Exhibit 99.1
Press Release
PRGX Global, Inc. Announces First Quarter
2013 Financial Results
Highlights
| • | | Q1 revenue of $45.1M and Adjusted EBITDA of $4.4M, in line with previously announced ranges |
| • | | Profit Optimization Q1 revenue reflects both sequential and year-over-year growth |
| • | | Recovery Audit Services – Americas Q1 gross margin percentage increased over Q1 2012 despite revenue challenges, reflecting ongoing impact of the Service Delivery Model Redesign program |
| • | | Awaiting results of bid for Centers for Medicare & Medicaid Services (CMS) Medicare Part A/B Recovery Audit Contractor (RAC) Program |
ATLANTA, April 29, 2013 — PRGX Global, Inc. (Nasdaq:PRGX), the world’s leading provider of recovery audit services and the pioneer inProfit Discovery™, today announced its unaudited financial results for the first quarter ended March 31, 2013.
“We had a tough quarter. Two of our three growth levers, including the core recovery audit business which is by far the largest part of our revenue, underperformed compared to the same quarter last year. Historically, our portfolio of clients and services has insulated us from volatility within and across our business segments. Q1 2013 represents the rare instance where multiple challenges worked against us. That said, we expect the remainder of the year to improve for our core business and for our profit optimization service line to continue to gain market traction. The financial performance of our healthcare business, which was expected to grow in 2013 under our current RAC Program subcontracts, will be largely dependent on the outcome of the CMS RAC Program rebid and the related transition timelines,” said Romil Bahl, president and chief executive officer.
“In our Recovery Audit Services segments, revenue was impacted by delays at key retail clients and in our commercial business. However, we expect the majority of this revenue will not be lost but rather shifted to later in the year. Our Europe/Asia-Pacific (EAP) business is still being affected by the tough macroeconomic environment in Europe that recently put three clients into bankruptcy. Our EAP leadership team has plans in place to both address revenue as well as drive efficiencies by deploying our global service delivery model,” continued Bahl.
“In our New Services segment, our Healthcare Claims Recovery Audit team dealt with claim delays resulting from Medicare claims processing system changes as well as a temporary drop in findings rates. The team restored the findings rates back to historical levels by quarter end, while also working on our proposal to CMS for the Medicare Part A/B RAC program rebid. We are committed to maximizing the recoveries we can generate for CMS under the current contract and eagerly await the results of the rebid,” said Bahl.
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“Finally, the Profit Optimization team continued on the positive trajectory that it had coming out of 2012, including some nice wins in our newer services. Together our different teams are building a consolidated value proposition that is resonating with our clients and has us excited about the future,” concluded Bahl.
Consolidated Results for Three Months Ended March 31, 2013
Consolidated revenue for the first quarter of 2013 decreased 12.7% to $45.1 million compared to $51.6 million in the same prior year period. After adjusting for changes in foreign exchange rates, consolidated first quarter revenue in 2013 decreased 11.9% compared to the same period in 2012.
Recovery Audit Services – Americas revenue for the first quarter of 2013 decreased 8.9% to $26.2 million compared to $28.8 million in the same period in the prior year. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services – Americas revenue decreased by 8.4% compared to 2012.
Recovery Audit Services – Europe/Asia-Pacific revenue for the first quarter of 2013 decreased 23.0% to $11.0 million compared to $14.3 million in the same period in the prior year. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services – Europe/Asia-Pacific revenue decreased by 21.4% compared to 2012.
New Services revenue for the first quarter of 2013 decreased 8.1% to $7.8 million compared to $8.5 million in the same period in the prior year. The New Services segment represents Healthcare Claims Recovery Audit services and our Profit Optimization services. Revenue from New Services represented 17.4% of consolidated revenue for the first quarter of 2013 compared to 16.5% of consolidated revenue in the same period in the prior year.
