10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2016

or

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

For the transition period from  to

Press Ganey Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-37398	20‑0259496
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
	401 Edgewater Place
	Suite 500
	Wakefield, Massachusetts 01880
	(Address of Principal Executive Offices) (Zip Code)

(781) 295‑5000

(Registrant’s telephone number, including area code)

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   ☐  No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non‑accelerated filer ☒
(Do not check if a
smaller reporting company) Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).    ☐  Yes    ☒   No

There were 52,865,354 shares of common stock outstanding as of May 2, 2016.

PRESS GANEY HOLDINGS, INC.

INDEX TO FORM 10-Q

March 31, 2016
		Page
PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015	1
	Unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2016 and 2015	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	3
	Unaudited Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 6.	Exhibits	20
SIGNATURES		21

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Press Ganey Holdings, Inc.

Condensed Consolidated Balance Sheets

(Thousands of dollars, except share amounts)

	March 31,		December 31,
	2016		2015
	(Unaudited)
ASSETS
Current assets:
Cash	$	56,632	$	35,235
Accounts receivable, net of allowances of $737 and $774 at March 31, 2016 and December 31, 2015, respectively		56,812		53,568
Other receivables		3,242		2,993
Prepaid expenses and other assets		5,187		4,603
Income taxes receivable		—		4,603
Total current assets		121,873		101,002
Property and equipment, net		58,102		60,262
Deferred financing fees, net		848		897
Intangible assets, net		358,269		362,465
Goodwill		411,203		411,203
Total assets	$	950,295	$	935,829
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	9,250	$	9,250
Current portion of capital lease obligations		4,778		4,626
Accounts payable		5,382		9,420
Accrued payroll and related liabilities		10,055		15,830
Accrued expenses and other liabilities		2,208		1,969
Income taxes payable		2,776		—
Deferred revenue		43,604		31,555
Total current liabilities		78,053		72,650
Long-term debt, less current portion		169,034		171,226
Capital lease obligations, less current portion		3,611		4,165
Deferred income taxes		123,975		125,179
Total liabilities		374,673		373,220
Commitments and contingencies		—		—
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value, 350,000,000 shares authorized; 52,843,986 and 52,770,722 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively		528		528
Additional paid-in capital		603,470		598,575
Accumulated deficit		(28,376)		(36,494)
Total shareholders' equity		575,622		562,609
Total liabilities and shareholders' equity	$	950,295	$	935,829

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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Press Ganey Holdings, Inc.

Condensed Consolidated Statements of Income

(Thousands of dollars, except share and per share amounts)

(Unaudited)

	Three Months Ended
	March 31,
	2016		2015
Revenue	$	86,731	$	74,891
Operating expenses:
Cost of revenue		36,469		31,427
General and administrative		22,644		18,301
Depreciation and amortization		11,572		9,859
Loss (gain) on disposal of property and equipment		18		(46)
Total operating expenses		70,703		59,541
Income from operations		16,028		15,350
Other income (expense):
Interest expense, net		(1,230)		(4,579)
Management fee of related party		—		(286)
Total other income (expense), net		(1,230)		(4,865)
Income before income taxes		14,798		10,485
Provision for income taxes		6,680		4,511
Net income	$	8,118	$	5,974
Earnings per share:
Basic	$	0.15	$	0.14
Diluted	$	0.15	$	0.14
Weighted average shares of common stock outstanding:
Basic		52,806,364		43,313,200
Diluted		53,286,140		43,313,200

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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Press Ganey Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Thousands of dollars)

(Unaudited)

	Three Months Ended
	March 31,
	2016		2015
Operating activities
Net income	$	8,118	$	5,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,572		9,859
Amortization of deferred financing fees and debt discount		170		185
Equity-based compensation		6,001		1,965
Provision for doubtful accounts		101		151
Loss (gain) on disposal of property and equipment		18		(46)
Deferred income taxes		(1,204)		1,221
Changes in assets and liabilities:
Accounts receivable		(3,345)		(10,691)
Other receivables		(249)		367
Prepaid expenses and other assets		(584)		(3,727)
Accounts payable		(3,258)		(7,762)
Accrued payroll and related liabilities		(5,775)		(4,852)
Accrued expenses and other liabilities		239		41
Deferred revenue		12,049		15,818
Income taxes, net		7,379		2,896
Net cash provided by operating activities		31,232		11,399
Investing activities
Purchases of property and equipment		(6,014)		(2,726)
Net cash used in investing activities		(6,014)		(2,726)
Financing activities
Payments on long-term debt		(2,313)		(1,070)
Deferred financing payments		—		(50)
Payments on capital lease obligations		(402)		(1,722)
Proceeds from sale of equity interests		—		100
Purchases of equity interests		(473)		(731)
Taxes paid for net settlements of restricted stock vesting		(633)		—
Net cash used in financing activities		(3,821)		(3,473)
Net increase in cash		21,397		5,200
Cash at beginning of period		35,235		6,962
Cash at end of period	$	56,632	$	12,162
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	984	$	4,396
Cash paid during the period for income taxes		457		362
Disposal of property and equipment acquired through capital leases		—		333
Purchase of property and equipment in accounts payable		2,002		2,903

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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Press Ganey Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(All tables in thousands, except per share amounts)

(Unaudited)

1. Basis of Presentation of Interim Financial Information

Press Ganey Holdings, Inc. (the “Company”) is a leading provider of patient experience and caregiver measurement, performance analytics and strategic advisory solutions for healthcare organizations across the continuum of care. The consolidated financial statements include the financial statements of Press Ganey Holdings, Inc. and its wholly owned subsidiary, Press Ganey Associates (“Associates”), and Associates’ wholly owned subsidiaries, PatientImpact LLC; Data Advantage LLC; Center for Performance Services, Inc.; Morehead Associates, Inc.; On The Spot Systems, Inc.; Dynamic Clinical Systems, Inc.; and Healthcare Performance Improvement, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Prior to the initial public offering (discussed below), the Company was a wholly owned subsidiary of PG Holdco, LLC (the “Parent”).

Effective May 8, 2015, the name of the Company was changed from PGA Holdings, Inc. to Press Ganey Holdings, Inc.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring accruals necessary to present fairly the financial statements in accordance with GAAP. Operating results for the three months ended March 31, 2016 and 2015 are not necessarily indicative of results to be expected for any other interim period or for the full year. The preparation of the consolidated financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could materially differ from those estimates.

Initial Public Offering

In May 2015, the Company completed its initial public offering (the “IPO”) of 8,900,000 shares of common stock and, upon the underwriters’ exercise of their option to purchase additional shares, issued an additional 1,335,000 shares for a total of 10,235,000 shares issued at an offering price of $25.00 per share. Proceeds from the IPO were approximately $234.4 million, net of underwriting discounts and commissions and offering-related transaction costs incurred.

Stock Split

On May 8, 2015, the Company’s common stock was split at a 2,800-for-one ratio. The authorized shares were increased to 350.0 million. Accordingly, all references to numbers of common shares and per-share data in the accompanying unaudited condensed consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis.

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Preferred Stock

On May 27, 2015, the Company amended and restated its certificate of incorporation to, among other things, authorize 50.0 million shares of preferred stock with a par value of $0.01.

2. Summary of Significant Accounting Policies

A complete listing of the Company’s significant accounting policies is discussed in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606)”. This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB deferred the effective date by one year to annual and interim reporting periods beginning after December 15, 2017. The FASB is permitting early adoption of the standard, but not until annual and interim reporting periods beginning after December 15, 2016, the original effective date. An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, which clarifies the implementation guidance on principal versus agent considerations of ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing”, which clarifies the identification of performance obligations and the licensing implementation guidance of ASU 2014-09. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption.

In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. In addition, this update changes the accounting for software licenses to be consistent with other licenses of intangible assets. This standard is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted ASU 2015-05 on January 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”. This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. This standard is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted ASU 2015-16 on January 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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In February 2016, the FASB issued ASU 2016-02, “Leases”. This ASU requires that a lessee record an operating lease in the balance sheet with a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Adoption of this standard will be on a modified retrospective approach, which includes a number of optional practical expedients that the Company may elect to apply. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, treatment of forfeitures and classification on the statement of cash flows. This standard is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements. 

3. Property and Equipment

Property and equipment, net consist of the following:

	March 31,		December 31,
	2016		2015
Furniture, fixtures, and leasehold improvements	$	8,910	$	9,431
Office equipment		17,733		19,619
Office equipment held under capital lease		20,916		20,916
Computer equipment and software		82,688		74,844
Construction in progress		9,332		14,585
		139,579		139,395
Accumulated amortization of office equipment held under capital leases		(11,320)		(10,143)
Accumulated depreciation		(70,157)		(68,990)
	$	58,102	$	60,262

Depreciation and amortization of property and equipment was $7.4 million and $5.7 million for the three months ended March 31, 2016 and 2015, respectively.

