the carrying value, goodwill is not impaired, and the second step is not necessary. If the carrying value of a reporting unit exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying value. If the fair value is less than the carrying value, we would record an impairment charge.

We are not required to calculate the fair value of our reporting units that hold goodwill unless we determine that it is more likely than not that the fair value of these reporting units is less than their carrying values. In this analysis, we consider a number of factors, including changes in our legal, business and regulatory climates, changes in competition or key personnel, macroeconomic factors impacting our company or our clients, our recent financial performance and expectations of future performance and other pertinent factors. Based on these analyses, we determined that it was not necessary for us to perform the two-step process. We last used independent business valuation professionals to estimate fair value in the fourth quarter of 2010 and determined that fair value exceeded carrying value for all relevant reporting units. No impairment charges were necessary based on our internal assessments in the three years ended December 31, 2017.

(h) Direct Expenses and Deferred Costs

We typically expense direct expenses that we incur during the course of recovery audit and delivery of Adjacent Services offerings as incurred. For certain implementation and set-up costs associated with our “fee for service” revenue that we earn over an extended period of time, we defer the related direct and incremental costs and recognize them as expenses over the life of the underlying contract.

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PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(i) Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. We measure deferred tax assets and liabilities using enacted tax rates we expect to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect on the deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date.

We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In determining the amount of valuation allowance to record, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods and the implementation of tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative losses in recent years are the most compelling form of negative evidence we considered in this determination.

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 jurisdictions.

(j) Foreign Currency

We use the local currency as the functional currency in the majority of the countries in which we conduct business outside of the United States. We translate the assets and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange at the balance sheet date. We include the translation gains and losses as a separate component of shareholders’ equity and in the determination of comprehensive income (loss). We translate revenue and expenses in foreign currencies at the weighted average exchange rates for the period. We separately state the foreign currency transaction gains and losses on short-term intercompany balances in the Consolidated Statements of Operations. We include all other realized and unrealized foreign currency transaction gains (losses) in “Selling, general and administrative expenses.”

(k) Earnings (Loss) Per Common Share

We compute basic earnings (loss) per common share by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. We compute diluted earnings (loss) per common share by dividing net income (loss) available to common shareholders by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of stock options using the treasury stock method, and (3) the dilutive effect of other potentially dilutive securities. We exclude the potential dilutive effect of stock options and convertible instruments from the determination of diluted earnings (loss) per common share if the effect of including them would be antidilutive.

(l) Stock-Based Compensation

We account for awards of equity instruments issued to employees and directors under the fair value method of accounting and recognize such amounts in our Consolidated Statements of Operations. We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our Consolidated Statements of Operations using the straight-line method over the service period over which we expect the awards to vest. We recognize compensation costs for awards with performance conditions based on the probable outcome of the performance conditions. We accrue compensation cost if we believe it is probable that the performance condition(s) will be achieved and do not accrue compensation cost if we believe it is not probable that the performance condition(s) will be achieved. In the event that it becomes probable that performance condition(s) will no longer be achieved, we reverse all of the previously recognized compensation expense in the period such a determination is made.

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PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We estimate the fair value of all time-vested options as of the date of grant using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility, which we calculate based on the historical volatility of our common stock. We use a risk-free interest rate, based on the U.S. Treasury instruments in effect at the time of the grant, for the period comparable to the expected term of the option. We use the “simplified” method in estimating the expected term of options as we have concluded that our historical share option exercise experience is a less than reasonable basis upon which to estimate the expected term for our grants.

We estimate the fair value of nonvested stock awards (restricted stock and restricted stock units) as being equal to the market value of the common stock on the date of the award. We classify our share-based payments as either liability-classified awards or as equity-classified awards. We remeasure liability-classified awards to fair value at each balance sheet date until the award is settled. We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. We have classified our share-based payments which are settled in our common stock as equity-classified awards and our share-based payments that are settled in cash as liability-classified awards. Compensation costs related to equity-classified awards generally are equal to the fair value of the award at grant-date amortized over the vesting period of the award. The liability for liability-classified awards generally is equal to the fair value of the award as of the balance sheet date multiplied by the percentage vested at the time. We record the change in the liability amount from one balance sheet date to another to compensation expense.

(m) Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

Consolidated comprehensive income (loss) consists of consolidated net income (loss) and foreign currency translation adjustments. We present the calculation of consolidated comprehensive income (loss) in the accompanying Consolidated Statements of Comprehensive Income (Loss). No amounts have been reclassified out of Accumulated Other Comprehensive Income during the periods presented in our consolidated financial statements.

(n) Segment Reporting

We report our operating segment information in three segments: Recovery Audit Services – Americas; Recovery Audit Services – Europe/Asia-Pacific and Adjacent Services. We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to our three operating segments in Corporate Support. Our business segments reflect the internal reporting that our Chief Executive Officer, who is our chief operating decision maker, uses for the purpose of making decisions about allocating resources and assessing performance. Our management, including our Chief Executive Officer, uses what we internally refer to as “Adjusted EBITDA” as the primary measure of profit or loss for purposes of assessing the operating performance of all operating segments. We define Adjusted EBITDA as earnings from continuing operations before interest, taxes, depreciation and amortization (“EBITDA”) as adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period.

EBITDA and Adjusted EBITDA are not financial measures determined in accordance with GAAP. Such non-GAAP financial measures do not measure the profit or loss of the reportable segments in accordance with GAAP. Given that we use Adjusted EBITDA as our primary measure of segment performance, GAAP rules on segment reporting require that we include this non-GAAP measure in our discussion of our operating segments. We also must reconcile Adjusted EBITDA to our operating results presented on a GAAP basis. We provide this reconciliation in Note 2 to these consolidated financial statements along with other information about our reportable segments. We do not intend the reconciling items to be, nor should they be, interpreted as non-recurring or extraordinary, or in any manner be deemed as adjustments made in accordance with GAAP. Because Adjusted EBITDA is not a financial measure determined in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies.

(o) Loss Contingencies

Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company, but which will only be determined and resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss is likely to occur and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

48

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Loss contingencies considered remote are generally not accrued or disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Legal costs relating to loss contingencies are expensed as incurred.

(p) Reclassification of Prior Year Balance Sheet

Certain reclassifications have been made in the prior year in order to conform to the current year presentation.

(q) Impact of Recently Issued Accounting Standards

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

Adopted by the Company in 2017

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 became effective for the Company beginning January 1, 2017. The Company has concluded that the early adoption of this standard, which is permitted, had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

FASB ASC Update No. 2016-09 - In March 2016, the FASB issued Accounting Standards Update 2016-09, Stock Compensation (Topic 718). The standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The standard also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the standard allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The standard became effective for the Company beginning January 1, 2017. The Company has concluded that the adoption of this standard had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

FASB ASC Update No. 2016-05 - In March 2016, the FASB issued Accounting Standards Update 2016-05, Derivatives and Hedging (Topic 815). The standard clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The standard became effective for the Company beginning January 1, 2017. The Company has concluded that the early adoption of this standard, which is permitted, had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

Accounting Standards Not Yet Adopted

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. 2014-09 - In May 2014,  the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), as later amended, which resulted in a new accounting standard Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Accounting Standards Update 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective on January 1, 2018. We have elected to adopt the revenue recognition standard in the first quarter of 2018 with a cumulative adjustment to retained earnings. We have completed our assessment of the new revenue recognition guidance. We do not anticipate the adoption of this standard to have a material impact on our financial statements, aside from adding expanded required disclosures.

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PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(2) OPERATING SEGMENTS AND RELATED INFORMATION

We conduct our operations through three reportable segments:

Recovery Audit Services – Americas represents recovery audit services (other than HCRA services) provided in the United States of America (“U.S.”), Canada and Latin America.

Recovery Audit Services – Europe/Asia-Pacific represents recovery audit services provided in Europe, Asia and the Pacific region.

Adjacent Services represents data transformation, spend analytics, PRGX OPTIX and SIM services, and associated advisory services.

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

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 part of discontinuing the HCRA business, the Company has an accrual for outstanding Medicare RAC appeals of approximately $2.9 million as of December 31, 2017. The HCRA services business has been reported as Discontinued Operations in accordance with US GAAP.

Discontinued operations information for the years ended December 31, 2017, 2016 and 2015 (in thousands) is as follows: 

Results of Discontinued Operations (in thousands)	Years Ended December 31,
	2017			2016			2015
Revenue, net	$	—		$	(14	)	$	1,266
Cost of sales	1,350			1,112			4,743
Selling, general and administrative expense	14			184			1,253
Depreciation and amortization	8			14			35
Pretax loss from discontinued operations	(1,372		)	(1,324		)	(4,765		)
Income tax expense	—			—			—
Net loss from discontinued operations	$	(1,372	)	$	(1,324	)	$	(4,765	)

We evaluate the performance of our reportable segments based upon revenue and measures of profit or loss we refer to as EBITDA and Adjusted EBITDA. We define Adjusted EBITDA as earnings 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.

50

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Segment information for the years ended December 31, 2017, 2016 and 2015 (in thousands) is as follows:

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
2017
Revenue, net	$	113,122		$	44,372		$	4,126		$	—		$	161,620
Net income from continuing operations													$	4,556
Income tax expense													2,962
Interest expense, net													1,539
EBIT	$	29,163		$	11,700		$	(7,942	)	$	(23,864	)	9,057
Depreciation of property and equipment	3,165			599			805			—			4,569
Amortization of intangible assets	1,919			142			1,573			—			3,634
EBITDA	34,247			12,441			(5,564		)	(23,864		)	17,260
Foreign currency transaction (gains) losses on short-term intercompany balances	(249		)	(1,769		)	(9		)	(163		)	(2,190		)
Acquisition-related adjustments	—			—			—			(2,283		)	(2,283		)
Transformation severance and related expenses	313			655			320			378			1,666
Other (income) loss	751			184			(195		)	(900		)	(160		)
Stock-based compensation	—			—			—			7,052			7,052
Adjusted EBITDA	$	35,062		$	11,511		$	(5,448	)	$	(19,780	)	$	21,345
Capital expenditures	$	2,389		$	2,383		$	1,335		$	3,248		$	9,355
Allocated assets	$	65,397		$	22,474		$	9,486		$	—		$	97,357
Unallocated assets:
Cash and cash equivalents	—			—			—			18,823			18,823
Restricted cash	—			—			—			51			51
Deferred income taxes	—			—			—			1,538			1,538
Prepaid expenses and other assets	—			—			—			910			910
Discontinued operations	—			—			—			1,539			1,539
Total assets	$	65,397		$	22,474		$	9,486		$	22,861		$	120,218

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PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
2016
Revenue, net	$	99,861	$	37,335	$	3,648		$	—		$	140,844
Net income from continuing operations											$	2,229
Income tax expense											1,242
Interest income, net											(153		)
EBIT	$	25,476	$	6,455	$	(4,617	)	$	(23,996	)	3,318
Depreciation of property and equipment	3,750		529		754			—			5,033
Amortization of intangible assets	1,477		—		355			—			1,832
EBITDA	30,703		6,984		(3,508		)	(23,996		)	10,183
Foreign currency transaction losses (gains) on short-term intercompany balances	31		107		17			(71		)	84
Transformation severance and related expenses	517		312		258			242			1,329
Other loss	—		—		(121		)	—			(121		)
Stock-based compensation	—		—		—			5,123			5,123
Adjusted EBITDA	$	31,251	$	7,403	$	(3,354	)	$	(18,702	)	$	16,598
Capital expenditures	$	4,393	$	600	$	894		$	—		$	5,887
Allocated assets	$	47,690	$	14,813	$	10,532		$	—		$	73,035
Unallocated assets:
Cash and cash equivalents	—		—		—			15,723			15,723
Restricted cash	—		—		—			47			47
Deferred income taxes	—		—		—			2,269			2,269
Prepaid expenses and other assets	—		—		—			800			800
Discontinued operations								1,600			1,600
Total assets	$	47,690	$	14,813	$	10,532		$	20,439		$	93,474

52

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
2015
Revenue, net	$	97,009	$	36,264	$	5,029		$	—		$	138,302
Net loss from continuing operations											$	1,539
Income tax expense											369
Interest income, net											(190		)
EBIT	$	22,539	$	2,573	$	(5,131	)	$	(18,263	)	1,718
Depreciation of property and equipment	4,036		647		634			—			5,317
Amortization of intangible assets	1,728		600		130			—			2,458
EBITDA	28,303		3,820		(4,367		)	(18,263		)	9,493
Foreign currency transaction (gains) losses on short-term intercompany balances	807		1,533		12			(187		)	2,165
Transformation severance and related expenses	322		589		30			308			1,249
Other loss	—		—		1,191			—			1,191
Stock-based compensation	—		—		—			3,926			3,926
Adjusted EBITDA	$	29,432	$	5,942	$	(3,134	)	$	(14,216	)	$	18,024
Capital expenditures	$	3,669	$	543	$	270		$	—		$	4,482
Allocated assets	$	44,588	$	13,922	$	1,030		$	—		$	59,540
Unallocated assets:
Cash and cash equivalents	—		—		—			15,122			15,122
Restricted cash	—		—		—			48			48
Deferred loan cost	—		—		—			80			80
Deferred income taxes	—		—		—			1,361			1,361
Prepaid expenses and other assets	—		—		—			2,465			2,465
Discontinued operations	—		—		—			1,775			1,775
Total assets	$	44,588	$	13,922	$	1,030		$	20,851		$	80,391

53

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents revenue by country based on the location of clients served (in thousands):

	Years Ended December 31,
	2017		2016		2015
United States	$	93,447	$	80,857	$	80,484
United Kingdom	23,408		17,501		19,540
Canada	14,375		14,531		12,388
Australia	8,732		7,354		6,111
France	5,987		6,934		6,186
Mexico	5,385		4,900		4,340
Brazil	2,053		1,169		1,223
Spain	1,127		964		1,019
Ireland	929		337		513
New Zealand	899		979		596
Hong Kong	889		824		864
Colombia	709		583		610
Thailand	699		654		933
Other	2,981		3,257		3,495
	$	161,620	$	140,844	$	138,302

The following table presents long-lived assets by country based on the location of the asset (in thousands):

	December 31,
	2017		2016
United States	$	47,371	$	34,429
UK	5,510		2,047
All Other	1,125		1,074
	$	54,006	$	37,550

One client, The Kroger Co., accounted for approximately 12% of revenue from continuing operations in 2017 and approximately 11% of revenue from continuing operations in 2016, while no one client accounted for 10% or more of revenue from continuing operations in 2015.

(3) EARNINGS (LOSS) PER COMMON SHARE

The following tables set forth the computations of basic and diluted earnings (loss) per common share (in thousands, except per share data):

	Years Ended December 31,
Basic earnings (loss) per common share:	2017				2016			2015
Numerator:
Net income from continuing operations	$	4,556		2	$	2,229		$	1,539
Net loss from discontinued operations	$	(1,372	)		$	(1,324	)	$	(4,765	)
Denominator:
Weighted-average common shares outstanding	21,937				21,969			25,868
Basic earnings per common share from continuing operations	$	0.21			$	0.10		$	0.06
Basic loss per common share from discontinued operations	$	(0.06	)		$	(0.06	)	$	(0.18	)

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	Years Ended December 31,
Diluted earnings (loss) per common share:	2017			2016			2015
Numerator:
Net income from continuing operations	$	4,556		$	2,229		$	1,539
Net loss from discontinued operations	$	(1,372	)	$	(1,324	)	$	(4,765	)
Denominator:
Weighted-average common shares outstanding	21,937			21,969			25,868
Effect of dilutive securities from stock-based compensation plans	174			47			36
Denominator for diluted earnings per common share	22,111			22,016			25,904
Diluted earnings per common share from continuing operations	$	0.21		$	0.10		$	0.06
Diluted loss per common share from discontinued operations	$	(0.06	)	$	(0.06	)	$	(0.18	)

Weighted-average shares outstanding excludes antidilutive shares underlying options that totaled 2.3 million, 2.9 million, and 3.3 million shares, respectively, from the computation of diluted earnings per common share for the years ended December 31, 2017, 2016, and 2015.

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(4) GOODWILL AND INTANGIBLE ASSETS

(a) Goodwill

We evaluate the recoverability of goodwill in the fourth quarter of each year or sooner if events or changes in circumstances indicate that the carrying amount may exceed its fair value. These analyses did not result in an impairment charge during the periods presented.

Goodwill by reportable segments during 2017 and 2016 was as follows (in thousands):

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services		Total
Balance, January 1, 2016	$	10,755	$	813		$	242	$	11,810
Goodwill recorded in connection with business combinations	—		—			2,146		2,146
Foreign currency translation	—		(133		)	—		(133		)
Balance, December 31, 2016	10,755		680			2,388		13,823
Goodwill recorded in connection with business combinations	2,685		869			140		3,694
Foreign currency translation	—		131			—		131
Balance, December 31, 2017	$	13,440	$	1,680		$	2,528	$	17,648

During 2017, we recorded goodwill of $3.6 million in our Recovery Audit Services - Americas and Recovery Audit Services - Europe/Asia-Pacific segments in conjunction with the acquisition of Cost & Compliance Associates, LLC and Cost & Compliance Associates Limited respectively, (collectively "C&CA") on February 23, 2017. C&CA is a commercial recovery audit and contract compliance firm with operations in the U.S. and the UK (refer to Note 12 below).

During 2016, we recorded goodwill of $2.1 million in our Adjacent Services segment in conjunction with our October 31, 2016 acquisition of Lavante. Lavante is a SaaS-based SIM and recovery audit services firm, based in San Jose, California. Lavante’s assets consist primarily of its proprietary software applications and customer contracts.

(b) Intangible Assets

Intangible assets consist principally of amounts we assigned to customer relationships, trademarks, non-compete agreements and trade names in conjunction with business acquisitions. Changes in gross carrying amounts for intangible assets in 2015 related primarily to the divestiture of certain assets from a document service offering ("SDS assets"). Note 12 – Business Acquisitions and Divestitures below includes a more detailed description of the divestiture in 2015 and recent acquisitions. Certain of our intangible assets associated with acquisitions of assets or businesses by our foreign subsidiaries are denominated in the local currency of such subsidiary and therefore are subject to foreign currency ("FX") adjustments. We present the amounts for these transactions in United States dollars utilizing foreign currency exchange rates as of the respective balance sheet dates.

Amortization expense relating to intangible assets was $3.6 million in 2017, $1.8 million in 2016 and $2.5 million in 2015. As of December 31, 2017 and based on our current amortization methods, we project amortization expense relating to intangible assets for the next five years will be $3.4 million in 2018, $3.5 million in 2019, $3.3 million in 2020, $1.7 million in 2021 and $0.9 million in 2022. We use accelerated amortization methods for customer relationships and trade names, and straight-line amortization for non-compete agreements and trademarks.

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Changes in noncurrent intangible assets during 2017 and 2016 were as follows (in thousands):

	Customer Relationships			Trademarks			Non- compete Agreements			Software			Trade Names			Total
Gross carrying amount:
Balance, January 1, 2016	$	37,784		$	931		$	1,477		$	—		$	2,200		$	42,392
Acquisition of Lavante Assets	—			—			—			6,178			—			6,178
FX adjustments and other	(1,211		)	(78		)	(155		)	—			—			(1,444		)
Balance, December 31, 2016	36,573			853			1,322			6,178			2,200			47,126
Acquisition of C&CA Assets	9,556			135			1,232			—			—			10,923
FX adjustments and other	777			38			75			—			—			890
Balance, December 31, 2017	$	46,906		$	1,026		$	2,629		$	6,178		$	2,200		$	58,939
Accumulated amortization:
Balance, January 1, 2016	$	(31,246	)	$	(881	)	$	(1,381	)	$	—		$	(2,200	)	$	(35,708	)
Amortization expense	(1,414		)	(50		)	(96		)	(272		)	—			(1,832		)
FX adjustments and other	1,179			78			155			—			—			1,412
Balance, December 31, 2016	(31,481		)	(853		)	(1,322		)	(272		)	(2,200		)	(36,128		)
Amortization expense	(1,796		)	(22		)	(204		)	(1,612		)	—			(3,634		)
FX adjustments and other	(585		)	(38		)	(76		)	—			—			(699		)
Balance, December 31, 2017	$	(33,862	)	$	(913	)	$	(1,602	)	$	(1,884	)	$	(2,200	)	$	(40,461	)
Net carrying amount:
Balance, December 31, 2016	$	5,092		$	—		$	—		$	5,906		$	—		$	10,998
Balance, December 31, 2017	$	13,044		$	113		$	1,027		$	4,294		$	—		$	18,478
Estimated useful life (years)	6-15 years			5 years			1-5 years			4 years			4-5 years

(5) DEBT

In May of 2016, the Company adopted ASU 2015-03, Interest - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 changed the presentation of debt issuance costs on the balance sheet by requiring that they be presented as a direct deduction from the related debt liability, rather than represented as a separate asset. As a result, the Company’s deferred financing costs are now reflected in Long-term debt, excluding current portion on the Company’s Consolidated Balance Sheets for all periods presented. Long-term debt as of December 31, 2017 and 2016 consists of the following (in thousands):

	As of December 31
	2017							2016
	Gross		DFC (1)			Net		Gross		DFC		Net
Revolving Facility	$	13,600	$	(131	)	$	13,469	$	3,600	$	—	$	3,600
Capital lease obligations	105		—			105		—		—		—
Total long term debt	13,705		(131		)	13,574		3,600		—		3,600
Less: Current portion of long-term debt	48		—			48		3,600		—		3,600
Long-term debt, excluding current portion	$	13,657	$	(131	)	$	13,526	$	—	$	—	$	—

(1) DFC refers to deferred financing costs related to the Company's long-term 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

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million term loan. The SunTrust credit facility is guaranteed by the Company and its domestic subsidiaries and is secured by substantially all of our assets.

The Company modified the existing credit facility agreement through various amendments during fiscal years 2014 and 2016. Included in these amendments was the refinancing of the committed credit facility in 2014, and clarification of certain definitions and other terms of the facility in 2016. The refinancing resulted in an extended maturity date of December 23, 2017, as well as lower interest rate. Pursuant to the December 2014 amendment, the credit facility would bear interest at a rate per annum comprised of a specified index rate based on one-month LIBOR, plus an applicable margin (1.75% per annum). The index rate was determined as of the first business day of each calendar month. We must pay a commitment fee, payable quarterly, on the unused portion of the credit facility.

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:

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

As of December 31, 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 December 31, 2017. Based on the terms of the credit facility, as amended, the applicable interest rate at December 31, 2017 was approximately 3.60%. As of December 31, 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 SunTrust credit facility, among other things, limit the amount of capital expenditures the Company can make, set forth maximum leverage and net funded debt ratios for the Company and a minimum fixed charge coverage ratio, and also require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the SunTrust credit facility includes customary events of default. The Company was in compliance with the covenants in its SunTrust credit facility as of December 31, 2017.

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Future Commitments

The following is a summary of the combined principal maturities of all long-term debt and principal payments to be made under the Company’s capital lease agreements for each of the fiscal years presented in the table below (in thousands):

Year Ended December 31
2018	$	73
2019	13,625
2020	7
Total	$	13,705

(6) LEASE COMMITMENTS

PRGX is committed under noncancelable lease arrangements for facilities and equipment. Rent expense, excluding costs associated with the termination of noncancelable lease arrangements, was $5.1 million in 2017, $3.9 million in 2016 and $4.6 million in 2015.

In January 2014, we amended the lease for our principal executive offices to extend the term through December 31, 2021, reduce the lease payment for 2014, and reduce the space under lease from approximately 132,000 square feet to approximately 58,000 square feet effective January 1, 2015. As of December 31, 2015, we had no subleased property. Starting in February 2016 we subleased approximately 3,000 square feet.

We have entered into several operating lease agreements that contain provisions for future rent increases, free rent periods or periods in which rent payments are reduced (abated). We charge the total amount of rental payments due over the lease term to rent expense on the straight-line, undiscounted method over the lease terms.

Future minimum lease payments under noncancelable operating leases including the amended lease for our principal executive offices, are as follows (in thousands):

Year Ending December 31,	Gross		Sublease Income			Amount
2018	$	3,363	$	(69	)	$	3,294
2019	2,981		(72		)	2,909
2020	2,527		(74		)	2,453
2021	2,116		(77		)	2,039
2022	440		—			440
Total payments	$	11,427	$	(292	)	$	11,135

(7) INCOME TAXES

Income (loss) before income taxes from continuing operations relate to the following jurisdictions (in thousands):

	Years Ended December 31,
	2017			2016			2015
United States	$	(6,502	)	$	(5,306	)	$	(244	)
Foreign	14,020			8,777			2,152
	$	7,518		$	3,471		$	1,908

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The provision for income taxes for continuing operations consists of the following (in thousands):

	Years Ended December 31,
	2017			2016			2015
Current:
Federal	$	—		$	—		$	—
State	1			—			(13		)
Foreign	2,230			2,103			1,494
	2,231			2,103			1,481
Deferred:
Federal	(155		)	—			—
State	—			—			—
Foreign	886			(861		)	(1,112		)
	731			(861		)	(1,112		)
Total	$	2,962		$	1,242		$	369

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The significant differences between the U.S. federal statutory tax rate and the Company’s effective income tax expense for earnings (in thousands) are as follows:

	Years Ended December 31,
	2017			2016			2015
Statutory federal income tax rate	$	2,631		$	1,180		$	649
State income taxes, net of federal effect	(62		)	(173		)	(240		)
Net operating loss limitation	2,975			—			—
Deferred tax true-up	—			(4,103		)	8,078
Change in deferred tax asset valuation allowance	(15,338		)	4,877			(6,729		)
Statutory rate change	13,850			—			—
Foreign tax rate differential	(899		)	(712		)	(223		)
Compensation deduction limitation	—			113			(1,201		)
Other, net	(195		)	60			35
Total	$	2,962		$	1,242		$	369

The tax effects of temporary differences and carry-forwards that give rise to deferred tax assets and liabilities consist of the following (in thousands):

	Years Ended December 31,
	2017		2016
Deferred income tax assets:
Accounts payable and accrued expenses	$	1,215	$	737
Accrued payroll and related expenses	1,691		3,062
Stock-based compensation expense	3,508		3,531
Depreciation of property and equipment	1,711		2,579
Capitalized Software	—		—
Non-compete agreements	—		—
Unbilled receivables and refund liabilities	1,811		2,216
Operating loss carry-forwards of foreign subsidiary	11,000		10,907
Federal operating loss carry-forwards	17,161		33,087
State operating loss carry-forwards	3,591		3,919
Other	376		1,181
Gross deferred tax assets	42,064		61,219
Less valuation allowance	34,776		50,114
Gross deferred tax assets net of valuation allowance	7,288		11,105
Deferred income tax liabilities:
Intangible assets	1,987		2,299
Capitalized software	29		1,928
Other	3,734		4,609
Gross deferred tax liabilities	5,750		8,836
Net deferred tax assets	$	1,538	$	2,269

Our reported effective tax rates on income approximated 39.4% in 2017, 35.8% in 2016, and 19.3% in 2015. Reported income tax expense in each year primarily results from taxes on the income of foreign subsidiaries. The effective tax rates generally differ from the expected tax rate primarily due to the Company’s deferred tax asset valuation allowance on the domestic earnings and taxes on income of foreign subsidiaries.

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On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act"), was signed into law making significant changes to the Internal Revenue Code.  The new legislation contains several key provisions that impact the consolidated financial statements for the year ended December 31, 2017. Additionally, in December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be incomplete though we have recorded provisional amounts in the consolidated financial statements. We expect to complete our analysis within the measurement period in accordance with SAB 118.

The new legislation contains several key provisions that affect us.    The lowering of the corporate tax rate from 35% to 21% resulted in our deferred tax balances and related valuation allowances being re-measured to reflect the future tax benefit at the new enacted rate.  The U.S. deferred tax assets were reduced by $13.9 million and the valuation allowance was also reduced by $13.9 million.  This remeasurement results in no net impact to the effective tax rate for the year ended December 31, 2017.    In addition the Alternative Minimum Tax (“AMT”) has been repealed for tax years beginning after December 31, 2017 and  the AMT credit will be refundable in future years.  The Company has an AMT credit balance of approximately $155,000 recorded as a deferred tax asset and has now released the valuation allowance related to this balance, resulting in a $155,000 income tax benefit. The Tax Act requires the payment of a transition tax on the mandatory deemed repatriation of cumulative unremitted foreign earnings, the larger amount measured on November 2, 2017 and December 31, 2017. Based upon all available evidence and the Company’s analysis, there is no transition tax liability due to a net earnings and profits deficit in our controlled foreign corporations and no impact to the effective tax rate for the year ended December 31, 2017.   The Global Intangible Low Tax Income Tax (“GILTI”) is a U.S. minimum tax on the foreign earnings on intangible assets.  The Company has elected to account for the impact of the minimum tax in the period realized.  GILTI results in no impact to the effective tax rate for the year ended December 31, 2017.

We undertook a detailed review of our deferred taxes and it was determined with the exception of the deferred tax assets associated with the AMT credit described above, a valuation allowance was required for all other U.S. deferred tax assets. We continue to maintain a valuation allowance on our U.K. deferred tax assets. We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carryback and carryforward periods and the implementation of tax planning strategies. Since this evaluation requires consideration of future events, significant judgment is required in making the evaluation, and our conclusion could be materially different should certain of our expectations not be met. The balance of our valuation allowance was $34.8 million as of December 31, 2017, representing a change of $15.3 million from the valuation allowance of $50.1 million recorded as of December 31, 2016. The primary driver of the valuation allowance movement was determined by the re-measurement of deferred tax assets and corresponding valuation allowance due to the reduction in the U.S. corporate tax rate under The Act as discussed above.

In 2015, management determined that a valuation allowance was no longer required against the deferred tax assets of one of its U.S. branches in Australia. As of December 31, 2015, we had gross deferred tax assets of $1.5 million relating to this subsidiary. The benefit of these deferred tax assets is reflected as a credit to tax expense of $0.5 million during the year ended December 31, 2015.

In 2016, management determined that a valuation allowance was no longer required against the deferred tax assets of its U.S. branches in New Zealand and Singapore. As of December 31, 2016, we had gross deferred tax assets of $8.4 million relating to those foreign subsidiaries. The benefit of these deferred tax assets is reflected as a credit of $1.7 million to tax expense during the year ended December 31, 2016.

