AP NEWS

PRGX Global, Inc. Announces Second Quarter 2018 Financial Results

August 9, 2018

ATLANTA, Aug. 09, 2018 (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 second quarter ended June 30, 2018.

“We continued our strong performance in the second quarter, delivering our eighth straight quarter of year-over-year revenue and adjusted EBITDA growth. Revenue from continuing operations in the second quarter grew over 9% and adjusted EBITDA from continuing operations grew over 17%. Also noteworthy in the second quarter was year-over-year revenue growth of over 47% in Adjacent Services. We are pleased with our second quarter results, achieving growth in every service line and in each region,” said Ron Stewart, president and chief executive officer.

“Our new business pipeline is strong and growing, providing continued momentum into the back half of 2018. Since the beginning of the year we have added more than 20 new clients and secured more than 25 service expansions in existing clients. Given our strong performance in the first half of the year and positive outlook for the remainder of the year, we remain on track to meet our 2018 guidance of year-over-year revenue growth in the range of 8% to 10% and adjusted EBITDA growth in the range of 17% to 22%,” concluded Stewart.

Consolidated Results from Continuing Operations for the Three Months Ended June 30, 2018

Consolidated revenue from continuing operations for the second quarter of 2018 was $42.1 million, compared to $38.5 million for the same period last year, an increase of 9.3%. Second quarter 2018 revenue from the Recovery Audit Services segments was $40.4 million compared to $37.3 million in the prior year, and from the Adjacent Services segment was $1.7 million compared to $1.2 million in 2017. On a constant dollar basis adjusted for changes in foreign exchange rates, consolidated revenue from continuing operations increased by 8.5% in the second quarter of 2018, compared to the same period in the prior year. On a constant dollar basis, revenue from the Recovery Audit Services segments increased 7.2% and revenue from the Adjacent Services segment increased 49.3% for the second quarter of 2018 compared to the same period in 2017.

Total cost of revenue from continuing operations for the second quarter of 2018 was $27.4 million, or 65.0% of revenue, compared to $25.6 million, or 66.5% of revenue, in the same period last year, an improvement of approximately 150 basis points in gross margin as a percentage of revenue.

Selling, general and administrative expenses from continuing operations for the second quarter of 2018 were $12.8 million, compared to $11.4 million in the prior year period. The increase in SG&A expenses for this period was primarily attributable to planned investments in our product development organization and global go-to-market team.

Consolidated net loss from continuing operations for the second quarter of 2018 was $2.9 million, or a negative $0.13 per basic and diluted share, compared to net loss of $0.3 million, or a negative $0.01 per basic and diluted share, for the same period in 2017.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the second quarter of 2018 was $4.1 million, or 9.7% of revenue, compared to Adjusted EBITDA of $3.5 million, or 9.0% of revenue, in the second quarter of 2017, an increase of 17.4%. 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.

Consolidated Results from Continuing Operations for the Six Months Ended June 30, 2018

Consolidated revenue from continuing operations for the six months ended June 30, 2018 was $78.8 million, compared to $72.1 million for the same period last year, an increase of 9.3%. For the six months ended June 30, 2018, revenue from the Recovery Audit Services segments was $76.3 million compared to $69.5 million in the prior year, and from the Adjacent Services segment was $2.5 million compared to $2.5 million in 2017. On a constant dollar basis adjusted for changes in foreign exchange rates, consolidated revenue from continuing operations increased by 7.2% in the six months ended June 30, 2018, compared to the same period in the prior year. On a constant dollar basis, revenue from the Recovery Audit Services segments increased 7.6% and revenue from the Adjacent Services segment decreased 3.1% for the for the six months ended June 30, 2018 compared to the same period in 2017.

Total cost of revenue from continuing operations for the six months ended June 30, 2018 was $52.2 million, or 66.2% of revenue, compared to $48.6 million, or 67.5% of revenue, in the same period last year, an improvement of approximately 130 basis points in gross margin as a percentage of revenue.

