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PRGX Global, Inc. Announces First Quarter 2019 Financial Results; Strong Revenue Growth, Maintains 2019 Annual Guidance

ATLANTA, April 30, 2019 (GLOBE NEWSWIRE) -- PRGX Global, Inc. (Nasdaq: PRGX), a global leader in Recovery Audit and Spend Analytics services, today announced its unaudited financial results for the first quarter ended March 31, 2019.  

Quarterly Highlights

  • Revenue from continuing operations of $38.8 million, representing growth of 5.7% year-over-year (8.6% on a constant dollar basis)
  • Executive team additions of Kurt Abkemeier (CFO), Carol O’Kelley (Chief Marketing Officer), Jim Madden (SVP, Sales) and Tony Massanelli (SVP, Global Commercial Operations)
  • Adjusted EBITDA from continuing operations of $1.7 million, net loss from continuing operations of $4.2 million
  • Maintaining 2019 annual guidance of year-over-year revenue growth in the range of 8% to 10% and Adjusted EBITDA growth in the range of 14% to 18%
           
    For the Three Months Ended March 31, 
 
           
  Selected Financial Data (dollars in thousands)  2019   2018 % Change 
 
             
  Revenue        
  Recovery Audit Services - Americas $ 27,373     $ 25,958   5.5 %  
  Recovery Audit Services - Europe/Asia-Pacific   9,759       10,027   -2.7 %  
  Adjacent Services   1,672       736   127.2 %  
  Total $    38,804     $   36,721   5.7 %  
  Net loss from continuing operations   (4,241 )     (2,328 ) -82.2 %  
           
  Non-GAAP Financial Measures         
  Adjusted EBITDA from continuing operations $ 1,733     $ 3,279   -47.1 %  
           

 

“We delivered strong revenue growth of 8.6% on a constant dollar basis with significant contributions from several large retail clients and healthy growth in our commercial business.  We fully expect to maintain top-line momentum throughout 2019 as we continue to convert new contracts into revenue, acquire new clients and expand the scope of services at existing clients,” said Ron Stewart, president and chief executive officer.

“As promised, we have also made significant progress migrating data into our transformational, next generation data processing platform.  At the same time, we continue to make investments in our technology development, global marketing and go-to-market teams to ensure they are ready to leverage this powerful data engine to drive increased revenue and profitability,” continued Stewart.

“Looking ahead, our new business pipeline remains strong and we are actively managing our costs, consistent with our strategy of being the lowest cost provider in the industry.  Accordingly, we are maintaining 2019 annual guidance of year-over-year revenue growth in the range of 8% to 10% and Adjusted EBITDA growth in the range of 14% to 18%,” concluded Stewart.

Consolidated Results from Continuing Operations for the Three Months Ended March 31, 2019

Consolidated revenue from continuing operations for the first quarter of 2019 was $38.8 million, compared to $36.7 million for the same period in 2019, an increase of 5.7%.  First quarter 2019 revenue from the Recovery Audit Services segments was $37.1 million compared to $36.0 million in the prior year, and from the Adjacent Services segment was $1.7 million compared to $0.7 million in 2018.  On a constant dollar basis adjusted for changes in foreign exchange rates, revenue increased by 8.6% in the first quarter of 2019 compared to the same period in the prior year.  

Total cost of revenue from continuing operations for the first quarter of 2019 was $25.2 million, or 65.0% of revenue, compared to $24.8 million, or 67.5% of revenue, for the same period in the prior year, representing a 2.5% improvement as a percentage of revenue.

Selling, general and administrative expenses from continuing operations for the first quarter of 2019 were $13.9 million compared to $11.3 million in the prior year period. 

Consolidated net loss from continuing operations for the first quarter of 2019 was $4.2 million, or $(0.19) per basic and diluted share, compared to net loss of $2.3 million, or $(0.10) per basic and diluted share, for the same period in 2018.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the first quarter of 2019 was $1.7 million, or 4.4 % of revenue, compared to Adjusted EBITDA of $3.3 million, or 8.9% of revenue, for the first quarter of 2018, a decrease of $1.6 million or 47.1%. This decline in Adjusted EBITDA was primarily driven by costs related to planned staffing in advance of revenue, in both Recovery Audit and Adjacent Services, the beginning of our sales and marketing initiatives, recruiting fees and changes in bad debt reserves. 