In 2017, management determined that a valuation allowance was no longer required against the deferred tax assets of certain of its U.S. branches in Spain, Taiwan, Thailand and Mexico. As of December 31, 2017, we had gross deferred tax assets of $0.9 million relating to those foreign subsidiaries. The benefit of these deferred tax assets is reflected as a credit of $0.2 million to tax expense during the year ended December 31, 2017.

As of December 31, 2017, we had approximately $81.7 million of U.S. federal loss carry-forwards available to reduce future U.S. federal taxable income. The U.S. federal loss carry-forwards expire between 2025 and 2035. As of December 31, 2017, we had approximately $65.0 million of state loss carry-forwards available to reduce future state taxable income. The state loss carry-forwards expire between 2018 and 2037 and are subject to certain limitations. The U.S. federal and state loss carry-forwards at December 31, 2017, reflect adjustments for current period write-downs associated with ownership changes for state tax purposes.

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Generally, we have not provided deferred taxes on the undistributed earnings of international subsidiaries as we consider these earnings to be permanently reinvested. As it relates to the earnings of our Brazilian subsidiary, we assert that we are not permanently reinvested. We did not provide additional incremental U.S. income tax expense on these amounts as our Brazilian subsidiary did not have undistributed earnings during the year.

On December 30, 2016, the Company experienced an ownership change as defined under Section 382 of the Internal Revenue Code (“IRC”). This ownership change resulted in an annual IRC Section 382 limitation that limits the use of certain tax attribute carry-forwards and also resulted in the write-off of certain deferred tax assets and the related valuation allowances that the Company recorded in 2017. The Company has performed its assessment and has determined that $87.3M million of the gross federal net operating losses outstanding as of December 30, 2016 will be available for use going-forward.

A reconciliation of our beginning and ending amount of unrecognized tax benefits and related accrued interest thereon is as follows:

	Unrecognized Tax Benefits			Accrued Interest and Penalties
Balance at January 1, 2015	$	677		$	220
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	—			24
Decrease based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	$	(142	)	$	(42	)
Balance at December 31, 2015	$	535		$	202
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	—			11
Decreases based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	(38		)	(59		)
Balance at December 31, 2016	$	497		$	154
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	116			19
Decreases based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	(420		)	(145		)
Balance at December 31, 2017	$	193		$	28

Due to the complexity of the tax rules underlying these unrecognized tax benefits, and the unclear timing of tax audits, tax agency determinations, and other events, we cannot establish reasonably reliable estimates for the periods in which the cash settlement of these liabilities will occur.

We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. As of December 31, 2017, the 2014 through 2016 tax years generally remain subject to examination by federal and most state and foreign tax authorities. The use of net operating losses generated in tax years prior to 2014 may also subject returns for those years to examination.

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(8) EMPLOYEE BENEFIT PLANS

We maintain a defined contribution retirement plan (the "Plan") in accordance with Section 401(k) of the Internal Revenue Code, which allows eligible participating employees to defer a portion of their annual compensation and contribute such amount to one or more investment funds. We match employee contributions in a discretionary amount to be determined by management and approved by the Board of Directors each plan year up to the lesser of 6% of an employee’s annual compensation or $3,000 per participant. We also may make additional discretionary contributions to the Plan as determined by management and approved by the Board of Directors each plan year. Company matching funds and discretionary contributions vest 100% after three years of service for participants who either had attained three or more years of service or were hired on or after January 1, 2012. For all other participants, company matching funds and discretionary contributions vest at the rate of 20% after two years of service and 100% after three years of service. We amended the Plan in 2013 to add Roth 401(k) plan features that allow participating employees to make post-tax contributions in addition to, or in lieu of, the pre-tax contributions allowed under the Plan. Company matching funds are made on a pre-tax basis for both pre-tax and post-tax employee contributions, and are subject to the above limitations based on the aggregate pre-tax and post-tax contribution by the participant. The Company contributed to the Plan approximately $0.8 million in 2017, $0.8 million in 2016, and $0.8 million in 2015.

(9) CAPITAL STRUCTURE

On February 21, 2014, our Board of Directors authorized a stock repurchase program under which we could repurchase up to $10.0 million of our common stock from time to time through March 31, 2015. On March 25, 2014, our Board of Directors authorized a $10.0 million increase to the stock repurchase program, bringing the total amount of its common stock that the Company could repurchase under the program to $20.0 million. On October 24, 2014, our Board of Directors authorized a $20.0 million increase to the stock repurchase program, increasing the total share repurchase program to $40.0 million, and extended the duration of the program to December 31, 2015. In October 2015, our Board of Directors authorized an additional $10.0 million increase to the stock repurchase program, increasing the total share repurchase program to $50.0 million, and extended the duration of the program to December 31, 2016. In December 2016, our Board of Directors authorized an additional $10.0 million increase to the stock repurchase program, increasing the total share repurchase program to $60.0 million, and extended the duration of the program to December 31, 2017. In December 2017, our Board of Directors extended the duration of the program to December 31, 2018. We repurchased 0.9 million shares of our common stock during the year ended December 31, 2016 for $3.8 million and no shares in the year ended December 31, 2017.

Pursuant to exercises of outstanding stock options, we issued 225,043 shares of our common stock having a value of $1.5 million in the year ended December 31, 2017 and 90,496 shares of our common stock having a value of $0.3 million in the year ended December 31, 2016.

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(10) COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

(11) STOCK-BASED COMPENSATION

Plan Summary

During 2017, the Company had two shareholder-approved stock-based compensation plans under which equity awards have been granted: (1) the 2008 Equity Incentive Plan (“2008 EIP”); and (2) the 2017 Equity Incentive Compensation Plan (“2017 EICP”) (collectively, the “Plans”). The Company generally issues authorized but previously unissued shares to satisfy stock option exercises, grants of restricted stock awards and vesting of restricted stock units.

2008 EIP Awards

During the first quarter of 2008, the Board of Directors of the Company adopted the 2008 EIP, which was approved by the shareholders at the annual meeting of the shareholders on May 29, 2008. The 2008 EIP authorized the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other incentive awards. Pursuant to amendments to the 2008 EIP that were approved by the Board of Directors and the Company's shareholders, 10,600,000 shares were reserved for issuance under the 2008 EIP to award grants to key employees, directors and service providers. The options granted pursuant to the 2008 EIP generally had seven year terms and vested in equal annual increments over the vesting period, which typically was three years for employees and one year for directors. No further awards can be granted from the 2008 EIP following the approval of the 2017 EICP by shareholders on June 27, 2017.

2017 EICP Awards

In April 2017, the Board of Directors adopted the 2017 EICP, which was approved by the shareholders at the annual meeting of the shareholders on June 27, 2017. The 2017 EICP applies to awards granted on or after June 27, 2017. Under the 2017 EICP, the Company may grant incentive and non-qualified 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 the awards under the 2017 EICP is 3.4 million shares plus that 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 subsequently terminate without deleting of the shares, whether by lapse, forfeiture, cancellation, or otherwise. The options granted to date pursuant to the 2017 EICP have a term of seven years. As of December 31, 2017, there were approximately 3.1 million shares available for future grants under the 2017 EICP.

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Grants

Option Awards

The following table summarizes stock option awards granted during the years ended December 31, 2017, 2016, and 2015:

Grantee Type	# of Options Granted	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
2017
Director group	90,566	1 year or less	$	6.34	$	3.49
Director group (1)	35,000	3 years	$	6.25	$	3.50
CEO grant	500,000	4 years	$	7.35	$	2.36
Employee group	30,000	3 years	$	7.25	$	3.99
Employee inducement (2)	335,000	3 years	$	6.19	$	3.41
2016
Director group (3)	195,417	1 year or less	$	5.01	$	2.71
Director group(1)	35,000	3 years	$	4.80	$	2.66
Employee inducement (4)(5)	232,500	3 years	$	4.61	$	2.60
2015
Director group	249,273	1 year or less	$	4.49	$	2.44
Employee group	17,092	3 years	$	3.99	$	1.33
Employee inducement (6)	135,000	3 years	$	5.51	$	1.42

(1) The Company granted non-qualified stock options to one director in connection with the director joining the Company's board of directors.

(2) The Company granted non-qualified stock options outside its existing stock-based compensation plans to certain employees.

(3) Includes 20,417 non-qualified stock options granted to one director in connection with the director joining the Company's board of directors.

(4) The Company granted non-qualified stock options outside its existing stock-based compensation plans in 2016 in connection with an employee joining the Company.

(5) The Company granted non-qualified stock options outside its existing stock-based compensation plans in connection with the closing of the Lavante acquisition.

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

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Nonvested Stock Awards

The following table summarizes nonvested stock awards granted during the years ended December 31, 2017, 2016 and 2015:

Grantee Type	# of Stock Awards Granted	Vesting Period	Weighted Average Grant Date Fair Value
2017
Director group	51,179	1 year or less	$	6.35
Employee group (1)	641,751	3 years or less	$	6.31
Employee inducement (2)	100,000	3 years or less	$	6.33
2016
Employee group (3)	1,250,750	2 years	$	4.88
Employee inducement (4)	100,000	3 years	$	4.94
2015
Director group	4,273	1 year or less	$	4.02
Director group	17,092	3 years	$	3.99
Employee group (5)	2,493,333	3 years	$	3.99
Employee inducement (6)	10,000	3 years	$	5.29

(1) The Company granted nonvested performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards in the first quarter of 2017 to twelve executive officers totaling 458,000 units. During the second quarter of 2017, the Company issued 183,751 restricted stock awards and restricted stock units to key employees.

(2) The Company granted nonvested performance-based stock awards (restricted stock units) and restricted stock awards in 2017 to two executive officers in connection with the employees joining the Company.

(3) The Company granted nonvested performance-based stock awards (restricted stock units) in 2016 to five executive officers, and certain other key employees.

(4) The Company granted nonvested performance-based stock awards (restricted stock units) outside its existing stock-based compensation plans in 2016 to three employees in connection with the employees joining the Company.

(5) The Company granted nonvested performance-based stock awards (restricted stock units) in the first quarter of 2015 to eight executive officers totaling 1,325,000 units. During the third and fourth quarters of 2015, the Company issued 1,168,333 units to key employees.

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

Nonvested stock awards, including both restricted stock and restricted stock units, 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 vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors.

Performance-Based Restricted Stock Units

In March 2017, six executive officers and six other senior leaders were granted 274,800 performance-based restricted stock units ("PBUs") under the 2008 EIP. If vested, 100% of the vested PBUs will be paid in whole shares of common stock. 65% of the PBUs vest and become payable based on the cumulative revenue from continuing operations and 35% of the PBUs vest and become payable on the cumulative adjusted EBITDA from continuing operations that the Company achieves, in each case, 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 shall become vested and payable will be based on a 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 applicable threshold performance level).

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In May 2017, one executive officer and one senior leader were granted 59,000 PBUs outside of the existing stock-based compensation plan as an inducement for employment. If vested, 100% of the vested PBUs will be paid in whole shares of common stock. 65% of the PBUs vest and become payable based on the cumulative revenue from continuing operations and 35% of the PBUs vest and become payable on the cumulative adjusted EBITDA from continuing operations that the Company achieves, in each case, 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 shall become vested and payable will be based on a straight line interpolation between such stated performance levels (although the Units 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 applicable threshold performance level).

On August 3, 2016, a senior leader of the Company was granted 10,000 performance-based restricted stock units ("PBUs") outside of the existing stock-based compensation plan as an inducement for employment. This employee terminated his employment in the second quarter of 2017. The PBUs were forfeited upon termination.

On June 27, 2016, certain employees of the Company were granted 641,750 PBUs under the 2008 EIP. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 40% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 60% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On June 20, 2016, a senior leader of the Company was granted 30,000 PBUs outside of the existing stock-based compensation plan as an inducement for employment. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 40% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 60% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On May 5, 2016, an executive officer of the Company was granted 60,000 PBUs outside of the existing stock-based compensation plan as an inducement for employment. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 43% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 57% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

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On March 31, 2016, five executive officers and three other senior leaders of the Company were granted 609,000 PBUs under the 2008 EIP. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 43% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 57% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On September 28, 2015, certain employees of the Company were granted 1,123,333 PBUs under the 2008 EIP. On December 14, 2015, certain employees of the Company were granted an additional 45,000 PBUs under the 2008 EIP. The specified performance goals for these PBUs were not achieved and the PBUs were forfeited in the first quarter of 2017.

On March 30, 2015, eight executive officers of the Company were granted 1,325,000 PBUs under the 2008 EIP. The specified performance goals for these PBUs were not achieved and the PBUs were forfeited in the first quarter of 2017.

The following table summarizes the PBUs granted during the years ended December 31, 2017, 2016 and 2015:

	Total PBUs Granted	PBUs to be Settled in Common Stock (1)	PBUs to be Settled in Cash (2)
2017	333,800	333,800	—
2016	1,350,750	560,670	790,080
2015(3)	2,493,333	954,583	1,538,750

(1) Represents the number of PBUs to be settled in common stock at the target performance level.

(2) Represents the number of PBUs to be settled in cash at the target performance level.

(3) PBUs were forfeited.

During 2015, the PBUs were expensed at the target performance level based on management's estimates. During the fourth quarter of 2015, it was determined it was "not probable" that the threshold performance level would be achieved by the vesting period ending December 31, 2016 and the Company reversed approximately $0.8 million of expense incurred in the second quarter and $0.6 million of expense incurred in third quarter, a total of $1.4 million for the year ended December 31, 2015. During 2017 and 2016, the PBUs that were granted in 2017 and 2016 were expensed at the target performance level based on management's estimates.

Stock Appreciation Rights

On April 27, 2016, the Company's Chief Executive Officer was granted stock appreciation rights (“SARs”) covering 200,000 shares of the Company’s common stock under the 2008 EIP. The SARs were issued with an initial value per share equal to $4.71. The SARs will vest and become payable in cash in a lump sum (net of applicable withholdings) on June 30, 2018, subject to the Chief Executive Officer’s continued employment through such date. Upon vesting, the Company will pay an amount equal to the excess of the fair market value, as of June 30, 2018, of the shares of the Company’s common stock with respect to the SARs that have become vested and payable over $4.71, the fair market value (closing price) of the Company's common stock on April 27, 2016.

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Summary of Activity

A summary of option activity as of December 31, 2017, and changes during the year then ended is presented below:

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	4.30 years	$	1,204
Granted	990,566		6.82
Exercised	(225,043	)	5.23			$	299
Forfeited	(475,504	)	6.01
Expired	(311,111	)	6.18
Outstanding at December 31, 2017	3,399,293		$	6.54	4.05 years	$	2,367
Exercisable at December 31, 2017	2,290,967		$	6.52	3.20 years	$	1,654

The weighted-average grant date fair value of options granted was $2.91 per share in 2017, $2.66 per share in 2016 and $2.32 per share in 2015. The total intrinsic value of options exercised was $0.3 million in 2017, $0.1 million in 2016 and less than $0.1 million in 2015.

For time-vested option grants that resulted in compensation expense recognition, we used the following assumptions in our Black-Scholes valuation models:

	Years Ended December 31,
	2017	2016	2015
Risk-free interest rates (1)	1.38% - 1.96%	0.58% - 1.20%	0.80% - 1.59%
Dividend yields (2)	—%	—%	—%
Volatility factor of expected market price (3)	.540 - .749	.391 - .779	.323 - .733
Weighted-average expected term of options (4)	2.2 - 4 years	1.3 - 4.5 years	3.1 - 5 years
Forfeiture rate (5)	—%	—%	—%

(1) The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding to the expected term of the options.

(2) The Company has not historically declared dividends.

(3) The expected volatility is based on the historical volatility of the Company's stock.

(4) The expected term represents the weighted average period of time that the stock options are expected to be outstanding, giving consideration to the vesting schedules.

The Company accounts for forfeitures as they occur rather than estimating expected forfeitures.

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A summary of nonvested stock awards (including restricted stock, restricted stock units and performance-based restricted stock units) activity as of December 31, 2017 and changes during the year then ended is presented below:

Nonvested Stock	Shares		Weighted Average Grant Date Fair Value (Per Share)
Nonvested at January 1, 2017	3,893,050		$	4.37
Granted	792,930		6.32
Vested	(45,002	)	6.24
Forfeited	(2,524,282	)	4.09
Nonvested at December 31, 2017	2,116,696		$	5.36

The weighted-average grant date fair value of nonvested stock awards (restricted stock and restricted stock units) granted was $6.32 per share in 2017, $4.86 per share in 2016 and $4.00 per share in 2015. The total vest date fair value of stock awards vested during the year was $0.3 million in 2017, $0.7 million in 2016 and $1.2 million in 2015.

Stock-based compensation expense was $7.1 million in 2017, $5.1 million in 2016, and $3.9 million in 2015. We include these charges in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations.

Total unrecognized compensation expense related to nonvested stock-based compensation as of December 31, 2017 is as follows (dollars in thousands):

	Stock				Restricted		Restricted
	Options		SAR		Stock Awards		Stock Units		Total
Unrecognized compensation expense	$	2,565	$	77	$	1,752	$	1,628	$	6,022
Weighted-average remaining recognition period (in years)	2.9		0.3		2.3		1.4		2.3

(12) BUSINESS ACQUISITIONS AND DIVESTITURES

We completed several acquisitions and divestitures in recent years that we describe below. Generally, we acquire businesses that we believe will provide a strategic fit for our existing operations, cost savings and revenue synergies, or enable us to expand our capabilities. We divest assets or businesses that we no longer find strategically aligned with our service offerings.

Cost & Compliance Associates Acquisition

In February 2017, we completed the acquisition 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. We acquired substantially all of the assets of C&CA for approximately $10.0 million in cash plus potential earnout consideration of up to $8.0 million.

The actual payment of the earnout consideration will be based on achieving certain financial targets over a two year period that commenced on March 1, 2017 and will conclude on February 28, 2019. Management estimated that the fair value of the earnout consideration was approximately $5.9 million at the date of acquisition. During 2017, the Company recognized accretion of $0.9 million on the fair value of the earnout amount which was included in Interest expense in the Consolidated Statements of Operations, and increased the related contingent consideration liability. As of December 31, 2017, the contingent consideration liability related to the C&CA acquisition was $6.8 million, of which $3.7 million was included in current Business acquisition obligations and $3.1 million was included in long-term Business acquisition obligations in our Consolidated Balance Sheet. We funded the purchase price and acquisition costs from borrowings under our credit facility, further described in Note 5.

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Purchase Price Allocation

We allocated the aggregate purchase price for C&CA to the net tangible and intangible assets acquired based on their fair values as of February 23, 2017. We based the allocation of the purchase price on a valuation for intangible assets and the carrying value for the remaining assets and liabilities, as the carrying value approximates their fair value. The fair value of C&CA's identifiable intangible assets were measured using the income approach which includes a projection of estimated future discounted cash flows using a discount rate that is specific to the business risk, cost of capital and other factors. We recorded the excess of the purchase price over the net tangible and intangible assets as goodwill, which has been allocated and recognized as goodwill within our Recovery Audit Services-Americas and Recovery Audit Services-Europe/Asia-Pacific business segments. Factors that contributed to the recognition of goodwill included expected synergies and the trained workforce.

Our purchase price allocation was as follows (in thousands):

Accounts receivable, net	$	1,621
Commissions receivable	48
Prepaid expenses	109
Other current assets, net	6
Intangible assets	10,923
Goodwill	3,554
Fixed assets, net	323
Accounts payable	(125		)
Accrued commissions	(537		)
Total consideration paid	$	15,922
Contingent consideration	(5,954		)
Total cash paid	$	9,968

The intangible assets acquired were as follows (in thousands):

	Fair Value		Remaining useful life
Customer relationships	$	9,556	14 years
Non-compete	1,232		4 years
Trademarks	135		4 years
	$	10,923

We have included the results of C&CA from the date of acquisition through December 31, 2017 in our Consolidated Statement of Operations. In fiscal year 2017, we included revenue of $7.8 million and income before income tax of $0.8 million in our Recovery Audit Services - Americas business segment, and revenue of $3.3 million and income before income tax of $1.0 million in our Recovery Audit Services - Europe/Asia- Pacific business segment.

Unaudited Supplemental Financial Information

Our unaudited pro forma results presented below, including C&CA, for the years ended December 31, 2017 and 2016 are presented as if the acquisition 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 information does not purport to project future operating results.

	Year Ended December 31,
(in thousands)	2017	2016
Unaudited pro forma revenue	162,459	155,626
Unaudited pro forma net income from continuing operations	3,886	5,365

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Lavante Acquisition

In October 2016, we completed the acquisition of Lavante, Inc. ("Lavante"). Lavante is a SaaS-based procure-to-pay supplier information management (SIM) and recovery audit services firm, based in San Jose, California. We acquired substantially all of the assets of Lavante, which primarily consisted of its proprietary software applications, for $3.8 million in cash, plus potential earnout consideration of up to $4.5 million.

The actual payment of the earnout consideration will be based on achieving certain financial targets over a two year period that commenced on October 31, 2016 and will conclude on December 31, 2018. Management estimated that the fair value of the earnout consideration was approximately $3.8 million at the date of acquisition, of which $2.0 million was included in Other current liabilities and $1.8 million was included in Other long-term liabilities in our Consolidated Balance Sheet as of December 31, 2016. During 2017, the Company recognized accretion of $0.3 million on the fair value of the earnout amount which was included in Interest expense in the Consolidated Statements of Operations, and increased the related contingent consideration liability. In the fourth quarter of 2017, it was determined that a portion of the earnout consideration would not be achieved and we reduced the related contingent consideration liability by $2.1 million. This adjustment was included in Acquisition-related adjustments in the Consolidated Statements of Operations for the year ended December 31, 2017. As of December 31, 2017, the contingent consideration liability related to the Lavante acquisition was $2.0 million, of which $0.1 million was included in current Business acquisition obligations and $1.9 million was included in long-term Business acquisition obligations in our Consolidated Balance Sheet. We funded the purchase price and acquisition costs from borrowings on our credit facility, further described in Note 5.

Purchase Price Allocation

We allocated the aggregate purchase price for Lavante to the net tangible and intangible assets acquired based on their fair values as of October 31, 2016. We based the allocation of the purchase price on a valuation of intangible assets, and the carrying value for the remaining assets and liabilities as the carrying value approximated their fair value. The fair value of Lavante's identifiable intangible assets were measured using a form of the income approach, and a cost approach. The income approach includes a projection of estimated future discounted cash flows using a discount rate that is specific to the business risk, cost of capital and other factors. We recorded the excess of the purchase price over the net tangible and intangible assets as goodwill within our Adjacent Services business segment. Factors that contributed to the recognition of goodwill included expected synergies and the trained workforce.

Our purchase price allocation was as follows (in thousands):

Cash and cash equivalents	$	28
Accounts receivable, net	207
Other current assets	92
Intangible assets	6,178
Goodwill	2,286
Fixed assets, net	98
Accounts payable	(121		)
Deferred revenue	(370		)
Other current liabilities	(757		)
Total consideration paid	$	7,641
Contingent consideration(1)	(3,832		)
Total cash paid	$	3,809

⁽¹⁾ In the fourth quarter of 2017, we reduced the earnout liability by $2.1 million. At December 31, 2017, the balance was $2.0 million.

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PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The intangible assets acquired were as follows (in thousands):

	Fair Value		Remaining useful life
Trademarks	$	163	4 years
Patents	114		1 year
Software	5,901		4 years
Total intangible assets	$	6,178

We have included the results of Lavante from its date of acquisition through December 31, 2017 in our Consolidated Statement of Operations, which consisted of revenue of $0.4 million and a loss before income tax of $0.9 million in the year ended December 31, 2016, and revenue of $1.9 million and a loss before income tax of $4.8 million in the year ended December 31, 2017. The results from Lavante are included in our Adjacent Services business segment.

Unaudited Supplemental Financial Information

Our unaudited pro forma results presented below, including Lavante, for the years ended December 31, 2016 and 2015 are presented as if the acquisition had been completed on January 1, 2015. 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 Lavante acquisition been completed on January 1, 2015. In addition, the unaudited pro forma information does not purport to project future operating results.

	Year Ended December 31,
(in thousands)	2016		2015
Unaudited pro forma revenue	143,198		140,994
Unaudited pro forma net (loss) income from continuing operations	(3,418	)	(5,516	)

Global Edge Acquisition

In December 2015, we acquired the SIM business of Global Edge for a purchase price of $0.7 million. The purchase price included an initial cash payment of $0.5 million and additional cash consideration based on the performance of the acquired businesses over a two year period from the date of acquisition valued at $0.2 million. In the fourth quarter of 2017, we determined that the performance targets for the additional cash consideration would not be achieved, and reduced the related contingent consideration liability by $0.2 million. This adjustment was included in Acquisition-related adjustments in the Consolidated Statements of Operations for the year ended December 31, 2017.

Divestitures

In August 2015, we divested certain assets from a document service offering purchased as part of the Business Strategy, Inc. acquisition in 2011. We did not receive any initial cash payments at closing of the transaction and recognized a loss on the sale of $1.6 million, which we recognized in Other loss in the Consolidated Statements of Operations.

74

PRGX GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(13) QUARTERLY RESULTS (UNAUDITED)

The following tables set forth certain unaudited condensed consolidated quarterly financial data for each of the last eight quarters during our fiscal years ended December 31, 2017 and 2016. We have derived the information from unaudited Condensed Consolidated Financial Statements that, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such quarterly information. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. The quarterly results are updated for continuing operations.

	2017 Quarter Ended												2016 Quarter Ended
	Mar. 31			June 30			Sept. 30			Dec. 31			Mar. 31			June 30			Sept. 30			Dec. 31
	(In thousands, except per share data)
Revenue	$	33,569		$	38,510		$	42,467		$	47,074		$	31,233		$	35,291		$	35,137		$	39,183
Operating expenses:
Cost of revenue	23,026			25,605			26,675			26,746			21,646			23,431			22,367			23,855
Selling, general and administrative expenses	10,536			11,424			12,189			12,792			8,848			9,620			9,883			11,048
Depreciation of property and equipment	1,220			1,109			1,133			1,107			1,232			1,216			1,376			1,209
Amortization of intangible assets	722			722			722			1,468			394			395			393			650
Acquisition-related adjustments	—			—			—			(2,283		)	—			—			—			—
Total operating expenses	35,504			38,860			40,719			39,830			32,120			34,662			34,019			36,762
Operating (loss) income from continuing operations	(1,935		)	(350		)	1,748			7,244			(887		)	629			1,118			2,421
Foreign currency transaction (gains) losses on short-term intercompany balances	(552		)	(957		)	(418		)	(263		)	(1,007		)	196			(165		)	1,060
Interest expense (income), net	37			48			142			1,312			(29		)	(12		)	(14		)	(98		)
Other (income) loss	(199		)	5			17			17			10			18			(168		)	19
(Loss) income from continuing operations before income taxes	(1,221		)	554			2,007			6,178			139			427			1,465			1,440
Income tax expense (benefit)	627			879			930			526			204			460			(685		)	1,263
Net (loss) income from continuing operations	(1,848		)	(325		)	1,077			5,652			(65		)	(33		)	2,150			177
Basic (loss) earnings per common share from continuing operations (1)	$	(0.08	)	$	(0.01	)	$	0.05		$	0.26		$	—		$	—		$	0.10		$	0.01
Diluted (loss) earnings per common share from continuing operations (1)	$	(0.08	)	$	(0.01	)	$	0.05		$	0.26		$	—		$	—		$	0.10		$	0.01

(1) We calculate each quarter as a discrete period; the sum of the four quarters may not equal the calculated full-year amount.

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of December 31, 2017.

Changes in internal controls over financial reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in the Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company conducted an assessment of the effectiveness of internal control over financial reporting based on the framework (2013 Framework) in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management concluded that, as of December 31, 2017, the Company’s internal control over financial reporting is effective. The Company’s internal control over financial reporting as of December 31, 2017 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report which is included herein, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.

Management’s report shall not be deemed filed for purposes of Section 18 of the Exchange Act.

76

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

PRGX Global, Inc. and subsidiaries

Atlanta, Georgia

Opinion on Internal Control over Financial Reporting

We have audited PRGX Global, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the accompanying index and our report dated March 13, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Atlanta, Georgia

March 13, 2018

77

ITEM 9B. Other Information

None.

78

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

Except as set forth below, the information required by Item 10 of this Form 10-K is incorporated herein by reference to the information contained in the sections captioned “Proposal I: Election of Directors”, “Information about the Board of Directors and Committees of the Board of Directors”, “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our definitive proxy statement (the “Proxy Statement”) for the 2018 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

We have undertaken to provide to any person without charge, upon request, a copy of our code of ethics applicable to our chief executive officer and senior financial officers. You may obtain a copy of this code of ethics free of charge from our website, www.prgx.com.

ITEM 11. Executive Compensation

The information required by Item 11 of this Form 10-K is incorporated by reference to the information contained in the sections captioned “Executive Compensation”, “Information about the Board of Directors and Committees of the Board of Directors”, and “Report of the Compensation Committee” of the Proxy Statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Except as set forth below, the information required by Item 12 of this Form 10-K is incorporated by reference to the information contained in the section captioned “Ownership of Directors, Principal Shareholders and Certain Executive Officers” of the Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

During 2017, the Company had two shareholder approved stock-based compensation plans under which equity awards have been granted: (1) the 2008 Equity Incentive Plan (“2008 EIP”) and (2) the 2017 Equity Incentive Compensation Plan ("2017 EICP").

Under the 2008 EIP, previously approved by our Board of Directors, we reserved shares of common stock for issuance in the form of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other incentive awards. Pursuant to amendments to the 2008 EIP that were approved by the Board of Directors and the Company's shareholders, 10,600,000 shares were reserved for issuance under the 2008 EIP.

On June 27, 2017, the shareholders approved the 2017 EICP which applies to awards granted on or after June 27, 2017. Under the 2017 EICP, the Company may grant incentive and non-qualified 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 under the 2017 EICP is 3,400,000 shares plus that number of shares of common stock subject to awards granted under the 2008 EIP that were outstanding when the 2017 EICP became effective.

