10-Q 1 a2019_q2prgx.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 0-28000
 PRGX Global, Inc.
(Exact name of registrant as specified in its charter) 
Georgia
 
58-2213805
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
600 Galleria Parkway
 
30339-5986
Suite 100
 
(Zip Code)
Atlanta, Georgia
 
 
(Address of principal executive offices)
 
 
Registrant’s telephone number, including area code: (770) 779-3900
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.  
¨  Large accelerated filer
ý
Accelerated filer
¨  Non-accelerated filer     
ý
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 Exchange Act).    Yes  ¨    No  ý



Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, no par value
PRGX
Nasdaq Global Select Market
Common shares of the registrant outstanding at August 2, 2019 were 23,607,264.


PRGX GLOBAL, INC.
FORM 10-Q
For the Quarter Ended June 30, 2019
INDEX
 
 
Page No.
Part I. Financial Information
 
Part II. Other Information
 


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenue, net
 
$
41,974

 
$
42,102

 
$
80,778

 
$
78,823

Operating expenses:
 
 
 
 
 
 
 
 
Cost of revenue
 
26,312

 
27,389

 
51,547

 
52,186

Selling, general and administrative expenses
 
15,748

 
12,809

 
29,665

 
24,073

Depreciation of property, equipment and software assets
 
2,381

 
2,360

 
4,584

 
3,583

Amortization of intangible assets
 
872

 
864

 
1,734

 
1,652

Total operating expenses
 
45,313

 
43,422

 
87,530

 
81,494

 
 
 
 
 
 
 
 
 
Operating loss from continuing operations
 
(3,339
)
 
(1,320
)
 
(6,752
)
 
(2,671
)
Foreign currency transaction (gains) losses on short-term intercompany balances
 
(77
)
 
880

 
129

 
660

Interest expense, net
 
592

 
486

 
1,065

 
884

Other loss (income)
 
11

 
5

 
(8
)
 
17

       Loss from continuing operations before income tax
 
(3,865
)
 
(2,691
)
 
(7,938
)
 
(4,232
)
Income tax expense
 
311

 
189

 
479

 
976

Net loss from continuing operations
 
$
(4,176
)
 
$
(2,880
)
 
$
(8,417
)
 
$
(5,208
)
 
 
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
 
 
Loss from discontinued operations
 
$
(103
)
 
$
(26
)
 
$
(258
)
 
$
(359
)
Income tax expense
 
—

 
—

 
—

 
—

Net loss from discontinued operations
 
$
(103
)
 
$
(26
)
 
$
(258
)
 
$
(359
)
 
 
 
 
 
 
 
 
 
Net loss
 
$
(4,279
)
 
$
(2,906
)
 
$
(8,675
)
 
$
(5,567
)
 
 
 
 
 
 
 
 
 
Basic loss per common share (Note 2):
 
 
 
 
 
 
 
 
Basic loss from continuing operations
 
$
(0.18
)
 
$
(0.13
)
 
$
(0.37
)
 
$
(0.23
)
Basic loss from discontinued operations
 
—

 
—

 
(0.01
)
 
(0.01
)
Total basic loss per common share
 
$
(0.18
)
 
$
(0.13
)
 
$
(0.38
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
 
Diluted loss per common share (Note 2):
 
 
 
 
 
 
 
 
Diluted loss from continuing operations
 
$
(0.18
)
 
$
(0.13
)
 
$
(0.37
)
 
$
(0.23
)
Diluted loss from discontinued operations
 
—

 
—

 
(0.01
)
 
(0.01
)
Total diluted loss per common share
 
$
(0.18
)
 
$
(0.13
)
 
$
(0.38
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (Note 2):
 
 
 
 
 
 
 
 
Basic
 
22,763

 
23,283

 
22,687

 
22,930

Diluted
 
22,763

 
23,283

 
22,687

 
22,930

See accompanying Notes to Condensed Consolidated Financial Statements.

1

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)

 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net loss
 
$
(4,279
)
 
$
(2,906
)
 
$
(8,675
)
 
$
(5,567
)
Foreign currency translation adjustments
 
(269
)
 
(666
)
 
244

 
(391
)
Comprehensive loss
 
$
(4,548
)
 
$
(3,572
)
 
$
(8,431
)
 
$
(5,958
)

See accompanying Notes to Condensed Consolidated Financial Statements.

2

PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
 
 
June 30,
 
December 31,
 
 
2019
 
2018
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
11,504

 
$
13,973

Restricted cash
 
146

 
46

Receivables:
 
 
 
 
Contract receivables, less allowances of $1,999 in 2019 and $1,024 in 2018
 
 
 
 
Billed
 
37,429

 
43,878

Unbilled
 
4,344

 
2,987

 
 
41,773

 
46,865

Employee advances and miscellaneous receivables, less allowances of $268 in 2019 and $176 in 2018
 
98

 
567

Total receivables
 
41,871

 
47,432

Prepaid expenses and other current assets
 
4,517

 
3,144

Total current assets
 
58,038

 
64,595

Property, equipment and software
 
71,489

 
65,252

Less accumulated depreciation and amortization
 
(47,819
)
 
(43,224
)
Property, equipment and software, net
 
23,670

 
22,028

Operating lease right-of-use assets (Note 9)
 
11,152

 
—

Goodwill
 
17,528

 
17,531

Intangible assets, less accumulated amortization of $45,085 in 2019 and $43,370 in 2018
 
13,207

 
14,945

Unbilled receivables
 
1,103

 
1,608

Deferred income taxes
 
3,575

 
3,561

Other assets
 
562

 
561

Total assets
 
$
128,835

 
$
124,829

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
Accounts payable and accrued expenses
 
$
3,064

 
$
7,515

Accrued payroll and related expenses
 
9,906

 
15,073

Current portion of operating lease liabilities (Note 9)
 
4,161

 
—

Refund liabilities
 
6,196

 
6,497

Deferred revenue
 
2,141

 
2,428

Current portion of debt (Note 5)
 
42

 
48

Business acquisition obligations (Note 6)
 
4,000

 
4,162

Total current liabilities
 
29,510

 
35,723

 
 
 
 
 
Long-term debt (Note 5)
 
32,628

 
21,553

Long-term operating lease liabilities (Note 9)
 
7,647

 
—

Refund liabilities
 
65

 
100

Deferred income taxes (Note 8)
 
666

 
666

Other long-term liabilities
 
9

 
458

Total liabilities
 
70,525

 
58,500

Commitments and contingencies (Note 7)
 


 


Shareholders’ equity (Note 2):
 
 
 
 
Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares; 23,611,403 shares issued and outstanding at June 30, 2019 and 23,186,258 shares issued and outstanding at December 31, 2018
 
236

 
232

Additional paid-in capital
 
582,982

 
582,574

Accumulated deficit
 
(524,131
)
 
(515,456
)
Accumulated other comprehensive loss
 
(777
)
 
(1,021
)
Total shareholders’ equity
 
58,310

 
66,329

Total liabilities and shareholders' equity
 
$
128,835

 
$
124,829

See accompanying Notes to Condensed Consolidated Financial Statements.

3

PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands, except share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 

 

 

 

 
 
Shares
 
Amount
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive (Loss) Income
 
Total Shareholders' Equity
Balance at March 31, 2019
 
23,438,058

 
$
234

 
$
581,356

 
$
(519,852
)
 
$
(508
)
 
$
61,230

Net loss
 
—

 
—

 
—

 
(4,279
)
 
 
 
(4,279
)
Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
(269
)
 
(269
)
Issuances of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
Restricted share awards
 
183,403

 
2

 
(2
)
 
—

 
—

 
—

Restricted shares remitted by employees for taxes
 
(38,304
)
 
—

 
(246
)
 
—

 
—

 
(246
)
Stock option exercises
 
35,319

 
—

 
170

 
—

 
—

 
170

Restricted stock unit settlement
 
17,517

 
—

 
—

 
—

 
—

 
—

Forfeited restricted share awards
 
(24,590
)
 
—

 
—

 
—

 
—

 
—

Stock-based compensation expense
 
—

 
—

 
1,704

 
—

 
—

 
1,704

Balance at June 30, 2019
 
23,611,403

 
$
236

 
$
582,982

 
$
(524,131
)
 
$
(777
)
 
$
58,310

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2018
 
23,094,617

 
$
231

 
$
581,898

 
$
(522,710
)
 
$
382

 
$
59,801

Net loss
 
—

 
—

 
—

 
(2,906
)
 
 
 
(2,906
)
Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
(666
)
 
(666
)
Issuances of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
Restricted share awards
 
285,885

 
3

 
(3
)
 
—

 
—

 
—

Restricted shares remitted by employees for taxes
 
(20,195
)
 
—

 
(191
)
 
—

 
—

 
(191
)
Stock option exercises
 
158,303

 
2

 
1,002

 
—

 
—

 
1,004

Restricted stock unit settlement
 
8,936

 
—

 
—

 
—

 
—

 
—

Forfeited restricted share awards
 
(56,924
)
 
(1
)
 
