SEGMENT REPORTING

6 Months Ended

Jun. 30, 2014

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 7:   SEGMENT REPORTING

We report our financial performance based on the following two reportable segments:  the Technology segment and the Bankruptcy and Settlement Administration segment.

Our Technology segment provides eDiscovery managed services and technology solutions comprised of consulting, collections and forensics, processing, search and review, and document review to companies and law firms.  Produced documents are made available primarily through a hosted environment utilizing our proprietary software DocuMatrix®, and third-party software which allows for efficient attorney review and data requests.  Our Bankruptcy and Settlement Administration segment provides managed services and technology solutions that address the needs of our customers with respect to litigation, claims and project administration, compliance matters, controlled disbursements, corporate restructuring, bankruptcy and class action proceedings.

The segment performance measure is based on earnings before interest, taxes, depreciation and amortization, other operating expense, and share-based compensation expense.  In management’s evaluation of performance, certain costs, such as compensation for administrative staff and executive management, are not allocated by segment and, accordingly, the following reporting segment results do not include such unallocated costs.

Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, equipment and leasehold improvements, software, identifiable intangible assets and goodwill.  Cash, certain tax-related assets, and certain prepaid assets and other assets are not allocated to our segments.  Although we can and do identify long-lived assets such as property, equipment and leasehold improvements, software, and identifiable intangible assets to reporting segments, we do not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges.

Following is a summary of segment information for the three months ended June 30, 2014.

	Three Months Ended June 30, 2014
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	78,523		$	36,928		$	—		$	115,451
Intersegment revenues	258			—			(258		)	—
Operating revenues including intersegment revenue	78,781			36,928			(258		)	115,451
Reimbursable expenses	850			8,755			—			9,605
Total revenues	79,631			45,683			(258		)	125,056
Direct costs, selling, general and administrative costs	59,094			31,780			(258		)	90,616
Segment performance measure	$	20,537		$	13,903		$	—		$	34,440
Segment performance measure as a percentage of segment operating revenue	26.2		%	37.6		%	—			29.8		%

Following is a summary of segment information for the three months ended June 30, 2013.

	Three Months Ended June 30, 2013
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	70,126		$	34,850		$	—		$	104,976
Intersegment revenues	78			—			(78		)	—
Operating revenues including intersegment revenue	70,204			34,850			(78		)	104,976
Reimbursable expenses	535			7,861			—			8,396
Total revenues	70,739			42,711			(78		)	113,372
Direct costs, selling, general and administrative costs	48,979			31,788			(78		)	80,689
Segment performance measure	$	21,760		$	10,923		$	—		$	32,683
Segment performance measure as a percentage of segment operating revenue	31.0		%	31.3		%	—			31.1		%

Following is a reconciliation of our segment performance measure to income (loss) before income taxes.

	Three Months Ended June 30,
	2014			2013
	(in thousands)
Segment performance measure	$	34,440		$	32,683
Unallocated corporate expenses	(21,988		)	(11,017		)
Share-based compensation expense	(737		)	(2,825		)
Depreciation and software and leasehold amortization	(9,255		)	(7,391		)
Amortization of intangible assets	(3,166		)	(4,736		)
Loss on disposition of property and equipment	(339		)	(4		)
Other operating expense	(157		)	(49		)
Income (loss) from operations	(1,202		)	6,661
Interest expense, net	(3,843		)	(1,996		)
Income (loss) before income taxes	$	(5,045	)	$	4,665

Following is a summary of segment information for the six months ended June 30, 2014.

	Six Months Ended June 30, 2014
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	159,692		$	71,979		$	—		$	231,671
Intersegment revenues	438			—			(438		)	—
Operating revenues including intersegment revenue	160,130			71,979			(438		)	231,671
Reimbursable expenses	1,957			14,699			—			16,656
Total revenues	162,087			86,678			(438		)	248,327
Direct costs, selling, general and administrative costs	119,252			60,824			(438		)	179,638
Segment performance measure	$	42,835		$	25,854		$	—		$	68,689
Segment performance measure as a percentage of segment operating revenue	26.8		%	35.9		%	—			29.6		%

Following is a summary of segment information for the six months ended June 30, 2013.

	Six Months Ended June 30, 2013
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	124,913		$	82,971		$	—		$	207,884
Intersegment revenues	83			—			(83		)	—
Operating revenues including intersegment revenue	124,996			82,971			(83		)	207,884
Reimbursable expenses	822			28,256			—			29,078
Total revenues	125,818			111,227			(83		)	236,962
Direct costs, selling, general and administrative costs	87,666			85,705			(83		)	173,288
Segment performance measure	$	38,152		$	25,522		$	—		$	63,674
Segment performance measure as a percentage of segment operating revenue	30.5		%	30.8		%	—			30.6		%

Following is a reconciliation of our segment performance measure to income (loss) before income taxes.

	Six Months Ended June 30,
	2014			2013
	(in thousands)
Segment performance measure	$	68,689		$	63,674
Unallocated corporate expenses	(38,029		)	(21,323		)
Share-based compensation expense	(4,276		)	(4,364		)
Depreciation and software and leasehold amortization	(17,955		)	(14,390		)
Amortization of intangible assets	(6,286		)	(9,702		)
Fair value adjustment to contingent consideration	(1,142		)	—
Loss on disposition of property and equipment	(351		)	(22		)
Other operating expense	(226		)	(96		)
Income from operations	424			13,777
Interest expense, net	(8,716		)	(3,831		)
Income (loss) before income taxes	$	(8,292	)	$	9,946

Following are total assets by segment.

	June 30,  2014		December 31, 2013
	(in thousands)
Assets
Technology	$	355,786	$	369,135
Bankruptcy and Settlement Administration	288,441		281,073
Unallocated corporate	79,559		97,573
Total consolidated assets	$	723,786	$	747,781