79

The following table presents certain information with respect to compensation plans under which equity securities of the registrant were authorized for issuance as of December 31, 2017:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders:
2008 EIP (1), (2)	3,088,355	$	6.51	—
2017 EICP (2), (3)	500,000	7.34		3,078,668
Equity compensation plans not approved by security holders (2), (4)	664,000	5.89		—
Total (2)	4,252,355	$	6.54	3,078,668

(1) This amount includes 2,294,293 stock options and 794,062 performance-based restricted stock units (“PBUs”) and restricted stock units ("RSUs") that, if and when vested, will be settled in shares of PRGX common stock. For PBUs for which the performance period has ended as of December 31, 2017, the amounts reported in the table reflect the expected number of PBUs to be earned based on actual performance measured at the end of the performance period. The amounts reported in the table assumed target level performance for PBUs for which the performance period has not ended as of December 31, 2017.

(2) Weighted-average exercise price of outstanding options only.

(3) This amount represents non-qualified stock options granted under the 2017 EICP.

(4) This amount includes 575,000 options and 59,000 PBUs that represent inducement grants, which were made outside of the existing stock-based compensation plans.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 of this Form 10-K is incorporated by reference to the information contained in the sections captioned “Information about the Board of Directors and Committees of the Board of Directors”, “Executive Compensation – Employment Agreements” and “Certain Transactions” of the Proxy Statement.

ITEM 14. Principal Accountant Fees and Services

The information required by Item 14 of this Form 10-K is incorporated by reference to the information contained in the sections captioned “Principal Accountant Fees and Services” of the Proxy Statement.

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PART IV

ITEM 15. Exhibits, Financial Statement Schedules

(a) Documents filed as part of the report

(1) Consolidated Financial Statements:

For the following consolidated financial information included herein, see Index on Page 36.

	Page No.
Report of Independent Registered Public Accounting Firm	38
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015	39
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2016 and 2015	40
Consolidated Balance Sheets as of December 31, 2017 and 2016	41
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2017, 2016 and 2015	42
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015	43
Notes to Consolidated Financial Statements	44

(2) Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts 81

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

(In thousands)

			Additions		Deductions
Description	Balance at Beginning of Year		Charge (Credit) to Costs and Expenses		Credit to the respective receivable (1)		Balance at End of Year
2017
Allowance for doubtful accounts receivable	$	799	724		(24	)	$	1,499
Allowance for doubtful employee advances and miscellaneous receivables	$	500	1,665		(1,873	)	$	292
Deferred tax valuation allowance	$	50,114	(15,338	)	—		$	34,776
2016
Allowance for doubtful accounts receivable	$	930	(129	)	(2	)	$	799
Allowance for doubtful employee advances and miscellaneous receivables	$	681	2,184		(2,365	)	$	500
Deferred tax valuation allowance	$	45,565	4,549		—		$	50,114
2015
Allowance for doubtful accounts receivable	$	2,243	(1,311	)	(2	)	$	930
Allowance for doubtful employee advances and miscellaneous receivables	$	692	1,294		(1,305	)	$	681
Deferred tax valuation allowance	$	52,002	(6,437	)	—		$	45,565

-----------------------------

(1) Write-offs net of recoveries.

81

(3) Exhibits

Exhibit Number	Description
2.1	Asset Purchase Agreement dated October 6, 2016, by and among PRGX USA, INC., PRGX UK LTD., Cost & Compliance Associates, LLC, Cost & Compliance Associates Limited and Robert F. Donohue (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on October 6, 2016).
2.2	Agreement and Plan of Merger dated October 25, 2016, by and among PRGX USA, Inc., Braveheart Merger Co., Lavante, Inc., PointGuard Ventures I, L.P. and Krish Panu (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on October 25, 2016).
2.3	First Amendment to Asset Purchase Agreement, dated February 23, 2017, by and among PRGX USA, INC., PRGX UK LTD., Cost & Compliance Associates, LLC, Cost & Compliance Associates Limited and Robert F. Donohue (incorporated by reference to Exhibit 2.2 to the Registrant’s Form 8-K filed on February 27, 2017).
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	Form of Indemnification Agreement between the Registrant and Directors and certain officers, including named executive officers, of the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 2003).
10.2	Noncompetition, Nonsolicitation and Confidentiality Agreement among The Profit Recovery Group International, Inc., Howard Schultz & Associates International, Inc., Howard Schultz, Andrew Schultz and certain trusts, dated January 24, 2002 (incorporated by reference to Exhibit 10.34 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.3	Office Lease Agreement between Galleria 600, LLC and PRG-Schultz International, Inc. (incorporated by reference to Exhibit 10.43 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.4	First Amendment to Office Lease Agreement between Galleria 600, LLC and PRG-Schultz International, Inc. (incorporated by reference to Exhibit 10.65 to the Registrant’s Form 10-K for the year ended December 31, 2002).
10.5	Third Amendment of Lease, entered into as of January 8, 2014, by and between Galleria 600, LLC and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on January 14, 2014).
+10.6	PRGX Global, Inc. 2008 Equity Incentive Plan, as Amended and Restated effective April 25, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 30, 2014).
+10.7	Form of Restricted Stock Agreement for Non-Employee Directors under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on June 4, 2008).
+10.8	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on June 4, 2008).
+10.9	Form of Nonqualified Stock Option Agreement under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on January 14, 2009).
+10.10	Form of Restricted Stock Agreement under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on January 14, 2009).

82

+10.11	Form of Performance-Based Restricted Stock Unit Agreement for Employees under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 1, 2015).
+10.12	Form of PRGX Global, Inc. Restricted Stock Unit Agreement for Non-Employee Directors under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on June 30, 2014.
+10.13	Form of PRGX Global, Inc. Stock Appreciation Rights Agreement under the PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on April 29, 2016).
+10.14	PRGX Global, Inc. 2017 Equity Incentive Compensation Plan effective as of April 25, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 30, 2017).
+10.15	PRGX Global, Inc. Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on June 30, 2014).
10.16	Amended & Restated Revolving Credit Agreement dated as of December 23, 2014, among PRGX Global, Inc. and PRGX USA, Inc., as borrowers, the lenders from time to time party thereto and SunTrust Bank, as administrative agent and issuing bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on December 30, 2014).
10.17	Subsidiary Guaranty Agreement dated as of January 19, 2010 by and among PRGX Global, Inc. (formerly PRG-Schultz International, Inc), and PRGX USA, Inc. (formerly PRG-Schultz USA, Inc.), as borrowers, each of the subsidiaries of PRGX Global, Inc. listed on Schedule I thereto, as guarantors, and SunTrust Bank, as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on January 25, 2010).
10.18	Security Agreement dated January 19, 2010 among PRGX Global, Inc. (formerly PRG-Schultz International, Inc), PRGX USA, Inc. (formerly PRG-Schultz USA, Inc.), and the other direct and indirect subsidiaries of PRGX Global, Inc. signatory thereto, as grantors, in favor of SunTrust Bank, as administrative agent (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on January 25, 2010).
10.19	Equity Pledge Agreement dated as of January 19, 2010, made by PRGX Global, Inc. (formerly PRG-Schultz International, Inc), PRGX USA, Inc. (formerly PRG-Schultz USA, Inc.), and the other direct and indirect subsidiaries of PRGX Global, Inc. signatory thereto, as grantors, in favor of SunTrust Bank, as administrative agent (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on January 25, 2010).
10.20	Loan Documents Modification Agreement dated June 21, 2010, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.29.4 to the Registrant’s Form 10-K filed on March 15, 2012).
10.21	Second Loan Documents Modification Agreement dated September 30, 2010, by and among the Borrowers and the Lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 1, 2010).
10.22	Third Loan Documents Modification Agreement dated October 17, 2011, by and among the Borrowers and the Lender (incorporated by reference to Exhibit 10.29.6 to the Registrant’s Form 10-K filed on March 15, 2012)
10.23	Fourth Loan Documents Modification Agreement, entered into as of January 17, 2014, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on January 24, 2014).
10.24	Fifth Loan Documents Modification Agreement and Waiver, entered into as of May 8, 2014, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on May 12, 2014).
10.25	Sixth Loan Documents Modification Agreement and Waiver, entered into as of August 7, 2014, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on August 7, 2014).
10.26	Seventh Loan Documents Modification Agreement, entered into as of October 23, 2014, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.29 to the Registrant's Form 10-K filed on March 13, 2015).
10.27	Eighth Loan Documents Modification Agreement, entered into as of December 23, 2014, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on December 30, 2014).

83

10.28	Ninth Loan Documents Modification Agreement, entered into as of December 21, 2016, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.26 to the Registrant’s Form 10-K filed on March 16, 2017).
10.29	Tenth Loan Documents Modification Agreement, entered into as of May 4, 2017, by and among the Borrowers, the Guarantors and the Lender (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on May 9, 2017).
+10.30	Employment Agreement between the Registrant and Victor A. Allums dated November 28, 2008 (incorporated by reference to Exhibit 10.31 to the Registrant’s Form 10-K filed on March 29, 2010).
+10.31	Employment Agreement between the Registrant and Tushar Sachdev dated June 18, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on August 6, 2013).
+10.32	Employment Agreement between the Registrant and Ronald E. Stewart dated December 13, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on December 19, 2013).
+10.33	Amendment of Employment Agreement dated April 27, 2016, by and between Ronald E. Stewart and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on April 29, 2016).
+10.34	Second Amendment of Employment Agreement dated October 25, 2017, by and between Ronald E. Stewart and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on October 26, 2017).
+10.35	PRGX Non-Qualified Stock Option Agreement dated October 25, 2017, by and between Ronald E. Stewart and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on October 26, 2017).
+10.36	Employment Agreement between the Registrant and Michael Cochrane dated April 24, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 29, 2014).
+10.37	Employment Agreement between the Registrant and Peter Limeri dated September 11, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on November 21, 2014).
+10.38	Separation Agreement between the Registrant and Michael W. Reene dated January 22, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-K filed on March 15, 2016).
+10.39	Separation Agreement between the Registrant and Puneet Pamnani dated April 22, 2016 (incorporated by reference to Exhibit 10.39 to the Registrant’s Form 10-K filed on March 16, 2017).
+10.40	Employment Agreement dated May 8, 2017, by and between Daryl T. Rolley and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-Q filed on August 8, 2017).
10.41	Agreement dated as of November 10, 2016 by and among PRGX Global, Inc. and Matthew A. Drapkin, Northern Right Capital Management, L.P., Northern Right Capital (QP), L.P., and BC Advisors, LLC (incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on November 10, 2016).
14.1	Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14.1 to the Registrant’s Form 10-K for the year ended December 31, 2003).
21.1	Subsidiaries of the Registrant.
23.1	Consent of BDO USA, LLP.
31.1	Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the year ended December 31, 2017.
31.2	Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the year ended December 31, 2017.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for the year ended December 31, 2017.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase

84

101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
+	Designates management contract or compensatory plan or arrangement.

85

ITEM 16. Form 10-K Summary

None.

86

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PRGX GLOBAL, INC.
	By:	/s/ PETER LIMERI
		Peter Limeri
		Chief Financial Officer, Treasurer and Controller (Principal Financial and Accounting Officer)
Date:		March 14, 2018

87

EX-21.1

EXHIBIT 21.1

PRGX GLOBAL, INC.

SUBSIDIARIES

As of December 31, 2017

Company	Jurisdiction of Organization
PRGX USA, Inc.	Georgia
PRGX Asia, Inc.	Georgia
PRGX Australia, Inc.	Georgia
PRGX Belgium, Inc.	Georgia
PRGX Canada, LLC	Georgia
PRGX Commercial LLC	Georgia
PRGX Costa Rica, Inc.	Georgia
PRGX New Zealand, Inc.	Georgia
PRGX Netherlands, Inc.	Georgia
PRGX Mexico, Inc.	Georgia
PRGX France, Inc.	Georgia
PRGX Germany, Inc.	Georgia
PRGX Acquisition Corp.	Georgia
PRGX Switzerland, Inc.	Georgia
PRGX Italy, Inc.	Georgia
PRGX Spain, Inc.	Georgia
PRGX Portugal, Inc.	Georgia
PRG International, Inc.	Georgia
PRG USA, Inc.	Georgia
PRGX Scandinavia, Inc.	Georgia
PRGX Holdings, Inc.	Georgia
PRGX Puerto Rico, Inc.	Georgia
PRGX Chile, Inc.	Georgia
PRGX Europe, Inc.	Georgia
PRGX Brasil, LLC	Georgia
PRGX India Private Limited	India
PRGX Holdings Mexico, S de RL de CV	Mexico
PRGX Servicios Mexico S de RL de CV	Mexico
PRGX de Mexico S de RL de CV	Mexico
PRGX Argentina S.A.	Argentina
PRGX Brasil Ltda.	Brazil
PRGX International PTE Limited	Singapore
PRG-Schultz Suzhou' Co Ltd.	China
PRGX Shanghai Company Limited	China
PRGX CR s.r.o.	Czech Republic
PRGFS, Inc.	Delaware
PRGX Texas, Inc.	Texas
Meridian Corporation Limited	Jersey (Channel Islands)
PRGX UK Holdings Ltd	United Kingdom
PRGX UK Ltd	United Kingdom
Etesius Limited	United Kingdom
PRGX Canada Corp.	Canada
PRGX Deutschland GmbH	Germany
PRGX Nederland B.V.	Netherlands
PRGX Colombia Ltda.	Colombia
PRGX Svenska AB	Sweden
PRG-Schultz Venezuela S. R. L.	Venezuela
PRGX Polska Sp. z o.o.	Poland
PRGDS, LLC	Georgia
PRGTS, LLC	Georgia
Lavante, Inc	Delaware

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

PRGX Global, Inc.

Atlanta, Georgia

We hereby consent to the incorporation by reference in the Registration Statements on Form S­3 (File No. 333-134698, No. 333-171986, No. 333-185027 and No. 333-208075) and Form S-8 (File No. 333-153837, No. 333-64125, No. 333-08707, No. 333-30885, No. 333-61578, No. 333-81168, No. 333-100817, No. 333-137438, No. 333-170809, No. 333-189010, No. 333-204489 and No. 333-222110) of PRGX Global, Inc. and subsidiaries of our reports dated March 13, 2018, relating to the consolidated financial statements and financial statement schedule, and the effectiveness of PRGX Global, Inc. and subsidiaries’ internal control over financial reporting, which appear in this Form 10-K/A.

/s/ BDO USA, LLP

Atlanta, Georgia

March 14, 2018

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Ronald E. Stewart, certify that:

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

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

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

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

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

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

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

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

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

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

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

March 14, 2018	By:	/s/ Ronald E. Stewart
		Ronald E. Stewart
		President, Chief Executive Officer, Director (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Peter Limeri, certify that:

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

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

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

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

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

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

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

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

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

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

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

March 14, 2018	By:	/s/ Peter Limeri
		Peter Limeri
		Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

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

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of PRGX Global, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald E. Stewart, President and Chief Executive Officer of the Company and I, Peter Limeri, Chief Financial Officer and Treasurer, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of the undersigned’s knowledge: (1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 14, 2018	By:	/s/ Ronald E. Stewart
		Ronald E. Stewart
		President, Chief Executive Officer, Director (Principal Executive Officer)
March 14, 2018	By:	/s/ Peter Limeri
		Peter Limeri
		Chief Financial Officer and Treasurer (Principal Financial Officer)

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Feb. 28, 2018	Jun. 30, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	PRGX GLOBAL, INC.
Entity Central Index Key	0001007330
Document Type	10-K/A
Document Period End Date	Dec. 31, 2017
Amendment Flag	true
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 130.1
Entity Common Stock, Shares Outstanding		22,401,917
Amendment Description	This Amendment No. 1 is being filed solely for the purpose of inserting the conformed signature of independent auditors on their report, which was inadvertently omitted from the initial filing. Except for this correction, there have been no changes in any of the financial or other information contained in the report. For convenience, the entire Annual Report on Form 10-K, as amended, is being re-filed.

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Statement [Abstract]
Revenue, net	$ 161,620	$ 140,844	$ 138,302
Operating expenses:
Cost of revenue	102,052	91,299	93,169
Selling, general and administrative expenses	46,941	39,399	32,284
Depreciation of property and equipment	4,569	5,033	5,317
Amortization of intangible assets	3,634	1,832	2,458
Acquisition-related adjustments	(2,283)	0	0
Total operating expenses	154,913	137,563	133,228
Operating income from continuing operations	6,707	3,281	5,074
Foreign currency transaction (gains) losses on short-term intercompany balances	(2,190)	84	2,165
Interest expense	(1,785)	(107)	(71)
Interest income	246	260	261
Other (income) loss	(160)	(121)	1,191
Net income from continuing operations before income tax	7,518	3,471	1,908
Income tax expense	2,962	1,242	369
Net income from continuing operations	4,556	2,229	1,539
Discontinued operations:
Loss from discontinued operations	(1,372)	(1,324)	(4,765)
Income tax expense (benefit)	0	0	0
Net loss from discontinued operations	(1,372)	(1,324)	(4,765)
Net income from continuing operations	$ 3,184	$ 905	$ (3,226)
Basic earnings (loss) per common share (Note 3):
Basic earnings from continuing operations (in USD per share)	$ 0.21	$ 0.10	$ 0.06
Basic earnings from discontinued operations (in USD per share)	(0.06)	(0.06)	(0.18)
Total basic earnings (loss) per common share (in USD per share)	0.15	0.04	(0.12)
Diluted earnings (loss) per common share (Note 3):
Diluted earnings from continuing operations (in USD per share)	0.21	0.10	0.06
Diluted earnings from discontinued operations (in USD per share)	(0.06)	(0.06)	(0.18)
Total diluted earnings (loss) per common share (in USD per share)	$ 0.15	$ 0.04	$ (0.12)
Weighted-average common shares outstanding (Note 3):
Basic (shares)	21,937	21,969	25,868
Diluted (shares)	22,111	22,016	25,904

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 3,184	$ 905	$ (3,226)
Foreign currency translation adjustments	(180)	(507)	(769)
Comprehensive income (loss)	$ 3,004	$ 398	$ (3,995)

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 18,823	$ 15,723
Restricted cash	51	47
Contract receivables, less allowances of $1,499 in 2017 and $799 in 2016
Billed	36,058	29,186
Unbilled	2,709	2,278
Contract receivables, net	38,767	31,464
Employee advances and miscellaneous receivables, less allowances of $292 in 2017 and $500 in 2016	1,665	2,184
Total receivables	40,432	33,648
Prepaid expenses and other current assets	4,608	3,363
Total current assets	63,914	52,781
Property and equipment:
Computer and other equipment	32,655	30,219
Furniture and fixtures	2,761	2,652
Leasehold improvements	3,916	3,558
Software	34,234	26,896
Property and equipment, gross	73,566	63,325
Less accumulated depreciation and amortization	(56,088)	(51,089)
Property and equipment, net	17,478	12,236
Goodwill (Note 4)	17,648	13,823
Intangible assets, less accumulated amortization of $40,461 in 2017 and $36,128 in 2016	18,478	10,998
Unbilled receivables	894	854
Deferred income taxes (Note 7)	1,538	2,269
Other assets	268	513
Total assets	120,218	93,474
Current liabilities:
Accounts payable and accrued expenses	8,548	7,299
Accrued payroll and related expenses	18,194	13,868
Refund liabilities	7,864	7,900
Deferred revenue	1,431	1,330
Current portion of debt (Note 5)	48	3,600
Business acquisition obligations (Note 12)	3,759	2,078
Total current liabilities	39,844	36,075
Long-term debt (Note 5)	13,526	0
Noncurrent business acquisition obligations (Note 12)	5,135	1,926
Refund liabilities	957	804
Other long-term liabilities	442	2,279
Total liabilities	59,904	41,084
Commitments and contingencies (Notes 2, 5, 6, 9 and 10)
Shareholders’ equity (Notes 9 and 11):
Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares; 22,419,417 shares issued and outstanding at December 31, 2017 and 21,845,920 shares issued and outstanding at December 31, 2016	224	218
Additional paid-in capital	580,032	575,118
Accumulated deficit	(520,049)	(523,233)
Accumulated other comprehensive income	107	287
Total shareholders’ equity	60,314	52,390
Total liabilities and shareholders’ equity	$ 120,218	$ 93,474

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowances for contract receivables	$ 1,499	$ 799
Allowances for employee advances and miscellaneous receivables	292	500
Accumulated amortization on intangible assets	$ 40,461	$ 36,128
Common stock, par value (usd per share)	$ 0	$ 0
Common stock, stated value per share (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	50,000,000	50,000,000
Common stock, shares issued (shares)	22,419,417	21,845,920
Common stock, shares outstanding (shares)	22,419,417	21,845,920

XML

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	MIP Performance Units	MIP Performance Units Common Stock
Beginning balance (shares) at Dec. 31, 2014		26,762,861
Beginning balance at Dec. 31, 2014	$ 70,986	$ 268	$ 590,067	$ (520,912)	$ 1,563
Increase (Decrease) in Stockholders' Equity
Net (loss) income	(3,226)			(3,226)
Foreign currency translation adjustments	(769)				(769)
Issuances of common stock:
Restricted share awards (shares)		23,200
Restricted share awards	0
Restricted shares remitted by employees for taxes (shares)		(17,147)
Restricted shares remitted by employees for taxes	(312)		(312)
Stock option exercises (shares)		29,128
Stock option exercises	91		91
2006 MIP Performance Unit settlements (shares)							9,918
2006 MIP Performance Unit settlements						$ 0
Forfeited restricted share awards (shares)		(7,918)
Forfeited restricted share awards	0
Repurchase of common stock (shares)		(4,118,386)
Repurchase of common stock	(18,071)	$ (41)	(18,030)
Stock-based compensation expense	3,716		3,716
Ending balance (shares) at Dec. 31, 2015		22,681,656
Ending balance at Dec. 31, 2015	52,415	$ 227	575,532	(524,138)	794
Increase (Decrease) in Stockholders' Equity
Net (loss) income	905			905
Foreign currency translation adjustments	(507)				(507)
Issuances of common stock:
Restricted shares remitted by employees for taxes (shares)		(20,829)
Restricted shares remitted by employees for taxes	(217)		(217)
Stock option exercises (shares)		90,496
Stock option exercises	320		320
2006 MIP Performance Unit settlements		$ 300
Repurchase of common stock (shares)		(905,403)
Repurchase of common stock	(3,772)	$ (9)	(3,763)
Stock-based compensation expense	$ 3,246		3,246
Ending balance (shares) at Dec. 31, 2016	21,845,920	21,845,920
Ending balance at Dec. 31, 2016	$ 52,390	$ 218	575,118	(523,233)	287
Increase (Decrease) in Stockholders' Equity
Net (loss) income	3,184			3,184
Foreign currency translation adjustments	(180)				(180)
Issuances of common stock:
Restricted share awards (shares)		381,059
Restricted share awards	0	$ 4	(4)
Restricted shares remitted by employees for taxes (shares)		(15,006)
Restricted shares remitted by employees for taxes	$ (100)		(100)
Stock option exercises (shares)	225,043	225,043
Stock option exercises	$ 1,172	$ 2	1,170
2006 MIP Performance Unit settlements		$ 1,500
Restricted stock unit settlement (shares)		10,000
Restricted stock unit settlement	0
Forfeited restricted share awards (shares)		(27,599)
Forfeited restricted share awards	0
Repurchase of common stock (shares)		0
Stock-based compensation expense	$ 3,848		3,848
Ending balance (shares) at Dec. 31, 2017	22,419,417	22,419,417
Ending balance at Dec. 31, 2017	$ 60,314	$ 224	$ 580,032	$ (520,049)	$ 107

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net income (loss)	$ 3,184	$ 905	$ (3,226)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	8,203	6,879	7,810
Amortization of deferred loan costs	85	60	20
Noncash interest expense	1,215	0	0
Stock-based compensation expense	7,052	5,123	3,926
Other loss from sale of assets	0	22	1,191
Foreign currency transaction (gains) losses on short-term intercompany balances	(2,190)	84	2,165
Deferred income taxes	731	(861)	(1,112)
Change in fair value of contingent consideration	(2,283)	0	0
Changes in operating assets and liabilities, net of business acquisitions:
Restricted cash	(4)	1	5
Billed receivables	(3,949)	(3,339)	4,331
Unbilled receivables	(469)	(509)	1,305
Prepaid expenses and other current assets	(417)	(1,506)	705
Other assets	(57)	(65)	0
Accounts payable and accrued expenses	815	1,218	(1,949)
Accrued payroll and related expenses	975	2,606	(3,595)
Refund liabilities	115	67	2,389
Deferred revenue	101	(5)	(784)
Other long-term liabilities	353	(562)	272
Net cash provided by operating activities	13,460	10,118	13,453
Cash flows from investing activities:
Business acquisition, net of cash acquired	(10,128)	(3,669)	(520)
Business divestiture	0	0	783
Purchases of property and equipment, net of disposal proceeds	(9,355)	(5,887)	(4,482)
Net cash used in investing activities	(19,483)	(9,556)	(4,219)
Cash flows from financing activities:
Repayments of long-term debt	66	0	0
Payments for deferred loan costs	(155)	0	(100)
Proceeds from term loan	10,000	3,600	0
Repurchases of common stock	0	(3,772)	(18,071)
Restricted stock repurchased from employees for withholding taxes	(100)	(218)	(312)
Proceeds from option exercises	1,172	326	91
Net cash provided by (used in) financing activities	10,983	(64)	(18,392)
Effect of exchange rates on cash and cash equivalents	(1,860)	103	(1,455)
Net increase (decrease) in cash and cash equivalents	3,100	601	(10,613)
Cash and cash equivalents at beginning of period	15,723	15,122	25,735
Cash and cash equivalents at end of period	18,823	15,723	15,122
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	434	60	63
Cash paid during the period for income taxes, net of refunds received	2,929	1,407	1,085
Noncash investing activities:
Fair value of contingent consideration liabilities at the date of acquisition	$ 5,954	$ 3,834	$ 0

XML

Summary of Significant Accounting Policies and Basis of Presentation

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Basis of Presentation

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

(a) Description of Business and Basis of Presentation

Description of Business

The principal business of PRGX Global, Inc. and subsidiaries is providing recovery audit services to large businesses and government agencies having numerous payment transactions. PRGX also provides services adjacent to recovery audit services, including supplier information management ("SIM"), data transformation, spend analytics and associated advisory services, to a similar client base. These businesses include, but are not limited to:

• retailers such as discount, department, specialty, grocery and drug stores, and wholesalers who sell to these retailers;

• business enterprises other than retailers such as manufacturers, financial services firms, pharmaceutical companies, and resource companies such as oil and gas companies; and

• federal and state government agencies.

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. PRGX currently provides services to clients in over 30 countries across a multitude of industries.

Basis of Presentation

During the fourth quarter of 2015 we discontinued the Healthcare Claims Recovery Audit ("HCRA") business. The results of our continuing and discontinued operations for the years ended December 31, 2017, 2016 and 2015 are presented in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations.

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). Actual results could differ from those estimates.

(b) Revenue Recognition, Billed and Unbilled Receivables, and Refund Liabilities

We base our revenue on specific contracts with our clients. These contracts generally specify: (a) time periods covered by the audit; (b) nature and extent of audit services we are to provide; (c) the client’s duties in assisting and cooperating with us; and (d) fees payable to us, generally expressed as a specified percentage of the amounts recovered by the client resulting from overpayment claims identified. Clients generally recover claims either by taking credits against outstanding payables or future purchases from the involved vendors, or receiving refund checks directly from those vendors. The manner in which a claim is recovered by a client often is dictated by industry practice. In addition, many clients establish specific procedural guidelines that we must satisfy prior to submitting claims for client approval, and these guidelines are unique to each client. For some services we provide, we earn our compensation in the form of a fixed fee, a fee per hour, or a fee per other unit of service.

We generally recognize revenue for a contractually specified percentage of amounts recovered when we have determined that our clients have received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors) and when we have met the following criteria: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectability is reasonably assured. In certain limited circumstances, we will invoice a client prior to meeting all four of these criteria; in such cases, we defer the revenue until we meet all of the criteria. Additionally, for purposes of determining appropriate timing of recognition and for internal control purposes, we rely on customary business practices and processes for documenting that we have met the criteria described in (a) through (d) above. Such customary business practices and processes may vary significantly by client. On occasion, it is possible that a transaction has met all of the revenue recognition criteria described above but we do not recognize revenue, unless we can otherwise determine that criteria (a) through (d) above have been met, because our customary business practices and processes specific to that client have not been completed.

Historically, there has been a certain amount of revenue with respect to which, even though we had met the requirements of our revenue recognition policy, our clients’ vendors ultimately have rejected the claims underlying the revenue. In that case, our clients may request a refund or offset of such amount even though we may have collected fees. We record any such refunds as a reduction of revenue. We provide refund liabilities for these reductions in the economic value previously received by our clients with respect to vendor claims we identified and for which we previously have recognized revenue. We compute an estimate of our refund liabilities at any given time based on actual historical refund data.

Billed receivables are stated at the amount we plan to collect and do not bear interest. We make ongoing estimates relating to the collectibility of our billed receivables and maintain a reserve for estimated losses resulting from the inability of our clients to meet their financial obligations to us. This reserve is primarily based on the level of past-due accounts based on the contractual terms of the receivables, our history of write-offs, and our relationships with, and the economic status of, our clients.

Unbilled receivables relate to claims for which clients have received economic value but for which we contractually have agreed not to submit an invoice to the clients at such time. Unbilled receivables arise when a portion of our fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after original invoice, and at other times a year after completion of the audit period), we invoice the unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge that we have earned this unbilled receivable at the time of the original invoice, but have agreed to defer billing the client for the related services.

We record periodic changes in unbilled receivables and refund liabilities as adjustments to revenue.

We derive a relatively small portion of revenue on a “fee-for-service” basis whereby billing is based upon a fixed fee, a fee per hour, or a fee per other unit of service. We recognize revenue for these types of services as we provide and invoice for them, and when criteria (a) through (d) as set forth above are met.

(c) Cash and Cash Equivalents

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

The $18.8 million in cash and cash equivalents as of December 31, 2017 includes $5.0 million held in the U.S., $1.8 million held in Canada, and $12.0 million held in other foreign jurisdictions, primarily in the United Kingdom, Australia, New Zealand, Mexico and Brazil. Our cash and cash equivalents included short-term investments of approximately $1.9 million as of December 31, 2017 and $2.2 million as of December 31, 2016, of which approximately $1.9 million and $2.2 million, respectively, were held at banks outside of the United States, primarily in Brazil and Canada.