1

 
—

 
—

 
—

Stock-based compensation expense
 
—

 
—

 
761

 
—

 
—

 
761

Balance at June 30, 2018
 
23,470,622

 
$
235

 
$
583,468

 
$
(525,616
)
 
$
(284
)
 
$
57,803








4

PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands, except share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive (Loss) Income
 
Total Shareholders' Equity
Balance at December 31, 2018
 
23,186,258

 
$
232

 
$
582,574

 
$
(515,456
)
 
$
(1,021
)
 
$
66,329

Net loss
 
—

 
—

 
—

 
(8,675
)
 
—

 
(8,675
)
Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
244

 
244

Issuances of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
Restricted share awards
 
516,955

 
5

 
(5
)
 
—

 
—

 
—

Restricted shares remitted by employees for taxes
 
(99,885
)
 
(1
)
 
(749
)
 
—

 
—

 
(750
)
Stock option exercises
 
45,380

 
—

 
221

 
—

 
—

 
221

Performance-based restricted stock unit settlement
 
203,524

 
2

 
(2
)
 
—

 
—

 
—

Restricted stock unit settlement
 
27,516

 
—

 
—

 
—

 
—

 
—

Forfeited restricted share awards
 
(24,590
)
 
—

 
—

 
—

 
—

 
—

Repurchase of common stock
 
(243,755
)
 
(2
)
 
(2,226
)
 
—

 
—

 
(2,228
)
Stock-based compensation expense
 
—

 
—

 
3,169

 
—

 
—

 
3,169

Balance at June 30, 2019
 
23,611,403

 
$
236

 
$
582,982

 
$
(524,131
)
 
$
(777
)
 
$
58,310

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
22,419,417

 
$
224

 
$
580,032

 
$
(520,049
)
 
$
107

 
$
60,314

Net loss
 
—

 
—

 
—

 
(5,567
)
 
—

 
(5,567
)
Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
(391
)
 
(391
)
Issuances of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
Restricted share awards
 
306,385

 
3

 
(3
)
 
—

 
—

 
—

Restricted shares remitted by employees for taxes
 
(155,188
)
 
(2
)
 
(1,277
)
 
—

 
—

 
(1,279
)
Stock option exercises
 
485,375

 
5

 
3,259

 
—

 
—

 
3,264

Performance-based restricted stock unit settlement
 
483,623

 
5

 
(5
)
 
—

 
—

 
—

Restricted stock unit settlement
 
18,934

 
—

 
—

 
—

 
—

 
—

Forfeited restricted share awards
 
(87,924
)
 
—

 
—

 
—

 
—

 
—

Stock-based compensation expense
 
—

 
—

 
1,462

 
—

 
—

 
1,462

Balance at June 30, 2018
 
23,470,622

 
$
235

 
$
583,468

 
$
(525,616
)
 
$
(284
)
 
$
57,803




5

PRGX GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 
Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(8,675
)
 
$
(5,567
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
6,318

 
5,235

Operating lease right-of-use asset expense
 
2,248

 
—

Amortization of deferred loan costs
 
117

 
32

Noncash interest expense
 
—

 
616

Stock-based compensation expense
 
3,046

 
2,818

Foreign currency transaction losses on short-term intercompany balances
 
129

 
660

Deferred income taxes
 
—

 
169

Changes in operating assets and liabilities
 
 
 
 
Billed receivables
 
6,593

 
1,211

Unbilled receivables
 
(851
)
 
(1,329
)
Prepaid expenses and other current assets
 
(1,296
)
 
427

Other assets
 
(1,567
)
 
(69
)
Accounts payable and accrued expenses
 
(2,930
)
 
(1,728
)
Accrued payroll and related expenses
 
(4,970
)
 
(3,881
)
Refund liabilities
 
(314
)
 
26

Deferred revenue
 
(292
)
 
388

Long-term incentive compensation payout
 
—

 
(5,380
)
Net cash used in operating activities
 
(2,444
)
 
(6,372
)
Cash flows from investing activities:
 
 
 
 
Business acquisition, net of cash acquired
 
—

 
19

Purchases of property, equipment and software, net of disposal proceeds
 
(7,640
)
 
(5,327
)
Net cash used in investing activities
 
(7,640
)
 
(5,308
)
Cash flows from financing activities:
 
 
 
 
Repayments of credit facility
 
(3,000
)
 
(9,500
)
Proceeds from credit facility
 
14,400

 
13,500

Payment of deferred loan costs
 
(394
)
 
(28
)
Payment of earnout liability related to business acquisitions
 
(479
)
 
(4,000
)
Restricted stock repurchased from employees for withholding taxes
 
(750
)
 
(1,279
)
Repurchases of common stock
 
(2,228
)
 
—

Proceeds from option exercises
 
221

 
3,264

Net cash provided by financing activities
 
7,770

 
1,957

Effect of exchange rates on cash and cash equivalents
 
(55
)
 
739

Net decrease in cash, cash equivalents and restricted cash
 
(2,369
)
 
(8,984
)
Cash, cash equivalents and restricted cash at beginning of period
 
14,019

 
18,874

Cash, cash equivalents and restricted cash at end of period
 
$
11,650

 
$
9,890

Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid during the period for interest
 
$
385

 
$
177

Cash paid during the period for income taxes, net of refunds received
 
$
1,638

 
$
927


See accompanying Notes to Condensed Consolidated Financial Statements.

6
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(1) Basis of Presentation
The accompanying Condensed Consolidated Financial Statements (Unaudited) of PRGX Global, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions for the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six-month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
Except as otherwise indicated or unless the context otherwise requires, “PRGX,” “we,” “us,” “our” and the “Company” refer to PRGX Global, Inc. and its subsidiaries. For further information, refer to the Consolidated Financial Statements and the related Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, except for the Company’s lease policy which has been revised as a result of the implementation of a new standard effective January 1, 2019.
Significant Accounting Policies
Leases
The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property, equipment and software, net. All other leases are categorized as operating leases. The Company’s leases generally have terms that range from two to five years for equipment and two to ten years for real property.
Certain lease contracts include obligations to pay for other services, such as operations and maintenance. For leases of real property, the Company accounts for these other services as a component of the lease. For substantially all other leases, the services are accounted for separately and the Company allocates payments to the lease and other services components based on estimated stand-alone prices.
Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to the Company. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.
When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that the Company will exercise the option, the Company considers these options in determining the classification and measurement of the lease. The Company’s leases may include variable payments based on measures that include changes in price indices, which are expensed as incurred.
Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. Finance lease assets are amortized within operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term.
Impact of Recently Issued Accounting Standards
A summary of the new accounting standards issued by the Financial Accounting Standards Board ("FASB") and included in the Accounting Standards Codification ("ASC") that apply to PRGX is included below:
Adopted by the Company in Fiscal Year 2019
In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in their financial statements in the year of adoption. Effective January 1, 2019,

7


the Company adopted ASU 2016-02 using the modified retrospective approach provided by ASU 2018-11. The Company elected certain practical expedients permitted under the transition guidance, including the election to carryforward historical lease classifications. The Company also elected the short-term lease practical expedient, which allowed the Company to not recognize leases with a term of less than twelve months on our consolidated balance sheets. In addition, the Company elected the lease and non-lease components practical expedient, for real property assets, which allowed us to calculate the present value of the fixed payments without performing an allocation of lease and non-lease components. Adoption of the new standard resulted in recording operating lease right-of-use assets and operating lease liabilities of approximately $14.4 million, with no material cumulative effect adjustment to retained earnings as of the date of adoption. The adoption of this standard did not have a material impact on our condensed Consolidated Statements of Operations or cash flows.
Operating leases are included in Operating lease right-of-use assets, Current portion of operating lease liabilities and Long-term operating lease liabilities on the Company's Condensed Consolidated Balance Sheet.
Accounting Standards Not Yet Adopted
FASB ASU 2016-13 - In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, and early adoption is permitted. The Company currently is evaluating the effect that the adoption of this standard will have on the Company's condensed consolidated financial statements.
FASB ASU 2018-13 - In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The new guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Upon the effective date, certain provisions are to be applied prospectively, while others are to be applied retrospectively to all periods presented. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the effect of this standard on our consolidated financial statement disclosures. Since this standard only affects disclosure requirements, it is not expected to have an impact on the Company's condensed consolidated financial statements.
FASB ASU 2018-15 - In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is evaluating the impact, if any, that this pronouncement will have on its condensed consolidated financial statements.
(2) Net Loss Per Common Share
The following table sets forth the computations of basic and diluted net loss per common share for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share data):  

8
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 
 
Three Months
Ended June 30,
 
Six Months Ended June 30,

 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
 
Net loss from continuing operations
 
$
(4,176
)
 
$
(2,880
)
 
$
(8,417
)
 
$
(5,208
)
Net loss from discontinued operations
 
$
(103
)
 
$
(26
)
 
$
(258
)
 
$
(359
)
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
 
22,763

 
23,283

 
22,687

 
22,930

Basic and diluted net loss per common share from continuing operations
 
$
(0.18
)
 
$
(0.13
)
 
$
(0.37
)
 
$
(0.23
)
Basic and diluted net loss per common share from discontinued operations
 