4. Fair Value Measurements

Financial Instruments

The recorded values of accounts receivable, accounts payable, and other liabilities approximate fair value because of the short maturity of these financial instruments. The recorded value of the variable rate Term Loan approximates fair value because the interest rate fluctuates with market rates.

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5. Intangible Assets

Intangible assets consist of the following:

	March 31, 2016						December 31, 2015
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trade name (indefinite life)	$	200,000	$	—	$	200,000	$	200,000	$	—	$	200,000
Trade names (finite life)		2,410		(1,582)		828		2,410		(1,509)		901
Customer relationships		237,620		(98,097)		139,523		237,620		(94,851)		142,769
Proprietary technology		32,240		(15,649)		16,591		32,240		(14,849)		17,391
Other		3,180		(1,853)		1,327		3,180		(1,776)		1,404
	$	475,450	$	(117,181)	$	358,269	$	475,450	$	(112,985)	$	362,465

Intangible asset amortization expense was $4.2 million and $4.1 million for the three months ended March 31, 2016 and 2015, respectively.

6. Revolving Line of Credit and Long‑Term Debt

As of March 31, 2016 and December 31, 2015, the Company’s long‑term debt consisted of the following:

	March 31,		December 31,
	2016		2015
Term Loan	$	180,375	$	182,688
Unamortized deferred financing fees		(2,091)		(2,212)
		178,284		180,476
Less current portion		(9,250)		(9,250)
Long-term debt	$	169,034	$	171,226

Unamortized deferred financing fees related to the Company’s Revolving Credit Facility (as defined below) were $848,000 and $897,000 at March 31, 2016 and December 31, 2015, respectively, and are classified as deferred financing fees, net in the condensed consolidated balance sheets.

2015 Credit Agreement

On July 31, 2015, the Company entered into a new credit agreement (“2015 Credit Agreement”). The 2015 Credit Agreement consists of a five-year $185.0 million term loan (“Term Loan”) and a five-year $75.0 million revolving credit facility (“Revolving Credit Facility”). The Company used the proceeds from the Term Loan to repay the outstanding balance on its previous term loan of $183.2 million.

At the discretion of the Company, interest accrues on outstanding borrowings under the 2015 Credit Agreement at either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin, currently 1.50%, or the adjusted base rate (“ABR”) plus an applicable margin, currently 0.50%. The applicable margins for both the LIBOR and ABR are variable based upon stipulated ranges of the secured net leverage ratio, as defined in the agreement. The Company is required to repay the outstanding principal amount of the Term Loan in equal quarterly amounts of $2.3 million. The remaining Term Loan balance and any outstanding balances on the Revolving Credit Facility will be due upon maturity on July 31, 2020. The Term Loan and Revolving Credit Facility are secured by substantially all of the assets of the Company.

There were no borrowings outstanding on the Revolving Credit Facility at March 31, 2016; however, the Company had a letter of credit outstanding of approximately $65,000 at March 31, 2016, which reduced the borrowing

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capacity of the Revolving Credit Facility to $74.9 million. The Company is charged a loan commitment fee, currently 0.375%, for unused amounts on the Revolving Credit Facility.

The 2015 Credit Agreement contains certain restrictive and financial covenants which the Company must comply with on a quarterly basis, including a maximum secured net leverage ratio, as defined in the agreement. The Company is also limited in its ability to incur additional indebtedness or liens; pay dividends or make certain other restricted payments, enter into certain transactions with affiliates, merge or consolidate with another entity; or sell, assign, transfer, convey, or otherwise dispose of all or substantially all of its assets. The Company was in compliance with these restrictive and financial covenants as of March 31, 2016.

7. Income Taxes

For the three months ended March 31, 2016, the Company recorded income tax expense of $6.7 million compared to $4.5 million for the three months ended March 31, 2015. The Company’s effective tax ratewas 45.1% for the three months ended March 31, 2016 compared to 43.0% for the three months ended March 31, 2015. The effective tax rate for the three months ended March 31, 2016 of 45.1% differs from the U.S. statutory rate primarily due to the impact of state tax rates and nondeductible equity-based compensation expense.

8. Segment Information

An operating segment is a component of an enterprise that engages in business activities and has discrete financial information that is regularly reviewed by the enterprise’s chief operating decision maker to assess performance of the individual component and make decisions about allocating resources to the component. The Company produces one set of financial information at the enterprise level that is regularly reviewed by the Company’s chief operating decision maker. Discrete financial information is not produced or reviewed by the Company’s chief operating decision maker at a level lower than the enterprise level. As such, the Company has one operating segment as of March 31, 2016 and 2015.

The Company’s identifiable assets are located in the United States and over 99% of the Company’s revenues are from clients located in the United States.

9. Related Party Transactions

The Company was charged an annual management fee that was payable quarterly to its majority shareholder, Vestar Capital Partners, LLC (“Vestar”). The management agreement was terminated and the annual management fee was no longer required after the effective date of the IPO. The Company incurred management fees of $0 and $286,000 for the three months ended March 31, 2016 and 2015, respectively.

10. Equity-Based Compensation

The Company measures its equity-based compensation expense based on the grant date fair value of the awards and recognizes this expense in the consolidated financial statements over the requisite service or performance vesting period.

Total equity-based compensation expense recorded in the condensed consolidated statements of operations for the periods indicated is as follows:

	Three Months Ended
	March 31,
	2016		2015
Cost of revenue	$	1,111	$	713
General and administrative		4,890		1,252
Total equity-based compensation expense	$	6,001	$	1,965

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Parent Equity-Based Compensation Plan

The Company’s former parent company, PG Holdco, LLC, had adopted an equity-based compensation plan (the “Parent Plan”), which authorized the granting of various equity awards of the Parent’s Preferred units, Class A common units, Class B common units, and Class C common units to employees and directors of the Company. The awards of the Parent were recorded as compensation expense in the accounts of the Company because the recipients are employees and directors of the Company.

2015 Incentive Award Plan

The Company’s 2015 Incentive Award Plan (the “2015 Plan”) provides for the grant of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, stock appreciation rights, and other stock or cash based awards. The 2015 Plan authorized 7,120,000 shares of common stock for issuance pursuant to awards under the plan.

Restricted Stock

A summary of restricted stock activity during the three months ended March 31, 2016, is as follows:

		Weighted
		Average
		Fair Value
		at Grant
	Shares	Date
Nonvested at January 1, 2016	2,255,681	$	25.15
Granted	579,359		26.18
Vested	(95,416)		25.00
Forfeited	(18,156)		25.00
Nonvested at March 31, 2016	2,721,468	$	25.38

During the three months ended March 31, 2016, the Company granted 326,060 shares of restricted stock with four-year service vesting (20% for years 1-2, 30% for years 3-4) and 253,299 shares of restricted stock with three-year performance vesting (cliff).

As of March 31, 2016, there was $53.6 million of unrecognized pre-tax compensation expense related to nonvested restricted stock, which is expected to be recognized over a weighted average period of 2.7 years.

During the three months ended March 31, 2016, the Company purchased $473,000 of unvested equity interests related to awards that were modified at the IPO.

Stock Options

A summary of stock option activity during the three months ended March 31, 2016, is as follows:

		Weighted
		Average
		Exercise
	Options	Price
Outstanding at January 1, 2016	36,304	$	31.74
Granted	778,220		26.18
Exercised	—		—
Forfeited	—		—
Outstanding at March 31, 2016	814,524	$	26.43
Exercisable at March 31, 2016	—	$	—

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The Company granted options to purchase 778,220 shares of the Company’s common stock during the three months ended March 31, 2016. Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of grant. The fair value of the stock options granted was estimated using a Black-Scholes valuation model. The weighted average fair value of the options granted during the three months ended March 31, 2016 is estimated at $10.97 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.4%; an expected term of approximately 6 years; expected volatility of 41.5%; and dividend yield of 0.0% over the expected life of the option. The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was based on historical volatility of several peer companies to Press Ganey Holdings, Inc. for periods equal to the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding.

As of March 31, 2016, there was $7.4 million of unrecognized pre-tax compensation expense related to stock options, which is expected to be recognized over a weighted average period of 3.9 years.

11. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury stock method. Common equivalent shares consist of common stock issuable on the vesting of restricted stock units and exercise of outstanding options when dilutive.

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended March 31,
	2016		2015
Net income	$	8,118	$	5,974
Weighted average shares outstanding, basic		52,806,364		43,313,200
Weighted average common equivalent shares		479,776		—
Weighted average shares outstanding, diluted		53,286,140		43,313,200
Net earnings per share
Basic	$	0.15	$	0.14
Diluted	$	0.15	$	0.14

12. Subsequent Event

On May 2, 2016, the Company acquired Avatar International Holding Company and its subsidiary Avatar International LLC (“Avatar”) for a preliminary cash purchase price of $17.1 million, subject to certain post-closing adjustments. Avatar is a competitor in the patient experience and caregiver engagement markets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as other sections of this report on Form 10-Q contain forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements are not historical facts, but instead represent only our beliefs, assumptions, expectations, estimates, forecasts and projections regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements include statements other than historical information or statements of current condition and may relate to our future plans and objectives and results. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. There is a possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.

