EX-99.1 2 d529410dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

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Press Release

PRGX Global, Inc. Announces First Quarter

2013 Financial Results

Highlights

 

 

Q1 revenue of $45.1M and Adjusted EBITDA of $4.4M, in line with previously announced ranges

 

 

Profit Optimization Q1 revenue reflects both sequential and year-over-year growth

 

 

Recovery Audit Services – Americas Q1 gross margin percentage increased over Q1 2012 despite revenue challenges, reflecting ongoing impact of the Service Delivery Model Redesign program

 

 

Awaiting results of bid for Centers for Medicare & Medicaid Services (CMS) Medicare Part A/B Recovery Audit Contractor (RAC) Program

ATLANTA, April 29, 2013 — PRGX Global, Inc. (Nasdaq:PRGX), the world’s leading provider of recovery audit services and the pioneer in Profit Discovery™, today announced its unaudited financial results for the first quarter ended March 31, 2013.

“We had a tough quarter. Two of our three growth levers, including the core recovery audit business which is by far the largest part of our revenue, underperformed compared to the same quarter last year. Historically, our portfolio of clients and services has insulated us from volatility within and across our business segments. Q1 2013 represents the rare instance where multiple challenges worked against us. That said, we expect the remainder of the year to improve for our core business and for our profit optimization service line to continue to gain market traction. The financial performance of our healthcare business, which was expected to grow in 2013 under our current RAC Program subcontracts, will be largely dependent on the outcome of the CMS RAC Program rebid and the related transition timelines,” said Romil Bahl, president and chief executive officer.

“In our Recovery Audit Services segments, revenue was impacted by delays at key retail clients and in our commercial business. However, we expect the majority of this revenue will not be lost but rather shifted to later in the year. Our Europe/Asia-Pacific (EAP) business is still being affected by the tough macroeconomic environment in Europe that recently put three clients into bankruptcy. Our EAP leadership team has plans in place to both address revenue as well as drive efficiencies by deploying our global service delivery model,” continued Bahl.

“In our New Services segment, our Healthcare Claims Recovery Audit team dealt with claim delays resulting from Medicare claims processing system changes as well as a temporary drop in findings rates. The team restored the findings rates back to historical levels by quarter end, while also working on our proposal to CMS for the Medicare Part A/B RAC program rebid. We are committed to maximizing the recoveries we can generate for CMS under the current contract and eagerly await the results of the rebid,” said Bahl.

 

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“Finally, the Profit Optimization team continued on the positive trajectory that it had coming out of 2012, including some nice wins in our newer services. Together our different teams are building a consolidated value proposition that is resonating with our clients and has us excited about the future,” concluded Bahl.

Consolidated Results for Three Months Ended March 31, 2013

Consolidated revenue for the first quarter of 2013 decreased 12.7% to $45.1 million compared to $51.6 million in the same prior year period. After adjusting for changes in foreign exchange rates, consolidated first quarter revenue in 2013 decreased 11.9% compared to the same period in 2012.

Recovery Audit Services – Americas revenue for the first quarter of 2013 decreased 8.9% to $26.2 million compared to $28.8 million in the same period in the prior year. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services – Americas revenue decreased by 8.4% compared to 2012.

Recovery Audit Services – Europe/Asia-Pacific revenue for the first quarter of 2013 decreased 23.0% to $11.0 million compared to $14.3 million in the same period in the prior year. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services – Europe/Asia-Pacific revenue decreased by 21.4% compared to 2012.

New Services revenue for the first quarter of 2013 decreased 8.1% to $7.8 million compared to $8.5 million in the same period in the prior year. The New Services segment represents Healthcare Claims Recovery Audit services and our Profit Optimization services. Revenue from New Services represented 17.4% of consolidated revenue for the first quarter of 2013 compared to 16.5% of consolidated revenue in the same period in the prior year.