—

 
—

 
(0.01
)
 
(0.01
)
Total basic and diluted net loss per common share
 
$
(0.18
)
 
$
(0.13
)
 
$
(0.38
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
 
Anti-dilutive securities awarded under equity compensation plans excluded from diluted net loss per share calculation
 
4,277

 
3,783

 
4,277

 
3,783



(3) Stock-Based Compensation
The Company has two stock-based compensation plans under which outstanding equity awards have been granted, the 2008 Equity Incentive Plan ("2008 EIP") and the 2017 Equity Incentive Compensation Plan ("2017 EICP") (collectively, the "Plans"). No additional awards may be granted under the 2008 EIP. Awards granted outside of the Plans are referred to as inducement awards.
During the three and six months ended June 30, 2019, equity awards were granted to certain key employees. The awards included stock options and nonvested stock awards (restricted stock, restricted stock units, and performance-based restricted stock units ("PBUs")).
Summary of Grant Activity
The following is a summary of grant activity for the three months ended June 30, 2019 (in thousands, except number of awards):
 
Three Months Ended June 30, 2019
 
# of Awards Granted
 
Grant Date Fair Value
Stock options
210,000

 
$
504

Restricted stock
183,403

 
1,374

Restricted stock units
74,188

 
480

 
467,591

 
$
2,358

The awards granted in the three months ended June 30, 2019 had the following terms:
•
The stock options vest over three years in approximately equal annual installments commencing one year after the grant date.
•
104,856 shares of the restricted stock vest over two years in equal monthly installments, 60,000 shares of the restricted stock vest over three years in approximately equal annual installments and 18,547 shares of restricted stock vest one year from the grant date.
•
The restricted stock units vest one year from the grant date.

9
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The following is a summary of grant activity for the six months ended June 30, 2019 (in thousands, except number of awards):
 
Six Months Ended June 30, 2019
 
# of Awards Granted
 
Grant Date Fair Value
Stock options
400,000

 
$
1,055

Restricted stock
516,955

 
4,198

Restricted stock units
108,188

 
753

PBUs
19,377

 
174

 
1,044,520

 
$
6,180

The awards granted in the six months ended June 30, 2019 had the following terms:
•
The stock options vest over three years in approximately equal annual installments commencing one year after the grant date.
•
130,436 shares of the restricted stock granted during the first quarter of 2019 vest over three years in approximately equal annual installments.
•
203,116 shares of the restricted stock granted during the first quarter of 2019 vest one year from the grant date.
•
104,856 shares of the restricted stock granted during the second quarter of 2019 vest over two years in equal monthly installments.
•
60,000 shares of the restricted stock granted during the second quarter of 2019 vest over three years in approximately equal annual installments.
•
18,547 shares of the restricted stock vest one year from the grant date.
•
The restricted stock units vest one year from the grant date.
•
The vesting of the PBUs is subject to the satisfaction of certain specified financial performance conditions for the two-year performance period ending on December 31, 2019. PBUs that vest will be settled in shares of the Company's common stock. Stock-based compensation expense for these PBUs is being recognized at the target level of financial performance, as if 100% of the awards will vest.

Additional Information

As of June 30, 2019, there were approximately 2.4 million shares available for future grant under the 2017 EICP.
Stock-based compensation expense for the three months ended June 30, 2019 and 2018 was $1.7 million and $0.9 million, respectively, and $3.0 million and $2.8 million for the six months ended June 30, 2019 and 2018, respectively, and is included in Selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations. As of June 30, 2019, there was $9.7 million of unrecognized stock-based compensation expense related to the Company's outstanding equity awards which will be recognized over approximately 1.7 years.
During the six months ended June 30, 2019, the Company issued 203,524 shares of common stock related to the vesting of PBU awards granted in 2017 and 2018.
(4) Operating Segments and Related Information
The Company conducts its operations through the following three reportable segments:
Recovery Audit Services – Americas represents recovery audit services (other than Healthcare Claims Recovery Audit services) provided in the United States of America (“U.S.”), Canada and Latin America.
Recovery Audit Services – Europe/Asia-Pacific represents recovery audit services (other than Healthcare Claims Recovery Audit services) provided in Europe, Asia and the Pacific region.
Adjacent Services represents data transformation, spend analytics, PRGX OPTIX®, supplier information management ("SIM") services and associated advisory services.

10
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Additionally, Corporate Support includes the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the three reportable segments.
Discontinued Operations
As of December 31, 2015, the Company discontinued its Healthcare Claims Recovery Audit ("HCRA") services business. 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. One of the third-party Medicare RAC-related contracts has been settled and the results are reflected in these financial statements. The Company will continue to incur certain expenses until the remaining Medicare RAC contracts are concluded. Associated with the discontinued HCRA services business, the Company has an accrued liability for outstanding Medicare RAC appeals of approximately $2.0 million and a receivable of approximately $1.7 million for unpaid claims as of June 30, 2019. The HCRA services business is reported as Discontinued Operations in accordance with GAAP.
The following table presents the discontinued operations of the HCRA services business in the Consolidated Statement of Operations, for the three and six months ended June 30, 2019 and 2018 (in thousands):
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue, net
$
—

 
$
157

 
$
—

 
$
157

Cost of sales
96

 
183

 
245

 
512

Selling, general and administrative expense
7

 
—

 
13

 
3

Depreciation and amortization
—

 
—

 
—

 
1

Loss from discontinued operations before income taxes
$
(103
)
 
$
(26
)
 
$
(258
)
 
$
(359
)
Income tax expense
—

 
—

 
—

 
—

Net loss from discontinued operations
$
(103
)
 
$
(26
)
 
$
(258
)
 
$
(359
)
The following table presents the discontinued operations of the HCRA services business in the Consolidated Statements of Cash Flows, for the six months ended June 30, 2019 and 2018 (in thousands):
 
Six Months
Ended June 30,
 
2019
 
2018
Net cash used in operating activities
$
(258
)
 
$
(359
)
Net cash used in investing activities
—

 
—

Net cash provided by financing activities
—

 
—

Decrease in cash and cash equivalents
$
(258
)
 
$
(359
)
The Company evaluates the performance of its reportable segments based upon revenue and measures of profit or loss referred to as EBITDA and Adjusted EBITDA. The Company defines Adjusted EBITDA as earnings from continuing operations before interest and taxes (“EBIT”), adjusted for depreciation and amortization (“EBITDA”), and then further adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period. Such adjustments include restructuring charges, stock-based compensation, bargain purchase gains, acquisition-related charges and benefits (acquisition transaction costs, acquisition obligations classified as compensation, and fair value adjustments to acquisition-related contingent consideration), tangible and intangible asset impairment charges, certain litigation costs and litigation settlements, certain severance charges and foreign currency transaction gains and losses on short-term intercompany balances viewed by management as individually or collectively significant. The Company does not have any inter-segment revenue.

11
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Segment information for the three and six months ended June 30, 2019 and 2018 (in thousands) is as follows:
 
 
 
Recovery
Audit
Services –
Americas
 
Recovery Audit
Services –
Europe/Asia-
Pacific
 
Adjacent
Services
 
Corporate
Support
 
Total
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Revenue, net
 
$
28,935

 
$
11,836

 
$
1,203

 
$
—

 
$
41,974

Net loss from continuing operations
 
 
 
 
 
 
 
 
 
(4,176
)
Income tax expense
 
 
 
 
 
 
 
 
 
311

Interest expense, net
 
 
 
 
 
 
 
 
 
592

EBIT
 
$
6,960

 
$
1,877

 
$
(2,914
)
 
$
(9,196
)
 
$
(3,273
)
Depreciation of property, equipment and software
 
1,919

 
182

 
280

 
—

 
2,381

Amortization of intangible assets
 
438

 
48

 
386

 
—

 
872

EBITDA
 
$
9,317

 
$
2,107

 
$
(2,248
)
 
$
(9,196
)
 
$
(20
)
Other loss
 
1

 
—

 
—

 
10

 
11

Foreign currency transaction (gains) losses on short-term intercompany balances
 
(106
)
 
(99
)
 
6

 
122

 
(77
)
Transformation, severance, and other expenses
 
250

 
122

 
605

 
303

 
1,280

Stock-based compensation
 
—

 
—

 
—

 
1,662

 
1,662

Adjusted EBITDA
 
$
9,462

 
$
2,130

 
$
(1,637
)
 
$
(7,099
)
 
$
2,856


 
 
Recovery
Audit
Services –
Americas
 
Recovery Audit
Services –
Europe/Asia-
Pacific
 
Adjacent
Services
 
Corporate
Support
 
Total
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Revenue, net
 
$
28,912

 
$
11,445

 
$
1,745

 
$
—

 
$
42,102

Net loss from continuing operations
 
 
 
 
 
 
 
 
 
(2,880
)
Income tax expense
 
 
 
 
 
 
 
 
 
189

Interest expense, net
 
 
 
 
 
 
 
 
 
486

EBIT
 
$
4,598

 
$
1,669

 
$
(1,058
)
 
$
(7,414
)
 