The forward-looking statements contained in this report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider the information in this report, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these factors include those described under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.

Any forward-looking statement made by us speaks only as of the date on which we make it. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Executive Overview

We are a leading provider of patient experience and caregiver measurement, performance analytics and strategic advisory solutions for healthcare organizations across the continuum of care. Our mission is to help healthcare organizations reduce patient suffering and improve clinical quality, safety and experience of care. We provide our clients with innovative digital platform that captures the perspectives of patients, physicians, nurses and other healthcare employees and enables our clients to benchmark, analyze and improve the patient and caregiver experience. We support clients in achieving the “Quadruple Aim” of improving the patient experience, improving population health, reducing costs and engaging caregivers. We believe we offer a powerful value proposition to the healthcare industry, as we help drive transformational change through performance transparency, safety and high reliability initiatives, better care coordination and sustainable performance improvements.

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Factors Affecting our Financial Performance

We believe that the financial performance of our business and our continued success are primarily dependent upon the following:

•Client Penetration and Growth.  We believe that we have opportunities to continue to grow our revenue from our comprehensive suite of solutions due to the trends we see affecting the healthcare industry. We expect an increasing percentage of our recurring and new revenues to be the result of increased focus by healthcare providers on measuring and reporting on, and bearing financial risk for, clinical outcomes and the patient experience. Our future growth will depend on our ability to expand sales of our suite of solutions to our existing client base and identify and execute upon new opportunities and attract new clients. Our expansion activities consist of focusing on growing healthcare settings, including hospitals, medical practices and post‑acute care settings, and servicing new markets and increasing engagement of existing clients impacted by expanded regulatory requirements. We plan to continue to invest in the development of innovative and value-added solutions and continue to market our proprietary platform.

•Continued Change in the U.S. Healthcare Industry.  Healthcare spending represents a significant and growing component of gross domestic product, or GDP, of the United States and the average annual growth in health care spending is expected to exceed average annual GDP growth through 2023. As healthcare costs rise and providers, patients and payment models focus on value‑based and patient‑centric care, the healthcare industry has increasingly focused attention on improving efficiency and transparency, standardizing care around best practices, and driving better clinical and operational outcomes. This has resulted in increasing demand for solutions designed to improve the efficiency and quality of care, safety and the patient experience. We believe this shift in the industry will continue to impact our business for the foreseeable future.

•Selective Acquisitions.  We expect to grow through selective acquisitions that complement and grow our existing suite of technologies, services and solutions and increase the number of clients we serve. Our acquisitions are integrated within our overall solutions suite and brand to strengthen our comprehensive offerings. As the U.S. healthcare industry continues to evolve, we expect that there will be attractive investment opportunities given the large number of complementary businesses in the industry. Any acquisition could have a material impact on our financial position and results of operations.

•Macro-economic Conditions.  Our clients are affected by macro-economic trends such as general economic conditions, inflation and unemployment. Macro-economic trends have various effects on our business, and on occasion have resulted in the slowing of the decision-making processes by existing and prospective clients. In recent years, changes in macro-economic trends have increased demand for our solutions as our clients strive to improve their clinical and operating performance, while reducing costs and moving to a value-based care model.

Initial Public Offering

On May 27, 2015, we completed our Initial Public Offering (the “IPO”) of 8,900,000 shares of common stock and, upon the underwriters’ exercise of their option to purchase additional shares, issued an additional 1,335,000 shares for a total of 10,235,000 shares issued at an offering price of $25.00 per share. Proceeds from the IPO were approximately $234.4 million, net of underwriting discounts, commissions and offering-related transaction costs incurred. Our common stock is traded on the New York Stock Exchange under the symbol “PGND”.

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Refinancings

We completed refinancings to lower our interest expense, reduce principal balances, and amend certain financial covenants. In May 2015, we repaid $223.0 million of principal on our First Lien Term Loan using the net proceeds from our IPO. In July 2015, we repaid the remaining principal balance of $183.2 million on our First Lien Term Loan with proceeds from a new $185 million Term Loan and replaced our $30 million revolving credit facility with a $75 million Revolving Credit Facility under our 2015 Credit Agreement. See Note 6 – Revolving Line of Credit and Long-Term Debt in the Notes to Condensed Consolidated Financial Statements for additional details.

Acquisitions

Since 2009, we have successfully acquired and integrated nine businesses to support our growth, further enhancing our comprehensive suite of solutions and expanding our market leadership position. Most recently, on September 1, 2015, we acquired all of the membership interests of Healthcare Performance Improvement, LLC (“HPI”), a leading patient safety and reliability consulting and coaching firm, for a purchase price of $11.7 million, net of cash acquired. The HPI acquisition was financed with cash on hand.

The results of operations of the acquired businesses have been included in our consolidated financial statements from the applicable date of acquisition.

Results of Operations

The following table sets forth our results of operations and our results of operations as a percentage of revenue for the periods indicated (in thousands):

	Three Months Ended March 31,
			% of				% of
	2016		revenue		2015		revenue
Revenue	$	86,731	100.0	%	$	74,891	100.0	%
Operating expenses:
Cost of revenue		36,469	42.0			31,427	42.0
General and administrative		22,644	26.1			18,301	24.4
Depreciation and amortization		11,572	13.3			9,859	13.2
Loss (gain) on disposal of property and equipment		18	—			(46)	(0.1)
Total operating expenses		70,703	81.5			59,541	79.5
Income from operations		16,028	18.5			15,350	20.5
Other income (expense):
Interest expense, net		(1,230)	(1.4)			(4,579)	(6.1)
Management fee of related party		—	—			(286)	(0.4)
Total other expense, net		(1,230)	(1.4)			(4,865)	(6.5)
Income before income taxes		14,798	17.1			10,485	14.0
Provision for income taxes		6,680	7.7			4,511	6.0
Net income	$	8,118	9.4	%	$	5,974	8.0	%
Non-GAAP Financial Measures:
Adjusted EBITDA (a)	$	33,791	39.0	%	$	27,340	36.5	%

(a)For an explanation of Adjusted EBITDA as a measure of the Company’s operating performance and a reconciliation to net income, see “Non-GAAP Financial Measures”.

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Three Months Ended March 31, 2016 compared to Three Months Ended March 31, 2015

Revenue

Revenue increased $11.8 million, or 15.8%, from $74.9 million for the three months ended March 31, 2015 to $86.7 million for the three months ended March 31, 2016. Revenue growth consisted of 13.0% organic growth and 2.8% acquisition growth. The acquisition of HPI contributed revenue of $2.1 million in the first quarter of 2016. Organic growth was comprised of increased sales of patient experience solutions to new and existing clients and to a lesser extent sales of engagement and consulting solutions.

Operating Expenses

Cost of Revenue. Cost of revenue increased $5.1 million, or 16.0%, from $31.4 million for the three months ended March 31, 2015 to $36.5 million for the three months ended March 31, 2016. As a percentage of revenue, cost of revenue remained consistent at 42.0% for both periods.

Cost of revenue included equity-based compensation expense of $713,000 in the three months ended March 31, 2015 and $1.1 million in the three months ended March 31, 2016. The increase in equity-based compensation reflects the issuance of equity awards in connection with our IPO, issuance of equity incentives to newly hired employees in 2015 and issuance of awards during the first quarter of 2016. Excluding these amounts, cost of revenue increased $4.6 million and decreased as a percentage of revenue from 41.0% in the 2015 period to 40.8% in the 2016 period. The decrease as a percentage of revenue was primarily the result of a higher proportion of lower cost electronic surveys for our patient experience solutions.

General and Administrative Expense.  General and administrative expense increased $4.3 million, or 23.7%, from $18.3 million for the three months ended March 31, 2015 to $22.6 million for the three months ended March 31, 2016. As a percentage of revenue, general and administrative expense increased from 24.4% in the 2015 period to 26.1% in the 2016 period.

General and administrative expense included equity-based compensation expense of $1.3 million in the three months ended March 31, 2015 and $4.9 million in the three months ended March 31, 2016. The increase in equity-based compensation primarily reflects the issuance of equity awards in connection with our IPO, issuance of equity incentives to newly hired employees in 2015 and issuance of equity awards during the first quarter of 2016. General and administrative expense also included $7,000 and $66,000 of expenses associated with completed and potential acquisitions in the 2015 and 2016 periods, respectively, and $205,000 of expenses associated with preparations for our IPO and capital structure planning in 2015 and $106,000 of expenses associated with professional fees incurred for the preparation for compliance with Section 404 of the Sarbanes-Oxley Act and for design of our equity incentive and compensation programs in 2016. Excluding these amounts, general and administrative expenses increased $745,000 and decreased as a percentage of revenue from 22.5% in the 2015 period to 20.3% in the 2016 period. The decrease was primarily the result of the leveraging of general and administrative resources as a result of organic growth.