Total cost of revenue for the first quarter of 2013 was $30.4 million, or 67.4% of revenue, compared to $34.2 million, or 66.3% of revenue, in the same period in the prior year. Total cost of revenue included decreases in both of our recovery audit segments driven by the expanded use of our Next-Generation Recovery Audit service model. Cost of revenue as a percentage of revenue declined in the Recovery Audit Services – Americas segment, but increased in the Company’s other two reporting segments. SG&A for the first quarter of 2013 was $11.7 million, or 26.0% of revenue, compared to $12.6 million, or 24.5% of revenue, in the same period in the prior year. Depreciation and amortization expenses were $3.3 million in the first quarter of 2013 compared to $3.8 million in the prior year first quarter. Net loss for the first quarter of 2013 was $(0.5) million, or $(0.02) per basic and diluted share, compared to net earnings of $0.3 million, or $0.01 per basic and diluted share, for the same period in 2012. Net cash provided by operating activities for the first quarter of 2013 was $0.8 million compared to $2.0 million in the first quarter of 2012. The decrease in net cash provided by operating activities is primarily due to lower operating income resulting from reduced revenue.

 

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Adjusted EBITDA for the first quarter of 2013 was $4.4 million compared to $6.8 million of Adjusted EBITDA for the same period in 2012. The 2013 first quarter Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization (EBITDA) excluding a charge of $1.3 million related to stock-based compensation, a $0.1 million charge for acquisition obligations classified as compensation, and $0.4 million of foreign currency losses on short-term intercompany balances. The comparable Adjusted EBITDA amount for the first quarter of 2012 excludes from EBITDA for such period a $1.4 million charge for stock-based compensation, $0.2 million in wage claim costs, $0.2 million of transformation severance and related expenses, a $0.1 million charge for acquisition obligations classified as compensation and $0.3 million of foreign currency gains on short-term intercompany balances. Schedule 3 attached to this press release provides a reconciliation of net earnings (loss) to each of EBIT (earnings before interest and taxes), EBITDA and Adjusted EBITDA.

Liquidity

At March 31, 2013, the Company had unrestricted cash and cash equivalents of $37.8 million and had no borrowings against its revolving credit facility. Bank debt outstanding at quarter end was $5.3 million, which represented the outstanding balance on a variable rate term loan due quarterly through December 2013, with a final payment due in January 2014.

First Quarter Earnings Call

As previously announced, management will hold a conference call tomorrow morning at 8:30 AM (Eastern time) to discuss the Company’s first quarter 2013 financial results. To access the conference call, listeners in the U.S. and Canada should dial (877) 755-7423 at least 5 minutes prior to the start of the conference. Listeners outside the U.S. and Canada should dial (678) 894-3069. To be admitted to the call, listeners should use passcode 33409158.

This teleconference will also be audiocast on the Internet at www.prgx.com (click on “Events & Presentations” under “Investors”). A replay of the audiocast will be available at the same location on www.prgx.com beginning approximately two hours after the conclusion of the live audiocast, extending through June 30, 2013. Please note that the Internet audiocast is “listen-only.” Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded from www.microsoft.com/windows/mediaplayer.

About PRGX Global, Inc.

Headquartered in Atlanta, Georgia, PRGX Global, Inc. is the world’s leading provider of recovery audit services. With over 1,700 employees, the Company operates and serves clients in more than 30 countries and provides its services to over 75% of the top 30 global retailers. PRGX is also pioneering Profit Discovery, a unique combination of audit, analytics and advisory services that improves client financial performance. For additional information, please visit PRGX at www.prgx.com.

Forward-Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company’s plans and anticipated financial results for the remainder of 2013, the outcome of the rebid of Medicare RAC program contracts and associated transitions and resulting

 

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anticipated impacts on the Company’s financial results, and the expected benefits of the Company’s redesigned recovery audit service delivery model. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. Risks that could affect the Company’s future performance include revenue that does not meet expectations or justify costs incurred, the Company’s ability to develop material sources of new revenue in addition to revenue from its core recovery audit services, changes in the market for the Company’s services, the Company’s ability to retain and attract qualified personnel, changes to Medicare and Medicaid recovery audit contractor programs and the outcome of the rebid of the Medicare RAC program contracts, the Company’s ability to integrate recent and future acquisitions, uncertainty in the credit markets, the Company’s ability to maintain compliance with its financial covenants, client bankruptcies, loss of major clients, and other risks generally applicable to the Company’s business. For a discussion of other risk factors that may impact the Company’s business, please see the Company’s filings with the Securities and Exchange Commission, including its Form 10-K filed on March 13, 2013. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

Non-GAAP Financial Measures

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, or GAAP. The Company believes these measures provide additional meaningful information in evaluating its performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company’s secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that, as described above, the adjustments may vary from period to period and in the future the Company will incur expenses such as those used in calculating these measures. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. Schedule 3 to this press release provides a reconciliation of net earnings (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: PRGX Global, Inc.