$
(2,205
)
Depreciation of property, equipment and software
 
1,719

 
206

 
435

 
—

 
2,360

Amortization of intangible assets
 
436

 
38

 
390

 
—

 
864

EBITDA
 
$
6,753

 
$
1,913

 
$
(233
)
 
$
(7,414
)
 
$
1,019

Other loss (income)
 
—

 
56

 
—

 
(51
)
 
5

Foreign currency transaction losses (gains) on short-term intercompany balances
 
149

 
905

 
13

 
(187
)
 
880

Transformation, severance, and other expenses
 
486

 
472

 
—

 
357

 
1,315

Stock-based compensation
 
—

 
—

 
—

 
873

 
873

Adjusted EBITDA
 
$
7,388

 
$
3,346

 
$
(220
)
 
$
(6,422
)
 
$
4,092




12
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 
 
Recovery
Audit
Services –
Americas
 
Recovery Audit
Services –
Europe/Asia-
Pacific
 
Adjacent
Services
 
Corporate
Support
 
Total
Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Revenue, net
 
$
56,308

 
$
21,595

 
$
2,875

 
$
—

 
$
80,778

Net loss from continuing operations
 
 
 
 
 
 
 
 
 
(8,417
)
Income tax expense
 
 
 
 
 
 
 
 
 
479

Interest expense, net
 
 
 
 
 
 
 
 
 
1,065

EBIT
 
$
12,964

 
$
2,190

 
$
(5,059
)
 
$
(16,968
)
 
$
(6,873
)
Depreciation of property, equipment and software
 
3,681

 
344

 
559

 
—

 
4,584

Amortization of intangible assets
 
876

 
85

 
773

 
—

 
1,734

EBITDA
 
$
17,521

 
$
2,619

 
$
(3,727
)
 
$
(16,968
)
 
$
(555
)
Other loss (income)
 
1

 
9

 
—

 
(18
)
 
(8
)
Foreign currency transaction (gains) losses on short-term intercompany balances
 
(179
)
 
300

 
—

 
8

 
129

Transformation, severance, and other expenses
 
378

 
245

 
623

 
731

 
1,977

Stock-based compensation
 
—

 
—

 
—

 
3,046

 
3,046

Adjusted EBITDA
 
$
17,721

 
$
3,173

 
$
(3,104
)
 
$
(13,201
)
 
$
4,589


 
 
Recovery
Audit
Services –
Americas
 
Recovery Audit
Services –
Europe/Asia-
Pacific
 
Adjacent
Services
 
Corporate
Support
 
Total
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Revenue, net
 
$
54,870

 
$
21,472

 
$
2,481

 
$
—

 
$
78,823

Net loss from continuing operations
 
 
 
 
 
 
 
 
 
(5,208
)
Income tax expense
 
 
 
 
 
 
 
 
 
976

Interest expense, net
 
 
 
 
 
 
 
 
 
884

EBIT
 
$
10,323

 
$
3,217

 
$
(2,779
)
 
$
(14,109
)
 
$
(3,348
)
Depreciation of property, equipment and software
 
2,616

 
348

 
619

 
—

 
3,583

Amortization of intangible assets
 
773

 
99

 
780

 
—

 
1,652

EBITDA
 
$
13,712

 
$
3,664

 
$
(1,380
)
 
$
(14,109
)
 
$
1,887

Other loss (income)
 
—

 
105

 
—

 
(88
)
 
17

Foreign currency transaction losses (gains) on short-term intercompany balances
 
206

 
676

 
4

 
(226
)
 
660

Transformation, severance, and other expenses
 
549

 
1,015

 
68

 
357

 
1,989

Stock-based compensation
 
—

 
—

 
—

 
2,818

 
2,818

Adjusted EBITDA
 
$
14,467

 
$
5,460

 
$
(1,308
)
 
$
(11,248
)
 
$
7,371



13
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(5) Debt
On March 14, 2019, the Company, as co-borrower with PRGX USA, Inc. (“PRGX-USA”), a wholly owned subsidiary that is the Company’s principal domestic operating subsidiary, entered into a five-year Credit Agreement (the “BOA Credit Facility”) with Bank of America, N.A. (“BOA”), and Synovus Bank as the initial lenders thereunder, and with BOA as the letter-of-credit issuer thereunder, as the swingline lender thereunder, and as the administrative agent (the “Administrative Agent”) for the lenders from time to time party thereto. The BOA Credit Facility consists of a $60.0 million senior revolving credit facility (the “Revolver”), with a $5.0 million subfacility for the issuance of letters of credit, and a $5.0 million swingline loan subfacility (the “Swingline Loan”). The BOA Credit Facility is guaranteed by each of PRGX’s direct and indirect domestic wholly owned subsidiaries (other than PRGX-USA), except for certain immaterial domestic subsidiaries. None of PRGX’s direct or indirect foreign subsidiaries has guaranteed the BOA Credit Facility. The BOA Credit Facility is secured by substantially all of the assets of PRGX, PRGX-USA and each guarantor (including the equity interests in substantially all of the Company’s domestic subsidiaries and up to sixty-five percent (65%) of the equity interests of certain of the Company’s first-tier material foreign subsidiaries).
In connection with the closing of the BOA Credit Facility, PRGX borrowed $30.0 million under the Revolver, substantially all of which was used to prepay in full the approximately $29.0 million in outstanding indebtedness owed to the lenders under PRGX’s pre-existing Amended & Restated Revolving Credit Agreement, dated December 23, 2014, as amended from time to time, by and among PRGX, PRGX-USA, the several banks and other financial institutions and lenders from time to time party thereto and SunTrust Bank, in its capacity as administrative agent for the lenders (the "SunTrust Credit Facility"), and to terminate that prior credit facility in its entirety. There were no early termination penalties associated with the termination of the SunTrust Credit Facility.
The BOA Credit Facility will mature on March 14, 2024. Interest is payable quarterly in arrears. There are no prepayment penalties in the event the Company elects to prepay and terminate the BOA Credit Facility prior to its scheduled maturity date, subject to breakage and redeployment costs in certain limited circumstances.
The Revolver bears interest at a rate per annum comprised of a specified index rate based on LIBOR plus an applicable interest rate margin determined under the BOA Credit Facility. For U.S. Dollar denominated loans under the Revolver, at the option of the Borrowers, such loans shall bear interest at a rate per annum equal to (x) the LIBOR daily floating rate plus an applicable interest rate margin determined under the BOA Credit Facility or (y) the base rate plus the applicable interest rate margin, each as determined under the BOA Credit Facility. Although the Company does not anticipate the need for Swingline Loans, were any Swingline Loans to be made they would bear interest at the base rate plus the applicable interest rate margin for base rate loans, each as determined under the BOA Credit Facility. The applicable interest rate margin varies from 1.50% per annum to 2.25% per annum, for LIBOR daily floating rate loans, and from 0.50% per annum to 1.25% per annum, for loans based on the base rate, and in either case depending on the Company’s consolidated leverage ratio, and is determined in accordance with a pricing grid under the BOA Credit Facility.
The BOA Credit Facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports and maintenance of existence. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments and sell assets, but does provide for certain permitted repurchases of shares of its capital stock and the declaration and payment of certain dividends on its capital stock. The financial covenants included in the BOA Credit Facility set forth a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio for the Company, each which will be tested on a quarterly basis; and with the Company having the ability to increase the maximum leverage ratio for a limited time when needed in connection with permitted acquisitions. In addition, the BOA Credit Facility includes customary events of default.
As of June 30, 2019, there was $33.0 million in debt outstanding under the BOA Credit Facility that will be due March 14, 2024. The amount available for additional borrowing under the BOA Credit Facility was $27.0 million as of June 30, 2019. Based on the terms of the BOA Credit Facility, on June 30, 2019 the applicable interest rate (inclusive of the applicable interest rate margin) for LIBOR daily floating rate loans (the only type outstanding on June 30, 2019) was approximately 3.90%. As of June 30, 2019, the Company was required to pay a commitment fee of 0.15% per annum, payable quarterly, on the unused portion of the BOA Credit Facility.