(d) 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 December 31, 2017, we had $13.6 million in bank debt outstanding. As of December 31, 2016, we had $3.6 million in bank debt outstanding. 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 $8.9 million of business acquisition obligations as of December 31, 2017, and $4.0 million as of December 31, 2016. Our business acquisition obligations represent the fair value of deferred consideration and earn-out payments estimated to be due as of the date for which we recorded these amounts. We determine the preliminary estimated fair values based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment to be made. The discount rate that we use to value the liability is based on specific business risk, cost of capital, and other factors. We consider these factors to be Level 3 inputs (significant unobservable inputs).

We state certain assets at fair value on a nonrecurring basis as required by accounting principles generally accepted in the United States of America. Generally, these assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.

(e) Property and Equipment

We report property and equipment at cost or estimated fair value at acquisition date and depreciate them over their estimated useful lives using the straight-line method. Our useful lives for fixed assets are three years for computer laptops, four years for desktops, five years for IT server, storage and network equipment, five years for furniture and fixtures and three years for purchased software. We amortize leasehold improvements using the straight-line method over the shorter of the lease term or ten years. Depreciation expense from continuing operations was $4.6 million in 2017, $5.0 million in 2016 and $5.3 million in 2015.

We review the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset. No impairment charges were necessary in the three years ended December 31, 2017.

(f) Software Development Costs

We capitalize a portion of the costs we incur related to our internal development of software that we use in our operations and amortize these costs using the straight-line method over the expected useful lives of three to seven years.

We also capitalize a portion of the costs we incur related to our internal development of software that we intend to market to others. We amortize these costs over the products’ estimated economic lives, which typically are three years, beginning when the underlying products are available for general release to clients. We review the carrying value of capitalized software development costs for impairment whenever events and circumstances indicate that the carrying value of the asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset.

We consider software development activities to be research and development costs and expense them as incurred. However, we capitalize the costs incurred for the development of computer software that will be sold, leased, or otherwise marketed or that will be used in our operations beginning when technological feasibility has been established. Research and development costs from continuing operations, including the amortization of amounts previously capitalized, were $2.2 million in 2017, $3.5 million in 2016 and $3.0 million in 2015.

(g) Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair market value of net identifiable assets of acquired businesses. We evaluate the recoverability of goodwill and other intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other, in the fourth quarter of each year or sooner if events or changes in circumstances indicate that the carrying amount may exceed its fair value. This evaluation includes a preliminary assessment of qualitative factors to determine if it is necessary to perform a two-step impairment testing process. The first step identifies potential impairments by comparing the fair value of the reporting unit with its carrying value, including goodwill. If the calculated fair value of a reporting unit exceeds the carrying value, goodwill is not impaired, and the second step is not necessary. If the carrying value of a reporting unit exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying value. If the fair value is less than the carrying value, we would record an impairment charge.

We are not required to calculate the fair value of our reporting units that hold goodwill unless we determine that it is more likely than not that the fair value of these reporting units is less than their carrying values. In this analysis, we consider a number of factors, including changes in our legal, business and regulatory climates, changes in competition or key personnel, macroeconomic factors impacting our company or our clients, our recent financial performance and expectations of future performance and other pertinent factors. Based on these analyses, we determined that it was not necessary for us to perform the two-step process. We last used independent business valuation professionals to estimate fair value in the fourth quarter of 2010 and determined that fair value exceeded carrying value for all relevant reporting units. No impairment charges were necessary based on our internal assessments in the three years ended December 31, 2017.

(h) Direct Expenses and Deferred Costs

We typically expense direct expenses that we incur during the course of recovery audit and delivery of Adjacent Services offerings as incurred. For certain implementation and set-up costs associated with our “fee for service” revenue that we earn over an extended period of time, we defer the related direct and incremental costs and recognize them as expenses over the life of the underlying contract.

(i) Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. We measure deferred tax assets and liabilities using enacted tax rates we expect to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect on the deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date.

We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In determining the amount of valuation allowance to record, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods and the implementation of tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative losses in recent years are the most compelling form of negative evidence we considered in this determination.

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 jurisdictions.

(j) Foreign Currency

We use the local currency as the functional currency in the majority of the countries in which we conduct business outside of the United States. We translate the assets and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange at the balance sheet date. We include the translation gains and losses as a separate component of shareholders’ equity and in the determination of comprehensive income (loss). We translate revenue and expenses in foreign currencies at the weighted average exchange rates for the period. We separately state the foreign currency transaction gains and losses on short-term intercompany balances in the Consolidated Statements of Operations. We include all other realized and unrealized foreign currency transaction gains (losses) in “Selling, general and administrative expenses.”

(k) Earnings (Loss) Per Common Share

We compute basic earnings (loss) per common share by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. We compute diluted earnings (loss) per common share by dividing net income (loss) available to common shareholders by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of stock options using the treasury stock method, and (3) the dilutive effect of other potentially dilutive securities. We exclude the potential dilutive effect of stock options and convertible instruments from the determination of diluted earnings (loss) per common share if the effect of including them would be antidilutive.

(l) Stock-Based Compensation

We account for awards of equity instruments issued to employees and directors under the fair value method of accounting and recognize such amounts in our Consolidated Statements of Operations. We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our Consolidated Statements of Operations using the straight-line method over the service period over which we expect the awards to vest. We recognize compensation costs for awards with performance conditions based on the probable outcome of the performance conditions. We accrue compensation cost if we believe it is probable that the performance condition(s) will be achieved and do not accrue compensation cost if we believe it is not probable that the performance condition(s) will be achieved. In the event that it becomes probable that performance condition(s) will no longer be achieved, we reverse all of the previously recognized compensation expense in the period such a determination is made.

We estimate the fair value of all time-vested options as of the date of grant using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility, which we calculate based on the historical volatility of our common stock. We use a risk-free interest rate, based on the U.S. Treasury instruments in effect at the time of the grant, for the period comparable to the expected term of the option. We use the “simplified” method in estimating the expected term of options as we have concluded that our historical share option exercise experience is a less than reasonable basis upon which to estimate the expected term for our grants.

We estimate the fair value of nonvested stock awards (restricted stock and restricted stock units) as being equal to the market value of the common stock on the date of the award. We classify our share-based payments as either liability-classified awards or as equity-classified awards. We remeasure liability-classified awards to fair value at each balance sheet date until the award is settled. We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. We have classified our share-based payments which are settled in our common stock as equity-classified awards and our share-based payments that are settled in cash as liability-classified awards. Compensation costs related to equity-classified awards generally are equal to the fair value of the award at grant-date amortized over the vesting period of the award. The liability for liability-classified awards generally is equal to the fair value of the award as of the balance sheet date multiplied by the percentage vested at the time. We record the change in the liability amount from one balance sheet date to another to compensation expense.

(m) Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

Consolidated comprehensive income (loss) consists of consolidated net income (loss) and foreign currency translation adjustments. We present the calculation of consolidated comprehensive income (loss) in the accompanying Consolidated Statements of Comprehensive Income (Loss). No amounts have been reclassified out of Accumulated Other Comprehensive Income during the periods presented in our consolidated financial statements.

(n) Segment Reporting

We report our operating segment information in three segments: Recovery Audit Services – Americas; Recovery Audit Services – Europe/Asia-Pacific and Adjacent Services. We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to our three operating segments in Corporate Support. Our business segments reflect the internal reporting that our Chief Executive Officer, who is our chief operating decision maker, uses for the purpose of making decisions about allocating resources and assessing performance. Our management, including our Chief Executive Officer, uses what we internally refer to as “Adjusted EBITDA” as the primary measure of profit or loss for purposes of assessing the operating performance of all operating segments. We define Adjusted EBITDA as earnings from continuing operations before interest, taxes, depreciation and amortization (“EBITDA”) as adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period.

EBITDA and Adjusted EBITDA are not financial measures determined in accordance with GAAP. Such non-GAAP financial measures do not measure the profit or loss of the reportable segments in accordance with GAAP. Given that we use Adjusted EBITDA as our primary measure of segment performance, GAAP rules on segment reporting require that we include this non-GAAP measure in our discussion of our operating segments. We also must reconcile Adjusted EBITDA to our operating results presented on a GAAP basis. We provide this reconciliation in Note 2 to these consolidated financial statements along with other information about our reportable segments. We do not intend the reconciling items to be, nor should they be, interpreted as non-recurring or extraordinary, or in any manner be deemed as adjustments made in accordance with GAAP. Because Adjusted EBITDA is not a financial measure determined in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies.

(o) Loss Contingencies

Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company, but which will only be determined and resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss is likely to occur and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not accrued or disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Legal costs relating to loss contingencies are expensed as incurred.

(p) Reclassification of Prior Year Balance Sheet

Certain reclassifications have been made in the prior year in order to conform to the current year presentation.

(q) Impact of Recently Issued Accounting Standards

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

Adopted by the Company in 2017

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 became effective for the Company beginning January 1, 2017. The Company has concluded that the early adoption of this standard, which is permitted, had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

FASB ASC Update No. 2016-09 - In March 2016, the FASB issued Accounting Standards Update 2016-09, Stock Compensation (Topic 718). The standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The standard also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the standard allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The standard became effective for the Company beginning January 1, 2017. The Company has concluded that the adoption of this standard had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

FASB ASC Update No. 2016-05 - In March 2016, the FASB issued Accounting Standards Update 2016-05, Derivatives and Hedging (Topic 815). The standard clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The standard became effective for the Company beginning January 1, 2017. The Company has concluded that the early adoption of this standard, which is permitted, had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

Accounting Standards Not Yet Adopted

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. 2014-09 - In May 2014,  the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), as later amended, which resulted in a new accounting standard Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Accounting Standards Update 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective on January 1, 2018. We have elected to adopt the revenue recognition standard in the first quarter of 2018 with a cumulative adjustment to retained earnings. We have completed our assessment of the new revenue recognition guidance. We do not anticipate the adoption of this standard to have a material impact on our financial statements, aside from adding expanded required disclosures.

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Operating Segments and Related Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Operating Segments and Related Information

OPERATING SEGMENTS AND RELATED INFORMATION

We conduct our operations through three reportable segments:

Recovery Audit Services – Americas represents recovery audit services (other than HCRA services) provided in the United States of America (“U.S.”), Canada and Latin America.

Recovery Audit Services – Europe/Asia-Pacific represents recovery audit services provided in Europe, Asia and the Pacific region.

Adjacent Services represents data transformation, spend analytics, PRGX OPTIX and SIM services, and associated advisory services.

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

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 part of discontinuing the HCRA business, the Company has an accrual for outstanding Medicare RAC appeals of approximately $2.9 million as of December 31, 2017. The HCRA services business has been reported as Discontinued Operations in accordance with US GAAP.

Discontinued operations information for the years ended December 31, 2017, 2016 and 2015 (in thousands) is as follows: 

Results of Discontinued Operations (in thousands)	Years Ended December 31,
	2017			2016			2015
Revenue, net	$	—		$	(14	)	$	1,266
Cost of sales	1,350			1,112			4,743
Selling, general and administrative expense	14			184			1,253
Depreciation and amortization	8			14			35
Pretax loss from discontinued operations	(1,372		)	(1,324		)	(4,765		)
Income tax expense	—			—			—
Net loss from discontinued operations	$	(1,372	)	$	(1,324	)	$	(4,765	)

We evaluate the performance of our reportable segments based upon revenue and measures of profit or loss we refer to as EBITDA and Adjusted EBITDA. We define Adjusted EBITDA as earnings 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 years ended December 31, 2017, 2016 and 2015 (in thousands) is as follows:

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
2017
Revenue, net	$	113,122		$	44,372		$	4,126		$	—		$	161,620
Net income from continuing operations													$	4,556
Income tax expense													2,962
Interest expense, net													1,539
EBIT	$	29,163		$	11,700		$	(7,942	)	$	(23,864	)	9,057
Depreciation of property and equipment	3,165			599			805			—			4,569
Amortization of intangible assets	1,919			142			1,573			—			3,634
EBITDA	34,247			12,441			(5,564		)	(23,864		)	17,260
Foreign currency transaction (gains) losses on short-term intercompany balances	(249		)	(1,769		)	(9		)	(163		)	(2,190		)
Acquisition-related adjustments	—			—			—			(2,283		)	(2,283		)
Transformation severance and related expenses	313			655			320			378			1,666
Other (income) loss	751			184			(195		)	(900		)	(160		)
Stock-based compensation	—			—			—			7,052			7,052
Adjusted EBITDA	$	35,062		$	11,511		$	(5,448	)	$	(19,780	)	$	21,345
Capital expenditures	$	2,389		$	2,383		$	1,335		$	3,248		$	9,355
Allocated assets	$	65,397		$	22,474		$	9,486		$	—		$	97,357
Unallocated assets:
Cash and cash equivalents	—			—			—			18,823			18,823
Restricted cash	—			—			—			51			51
Deferred income taxes	—			—			—			1,538			1,538
Prepaid expenses and other assets	—			—			—			910			910
Discontinued operations	—			—			—			1,539			1,539
Total assets	$	65,397		$	22,474		$	9,486		$	22,861		$	120,218

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
2016
Revenue, net	$	99,861	$	37,335	$	3,648		$	—		$	140,844
Net income from continuing operations											$	2,229
Income tax expense											1,242
Interest income, net											(153		)
EBIT	$	25,476	$	6,455	$	(4,617	)	$	(23,996	)	3,318
Depreciation of property and equipment	3,750		529		754			—			5,033
Amortization of intangible assets	1,477		—		355			—			1,832
EBITDA	30,703		6,984		(3,508		)	(23,996		)	10,183
Foreign currency transaction losses (gains) on short-term intercompany balances	31		107		17			(71		)	84
Transformation severance and related expenses	517		312		258			242			1,329
Other loss	—		—		(121		)	—			(121		)
Stock-based compensation	—		—		—			5,123			5,123
Adjusted EBITDA	$	31,251	$	7,403	$	(3,354	)	$	(18,702	)	$	16,598
Capital expenditures	$	4,393	$	600	$	894		$	—		$	5,887
Allocated assets	$	47,690	$	14,813	$	10,532		$	—		$	73,035
Unallocated assets:
Cash and cash equivalents	—		—		—			15,723			15,723
Restricted cash	—		—		—			47			47
Deferred income taxes	—		—		—			2,269			2,269
Prepaid expenses and other assets	—		—		—			800			800
Discontinued operations								1,600			1,600
Total assets	$	47,690	$	14,813	$	10,532		$	20,439		$	93,474

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
2015
Revenue, net	$	97,009	$	36,264	$	5,029		$	—		$	138,302
Net loss from continuing operations											$	1,539
Income tax expense											369
Interest income, net											(190		)
EBIT	$	22,539	$	2,573	$	(5,131	)	$	(18,263	)	1,718
Depreciation of property and equipment	4,036		647		634			—			5,317
Amortization of intangible assets	1,728		600		130			—			2,458
EBITDA	28,303		3,820		(4,367		)	(18,263		)	9,493
Foreign currency transaction (gains) losses on short-term intercompany balances	807		1,533		12			(187		)	2,165
Transformation severance and related expenses	322		589		30			308			1,249
Other loss	—		—		1,191			—			1,191
Stock-based compensation	—		—		—			3,926			3,926
Adjusted EBITDA	$	29,432	$	5,942	$	(3,134	)	$	(14,216	)	$	18,024
Capital expenditures	$	3,669	$	543	$	270		$	—		$	4,482
Allocated assets	$	44,588	$	13,922	$	1,030		$	—		$	59,540
Unallocated assets:
Cash and cash equivalents	—		—		—			15,122			15,122
Restricted cash	—		—		—			48			48
Deferred loan cost	—		—		—			80			80
Deferred income taxes	—		—		—			1,361			1,361
Prepaid expenses and other assets	—		—		—			2,465			2,465
Discontinued operations	—		—		—			1,775			1,775
Total assets	$	44,588	$	13,922	$	1,030		$	20,851		$	80,391

The following table presents revenue by country based on the location of clients served (in thousands):

	Years Ended December 31,
	2017		2016		2015
United States	$	93,447	$	80,857	$	80,484
United Kingdom	23,408		17,501		19,540
Canada	14,375		14,531		12,388
Australia	8,732		7,354		6,111
France	5,987		6,934		6,186
Mexico	5,385		4,900		4,340
Brazil	2,053		1,169		1,223
Spain	1,127		964		1,019
Ireland	929		337		513
New Zealand	899		979		596
Hong Kong	889		824		864
Colombia	709		583		610
Thailand	699		654		933
Other	2,981		3,257		3,495
	$	161,620	$	140,844	$	138,302

The following table presents long-lived assets by country based on the location of the asset (in thousands):

	December 31,
	2017		2016
United States	$	47,371	$	34,429
UK	5,510		2,047
All Other	1,125		1,074
	$	54,006	$	37,550

One client, The Kroger Co., accounted for approximately 12% of revenue from continuing operations in 2017 and approximately 11% of revenue from continuing operations in 2016, while no one client accounted for 10% or more of revenue from continuing operations in 2015.

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Earnings (Loss) Per Common Share

12 Months Ended

Dec. 31, 2017

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 (in thousands, except per share data):

	Years Ended December 31,
Basic earnings (loss) per common share:	2017				2016			2015
Numerator:
Net income from continuing operations	$	4,556		2	$	2,229		$	1,539
Net loss from discontinued operations	$	(1,372	)		$	(1,324	)	$	(4,765	)
Denominator:
Weighted-average common shares outstanding	21,937				21,969			25,868
Basic earnings per common share from continuing operations	$	0.21			$	0.10		$	0.06
Basic loss per common share from discontinued operations	$	(0.06	)		$	(0.06	)	$	(0.18	)

	Years Ended December 31,
Diluted earnings (loss) per common share:	2017			2016			2015
Numerator:
Net income from continuing operations	$	4,556		$	2,229		$	1,539
Net loss from discontinued operations	$	(1,372	)	$	(1,324	)	$	(4,765	)
Denominator:
Weighted-average common shares outstanding	21,937			21,969			25,868
Effect of dilutive securities from stock-based compensation plans	174			47			36
Denominator for diluted earnings per common share	22,111			22,016			25,904
Diluted earnings per common share from continuing operations	$	0.21		$	0.10		$	0.06
Diluted loss per common share from discontinued operations	$	(0.06	)	$	(0.06	)	$	(0.18	)

Weighted-average shares outstanding excludes antidilutive shares underlying options that totaled 2.3 million, 2.9 million, and 3.3 million shares, respectively, from the computation of diluted earnings per common share for the years ended December 31, 2017, 2016, and 2015.

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

(a) Goodwill

We evaluate the recoverability of goodwill in the fourth quarter of each year or sooner if events or changes in circumstances indicate that the carrying amount may exceed its fair value. These analyses did not result in an impairment charge during the periods presented.

Goodwill by reportable segments during 2017 and 2016 was as follows (in thousands):

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services		Total
Balance, January 1, 2016	$	10,755	$	813		$	242	$	11,810
Goodwill recorded in connection with business combinations	—		—			2,146		2,146
Foreign currency translation	—		(133		)	—		(133		)
Balance, December 31, 2016	10,755		680			2,388		13,823
Goodwill recorded in connection with business combinations	2,685		869			140		3,694
Foreign currency translation	—		131			—		131
Balance, December 31, 2017	$	13,440	$	1,680		$	2,528	$	17,648

During 2017, we recorded goodwill of $3.6 million in our Recovery Audit Services - Americas and Recovery Audit Services - Europe/Asia-Pacific segments in conjunction with the acquisition of Cost & Compliance Associates, LLC and Cost & Compliance Associates Limited respectively, (collectively "C&CA") on February 23, 2017. C&CA is a commercial recovery audit and contract compliance firm with operations in the U.S. and the UK (refer to Note 12 below).

During 2016, we recorded goodwill of $2.1 million in our Adjacent Services segment in conjunction with our October 31, 2016 acquisition of Lavante. Lavante is a SaaS-based SIM and recovery audit services firm, based in San Jose, California. Lavante’s assets consist primarily of its proprietary software applications and customer contracts.

(b) Intangible Assets

Intangible assets consist principally of amounts we assigned to customer relationships, trademarks, non-compete agreements and trade names in conjunction with business acquisitions. Changes in gross carrying amounts for intangible assets in 2015 related primarily to the divestiture of certain assets from a document service offering ("SDS assets"). Note 12 – Business Acquisitions and Divestitures below includes a more detailed description of the divestiture in 2015 and recent acquisitions. Certain of our intangible assets associated with acquisitions of assets or businesses by our foreign subsidiaries are denominated in the local currency of such subsidiary and therefore are subject to foreign currency ("FX") adjustments. We present the amounts for these transactions in United States dollars utilizing foreign currency exchange rates as of the respective balance sheet dates.

Amortization expense relating to intangible assets was $3.6 million in 2017, $1.8 million in 2016 and $2.5 million in 2015. As of December 31, 2017 and based on our current amortization methods, we project amortization expense relating to intangible assets for the next five years will be $3.4 million in 2018, $3.5 million in 2019, $3.3 million in 2020, $1.7 million in 2021 and $0.9 million in 2022. We use accelerated amortization methods for customer relationships and trade names, and straight-line amortization for non-compete agreements and trademarks.

Changes in noncurrent intangible assets during 2017 and 2016 were as follows (in thousands):

	Customer Relationships			Trademarks			Non- compete Agreements			Software			Trade Names			Total
Gross carrying amount:
Balance, January 1, 2016	$	37,784		$	931		$	1,477		$	—		$	2,200		$	42,392
Acquisition of Lavante Assets	—			—			—			6,178			—			6,178
FX adjustments and other	(1,211		)	(78		)	(155		)	—			—			(1,444		)
Balance, December 31, 2016	36,573			853			1,322			6,178			2,200			47,126
Acquisition of C&CA Assets	9,556			135			1,232			—			—			10,923
FX adjustments and other	777			38			75			—			—			890
Balance, December 31, 2017	$	46,906		$	1,026		$	2,629		$	6,178		$	2,200		$	58,939
Accumulated amortization:
Balance, January 1, 2016	$	(31,246	)	$	(881	)	$	(1,381	)	$	—		$	(2,200	)	$	(35,708	)
Amortization expense	(1,414		)	(50		)	(96		)	(272		)	—			(1,832		)
FX adjustments and other	1,179			78			155			—			—			1,412
Balance, December 31, 2016	(31,481		)	(853		)	(1,322		)	(272		)	(2,200		)	(36,128		)
Amortization expense	(1,796		)	(22		)	(204		)	(1,612		)	—			(3,634		)
FX adjustments and other	(585		)	(38		)	(76		)	—			—			(699		)
Balance, December 31, 2017	$	(33,862	)	$	(913	)	$	(1,602	)	$	(1,884	)	$	(2,200	)	$	(40,461	)
Net carrying amount:
Balance, December 31, 2016	$	5,092		$	—		$	—		$	5,906		$	—		$	10,998
Balance, December 31, 2017	$	13,044		$	113		$	1,027		$	4,294		$	—		$	18,478
Estimated useful life (years)	6-15 years			5 years			1-5 years			4 years			4-5 years

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Debt

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Debt

DEBT

In May of 2016, the Company adopted ASU 2015-03, Interest - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 changed the presentation of debt issuance costs on the balance sheet by requiring that they be presented as a direct deduction from the related debt liability, rather than represented as a separate asset. As a result, the Company’s deferred financing costs are now reflected in Long-term debt, excluding current portion on the Company’s Consolidated Balance Sheets for all periods presented. Long-term debt as of December 31, 2017 and 2016 consists of the following (in thousands):

	As of December 31
	2017							2016
	Gross		DFC (1)			Net		Gross		DFC		Net
Revolving Facility	$	13,600	$	(131	)	$	13,469	$	3,600	$	—	$	3,600
Capital lease obligations	105		—			105		—		—		—
Total long term debt	13,705		(131		)	13,574		3,600		—		3,600
Less: Current portion of long-term debt	48		—			48		3,600		—		3,600
Long-term debt, excluding current portion	$	13,657	$	(131	)	$	13,526	$	—	$	—	$	—

(1) DFC refers to deferred financing costs related to the Company's long-term 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 credit facility is guaranteed by the Company and its domestic subsidiaries and is secured by substantially all of our assets.

The Company modified the existing credit facility agreement through various amendments during fiscal years 2014 and 2016. Included in these amendments was the refinancing of the committed credit facility in 2014, and clarification of certain definitions and other terms of the facility in 2016. The refinancing resulted in an extended maturity date of December 23, 2017, as well as lower interest rate. Pursuant to the December 2014 amendment, the credit facility would bear interest at a rate per annum comprised of a specified index rate based on one-month LIBOR, plus an applicable margin (1.75% per annum). The index rate was determined as of the first business day of each calendar month. We must pay a commitment fee, payable quarterly, on the unused portion of the credit facility.

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:

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

As of December 31, 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 December 31, 2017. Based on the terms of the credit facility, as amended, the applicable interest rate at December 31, 2017 was approximately 3.60%. As of December 31, 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 SunTrust credit facility, among other things, limit the amount of capital expenditures the Company can make, set forth maximum leverage and net funded debt ratios for the Company and a minimum fixed charge coverage ratio, and also require the Company to maintain minimum consolidated earnings before interest, taxes, depreciation and amortization. In addition, the SunTrust credit facility includes customary events of default. The Company was in compliance with the covenants in its SunTrust credit facility as of December 31, 2017.

Future Commitments

The following is a summary of the combined principal maturities of all long-term debt and principal payments to be made under the Company’s capital lease agreements for each of the fiscal years presented in the table below (in thousands):

Year Ended December 31
2018	$	73
2019	13,625
2020	7
Total	$	13,705

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Lease Commitments

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Lease Commitments

LEASE COMMITMENTS

PRGX is committed under noncancelable lease arrangements for facilities and equipment. Rent expense, excluding costs associated with the termination of noncancelable lease arrangements, was $5.1 million in 2017, $3.9 million in 2016 and $4.6 million in 2015.

In January 2014, we amended the lease for our principal executive offices to extend the term through December 31, 2021, reduce the lease payment for 2014, and reduce the space under lease from approximately 132,000 square feet to approximately 58,000 square feet effective January 1, 2015. As of December 31, 2015, we had no subleased property. Starting in February 2016 we subleased approximately 3,000 square feet.

We have entered into several operating lease agreements that contain provisions for future rent increases, free rent periods or periods in which rent payments are reduced (abated). We charge the total amount of rental payments due over the lease term to rent expense on the straight-line, undiscounted method over the lease terms.

Future minimum lease payments under noncancelable operating leases including the amended lease for our principal executive offices, are as follows (in thousands):

Year Ending December 31,	Gross		Sublease Income			Amount
2018	$	3,363	$	(69	)	$	3,294
2019	2,981		(72		)	2,909
2020	2,527		(74		)	2,453
2021	2,116		(77		)	2,039
2022	440		—			440
Total payments	$	11,427	$	(292	)	$	11,135

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Income (loss) before income taxes from continuing operations relate to the following jurisdictions (in thousands):

	Years Ended December 31,
	2017			2016			2015
United States	$	(6,502	)	$	(5,306	)	$	(244	)
Foreign	14,020			8,777			2,152
	$	7,518		$	3,471		$	1,908

The provision for income taxes for continuing operations consists of the following (in thousands):

	Years Ended December 31,
	2017			2016			2015
Current:
Federal	$	—		$	—		$	—
State	1			—			(13		)
Foreign	2,230			2,103			1,494
	2,231			2,103			1,481
Deferred:
Federal	(155		)	—			—
State	—			—			—
Foreign	886			(861		)	(1,112		)
	731			(861		)	(1,112		)
Total	$	2,962		$	1,242		$	369

The significant differences between the U.S. federal statutory tax rate and the Company’s effective income tax expense for earnings (in thousands) are as follows:

	Years Ended December 31,
	2017			2016			2015
Statutory federal income tax rate	$	2,631		$	1,180		$	649
State income taxes, net of federal effect	(62		)	(173		)	(240		)
Net operating loss limitation	2,975			—			—
Deferred tax true-up	—			(4,103		)	8,078
Change in deferred tax asset valuation allowance	(15,338		)	4,877			(6,729		)
Statutory rate change	13,850			—			—
Foreign tax rate differential	(899		)	(712		)	(223		)
Compensation deduction limitation	—			113			(1,201		)
Other, net	(195		)	60			35
Total	$	2,962		$	1,242		$	369

The tax effects of temporary differences and carry-forwards that give rise to deferred tax assets and liabilities consist of the following (in thousands):

	Years Ended December 31,
	2017		2016
Deferred income tax assets:
Accounts payable and accrued expenses	$	1,215	$	737
Accrued payroll and related expenses	1,691		3,062
Stock-based compensation expense	3,508		3,531
Depreciation of property and equipment	1,711		2,579
Capitalized Software	—		—
Non-compete agreements	—		—
Unbilled receivables and refund liabilities	1,811		2,216
Operating loss carry-forwards of foreign subsidiary	11,000		10,907
Federal operating loss carry-forwards	17,161		33,087
State operating loss carry-forwards	3,591		3,919
Other	376		1,181
Gross deferred tax assets	42,064		61,219
Less valuation allowance	34,776		50,114
Gross deferred tax assets net of valuation allowance	7,288		11,105
Deferred income tax liabilities:
Intangible assets	1,987		2,299
Capitalized software	29		1,928
Other	3,734		4,609
Gross deferred tax liabilities	5,750		8,836
Net deferred tax assets	$	1,538	$	2,269

Our reported effective tax rates on income approximated 39.4% in 2017, 35.8% in 2016, and 19.3% in 2015. Reported income tax expense in each year primarily results from taxes on the income of foreign subsidiaries. The effective tax rates generally differ from the expected tax rate primarily due to the Company’s deferred tax asset valuation allowance on the domestic earnings and taxes on income of foreign subsidiaries.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act"), was signed into law making significant changes to the Internal Revenue Code.  The new legislation contains several key provisions that impact the consolidated financial statements for the year ended December 31, 2017. Additionally, in December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be incomplete though we have recorded provisional amounts in the consolidated financial statements. We expect to complete our analysis within the measurement period in accordance with SAB 118.