SG&A expenses from continuing operations for the six months ended June 30, 2018 were $24.1 million, compared to $22.0 million in the prior year period. The increase in SG&A expenses for this period was primarily attributable to planned investments in our product development organization and global go-to-market team.

Consolidated net loss from continuing operations for the six months ended June 30, 2018 was $5.2 million, or $0.23 per basic and diluted share, compared to a net loss of $2.2 million, or $0.10 per basic and diluted share, for the same period in 2017.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) from continuing operations for the six months ended June 30, 2018 was $7.4 million, or 9.4% of revenue, compared to Adjusted EBITDA of $5.6 million, or 7.8% of revenue, for the same period in the prior year. Schedule 3 attached to this press release provides a reconciliation of net income (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 second quarter of 2018 was $3.5 million compared to net cash provided of $4.6 million in the second quarter of the prior year, and net cash used was $6.5 million for the six months ended June 30, 2018 compared to net cash provided of $1.3 million in the same period in the prior year.

At June 30, 2018, the Company had unrestricted cash and cash equivalents of $9.7 million, and borrowings of $17.6 million against its $35.0 million revolving credit facility. During the second quarter of 2018, the Company borrowed $4 million from its revolving credit facility to pay contingent consideration related to a prior acquisition.

Second 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 second quarter 2018 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 9099844.

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, 2018. 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 75% of the top 20 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, PRGX 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 Company’s execution of its business strategy, the sustainability and predictability of the Company’s growth, the Company’s sales pipeline, and the Company’s expectations regarding its 2018 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.

This news release was distributed by GlobeNewswire, www.globenewswire.com

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 Six Months Ended June 30, Ended June 30, ------------------- -------------------- 2018 2017 2018 2017 --------- -------- --------- --------- Revenue, net $ 42,102 $ 38,510 $ 78,823 $ 72,079 Operating expenses: Cost of revenue 27,389 25,605 52,186 48,631 Selling, general and administrative 12,809 11,424 24,073 21,960 expenses Depreciation of property and equipment 2,360 1,109 3,583 2,329 Amortization of intangible assets 864 722 1,652 1,444 Total operating expenses 43,422 38,860 81,494 74,364 Operating loss from continuing operations (1,320) (350) (2,671) (2,285) Foreign currency transaction losses (gains) on short-term intercompany balances 880 (957) 660 (1,509) Interest expense, net 486 48 884 85 Other loss (income) 5 5 17 (194) (Loss) income from continuing operations before income (2,691) 554 (4,232) (667) taxes Income tax expense 189 879 976 1,506 Net loss from continuing operations $ (2,880) $ (325) $ (5,208) $ (2,173) - ------- - ------ - ------- - ------- Discontinued operations: Loss from discontinued operations (26) (349) (359) (685) Income tax expense - - - - --------- -------- --------- --------- Net loss from discontinued operations (26) (349) (359) (685) Net loss $ (2,906) $ (674) $ (5,567) $ (2,858) - ------- - ------ - ------- - ------- Basic loss per common share: Basic loss from continuing operations $ (0.13) $ (0.01) $ (0.23) $ (0.10) Basic loss from discontinued operations - (0.02) (0.01) (0.03) --------- -------- --------- --------- Total basic loss per common share $ (0.13) $ (0.03) $ (0.24) $ (0.13) - ------- - ------ - ------- - ------- Diluted loss per common share: Diluted loss from continuing operations $ (0.13) $ (0.01) $ (0.23) $ (0.10) Diluted loss from discontinued operations - (0.02) (0.01) (0.03) --------- -------- --------- --------- Total diluted loss per common share $ (0.13) $ (0.03) $ (0.24) $ (0.13) - ------- - ------ - ------- - ------- Weighted average common shares outstanding: Basic 23,283 22,227 22,930 22,087 --------- -------- --------- --------- Diluted 23,283 22,227 22,930 22,087 --------- -------- --------- ---------