14
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 
As of
June 30, 2019
As of
December 31, 2018
Credit facility(1)
$
33,000

 
$
21,600

DFC (2)
(372
)
 
(65
)
Net credit facility
32,628

 
21,535

Finance lease obligations(1)
42

 
66

Total debt
32,670

 
21,601

Less: Current portion of long-term debt
42

 
48

Long-term debt, excluding current portion
$
32,628

 
$
21,553

(1)
Principal portion of long-term debt. Refer to Future Commitments table below for principal payments to be made on long-term debt.
(2)
DFC refers to deferred financing costs related to the Company's long-term debt.
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 finance lease agreements for each of the fiscal years presented in the table below (in thousands):
Year Ended December 31,
 
 
2019
 
$
25

2020
 
17

2021
 
—

2022
 
—

2023
 
—

2024
 
33,000

Total
 
$
33,042

(6) Fair Value of Financial Instruments
The Company records 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.
The Company records bank debt, if any, as of the period end date based on the effective borrowing rate and repayment terms when originated. The Company had $33.0 million in bank debt outstanding as of June 30, 2019 and $21.6 million in bank debt outstanding as of December 31, 2018. The Company believes the carrying value of the bank debt approximates its fair value. The Company considers the factors used in determining the fair value of this debt to be Level 3 inputs (significant unobservable inputs).
The Company had $4.0 million of business acquisition obligations as of June 30, 2019, and $4.2 million of business acquisition obligations as of December 31, 2018. The Company's business acquisition obligations represent the estimated fair value of the deferred consideration and projected earnout payments due as of the end of the reporting period. The Company determines the estimated fair value of business acquisition obligations based on its projections of future revenue and profits or other factors used in the calculation of the ultimate payment(s) to be made. The discount rate that the Company uses to value the liability is based on specific business risk, cost of capital, and other factors. The Company considers these factors to be Level 3 inputs (significant unobservable inputs). The business acquisition obligations were subsequently settled in July 2019.
The Company states certain assets at fair value on a nonrecurring basis as required by GAAP. Generally, these assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.

15
PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(7) Commitments and Contingencies
Legal Proceedings
The Company is 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 the Company's financial position, results of operations or cash flows.
(8) Income Taxes
Reported income tax expense in each period primarily results from taxes on the income of foreign subsidiaries. The effective tax rates generally differ from the expected tax rate due primarily to the Company’s deferred tax asset valuation allowance on the domestic earnings and taxes on income of foreign subsidiaries.
Significant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service in the U.S. and other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.
The Company applies 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. PRGX refers to GAAP for guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with FASB ASC 740, the Company's 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 tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments also varies by tax jurisdiction.
(9) Leases
The Company primarily leases office space and certain office equipment using noncancelable operating leases. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the implicit rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease terms. Certain of our lease agreements include variable lease payments, primarily related to common area maintenance, insurance and taxes. The variable portion of payments is not included in the initial measurement of the right-of-use asset or lease liability due to the uncertainty of the payment amount and are recorded as lease expense in the period incurred.
The Company's leases have original lease periods expiring between 2019 and 2027, which may include the option to extend the lease when it is reasonably certain the Company will exercise that option. The Company does not have lease agreements with residual value guarantees, sale leaseback terms or material restrictive covenants.
The components of lease expense, lease term and discount rate are as follows (in thousands):
 
 
Three Months
Ended June 30, 2019
 
Six Months
Ended June 30, 2019
Operating lease cost
 
$
1,182

 
$
2,448

Short-term lease cost
 
21

 
42

Variable lease cost
 
411

 
454

Sublease income
 
(18
)
 
(35
)
Total lease cost
 
$
1,596

 
$
2,909






16

As of June 30, 2019, the weighted average remaining lease term and weighted average discount rate for the Company's operating leases were as follows:
 
 
Operating Leases
Weighted Average Remaining Lease Term
 
3.2 years

Weighted Average Discount Rate
 
4.1
%

The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2019 (in thousands):
 
 
Operating Leases
The remainder of 2019
 
$
2,370

2020
 
4,104

2021
 
3,338

2022
 
1,346

2023
 
661

Thereafter
 
583

Total undiscounted cash flows
 
12,402

Less imputed interest
 
(594
)
Present value of lease liabilities
 
$
11,808


Future minimum lease payments under noncancelable operating leases including the amended lease for our principal executive offices, are as of December 31, 2018 (in thousands):
Year Ending December 31,
Gross
Sublease Income
Amount
2019
$
4,974

$
(72
)
$
4,902

2020
3,882

(74
)
3,808

2021
3,248

(77
)
3,171

2022
1,168

—

1,168

2023
488

—

488

Total payments
$
13,760

$
(223
)
$
13,537

Rent expense for the three and six months ended June 30, 2018 was $1.2 million and $2.5 million, respectively.

Supplemental cash flow information related to the Company's operating leases are as follows (in thousands):
 
Six Months
Ended June 30, 2019
Non-cash activity:
 
Right-of-use assets obtained in exchange for operating lease obligations
$
14,479

Operating cash flows:
 
Cash paid for amounts included in the measurement of lease liabilities
$
2,442





17


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Some of the information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which statements involve substantial risks and uncertainties including, without limitation, statements regarding future results of operations or the Company’s financial condition; the adequacy of the Company’s current working capital and other available sources of funds for capital expenditures and otherwise; the Company's goals and plans for the future, including its strategic initiatives and growth opportunities; expectations regarding future revenue and growth trends; and the expected impact of the Company’s decision to exit the Company's Healthcare Claims Recovery Audit Services business. All statements that cannot be assessed until the occurrence of a future event or events should be considered forward-looking. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” or similar words. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price, and current competitive conditions. Risks and uncertainties that may potentially impact these forward-looking statements include, without limitation, those set forth under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and its other periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation or duty to update or modify these forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by law.
There may be events in the future, however, that the Company cannot accurately predict or over which the Company has no control. The risks and uncertainties listed in this section, as well as any cautionary language in this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of any of the events denoted above as risks and uncertainties and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, financial condition and results of operations.
You should read the following discussion and analysis in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018 and our other periodic reports filed with the Securities and Exchange Commission and the condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Except as otherwise indicated or unless context otherwise requires, “PRGX”, “we,” “us,” “our” and the "Company” refer to PRGX Global, Inc. and its subsidiaries.

Business Overview
PRGX Global, Inc. is a global leader in recovery audit and spend analytics, providing a suite of services targeted at our clients' Source-to-Pay ("S2P") business processes. At the heart of our services suite 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.
In addition to recovery audit and spend analytics, we offer advisory and supplier information management ("SIM") services. We deliver services to hundreds of clients and serve clients in more than 30 countries. 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. 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

18

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 segments 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 positions in the market and their market segments;
•
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 value 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.

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 OPTIX analytics 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.

19

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.
Looking ahead, we expect to continue the evolution of our business from its historical auditor-led recovery audit operation, to today’s data-driven, technology-led recovery audit, SIM and analytics solutions, to tomorrow’s next generation payment assurance solutions, which will provide access to software and enable services closer in time to or contemporaneous with the transaction. We believe this evolution will allow us to provide incremental value to our clients and ultimately transform our business from one primarily focused on post-transaction analysis, error identification and recovery, to one with its major emphasis on error prevention and S2P process efficiency.
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, including developing and enhancing our technology platforms and improved operational processes within our recovery audit business. 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 otherwise control our costs. Beginning in the second quarter of 2019 we took steps to improve our profitability. We initiated a cost reduction program and intensified our focus on client profitability. We expect to continue to rationalize expenses across the Company and to address unprofitable client arrangements through renegotiation of terms or contract terminations.
We expect to continue our information technology and product development efforts to improve our services and solutions. We also expect to continue to assess and adjust, as appropriate, the investment in product development, data services, advisory services and recovery audit needed to support new services and client contracts. We believe that our investments in next generation recovery audit technology will further increase the operating leverage in our recovery audit platform in future years. We will continue to assess the success and effectiveness of our sales and marketing efforts and the optimal level of sales and marketing investment for future periods and will make adjustments to associated costs as appropriate.
Discontinued Operations
As of December 31, 2015, the Company discontinued its HCRA business. In connection with the discontinuation of that business, the Company 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. One of the third-party Medicare RAC-related contracts has been settled and the results are reflected in the Company's financial statements included in this report. The Company will continue to incur certain expenses until the remaining Medicare RAC contracts and relationships are concluded.

20


Results of Operations from Continuing Operations
The discussions and financial results in this Item 2 reflect our results from continuing operations.
The following table sets forth the percentage of revenue represented by certain items in the Company’s Condensed Consolidated Statements of Operations (Unaudited) for the periods indicated:
 
 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenue, net
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
Operating expenses:
 
 
 
 
 
 
 
 
Cost of revenue
 
62.7

 
65.1

 
63.8

 
66.2

Selling, general and administrative expenses
 
37.5

 
30.4

 
36.7

 
30.5

Depreciation of property, equipment and software
 
5.7

 
5.6

 
5.7

 
4.5

Amortization of intangible assets
 
2.1

 
2.1

 
2.1

 
2.1

Total operating expenses
 
108.0

 
103.2

 
108.3

 
103.3

Operating loss from continuing operations
 
(8.0
)
 
(3.2
)
 
(8.3
)
 
(3.3
)
Foreign currency transaction (gains) losses on short-term intercompany balances
 
(0.2
)
 
2.1

 
0.2

 
0.8

Interest expense, net
 
1.4

 
1.2

 
1.3

 
1.1

  Net loss from continuing operations before income tax
 
(9.2
)
 
(6.5
)
 
(9.8
)
 
(5.2
)
Income tax expense
 
0.7

 
0.4

 
0.6

 
1.2

Net loss from continuing operations
 
(9.9
)%
 
(6.9
)%
 
(10.4
)%
 
(6.4
)%
Three and Six Months Ended June 30, 2019 Compared to the Corresponding Period of the Prior Year
Revenue, net. Revenue, net was as follows (in thousands):
 
 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Recovery Audit Services – Americas
 