Depreciation and Amortization Expense.  Depreciation and amortization expense increased $1.7 million, or 17.4%, from $9.9 million for the three months ended March 31, 2015 to $11.6 million for the three months ended March 31, 2016. Intangible asset amortization expense was $4.1 million in the 2015 period and $4.2 million in the 2016 period. The increase in depreciation was largely the result of depreciation of previously capitalized software development costs and assets acquired under capital leases.

Other Income (Expense)

Interest expense, net.  Interest expense, net decreased $3.4 million, or 73.1%, from $4.6 million for the three months ended March 31, 2015 to $1.2 million for the three months ended March 31, 2016. The $3.4 million decrease was primarily due to lower average borrowings in 2016 as a result of principal repayments from the proceeds of our IPO in May 2015, which resulted in interest savings of approximately $2.4 million, and lower average interest rates resulting from our debt refinancing in July 2015.

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Management fee of related party.  We paid a management fee to our majority stockholder of $286,000 for the three months ended March 31, 2015. The management agreement was terminated and the management fee was no longer required after the effective date of the IPO in May 2015. See Note 9 – Related Party Transactions in the Notes to Condensed Consolidated Financial Statements for additional details.

Provision for Income Taxes

Provision for income taxes increased $2.2 million, or 48.1%, from $4.5 million for the three months ended March 31, 2015 to $6.7 million for the three months ended March 31, 2016. The provision for income taxes for the three months ended March 31, 2016 and 2015 represents federal and state income tax expense for the periods.

For the three months ended March 31, 2016, our effective income tax rate was 45.1% as compared to 43.0% for the three months ended March 31, 2015. Our federal statutory income tax rate and state statutory rate, net of federal benefit, is approximately 42%. The 2016 effective tax rate of 45.1% differs from the statutory rate primarily due to the impact of nondeductible equity-based compensation expense.

Non-GAAP Financial Measures

We define Adjusted EBITDA as net income (loss) before interest expense, net, income taxes and depreciation and amortization, with further adjustments to add back (i) items that terminated in connection with the IPO, (ii) non-cash charges, (iii) items that are not indicative of the underlying operating performance of the business and (iv) items that are solely related to changes in our capital structure, and therefore are not indicative of the underlying operating performance of the business.

Management uses Adjusted EBITDA (i) to compare our operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes, including the preparation of our internal annual operating budget, (iv) to evaluate the performance and effectiveness of our operational strategies and (v) to assess compliance with various metrics associated with the agreements governing our indebtedness. We also believe that Adjusted EBITDA is useful to investors in assessing our financial performance because this measure is similar to the metrics used by investors and other interested parties when comparing companies in our industry that have different capital structures, debt levels and/or income tax rates. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating performance in the same manner as our management.

Adjusted EBITDA is not determined in accordance with U.S. generally accepted accounting principles, or GAAP, and should not be considered in isolation or as an alternative to net income, income from operations, net cash provided by operating, investing or financing activities or other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP. The table below presents information for the periods indicated about our Adjusted EBITDA. A reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measures is provided in the table below (in thousands).

	Three Months Ended March 31,
	2016		2015
Net income	$	8,118	$	5,974
Interest expense		1,230		4,579
Income tax expense		6,680		4,511
Depreciation and amortization		11,572		9,859
EBITDA	$	27,600	$	24,923
Equity-based compensation(a)		6,001		1,965
Management fee to related party(b)		—		286
Acquisition expenses(c)		66		7
Loss on disposal of property and equipment(d)		18		(46)
Other non-comparable items(e)		106		205
Adjusted EBITDA	$	33,791	$	27,340

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(a)Equity-based compensation expense associated with equity awards granted to attract and retain employees and directors. Our incentive compensation plan excludes this expense. We have also excluded this item in order to provide consistent operating performance insight as these expenses have fluctuated period to period, are noncash, and do not necessarily reflect current period effectiveness of operational strategies. See Note 10 – Equity-Based Compensation in the Notes to Condensed Consolidated Financial Statements for classification of equity-based compensation on the Condensed Consolidated Statements of Operations for the periods indicated.

(b)Fees paid to our majority stockholder under a management agreement prior to our IPO. The management agreement was terminated upon the closing of the IPO. See Note 9 – Related Party Transactions in the Notes to Condensed Consolidated Financial Statements for additional details.

(c)Transaction costs incurred in connection with completed and potential acquisitions. Our incentive compensation plan excludes this expense. We have also excluded this item in order to provide consistent operating performance insight as these expenses are associated with specific acquisition targets. See “Acquisitions.”

(d)Noncash gains and losses associated with disposals of property and equipment. Our incentive compensation plan excludes this item.

(e)Other non-comparable items include costs incurred in connection with our IPO and professional fees incurred in connection with capital structure and strategic corporate planning in 2015 and professional fees incurred for the preparation for compliance with Section 404 of the Sarbanes-Oxley Act and for design of our equity incentive and compensation programs in 2016. Our incentive compensation plan excludes these expenses. We have also excluded this item in order to provide consistent operating performance insight as these expenses are associated with specific projects that are not associated with ongoing operating activities.

Liquidity and Capital Resources

Overview

Our principal uses of cash are to meet working capital requirements, fund debt obligations, finance capital expenditures, support our growth strategy and fund strategic acquisitions. Our principal sources of funds are cash flows from operating activities and available borrowings under our Revolving Credit Facility.

As of March 31, 2016, we had cash of $56.6 million and $74.9 million of available borrowings under our Revolving Credit Facility (after giving effect to a $65,000 letter of credit outstanding under our Revolving Credit Facility). As of March 31, 2016, we had $186.7 million of outstanding indebtedness (which includes capital leases).

We believe that our cash flows from operations, cash on hand and available borrowings under our Revolving Credit Facility will be sufficient to meet our liquidity needs during the next twelve months and beyond. We anticipate that to the extent that we require additional liquidity, it will be funded through the incurrence of indebtedness, including borrowings under our Revolving Credit Facility, equity financings or a combination thereof. It is not guaranteed that we will be able to obtain this additional liquidity on reasonable terms, or at all. Our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, there can be no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available under our senior secured credit facilities or otherwise to meet our liquidity needs. If we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions.

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Cash Flows

The following table presents a summary of our cash flow for the periods indicated (in thousands):

	Three months ended March 31,
	2016		2015
Net cash provided by operating activities	$	31,232	$	11,399
Net cash used in investing activities		(6,014)		(2,726)
Net cash used in financing activities		(3,821)		(3,473)
Net increase in cash	$	21,397	$	5,200

Operating Activities

Cash provided by operating activities consists of net income adjusted for certain non‑cash items, including depreciation and amortization, equity‑based compensation, extinguishment of debt, and deferred income taxes, as well as the effect of changes in working capital and other activities.

Net cash provided by operating activities for the three months ended March 31, 2016 was $31.2 million compared to $11.4 million for the three months ended March 31, 2015, an increase of $19.8 million, or 174.0%. In 2016, cash provided by operations primarily resulted from net earnings after adding back non-cash items and a decrease in net working capital of $6.5 million. In 2015, cash provided by operations primarily resulted from net earnings after adding back non-cash items offset by an increase in net working capital of $7.9 million. The increase in cash provided by operating activities in 2016 as compared to the same period in 2015 is due to an increase in profitability after adjusting for non-cash expenses, including a decrease in cash interest expense as a result of repayment of principal using proceeds from our IPO and refinancing our credit facilities at lower interest rates, and a net increase in cash from changes in working capital primarily associated with changes in accounts receivable, accounts payable and accrued income taxes.

Investing Activities

Our primary investing activities relate to acquisitions and purchases of property and equipment, which includes investments in capitalized computer software development costs, facilities and equipment.

Net cash used in investing activities for the three months ended March 31, 2016 was $6.0 million compared to $2.7 million for the three months ended March 31, 2015, an increase of $3.3 million, or 120.6%. In 2016, purchases of property and equipment were $6.0 million and included $5.9 million of capitalized software development costs and $82,000 of equipment and leasehold improvements. In 2015, purchases of property and equipment were $2.7 million and included $2.7 million of capitalized software development costs and $44,000 of equipment and leasehold improvements. Capitalized software development costs increased in 2016 due to additional investments in our digital platform.

Financing Activities

Our primary financing activities consist of borrowings under our credit facilities, payments on our long‑term debt and capital leases, repurchases of equity interests and tax withholding payments to the vesting of restricted stock units.

Net cash used in financing activities for the three months ended March 31, 2016 was $3.8 million compared to $3.5 million for the three months ended March 31, 2015, an increase of $348,000, or 10.0%. In 2016, we used cash generated from operations after investing activities of $25.2 million primarily to make scheduled payments on our borrowings and capital leases, fund minimum employee tax withholdings for restricted stock vesting and to repurchase equity interests. In 2015, we used cash generated from operations after investing activities of $8.7 million primarily to make scheduled payments on our borrowings and capital leases and repurchase equity interests.