The new legislation contains several key provisions that affect us.    The lowering of the corporate tax rate from 35% to 21% resulted in our deferred tax balances and related valuation allowances being re-measured to reflect the future tax benefit at the new enacted rate.  The U.S. deferred tax assets were reduced by $13.9 million and the valuation allowance was also reduced by $13.9 million.  This remeasurement results in no net impact to the effective tax rate for the year ended December 31, 2017.    In addition the Alternative Minimum Tax (“AMT”) has been repealed for tax years beginning after December 31, 2017 and  the AMT credit will be refundable in future years.  The Company has an AMT credit balance of approximately $155,000 recorded as a deferred tax asset and has now released the valuation allowance related to this balance, resulting in a $155,000 income tax benefit. The Tax Act requires the payment of a transition tax on the mandatory deemed repatriation of cumulative unremitted foreign earnings, the larger amount measured on November 2, 2017 and December 31, 2017. Based upon all available evidence and the Company’s analysis, there is no transition tax liability due to a net earnings and profits deficit in our controlled foreign corporations and no impact to the effective tax rate for the year ended December 31, 2017.   The Global Intangible Low Tax Income Tax (“GILTI”) is a U.S. minimum tax on the foreign earnings on intangible assets.  The Company has elected to account for the impact of the minimum tax in the period realized.  GILTI results in no impact to the effective tax rate for the year ended December 31, 2017.

We undertook a detailed review of our deferred taxes and it was determined with the exception of the deferred tax assets associated with the AMT credit described above, a valuation allowance was required for all other U.S. deferred tax assets. We continue to maintain a valuation allowance on our U.K. deferred tax assets. We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carryback and carryforward periods and the implementation of tax planning strategies. Since this evaluation requires consideration of future events, significant judgment is required in making the evaluation, and our conclusion could be materially different should certain of our expectations not be met. The balance of our valuation allowance was $34.8 million as of December 31, 2017, representing a change of $15.3 million from the valuation allowance of $50.1 million recorded as of December 31, 2016. The primary driver of the valuation allowance movement was determined by the re-measurement of deferred tax assets and corresponding valuation allowance due to the reduction in the U.S. corporate tax rate under The Act as discussed above.

In 2015, management determined that a valuation allowance was no longer required against the deferred tax assets of one of its U.S. branches in Australia. As of December 31, 2015, we had gross deferred tax assets of $1.5 million relating to this subsidiary. The benefit of these deferred tax assets is reflected as a credit to tax expense of $0.5 million during the year ended December 31, 2015.

In 2016, management determined that a valuation allowance was no longer required against the deferred tax assets of its U.S. branches in New Zealand and Singapore. As of December 31, 2016, we had gross deferred tax assets of $8.4 million relating to those foreign subsidiaries. The benefit of these deferred tax assets is reflected as a credit of $1.7 million to tax expense during the year ended December 31, 2016.

In 2017, management determined that a valuation allowance was no longer required against the deferred tax assets of certain of its U.S. branches in Spain, Taiwan, Thailand and Mexico. As of December 31, 2017, we had gross deferred tax assets of $0.9 million relating to those foreign subsidiaries. The benefit of these deferred tax assets is reflected as a credit of $0.2 million to tax expense during the year ended December 31, 2017.

As of December 31, 2017, we had approximately $81.7 million of U.S. federal loss carry-forwards available to reduce future U.S. federal taxable income. The U.S. federal loss carry-forwards expire between 2025 and 2035. As of December 31, 2017, we had approximately $65.0 million of state loss carry-forwards available to reduce future state taxable income. The state loss carry-forwards expire between 2018 and 2037 and are subject to certain limitations. The U.S. federal and state loss carry-forwards at December 31, 2017, reflect adjustments for current period write-downs associated with ownership changes for state tax purposes.

Generally, we have not provided deferred taxes on the undistributed earnings of international subsidiaries as we consider these earnings to be permanently reinvested. As it relates to the earnings of our Brazilian subsidiary, we assert that we are not permanently reinvested. We did not provide additional incremental U.S. income tax expense on these amounts as our Brazilian subsidiary did not have undistributed earnings during the year.

On December 30, 2016, the Company experienced an ownership change as defined under Section 382 of the Internal Revenue Code (“IRC”). This ownership change resulted in an annual IRC Section 382 limitation that limits the use of certain tax attribute carry-forwards and also resulted in the write-off of certain deferred tax assets and the related valuation allowances that the Company recorded in 2017. The Company has performed its assessment and has determined that $87.3M million of the gross federal net operating losses outstanding as of December 30, 2016 will be available for use going-forward.

A reconciliation of our beginning and ending amount of unrecognized tax benefits and related accrued interest thereon is as follows:

	Unrecognized Tax Benefits			Accrued Interest and Penalties
Balance at January 1, 2015	$	677		$	220
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	—			24
Decrease based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	$	(142	)	$	(42	)
Balance at December 31, 2015	$	535		$	202
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	—			11
Decreases based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	(38		)	(59		)
Balance at December 31, 2016	$	497		$	154
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	116			19
Decreases based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	(420		)	(145		)
Balance at December 31, 2017	$	193		$	28

Due to the complexity of the tax rules underlying these unrecognized tax benefits, and the unclear timing of tax audits, tax agency determinations, and other events, we cannot establish reasonably reliable estimates for the periods in which the cash settlement of these liabilities will occur.

We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. As of December 31, 2017, the 2014 through 2016 tax years generally remain subject to examination by federal and most state and foreign tax authorities. The use of net operating losses generated in tax years prior to 2014 may also subject returns for those years to examination.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

Compensation and Retirement Disclosure [Abstract]

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

We maintain a defined contribution retirement plan (the "Plan") in accordance with Section 401(k) of the Internal Revenue Code, which allows eligible participating employees to defer a portion of their annual compensation and contribute such amount to one or more investment funds. We match employee contributions in a discretionary amount to be determined by management and approved by the Board of Directors each plan year up to the lesser of 6% of an employee’s annual compensation or $3,000 per participant. We also may make additional discretionary contributions to the Plan as determined by management and approved by the Board of Directors each plan year. Company matching funds and discretionary contributions vest 100% after three years of service for participants who either had attained three or more years of service or were hired on or after January 1, 2012. For all other participants, company matching funds and discretionary contributions vest at the rate of 20% after two years of service and 100% after three years of service. We amended the Plan in 2013 to add Roth 401(k) plan features that allow participating employees to make post-tax contributions in addition to, or in lieu of, the pre-tax contributions allowed under the Plan. Company matching funds are made on a pre-tax basis for both pre-tax and post-tax employee contributions, and are subject to the above limitations based on the aggregate pre-tax and post-tax contribution by the participant. The Company contributed to the Plan approximately $0.8 million in 2017, $0.8 million in 2016, and $0.8 million in 2015.

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Capital Structure

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

CAPITAL STRUCTURE

CAPITAL STRUCTURE

On February 21, 2014, our Board of Directors authorized a stock repurchase program under which we could repurchase up to $10.0 million of our common stock from time to time through March 31, 2015. On March 25, 2014, our Board of Directors authorized a $10.0 million increase to the stock repurchase program, bringing the total amount of its common stock that the Company could repurchase under the program to $20.0 million. On October 24, 2014, our Board of Directors authorized a $20.0 million increase to the stock repurchase program, increasing the total share repurchase program to $40.0 million, and extended the duration of the program to December 31, 2015. In October 2015, our Board of Directors authorized an additional $10.0 million increase to the stock repurchase program, increasing the total share repurchase program to $50.0 million, and extended the duration of the program to December 31, 2016. In December 2016, our Board of Directors authorized an additional $10.0 million increase to the stock repurchase program, increasing the total share repurchase program to $60.0 million, and extended the duration of the program to December 31, 2017. In December 2017, our Board of Directors extended the duration of the program to December 31, 2018. We repurchased 0.9 million shares of our common stock during the year ended December 31, 2016 for $3.8 million and no shares in the year ended December 31, 2017.

Pursuant to exercises of outstanding stock options, we issued 225,043 shares of our common stock having a value of $1.5 million in the year ended December 31, 2017 and 90,496 shares of our common stock having a value of $0.3 million in the year ended December 31, 2016.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 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.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2017

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

Stock-Based Compensation

STOCK-BASED COMPENSATION

Plan Summary

During 2017, the Company had two shareholder-approved stock-based compensation plans under which equity awards have been granted: (1) the 2008 Equity Incentive Plan (“2008 EIP”); and (2) the 2017 Equity Incentive Compensation Plan (“2017 EICP”) (collectively, the “Plans”). The Company generally issues authorized but previously unissued shares to satisfy stock option exercises, grants of restricted stock awards and vesting of restricted stock units.

2008 EIP Awards

During the first quarter of 2008, the Board of Directors of the Company adopted the 2008 EIP, which was approved by the shareholders at the annual meeting of the shareholders on May 29, 2008. The 2008 EIP authorized the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other incentive awards. Pursuant to amendments to the 2008 EIP that were approved by the Board of Directors and the Company's shareholders, 10,600,000 shares were reserved for issuance under the 2008 EIP to award grants to key employees, directors and service providers. The options granted pursuant to the 2008 EIP generally had seven year terms and vested in equal annual increments over the vesting period, which typically was three years for employees and one year for directors. No further awards can be granted from the 2008 EIP following the approval of the 2017 EICP by shareholders on June 27, 2017.

2017 EICP Awards

In April 2017, the Board of Directors adopted the 2017 EICP, which was approved by the shareholders at the annual meeting of the shareholders on June 27, 2017. The 2017 EICP applies to awards granted on or after June 27, 2017. Under the 2017 EICP, the Company may grant incentive and non-qualified 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 the awards under the 2017 EICP is 3.4 million shares plus that 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 subsequently terminate without deleting of the shares, whether by lapse, forfeiture, cancellation, or otherwise. The options granted to date pursuant to the 2017 EICP have a term of seven years. As of December 31, 2017, there were approximately 3.1 million shares available for future grants under the 2017 EICP.

Grants

Option Awards

The following table summarizes stock option awards granted during the years ended December 31, 2017, 2016, and 2015:

Grantee Type	# of Options Granted	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
2017
Director group	90,566	1 year or less	$	6.34	$	3.49
Director group (1)	35,000	3 years	$	6.25	$	3.50
CEO grant	500,000	4 years	$	7.35	$	2.36
Employee group	30,000	3 years	$	7.25	$	3.99
Employee inducement (2)	335,000	3 years	$	6.19	$	3.41
2016
Director group (3)	195,417	1 year or less	$	5.01	$	2.71
Director group(1)	35,000	3 years	$	4.80	$	2.66
Employee inducement (4)(5)	232,500	3 years	$	4.61	$	2.60
2015
Director group	249,273	1 year or less	$	4.49	$	2.44
Employee group	17,092	3 years	$	3.99	$	1.33
Employee inducement (6)	135,000	3 years	$	5.51	$	1.42

(1) The Company granted non-qualified stock options to one director in connection with the director joining the Company's board of directors.

(2) The Company granted non-qualified stock options outside its existing stock-based compensation plans to certain employees.

(3) Includes 20,417 non-qualified stock options granted to one director in connection with the director joining the Company's board of directors.

(4) The Company granted non-qualified stock options outside its existing stock-based compensation plans in 2016 in connection with an employee joining the Company.

(5) The Company granted non-qualified stock options outside its existing stock-based compensation plans in connection with the closing of the Lavante acquisition.

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

Nonvested Stock Awards

The following table summarizes nonvested stock awards granted during the years ended December 31, 2017, 2016 and 2015:

Grantee Type	# of Stock Awards Granted	Vesting Period	Weighted Average Grant Date Fair Value
2017
Director group	51,179	1 year or less	$	6.35
Employee group (1)	641,751	3 years or less	$	6.31
Employee inducement (2)	100,000	3 years or less	$	6.33
2016
Employee group (3)	1,250,750	2 years	$	4.88
Employee inducement (4)	100,000	3 years	$	4.94
2015
Director group	4,273	1 year or less	$	4.02
Director group	17,092	3 years	$	3.99
Employee group (5)	2,493,333	3 years	$	3.99
Employee inducement (6)	10,000	3 years	$	5.29

(1) The Company granted nonvested performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards in the first quarter of 2017 to twelve executive officers totaling 458,000 units. During the second quarter of 2017, the Company issued 183,751 restricted stock awards and restricted stock units to key employees.

(2) The Company granted nonvested performance-based stock awards (restricted stock units) and restricted stock awards in 2017 to two executive officers in connection with the employees joining the Company.

(3) The Company granted nonvested performance-based stock awards (restricted stock units) in 2016 to five executive officers, and certain other key employees.

(4) The Company granted nonvested performance-based stock awards (restricted stock units) outside its existing stock-based compensation plans in 2016 to three employees in connection with the employees joining the Company.

(5) The Company granted nonvested performance-based stock awards (restricted stock units) in the first quarter of 2015 to eight executive officers totaling 1,325,000 units. During the third and fourth quarters of 2015, the Company issued 1,168,333 units to key employees.

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

Nonvested stock awards, including both restricted stock and restricted stock units, 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 vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors.

Performance-Based Restricted Stock Units

In March 2017, six executive officers and six other senior leaders were granted 274,800 performance-based restricted stock units ("PBUs") under the 2008 EIP. If vested, 100% of the vested PBUs will be paid in whole shares of common stock. 65% of the PBUs vest and become payable based on the cumulative revenue from continuing operations and 35% of the PBUs vest and become payable on the cumulative adjusted EBITDA from continuing operations that the Company achieves, in each case, 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 shall become vested and payable will be based on a 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 applicable threshold performance level).

In May 2017, one executive officer and one senior leader were granted 59,000 PBUs outside of the existing stock-based compensation plan as an inducement for employment. If vested, 100% of the vested PBUs will be paid in whole shares of common stock. 65% of the PBUs vest and become payable based on the cumulative revenue from continuing operations and 35% of the PBUs vest and become payable on the cumulative adjusted EBITDA from continuing operations that the Company achieves, in each case, 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 shall become vested and payable will be based on a straight line interpolation between such stated performance levels (although the Units 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 applicable threshold performance level).

On August 3, 2016, a senior leader of the Company was granted 10,000 performance-based restricted stock units ("PBUs") outside of the existing stock-based compensation plan as an inducement for employment. This employee terminated his employment in the second quarter of 2017. The PBUs were forfeited upon termination.

On June 27, 2016, certain employees of the Company were granted 641,750 PBUs under the 2008 EIP. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 40% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 60% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On June 20, 2016, a senior leader of the Company was granted 30,000 PBUs outside of the existing stock-based compensation plan as an inducement for employment. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 40% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 60% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On May 5, 2016, an executive officer of the Company was granted 60,000 PBUs outside of the existing stock-based compensation plan as an inducement for employment. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 43% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 57% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On March 31, 2016, five executive officers and three other senior leaders of the Company were granted 609,000 PBUs under the 2008 EIP. Upon vesting, the PBUs will be settled by the issuance of Company common stock equal to 43% of the number of PBUs being settled and the payment of cash in an amount equal to the fair market value of that number of shares of common stock equal to 57% 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, 2017. At the threshold performance level, 35% of the PBUs will become vested and payable; at the target performance level, 100% of the PBUs will become vested and payable; and at the maximum performance level, 150% of the PBUs will become vested and payable. If performance falls between the stated performance levels, the percentage of PBUs that shall become vested and payable will be based on straight line interpolation between such stated performance levels (although the PBUs may not become vested and payable for more than 150% of the PBUs and no PBUs shall become vested and payable if performance does not equal or exceed the threshold performance level).

On September 28, 2015, certain employees of the Company were granted 1,123,333 PBUs under the 2008 EIP. On December 14, 2015, certain employees of the Company were granted an additional 45,000 PBUs under the 2008 EIP. The specified performance goals for these PBUs were not achieved and the PBUs were forfeited in the first quarter of 2017.

On March 30, 2015, eight executive officers of the Company were granted 1,325,000 PBUs under the 2008 EIP. The specified performance goals for these PBUs were not achieved and the PBUs were forfeited in the first quarter of 2017.

The following table summarizes the PBUs granted during the years ended December 31, 2017, 2016 and 2015:

	Total PBUs Granted	PBUs to be Settled in Common Stock (1)	PBUs to be Settled in Cash (2)
2017	333,800	333,800	—
2016	1,350,750	560,670	790,080
2015(3)	2,493,333	954,583	1,538,750

(1) Represents the number of PBUs to be settled in common stock at the target performance level.

(2) Represents the number of PBUs to be settled in cash at the target performance level.

(3) PBUs were forfeited.

During 2015, the PBUs were expensed at the target performance level based on management's estimates. During the fourth quarter of 2015, it was determined it was "not probable" that the threshold performance level would be achieved by the vesting period ending December 31, 2016 and the Company reversed approximately $0.8 million of expense incurred in the second quarter and $0.6 million of expense incurred in third quarter, a total of $1.4 million for the year ended December 31, 2015. During 2017 and 2016, the PBUs that were granted in 2017 and 2016 were expensed at the target performance level based on management's estimates.

Stock Appreciation Rights

On April 27, 2016, the Company's Chief Executive Officer was granted stock appreciation rights (“SARs”) covering 200,000 shares of the Company’s common stock under the 2008 EIP. The SARs were issued with an initial value per share equal to $4.71. The SARs will vest and become payable in cash in a lump sum (net of applicable withholdings) on June 30, 2018, subject to the Chief Executive Officer’s continued employment through such date. Upon vesting, the Company will pay an amount equal to the excess of the fair market value, as of June 30, 2018, of the shares of the Company’s common stock with respect to the SARs that have become vested and payable over $4.71, the fair market value (closing price) of the Company's common stock on April 27, 2016.

Summary of Activity

A summary of option activity as of December 31, 2017, and changes during the year then ended is presented below:

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	4.30 years	$	1,204
Granted	990,566		6.82
Exercised	(225,043	)	5.23			$	299
Forfeited	(475,504	)	6.01
Expired	(311,111	)	6.18
Outstanding at December 31, 2017	3,399,293		$	6.54	4.05 years	$	2,367
Exercisable at December 31, 2017	2,290,967		$	6.52	3.20 years	$	1,654

The weighted-average grant date fair value of options granted was $2.91 per share in 2017, $2.66 per share in 2016 and $2.32 per share in 2015. The total intrinsic value of options exercised was $0.3 million in 2017, $0.1 million in 2016 and less than $0.1 million in 2015.

For time-vested option grants that resulted in compensation expense recognition, we used the following assumptions in our Black-Scholes valuation models:

	Years Ended December 31,
	2017	2016	2015
Risk-free interest rates (1)	1.38% - 1.96%	0.58% - 1.20%	0.80% - 1.59%
Dividend yields (2)	—%	—%	—%
Volatility factor of expected market price (3)	.540 - .749	.391 - .779	.323 - .733
Weighted-average expected term of options (4)	2.2 - 4 years	1.3 - 4.5 years	3.1 - 5 years
Forfeiture rate (5)	—%	—%	—%

(1) The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding to the expected term of the options.

(2) The Company has not historically declared dividends.

(3) The expected volatility is based on the historical volatility of the Company's stock.

(4) The expected term represents the weighted average period of time that the stock options are expected to be outstanding, giving consideration to the vesting schedules.

The Company accounts for forfeitures as they occur rather than estimating expected forfeitures.

A summary of nonvested stock awards (including restricted stock, restricted stock units and performance-based restricted stock units) activity as of December 31, 2017 and changes during the year then ended is presented below:

Nonvested Stock	Shares		Weighted Average Grant Date Fair Value (Per Share)
Nonvested at January 1, 2017	3,893,050		$	4.37
Granted	792,930		6.32
Vested	(45,002	)	6.24
Forfeited	(2,524,282	)	4.09
Nonvested at December 31, 2017	2,116,696		$	5.36

The weighted-average grant date fair value of nonvested stock awards (restricted stock and restricted stock units) granted was $6.32 per share in 2017, $4.86 per share in 2016 and $4.00 per share in 2015. The total vest date fair value of stock awards vested during the year was $0.3 million in 2017, $0.7 million in 2016 and $1.2 million in 2015.

Stock-based compensation expense was $7.1 million in 2017, $5.1 million in 2016, and $3.9 million in 2015. We include these charges in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations.

Total unrecognized compensation expense related to nonvested stock-based compensation as of December 31, 2017 is as follows (dollars in thousands):

	Stock				Restricted		Restricted
	Options		SAR		Stock Awards		Stock Units		Total
Unrecognized compensation expense	$	2,565	$	77	$	1,752	$	1,628	$	6,022
Weighted-average remaining recognition period (in years)	2.9		0.3		2.3		1.4		2.3

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Business Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

BUSINESS ACQUISITIONS AND DIVESTITURES

BUSINESS ACQUISITIONS AND DIVESTITURES

We completed several acquisitions and divestitures in recent years that we describe below. Generally, we acquire businesses that we believe will provide a strategic fit for our existing operations, cost savings and revenue synergies, or enable us to expand our capabilities. We divest assets or businesses that we no longer find strategically aligned with our service offerings.

Cost & Compliance Associates Acquisition

In February 2017, we completed the acquisition 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. We acquired substantially all of the assets of C&CA for approximately $10.0 million in cash plus potential earnout consideration of up to $8.0 million.

The actual payment of the earnout consideration will be based on achieving certain financial targets over a two year period that commenced on March 1, 2017 and will conclude on February 28, 2019. Management estimated that the fair value of the earnout consideration was approximately $5.9 million at the date of acquisition. During 2017, the Company recognized accretion of $0.9 million on the fair value of the earnout amount which was included in Interest expense in the Consolidated Statements of Operations, and increased the related contingent consideration liability. As of December 31, 2017, the contingent consideration liability related to the C&CA acquisition was $6.8 million, of which $3.7 million was included in current Business acquisition obligations and $3.1 million was included in long-term Business acquisition obligations in our Consolidated Balance Sheet. We funded the purchase price and acquisition costs from borrowings under our credit facility, further described in Note 5.

Purchase Price Allocation

We allocated the aggregate purchase price for C&CA to the net tangible and intangible assets acquired based on their fair values as of February 23, 2017. We based the allocation of the purchase price on a valuation for intangible assets and the carrying value for the remaining assets and liabilities, as the carrying value approximates their fair value. The fair value of C&CA's identifiable intangible assets were measured using the income approach which includes a projection of estimated future discounted cash flows using a discount rate that is specific to the business risk, cost of capital and other factors. We recorded the excess of the purchase price over the net tangible and intangible assets as goodwill, which has been allocated and recognized as goodwill within our Recovery Audit Services-Americas and Recovery Audit Services-Europe/Asia-Pacific business segments. Factors that contributed to the recognition of goodwill included expected synergies and the trained workforce.

Our purchase price allocation was as follows (in thousands):

Accounts receivable, net	$	1,621
Commissions receivable	48
Prepaid expenses	109
Other current assets, net	6
Intangible assets	10,923
Goodwill	3,554
Fixed assets, net	323
Accounts payable	(125		)
Accrued commissions	(537		)
Total consideration paid	$	15,922
Contingent consideration	(5,954		)
Total cash paid	$	9,968

The intangible assets acquired were as follows (in thousands):

	Fair Value		Remaining useful life
Customer relationships	$	9,556	14 years
Non-compete	1,232		4 years
Trademarks	135		4 years
	$	10,923

We have included the results of C&CA from the date of acquisition through December 31, 2017 in our Consolidated Statement of Operations. In fiscal year 2017, we included revenue of $7.8 million and income before income tax of $0.8 million in our Recovery Audit Services - Americas business segment, and revenue of $3.3 million and income before income tax of $1.0 million in our Recovery Audit Services - Europe/Asia- Pacific business segment.

Unaudited Supplemental Financial Information

Our unaudited pro forma results presented below, including C&CA, for the years ended December 31, 2017 and 2016 are presented as if the acquisition 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 information does not purport to project future operating results.

	Year Ended December 31,
(in thousands)	2017	2016
Unaudited pro forma revenue	162,459	155,626
Unaudited pro forma net income from continuing operations	3,886	5,365

Lavante Acquisition

In October 2016, we completed the acquisition of Lavante, Inc. ("Lavante"). Lavante is a SaaS-based procure-to-pay supplier information management (SIM) and recovery audit services firm, based in San Jose, California. We acquired substantially all of the assets of Lavante, which primarily consisted of its proprietary software applications, for $3.8 million in cash, plus potential earnout consideration of up to $4.5 million.

The actual payment of the earnout consideration will be based on achieving certain financial targets over a two year period that commenced on October 31, 2016 and will conclude on December 31, 2018. Management estimated that the fair value of the earnout consideration was approximately $3.8 million at the date of acquisition, of which $2.0 million was included in Other current liabilities and $1.8 million was included in Other long-term liabilities in our Consolidated Balance Sheet as of December 31, 2016. During 2017, the Company recognized accretion of $0.3 million on the fair value of the earnout amount which was included in Interest expense in the Consolidated Statements of Operations, and increased the related contingent consideration liability. In the fourth quarter of 2017, it was determined that a portion of the earnout consideration would not be achieved and we reduced the related contingent consideration liability by $2.1 million. This adjustment was included in Acquisition-related adjustments in the Consolidated Statements of Operations for the year ended December 31, 2017. As of December 31, 2017, the contingent consideration liability related to the Lavante acquisition was $2.0 million, of which $0.1 million was included in current Business acquisition obligations and $1.9 million was included in long-term Business acquisition obligations in our Consolidated Balance Sheet. We funded the purchase price and acquisition costs from borrowings on our credit facility, further described in Note 5.

Purchase Price Allocation

We allocated the aggregate purchase price for Lavante to the net tangible and intangible assets acquired based on their fair values as of October 31, 2016. We based the allocation of the purchase price on a valuation of intangible assets, and the carrying value for the remaining assets and liabilities as the carrying value approximated their fair value. The fair value of Lavante's identifiable intangible assets were measured using a form of the income approach, and a cost approach. The income approach includes a projection of estimated future discounted cash flows using a discount rate that is specific to the business risk, cost of capital and other factors. We recorded the excess of the purchase price over the net tangible and intangible assets as goodwill within our Adjacent Services business segment. Factors that contributed to the recognition of goodwill included expected synergies and the trained workforce.

Our purchase price allocation was as follows (in thousands):

Cash and cash equivalents	$	28
Accounts receivable, net	207
Other current assets	92
Intangible assets	6,178
Goodwill	2,286
Fixed assets, net	98
Accounts payable	(121		)
Deferred revenue	(370		)
Other current liabilities	(757		)
Total consideration paid	$	7,641
Contingent consideration(1)	(3,832		)
Total cash paid	$	3,809

⁽¹⁾ In the fourth quarter of 2017, we reduced the earnout liability by $2.1 million. At December 31, 2017, the balance was $2.0 million.

The intangible assets acquired were as follows (in thousands):

	Fair Value		Remaining useful life
Trademarks	$	163	4 years
Patents	114		1 year
Software	5,901		4 years
Total intangible assets	$	6,178

We have included the results of Lavante from its date of acquisition through December 31, 2017 in our Consolidated Statement of Operations, which consisted of revenue of $0.4 million and a loss before income tax of $0.9 million in the year ended December 31, 2016, and revenue of $1.9 million and a loss before income tax of $4.8 million in the year ended December 31, 2017. The results from Lavante are included in our Adjacent Services business segment.

Unaudited Supplemental Financial Information

Our unaudited pro forma results presented below, including Lavante, for the years ended December 31, 2016 and 2015 are presented as if the acquisition had been completed on January 1, 2015. 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 Lavante acquisition been completed on January 1, 2015. In addition, the unaudited pro forma information does not purport to project future operating results.

	Year Ended December 31,
(in thousands)	2016		2015
Unaudited pro forma revenue	143,198		140,994
Unaudited pro forma net (loss) income from continuing operations	(3,418	)	(5,516	)

Global Edge Acquisition

In December 2015, we acquired the SIM business of Global Edge for a purchase price of $0.7 million. The purchase price included an initial cash payment of $0.5 million and additional cash consideration based on the performance of the acquired businesses over a two year period from the date of acquisition valued at $0.2 million. In the fourth quarter of 2017, we determined that the performance targets for the additional cash consideration would not be achieved, and reduced the related contingent consideration liability by $0.2 million. This adjustment was included in Acquisition-related adjustments in the Consolidated Statements of Operations for the year ended December 31, 2017.

Divestitures

In August 2015, we divested certain assets from a document service offering purchased as part of the Business Strategy, Inc. acquisition in 2011. We did not receive any initial cash payments at closing of the transaction and recognized a loss on the sale of $1.6 million, which we recognized in Other loss in the Consolidated Statements of Operations.

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Quarterly Results (Unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY RESULTS (UNAUDITED)

QUARTERLY RESULTS (UNAUDITED)

The following tables set forth certain unaudited condensed consolidated quarterly financial data for each of the last eight quarters during our fiscal years ended December 31, 2017 and 2016. We have derived the information from unaudited Condensed Consolidated Financial Statements that, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such quarterly information. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. The quarterly results are updated for continuing operations.

	2017 Quarter Ended												2016 Quarter Ended
	Mar. 31			June 30			Sept. 30			Dec. 31			Mar. 31			June 30			Sept. 30			Dec. 31
	(In thousands, except per share data)
Revenue	$	33,569		$	38,510		$	42,467		$	47,074		$	31,233		$	35,291		$	35,137		$	39,183
Operating expenses:
Cost of revenue	23,026			25,605			26,675			26,746			21,646			23,431			22,367			23,855
Selling, general and administrative expenses	10,536			11,424			12,189			12,792			8,848			9,620			9,883			11,048
Depreciation of property and equipment	1,220			1,109			1,133			1,107			1,232			1,216			1,376			1,209
Amortization of intangible assets	722			722			722			1,468			394			395			393			650
Acquisition-related adjustments	—			—			—			(2,283		)	—			—			—			—
Total operating expenses	35,504			38,860			40,719			39,830			32,120			34,662			34,019			36,762
Operating (loss) income from continuing operations	(1,935		)	(350		)	1,748			7,244			(887		)	629			1,118			2,421
Foreign currency transaction (gains) losses on short-term intercompany balances	(552		)	(957		)	(418		)	(263		)	(1,007		)	196			(165		)	1,060
Interest expense (income), net	37			48			142			1,312			(29		)	(12		)	(14		)	(98		)
Other (income) loss	(199		)	5			17			17			10			18			(168		)	19
(Loss) income from continuing operations before income taxes	(1,221		)	554			2,007			6,178			139			427			1,465			1,440
Income tax expense (benefit)	627			879			930			526			204			460			(685		)	1,263
Net (loss) income from continuing operations	(1,848		)	(325		)	1,077			5,652			(65		)	(33		)	2,150			177
Basic (loss) earnings per common share from continuing operations (1)	$	(0.08	)	$	(0.01	)	$	0.05		$	0.26		$	—		$	—		$	0.10		$	0.01
Diluted (loss) earnings per common share from continuing operations (1)	$	(0.08	)	$	(0.01	)	$	0.05		$	0.26		$	—		$	—		$	0.10		$	0.01

(1) We calculate each quarter as a discrete period; the sum of the four quarters may not equal the calculated full-year amount.