Schedule 3 attached to this press release provides a reconciliation of net loss to each of EBIT (Earnings Before Interest and Taxes), EBITDA and Adjusted EBITDA.  

Cash Flow and Liquidity

Net cash used by operating activities for the first quarter of 2019 was $2.4 million, compared to $3.0 million in the first quarter of the prior year.

At March 31, 2019, the Company had unrestricted cash and cash equivalents of $12.3 million, and borrowings of $29.7 million against its $60.0 million revolving credit facility.

Stock Repurchase Program

Since the February 2014 announcement of the Company’s stock repurchase program, as of March 31, 2019, the Company has repurchased 9.3 million shares.  The Company repurchased approximately 0.2 million shares of its outstanding common stock for an aggregate cost of $2.2 million in the quarter ended March 31, 2019.   

Adoption of New Lease Accounting Standard

On January 1, 2019, we adopted the new accounting standard amending the accounting for leases, which did not have a material impact on our first quarter operating results. Prior period amounts were not retrospectively adjusted. Under this new standard, leases we previously referred to as “operating leases” are now reflected on the balance sheet as “operating lease right-of-use assets” with a corresponding liability of “operating lease liabilities.”

First Quarter Earnings Call

As previously announced, management will hold a conference call later today at 5:00 PM (Eastern time) to discuss the Company’s first quarter 2019 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 8889896.  

This teleconference will also be audiocast on the Internet at www.prgx.com (click on "Events & Presentations" under "Investors"). A replay of the audiocast will be available at the same location on www.prgx.com beginning approximately two hours after the conclusion of the live audiocast, extending through September 30, 2019. Please note that the Internet audiocast is “listen-only.” Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded from www.microsoft.com/en-us/downloads.

About PRGX

PRGX Global, Inc. is a global leader in Recovery Audit and Spend Analytics services.  With over 1,500 employees, the Company serves clients in more than 30 countries and provides its services to 80% of the top 15 global retailers and over 25% of the top 50 companies in the Fortune 500. PRGX delivers more than $1 billion in cash flow improvement for its clients each year.  The creator of the recovery audit industry more than 40 years ago, PRGX continues to innovate through technology and expanded service offerings.  In addition to Recovery Audit, the Company provides Contract Compliance, Spend Analytics and Supplier Information Management services to improve clients’ financial performance and manage risk. For additional information on PRGX, please visit www.prgx.com.

Forward-Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company's overall condition and growth prospects, the anticipated benefits from the Company’s investments in technology, marketing and sales personnel, the strength of the Company’s new business pipeline, effectiveness of the Company’s cost management efforts, and the Company’s expectations regarding its 2019 financial performance. 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, 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. 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 income (loss) to each of EBIT, EBITDA and Adjusted EBITDA.

CONTACT: PRGX Global, Inc.
investor-relations@prgx.com
Phone: 770-779-3011


SCHEDULE 1    
PRGX Global, Inc. and Subsidiaries    
Condensed Consolidated Statements of Operations    
(Amounts in thousands, except per share data)    
(Unaudited)    
                 
                 
        Three Months    
        Ended March 31,    
        2019   2018    
                 
Revenue, net of refund liabilities     $ 38,804     $ 36,721      
Operating expenses:              
  Cost of revenue       25,235       24,797      
  Selling, general and administrative expenses     13,917       11,264      
  Depreciation of property, equipment and software assets   2,203       1,223      
  Amortization of intangible assets       862       788      
  Total operating expenses       42,217       38,072      
                 
  Operating loss from continuing operations       (3,413 )     (1,351 )    
                 
Foreign currency transaction losses (gains)              
  on short-term intercompany balances       206       (220 )    
Interest expense, net       473       398      
Other (income) loss       (19 )     12      
  Loss from continuing operations before income taxes   (4,073 )     (1,541 )    
                 
Income tax expense       168       787      
                 
  Net loss from continuing operations     $ (4,241 )   $ (2,328 )    
                 
Discontinued operations:              
Loss from discontinued operations       (155 )     (333 )    
Income tax expense       -       -      
  Net loss from discontinued operations       (155 )     (333 )    
                 