$
28,935

 
$
28,912

 
0.1
 %
 
$
56,308

 
$
54,870

 
2.6
%
Recovery Audit Services – Europe/Asia-Pacific
 
11,836

 
11,445

 
3.4
 %
 
21,595

 
21,472

 
0.6
%
Adjacent Services
 
1,203

 
1,745

 
(31.1
)%
 
2,875

 
2,481

 
15.9
%
Total
 
$
41,974

 
$
42,102

 
(0.3
)%
 
$
80,778

 
$
78,823

 
2.5
%

Consolidated revenue for the three months ended June 30, 2019 was essentially unchanged compared to the same period in 2018. Consolidated revenue for the six months ended June 30, 2019 increased slightly compared to the same period in 2018. Below is a discussion of our revenue for our three reportable segments.
Recovery Audit Services – Americas revenue for the three months ended June 30, 2019 was essentially unchanged compared to the same period in 2018. For the six months ended June 30, 2019, revenue increased 2.6% compared to the same period in 2018. Revenue growth was adversely impacted by lower revenues in the U.S. retail recovery audit business. 
Recovery Audit Services – Europe/Asia-Pacific revenue increased 3.4% and 0.6% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. Revenue in the retail recovery audit business increased, but was partially offset by a decrease in contract compliance audit revenue.
Adjacent Services revenue decreased 31.1% and increased 15.9% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The year-over-year changes in revenue are primarily a result of the size, number and scope of active projects compared to the same periods in 2018.

21

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, our data services costs allocated to client projects, compensation paid to various types of hourly support staff and salaries for operational and client service managers for our recovery audit services and our Adjacent Services businesses. COR also includes other direct and indirect costs incurred by these personnel, including office rent, travel and entertainment, telephone, utilities, maintenance and supplies and clerical assistance. A significant portion of the components comprising COR is variable and will increase or decrease with increases or decreases in revenue. Since the timing of our recognition of recovery audit revenue is impacted by the timing of claims recovery by our clients, which can often take between two and four months for a typical recovery audit engagement and even longer for the more complex contract compliance engagements, our revenue growth may lag incremental variable COR as we grow.
COR was as follows (in thousands):
 
 
 
Three Months
Ended June 30,
 
% of Revenue
 
Six Months
Ended June 30,
 
 
 
% of Revenue
 
 
2019
2018
 
Change
 
2019
2018
 
2019
2018
 
Change
 
2019
2018
Recovery Audit Services – Americas
 
$
16,076

$
19,113

 
(15.9
)%
 
55.6
%
66.1
%
 
$
31,939

$
35,264

 
(9.4
)%
 
56.7
%
64.3
%
Recovery Audit Services – Europe/Asia-Pacific
 
7,189

6,834

 
5.2
 %
 
60.7
%
59.7
%
 
13,915

13,919

 
—
 %
 
64.4
%
64.8
%
Adjacent Services
 
3,047

1,442

 
111.3
 %
 
253.3
%
82.6
%
 
5,693

3,003

 
89.6
 %
 
198.0
%
121.0
%
Total
 
$
26,312

$
27,389

 
(3.9
)%
 
62.7
%
65.1
%
 
$
51,547

$
52,186

 
(1.2
)%
 
63.8
%
66.2
%
COR as a percentage of revenue for Recovery Audit Services - Americas was 55.6% and 56.7% for the three and six months ended June 30, 2019, respectively, compared to 66.1% and 64.3% for the three and six months ended June 30, 2018. The improvement in COR for Recovery Audit Services - Americas as a percentage of revenue is primarily attributable to lower payroll expense in the 2019 periods.
COR as a percentage of revenue for Recovery Audit Services - Europe/Asia-Pacific was essentially unchanged for the three and six months ended June 30, 2019 compared to the same periods in 2018.
COR as a percentage of revenue for Adjacent Services was 253.3% and 198.0% for the three and six months ended June 30, 2019, respectively, compared to 82.6% and 121.0% for the three and six months ended June 30, 2018. The increases in Adjacent Services COR as a percentage of revenue are primarily due to increases in payroll, bonuses and transformation expense associated with the termination of a real property lease.

22

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, finance, executive management, accounting, treasury, administration, and stock-based compensation expense.
SG&A expenses were as follows (in thousands):
 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Recovery Audit Services – Americas
 
$
3,647

 
$
2,897

 
25.9
 %
 
$
7,026

 
$
5,688

 
23.5
%
Recovery Audit Services – Europe/Asia-Pacific
 
2,639

 
1,737

 
51.9
 %
 
4,752

 
3,108

 
52.9
%
Adjacent Services
 
398

 
523

 
(23.9
)%
 
909

 
854

 
6.4
%
Subtotal for reportable segments
 
6,684

 
5,157

 
29.6
 %
 
12,687

 
9,650

 
31.5
%
Corporate Support
 
9,064

 
7,652

 
18.5
 %
 
16,978

 
14,423

 
17.7
%
Total
 
$
15,748

 
$
12,809

 
22.9
 %
 
$
29,665

 
$
24,073

 
23.2
%
Recovery Audit Services – Americas SG&A expenses increased 25.9% and 23.5% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The year-over-year increases in expense were primarily due to increases in our investment in our sales organization.
Recovery Audit Services – Europe/Asia-Pacific SG&A expenses increased 51.9% and 52.9% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The year-over-year increases in expense were primarily due to an increase in bad debt expense.
Adjacent Services SG&A expenses decreased 23.9% and increased 6.4% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The decrease in expense in the second quarter of 2019 was primarily due to a decrease in payroll expense.
Corporate Support SG&A increased 18.5% and 17.7% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. Corporate Support SG&A includes stock-based compensation of $1.7 million and $3.0 million for the three and six months ended June 30, 2019, respectively. Excluding stock-based compensation expense, Corporate Support SG&A expenses increased year-over-year in both the three and six-month periods primarily as a result of our investment in product innovation.

23

Depreciation of property, equipment and software. Depreciation of property, equipment and software was as follows (in thousands):
 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Recovery Audit Services – Americas
 
$
1,919

 
$
1,719

 
11.6
 %
 
$
3,681

 
$
2,616

 
40.7
 %
Recovery Audit Services – Europe/Asia-Pacific
 
182

 
206

 
(11.7
)%
 
344

 
348

 
(1.1
)%
Adjacent Services
 
280

 
435

 
(35.6
)%
 
559

 
619

 
(9.7
)%
Total
 
$
2,381

 
$
2,360

 
0.9
 %
 
$
4,584

 
$
3,583

 
27.9
 %
Depreciation expense increased for the three and six months ended June 30, 2019, compared to the same periods in 2018, as a result of an increased level of capital expenditures and assets placed into service compared to the same periods in 2018.
Amortization of intangible assets. Amortization of intangible assets was as follows (in thousands):
 
 
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Recovery Audit Services – Americas
 
$
438

 
$
436

 
0.5
 %
 
$
876

 
$
773

 
13.3
 %
Recovery Audit Services – Europe/Asia-Pacific
 
48

 
38

 
26.3
 %
 
85

 
99

 
(14.1
)%
Adjacent Services
 
386

 
390

 
(1.0
)%
 
773

 
780

 
(0.9
)%
Total
 
$
872

 
$
864

 
0.9
 %
 
$
1,734

 
$
1,652

 
5.0
 %

Generally, we amortize the customer relationship 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.
Foreign Currency Transaction (Gains) Losses on Short-Term Intercompany Balances. Foreign currency transaction gains and losses on short-term intercompany balances result from fluctuations in the exchange rates for foreign currencies and the U.S. dollar and the impact of these fluctuations, primarily on balances payable by our foreign subsidiaries to their U.S. parent. Substantial changes from period to period in foreign currency exchange rates may significantly impact the amount of such gains and losses. The strengthening of the U.S. dollar relative to other currencies results in recorded losses on short-term intercompany receivables from our foreign subsidiaries while the relative weakening of the U.S. dollar results in recorded gains. In the three and six months ended June 30, 2019, we recorded foreign currency transaction gains of less than $0.1 million and losses of $0.1 million, respectively, on short-term intercompany balances compared to losses of $0.9 million and $0.7 million, respectively, for the same periods in 2018.
Interest Expense, net. Interest expense, net increased $0.1 million and $0.2 million for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The increases are primarily due to increased borrowings under our credit facility.
Income Tax Expense. Our income tax expense amounts as reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) do not reflect amounts that normally would be expected due to several factors. The most significant of these factors is that for U.S. tax reporting purposes we have net operating loss carryforwards and other tax attributes which created deferred tax assets on our balance sheet. We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. Generally, these factors have resulted in minimal income tax expense or benefit relating to our operations in the United States. Reported income tax expense for the three and six months ended June 30, 2019 and 2018 primarily results from taxes on the income of certain of our foreign subsidiaries.
As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to the future realization of deferred tax assets. Over the next twelve months, management may be in the position to have sufficient positive evidence to release partially or in full the valuation allowance held over our U.S. deferred tax assets.