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Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2017

Valuation and Qualifying Accounts [Abstract]

Schedule II - Valuation and Qualifying Accounts

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

(In thousands)

			Additions		Deductions
Description	Balance at Beginning of Year		Charge (Credit) to Costs and Expenses		Credit to the respective receivable (1)		Balance at End of Year
2017
Allowance for doubtful accounts receivable	$	799	724		(24	)	$	1,499
Allowance for doubtful employee advances and miscellaneous receivables	$	500	1,665		(1,873	)	$	292
Deferred tax valuation allowance	$	50,114	(15,338	)	—		$	34,776
2016
Allowance for doubtful accounts receivable	$	930	(129	)	(2	)	$	799
Allowance for doubtful employee advances and miscellaneous receivables	$	681	2,184		(2,365	)	$	500
Deferred tax valuation allowance	$	45,565	4,549		—		$	50,114
2015
Allowance for doubtful accounts receivable	$	2,243	(1,311	)	(2	)	$	930
Allowance for doubtful employee advances and miscellaneous receivables	$	692	1,294		(1,305	)	$	681
Deferred tax valuation allowance	$	52,002	(6,437	)	—		$	45,565

-----------------------------

(1) Write-offs net of recoveries.

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Summary of Significant Accounting Policies and Basis of Presentation (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Consolidation

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.

Basis of Presentation

Basis of Presentation

During the fourth quarter of 2015 we discontinued the Healthcare Claims Recovery Audit ("HCRA") business. The results of our continuing and discontinued operations for the years ended December 31, 2017, 2016 and 2015 are presented in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations.

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). Actual results could differ from those estimates.

Revenue Recognition

We base our revenue on specific contracts with our clients. These contracts generally specify: (a) time periods covered by the audit; (b) nature and extent of audit services we are to provide; (c) the client’s duties in assisting and cooperating with us; and (d) fees payable to us, generally expressed as a specified percentage of the amounts recovered by the client resulting from overpayment claims identified. Clients generally recover claims either by taking credits against outstanding payables or future purchases from the involved vendors, or receiving refund checks directly from those vendors. The manner in which a claim is recovered by a client often is dictated by industry practice. In addition, many clients establish specific procedural guidelines that we must satisfy prior to submitting claims for client approval, and these guidelines are unique to each client. For some services we provide, we earn our compensation in the form of a fixed fee, a fee per hour, or a fee per other unit of service.

We generally recognize revenue for a contractually specified percentage of amounts recovered when we have determined that our clients have received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors) and when we have met the following criteria: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectability is reasonably assured. In certain limited circumstances, we will invoice a client prior to meeting all four of these criteria; in such cases, we defer the revenue until we meet all of the criteria. Additionally, for purposes of determining appropriate timing of recognition and for internal control purposes, we rely on customary business practices and processes for documenting that we have met the criteria described in (a) through (d) above. Such customary business practices and processes may vary significantly by client. On occasion, it is possible that a transaction has met all of the revenue recognition criteria described above but we do not recognize revenue, unless we can otherwise determine that criteria (a) through (d) above have been met, because our customary business practices and processes specific to that client have not been completed.

Historically, there has been a certain amount of revenue with respect to which, even though we had met the requirements of our revenue recognition policy, our clients’ vendors ultimately have rejected the claims underlying the revenue. In that case, our clients may request a refund or offset of such amount even though we may have collected fees. We record any such refunds as a reduction of revenue. We provide refund liabilities for these reductions in the economic value previously received by our clients with respect to vendor claims we identified and for which we previously have recognized revenue. We compute an estimate of our refund liabilities at any given time based on actual historical refund data.

Billed Receivables

Billed receivables are stated at the amount we plan to collect and do not bear interest. We make ongoing estimates relating to the collectibility of our billed receivables and maintain a reserve for estimated losses resulting from the inability of our clients to meet their financial obligations to us. This reserve is primarily based on the level of past-due accounts based on the contractual terms of the receivables, our history of write-offs, and our relationships with, and the economic status of, our clients.

Unbilled Receivables

Unbilled receivables relate to claims for which clients have received economic value but for which we contractually have agreed not to submit an invoice to the clients at such time. Unbilled receivables arise when a portion of our fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after original invoice, and at other times a year after completion of the audit period), we invoice the unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge that we have earned this unbilled receivable at the time of the original invoice, but have agreed to defer billing the client for the related services.

We record periodic changes in unbilled receivables and refund liabilities as adjustments to revenue.

We derive a relatively small portion of revenue on a “fee-for-service” basis whereby billing is based upon a fixed fee, a fee per hour, or a fee per other unit of service. We recognize revenue for these types of services as we provide and invoice for them, and when criteria (a) through (d) as set forth above are met.

Cash and Cash Equivalents

Cash and Cash Equivalents

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

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 December 31, 2017, we had $13.6 million in bank debt outstanding. As of December 31, 2016, we had $3.6 million in bank debt outstanding. 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 $8.9 million of business acquisition obligations as of December 31, 2017, and $4.0 million as of December 31, 2016. Our business acquisition obligations represent the fair value of deferred consideration and earn-out payments estimated to be due as of the date for which we recorded these amounts. We determine the preliminary estimated fair values based on our projections of future revenue and profits or other factors used in the calculation of the ultimate payment to be made. The discount rate that we use to value the liability is based on specific business risk, cost of capital, and other factors. We consider these factors to be Level 3 inputs (significant unobservable inputs).

We state certain assets at fair value on a nonrecurring basis as required by accounting principles generally accepted in the United States of America. Generally, these assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.

Property and Equipment

Property and Equipment

We report property and equipment at cost or estimated fair value at acquisition date and depreciate them over their estimated useful lives using the straight-line method. Our useful lives for fixed assets are three years for computer laptops, four years for desktops, five years for IT server, storage and network equipment, five years for furniture and fixtures and three years for purchased software. We amortize leasehold improvements using the straight-line method over the shorter of the lease term or ten years. Depreciation expense from continuing operations was $4.6 million in 2017, $5.0 million in 2016 and $5.3 million in 2015.

We review the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset. No impairment charges were necessary in the three years ended December 31, 2017.

Software Development Costs

Software Development Costs

We capitalize a portion of the costs we incur related to our internal development of software that we use in our operations and amortize these costs using the straight-line method over the expected useful lives of three to seven years.

We also capitalize a portion of the costs we incur related to our internal development of software that we intend to market to others. We amortize these costs over the products’ estimated economic lives, which typically are three years, beginning when the underlying products are available for general release to clients. We review the carrying value of capitalized software development costs for impairment whenever events and circumstances indicate that the carrying value of the asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, we will recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset.

We consider software development activities to be research and development costs and expense them as incurred. However, we capitalize the costs incurred for the development of computer software that will be sold, leased, or otherwise marketed or that will be used in our operations beginning when technological feasibility has been established.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair market value of net identifiable assets of acquired businesses. We evaluate the recoverability of goodwill and other intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other, in the fourth quarter of each year or sooner if events or changes in circumstances indicate that the carrying amount may exceed its fair value. This evaluation includes a preliminary assessment of qualitative factors to determine if it is necessary to perform a two-step impairment testing process. The first step identifies potential impairments by comparing the fair value of the reporting unit with its carrying value, including goodwill. If the calculated fair value of a reporting unit exceeds the carrying value, goodwill is not impaired, and the second step is not necessary. If the carrying value of a reporting unit exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying value. If the fair value is less than the carrying value, we would record an impairment charge.

We are not required to calculate the fair value of our reporting units that hold goodwill unless we determine that it is more likely than not that the fair value of these reporting units is less than their carrying values. In this analysis, we consider a number of factors, including changes in our legal, business and regulatory climates, changes in competition or key personnel, macroeconomic factors impacting our company or our clients, our recent financial performance and expectations of future performance and other pertinent factors. Based on these analyses, we determined that it was not necessary for us to perform the two-step process. We last used independent business valuation professionals to estimate fair value in the fourth quarter of 2010 and determined that fair value exceeded carrying value for all relevant reporting units.

Direct Expenses and Deferred Costs

Direct Expenses and Deferred Costs

We typically expense direct expenses that we incur during the course of recovery audit and delivery of Adjacent Services offerings as incurred. For certain implementation and set-up costs associated with our “fee for service” revenue that we earn over an extended period of time, we defer the related direct and incremental costs and recognize them as expenses over the life of the underlying contract.

Income Taxes

Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. We measure deferred tax assets and liabilities using enacted tax rates we expect to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect on the deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date.

We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In determining the amount of valuation allowance to record, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods and the implementation of tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative losses in recent years are the most compelling form of negative evidence we considered in this determination.

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 jurisdictions.

Foreign Currency

Foreign Currency

We use the local currency as the functional currency in the majority of the countries in which we conduct business outside of the United States. We translate the assets and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange at the balance sheet date. We include the translation gains and losses as a separate component of shareholders’ equity and in the determination of comprehensive income (loss). We translate revenue and expenses in foreign currencies at the weighted average exchange rates for the period. We separately state the foreign currency transaction gains and losses on short-term intercompany balances in the Consolidated Statements of Operations. We include all other realized and unrealized foreign currency transaction gains (losses) in “Selling, general and administrative expenses.”

Earnings (Loss) Per Common Share

Earnings (Loss) Per Common Share

We compute basic earnings (loss) per common share by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. We compute diluted earnings (loss) per common share by dividing net income (loss) available to common shareholders by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of stock options using the treasury stock method, and (3) the dilutive effect of other potentially dilutive securities. We exclude the potential dilutive effect of stock options and convertible instruments from the determination of diluted earnings (loss) per common share if the effect of including them would be antidilutive.

Stock-Based Compensation

Stock-Based Compensation

We account for awards of equity instruments issued to employees and directors under the fair value method of accounting and recognize such amounts in our Consolidated Statements of Operations. We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our Consolidated Statements of Operations using the straight-line method over the service period over which we expect the awards to vest. We recognize compensation costs for awards with performance conditions based on the probable outcome of the performance conditions. We accrue compensation cost if we believe it is probable that the performance condition(s) will be achieved and do not accrue compensation cost if we believe it is not probable that the performance condition(s) will be achieved. In the event that it becomes probable that performance condition(s) will no longer be achieved, we reverse all of the previously recognized compensation expense in the period such a determination is made.

We estimate the fair value of all time-vested options as of the date of grant using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility, which we calculate based on the historical volatility of our common stock. We use a risk-free interest rate, based on the U.S. Treasury instruments in effect at the time of the grant, for the period comparable to the expected term of the option. We use the “simplified” method in estimating the expected term of options as we have concluded that our historical share option exercise experience is a less than reasonable basis upon which to estimate the expected term for our grants.

We estimate the fair value of nonvested stock awards (restricted stock and restricted stock units) as being equal to the market value of the common stock on the date of the award. We classify our share-based payments as either liability-classified awards or as equity-classified awards. We remeasure liability-classified awards to fair value at each balance sheet date until the award is settled. We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. We have classified our share-based payments which are settled in our common stock as equity-classified awards and our share-based payments that are settled in cash as liability-classified awards. Compensation costs related to equity-classified awards generally are equal to the fair value of the award at grant-date amortized over the vesting period of the award. The liability for liability-classified awards generally is equal to the fair value of the award as of the balance sheet date multiplied by the percentage vested at the time. We record the change in the liability amount from one balance sheet date to another to compensation expense.

Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

Consolidated comprehensive income (loss) consists of consolidated net income (loss) and foreign currency translation adjustments. We present the calculation of consolidated comprehensive income (loss) in the accompanying Consolidated Statements of Comprehensive Income (Loss). No amounts have been reclassified out of Accumulated Other Comprehensive Income during the periods presented in our consolidated financial statements.

Segment Reporting

Segment Reporting

We report our operating segment information in three segments: Recovery Audit Services – Americas; Recovery Audit Services – Europe/Asia-Pacific and Adjacent Services. We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to our three operating segments in Corporate Support. Our business segments reflect the internal reporting that our Chief Executive Officer, who is our chief operating decision maker, uses for the purpose of making decisions about allocating resources and assessing performance. Our management, including our Chief Executive Officer, uses what we internally refer to as “Adjusted EBITDA” as the primary measure of profit or loss for purposes of assessing the operating performance of all operating segments. We define Adjusted EBITDA as earnings from continuing operations before interest, taxes, depreciation and amortization (“EBITDA”) as adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period.

EBITDA and Adjusted EBITDA are not financial measures determined in accordance with GAAP. Such non-GAAP financial measures do not measure the profit or loss of the reportable segments in accordance with GAAP. Given that we use Adjusted EBITDA as our primary measure of segment performance, GAAP rules on segment reporting require that we include this non-GAAP measure in our discussion of our operating segments. We also must reconcile Adjusted EBITDA to our operating results presented on a GAAP basis. We provide this reconciliation in Note 2 to these consolidated financial statements along with other information about our reportable segments. We do not intend the reconciling items to be, nor should they be, interpreted as non-recurring or extraordinary, or in any manner be deemed as adjustments made in accordance with GAAP. Because Adjusted EBITDA is not a financial measure determined in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies.

Loss Contingencies

Loss Contingencies

Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company, but which will only be determined and resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss is likely to occur and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not accrued or disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Legal costs relating to loss contingencies are expensed as incurred.

Reclassification of Prior Year Balance Sheet

Reclassification of Prior Year Balance Sheet

Certain reclassifications have been made in the prior year in order to conform to the current year presentation.

Impact of Recently Issued Accounting Standards, Adopted by the Company in 2017, and Accounting Standards Not Yet Adopted

Impact of Recently Issued Accounting Standards

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

Adopted by the Company in 2017

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 became effective for the Company beginning January 1, 2017. The Company has concluded that the early adoption of this standard, which is permitted, had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

FASB ASC Update No. 2016-09 - In March 2016, the FASB issued Accounting Standards Update 2016-09, Stock Compensation (Topic 718). The standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The standard also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the standard allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The standard became effective for the Company beginning January 1, 2017. The Company has concluded that the adoption of this standard had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

FASB ASC Update No. 2016-05 - In March 2016, the FASB issued Accounting Standards Update 2016-05, Derivatives and Hedging (Topic 815). The standard clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The standard became effective for the Company beginning January 1, 2017. The Company has concluded that the early adoption of this standard, which is permitted, had no material impact on its consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

Accounting Standards Not Yet Adopted

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.

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Operating Segments and Related Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Schedule of Discontinued Operations Information

Discontinued operations information for the years ended December 31, 2017, 2016 and 2015 (in thousands) is as follows: 

Results of Discontinued Operations (in thousands)	Years Ended December 31,
	2017			2016			2015
Revenue, net	$	—		$	(14	)	$	1,266
Cost of sales	1,350			1,112			4,743
Selling, general and administrative expense	14			184			1,253
Depreciation and amortization	8			14			35
Pretax loss from discontinued operations	(1,372		)	(1,324		)	(4,765		)
Income tax expense	—			—			—
Net loss from discontinued operations	$	(1,372	)	$	(1,324	)	$	(4,765	)

Schedule of Segment Information

Segment information for the years ended December 31, 2017, 2016 and 2015 (in thousands) is as follows:

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Corporate Support			Total
2017
Revenue, net	$	113,122		$	44,372		$	4,126		$	—		$	161,620
Net income from continuing operations													$	4,556
Income tax expense													2,962
Interest expense, net													1,539
EBIT	$	29,163		$	11,700		$	(7,942	)	$	(23,864	)	9,057
Depreciation of property and equipment	3,165			599			805			—			4,569
Amortization of intangible assets	1,919			142			1,573			—			3,634
EBITDA	34,247			12,441			(5,564		)	(23,864		)	17,260
Foreign currency transaction (gains) losses on short-term intercompany balances	(249		)	(1,769		)	(9		)	(163		)	(2,190		)
Acquisition-related adjustments	—			—			—			(2,283		)	(2,283		)
Transformation severance and related expenses	313			655			320			378			1,666
Other (income) loss	751			184			(195		)	(900		)	(160		)
Stock-based compensation	—			—			—			7,052			7,052
Adjusted EBITDA	$	35,062		$	11,511		$	(5,448	)	$	(19,780	)	$	21,345
Capital expenditures	$	2,389		$	2,383		$	1,335		$	3,248		$	9,355
Allocated assets	$	65,397		$	22,474		$	9,486		$	—		$	97,357
Unallocated assets:
Cash and cash equivalents	—			—			—			18,823			18,823
Restricted cash	—			—			—			51			51
Deferred income taxes	—			—			—			1,538			1,538
Prepaid expenses and other assets	—			—			—			910			910
Discontinued operations	—			—			—			1,539			1,539
Total assets	$	65,397		$	22,474		$	9,486		$	22,861		$	120,218

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
2016
Revenue, net	$	99,861	$	37,335	$	3,648		$	—		$	140,844
Net income from continuing operations											$	2,229
Income tax expense											1,242
Interest income, net											(153		)
EBIT	$	25,476	$	6,455	$	(4,617	)	$	(23,996	)	3,318
Depreciation of property and equipment	3,750		529		754			—			5,033
Amortization of intangible assets	1,477		—		355			—			1,832
EBITDA	30,703		6,984		(3,508		)	(23,996		)	10,183
Foreign currency transaction losses (gains) on short-term intercompany balances	31		107		17			(71		)	84
Transformation severance and related expenses	517		312		258			242			1,329
Other loss	—		—		(121		)	—			(121		)
Stock-based compensation	—		—		—			5,123			5,123
Adjusted EBITDA	$	31,251	$	7,403	$	(3,354	)	$	(18,702	)	$	16,598
Capital expenditures	$	4,393	$	600	$	894		$	—		$	5,887
Allocated assets	$	47,690	$	14,813	$	10,532		$	—		$	73,035
Unallocated assets:
Cash and cash equivalents	—		—		—			15,723			15,723
Restricted cash	—		—		—			47			47
Deferred income taxes	—		—		—			2,269			2,269
Prepaid expenses and other assets	—		—		—			800			800
Discontinued operations								1,600			1,600
Total assets	$	47,690	$	14,813	$	10,532		$	20,439		$	93,474

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Corporate Support			Total
2015
Revenue, net	$	97,009	$	36,264	$	5,029		$	—		$	138,302
Net loss from continuing operations											$	1,539
Income tax expense											369
Interest income, net											(190		)
EBIT	$	22,539	$	2,573	$	(5,131	)	$	(18,263	)	1,718
Depreciation of property and equipment	4,036		647		634			—			5,317
Amortization of intangible assets	1,728		600		130			—			2,458
EBITDA	28,303		3,820		(4,367		)	(18,263		)	9,493
Foreign currency transaction (gains) losses on short-term intercompany balances	807		1,533		12			(187		)	2,165
Transformation severance and related expenses	322		589		30			308			1,249
Other loss	—		—		1,191			—			1,191
Stock-based compensation	—		—		—			3,926			3,926
Adjusted EBITDA	$	29,432	$	5,942	$	(3,134	)	$	(14,216	)	$	18,024
Capital expenditures	$	3,669	$	543	$	270		$	—		$	4,482
Allocated assets	$	44,588	$	13,922	$	1,030		$	—		$	59,540
Unallocated assets:
Cash and cash equivalents	—		—		—			15,122			15,122
Restricted cash	—		—		—			48			48
Deferred loan cost	—		—		—			80			80
Deferred income taxes	—		—		—			1,361			1,361
Prepaid expenses and other assets	—		—		—			2,465			2,465
Discontinued operations	—		—		—			1,775			1,775
Total assets	$	44,588	$	13,922	$	1,030		$	20,851		$	80,391

The following table presents revenue by country based on the location of clients served (in thousands):

	Years Ended December 31,
	2017		2016		2015
United States	$	93,447	$	80,857	$	80,484
United Kingdom	23,408		17,501		19,540
Canada	14,375		14,531		12,388
Australia	8,732		7,354		6,111
France	5,987		6,934		6,186
Mexico	5,385		4,900		4,340
Brazil	2,053		1,169		1,223
Spain	1,127		964		1,019
Ireland	929		337		513
New Zealand	899		979		596
Hong Kong	889		824		864
Colombia	709		583		610
Thailand	699		654		933
Other	2,981		3,257		3,495
	$	161,620	$	140,844	$	138,302

The following table presents long-lived assets by country based on the location of the asset (in thousands):

	December 31,
	2017		2016
United States	$	47,371	$	34,429
UK	5,510		2,047
All Other	1,125		1,074
	$	54,006	$	37,550

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Earnings (Loss) Per Common Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Schedule of 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 (in thousands, except per share data):

	Years Ended December 31,
Basic earnings (loss) per common share:	2017				2016			2015
Numerator:
Net income from continuing operations	$	4,556		2	$	2,229		$	1,539
Net loss from discontinued operations	$	(1,372	)		$	(1,324	)	$	(4,765	)
Denominator:
Weighted-average common shares outstanding	21,937				21,969			25,868
Basic earnings per common share from continuing operations	$	0.21			$	0.10		$	0.06
Basic loss per common share from discontinued operations	$	(0.06	)		$	(0.06	)	$	(0.18	)

	Years Ended December 31,
Diluted earnings (loss) per common share:	2017			2016			2015
Numerator:
Net income from continuing operations	$	4,556		$	2,229		$	1,539
Net loss from discontinued operations	$	(1,372	)	$	(1,324	)	$	(4,765	)
Denominator:
Weighted-average common shares outstanding	21,937			21,969			25,868
Effect of dilutive securities from stock-based compensation plans	174			47			36
Denominator for diluted earnings per common share	22,111			22,016			25,904
Diluted earnings per common share from continuing operations	$	0.21		$	0.10		$	0.06
Diluted loss per common share from discontinued operations	$	(0.06	)	$	(0.06	)	$	(0.18	)

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill by Reportable Segment

Goodwill by reportable segments during 2017 and 2016 was as follows (in thousands):

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services		Total
Balance, January 1, 2016	$	10,755	$	813		$	242	$	11,810
Goodwill recorded in connection with business combinations	—		—			2,146		2,146
Foreign currency translation	—		(133		)	—		(133		)
Balance, December 31, 2016	10,755		680			2,388		13,823
Goodwill recorded in connection with business combinations	2,685		869			140		3,694
Foreign currency translation	—		131			—		131
Balance, December 31, 2017	$	13,440	$	1,680		$	2,528	$	17,648

Schedule of Changes in Noncurrent Intangible Assets

Changes in noncurrent intangible assets during 2017 and 2016 were as follows (in thousands):

	Customer Relationships			Trademarks			Non- compete Agreements			Software			Trade Names			Total
Gross carrying amount:
Balance, January 1, 2016	$	37,784		$	931		$	1,477		$	—		$	2,200		$	42,392
Acquisition of Lavante Assets	—			—			—			6,178			—			6,178
FX adjustments and other	(1,211		)	(78		)	(155		)	—			—			(1,444		)
Balance, December 31, 2016	36,573			853			1,322			6,178			2,200			47,126
Acquisition of C&CA Assets	9,556			135			1,232			—			—			10,923
FX adjustments and other	777			38			75			—			—			890
Balance, December 31, 2017	$	46,906		$	1,026		$	2,629		$	6,178		$	2,200		$	58,939
Accumulated amortization:
Balance, January 1, 2016	$	(31,246	)	$	(881	)	$	(1,381	)	$	—		$	(2,200	)	$	(35,708	)
Amortization expense	(1,414		)	(50		)	(96		)	(272		)	—			(1,832		)
FX adjustments and other	1,179			78			155			—			—			1,412
Balance, December 31, 2016	(31,481		)	(853		)	(1,322		)	(272		)	(2,200		)	(36,128		)
Amortization expense	(1,796		)	(22		)	(204		)	(1,612		)	—			(3,634		)
FX adjustments and other	(585		)	(38		)	(76		)	—			—			(699		)
Balance, December 31, 2017	$	(33,862	)	$	(913	)	$	(1,602	)	$	(1,884	)	$	(2,200	)	$	(40,461	)
Net carrying amount:
Balance, December 31, 2016	$	5,092		$	—		$	—		$	5,906		$	—		$	10,998
Balance, December 31, 2017	$	13,044		$	113		$	1,027		$	4,294		$	—		$	18,478
Estimated useful life (years)	6-15 years			5 years			1-5 years			4 years			4-5 years

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Debt (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Long-term debt as of December 31, 2017 and 2016 consists of the following (in thousands):

	As of December 31
	2017							2016
	Gross		DFC (1)			Net		Gross		DFC		Net
Revolving Facility	$	13,600	$	(131	)	$	13,469	$	3,600	$	—	$	3,600
Capital lease obligations	105		—			105		—		—		—
Total long term debt	13,705		(131		)	13,574		3,600		—		3,600
Less: Current portion of long-term debt	48		—			48		3,600		—		3,600
Long-term debt, excluding current portion	$	13,657	$	(131	)	$	13,526	$	—	$	—	$	—

(1) DFC refers to deferred financing costs related to the Company's long-term debt.

Schedule of Debt

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:

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

Schedule of Future Minimum Lease Payments for Capital Leases

The following is a summary of the combined principal maturities of all long-term debt and principal payments to be made under the Company’s capital lease agreements for each of the fiscal years presented in the table below (in thousands):

Year Ended December 31
2018	$	73
2019	13,625
2020	7
Total	$	13,705

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Lease Commitments (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments

Future minimum lease payments under noncancelable operating leases including the amended lease for our principal executive offices, are as follows (in thousands):

Year Ending December 31,	Gross		Sublease Income			Amount
2018	$	3,363	$	(69	)	$	3,294
2019	2,981		(72		)	2,909
2020	2,527		(74		)	2,453
2021	2,116		(77		)	2,039
2022	440		—			440
Total payments	$	11,427	$	(292	)	$	11,135

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Schedule of Income (Loss) Before Income Taxes

Income (loss) before income taxes from continuing operations relate to the following jurisdictions (in thousands):

	Years Ended December 31,
	2017			2016			2015
United States	$	(6,502	)	$	(5,306	)	$	(244	)
Foreign	14,020			8,777			2,152
	$	7,518		$	3,471		$	1,908

Schedule of Provision for Income Taxes

The provision for income taxes for continuing operations consists of the following (in thousands):

	Years Ended December 31,
	2017			2016			2015
Current:
Federal	$	—		$	—		$	—
State	1			—			(13		)
Foreign	2,230			2,103			1,494
	2,231			2,103			1,481
Deferred:
Federal	(155		)	—			—
State	—			—			—
Foreign	886			(861		)	(1,112		)
	731			(861		)	(1,112		)
Total	$	2,962		$	1,242		$	369

Schedule of Significant Differences Between the U.S. Federal Statutory Tax Rate and the Effective Income Tax Expense

The significant differences between the U.S. federal statutory tax rate and the Company’s effective income tax expense for earnings (in thousands) are as follows:

	Years Ended December 31,
	2017			2016			2015
Statutory federal income tax rate	$	2,631		$	1,180		$	649
State income taxes, net of federal effect	(62		)	(173		)	(240		)
Net operating loss limitation	2,975			—			—
Deferred tax true-up	—			(4,103		)	8,078
Change in deferred tax asset valuation allowance	(15,338		)	4,877			(6,729		)
Statutory rate change	13,850			—			—
Foreign tax rate differential	(899		)	(712		)	(223		)
Compensation deduction limitation	—			113			(1,201		)
Other, net	(195		)	60			35
Total	$	2,962		$	1,242		$	369

Schedule of the Tax Effects of Temporary Differences and Carry-Forwards That Give Rise to Deferred Tax Assets and Liabilities

The tax effects of temporary differences and carry-forwards that give rise to deferred tax assets and liabilities consist of the following (in thousands):

	Years Ended December 31,
	2017		2016
Deferred income tax assets:
Accounts payable and accrued expenses	$	1,215	$	737
Accrued payroll and related expenses	1,691		3,062
Stock-based compensation expense	3,508		3,531
Depreciation of property and equipment	1,711		2,579
Capitalized Software	—		—
Non-compete agreements	—		—
Unbilled receivables and refund liabilities	1,811		2,216
Operating loss carry-forwards of foreign subsidiary	11,000		10,907
Federal operating loss carry-forwards	17,161		33,087
State operating loss carry-forwards	3,591		3,919
Other	376		1,181
Gross deferred tax assets	42,064		61,219
Less valuation allowance	34,776		50,114
Gross deferred tax assets net of valuation allowance	7,288		11,105
Deferred income tax liabilities:
Intangible assets	1,987		2,299
Capitalized software	29		1,928
Other	3,734		4,609
Gross deferred tax liabilities	5,750		8,836
Net deferred tax assets	$	1,538	$	2,269

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits and Related Accrued Interest

A reconciliation of our beginning and ending amount of unrecognized tax benefits and related accrued interest thereon is as follows:

	Unrecognized Tax Benefits			Accrued Interest and Penalties
Balance at January 1, 2015	$	677		$	220
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	—			24
Decrease based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	$	(142	)	$	(42	)
Balance at December 31, 2015	$	535		$	202
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	—			11
Decreases based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	(38		)	(59		)
Balance at December 31, 2016	$	497		$	154
Additions based on tax positions related to the current year	—			—
Additions based on tax positions related to the prior years	116			19
Decreases based on payments made during the year	—			—
Decreases based on tax positions related to the prior years	(420		)	(145		)
Balance at December 31, 2017	$	193		$	28

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

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

Summary of Stock Option Awards Granted

The following table summarizes stock option awards granted during the years ended December 31, 2017, 2016, and 2015:

Grantee Type	# of Options Granted	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
2017
Director group	90,566	1 year or less	$	6.34	$	3.49
Director group (1)	35,000	3 years	$	6.25	$	3.50
CEO grant	500,000	4 years	$	7.35	$	2.36
Employee group	30,000	3 years	$	7.25	$	3.99
Employee inducement (2)	335,000	3 years	$	6.19	$	3.41
2016
Director group (3)	195,417	1 year or less	$	5.01	$	2.71
Director group(1)	35,000	3 years	$	4.80	$	2.66
Employee inducement (4)(5)	232,500	3 years	$	4.61	$	2.60
2015
Director group	249,273	1 year or less	$	4.49	$	2.44
Employee group	17,092	3 years	$	3.99	$	1.33
Employee inducement (6)	135,000	3 years	$	5.51	$	1.42

(1) The Company granted non-qualified stock options to one director in connection with the director joining the Company's board of directors.