CONTACT: PRGX Global, Inc.

investor-relations@prgx.com

Phone: 770-779-3011

 

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SCHEDULE 1

PRGX Global, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Amounts in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  

Revenue

   $ 45,101      $ 51,649   

Operating expenses:

    

Cost of revenue

     30,407        34,218   

Selling, general and administrative expenses

     11,711        12,637   

Depreciation of property and equipment

     2,008        1,513   

Amortization of intangible assets

     1,276        2,327   
  

 

 

   

 

 

 

Total operating expenses

     45,402        50,695   
  

 

 

   

 

 

 

Operating income (loss)

     (301     954   

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

     357        (339

Interest expense (income), net

     (217     504   
  

 

 

   

 

 

 

Earnings (loss) before income taxes

     (441     789   
  

 

 

   

 

 

 

Income tax expense

     56        497   
  

 

 

   

 

 

 

Net earnings (loss)

   $ (497   $ 292   
  

 

 

   

 

 

 

Basic earnings (loss) per common share

   $ (0.02   $ 0.01   
  

 

 

   

 

 

 

Diluted earnings (loss) per common share

   $ (0.02   $ 0.01   
  

 

 

   

 

 

 

Weighted average common shares outstanding:

    

Basic

     28,770        25,309   
  

 

 

   

 

 

 

Diluted

     28,770        25,765   
  

 

 

   

 

 

 

 

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SCHEDULE 2

PRGX Global, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Amounts in thousands)

(Unaudited)

 

     March 31,
2013
    December 31,
2012
 
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 37,787      $ 37,806   

Restricted cash

     129        65   

Receivables:

    

Contract receivables, net

     38,284        45,127   

Employee advances and miscellaneous receivables, net

     1,198        1,352   
  

 

 

   

 

 

 

Total receivables

     39,482        46,479   

Prepaid expenses and other current assets

     4,124        3,853   
  

 

 

   

 

 

 

Total current assets

     81,522        88,203   

Property and equipment, net

     19,555        19,574   

Goodwill

     13,611        13,669   

Intangible assets, net

     16,934        18,399   

Deferred income taxes

     1,630        1,552   

Other assets

     1,742        2,189   
  

 

 

   

 

 

 

Total assets

   $ 134,994      $ 143,586   
  

 

 

   

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY   

Current liabilities:

    

Accounts payable and accrued expenses

   $ 11,674      $ 14,136   

Accrued payroll and related expenses

     13,652        20,874   

Refund liabilities and deferred revenue

     8,639        8,530   

Current portion of debt

     5,250        3,000   

Business acquisition obligations

     3,098        4,218   
  

 

 

   

 

 

 

Total current liabilities

     42,313        50,758   

Long-term debt

     —           3,000   

Noncurrent business acquisition obligations

     —           2,479   

Other long-term liabilities

     2,276        2,697   
  

 

 

   

 

 

 

Total liabilities

     44,589        58,934   
  

 

 

   

 

 

 

Shareholders’ equity:

    

Common stock

     289        279   

Additional paid-in capital

     600,769        594,045   

Accumulated deficit

     (513,697     (513,200

Accumulated other comprehensive income

     3,044        3,528   
  

 

 

   

 

 

 

Total shareholders’ equity

     90,405        84,652   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 134,994      $ 143,586   
  

 

 

   

 

 

 

 

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Reconciliation of Net Earnings (Loss) to EBIT, EBITDA and Adjusted EBITDA

(Amounts in thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  

Reconciliation of net earnings (loss) to EBIT, EBITDA and Adjusted EBITDA:

    

Net earnings (loss)

   $ (497   $ 292   

Income tax expense

     56        497   

Interest expense (income), net

     (217     504   
  

 

 

   

 

 

 

EBIT

     (658     1,293   

Depreciation of property and equipment

     2,008        1,513   

Amortization of intangible assets

     1,276        2,327   
  

 

 

   

 

 

 

EBITDA

     2,626        5,133   

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

     357        (339

Acquisition obligations classified as compensation

     56        101   

Transformation severance and related expenses

     —           242   

Wage claim costs

     —           249   

Stock-based compensation

     1,318        1,401   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,357      $ 6,787   
  