SCHEDULE 2 PRGX Global, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Amounts in thousands) (Unaudited) June 30, December 31, 2018 2017 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 9,731 $ 18,823 Restricted cash 159 51 Receivables: Contract receivables, net 38,152 38,767 Employee advances and miscellaneous receivables, net 1,358 1,665 Total receivables 39,510 40,432 Prepaid expenses and other current assets 4,348 4,608 Total current assets 53,748 63,914 Property and equipment, net 19,163 17,478 Goodwill 17,591 17,648 Intangible assets, net 16,773 18,478 Deferred income taxes 1,378 1,538 Other assets 1,726 1,162 Total assets $ 110,379 $ 120,218 - ------- - ------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 7,263 $ 8,548 Accrued payroll and related expenses 10,239 13,078 Refund liabilities 8,499 7,864 Deferred revenue 1,795 1,431 Current portion of long-term debt 48 48 Current portion of long-term incentive compensation liability 998 5,116 Current portion of business acquisition obligations 5,444 3,759 Total current liabilities 34,286 39,844 Long-term debt 17,543 13,526 Business acquisition obligations - 5,135 Refund liabilities 287 957 Other long-term liabilities 461 442 Total liabilities 52,577 59,904 --------- --------- Shareholders’ equity: Common stock 235 224 Additional paid-in capital 583,468 580,032 Accumulated deficit (525,616) (520,049) Accumulated other comprehensive income (285) 107 Total shareholders’ equity 57,802 60,314 --------- --------- Total liabilities and shareholders’ equity $ 110,379 $ 120,218 - ------- - -------

SCHEDULE 3 PRGX Global, Inc. and Subsidiaries Reconciliation of Net Income (Loss) to EBIT, EBITDA and Adjusted EBITDA (Amounts in thousands) (Unaudited) Three Months Six Months Ended June 30, Ended June 30, ------------------ -------------------- 2018 2017 2018 2017 --------- ------- --------- --------- Reconciliation of net income (loss) to EBIT, EBITDA and Adjusted EBITDA: -------------------------------------------------- Net loss $ (2,906) $ (674) $ (5,567) $ (2,858) Income tax expense 189 879 976 1,506 Interest expense, net 486 48 884 85 EBIT (2,231) 253 (3,707) (1,267) Depreciation of property and equipment 2,360 1,113 3,584 2,333 Amortization of intangible assets 864 722 1,652 1,444 EBITDA 993 2,088 1,529 2,510 Foreign currency transaction losses (gains) on short-term intercompany balances 880 (957) 660 (1,509) Transformation severance and related expenses 1,315 314 1,989 899 Other loss (income) 5 5 17 (194) Stock-based compensation 873 1,688 2,818 3,254 Adjusted EBITDA $ 4,066 $ 3,138 $ 7,013 $ 4,960 - ------- - ----- - ------- - ------- Adjusted EBITDA from continuing operations $ 4,092 $ 3,484 $ 7,371 $ 5,641 - ------- - ----- - ------- - ------- Adjusted EBITDA from discontinued operations $ (26) $ (346) $ (358) $ (681) - ------- - ----- - ------- - ------- 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 Six Months Ended June 30, Ended June 30, ------------------- -------------------- 2018 2017 2018 2017 --------- -------- --------- --------- Cash flows from operating activities: Net loss $ (2,906) $ (674) $ (5,567) $ (2,858) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,224 1,833 5,235 3,773 Amortization of deferred debt costs 24 20 32 20 Deferred income taxes - - 169 - Stock-based compensation expense 873 1,688 2,818 3,254 Foreign currency transaction losses (gains) on short-term intercompany balances 880 (957) 660 (1,509) Long-term incentive compensation payout - - (5,380) (Increase) decrease in receivables (6,018) 117 (118) 2,154 Increase (decrease) in accounts payable, accrued payroll and other accrued expenses 96 4,436 (5,609) 282 Other, primarily changes in assets and liabilities 316 (1,846) 1,280 (3,840) Net cash (used in) provided by operating activities (3,511) 4,617 (6,480) 1,276 Cash flows from investing activities: Acquistion of businesses, net of cash acquired - 12 19 (10,128) Purchases of property and equipment, net of disposals (2,807) (2,549) (5,327) (4,049) Net cash used in investing activities (2,807) (2,537) (5,308) (14,177) --------- -------- --------- --------- Cash flows from financing activities: Net borrowings under line of credit 4,000 - 4,000 10,000 Payment of earnout liability related to business (4,000) - (4,000) - acquisitions Other, net 785 222 1,957 604 Net cash provided by financing activities 785 222 1,957 10,604 --------- -------- --------- --------- Effect of exchange rates on cash and cash equivalents 316 (967) 739 (556) Net change in cash and cash equivalents (5,217) 1,335 (9,092) (2,853) Cash and cash equivalents at beginning of period 14,948 11,535 18,823 15,723 Cash and cash equivalents at end of period $ 9,731 $ 12,870 $ 9,731 $ 12,870 - ------- - ------ - ------- - -------