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Credit Facilities

See Note 6 – Revolving Line of Credit and Long-Term Debt in the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of March 31, 2016 are summarized in the table below (in thousands).

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt(a)	$	194,139	$	12,727	$	24,909	$	156,503	$	—
Capital lease obligations		9,035		5,273		3,365		397		—
Operating lease obligations(b)		8,081		3,053		3,505		1,523		—
Total	$	211,255	$	21,053	$	31,779	$	158,423	$	—

(a)Represents the principal amount of our long‑term debt, including current portion, and the expected cash payments for interest based on the interest rates in place and amounts outstanding as of March 31, 2016.

(b)For a more detailed description of our operating leases, see Note 9 – Leases in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Off‑Balance Sheet Arrangements

As of March 31, 2016, we do not have any off-balance sheet transactions or interests.

Application of Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared using accounting principles generally accepted in the United States of America. Our significant accounting policies are discussed in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015, and in Note 2 – Summary of Significant Accounting Policies, in the Notes to Condensed Consolidated Financial Statements included in Item 1. The preparation of these financial statements requires management to make estimates and assumptions that are believed 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. If actual amounts are ultimately different from previous estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes its critical accounting policies that reflect its more significant estimates and assumptions relate to revenue recognition, property and equipment, goodwill and intangible assets, and equity-based compensation. See “Application of Critical Accounting Policies and Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2015.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are subject to interest rate risk in connection with our long‑term indebtedness. Our primary interest rate exposure relates to loans outstanding under our Term Loan and Revolving Credit Facility. All outstanding indebtedness under the Term Loan and Revolving Credit Facility bears interest at a variable rate. Each quarter point change in interest rates on such indebtedness under our Term Loan would result in a change of $451,000 to our interest expense on an annual basis, based on our outstanding balance of $180.4 million (exclusive of the deferred financing fees) at March 31, 2016. There were no borrowings under the Revolving Credit Facility at March 31, 2016. Assuming the $74.9 million of current borrowing capacity were drawn under the Revolving Credit Facility, a hypothetical quarter point change in interest rates on such variable rate debt would change our annual interest expense by $187,000.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15(b), under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, and concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control

There have been no changes in our internal control over financial reporting that occurred during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business. Although the results of litigation and claims are inherently unpredictable and uncertain, we are not currently a party to any legal proceedings the outcome of which, if determined adversely to us, are believed to, either individually or taken together, have a material adverse effect on our business, operating results, cash flows or financial condition. Regardless of the outcome, litigation has the potential to have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2015.

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Item 6. Exhibit Index

Exhibit Number		Description of Exhibit
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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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.

		PRESS GANEY HOLDINGS, INC.
May 4, 2016	By:	/S/ PATRICK T. RYAN
	Name:	Patrick T. Ryan
	Title:	Chief Executive Officer
May 4, 2016	By:	/S/ BREHT T. FEIGH
	Name:	Breht T. Feigh
	Title:	Chief Financial Officer

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EX-31.1

Exhibit 31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Patrick T. Ryan, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Press Ganey Holdings, Inc.;

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

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

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

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

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

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

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

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

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

May 4, 2016	By:	/S/ PATRICK T. RYAN
	Name:	Patrick T. Ryan
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Breht T. Feigh, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Press Ganey Holdings, Inc.;

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

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

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

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

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

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

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

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

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

May 4, 2016	By:	/S/ BREHT T. FEIGH
	Name:	Breht T. Feigh
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certifications pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Press Ganey Holdings, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

 (i)  the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 4, 2016	By:	/S/ PATRICK T. RYAN
	Name:	Patrick T. Ryan
	Title:	Chief Executive Officer
May 4, 2016	By:	/S/ BREHT T. FEIGH
	Name:	Breht T. Feigh
	Title:	Chief Financial Officer

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 02, 2016
Document and Entity Information
Entity Registrant Name	Press Ganey Holdings, Inc.
Entity Central Index Key	0001633142
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		52,865,354
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash	$ 56,632	$ 35,235
Accounts receivable, net of allowances of $737 and $774 at March 31, 2016 and December 31, 2015, respectively	56,812	53,568
Other receivables	3,242	2,993
Prepaid expenses and other assets	5,187	4,603
Income taxes receivable		4,603
Total current assets	121,873	101,002
Property and equipment, net	58,102	60,262
Deferred financing fees, net	848	897
Intangible assets, net	358,269	362,465
Goodwill	411,203	411,203
Total assets	950,295	935,829
Current liabilities:
Current portion of long-term debt	9,250	9,250
Current portion of capital lease obligations	4,778	4,626
Accounts payable	5,382	9,420
Accrued payroll and related liabilities	10,055	15,830
Accrued expenses and other liabilities	2,208	1,969
Income taxes payable	2,776
Deferred revenue	43,604	31,555
Total current liabilities	78,053	72,650
Long-term debt, less current portion	169,034	171,226
Capital lease obligations, less current portion	3,611	4,165
Deferred income taxes	123,975	125,179
Total liabilities	$ 374,673	$ 373,220
Commitments and contingencies
SHAREHOLDER’S EQUITY
Common stock, $0.01 par value; 350,000,000 shares authorized, 52,843,986 and 52,770,722 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	$ 528	$ 528
Additional paid-in capital	603,470	598,575
Accumulated deficit	(28,376)	(36,494)
Total shareholder’s equity	575,622	562,609
Total liabilities and shareholder’s equity	$ 950,295	$ 935,829

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Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Condensed Consolidated Balance Sheets
Accounts receivable, allowances (in dollars)	$ 737	$ 774
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	52,843,986	52,770,722
Common stock, shares outstanding	52,843,986	52,770,722

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Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Condensed Consolidated Statements of Income
Revenue	$ 86,731	$ 74,891
Operating expenses:
Cost of revenue	36,469	31,427
General and administrative	22,644	18,301
Depreciation and amortization	11,572	9,859
Loss (gain) on disposal of property and equipment	18	(46)
Total operating expenses	70,703	59,541
Income from operations	16,028	15,350
Other income (expense):
Interest expense, net	(1,230)	(4,579)
Management fee of related party		(286)
Total other income (expense), net	(1,230)	(4,865)
Income before income taxes	14,798	10,485
Provision for income taxes	6,680	4,511
Net income	$ 8,118	$ 5,974
Earnings per share:
Basic (in dollars per share)	$ 0.15	$ 0.14
Diluted (in dollars per share)	$ 0.15	$ 0.14
Weighted average shares of common stock outstanding:
Basic (in shares)	52,806,364	43,313,200
Diluted (in shares)	53,286,140	43,313,200

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities
Net income	$ 8,118	$ 5,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,572	9,859
Amortization of deferred financing costs and debt discount	170	185
Equity-based compensation	6,001	1,965
Provision for doubtful accounts	101	151
Loss (gain) on disposal of property and equipment	18	(46)
Deferred income taxes	(1,204)	1,221
Changes in assets and liabilities:
Accounts receivable	(3,345)	(10,691)
Other receivables	(249)	367
Prepaid expenses and other assets	(584)	(3,727)
Accounts payable	(3,258)	(7,762)
Accrued payroll and related liabilities	(5,775)	(4,852)
Accrued expenses and other liabilities	239	41
Deferred revenue	12,049	15,818
Income taxes receivable	7,379	2,896
Net cash provided by operating activities	31,232	11,399
Investing activities
Purchases of property and equipment	(6,014)	(2,726)
Net cash used in investing activities	(6,014)	(2,726)
Financing activities
Payments on long-term debt	(2,313)	(1,070)
Deferred financing payments		(50)
Payments on capital lease obligations	(402)	(1,722)
Proceeds from sale of equity interests		100
Purchases of equity interests	(473)	(731)
Taxes paid for net settlements of restricted stock vesting	(633)
Net cash used in financing activities	(3,821)	(3,473)
Net increase in cash	21,397	5,200
Cash at beginning of period	35,235	6,962
Cash at end of period	56,632	12,162
Supplemental disclosure of cash flow information
Cash paid during the period for interest	984	4,396
Cash paid during the period for income taxes	457	362
Disposal of property and equipment acquired through capital leases		333
Purchase of property and equipment in accounts payable	$ 2,002	$ 2,903

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Basis of Presentation of Interim Financial Information

3 Months Ended

Mar. 31, 2016

Basis of Presentation of Interim Financial Information

Basis of Presentation of Interim Financial Information

1. Basis of Presentation of Interim Financial Information

Press Ganey Holdings, Inc. (the “Company”) is a leading provider of patient experience and caregiver measurement, performance analytics and strategic advisory solutions for healthcare organizations across the continuum of care. The consolidated financial statements include the financial statements of Press Ganey Holdings, Inc. and its wholly owned subsidiary, Press Ganey Associates (“Associates”), and Associates’ wholly owned subsidiaries, PatientImpact LLC; Data Advantage LLC; Center for Performance Services, Inc.; Morehead Associates, Inc.; On The Spot Systems, Inc.; Dynamic Clinical Systems, Inc.; and Healthcare Performance Improvement, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Prior to the initial public offering (discussed below), the Company was a wholly owned subsidiary of PG Holdco, LLC (the “Parent”).