 

 

   

 

 

 

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

 

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SCHEDULE 4

PRGX Global, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Cash flows from operating activities:

    

Net earnings (loss)

   $ (497   $ 292   

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     3,284        3,840   

Amortization of deferred debt costs

     46        46   

Stock-based compensation expense

     1,318        1,401   

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

     357        (339

Decrease in receivables

     6,670        1,187   

Decrease in accounts payable, accrued payroll and other accrued expenses

     (9,338     (5,482

Other, primarily changes in assets and liabilities

     (991     1,029   
  

 

 

   

 

 

 

Net cash provided by operating activities

     849        1,974   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Business acquisitions

     —          (997

Purchases of property and equipment, net of disposals

     (2,207     (1,967
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,207     (2,964
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net proceeds from issuance of common stock

     4,118        —     

Other, net

     (2,500     (1,571
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,618        (1,571
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     (279     416   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (19     (2,145

Cash and cash equivalents at beginning of period

     37,806        20,337   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 37,787      $ 18,192   
  

 

 

   

 

 

 

 

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SCHEDULE 5

PRGX Global, Inc. and Subsidiaries

Results by Operating Segment *

(Amounts in thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012     Change  

Revenue

      

Recovery Audit Services - Americas

   $ 26,242      $ 28,813      $ (2,571

Recovery Audit Services - Europe/Asia-Pacific

     11,017        14,305        (3,288

New Services

     7,842        8,531        (689
  

 

 

   

 

 

   

 

 

 

Total

   $ 45,101      $ 51,649      $ (6,548
  

 

 

   

 

 

   

 

 

 

Cost of revenue

      

Recovery Audit Services - Americas

   $ 14,350      $ 15,952      $ 1,602   

Recovery Audit Services - Europe/Asia-Pacific

     9,245        11,075        1,830   

New Services

     6,812        7,191        379   
  

 

 

   

 

 

   

 

 

 

Total

   $ 30,407      $ 34,218      $ 3,811   
  

 

 

   

 

 

   

 

 

 

Selling, general and administrative expenses

      

Recovery Audit Services - Americas

   $ 4,320      $ 4,862      $ 542   

Recovery Audit Services - Europe/Asia-Pacific

     517        1,251        734   

New Services

     1,481        1,397        (84

Corporate

     5,393        5,127        (266
  

 

 

   

 

 

   

 

 

 

Total

   $ 11,711      $ 12,637      $ 926   
  

 

 

   

 

 

   

 

 

 

Depreciation of property and equipment

      

Recovery Audit Services - Americas

   $ 1,368      $ 915      $ (453

Recovery Audit Services - Europe/Asia-Pacific

     112        40        (72

New Services

     528        558        30   
  

 

 

   

 

 

   

 

 

 

Total

   $ 2,008      $ 1,513      $ (495
  

 

 

   

 

 

   

 

 

 

Amortization of intangible assets

      

Recovery Audit Services - Americas

   $ 698      $ 1,586      $ 888   

Recovery Audit Services - Europe/Asia-Pacific

     396        539        143   

New Services

     182        202        20   
  

 

 

   

 

 

   

 

 

 

Total

   $ 1,276      $ 2,327      $ 1,051   
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

      

Recovery Audit Services - Americas

   $ 5,506      $ 5,498      $ 8   

Recovery Audit Services - Europe/Asia-Pacific

     747        1,400        (653

New Services

     (1,161     (817     (344

Corporate

     (5,393     (5,127     (266
  

 

 

   

 

 

   

 

 

 

Total

   $ (301   $ 954      $ (1,255
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

      

Recovery Audit Services - Americas

   $ 7,572      $ 8,338      $ (766

Recovery Audit Services - Europe/Asia-Pacific

     1,255        2,036        (781

New Services

     (395     139        (534

Corporate

     (4,075     (3,726     (349
  

 

 

   

 

 

   

 

 

 

Total

   $ 4,357      $ 6,787      $ (2,430
  

 

 

   

 

 

   

 

 

 

 

* The Recovery Audit Services - Americas segment represents recovery audit services, excluding New Services, provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services provided in Europe, Asia and the Pacific region. The New Services segment represents Healthcare Claims Recovery Audit services and Profit Optimization services.

 

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