  Net loss     $ (4,396 )   $ (2,661 )    
                 

 

SCHEDULE 2  
PRGX Global, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
(Amounts in thousands)  
(Unaudited)  
                     
                     
                     
                     
              March 31,   December 31,  
              2019   2018  
                     
      ASSETS   
Current assets:              
  Cash and cash equivalents     $ 12,187     $ 13,973    
  Restricted cash         99       46    
  Receivables:              
    Contract receivables, net     42,470       46,865    
    Employee advances and miscellaneous receivables, net     601       567    
      Total receivables       43,071       47,432    
                     
  Prepaid expenses and other current assets     2,176       3,144    
      Total current assets       57,533       64,595    
                     
Property, equipment and software, net     22,504       22,028    
Operating lease right-of-use assets     13,268       -    
Goodwill           17,570       17,531    
Intangible assets, net       14,137       14,945    
Deferred income taxes       3,542       3,561    
Other assets         1,480       2,169    
      Total assets     $ 130,034     $ 124,829    
                     
                     
      LIABILITIES AND SHAREHOLDERS' EQUITY  
Current liabilities:              
  Accounts payable and accrued expenses   $ 2,641     $ 7,515    
  Accrued payroll and related expenses     10,093       15,073    
  Current portion of operating lease liabilites     4,530       -    
  Refund liabilities       6,044       6,497    
  Deferred revenue       2,388       2,428    
  Current portion of long-term debt     48       48    
  Current portion of long-term incentive compensation liability     15       -    
  Current portion of business acquisition obligations     3,843       4,162    
      Total current liabilities     29,602       35,723    
                     
Long-term debt         29,661       21,553    
Long-term operating lease liabilities     8,786       -    
Refund liabilities         42       100    
Deferred income taxes       666       666    
Other long-term liabilities       47       458    
      Total liabilities       68,804       58,500    
                     
Shareholders' equity:            
  Common stock         234       232    
  Additional paid-in capital       581,356       582,574    
  Accumulated deficit       (519,852 )     (515,456 )  
  Accumulated other comprehensive income     (508 )     (1,021 )  
      Total shareholders' equity     61,230       66,329    
                     
      Total liabilities and shareholders' equity   $ 130,034     $ 124,829    
                     

 

SCHEDULE 3  
PRGX Global, Inc. and Subsidiaries  
Reconciliation of Net Income (Loss) to EBIT, EBITDA and Adjusted EBITDA  
(Amounts in thousands)  
(Unaudited)  
             
             
      Three Months  
      Ended December 31,  
      2019   2018  
Reconciliation of net loss to EBIT, EBITDA        
  and Adjusted EBITDA:        
             
Net loss $ (4,396 )   $ (2,661 )  
             
  Income tax (benefit) expense   168       787    
  Interest expense, net   473       398    
             
EBIT     (3,755 )     (1,476 )  
             
  Depreciation of property, equipment and software assets   2,203       1,224    
  Amortization of intangible assets   862       788    
             
EBITDA   (690 )     536    
             
  Foreign currency transaction losses (gains)        
  on short-term intercompany balances   206       (220 )  
  Transformation, severance, and other expenses   697       674    
  Other (income) loss   (19 )     12    
  Stock-based compensation   1,384       1,945    
             
Adjusted EBITDA $ 1,578     $ 2,947    
             
Adjusted EBITDA from continuing operations $ 1,733     $ 3,279    
Adjusted EBITDA from discontinued operations $ (155 )   $ (332 )  
             
             
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.  
             

 

 SCHEDULE 4 
 PRGX Global, Inc. and Subsidiaries 
 Condensed Consolidated Statements of Cash Flows 
 (Amounts in thousands) 
 (Unaudited) 
             
             
         Three Months 
         Ended March 31, 
        2019   2018
Cash flows from operating activities:      
  Net loss $ (4,396 )   $ (2,661 )
             