Effective May 8, 2015, the name of the Company was changed from PGA Holdings, Inc. to Press Ganey Holdings, Inc.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring accruals necessary to present fairly the financial statements in accordance with GAAP. Operating results for the three months ended March 31, 2016 and 2015are not necessarily indicative of results to be expected for any other interim period or for the full year. The preparation of the consolidated financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could materially differ from those estimates.

Initial Public Offering

In May 2015, the Company completed its initial public offering (the “IPO”) of 8,900,000 shares of common stock and, upon the underwriters’ exercise of their option to purchase additional shares, issued an additional 1,335,000 shares for a total of 10,235,000 shares issued at an offering price of $25.00 per share. Proceeds from the IPO were approximately $234.4 million, net of underwriting discounts and commissions and offering-related transaction costs incurred.

Stock Split

On May 8, 2015, the Company’s common stock was split at a 2,800-for-one ratio. The authorized shares were increased to 350.0 million. Accordingly, all references to numbers of common shares and per-share data in the accompanying unaudited condensed consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis.

Preferred Stock

On May 27, 2015, the Company amended and restated its certificate of incorporation to, among other things, authorize 50.0 million shares of preferred stock with a par value of $0.01.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

A complete listing of the Company’s significant accounting policies is discussed in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606)”. This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB deferred the effective date by one year to annual and interim reporting periods beginning after December 15, 2017. The FASB is permitting early adoption of the standard, but not until annual and interim reporting periods beginning after December 15, 2016, the original effective date. An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, which clarifies the implementation guidance on principal versus agent considerations of ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing”, which clarifies the identification of performance obligations and the licensing implementation guidance of ASU 2014-09. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption.

In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. In addition, this update changes the accounting for software licenses to be consistent with other licenses of intangible assets. This standard is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted ASU 2015-05 on January 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”. This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. This standard is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted ASU 2015-16 on January 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”. This ASU requires that a lessee record an operating lease in the balance sheet with a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Adoption of this standard will be on a modified retrospective approach, which includes a number of optional practical expedients that the Company may elect to apply. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, treatment of forfeitures and classification on the statement of cash flows. This standard is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements. 

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Property and Equipment

3 Months Ended

Mar. 31, 2016

Property and Equipment

Property and Equipment

3. Property and Equipment

Property and equipment, net consist of the following:

	March 31,		December 31,
	2016		2015
Furniture, fixtures, and leasehold improvements	$	8,910	$	9,431
Office equipment		17,733		19,619
Office equipment held under capital lease		20,916		20,916
Computer equipment and software		82,688		74,844
Construction in progress		9,332		14,585
		139,579		139,395
Accumulated amortization of office equipment held under capital leases		(11,320)		(10,143)
Accumulated depreciation		(70,157)		(68,990)
	$	58,102	$	60,262

Depreciation and amortization of property and equipment was $7.4 million and $5.7 million for the three months ended March 31, 2016 and 2015, respectively.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements

Fair Value Measurements

4. Fair Value Measurements

Financial Instruments

The recorded values of accounts receivable, accounts payable, and other liabilities approximate fair value because of the short maturity of these financial instruments. The recorded value of the variable rate Term Loan approximates fair value because the interest rate fluctuates with market rates.

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Intangible Assets

3 Months Ended

Mar. 31, 2016

Intangible Assets

Intangible Assets

5. Intangible Assets

Intangible assets consist of the following:

	March 31, 2016						December 31, 2015
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trade name (indefinite life)	$	200,000	$	—	$	200,000	$	200,000	$	—	$	200,000
Trade names (finite life)		2,410		(1,582)		828		2,410		(1,509)		901
Customer relationships		237,620		(98,097)		139,523		237,620		(94,851)		142,769
Proprietary technology		32,240		(15,649)		16,591		32,240		(14,849)		17,391
Other		3,180		(1,853)		1,327		3,180		(1,776)		1,404
	$	475,450	$	(117,181)	$	358,269	$	475,450	$	(112,985)	$	362,465

Intangible asset amortization expense was $4.2 million and $4.1 million for the three months ended March 31, 2016 and 2015, respectively.

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Revolving Line of Credit and Long Term Debt

3 Months Ended

Mar. 31, 2016

Revolving Line of Credit and Long Term Debt

Revolving Line of Credit and Long Term Debt

6. Revolving Line of Credit and Long‑Term Debt

As of March 31, 2016 and December 31, 2015, the Company’s long‑term debt consisted of the following:

	March 31,		December 31,
	2016		2015
Term Loan	$	180,375	$	182,688
Unamortized deferred financing fees		(2,091)		(2,212)
		178,284		180,476
Less current portion		(9,250)		(9,250)
Long-term debt	$	169,034	$	171,226

Unamortized deferred financing fees related to the Company’s Revolving Credit Facility (as defined below) were $848,000 and $897,000 at March 31, 2016 and December 31, 2015, respectively, and are classified as deferred financing fees, net in the condensed consolidated balance sheets.

2015 Credit Agreement

On July 31, 2015, the Company entered into a new credit agreement (“2015 Credit Agreement”). The 2015 Credit Agreement consists of a five-year $185.0 million term loan (“Term Loan”) and a five-year $75.0 million revolving credit facility (“Revolving Credit Facility”). The Company used the proceeds from the Term Loan to repay the outstanding balance on its previous term loan of $183.2 million.

At the discretion of the Company, interest accrues on outstanding borrowings under the 2015 Credit Agreement at either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin, currently 1.50%, or the adjusted base rate (“ABR”) plus an applicable margin, currently 0.50%. The applicable margins for both the LIBOR and ABR are variable based upon stipulated ranges of the secured net leverage ratio, as defined in the agreement. The Company is required to repay the outstanding principal amount of the Term Loan in equal quarterly amounts of $2.3 million. The remaining Term Loan balance and any outstanding balances on the Revolving Credit Facility will be due upon maturity on July 31, 2020. The Term Loan and Revolving Credit Facility are secured by substantially all of the assets of the Company.

There were no borrowings outstanding on the Revolving Credit Facility at March 31, 2016; however, the Company had a letter of credit outstanding of approximately $65,000 at March 31, 2016, which reduced the borrowing capacity of the Revolving Credit Facility to $74.9 million. The Company is charged a loan commitment fee, currently 0.375%, for unused amounts on the Revolving Credit Facility.

The 2015 Credit Agreement contains certain restrictive and financial covenants which the Company must comply with on a quarterly basis, including a maximum secured net leverage ratio, as defined in the agreement. The Company is also limited in its ability to incur additional indebtedness or liens; pay dividends or make certain other restricted payments, enter into certain transactions with affiliates, merge or consolidate with another entity; or sell, assign, transfer, convey, or otherwise dispose of all or substantially all of its assets. The Company was in compliance with these restrictive and financial covenants as of March 31, 2016.

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Taxes

Income Taxes

7. Income Taxes

For the three months ended March 31, 2016, the Company recorded income tax expense of $6.7 million compared to $4.5 million for the three months ended March 31, 2015. The Company’s effective tax ratewas 45.1% for the three months ended March 31, 2016 compared to 43.0% for the three months endedMarch 31, 2015. The effective tax rate for the three months ended March 31, 2016 of 45.1% differs from the U.S. statutory rate primarily due to the impact of state tax rates and nondeductible equity-based compensation expense.

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Segment Information

3 Months Ended

Mar. 31, 2016

Segment Information

Segment Information

8. Segment Information

An operating segment is a component of an enterprise that engages in business activities and has discrete financial information that is regularly reviewed by the enterprise’s chief operating decision maker to assess performance of the individual component and make decisions about allocating resources to the component. The Company produces one set of financial information at the enterprise level that is regularly reviewed by the Company’s chief operating decision maker. Discrete financial information is not produced or reviewed by the Company’s chief operating decision maker at a level lower than the enterprise level. As such, the Company has one operating segment as of March 31, 2016 and 2015.

The Company’s identifiable assets are located in the United States and over 99% of the Company’s revenues are from clients located in the United States.

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Related Party Transactions

3 Months Ended

Mar. 31, 2016

Related Party Transactions

Related Party Transactions

9. Related Party Transactions

The Company was charged an annual management fee that was payable quarterly to its majority shareholder, Vestar Capital Partners, LLC (“Vestar”). The management agreement was terminated and the annual management fee was no longer required after the effective date of the IPO. The Company incurred management fees of $0 and $286,000 for the three months endedMarch 31, 2016 and 2015, respectively.

