SEGMENT REPORTING

9 Months Ended

Sep. 30, 2014

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 8:   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 September 30, 2014.

	Three Months Ended September 30, 2014
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	69,139		$	34,816		$	—		$	103,955
Intersegment revenues	187			—			(187		)	—
Operating revenues including intersegment revenue	69,326			34,816			(187		)	103,955
Reimbursable expenses	205			6,846			—			7,051
Total revenues	69,531			41,662			(187		)	111,006
Direct costs, selling, general and administrative costs	49,044			28,987			(187		)	77,844
Segment performance measure	$	20,487		$	12,675		$	—		$	33,162
Segment performance measure as a percentage of segment operating revenue	29.6		%	36.4		%	—			31.9		%

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

	Three Months Ended September 30, 2013
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	75,624		$	34,213		$	—		$	109,837
Intersegment revenues	154			—			(154		)	—
Operating revenues including intersegment revenue	75,778			34,213			(154		)	109,837
Reimbursable expenses	676			5,171			—			5,847
Total revenues	76,454			39,384			(154		)	115,684
Direct costs, selling, general and administrative costs	50,857			28,589			(154		)	79,292
Segment performance measure	$	25,597		$	10,795		$	—		$	36,392
Segment performance measure as a percentage of segment operating revenue	33.8		%	31.6		%	—			33.1		%

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

	Three Months Ended September 30,
	2014			2013
	(in thousands)
Segment performance measure	$	33,162		$	36,392
Unallocated corporate expenses	(11,805		)	(12,222		)
Share-based compensation expense	(703		)	(1,332		)
Depreciation and software and leasehold amortization	(9,693		)	(8,192		)
Amortization of intangible assets	(3,184		)	(4,761		)
Gain (loss) on disposition of property and equipment	175			(7		)
Other operating (expense) income	(390		)	855
Income from operations	7,562			10,733
Interest expense, net	(3,941		)	(4,099		)
Income before income taxes	$	3,621		$	6,634

Following is a summary of segment information for the nine months ended September 30, 2014.

	Nine Months Ended September 30, 2014
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	228,831		$	106,795		$	—		$	335,626
Intersegment revenues	625			—			(625		)	—
Operating revenues including intersegment revenue	229,456			106,795			(625		)	335,626
Reimbursable expenses	2,162			21,545			—			23,707
Total revenues	231,618			128,340			(625		)	359,333
Direct costs, selling, general and administrative costs	168,296			89,811			(625		)	257,482
Segment performance measure	$	63,322		$	38,529		$	—		$	101,851
Segment performance measure as a percentage of segment operating revenue	27.7		%	36.1		%	—			30.3		%

Following is a summary of segment information for the nine months ended September 30, 2013.

	Nine Months Ended September 30, 2013
	Technology			Bankruptcy and Settlement Administration			Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	200,537		$	117,184		$	—		$	317,721
Intersegment revenues	237			—			(237		)	—
Operating revenues including intersegment revenue	200,774			117,184			(237		)	317,721
Reimbursable expenses	1,498			33,427			—			34,925
Total revenues	202,272			150,611			(237		)	352,646
Direct costs, selling, general and administrative costs	138,523			114,294			(237		)	252,580
Segment performance measure	$	63,749		$	36,317		$	—		$	100,066
Segment performance measure as a percentage of segment operating revenue	31.8		%	31.0		%	—			31.5		%

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

	Nine Months Ended September 30,
	2014			2013
	(in thousands)
Segment performance measure	$	101,851		$	100,066
Unallocated corporate expenses	(49,834		)	(33,545		)
Share-based compensation expense	(4,979		)	(5,696		)
Depreciation and software and leasehold amortization	(27,648		)	(22,582		)
Amortization of intangible assets	(9,470		)	(14,463		)
Fair value adjustment to contingent consideration	(1,142		)	—
Loss on disposition of property and equipment	(176		)	(29		)
Other operating (expense) income	(616		)	759
Income from operations	7,986			24,510
Interest expense, net	(12,657		)	(7,930		)
Income (loss) before income taxes	$	(4,671	)	$	16,580

Following are total assets by segment.

	September 30,  2014		December 31, 2013
	(in thousands)
Assets
Technology	$	348,570	$	369,135
Bankruptcy and Settlement Administration	280,069		281,073
Unallocated corporate	86,537		97,573
Total consolidated assets	$	715,176	$	747,781