  Adjustments to reconcile net loss to net cash      
    provided by operating activities:      
      Depreciation and amortization   3,065       2,011  
      Amortization of deferred loan costs   56       8  
      Deferred income taxes   -       169  
      Stock-based compensation expense   1,384       1,945  
      Foreign currency transaction losses (gains) on      
      short-term intercompany balances   206       (220 )
      Long-term incentive compensation payout   -       (5,380 )
      Decrease in receivables   5,352       5,900  
      Decrease in accounts payable, accrued      
      payroll and other accrued expenses   (7,986 )     (5,705 )
      Other, primarily changes in assets and liabilities   (89 )     964  
      Net cash used in operating activities   (2,408 )     (2,969 )
             
Cash flows from investing activities:      
  Purchases of property and equipment, net of disposals   (4,441 )     (2,520 )
  Acquistion of businesses, net of cash acquired   -       19  
      Net cash used in investing activities   (4,441 )     (2,501 )
             
Cash flows from financing activities:      
  Net borrowings under line of credit   8,400       -  
  Payment of deferred loan costs   (347 )     -  
  Repurchases of common stock   (2,228 )     -  
  Other, net   (932 )     1,172  
      Net cash provided by financing activities   4,893       1,172  
             
Effect of exchange rates on cash and cash equivalents   170       423  
             
      Net change in cash and cash equivalents   (1,786 )     (3,875 )
             
Cash and cash equivalents at beginning of period   13,973       18,823  
             
Cash and cash equivalents at end of period $ 12,187     $ 14,948  
             

 

SCHEDULE 5  
PRGX Global, Inc. and Subsidiaries  
Results by Operating Segment *  
(Amounts in thousands)  
(Unaudited)  
                 
                 
      Three Months Ended  
      March 31,  
                 
      2019   2018   Change  
Revenue, net of refund liabilities              
  Recovery Audit Services - Americas   $ 27,373     $ 25,958     $ 1,415    
  Recovery Audit Services - Europe/Asia-Pacific     9,759       10,027       (268 )  
  Adjacent Services     1,672       736       936    
  Total   $ 38,804     $ 36,721     $ 2,083    
                 
Cost of revenue              
  Recovery Audit Services - Americas   $ 15,863     $ 16,151     $ (288 )  
  Recovery Audit Services - Europe/Asia-Pacific     6,726       7,085       (359 )  
  Adjacent Services     2,646       1,561       1,085    
  Total   $ 25,235     $ 24,797     $ 438    
                 
Selling, general and administrative expenses              
  Recovery Audit Services - Americas   $ 3,379     $ 2,791     $ 588    
  Recovery Audit Services - Europe/Asia-Pacific     2,113       1,371       742    
  Adjacent Services     511       331       180    
  Corporate     7,914       6,771       1,143    
  Total   $ 13,917     $ 11,264     $ 2,653    
                 
Depreciation of property, equipment and software assets              
  Recovery Audit Services - Americas   $ 1,762     $ 897     $ 865    
  Recovery Audit Services - Europe/Asia-Pacific     162       142       20    
  Adjacent Services     279       184       95    
  Total   $ 2,203     $ 1,223     $ 980    
                 
Amortization of intangible assets              
  Recovery Audit Services - Americas   $ 438     $ 337     $ 101    
  Recovery Audit Services - Europe/Asia-Pacific     37       61       (24 )  
  Adjacent Services     387       390       (3 )  
  Total   $ 862     $ 788     $ 74    
                 
Operating income (loss)              
  Recovery Audit Services - Americas   $ 5,931     $ 5,782     $ 149    
  Recovery Audit Services - Europe/Asia-Pacific     721       1,368       (647 )  
  Adjacent Services     (2,151 )     (1,730 )     (421 )  
  Corporate     (7,914 )     (6,771 )     (1,143 )  
  Total   $ (3,413 )   $ (1,351 )   $ (2,062 )  
                 
Adjusted EBITDA              
  Recovery Audit Services - Americas   $ 8,259     $ 7,079     $ 1,180    
  Recovery Audit Services - Europe/Asia-Pacific     1,043       2,114       (1,071 )  
  Adjacent Services     (1,467 )     (1,088 )     (379 )  
  Corporate     (6,102 )     (4,826 )     (1,276 )  
  Total   $ 1,733     $ 3,279     $ (1,546 )  
                 
* The Recovery Audit Services - Americas segment represents recovery audit 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 Adjacent Services segment represents advisory services, spend analytics and supplier information management services.  

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PRGX Global, Inc.