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Equity-Based Compensation

3 Months Ended

Mar. 31, 2016

Equity-Based Compensation

Equity-Based Compensation

10. Equity-Based Compensation

The Company measures its equity-based compensation expense based on the grant date fair value of the awards and recognizes this expense in the consolidated financial statements over the requisite service or performance vesting period.

Total equity-based compensation expense recorded in the condensed consolidated statements of operations for the periods indicated is as follows:

	Three Months Ended
	March 31,
	2016		2015
Cost of revenue	$	1,111	$	713
General and administrative		4,890		1,252
Total equity-based compensation expense	$	6,001	$	1,965

Parent Equity-Based Compensation Plan

The Company’s former parent company, PG Holdco, LLC, had adopted an equity-based compensation plan (the “Parent Plan”), which authorized the granting of various equity awards of the Parent’s Preferred units, Class A common units, Class B common units, and Class C common units to employees and directors of the Company. The awards of the Parent were recorded as compensation expense in the accounts of the Company because the recipients are employees and directors of the Company.

2015 Incentive Award Plan

The Company’s 2015 Incentive Award Plan (the “2015 Plan”) provides for the grant of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, stock appreciation rights, and other stock or cash based awards. The 2015 Plan authorized 7,120,000 shares of common stock for issuance pursuant to awards under the plan.

Restricted Stock

A summary of restricted stock activity during the three months ended March 31, 2016, is as follows:

		Weighted
		Average
		Fair Value
		at Grant
	Shares	Date
Nonvested at January 1, 2016	2,255,681	$	25.15
Granted	579,359		26.18
Vested	(95,416)		25.00
Forfeited	(18,156)		25.00
Nonvested at March 31, 2016	2,721,468	$	25.38

During the three months ended March 31, 2016, the Company granted 326,060 shares of restricted stock with four-year service vesting (20% for years 1-2, 30% for years 3-4) and 253,299 shares of restricted stock with three-year performance vesting (cliff).

As of March 31, 2016, there was $53.6 million of unrecognized pre-tax compensation expense related to nonvested restricted stock, which is expected to be recognized over a weighted average period of 2.7 years.

During the three months ended March 31, 2016, the Company purchased $473,000 of unvested equity interests related to awards that were modified at the IPO.

Stock Options

A summary of stock option activity during the three months ended March 31, 2016, is as follows:

		Weighted
		Average
		Exercise
	Options	Price
Outstanding at January 1, 2016	36,304	$	31.74
Granted	778,220		26.18
Exercised	—		—
Forfeited	—		—
Outstanding at March 31, 2016	814,524	$	26.43
Exercisable at March 31, 2016	—	$	—

The Company granted options to purchase 778,220 shares of the Company’s common stock during the three months ended March 31, 2016. Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of grant. The fair value of the stock options granted was estimated using a Black-Scholes valuation model. The weighted average fair value of the options granted during the three months ended March 31, 2016 is estimated at $10.97 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.4%; an expected term of approximately 6 years; expected volatility of 41.5%; and dividend yield of 0.0% over the expected life of the option. The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was based on historical volatility of several peer companies to Press Ganey Holdings, Inc. for periods equal to the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding.

As of March 31, 2016, there was $7.4 million of unrecognized pre-tax compensation expense related to stock options, which is expected to be recognized over a weighted average period of 3.9 years.

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Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share

Earnings Per Share

11. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury stock method. Common equivalent shares consist of common stock issuable on the vesting of restricted stock units and exercise of outstanding options when dilutive.

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended March 31,
	2016		2015
Net income	$	8,118	$	5,974
Weighted average shares outstanding, basic		52,806,364		43,313,200
Weighted average common equivalent shares		479,776		—
Weighted average shares outstanding, diluted		53,286,140		43,313,200
Net earnings per share
Basic	$	0.15	$	0.14
Diluted	$	0.15	$	0.14

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events

Subsequent Events

12. Subsequent Event

On May 2, 2016, the Company acquired Avatar International Holding Company and its subsidiary Avatar International LLC (“Avatar”) for a preliminary cash purchase price of $17.1 million, subject to certain post-closing adjustments. Avatar is a competitor in the patient experience and caregiver engagement markets.

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Basis of Presentation of Interim Financial Information (Policies)

3 Months Ended

Mar. 31, 2016

Basis of Presentation of Interim Financial Information

Basis of Presentation of Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring accruals necessary to present fairly the financial statements in accordance with GAAP. Operating results for the three months ended March 31, 2016 and 2015are not necessarily indicative of results to be expected for any other interim period or for the full year. The preparation of the consolidated financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could materially differ from those estimates.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606)”. This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB deferred the effective date by one year to annual and interim reporting periods beginning after December 15, 2017. The FASB is permitting early adoption of the standard, but not until annual and interim reporting periods beginning after December 15, 2016, the original effective date. An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, which clarifies the implementation guidance on principal versus agent considerations of ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing”, which clarifies the identification of performance obligations and the licensing implementation guidance of ASU 2014-09. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption.

In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. In addition, this update changes the accounting for software licenses to be consistent with other licenses of intangible assets. This standard is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted ASU 2015-05 on January 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”. This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. This standard is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted ASU 2015-16 on January 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”. This ASU requires that a lessee record an operating lease in the balance sheet with a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Adoption of this standard will be on a modified retrospective approach, which includes a number of optional practical expedients that the Company may elect to apply. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, treatment of forfeitures and classification on the statement of cash flows. This standard is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements. 

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Property and Equipment

Schedule of Property and equipment, net

	March 31,		December 31,
	2016		2015
Furniture, fixtures, and leasehold improvements	$	8,910	$	9,431
Office equipment		17,733		19,619
Office equipment held under capital lease		20,916		20,916
Computer equipment and software		82,688		74,844
Construction in progress		9,332		14,585
		139,579		139,395
Accumulated amortization of office equipment held under capital leases		(11,320)		(10,143)
Accumulated depreciation		(70,157)		(68,990)
	$	58,102	$	60,262

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Intangible Assets

Schedule of intangible assets

	March 31, 2016						December 31, 2015
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trade name (indefinite life)	$	200,000	$	—	$	200,000	$	200,000	$	—	$	200,000
Trade names (finite life)		2,410		(1,582)		828		2,410		(1,509)		901
Customer relationships		237,620		(98,097)		139,523		237,620		(94,851)		142,769
Proprietary technology		32,240		(15,649)		16,591		32,240		(14,849)		17,391
Other		3,180		(1,853)		1,327		3,180		(1,776)		1,404
	$	475,450	$	(117,181)	$	358,269	$	475,450	$	(112,985)	$	362,465

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Revolving Line of Credit and Long Term Debt (Tables)

3 Months Ended

Mar. 31, 2016

Revolving Line of Credit and Long Term Debt

Schedule of long-term debt

	March 31,		December 31,
	2016		2015
Term Loan	$	180,375	$	182,688
Unamortized deferred financing fees		(2,091)		(2,212)
		178,284		180,476
Less current portion		(9,250)		(9,250)
Long-term debt	$	169,034	$	171,226

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Equity-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Equity-Based Compensation

Schedule of equity-based compensation expense in condensed consolidated statements of operations

	Three Months Ended
	March 31,
	2016		2015
Cost of revenue	$	1,111	$	713
General and administrative		4,890		1,252
Total equity-based compensation expense	$	6,001	$	1,965

Schedule of changes in nonvested restricted stock

		Weighted
		Average
		Fair Value
		at Grant
	Shares	Date
Nonvested at January 1, 2016	2,255,681	$	25.15
Granted	579,359		26.18
Vested	(95,416)		25.00
Forfeited	(18,156)		25.00
Nonvested at March 31, 2016	2,721,468	$	25.38

Schedule of stock option activity

		Weighted
		Average
		Exercise
	Options	Price
Outstanding at January 1, 2016	36,304	$	31.74
Granted	778,220		26.18
Exercised	—		—
Forfeited	—		—
Outstanding at March 31, 2016	814,524	$	26.43
Exercisable at March 31, 2016	—	$	—

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share

Schedule of basic and diluted earnings (net loss) per share

	Three Months Ended March 31,
	2016		2015
Net income	$	8,118	$	5,974
Weighted average shares outstanding, basic		52,806,364		43,313,200
Weighted average common equivalent shares		479,776		—
Weighted average shares outstanding, diluted		53,286,140		43,313,200
Net earnings per share
Basic	$	0.15	$	0.14
Diluted	$	0.15	$	0.14

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Basis of Presentation of Interim Financial Information - Initial Public Offering (Details) - Common $ / shares in Units, shares in Thousands, $ in Millions	1 Months Ended
	May. 31, 2015 USD ($) $ / shares shares
IPO
Initial Public Offering
Shares issued in offering	10,235
Share price (in dollars per share) | $ / shares	$ 25.00
Proceeds from the issuance of common stock in initial public offering, net of fees | $	$ 234.4
IPO, excluding Underwriters' Option
Initial Public Offering
Shares issued in offering	8,900
Underwriters' Option
Initial Public Offering
Shares issued in offering	1,335