(2) The Company granted non-qualified stock options outside its existing stock-based compensation plans to certain employees.

(3) Includes 20,417 non-qualified stock options granted to one director in connection with the director joining the Company's board of directors.

(4) The Company granted non-qualified stock options outside its existing stock-based compensation plans in 2016 in connection with an employee joining the Company.

(5) The Company granted non-qualified stock options outside its existing stock-based compensation plans in connection with the closing of the Lavante acquisition.

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

Summary of Nonvested Stock Awards Granted

The following table summarizes nonvested stock awards granted during the years ended December 31, 2017, 2016 and 2015:

Grantee Type	# of Stock Awards Granted	Vesting Period	Weighted Average Grant Date Fair Value
2017
Director group	51,179	1 year or less	$	6.35
Employee group (1)	641,751	3 years or less	$	6.31
Employee inducement (2)	100,000	3 years or less	$	6.33
2016
Employee group (3)	1,250,750	2 years	$	4.88
Employee inducement (4)	100,000	3 years	$	4.94
2015
Director group	4,273	1 year or less	$	4.02
Director group	17,092	3 years	$	3.99
Employee group (5)	2,493,333	3 years	$	3.99
Employee inducement (6)	10,000	3 years	$	5.29

(1) The Company granted nonvested performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards in the first quarter of 2017 to twelve executive officers totaling 458,000 units. During the second quarter of 2017, the Company issued 183,751 restricted stock awards and restricted stock units to key employees.

(2) The Company granted nonvested performance-based stock awards (restricted stock units) and restricted stock awards in 2017 to two executive officers in connection with the employees joining the Company.

(3) The Company granted nonvested performance-based stock awards (restricted stock units) in 2016 to five executive officers, and certain other key employees.

(4) The Company granted nonvested performance-based stock awards (restricted stock units) outside its existing stock-based compensation plans in 2016 to three employees in connection with the employees joining the Company.

(5) The Company granted nonvested performance-based stock awards (restricted stock units) in the first quarter of 2015 to eight executive officers totaling 1,325,000 units. During the third and fourth quarters of 2015, the Company issued 1,168,333 units to key employees.

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

Summary of PBUs Granted

The following table summarizes the PBUs granted during the years ended December 31, 2017, 2016 and 2015:

	Total PBUs Granted	PBUs to be Settled in Common Stock (1)	PBUs to be Settled in Cash (2)
2017	333,800	333,800	—
2016	1,350,750	560,670	790,080
2015(3)	2,493,333	954,583	1,538,750

(1) Represents the number of PBUs to be settled in common stock at the target performance level.

(2) Represents the number of PBUs to be settled in cash at the target performance level.

(3) PBUs were forfeited.

Summary of Option Activity

A summary of option activity as of December 31, 2017, and changes during the year then ended is presented below:

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	4.30 years	$	1,204
Granted	990,566		6.82
Exercised	(225,043	)	5.23			$	299
Forfeited	(475,504	)	6.01
Expired	(311,111	)	6.18
Outstanding at December 31, 2017	3,399,293		$	6.54	4.05 years	$	2,367
Exercisable at December 31, 2017	2,290,967		$	6.52	3.20 years	$	1,654

Schedule of Assumptions Used in Black-Scholes Valuation Models

For time-vested option grants that resulted in compensation expense recognition, we used the following assumptions in our Black-Scholes valuation models:

	Years Ended December 31,
	2017	2016	2015
Risk-free interest rates (1)	1.38% - 1.96%	0.58% - 1.20%	0.80% - 1.59%
Dividend yields (2)	—%	—%	—%
Volatility factor of expected market price (3)	.540 - .749	.391 - .779	.323 - .733
Weighted-average expected term of options (4)	2.2 - 4 years	1.3 - 4.5 years	3.1 - 5 years
Forfeiture rate (5)	—%	—%	—%

(1) The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding to the expected term of the options.

(2) The Company has not historically declared dividends.

(3) The expected volatility is based on the historical volatility of the Company's stock.

(4) The expected term represents the weighted average period of time that the stock options are expected to be outstanding, giving consideration to the vesting schedules.

The Company accounts for forfeitures as they occur rather than estimating expected forfeitures.

Summary of Nonvested Stock Awards Activity

A summary of nonvested stock awards (including restricted stock, restricted stock units and performance-based restricted stock units) activity as of December 31, 2017 and changes during the year then ended is presented below:

Nonvested Stock	Shares		Weighted Average Grant Date Fair Value (Per Share)
Nonvested at January 1, 2017	3,893,050		$	4.37
Granted	792,930		6.32
Vested	(45,002	)	6.24
Forfeited	(2,524,282	)	4.09
Nonvested at December 31, 2017	2,116,696		$	5.36

Schedule of Unrecognized Compensation Expense Related to Nonvested Stock-Based Compensation

Total unrecognized compensation expense related to nonvested stock-based compensation as of December 31, 2017 is as follows (dollars in thousands):

	Stock				Restricted		Restricted
	Options		SAR		Stock Awards		Stock Units		Total
Unrecognized compensation expense	$	2,565	$	77	$	1,752	$	1,628	$	6,022
Weighted-average remaining recognition period (in years)	2.9		0.3		2.3		1.4		2.3

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Business Acquisitions and Divestitures (Tables)

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Summary of the allocation of the aggregate fair values of the assets acquired and purchase price for the associate migrations

Our purchase price allocation was as follows (in thousands):

Cash and cash equivalents	$	28
Accounts receivable, net	207
Other current assets	92
Intangible assets	6,178
Goodwill	2,286
Fixed assets, net	98
Accounts payable	(121		)
Deferred revenue	(370		)
Other current liabilities	(757		)
Total consideration paid	$	7,641
Contingent consideration(1)	(3,832		)
Total cash paid	$	3,809

⁽¹⁾ In the fourth quarter of 2017, we reduced the earnout liability by $2.1 million. At December 31, 2017, the balance was $2.0 million.

Our purchase price allocation was as follows (in thousands):

Accounts receivable, net	$	1,621
Commissions receivable	48
Prepaid expenses	109
Other current assets, net	6
Intangible assets	10,923
Goodwill	3,554
Fixed assets, net	323
Accounts payable	(125		)
Accrued commissions	(537		)
Total consideration paid	$	15,922
Contingent consideration	(5,954		)
Total cash paid	$	9,968

Schedule of finite-lived intangible assets acquired as part of business combination

The intangible assets acquired were as follows (in thousands):

	Fair Value		Remaining useful life
Customer relationships	$	9,556	14 years
Non-compete	1,232		4 years
Trademarks	135		4 years
	$	10,923

The intangible assets acquired were as follows (in thousands):

	Fair Value		Remaining useful life
Trademarks	$	163	4 years
Patents	114		1 year
Software	5,901		4 years
Total intangible assets	$	6,178

Business acquisition, revenues and loss from continuing operations since acquisition and pro forma information

Our unaudited pro forma results presented below, including Lavante, for the years ended December 31, 2016 and 2015 are presented as if the acquisition had been completed on January 1, 2015. 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 Lavante acquisition been completed on January 1, 2015. In addition, the unaudited pro forma information does not purport to project future operating results.

	Year Ended December 31,
(in thousands)	2016		2015
Unaudited pro forma revenue	143,198		140,994
Unaudited pro forma net (loss) income from continuing operations	(3,418	)	(5,516	)

Our unaudited pro forma results presented below, including C&CA, for the years ended December 31, 2017 and 2016 are presented as if the acquisition 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 information does not purport to project future operating results.

	Year Ended December 31,
(in thousands)	2017	2016
Unaudited pro forma revenue	162,459	155,626
Unaudited pro forma net income from continuing operations	3,886	5,365

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Quarterly Results (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Quarterly results (unaudited)

The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. The quarterly results are updated for continuing operations.

	2017 Quarter Ended												2016 Quarter Ended
	Mar. 31			June 30			Sept. 30			Dec. 31			Mar. 31			June 30			Sept. 30			Dec. 31
	(In thousands, except per share data)
Revenue	$	33,569		$	38,510		$	42,467		$	47,074		$	31,233		$	35,291		$	35,137		$	39,183
Operating expenses:
Cost of revenue	23,026			25,605			26,675			26,746			21,646			23,431			22,367			23,855
Selling, general and administrative expenses	10,536			11,424			12,189			12,792			8,848			9,620			9,883			11,048
Depreciation of property and equipment	1,220			1,109			1,133			1,107			1,232			1,216			1,376			1,209
Amortization of intangible assets	722			722			722			1,468			394			395			393			650
Acquisition-related adjustments	—			—			—			(2,283		)	—			—			—			—
Total operating expenses	35,504			38,860			40,719			39,830			32,120			34,662			34,019			36,762
Operating (loss) income from continuing operations	(1,935		)	(350		)	1,748			7,244			(887		)	629			1,118			2,421
Foreign currency transaction (gains) losses on short-term intercompany balances	(552		)	(957		)	(418		)	(263		)	(1,007		)	196			(165		)	1,060
Interest expense (income), net	37			48			142			1,312			(29		)	(12		)	(14		)	(98		)
Other (income) loss	(199		)	5			17			17			10			18			(168		)	19
(Loss) income from continuing operations before income taxes	(1,221		)	554			2,007			6,178			139			427			1,465			1,440
Income tax expense (benefit)	627			879			930			526			204			460			(685		)	1,263
Net (loss) income from continuing operations	(1,848		)	(325		)	1,077			5,652			(65		)	(33		)	2,150			177
Basic (loss) earnings per common share from continuing operations (1)	$	(0.08	)	$	(0.01	)	$	0.05		$	0.26		$	—		$	—		$	0.10		$	0.01
Diluted (loss) earnings per common share from continuing operations (1)	$	(0.08	)	$	(0.01	)	$	0.05		$	0.26		$	—		$	—		$	0.10		$	0.01

(1) We calculate each quarter as a discrete period; the sum of the four quarters may not equal the calculated full-year amount.

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Summary of Significant Accounting Policies and Basis of Presentation - Description of Business and Basis of Presentation (Details)	Dec. 31, 2017 country
Accounting Policies [Abstract]
Number of countries	30

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Summary of Significant Accounting Policies and Basis of Presentation - Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	$ 18,823	$ 15,723	$ 15,122	$ 25,735
Short-term investments	1,900	2,200
Banks outside of the United States, primarily in Brazil and Canada
Cash and Cash Equivalents [Line Items]
Short-term investments	1,900	$ 2,200
United States
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	5,000
Canada
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	1,800
Other
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	$ 12,000

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Summary of Significant Accounting Policies and Basis of Presentation - Fair Value of Financial Instruments (Details) - Level 3 - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Bank debt
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Bank debt outstanding	$ 13.6	$ 3.6
Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Business acquisition obligations	$ 8.9	$ 4.0

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Summary of Significant Accounting Policies and Basis of Presentation - Property and Equipment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Depreciation expense from continuing operations	$ 4,600,000	$ 5,000,000	$ 5,300,000
Impairment charges	$ 0	$ 0	$ 0
Computer laptops
Property, Plant and Equipment [Line Items]
Useful life	3 years
Desktops
Property, Plant and Equipment [Line Items]
Useful life	4 years
IT server, storage and network equipment
Property, Plant and Equipment [Line Items]
Useful life	5 years
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Useful life	5 years
Purchased software
Property, Plant and Equipment [Line Items]
Useful life	3 years
Leasehold improvements
Property, Plant and Equipment [Line Items]
Useful life	10 years

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Summary of Significant Accounting Policies and Basis of Presentation - Software Development Costs (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Research and development costs from continuing operations, including the amortization of amounts previously capitalized	$ 2.2	$ 3.5	$ 3.0
Software Developed for Internal Use | Minimum
Finite-Lived Intangible Assets [Line Items]
Expected useful life	3 years
Software Developed for Internal Use | Maximum
Finite-Lived Intangible Assets [Line Items]
Expected useful life	7 years
Software Development
Finite-Lived Intangible Assets [Line Items]
Expected useful life	3 years

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Summary of Significant Accounting Policies and Basis of Presentation - Goodwill and Intangible Assets (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Impairment charges	$ 0	$ 0	$ 0

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Summary of Significant Accounting Policies and Basis of Presentation - Segment Reporting (Details)	12 Months Ended
	Dec. 31, 2017 segment
Accounting Policies [Abstract]
Number of segments	3

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Operating Segments and Related Information - Narrative (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) segment	Dec. 31, 2016
Segment Reporting [Abstract]
Number of reportable segments | segment	3
HCRA
Revenue, Major Customer [Line Items]
Accrued liabilities | $	$ 2.9
Revenue from continuing operations | The Kroger Co.
Revenue, Major Customer [Line Items]
Concentration risk (as a percent)	12.00%	11.00%

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Operating Segments and Related Information - Schedule of Discontinued Operations Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting [Abstract]
Revenue, net	$ 0	$ (14)	$ 1,266
Cost of sales	1,350	1,112	4,743
Selling, general and administrative expense	14	184	1,253
Depreciation and amortization	8	14	35
Pretax loss from discontinued operations	(1,372)	(1,324)	(4,765)
Income tax expense	0	0	0
Net loss from discontinued operations	$ (1,372)	$ (1,324)	$ (4,765)

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Operating Segments and Related Information - Schedule of Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment information
Revenue, net	$ 47,074	$ 42,467	$ 38,510	$ 33,569	$ 39,183	$ 35,137	$ 35,291	$ 31,233	$ 161,620	$ 140,844	$ 138,302
Net income from continuing operations									4,556	2,229	1,539
Income tax expense	526	930	879	627	1,263	(685)	460	204	2,962	1,242	369
Interest expense, net	1,312	142	48	37	(98)	(14)	(12)	(29)	1,539	(153)	(190)
EBIT									9,057	3,318	1,718
Depreciation of property and equipment	1,107	1,133	1,109	1,220	1,209	1,376	1,216	1,232	4,569	5,033	5,317
Amortization of intangible assets	1,468	722	722	722	650	393	395	394	3,634	1,832	2,458
EBITDA									17,260	10,183	9,493
Foreign currency transaction (gains) losses on short-term intercompany balances	(263)	(418)	(957)	(552)	1,060	(165)	196	(1,007)	(2,190)	84	2,165
Acquisition-related charges									(2,283)
Transformation severance and related expenses									1,666	1,329	1,249
Other (income) loss	17	$ 17	$ 5	$ (199)	19	$ (168)	$ 18	$ 10	(160)	(121)	1,191
Stock-based compensation									7,052	5,123	3,926
Adjusted EBITDA									21,345	16,598	18,024
Capital expenditures									9,355	5,887	4,482
Allocated assets	97,357				73,035				97,357	73,035	59,540
Cash and cash equivalents	18,823				15,723				18,823	15,723	15,122	$ 25,735
Restricted cash	51				47				51	47
Deferred loan cost	131				0				131	0	80
Deferred income taxes	1,538				2,269				1,538	2,269
Total assets	120,218				93,474				120,218	93,474	80,391
Long-lived assets	54,006				37,550				54,006	37,550
Continuing operations
Segment information
Cash and cash equivalents	18,823				15,723				18,823	15,723	15,122
Restricted cash	51				47				51	47	48
Deferred income taxes	1,538				2,269				1,538	2,269	1,361
Prepaid expenses and other assets	910				800				910	800	2,465
Discontinued operations
Segment information
Discontinued operations	1,539				1,600				1,539	1,600	1,775
United States
Segment information
Revenue, net									93,447	80,857	80,484
Cash and cash equivalents	5,000								5,000
Long-lived assets	47,371				34,429				47,371	34,429
United Kingdom
Segment information
Revenue, net									23,408	17,501	19,540
Long-lived assets	5,510				2,047				5,510	2,047
Canada
Segment information
Revenue, net									14,375	14,531	12,388
Cash and cash equivalents	1,800								1,800
Australia
Segment information
Revenue, net									8,732	7,354	6,111
France
Segment information
Revenue, net									5,987	6,934	6,186
Mexico
Segment information
Revenue, net									5,385	4,900	4,340
Brazil
Segment information
Revenue, net									2,053	1,169	1,223
Spain
Segment information
Revenue, net									1,127	964	1,019
Ireland
Segment information
Revenue, net									929	337	513
New Zealand
Segment information
Revenue, net									899	979	596
Hong Kong
Segment information
Revenue, net									889	824	864
Colombia
Segment information
Revenue, net									709	583	610
Thailand
Segment information
Revenue, net									699	654	933
Other
Segment information
Revenue, net									2,981	3,257	3,495
Cash and cash equivalents	12,000								12,000
Other Segments [Member]
Segment information
Long-lived assets	1,125				1,074				1,125	1,074
Recovery Audit Services – Americas
Segment information
Revenue, net									113,122	99,861	97,009
EBIT									29,163	25,476	22,539
Depreciation of property and equipment									3,165	3,750	4,036
Amortization of intangible assets									1,919	1,477	1,728
EBITDA									34,247	30,703	28,303
Foreign currency transaction (gains) losses on short-term intercompany balances									(249)	31	807
Acquisition-related charges									0
Transformation severance and related expenses									313	517	322
Other (income) loss									751	0	0
Stock-based compensation									0	0	0
Adjusted EBITDA									35,062	31,251	29,432
Capital expenditures									2,389	4,393	3,669
Allocated assets	65,397				47,690				65,397	47,690	44,588
Total assets	65,397				47,690				65,397	47,690	44,588
Recovery Audit Services – Europe/Asia- Pacific
Segment information
Revenue, net									44,372	37,335	36,264
EBIT									11,700	6,455	2,573
Depreciation of property and equipment									599	529	647
Amortization of intangible assets									142	0	600
EBITDA									12,441	6,984	3,820
Foreign currency transaction (gains) losses on short-term intercompany balances									(1,769)	107	1,533
Acquisition-related charges									0
Transformation severance and related expenses									655	312	589
Other (income) loss									184	0	0
Stock-based compensation									0	0	0
Adjusted EBITDA									11,511	7,403	5,942
Capital expenditures									2,383	600	543
Allocated assets	22,474				14,813				22,474	14,813	13,922
Total assets	22,474				14,813				22,474	14,813	13,922
Adjacent Services
Segment information
Revenue, net									4,126	3,648	5,029
EBIT									(7,942)	(4,617)	(5,131)
Depreciation of property and equipment									805	754	634
Amortization of intangible assets									1,573	355	130
EBITDA									(5,564)	(3,508)	(4,367)
Foreign currency transaction (gains) losses on short-term intercompany balances									(9)	17	12
Acquisition-related charges									0
Transformation severance and related expenses									320	258	30
Other (income) loss									(195)	(121)	1,191
Stock-based compensation									0	0	0
Adjusted EBITDA									(5,448)	(3,354)	(3,134)
Capital expenditures									1,335	894	270
Allocated assets	9,486				10,532				9,486	10,532	1,030
Total assets	9,486				10,532				9,486	10,532	1,030
Corporate Support
Segment information
Revenue, net									0	0	0
EBIT									(23,864)	(23,996)	(18,263)
Depreciation of property and equipment									0	0	0
Amortization of intangible assets									0	0	0
EBITDA									(23,864)	(23,996)	(18,263)
Foreign currency transaction (gains) losses on short-term intercompany balances									(163)	(71)	(187)
Acquisition-related charges									(2,283)
Transformation severance and related expenses									378	242	308
Other (income) loss									(900)	0	0
Stock-based compensation									7,052	5,123	3,926
Adjusted EBITDA									(19,780)	(18,702)	(14,216)
Capital expenditures									3,248	0	0
Allocated assets	0				0				0	0	0
Total assets	22,861				20,439				22,861	20,439	20,851
Corporate Support | Continuing operations
Segment information
Cash and cash equivalents	18,823				15,723				18,823	15,723	15,122
Restricted cash	51				47				51	47	48
Deferred loan cost											80
Deferred income taxes	1,538				2,269				1,538	2,269	1,361
Prepaid expenses and other assets	910								910		2,465
Corporate Support | Discontinued operations
Segment information
Prepaid expenses and other assets					800					800
Discontinued operations	$ 1,539				$ 1,600				$ 1,539	$ 1,600	$ 1,775

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Earnings (Loss) Per Common Share - Schedule of Computations of Basic and Diluted Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Numerator:
Net income from continuing operations	$ 4,556	$ 2,229	$ 1,539
Net loss from discontinued operations	$ (1,372)	$ (1,324)	$ (4,765)
Denominator:
Weighted-average common shares outstanding (shares)	21,937	21,969	25,868
Basic earnings per common share from continuing operations (in USD per share)	$ 0.21	$ 0.10	$ 0.06
Basic loss per common share from discontinued operations (in USD per share)	$ (0.06)	$ (0.06)	$ (0.18)
Numerator:
Net income from continuing operations	$ 4,556	$ 2,229	$ 1,539
Net loss from discontinued operations	$ (1,372)	$ (1,324)	$ (4,765)
Denominator:
Weighted-average common shares outstanding (shares)	21,937	21,969	25,868
Effect of dilutive securities from stock-based compensation plans (shares)	174	47	36
Denominator for diluted earnings per common share (shares)	22,111	22,016	25,904
Diluted earnings per common share from continuing operations (in USD per share)	$ 0.21	$ 0.10	$ 0.06
Diluted loss per common share from discontinued operations (in USD per share)	$ (0.06)	$ (0.06)	$ (0.18)

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Earnings (Loss) Per Common Share - Narrative (Details) - shares shares in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share [Abstract]
Antidilutive shares underlying options (shares)	2.3	2.9	3.3

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Goodwill and Intangible Assets - Schedule of Goodwill by Reportable Segment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Goodwill
Beginning balance	$ 13,823	$ 11,810
Goodwill recorded in connection with business combinations	3,694	2,146
Foreign currency translation	131	(133)
Ending balance	17,648	13,823
Recovery Audit Services – Americas
Goodwill
Beginning balance	10,755	10,755
Goodwill recorded in connection with business combinations	2,685	0
Foreign currency translation	0	0
Ending balance	13,440	10,755
Recovery Audit Services – Europe/Asia- Pacific
Goodwill
Beginning balance	680	813
Goodwill recorded in connection with business combinations	869	0
Foreign currency translation	131	(133)
Ending balance	1,680	680
Adjacent Services
Goodwill
Beginning balance	2,388	242
Goodwill recorded in connection with business combinations	140	2,146
Foreign currency translation	0	0
Ending balance	$ 2,528	$ 2,388

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Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Feb. 23, 2017	Oct. 31, 2016
Goodwill [Line Items]
Goodwill	$ 17,648	$ 13,823	$ 11,810
Amortization expense relating to intangible assets	3,634	1,832	2,500
Projected amortization expense 2018	3,400
Projected amortization expense 2019	3,500
Projected amortization expense 2020	3,300
Projected amortization expense 2021	1,700
Projected amortization expense 2022	900
Recovery Audit Services – Americas
Goodwill [Line Items]
Goodwill	13,440	10,755	10,755
Adjacent Services
Goodwill [Line Items]
Goodwill	2,528	2,388	$ 242
C&CA
Goodwill [Line Items]
Goodwill				$ 3,554
C&CA | Recovery Audit Services – Americas
Goodwill [Line Items]
Goodwill	$ 3,600
Lavante
Goodwill [Line Items]
Goodwill					$ 2,286
Lavante | Adjacent Services
Goodwill [Line Items]
Goodwill		$ 2,100

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Goodwill and Intangible Assets - Schedule of Changes in Noncurrent Intangible Assets (Details) - USD ($) $ in Thousands			12 Months Ended
	Feb. 23, 2017	Oct. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Gross carrying amount:
Beginning balance			$ 47,126	$ 42,392
FX adjustments and other			890	(1,444)
Ending balance			58,939	47,126	$ 42,392
Accumulated amortization:
Beginning balance			(36,128)	(35,708)
Amortization expense			(3,634)	(1,832)	(2,500)
FX adjustments and other			(699)	1,412
Ending balance			(40,461)	(36,128)	(35,708)
Net carrying amount:
Balance, December 31, 2016			10,998
Balance, December 31, 2017			18,478	10,998
Customer Relationships
Gross carrying amount:
Beginning balance			36,573	37,784
FX adjustments and other			777	(1,211)
Ending balance			46,906	36,573	37,784
Accumulated amortization:
Beginning balance			(31,481)	(31,246)
Amortization expense			(1,796)	(1,414)
FX adjustments and other			(585)	1,179
Ending balance			(33,862)	(31,481)	(31,246)
Net carrying amount:
Balance, December 31, 2016			5,092
Balance, December 31, 2017			$ 13,044	5,092
Customer Relationships | Minimum
Net carrying amount:
Estimated useful life (years)			6 years
Customer Relationships | Maximum
Net carrying amount:
Estimated useful life (years)			15 years
Trademarks
Gross carrying amount:
Beginning balance			$ 853	931
FX adjustments and other			38	(78)
Ending balance			1,026	853	931
Accumulated amortization:
Beginning balance			(853)	(881)
Amortization expense			(22)	(50)
FX adjustments and other			(38)	78
Ending balance			(913)	(853)	(881)
Net carrying amount:
Balance, December 31, 2016			0
Balance, December 31, 2017			$ 113	0
Estimated useful life (years)			5 years
Non- compete Agreements
Gross carrying amount:
Beginning balance			$ 1,322	1,477
FX adjustments and other			75	(155)
Ending balance			2,629	1,322	1,477
Accumulated amortization:
Beginning balance			(1,322)	(1,381)
Amortization expense			(204)	(96)
FX adjustments and other			(76)	155
Ending balance			(1,602)	(1,322)	(1,381)
Net carrying amount:
Balance, December 31, 2016			0
Balance, December 31, 2017			$ 1,027	0
Non- compete Agreements | Minimum
Net carrying amount:
Estimated useful life (years)			1 year
Non- compete Agreements | Maximum
Net carrying amount:
Estimated useful life (years)			5 years
Software
Gross carrying amount:
Beginning balance			$ 6,178	0
FX adjustments and other			0	0
Ending balance			6,178	6,178	0
Accumulated amortization:
Beginning balance			(272)	0
Amortization expense			(1,612)	(272)
FX adjustments and other			0	0
Ending balance			(1,884)	(272)	0
Net carrying amount:
Balance, December 31, 2016			5,906
Balance, December 31, 2017			$ 4,294	5,906
Estimated useful life (years)			4 years
Trade Names
Gross carrying amount:
Beginning balance			$ 2,200	2,200
FX adjustments and other			0	0
Ending balance			2,200	2,200	2,200
Accumulated amortization:
Beginning balance			(2,200)	(2,200)
Amortization expense			0	0
FX adjustments and other			0	0
Ending balance			(2,200)	(2,200)	$ (2,200)
Net carrying amount:
Balance, December 31, 2016			0
Balance, December 31, 2017			$ 0	0
Trade Names | Minimum
Net carrying amount:
Estimated useful life (years)			4 years
Trade Names | Maximum
Net carrying amount:
Estimated useful life (years)			5 years
Lavante
Gross carrying amount:
Acquisition of Assets		$ 6,178		6,178
Lavante | Customer Relationships
Gross carrying amount:
Acquisition of Assets				0
Lavante | Trademarks
Gross carrying amount:
Acquisition of Assets		163		0
Lavante | Non- compete Agreements
Gross carrying amount:
Acquisition of Assets				0
Lavante | Software
Gross carrying amount:
Acquisition of Assets		$ 5,901		6,178
Lavante | Trade Names
Gross carrying amount:
Acquisition of Assets				$ 0
C&CA
Gross carrying amount:
Acquisition of Assets	$ 10,923		$ 10,923
C&CA | Customer Relationships
Gross carrying amount:
Acquisition of Assets	9,556		9,556
C&CA | Trademarks
Gross carrying amount:
Acquisition of Assets	135		135
C&CA | Non- compete Agreements
Gross carrying amount:
Acquisition of Assets	$ 1,232		1,232
C&CA | Software
Gross carrying amount:
Acquisition of Assets			0
C&CA | Trade Names
Gross carrying amount:
Acquisition of Assets			$ 0

XML

Debt (Details) - USD ($)		12 Months Ended
	Jan. 19, 2010	Dec. 31, 2017	Dec. 31, 2018	May 04, 2017	May 03, 2017
SunTrust Bank
Line of Credit Facility [Line Items]
Period of term loan and the revolving credit facility	4 years
SunTrust Bank | Minimum
Line of Credit Facility [Line Items]
Applicable margin (percent)		1.75%
Sun Trust Revolving Credit Facility
Line of Credit Facility [Line Items]
Line of credit		$ 13,600,000
Remaining borrowing capacity		$ 21,400,000
Sun Trust Revolving Credit Facility | SunTrust Bank
Line of Credit Facility [Line Items]
Committed revolving credit facility	$ 15,000,000.0			$ 35,000,000.0	$ 20,000,000.0
Sun Trust Term Loan | SunTrust Bank
Line of Credit Facility [Line Items]
Committed term loan	$ 15,000,000.0
Scenario, Forecast | Subsequent Event | Sun Trust Revolving Credit Facility | SunTrust Bank
Line of Credit Facility [Line Items]
Committed revolving credit facility			$ 30,000,000.0
Line of Credit | SunTrust Bank
Line of Credit Facility [Line Items]
Revolving credit facility commitment fee (percent)		0.25%
Interest rate during period		3.60%