24

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, certain 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 our 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. The adjustments impacting the calculations of EBIT, EBITDA and Adjusted EBITDA may vary from period to period and in the future, we expect to incur expenses of a similar nature 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 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
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Net loss
 
$
(4,279
)
 
$
(2,906
)
 
47.2
 %
 
$
(8,675
)
 
$
(5,567
)
 
55.8
 %
Income tax expense
 
311

 
189

 
64.6
 %
 
479

 
976

 
(50.9
)%
Interest expense, net
 
592

 
486

 
21.8
 %
 
1,065

 
884

 
20.5
 %
EBIT
 
(3,376
)
 
(2,231
)
 
51.3
 %
 
(7,131
)
 
(3,707
)
 
92.4
 %
Depreciation of property, equipment and software
 
2,381

 
2,360

 
0.9
 %
 
4,584

 
3,584

 
27.9
 %
Amortization of intangible assets
 
872

 
864

 
0.9
 %
 
1,734

 
1,652

 
5.0
 %
EBITDA
 
(123
)
 
993

 
(112.4
)%
 
(813
)
 
1,529

 
(153.2
)%
Foreign currency transaction (gains) losses on short-term intercompany balances
 
(77
)
 
880

 
(108.8
)%
 
129

 
660

 
(80.5
)%
Transformation, severance, and other expenses
 
1,280

 
1,315

 
(2.7
)%
 
1,977

 
1,989

 
(0.6
)%
Other loss (income)
 
11

 
5

 
120.0
 %
 
(8
)
 
17

 
(147.1
)%
Stock-based compensation
 
1,662

 
873

 
90.4
 %
 
3,046

 
2,818

 
8.1
 %
Adjusted EBITDA
 
$
2,753

 
$
4,066

 
(32.3
)%
 
$
4,331

 
$
7,013

 
(38.2
)%
Adjusted EBITDA from continuing operations
 
$
2,856

 
$
4,092

 
(30.2
)%
 
$
4,589

 
$
7,371

 
(37.7
)%

Transformation, severance, and other expenses for the three and six months ended June 30, 2019 were essentially unchanged compared to the same periods in 2018. Transformation, severance, and other expenses fluctuate as we transform our business or adjust our cost structure.
Stock-based compensation for the three and six months ended June 30, 2019 increased compared to the same periods in 2018 primarily due to expense associated with the relatively higher number of equity awards granted in the 2019 periods.
Adjusted EBITDA

25

We include a detailed calculation of Adjusted EBITDA by segment in Note 4 of “Notes to Consolidated Financial Statements” in Item 1 of this Form 10-Q. A summary of Adjusted EBITDA, from continuing operations by segment, for the three and six months ended June 30, 2019 and 2018 is as follows (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Recovery Audit Services – Americas
 
$
9,462

 
$
7,388

 
28.1
 %
 
$
17,721

 
$
14,467

 
22.5
 %
Recovery Audit Services – Europe/Asia-Pacific
 
2,130

 
3,346

 
(36.3
)%
 
3,173

 
5,460

 
(41.9
)%
Adjacent Services
 
(1,637
)
 
(220
)
 
(644.1
)%
 
(3,104
)
 
(1,308
)
 
(137.3
)%
Subtotal for reportable segments
 
9,955

 
10,514

 
(5.3
)%
 
17,790

 
18,619

 
(4.5
)%
Corporate Support
 
(7,099
)
 
(6,422
)
 
(10.5
)%
 
(13,201
)
 
(11,248
)
 
(17.4
)%
Total
 
$
2,856

 
$
4,092

 
(30.2
)%
 
$
4,589

 
$
7,371

 
(37.7
)%
Adjusted EBITDA for the three and six months ended June 30, 2019 decreased compared to the same periods in 2018. Adjusted EBITDA as a percentage of revenue decreased for the three and six months ended June 30, 2019 compared to the same periods in 2018.
Recovery Audit Services – Americas Adjusted EBITDA increased for the three and six months ended June 30, 2019 compared to the same periods in 2018. The increases were primarily due to decreases in cost of revenue for the three and six months ended June 30, 2019.
Recovery Audit Services – Europe/Asia-Pacific Adjusted EBITDA decreased for the three and six months ended June 30, 2019 compared to the same periods in 2018. The decreases were primarily due to increased bad debt expenses and changes in foreign currency exchange rates.
Adjacent Services Adjusted EBITDA decreased for the three and six months ended June 30, 2019 compared to the same periods in 2018. The decreases were primarily due to increases in the cost of revenue.
Corporate Support Adjusted EBITDA decreased for the three and six months ended June 30, 2019 compared to the same periods in 2018. The decreases were primarily due to increases in investment in our product innovation team.
Liquidity and Capital Resources and Financial Position
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.
As of June 30, 2019, we had $11.5 million in cash and cash equivalents and $33.0 million of borrowings under our credit facility with Bank of America, N.A. ("BOA"). As of June 30, 2019, the limit on our credit facility was $60.0 million and, subject to compliance with the covenants under our credit facility, we had $27.0 million of availability for additional borrowings. As of June 30, 2019, the Company was in compliance with the covenants in its BOA credit facility.

The $11.5 million in cash and cash equivalents includes $2.3 million held at banks in the U.S. and the remainder held at banks in other jurisdictions, primarily, in France, the United Kingdom, Spain, India, Australia and Canada. 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 jurisdictions 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 for 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 Canadian subsidiary to be permanently reinvested, and have provided for deferred taxes relating to the potential repatriation of the funds held in Canada.

Our cash and cash equivalents as of June 30, 2019 included short-term investments of approximately $1.1 million, the majority of which was held at banks outside of the United States, primarily in Canada, Brazil and Argentina.


26

Operating Activities. Net cash used in operating activities was $2.4 million and $6.4 million for the six months ended June 30, 2019 and 2018, respectively. These amounts consist of two components, specifically, net loss adjusted for certain non-cash items (such as depreciation, amortization, stock-based compensation expense, non-cash interest expense, foreign currency transaction losses (gains) on short term intercompany balances and deferred income taxes) and changes in assets and liabilities, primarily working capital, as follows (in thousands):
 
 
Six Months
Ended June 30,
 
 
2019
 
2018
Net loss
 
$
(8,675
)
 
$
(5,567
)
Adjustments for certain non-cash items
 
11,858

 
9,530

 
 
3,183

 
3,963

Changes in operating assets and liabilities
 
(5,627
)
 
(10,335
)
Net cash used in operating activities
 
$
(2,444
)
 
$
(6,372
)
Investing Activities. Net cash used in investing activities was $7.6 million for the six months ended June 30, 2019, and $5.3 million for the six months ended June 30, 2018, the increase is primarily due to purchases of property and equipment to upgrade the Company's technology infrastructure, computer equipment, and to develop new analytics tools.
Financing Activities. Net cash provided by financing activities was $7.8 million for the six months ended June 30, 2019, primarily resulting from $11.4 million in net borrowings offset by $2.2 million in repurchases of common stock and $0.8 million paid for shares of common stock repurchased by the Company and surrendered by employees to satisfy withholding taxes. Net cash provided by financing activities was $2.0 million for the six months ended June 30, 2018, primarily resulting from $4.0 million in net borrowings primarily to pay the earnout liability associated with the Cost & Compliance Associates, LLC acquisition, $3.3 million in proceeds from option exercises, offset by $1.3 million paid for shares of common stock surrendered by employees to satisfy withholding taxes.
Future Cash Requirements and Restrictions
We expect our capital expenditures to continue through the remainder of 2019 at a rate slightly higher than 2018, primarily for technology infrastructure and software development. Capital expenditures are discretionary, and we currently expect to continue to make capital expenditures to enhance our information technology infrastructure (both hardware and software) and analytics tools in the foreseeable future. Should we experience a change in our operating results, we may alter our capital expenditure plan in accordance with the needs of the Company.
We believe that our existing cash and cash equivalent balances, cash provided from operations, and borrowings available under the Company's BOA credit facility will provide sufficient liquidity to meet our operating and capital expenditure needs for existing operations during the next twelve months.
Secured Credit Facility
On March 14, 2019, the Company, as co-borrower with PRGX USA, Inc. (“PRGX-USA”), a wholly owned subsidiary that is the Company’s principal domestic operating subsidiary, entered into a five-year Credit Agreement (the “BOA Credit Facility”) with BOA, and Synovus Bank as the initial lenders thereunder, and with BOA as the letter-of-credit issuer thereunder, as the swingline lender thereunder, and as the administrative agent (the “Administrative Agent”) for the lenders from time to time party thereto. The BOA Credit Facility consists of a $60.0 million senior revolving credit facility (the “Revolver”), with a $5.0 million subfacility for the issuance of letters of credit, and a $5.0 million swingline loan subfacility (the “Swingline Loan”). The BOA Credit Facility is guaranteed by each of PRGX’s direct and indirect domestic wholly owned subsidiaries (other than PRGX-USA), except for certain immaterial domestic subsidiaries. None of PRGX’s direct or indirect foreign subsidiaries has guaranteed the BOA Credit Facility. The BOA Credit Facility is secured by substantially all of the assets of PRGX, PRGX-USA and each guarantor (including the equity interests in substantially all of the Company’s domestic subsidiaries and up to sixty-five percent (65%) of the equity interests of certain of the Company’s first-tier material foreign subsidiaries).
PRGX used substantially all of the funds initially borrowed under the Revolver to prepay in full the approximately $29.0 million in outstanding indebtedness owed to the lenders under PRGX’s pre-existing Amended & Restated Revolving Credit Agreement, dated December 23, 2014, as amended from time to time, by and among PRGX, PRGX-USA, the several banks and other financial institutions and lenders from time to time party thereto and SunTrust Bank, in its capacity as administrative agent for the lenders (the "SunTrust Credit Facility"), and to terminate the SunTrust Credit Facility in its entirety. There were no early termination penalties associated with the termination of the SunTrust Credit Facility. The terms of the SunTrust Credit Facility