Total cost of revenue for the first quarter of 2013 was $30.4 million, or 67.4% of revenue, compared to $34.2 million, or 66.3% of revenue, in the same period in the prior year. Total cost of revenue included decreases in both of our recovery audit segments driven by the expanded use of our Next-Generation Recovery Audit service model. Cost of revenue as a percentage of revenue declined in the Recovery Audit Services – Americas segment, but increased in the Company’s other two reporting segments. SG&A for the first quarter of 2013 was $11.7 million, or 26.0% of revenue, compared to $12.6 million, or 24.5% of revenue, in the same period in the prior year. Depreciation and amortization expenses were $3.3 million in the first quarter of 2013 compared to $3.8 million in the prior year first quarter. Net loss for the first quarter of 2013 was $(0.5) million, or $(0.02) per basic and diluted share, compared to net earnings of $0.3 million, or $0.01 per basic and diluted share, for the same period in 2012. Net cash provided by operating activities for the first quarter of 2013 was $0.8 million compared to $2.0 million in the first quarter of 2012. The decrease in net cash provided by operating activities is primarily due to lower operating income resulting from reduced revenue.
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Adjusted EBITDA for the first quarter of 2013 was $4.4 million compared to $6.8 million of Adjusted EBITDA for the same period in 2012. The 2013 first quarter Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization (EBITDA) excluding a charge of $1.3 million related to stock-based compensation, a $0.1 million charge for acquisition obligations classified as compensation, and $0.4 million of foreign currency losses on short-term intercompany balances. The comparable Adjusted EBITDA amount for the first quarter of 2012 excludes from EBITDA for such period a $1.4 million charge for stock-based compensation, $0.2 million in wage claim costs, $0.2 million of transformation severance and related expenses, a $0.1 million charge for acquisition obligations classified as compensation and $0.3 million of foreign currency gains on short-term intercompany balances. Schedule 3 attached to this press release provides a reconciliation of net earnings (loss) to each of EBIT (earnings before interest and taxes), EBITDA and Adjusted EBITDA.
Liquidity
At March 31, 2013, the Company had unrestricted cash and cash equivalents of $37.8 million and had no borrowings against its revolving credit facility. Bank debt outstanding at quarter end was $5.3 million, which represented the outstanding balance on a variable rate term loan due quarterly through December 2013, with a final payment due in January 2014.
First Quarter Earnings Call
As previously announced, management will hold a conference call tomorrow morning at 8:30 AM (Eastern time) to discuss the Company’s first quarter 2013 financial results. To access the conference call, listeners in the U.S. and Canada should dial (877) 755-7423 at least 5 minutes prior to the start of the conference. Listeners outside the U.S. and Canada should dial (678) 894-3069. To be admitted to the call, listeners should use passcode 33409158.
This teleconference will also be audiocast on the Internet atwww.prgx.com (click on “Events & Presentations” under “Investors”). A replay of the audiocast will be available at the same location onwww.prgx.com beginning approximately two hours after the conclusion of the live audiocast, extending through June 30, 2013. Please note that the Internet audiocast is “listen-only.” Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded fromwww.microsoft.com/windows/mediaplayer.
About PRGX Global, Inc.
Headquartered in Atlanta, Georgia, PRGX Global, Inc. is the world’s leading provider of recovery audit services. With over 1,700 employees, the Company operates and serves clients in more than 30 countries and provides its services to over 75% of the top 30 global retailers. PRGX is also pioneering Profit Discovery, a unique combination of audit, analytics and advisory services that improves client financial performance. For additional information, please visit PRGX atwww.prgx.com.
Forward-Looking Statements
In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company’s plans and anticipated financial results for the remainder of 2013, the outcome of the rebid of Medicare RAC program contracts and associated transitions and resulting
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anticipated impacts on the Company’s financial results, and the expected benefits of the Company’s redesigned recovery audit service delivery model. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. Risks that could affect the Company’s future performance include revenue that does not meet expectations or justify costs incurred, the Company’s ability to develop material sources of new revenue in addition to revenue from its core recovery audit services, changes in the market for the Company’s services, the Company’s ability to retain and attract qualified personnel, changes to Medicare and Medicaid recovery audit contractor programs and the outcome of the rebid of the Medicare RAC program contracts, the Company’s ability to integrate recent and future acquisitions, uncertainty in the credit markets, the Company’s ability to maintain compliance with its financial covenants, client bankruptcies, loss of major clients, and other risks generally applicable to the Company’s business. For a discussion of other risk factors that may impact the Company’s business, please see the Company’s filings with the Securities and Exchange Commission, including its Form 10-K filed on March 13, 2013. The Company disclaims any obligation or duty to update or modify these forward-looking statements.