XML

Debt - Debt Terms (Details) - SunTrust Bank		12 Months Ended
	May 04, 2017	Dec. 31, 2017
Minimum
Debt Instrument [Line Items]
Applicable Margin		1.75%
Sun Trust Revolving Credit Facility | Leverage Ratio I
Debt Instrument [Line Items]
Leverage Ratio	1.25
Applicable Percentage For Commitment Fee	0.25%
Sun Trust Revolving Credit Facility | Leverage Ratio I | LIBOR
Debt Instrument [Line Items]
Applicable Margin	2.25%
Sun Trust Revolving Credit Facility | Leverage Ratio I | Base Rate
Debt Instrument [Line Items]
Applicable Margin	1.25%
Sun Trust Revolving Credit Facility | Leverage Ratio II
Debt Instrument [Line Items]
Applicable Percentage For Commitment Fee	0.375%
Sun Trust Revolving Credit Facility | Leverage Ratio II | Minimum
Debt Instrument [Line Items]
Leverage Ratio	1.25
Sun Trust Revolving Credit Facility | Leverage Ratio II | Maximum
Debt Instrument [Line Items]
Leverage Ratio	1.75
Sun Trust Revolving Credit Facility | Leverage Ratio II | LIBOR
Debt Instrument [Line Items]
Applicable Margin	2.50%
Sun Trust Revolving Credit Facility | Leverage Ratio II | Base Rate
Debt Instrument [Line Items]
Applicable Margin	1.50%
Sun Trust Revolving Credit Facility | Leverage Ratio III
Debt Instrument [Line Items]
Leverage Ratio	1.75
Applicable Percentage For Commitment Fee	0.375%
Sun Trust Revolving Credit Facility | Leverage Ratio III | LIBOR
Debt Instrument [Line Items]
Applicable Margin	2.75%
Sun Trust Revolving Credit Facility | Leverage Ratio III | Base Rate
Debt Instrument [Line Items]
Applicable Margin	1.75%

XML

Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Long-term debt, gross	$ 13,705	$ 3,600
Debt issuance cost	(131)	0	$ (80)
Long-term debt, net	13,574	3,600
Less: Current portion of long-term debt	48	3,600
Long-term debt, excluding current portion, gross	13,657	0
Long-term debt, excluding current portion, net	13,526	0
Revolving Facility
Debt Instrument [Line Items]
Long-term debt, gross	13,600	3,600
Debt issuance cost	(131)	0
Long-term debt, net	13,469	3,600
Capital lease obligations
Debt Instrument [Line Items]
Long-term debt, gross	105	0
Debt issuance cost	0	0
Long-term debt, net	$ 105	$ 0

XML

Debt - Capital Lease Minimum Payments Due (Details) $ in Millions	Dec. 31, 2017 USD ($)
Debt Disclosure [Abstract]
2018	$ 73
2019	13,625
2020	7
Total	$ 13,705

XML

Lease Commitments - Narrative (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($) ft²	Feb. 29, 2016 ft²	Jan. 01, 2015 ft²	Jan. 31, 2014 ft²
Commitments and Contingencies Disclosure [Abstract]
Rent expense, excluding costs associated with the termination of noncancelable lease arrangements | $	$ 5.1	$ 3.9	$ 4.6
Long-term Purchase Commitment [Line Items]
Space under lease (sq ft)					58,000	132,000
Sublease
Long-term Purchase Commitment [Line Items]
Space under lease (sq ft)			0	3,000

XML

Lease Commitments - Schedule of Future Minimum Lease Payments (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Gross
2018	$ 3,363
2019	2,981
2020	2,527
2021	2,116
2022	440
Total payments	11,427
Sublease Income
2018	(69)
2019	(72)
2020	(74)
2021	(77)
2022	0
Total payments	(292)
Amount
2018	3,294
2019	2,909
2020	2,453
2021	2,039
2022	440
Total payments	$ 11,135

XML

Income Taxes - Schedule of Income (Loss) Before Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
United States									$ (6,502)	$ (5,306)	$ (244)
Foreign									14,020	8,777	2,152
Net income from continuing operations before income tax	$ 6,178	$ 2,007	$ 554	$ (1,221)	$ 1,440	$ 1,465	$ 427	$ 139	$ 7,518	$ 3,471	$ 1,908

XML

Income Taxes - Schedule of Provision for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current:
Federal									$ 0	$ 0	$ 0
State									1	0	(13)
Foreign									2,230	2,103	1,494
Current provision for income taxes									2,231	2,103	1,481
Deferred:
Federal									(155)	0	0
State									0	0	0
Foreign									886	(861)	(1,112)
Deferred provision for income taxes									731	(861)	(1,112)
Total	$ 526	$ 930	$ 879	$ 627	$ 1,263	$ (685)	$ 460	$ 204	$ 2,962	$ 1,242	$ 369

XML

Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 30, 2016
Income Tax Examination [Line Items]
Reported effective tax rate									39.40%	35.80%	19.30%
Deferred tax asset reduction									$ (13,900)
Change in valuation allowance									(13,900)	$ (15,300)
Alternative minimum tax credit	$ 155								155
Valuation allowance	34,776				$ 50,114				34,776	50,114
Gross deferred tax assets	42,064				61,219				42,064	61,219
Credit to tax expense	(526)	$ (930)	$ (879)	$ (627)	(1,263)	$ 685	$ (460)	$ (204)	(2,962)	(1,242)	$ (369)
Loss carry-forwards	17,161				33,087				17,161	33,087
U.S. federal
Income Tax Examination [Line Items]
Loss carry-forwards	81,700								81,700			$ 87,300
State
Income Tax Examination [Line Items]
Loss carry-forwards	65,000								65,000
Foreign subsidiary
Income Tax Examination [Line Items]
Gross deferred tax assets	$ 900				$ 8,400				900	8,400	1,500
Credit to tax expense									$ 200	$ 1,700	$ 500

XML

Income Taxes - Schedule of Significant Differences Between the U.S. Federal Statutory Tax Rate and the Effective Income Tax Expense (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Statutory federal income tax rate									$ 2,631	$ 1,180	$ 649
State income taxes, net of federal effect									(62)	(173)	(240)
Net operating loss limitation									2,975	0	0
Deferred tax true-up									0	(4,103)	8,078
Change in deferred tax asset valuation allowance									(15,338)	4,877	(6,729)
Statutory rate change									13,850	0	0
Foreign tax rate differential									(899)	(712)	(223)
Compensation deduction limitation									0	113	(1,201)
Other, net									(195)	60	35
Total	$ 526	$ 930	$ 879	$ 627	$ 1,263	$ (685)	$ 460	$ 204	$ 2,962	$ 1,242	$ 369

XML

Income Taxes - Schedule of the Tax Effects of Temporary Differences and Carry-Forwards That Give Rise to Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred income tax assets:
Accounts payable and accrued expenses	$ 1,215	$ 737
Accrued payroll and related expenses	1,691	3,062
Stock-based compensation expense	3,508	3,531
Depreciation of property and equipment	1,711	2,579
Capitalized Software	0	0
Non-compete agreements	0	0
Unbilled receivables and refund liabilities	1,811	2,216
Operating loss carry-forwards of foreign subsidiary	11,000	10,907
Federal operating loss carry-forwards	17,161	33,087
State operating loss carry-forwards	3,591	3,919
Other	376	1,181
Gross deferred tax assets	42,064	61,219
Less valuation allowance	34,776	50,114
Gross deferred tax assets net of valuation allowance	7,288	11,105
Deferred income tax liabilities:
Intangible assets	1,987	2,299
Capitalized software	29	1,928
Other	3,734	4,609
Gross deferred tax liabilities	5,750	8,836
Net deferred tax assets	$ 1,538	$ 2,269

XML

Income Taxes - Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits and Related Accrued Interest (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Unrecognized Tax Benefits
Beginning balance	$ 497	$ 535	$ 677
Additions based on tax positions related to the current year	0	0	0
Additions based on tax positions related to the prior years	116	0	0
Decrease based on payments made during the year	0	0	0
Decreases based on tax positions related to the prior years	(420)	(38)	(142)
Ending balance	193	497	535
Accrued Interest and Penalties
Beginning balance	154	202	220
Additions based on tax positions related to the current year	0	0	0
Additions based on tax positions related to the prior years	19	11	24
Decrease based on payments made during the year	0	0	0
Decreases based on tax positions related to the prior years	(145)	(59)	(42)
Ending balance	$ 28	$ 154	$ 202

XML

Employee Benefit Plans (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Employee Benefit Plans [Abstract]
Percentage of annual compensation per employee	6.00%
Defined contribution plan contributions by employer	$ 3,000
Defined contribution plan employers matching contribution annual vesting percentage after three years	100.00%
Period of defined contribution plan employers matching contribution annual vesting 100 percentage	3 years
Defined contribution plan employers matching contribution annual vesting percentage	20.00%
Defined contribution plan employers matching contribution annual vesting period	2 years
Defined contribution plan, employer contributions	$ 800,000	$ 800,000	$ 800,000

XML

Capital Structure (Details) - Common Stock - USD ($) $ in Millions			1 Months Ended		12 Months Ended
	Oct. 24, 2014	Mar. 25, 2014	Dec. 31, 2016	Oct. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Feb. 21, 2014
Class of Stock [Line Items]
Repurchase program, authorized amount	$ 40.0	$ 20.0		$ 50.0	$ 0.0			$ 10.0
Share repurchase program, increase in shares authorized	$ 20.0	$ 10.0	$ 10.0	$ 10.0
Repurchases of common stock, shares					0	905,403	4,118,386
Repurchases of common stock						$ 3.8
Stock option exercises, shares					225,043	90,496
Stock option exercises					$ 1.5	$ 0.3

XML

Stock-Based Compensation - Plan Summary (Narrative) (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2008 shares	Dec. 31, 2017 compensation_plan	Jun. 27, 2017 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shareholder-approved stock-based compensation plans | compensation_plan		2
2008 EIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserved for issuance (shares)	10,600,000
2017 EICP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserved for issuance (shares)			3,400,000
Available for future grant (shares)			3,100,000
Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		3 years
Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		1 year
Options | 2008 EIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award expiration period	7 years
Options | Employees | 2008 EIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Options | Directors | 2008 EIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year

XML

Stock-Based Compensation - Summary of Stock Option Awards Granted (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2015 employee	Dec. 31, 2017 employee $ / shares shares	Dec. 31, 2016 employee $ / shares shares	Dec. 31, 2015 $ / shares shares
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares		990,566
Weighted Average Exercise Price (usd per share)		$ 6.82
Director group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Vesting Period		1 year		1 year
Weighted Average Grant Date Fair Value (usd per share)		$ 6.35		$ 4.02
Employee group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Vesting Period		3 years	2 years	3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 6.31	$ 4.88	$ 3.99
Director group (3)
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares			20,417
Employee inducement
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Vesting Period		3 years	3 years	3 years
Weighted Average Grant Date Fair Value (usd per share)		$ 6.33	$ 4.94	$ 5.29
Options | Director group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares		90,566		249,273
Vesting Period		1 year		1 year
Weighted Average Exercise Price (usd per share)		$ 6.34		$ 4.49
Weighted Average Grant Date Fair Value (usd per share)		$ 3.49		$ 2.44
Options | Director group (1)
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares		35,000	35,000
Vesting Period		3 years	3 years
Weighted Average Exercise Price (usd per share)		$ 6.25	$ 4.80
Weighted Average Grant Date Fair Value (usd per share)		$ 3.50	$ 2.66
Number of employees granted non-qualified stock options | employee		1
Options | CEO grant
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares		500,000
Vesting Period		4 years
Weighted Average Exercise Price (usd per share)		$ 7.35
Weighted Average Grant Date Fair Value (usd per share)		$ 2.36
Options | Employee group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares		30,000		17,092
Vesting Period		3 years		3 years
Weighted Average Exercise Price (usd per share)		$ 7.25		$ 3.99
Weighted Average Grant Date Fair Value (usd per share)		$ 3.99		$ 1.33
Options | Director group (3)
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares			195,417
Vesting Period			1 year
Weighted Average Exercise Price (usd per share)			$ 5.01
Weighted Average Grant Date Fair Value (usd per share)			$ 2.71
Number of employees granted non-qualified stock options | employee			1
Options | Employee inducement
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Options Granted (shares) | shares		335,000	232,500	135,000
Vesting Period		3 years	3 years	3 years
Weighted Average Exercise Price (usd per share)		$ 6.19	$ 4.61	$ 5.51
Weighted Average Grant Date Fair Value (usd per share)		$ 3.41	$ 2.60	$ 1.42
Number of employees granted non-qualified stock options | employee	3

XML

Stock-Based Compensation - Option Awards (Narrative) (Details)	12 Months Ended
	Dec. 31, 2017
Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year

XML

Stock-Based Compensation - Summary of Nonvested Stock Awards Granted (Details)	3 Months Ended			6 Months Ended			12 Months Ended
	Jun. 30, 2017 employee shares	Mar. 31, 2017 employee shares	Mar. 31, 2015 executive_officer employee shares	Sep. 30, 2016 employee	Jun. 30, 2016 executive_officer	Dec. 31, 2015 shares	Dec. 31, 2017 $ / shares shares	Dec. 31, 2016 $ / shares shares	Dec. 31, 2015 $ / shares shares
Director group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)							51,179		4,273
Vesting Period							1 year		1 year
Weighted Average Grant Date Fair Value (usd per share) | $ / shares							$ 6.35		$ 4.02
Employee group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)							641,751	1,250,750	2,493,333
Vesting Period							3 years	2 years	3 years
Weighted Average Grant Date Fair Value (usd per share) | $ / shares							$ 6.31	$ 4.88	$ 3.99
Employee inducement
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)							100,000	100,000	10,000
Vesting Period							3 years	3 years	3 years
Weighted Average Grant Date Fair Value (usd per share) | $ / shares							$ 6.33	$ 4.94	$ 5.29
Director group (2015)
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)									17,092
Vesting Period									3 years
Weighted Average Grant Date Fair Value (usd per share) | $ / shares									$ 3.99
Performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)	183,751						792,930
Weighted Average Grant Date Fair Value (usd per share) | $ / shares							$ 6.32	$ 4.86	$ 4.00
Performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards | Employee group
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)			1,325,000			1,168,333
Number of employees granted share-based compensation awards | executive_officer			8		5
Performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards | Employee inducement
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of employees granted share-based compensation awards | employee	2		2	3
Performance-based stock awards (restricted stock units), restricted stock units and restricted stock awards | Executive officers
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of Stock Awards Granted (shares)		458,000
Number of employees granted share-based compensation awards | employee		12

XML

Stock-Based Compensation - Nonvested Stock Awards (Narrative) (Details)	12 Months Ended
	Dec. 31, 2017
Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year

XML

Stock-Based Compensation - Performance-Based Restricted Stock Units (Narrative) (Details) $ in Millions									1 Months Ended		3 Months Ended		12 Months Ended
	Aug. 03, 2016 shares	Jun. 27, 2016 shares	Jun. 20, 2016 shares	May 05, 2016 shares	Mar. 31, 2016 employee shares	Dec. 14, 2015 shares	Sep. 28, 2015 shares	Mar. 30, 2015 executive_officer shares	May 31, 2017 employee shares	Mar. 31, 2017 employee shares	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2017 USD ($) shares	Dec. 31, 2016 USD ($) shares	Dec. 31, 2015 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
PBU expense reversed | $													$ 7.1	$ 5.1	$ 3.9
PBUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)													333,800,000	1,350,750,000	2,493,333,000
2008 EIP | PBUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)		641,750
Vested PBUs to be paid in whole shares of common stock (as a percent)		40.00%								100.00%
PBUs that vest and become payable based on the cumulative revenue from continuing operations (as a percent)										65.00%
PBUs that vest and become payable on the cumulative adjusted EBITDA from continuing operations (as a percent)										35.00%
Performance period		2 years								2 years
PBUs that will become vested and payable at the threshold performance level (as a percent)		35.00%								35.00%
PBUs that will become vested and payable at the target performance level (as a percent)		100.00%								100.00%
PBUs that will become vested and payable at the maximum performance level (as a percent)		150.00%
Maximum PBUs that may become vested and payable (as a percent)										100.00%
PBUs that shall become vested and payable if performance does not equal or exceed the applicable threshold performance level (as a percent)		0.00%								0.00%
Fair market value of shares equal to the number of PBUs being settled (as a percent)		60.00%
PBU expense reversed | $											$ (0.6)	$ (0.8)			$ (1.4)
Executive officers | 2008 EIP | PBUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees granted share-based compensation awards					5			8	1	6
Awards granted (shares)								1,325,000
PBUs that will become vested and payable at the threshold performance level (as a percent)				35.00%
PBUs that will become vested and payable at the target performance level (as a percent)				100.00%
PBUs that will become vested and payable at the maximum performance level (as a percent)				150.00%
PBUs that shall become vested and payable if performance does not equal or exceed the applicable threshold performance level (as a percent)				0.00%
Senior leaders | 2008 EIP | PBUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees granted share-based compensation awards | employee					3				1	6
Awards granted (shares)	10,000		30,000	60,000	609,000	45,000	1,123,333
Share Based Compensation Arrangement by Share Based Payment Award Performance Units Settlement in Common Stock Percentage				43.00%	43.00%
Vested PBUs to be paid in whole shares of common stock (as a percent)			40.00%
Performance period			2 years	2 years	2 years
PBUs that will become vested and payable at the threshold performance level (as a percent)			35.00%
PBUs that will become vested and payable at the target performance level (as a percent)			100.00%
PBUs that will become vested and payable at the maximum performance level (as a percent)			150.00%
PBUs that shall become vested and payable if performance does not equal or exceed the applicable threshold performance level (as a percent)			0.00%
Fair market value of shares equal to the number of PBUs being settled (as a percent)			60.00%	57.00%	57.00%
Executive officers and senior leaders | 2008 EIP | PBUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)									59,000	274,800
Vested PBUs to be paid in whole shares of common stock (as a percent)									100.00%
PBUs that vest and become payable based on the cumulative revenue from continuing operations (as a percent)									65.00%
PBUs that vest and become payable on the cumulative adjusted EBITDA from continuing operations (as a percent)									35.00%
Performance period									2 years
PBUs that will become vested and payable at the threshold performance level (as a percent)					35.00%				35.00%
PBUs that will become vested and payable at the target performance level (as a percent)					100.00%				100.00%
PBUs that will become vested and payable at the maximum performance level (as a percent)					150.00%
Maximum PBUs that may become vested and payable (as a percent)									100.00%
PBUs that shall become vested and payable if performance does not equal or exceed the applicable threshold performance level (as a percent)					0.00%				0.00%

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Stock-Based Compensation - Summary of PBUs Granted (Details) - PBUs - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total PBUs Granted	333,800,000	1,350,750,000	2,493,333,000
PBUs Settled in Common Stock	333,800,000	560,670,000	954,583,000
PBUs Settled in Cash	0	790,080,000	1,538,750,000

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Stock-Based Compensation - Stock Appreciation Rights (Narrative) (Details) - Chief Executive Officer - 2008 EIP - SARs	Apr. 27, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares) | shares	200,000
Initial value per share (usd per share) | $ / shares	$ 4.71

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Stock-Based Compensation - Summary of Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares
Outstanding, beginning balance (shares)	3,420,385
Granted (shares)	990,566
Exercised (shares)	(225,043)
Forfeited (shares)	(475,504)
Expired (shares)	(311,111)
Outstanding, ending balance (shares)	3,399,293	3,420,385
Exercisable (shares)	2,290,967
Weighted- Average Exercise Price (Per Share)
Outstanding, beginning balance (usd per share)	$ 6.26
Granted (usd per share)	6.82
Exercised (usd per share)	5.23
Forfeited (usd per share)	6.01
Expired (usd per share)	6.18
Outstanding, ending balance (iusd per share)	6.54	$ 6.26
Exercisable (usd per share)	$ 6.52
Weighted- Average Remaining Contractual Term
Outstanding (term)	4 years 18 days	4 years 3 months 18 days
Exercisable (term)	3 years 2 months 12 days
Aggregate Intrinsic Value ($ 000’s)
Outstanding, beginning balance	$ 1,204
Exercised	299	$ 100	$ 100
Outstanding, ending balance	2,367	$ 1,204
Exercisable	$ 1,654

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Stock-Based Compensation - Summary of Activity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value of options granted (usd per share)	$ 2.91	$ 2.66	$ 2.32
Total intrinsic value of options exercised	$ 299	$ 100	$ 100
Stock-based compensation expense	7,100	5,100	3,900
Nonvested stock awards (restricted stock and restricted stock units)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total vest date fair value of stock awards vested	$ 300	$ 700	$ 1,200

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Stock-Based Compensation - Schedule of Assumptions Used in Black-Scholes Valuation Models (Details) - Stock options	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend yields (as a percent)	0.00%	0.00%	0.00%
Forfeiture rate	0.00%	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rates	1.38%	0.58%	0.80%
Volatility factor of expected market price (as a percent)	0.54%	0.391%	0.323%
Weighted-average expected term of options	2 years 2 months 12 days	1 year 3 months 18 days	3 years 1 month 6 days
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rates	1.96%	1.20%	1.59%
Volatility factor of expected market price (as a percent)	0.749%	0.779%	0.733%
Weighted-average expected term of options	4 years	4 years 6 months	5 years

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Stock-Based Compensation - Summary of Nonvested Stock Awards Activity (Details) - Nonvested stock awards (including restricted stock, restricted stock units and performance-based restricted stock units) - $ / shares	3 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares
Nonvested, beginning balance (shares)		3,893,050
Granted (shares)	183,751	792,930
Vested (shares)		(45,002)
Forfeited (shares)		(2,524,282)
Nonvested, ending balance (shares)		2,116,696	3,893,050
Weighted Average Grant Date Fair Value (Per Share)
Nonvested, beginning balance (usd per share)		$ 4.37
Granted (usd per share)		6.32	$ 4.86	$ 4.00
Vested (usd per share)		6.24
Forfeited (usd per share)		4.09
Nonvested, ending balance (usd per share)		$ 5.36	$ 4.37

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Stock-Based Compensation - Schedule of Unrecognized Compensation Expense Related to Nonvested Stock-Based Compensation (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 6,022
Weighted-average remaining recognition period	2 years 3 months 18 days
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 2,565
Weighted-average remaining recognition period	2 years 10 months 24 days
SAR
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 77
Weighted-average remaining recognition period	3 months 18 days
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 1,752
Weighted-average remaining recognition period	2 years 3 months 18 days
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 1,628
Weighted-average remaining recognition period	1 year 4 months 24 days

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Business Acquisitions and Divestitures - Narrative (Details) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended	12 Months Ended
	Feb. 28, 2017	Dec. 31, 2015	Aug. 31, 2015	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Feb. 23, 2017	Oct. 31, 2016
Business Acquisition [Line Items]
Fair value of contingent consideration liabilities at the date of acquisition					$ 5,954	$ 3,834	$ 0
Payments for business acquisition					10,128	3,669	520
Business Strategy, Inc. Assets
Business Acquisition [Line Items]
Loss on sale of divested assets (less than)			$ 1,600
C&CA
Business Acquisition [Line Items]
Business combination, consideration transferred	$ 10,000
Contingent consideration, liability, maximum	8,000
Contingent consideration, liability	5,900			$ 6,800	6,800
Fair value of contingent consideration liabilities at the date of acquisition	$ 900
Total cash paid								$ 9,968
C&CA | Other current liabilities
Business Acquisition [Line Items]
Contingent consideration, liability				3,700	3,700
C&CA | Other long-term liabilities
Business Acquisition [Line Items]
Contingent consideration, liability				3,100	3,100
C&CA | Recovery Audit Services – Americas | Audit Claim Recovery
Business Acquisition [Line Items]
Revenue					7,800
Income (loss) before income taxes due to acquisition					800
C&CA | Europe, Asia and Pacific | Audit Claim Recovery
Business Acquisition [Line Items]
Revenue					3,300
Income (loss) before income taxes due to acquisition					1,000
Lavante
Business Acquisition [Line Items]
Contingent consideration, liability, maximum									$ 4,500
Contingent consideration, liability				2,000	2,000				3,800
Fair value of contingent consideration liabilities at the date of acquisition				(2,100)	300
Revenue					1,900	400
Income (loss) before income taxes due to acquisition					(4,800)	(900)
Total cash paid									$ 3,809
Lavante | Other current liabilities
Business Acquisition [Line Items]
Contingent consideration, liability				100	100	2,000
Lavante | Other long-term liabilities
Business Acquisition [Line Items]
Contingent consideration, liability				1,900	$ 1,900	$ 1,800
SIM/Global Edge
Business Acquisition [Line Items]
Contingent consideration, liability, maximum		$ 200					$ 200
Fair value of contingent consideration liabilities at the date of acquisition				$ (200)
Payments for business acquisition		$ 500
Contingent consideration, payment term		2 years
Total purchase price		$ 700

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Business Acquisitions and Divestitures - Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Feb. 23, 2017	Dec. 31, 2016	Oct. 31, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill	$ 17,648		$ 13,823		$ 11,810
C&CA
Business Acquisition [Line Items]
Account receivables		$ 1,621
Commissions receivable		48
Prepaid expenses		109
Other current assets, net		6
Intangible Assets		10,923
Goodwill		3,554
Fixed Assets		323
Accounts payable		(125)
Accrued commissions		(537)
Total consideration paid		15,922
Contingent consideration		(5,954)
Total cash paid		$ 9,968
Lavante
Business Acquisition [Line Items]
Cash and cash equivalents				$ 28
Account receivables				207
Other current assets, net				92
Intangible Assets				6,178
Goodwill				2,286
Fixed Assets				98
Accounts payable				(121)
Deferred revenue				(370)
Other current liabilities				(757)
Total consideration paid				7,641
Contingent consideration				(3,832)
Total cash paid				$ 3,809

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Business Acquisitions and Divestitures - Intangible Assets Acquired (Details) - USD ($) $ in Thousands			12 Months Ended
	Feb. 23, 2017	Oct. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
C&CA
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values	$ 10,923		$ 10,923
Lavante
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values		$ 6,178		$ 6,178
Customer relationships | C&CA
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values	$ 9,556		9,556
Acquired finite-lived Intangible Assets, Remaining useful lives	14 years
Customer relationships | Lavante
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values				0
Non-compete | C&CA
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values	$ 1,232		1,232
Acquired finite-lived Intangible Assets, Remaining useful lives	4 years
Non-compete | Lavante
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values				0
Trademarks | C&CA
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values	$ 135		135
Acquired finite-lived Intangible Assets, Remaining useful lives	4 years
Trademarks | Lavante
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values		$ 163		0
Acquired finite-lived Intangible Assets, Remaining useful lives		4 years
Patents | Lavante
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values		$ 114
Acquired finite-lived Intangible Assets, Remaining useful lives		1 year
Software | C&CA
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values			$ 0
Software | Lavante
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired, Fair Values		$ 5,901		$ 6,178
Acquired finite-lived Intangible Assets, Remaining useful lives		4 years

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Business Acquisitions and Divestitures - Pro Forma Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
C&CA
Business Acquisition, Pro Forma Information [Abstract]
Unaudited pro forma revenue	$ 162,459	$ 155,626
Unaudited pro forma net (loss) income from continuing operations	$ 3,886	5,365
Lavante
Business Acquisition, Pro Forma Information [Abstract]
Unaudited pro forma revenue		143,198	$ 140,994
Unaudited pro forma net (loss) income from continuing operations		$ (3,418)	$ (5,516)

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Quarterly Results (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Quarterly financial data
Revenue, net	$ 47,074	$ 42,467	$ 38,510	$ 33,569	$ 39,183	$ 35,137	$ 35,291	$ 31,233	$ 161,620	$ 140,844	$ 138,302
Operating expenses:
Cost of revenue	26,746	26,675	25,605	23,026	23,855	22,367	23,431	21,646	102,052	91,299	93,169
Selling, general and administrative expenses	12,792	12,189	11,424	10,536	11,048	9,883	9,620	8,848	46,941	39,399	32,284
Depreciation of property and equipment	1,107	1,133	1,109	1,220	1,209	1,376	1,216	1,232	4,569	5,033	5,317
Amortization of intangible assets	1,468	722	722	722	650	393	395	394	3,634	1,832	2,458
Acquisition-related adjustments	(2,283)	0	0	0	0	0	0	0	(2,283)	0	0
Total operating expenses	39,830	40,719	38,860	35,504	36,762	34,019	34,662	32,120	154,913	137,563	133,228
Operating income from continuing operations	7,244	1,748	(350)	(1,935)	2,421	1,118	629	(887)	6,707	3,281	5,074
Foreign currency transaction (gains) losses on short-term intercompany balances	(263)	(418)	(957)	(552)	1,060	(165)	196	(1,007)	(2,190)	84	2,165
Interest expense (income), net	1,312	142	48	37	(98)	(14)	(12)	(29)	1,539	(153)	(190)
Other (income) loss	17	17	5	(199)	19	(168)	18	10	(160)	(121)	1,191
Net income from continuing operations before income tax	6,178	2,007	554	(1,221)	1,440	1,465	427	139	7,518	3,471	1,908
Income tax expense (benefit)	526	930	879	627	1,263	(685)	460	204	2,962	1,242	369
Net income from continuing operations	$ 5,652	$ 1,077	$ (325)	$ (1,848)	$ 177	$ 2,150	$ (33)	$ (65)	$ 3,184	$ 905	$ (3,226)
Basic (loss) earnings per common share from continuing operations (usd per share)	$ 0.26	$ 0.05	$ (0.01)	$ (0.08)	$ 0.01	$ 0.10	$ 0.00	$ 0.00	$ 0.15	$ 0.04	$ (0.12)
Diluted (loss) earnings per common share from continuing operations (usd per share)	$ 0.26	$ 0.05	$ (0.01)	$ (0.08)	$ 0.01	$ 0.10	$ 0.00	$ 0.00	$ 0.15	$ 0.04	$ (0.12)

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Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Allowance for doubtful accounts receivable
Movement in Valuation Allowances and Reserves
Balance at Beginning of Year	$ 799	$ 930	$ 2,243
Additions	724	(129)	(1,311)
Deductions	(24)	(2)	(2)
Balance at End of Year	1,499	799	930
Allowance for doubtful employee advances and miscellaneous receivables
Movement in Valuation Allowances and Reserves
Balance at Beginning of Year	500	681	692
Additions	1,665	2,184	1,294
Deductions	(1,873)	(2,365)	(1,305)
Balance at End of Year	292	500	681
Deferred tax valuation allowance
Movement in Valuation Allowances and Reserves
Balance at Beginning of Year	50,114	45,565	52,002
Additions	(15,338)	4,549	(6,437)
Deductions	0	0	0
Balance at End of Year	$ 34,776	$ 50,114	$ 45,565