27

are disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and the Company's other SEC filings.
The BOA Credit Facility will mature on March 14, 2024. Interest is payable quarterly in arrears. There are no prepayment penalties in the event the Company elects to prepay and terminate the BOA Credit Facility prior to its scheduled maturity date, subject to breakage and redeployment costs in certain limited circumstances.
The Revolver bears interest at a rate per annum comprised of a specified index rate based on LIBOR plus an applicable interest rate margin determined under the BOA Credit Facility. For U.S. Dollar denominated loans under the Revolver, at the option of the Borrowers, such loans bear interest at a rate per annum equal to (x) the LIBOR daily floating rate plus an applicable interest rate margin determined under the BOA Credit Facility or (y) the base rate plus the applicable interest rate margin, each as determined under the BOA Credit Facility. Although the Company does not anticipate the need for Swingline Loans, were any Swingline Loans to be made they would bear interest at the base rate plus the applicable interest rate margin for base rate loans, each as determined under the BOA Credit Facility. The applicable interest rate margin varies from 1.50% per annum to 2.25% per annum, for LIBOR daily floating rate loans, and from 0.50% per annum to 1.25% per annum, for loans based on the base rate, and in either case depending on the Company’s consolidated leverage ratio, and is determined in accordance with a pricing grid under the BOA Credit Facility.
The BOA Credit Facility includes customary affirmative, negative, and financial covenants binding on the Company, including delivery of financial statements and other reports and maintenance of existence. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments and sell assets, but does provide for certain permitted repurchases of shares of its capital stock and the declaration and payment of certain dividends on its capital stock. The financial covenants included in the BOA Credit Facility set forth a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio for the Company, each which will be tested on a quarterly basis; and with the Company having the ability to increase the maximum leverage ratio for a limited time when needed in connection with permitted acquisitions. In addition, the BOA Credit Facility includes customary events of default.
As of June 30, 2019, there was $33.0 million in debt outstanding under the BOA Credit Facility. The Company was in compliance with the covenants of the BOA Credit Facility as of June 30, 2019.
Capital Allocation
The Company allocates its capital resources to invest in the capital expenditures and operations as needed to execute its business strategy. Today, this includes our investments in our sales and marketing organization, our information technology infrastructure and talent, and our technology solutions. We also look for merger and acquisition opportunities that advance our growth strategy or accelerate our acquisition of key technologies. Finally, we look to return capital to our investors.
On February 21, 2014, the Company's Board of Directors authorized a stock repurchase program under which the Company could repurchase up to $10.0 million of the Company's 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 $75 million and extend the expiration date to December 31, 2019. Since the February 2014 announcement of the program, the Company has repurchased 9.3 million shares of its common stock for an aggregate cost of $50.8 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. As of August 2, 2019, the Company has approximately 23.6 million shares of common stock outstanding.
The timing and amount of future repurchases, if any, will depend upon the Company’s stock price, the amount of the Company’s available cash, regulatory requirements, and other corporate considerations. The Company may initiate, suspend or discontinue purchases under the stock repurchase program at any time.
Off-Balance Sheet Arrangements
As of June 30, 2019, 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.

28



Critical Accounting Policies
We describe the Company’s significant accounting policies in Note 1 of the Company’s Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2018. We consider certain of these accounting policies to be “critical” to the portrayal of the Company’s financial position and results of operations, as they require the application of significant judgment by management. As a result, they are subject to an inherent degree of uncertainty. We identify and discuss these “critical” accounting policies in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes in our critical accounting policies since December 31, 2018.
Management bases its estimates and judgments on historical experience and on various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, management evaluates its estimates and judgments, including those considered “critical”. Management has discussed the development, selection and evaluation of accounting estimates, including those deemed “critical,” and the associated disclosures in this Quarterly Report on Form 10-Q with the Audit Committee of the Board of Directors.

29


Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Market Risk. Our reporting currency is the U.S. dollar, although we transact business in various foreign locations and currencies. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we provide our services. Our operating results are exposed to changes in exchange rates between the U.S. dollar and the currencies of the other countries in which we operate. When the U.S. dollar strengthens against other currencies, the translated value of foreign functional currency results in lower net income. When the U.S. dollar weakens, the translated value of the foreign functional currency results in higher net income. We therefore are adversely affected by a stronger dollar relative to major currencies worldwide. During the three and six months ended June 30, 2019, we recognized $2.7 million and $4.6 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 $0.3 million and $0.5 million for the three and six months ended June 30, 2019. We currently do not have any arrangements in place to hedge our foreign currency risk. The implementation of the United Kingdom's referendum to withdraw membership from the European Union (referred to as "Brexit"), has had a detrimental effect, and could have further detrimental effects, on the value of either or both of the euro and the British pound sterling, which could negatively impact our business (principally from the translation of sales and earnings in those foreign currencies into our reporting currency).
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 the BOA Credit Facility, if any. As of June 30, 2019, we had $27.0 million of borrowing availability under our BOA Credit Facility and $33.0 million borrowed under the BOA Credit Facility as of that date. The Revolver bears interest under the BOA Credit Facility at a rate per annum comprised of a specified index rate based on LIBOR plus an applicable interest rate margin determined under the BOA Credit Facility. Such interest under the BOA Credit Facility shall be at a rate per annum equal to (x) the LIBOR daily floating rate plus an applicable interest rate margin determined under the BOA Credit Facility or (y) the base rate plus the applicable interest rate margin, each as determined under the BOA Credit Facility. Although the Company does not anticipate the need for Swingline Loans, were any Swingline Loans to be made they would bear interest at the base rate plus the applicable interest rate margin for base rate loans, each as determined under the BOA Credit Facility. The applicable interest rate margin varies from 1.50% per annum to 2.25% per annum, for LIBOR daily floating rate loans, and from 0.50% per annum to 1.25% per annum, for loans based on the base rate, and in either case depending on the Company’s consolidated leverage ratio, and is determined in accordance with a pricing grid under the BOA Credit Facility. Assuming full utilization of the BOA Credit Facility, a hypothetical 100 basis point change in interest rates applicable to the revolver would result in an approximate $0.6 million change in annual pre-tax income.


30

Item 4. Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2019.
There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

31

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to a variety of legal proceedings arising in the normal course of business. While the results of these proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes in the risks facing the Company as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company’s current credit facility prohibits the payment of any cash dividends on the Company’s capital stock.
The following table sets forth information regarding the purchases of the Company’s equity securities made by or on behalf of the Company or any affiliated purchaser (as defined in Exchange Act Rule 10b-18) during the three months ended June 30, 2019.
2019
 
Total Number
of Shares
Purchased (a)
 
Average Price
Paid per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum Approximate
Dollar Value of Shares
that May Yet Be
Purchased Under the
Plans or Programs
 
 
 
 
 
 
 
 
(millions of dollars)
April 1 - April 30
 
—

 
$
—

 
—

 
$
—

May 1 - May 31
 
24,705

 
$
6.75

 
—

 
$
—

June 1 - June 30
 
13,599

 
$
5.87

 
—

 
$
—

 
 
38,304

 
$
6.44

 
—

 
$
24.2

(a) Amount includes shares surrendered by employees to satisfy tax withholding obligations resulting from restricted stock awards that vested during the three months ended June 30, 2019.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.


32

Item 6. Exhibits

Exhibit
Number
  
Description
3.1

  
 
 
3.1.1

  
 
 
3.2

  
 
 
4.1

  
 
 
4.2

  
See Restated Articles of Incorporation and Bylaws of the Registrant, filed as Exhibits 3.1 and 3.2, respectively.
 
 
 
31.1

  
 
 
31.2

  
 
 
32.1

  
 
 
 
101.INS

 
XBRL Instance Document
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase
 
 
 
101.LAB

 
XBRL Taxonomy Extension Label Linkbase
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase


33

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
PRGX GLOBAL, INC.
 
 
 
August 9, 2019
By:
 
/s/ Ronald E. Stewart
 
 
 
Ronald E. Stewart
 
 
 
President, Chief Executive Officer, Director
(Principal Executive Officer)
 
 
 
August 9, 2019
By:
 
/s/ Kurt J. Abkemeier
 
 
 
Kurt J. Abkemeier
 
 
 
Chief Financial Officer and Treasurer
(Principal Financial Officer)

34