Non-GAAP Financial Measures
EBIT, EBITDA and Adjusted EBITDA are all “non-GAAP financial measures” presented as supplemental measures of the Company’s performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating its performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company’s secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that, as described above, the adjustments may vary from period to period and in the future the Company will incur expenses such as those used in calculating these measures. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. Schedule 3 to this press release provides a reconciliation of net earnings (loss) to each of EBIT, EBITDA and Adjusted EBITDA.
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: PRGX Global, Inc.
CONTACT: PRGX Global, Inc.
investor-relations@prgx.com
Phone: 770-779-3011
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SCHEDULE 1
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
(Unaudited)
| | | | | | | | |
| | | Three Months Ended
March 31, | |
| | | 2013 | | | 2012 | |
Revenue | | $ | 45,101 | | | $ | 51,649 | |
Operating expenses: | | | | | | | | |
Cost of revenue | | | 30,407 | | | | 34,218 | |
Selling, general and administrative expenses | | | 11,711 | | | | 12,637 | |
Depreciation of property and equipment | | | 2,008 | | | | 1,513 | |
Amortization of intangible assets | | | 1,276 | | | | 2,327 | |
| | | | | | | | |
Total operating expenses | | | 45,402 | | | | 50,695 | |
| | | | | | | | |
Operating income (loss) | | | (301 | ) | | | 954 | |
Foreign currency transaction (gains) losses on short-term intercompany balances | | | 357 | | | | (339 | ) |
Interest expense (income), net | | | (217 | ) | | | 504 | |
| | | | | | | | |
Earnings (loss) before income taxes | | | (441 | ) | | | 789 | |
| | | | | | | | |
Income tax expense | | | 56 | | | | 497 | |
| | | | | | | | |
Net earnings (loss) | | $ | (497 | ) | | $ | 292 | |
| | | | | | | | |
Basic earnings (loss) per common share | | $ | (0.02 | ) | | $ | 0.01 | |
| | | | | | | | |
Diluted earnings (loss) per common share | | $ | (0.02 | ) | | $ | 0.01 | |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
Basic | | | 28,770 | | | | 25,309 | |
| | | | | | | | |
Diluted | | | 28,770 | | | | 25,765 | |
| | | | | | | | |
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SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
| | | | | | | | |
| | | March 31,
2013 | | | December 31,
2012 | |
| ASSETS | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 37,787 | | | $ | 37,806 | |
Restricted cash | | | 129 | | | | 65 | |
Receivables: | | | | | | | | |
Contract receivables, net | | | 38,284 | | | | 45,127 | |
Employee advances and miscellaneous receivables, net | | | 1,198 | | | | 1,352 | |
| | | | | | | | |
Total receivables | | | 39,482 | | | | 46,479 | |
| | |
Prepaid expenses and other current assets | | | 4,124 | | | | 3,853 | |
| | | | | | | | |
Total current assets | | | 81,522 | | | | 88,203 | |
| | |
Property and equipment, net | | | 19,555 | | | | 19,574 | |
Goodwill | | | 13,611 | | | | 13,669 | |
Intangible assets, net | | | 16,934 | | | | 18,399 | |
Deferred income taxes | | | 1,630 | | | | 1,552 | |
Other assets | | | 1,742 | | | | 2,189 | |
| | | | | | | | |
Total assets | | $ | 134,994 | | | $ | 143,586 | |
| | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 11,674 | | | $ | 14,136 | |
Accrued payroll and related expenses | | | 13,652 | | | | 20,874 | |
Refund liabilities and deferred revenue | | | 8,639 | | | | 8,530 | |
Current portion of debt | | | 5,250 | | | | 3,000 | |
Business acquisition obligations | | | 3,098 | | | | 4,218 | |
| | | | | | | | |
Total current liabilities | | | 42,313 | | | | 50,758 | |
Long-term debt | | | — | | | | 3,000 | |