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Basis of Presentation of Interim Financial Information - Stock Split and Preferred Stock (Details)	May. 08, 2015 shares	Mar. 31, 2016 shares	Dec. 31, 2015 shares	May. 27, 2015 $ / shares shares
Stock split
Common stock, shares authorized		350,000,000	350,000,000
Preferred Stock
Preferred, shares authorized				50,000,000
Preferred, par value (in dollars per share) | $ / shares				$ 0.01
Common
Stock split
Stock split, conversion ratio	2,800
Common stock, shares authorized	350,000,000

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Property and Equipment - Components (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Property and equipment, net
Property and equipment, gross	$ 139,579	$ 139,395
Accumulated amortization on office equipment held under capital leases	(11,320)	(10,143)
Accumulated depreciation	(70,157)	(68,990)
Property and equipment, net	58,102	60,262
Furniture, fixtures, and leasehold improvements
Property and equipment, net
Property and equipment, gross	8,910	9,431
Office equipment
Property and equipment, net
Property and equipment, gross	17,733	19,619
Office equipment held under capital lease
Property and equipment, net
Property and equipment, gross	20,916	20,916
Computer equipment and software
Property and equipment, net
Property and equipment, gross	82,688	74,844
Construction in progress
Property and equipment, net
Property and equipment, gross	$ 9,332	$ 14,585

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Property and Equipment - Depreciation (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Depreciation and amortization
Depreciation and amortization	$ 7.4	$ 5.7

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Intangible Assets - Intangibles, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets, Net
Accumulated Amortization	$ (117,181)	$ (112,985)
Intangible Assets, Net (Excluding Goodwill)
Gross Carrying Value	475,450	475,450
Accumulated Amortization	(117,181)	(112,985)
Intangible assets, net	358,269	362,465
Trade names
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	2,410	2,410
Accumulated Amortization	(1,582)	(1,509)
Intangible Assets, Net (finite life)	828	901
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(1,582)	(1,509)
Customer relationships
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	237,620	237,620
Accumulated Amortization	(98,097)	(94,851)
Intangible Assets, Net (finite life)	139,523	142,769
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(98,097)	(94,851)
Proprietary technology
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	32,240	32,240
Accumulated Amortization	(15,649)	(14,849)
Intangible Assets, Net (finite life)	16,591	17,391
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(15,649)	(14,849)
Other
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	3,180	3,180
Accumulated Amortization	(1,853)	(1,776)
Intangible Assets, Net (finite life)	1,327	1,404
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(1,853)	(1,776)
Trade names
Indefinite-Lived Intangible Assets (Excluding Goodwill)
Indefinite-lived intangible assets	$ 200,000	$ 200,000

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Intangible Assets - Amortization (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Amortization expense
Amortization expense	$ 4.2	$ 4.1

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Revolving Line of Credit and Long Term Debt - Components (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Long-term debt
Unamortized deferred financing fees	$ (848)	$ (897)
Less current portion	(9,250)	(9,250)
Long-term debt	169,034	171,226
2015 Credit Agreement
Long-term debt
Unamortized deferred financing fees	(2,091)	(2,212)
Total debt	178,284	180,476
Less current portion	(9,250)	(9,250)
Long-term debt	169,034	171,226
2015 Credit Agreement | Term Loan
Long-term debt
Long-term debt, gross	$ 180,375	$ 182,688

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Revolving Line of Credit and Long Term Debt - Unamortized Deferred Financing Fees (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Long-term debt
Deferred financing fees, net	$ 848	$ 897
2015 Credit Agreement
Long-term debt
Deferred financing fees, net	2,091	2,212
2015 Credit Agreement | Revolving Credit Facility
Long-term debt
Deferred financing fees, net	$ 848	$ 897

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Revolving Line of Credit and Long Term Debt - Terms (Details) - USD ($)		3 Months Ended
	Jul. 31, 2015	Mar. 31, 2016	Dec. 31, 2015
2015 Credit Agreement | LIBOR
Long-term debt
Variable rate, basis spread (as a percent)		1.50%
2015 Credit Agreement | Adjusted Base Rate (ABR)
Long-term debt
Variable rate, basis spread (as a percent)		0.50%
Term Loan | 2015 Credit Agreement
Long-term debt
Term of debt instrument	5 years
Face amount of debt	$ 185,000,000
Frequency of periodic payment		quarterly
Periodic payment required		$ 2,300,000
Long-term debt, amount outstanding		180,375,000	$ 182,688,000
Term Loan | First Lien Credit Agreement
Long-term debt
Payments on debt	$ 183,200,000
Revolving Credit Facility | 2015 Credit Agreement
Long-term debt
Term of debt instrument	5 years
Maximum borrowing capacity	$ 75,000,000
Long-term debt, amount outstanding		0
Letters of credit outstanding		65,000
Available borrowing capacity		$ 74,900,000
Commitment fee, unused amounts (as a percent)		0.375%

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Income Taxes - Effective Tax Rate (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income tax expense
Income tax expense	$ 6,680	$ 4,511
Effective income tax reconciliation
Effective income tax rate, expense (benefit)	45.10%	43.00%

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Segment Information (Details) - Operating - segment	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Information
Number of operating segments	1	1
Revenues | Geographic Concentration Risk | US
Segment Information
Revenues by location, as a percent	99.00%	99.00%

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Related Party Transactions - Management Fees (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Related Party Transactions
Related party expenses		$ 286
Vestar | Management Fees
Related Party Transactions
Related party expenses	$ 0	$ 286

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Equity-Based Compensation - Allocated Equity-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Equity-based compensation expense
Total equity-based compensation expense	$ 6,001	$ 1,965
Cost of revenue, excluding depreciation and amortization
Equity-based compensation expense
Total equity-based compensation expense	1,111	713
General and administrative
Equity-based compensation expense
Total equity-based compensation expense	$ 4,890	$ 1,252

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Equity-Based Compensation - Restricted Stock (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Nonvested awards
Equity interests purchased	$ 473,000	$ 731,000
2015 Plan
Equity-based compensation
Shares authorized for issuance	7,120,000
Restricted stock
Nonvested awards
Equity interests purchased	$ 473,000
Unrecognized compensation
Unrecognized compensation costs	$ 53,600,000
Unrecognized compensation costs, weighted average period for recognition	2 years 8 months 12 days
Restricted stock | 4-year service vesting
Nonvested awards
Granted (in shares)	326,060
Restricted stock | Service vesting, year 1
Vesting terms
Vesting percentage	20.00%
Restricted stock | Service vesting, year 2
Vesting terms
Vesting percentage	20.00%
Restricted stock | Service vesting, year 3
Vesting terms
Vesting percentage	30.00%
Restricted stock | Service vesting, year 4
Vesting terms
Vesting percentage	30.00%
Restricted stock | 3-year performance vesting (cliff)
Nonvested awards
Granted (in shares)	253,299
Restricted stock | 2015 Plan
Nonvested awards
Nonvested at beginning of period (in shares)	2,255,681
Granted (in shares)	579,359
Vested (in shares)	(95,416)
Forfeited (in shares)	(18,156)
Nonvested at end of period (in shares)	2,721,468
Weighted Average Fair Value at Grant Date
Nonvested at beginning of period (in dollars per share)	$ 25.15
Granted (in dollars per share)	26.18
Vested (in dollars per share)	25.00
Forfeited (in dollars per share)	25.00
Nonvested at end of period (in dollars per share)	$ 25.38

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Equity-Based Compensation - Stock Options (Details) - Stock Options $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) $ / shares shares
Stock Options
Outstanding at beginning of period (in shares) | shares	36,304
Grants (in shares) | shares	778,220
Outstanding at end of period (in shares) | shares	814,524
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 31.74
Granted (in dollars per share)	26.18
Outstanding at end of period (in dollars per share)	26.43
Fair value assumptions, Black-Scholes valuation model
Weighted-average grant date fair value (in dollars per share)	$ 10.97
Risk-free interest rate (as a percent)	1.40%
Expected term (in years)	6 years
Expected volatility (as a percent)	41.50%
Dividend yield (as a percent)	0.00%
Unrecognized compensation
Unrecognized compensation costs | $	$ 7.4
Unrecognized compensation costs, weighted average period for recognition	3 years 10 months 24 days

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share
Net income	$ 8,118	$ 5,974
Weighted average shares outstanding, basic	52,806,364	43,313,200
Weighted average common equivalent shares	479,776
Weighted average shares outstanding, diluted	53,286,140	43,313,200
Net earnings per share
Basic (in dollars per share)	$ 0.15	$ 0.14
Diluted (in dollars per share)	$ 0.15	$ 0.14

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Subsequent Events (Details) $ in Millions	May. 02, 2016 USD ($)
Avatar | Subsequent Event
Business Acquisitions
Consideration paid, cash	$ 17.1