Noncurrent business acquisition obligations | | | — | | | | 2,479 | |
Other long-term liabilities | | | 2,276 | | | | 2,697 | |
| | | | | | | | |
Total liabilities | | | 44,589 | | | | 58,934 | |
| | | | | | | | |
Shareholders’ equity: | | | | | | | | |
Common stock | | | 289 | | | | 279 | |
Additional paid-in capital | | | 600,769 | | | | 594,045 | |
Accumulated deficit | | | (513,697 | ) | | | (513,200 | ) |
Accumulated other comprehensive income | | | 3,044 | | | | 3,528 | |
| | | | | | | | |
Total shareholders’ equity | | | 90,405 | | | | 84,652 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 134,994 | | | $ | 143,586 | |
| | | | | | | | |
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Reconciliation of Net Earnings (Loss) to EBIT, EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
| | | | | | | | |
| | | Three Months Ended
March 31, | |
| | | 2013 | | | 2012 | |
Reconciliation of net earnings (loss) to EBIT, EBITDA and Adjusted EBITDA: | | | | | | | | |
Net earnings (loss) | | $ | (497 | ) | | $ | 292 | |
| | |
Income tax expense | | | 56 | | | | 497 | |
Interest expense (income), net | | | (217 | ) | | | 504 | |
| | | | | | | | |
EBIT | | | (658 | ) | | | 1,293 | |
| | |
Depreciation of property and equipment | | | 2,008 | | | | 1,513 | |
Amortization of intangible assets | | | 1,276 | | | | 2,327 | |
| | | | | | | | |
EBITDA | | | 2,626 | | | | 5,133 | |
Foreign currency transaction (gains) losses on short-term intercompany balances | | | 357 | | | | (339 | ) |
Acquisition obligations classified as compensation | | | 56 | | | | 101 | |
Transformation severance and related expenses | | | — | | | | 242 | |
Wage claim costs | | | — | | | | 249 | |
Stock-based compensation | | | 1,318 | | | | 1,401 | |
| | | | | | | | |
Adjusted EBITDA | | $ | 4,357 | | | $ | 6,787 | |
| | | | | | | | |
EBIT, EBITDA and Adjusted EBITDA are all “non-GAAP financial measures” presented as supplemental measures of our performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating the Company’s performance over time, and that the rating agencies and a number of lenders use EBIT, EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company’s secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
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SCHEDULE 4
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
| | | | | | | | |
| | | Three Months Ended | |
| | | March 31, | |
| | | 2013 | | | 2012 | |
Cash flows from operating activities: | | | | | | | | |
Net earnings (loss) | | $ | (497 | ) | | $ | 292 | |
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 3,284 | | | | 3,840 | |
Amortization of deferred debt costs | | | 46 | | | | 46 | |
Stock-based compensation expense | | | 1,318 | | | | 1,401 | |
Foreign currency transaction (gains) losses on short-term intercompany balances | | | 357 | | | | (339 | ) |
Decrease in receivables | | | 6,670 | | | | 1,187 | |
Decrease in accounts payable, accrued payroll and other accrued expenses | | | (9,338 | ) | | | (5,482 | ) |
Other, primarily changes in assets and liabilities | | | (991 | ) | | | 1,029 | |
| | | | | | | | |
Net cash provided by operating activities | | | 849 | | | | 1,974 | |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Business acquisitions | | | — | | | | (997 | ) |
Purchases of property and equipment, net of disposals | | | (2,207 | ) | | | (1,967 | ) |
| | | | | | | | |
Net cash used in investing activities | | | (2,207 | ) | | | (2,964 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Net proceeds from issuance of common stock | | | 4,118 | | | | — | |
Other, net | | | (2,500 | ) | | | (1,571 | ) |
| | | | | | | | |
Net cash provided by (used in) financing activities | | | 1,618 | | | | (1,571 | ) |
| | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | (279 | ) | | | 416 | |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (19 | ) | | | (2,145 | ) |
| | |
Cash and cash equivalents at beginning of period | | | 37,806 | | | | 20,337 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 37,787 | | | $ | 18,192 | |
| | | | | | | | |
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SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended | |
| | | March 31, | |
| | | 2013 | | | 2012 | | | Change | |
Revenue | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 26,242 | | | $ | 28,813 | | | $ | (2,571 | ) |
Recovery Audit Services - Europe/Asia-Pacific | | | 11,017 | | | | 14,305 | | | | (3,288 | ) |
New Services | | | 7,842 | | | | 8,531 | | | | (689 | ) |
| | | | | | | | | | | | |
Total | | $ | 45,101 | | | $ | 51,649 | | | $ | (6,548 | ) |
| | | | | | | | | | | | |
Cost of revenue | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 14,350 | | | $ | 15,952 | | | $ | 1,602 | |
Recovery Audit Services - Europe/Asia-Pacific | | | 9,245 | | | | 11,075 | | | | 1,830 | |
New Services | | | 6,812 | | | | 7,191 | | | | 379 | |
| | | | | | | | | | | | |
Total | | $ | 30,407 | | | $ | 34,218 | | | $ | 3,811 | |
| | | | | | | | | | | | |
Selling, general and administrative expenses | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 4,320 | | | $ | 4,862 | | | $ | 542 | |
Recovery Audit Services - Europe/Asia-Pacific | | | 517 | | | | 1,251 | | | | 734 | |
New Services | | | 1,481 | | | | 1,397 | | | | (84 | ) |
Corporate | | | 5,393 | | | | 5,127 | | | | (266 | ) |
| | | | | | | | | | | | |
Total | | $ | 11,711 | | | $ | 12,637 | | | $ | 926 | |
| | | | | | | | | | | | |
Depreciation of property and equipment | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 1,368 | | | $ | 915 | | | $ | (453 | ) |
Recovery Audit Services - Europe/Asia-Pacific | | | 112 | | | | 40 | | | | (72 | ) |
New Services | | | 528 | | | | 558 | | | | 30 | |
| | | | | | | | | | | | |
Total | | $ | 2,008 | | | $ | 1,513 | | | $ | (495 | ) |
| | | | | | | | | | | | |
Amortization of intangible assets | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 698 | | | $ | 1,586 | | | $ | 888 | |
Recovery Audit Services - Europe/Asia-Pacific | | | 396 | | | | 539 | | | | 143 | |
New Services | | | 182 | | | | 202 | | | | 20 | |
| | | | | | | | | | | | |
Total | | $ | 1,276 | | | $ | 2,327 | | | $ | 1,051 | |
| | | | | | | | | | | | |
Operating income (loss) | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 5,506 | | | $ | 5,498 | | | $ | 8 | |
Recovery Audit Services - Europe/Asia-Pacific | | | 747 | | | | 1,400 | | | | (653 | ) |
New Services | | | (1,161 | ) | | | (817 | ) | | | (344 | ) |
Corporate | | | (5,393 | ) | | | (5,127 | ) | | | (266 | ) |
| | | | | | | | | | | | |
Total | | $ | (301 | ) | | $ | 954 | | | $ | (1,255 | ) |
| | | | | | | | | | | | |
Adjusted EBITDA | | | | | | | | | | | | |
Recovery Audit Services - Americas | | $ | 7,572 | | | $ | 8,338 | | | $ | (766 | ) |
Recovery Audit Services - Europe/Asia-Pacific | | | 1,255 | | | | 2,036 | | | | (781 | ) |
New Services | | | (395 | ) | | | 139 | | | | (534 | ) |
Corporate | | | (4,075 | ) | | | (3,726 | ) | | | (349 | ) |
| | | | | | | | | | | | |
Total | | $ | 4,357 | | | $ | 6,787 | | | $ | (2,430 | ) |
| | | | | | | | | | | | |
| * | The Recovery Audit Services - Americas segment represents recovery audit services, excluding New Services, provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services provided in Europe, Asia and the Pacific region. The New Services segment represents Healthcare Claims Recovery Audit services and Profit Optimization services. |
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