SCHEDULE 5 PRGX Global, Inc. and Subsidiaries Results by Operating Segment * (Amounts in thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ----------------------------- 2018 2017 Change 2018 2017 Change --------- -------- ------- --------- --------- ------- Revenue Recovery Audit Services - Americas $ 28,912 $ 26,553 $ 2,359 $ 54,870 $ 50,936 $ 3,934 Recovery Audit Services - Europe/Asia-Pacific 11,445 10,773 672 21,472 18,604 2,868 Adjacent Services 1,745 1,184 561 2,481 2,539 (58) Total $ 42,102 $ 38,510 $ 3,592 $ 78,823 $ 72,079 $ 6,744 - ------- - ------ - ----- - ------- - ------- - ----- Cost of revenue Recovery Audit Services - Americas $ 19,113 $ 17,324 $ 1,789 $ 35,264 $ 32,602 $ 2,662 Recovery Audit Services - Europe/Asia-Pacific 6,834 6,717 117 13,919 12,903 1,016 Adjacent Services 1,442 1,564 (122) 3,003 3,126 (123) Total $ 27,389 $ 25,605 $ 1,784 $ 52,186 $ 48,631 $ 3,555 - ------- - ------ - ----- - ------- - ------- - ----- Selling, general and administrative expenses Recovery Audit Services - Americas $ 2,897 $ 2,615 $ 282 $ 5,688 $ 4,658 $ 1,030 Recovery Audit Services - Europe/Asia-Pacific 1,737 1,786 (49) 3,108 3,133 (25) Adjacent Services 523 959 (436) 854 2,130 (1,276) Corporate 7,652 6,064 1,588 14,423 12,039 2,384 -------- --------- ------- Total $ 12,809 $ 11,424 $ 1,385 $ 24,073 $ 21,960 $ 2,113 - ------- - ------ - ----- - ------- - ------- - ----- Depreciation of property and equipment Recovery Audit Services - Americas $ 1,719 $ 779 $ 940 $ 2,616 $ 1,689 $ 927 Recovery Audit Services - Europe/Asia-Pacific 206 152 54 348 292 56 Adjacent Services 435 178 257 619 348 271 Total $ 2,360 $ 1,109 $ 1,251 $ 3,583 $ 2,329 $ 1,254 - ------- - ------ - ----- - ------- - ------- - ----- Amortization of intangible assets Recovery Audit Services - Americas $ 436 $ 328 $ 108 $ 773 $ 657 $ 116 Recovery Audit Services - Europe/Asia-Pacific 38 - 38 99 - 99 Adjacent Services 390 394 (4) 780 787 (7) Total $ 864 $ 722 $ 142 $ 1,652 $ 1,444 $ 208 - ------- - ------ - ----- - ------- - ------- - ----- Operating income (loss) Recovery Audit Services - Americas $ 4,747 $ 5,507 $ (760) $ 10,529 $ 11,330 $ (801) Recovery Audit Services - Europe/Asia-Pacific 2,630 2,118 512 3,998 2,276 1,722 Adjacent Services (1,045) (1,911) 866 (2,775) (3,852) 1,077 Corporate (7,652) (6,064) (1,588) (14,423) (12,039) (2,384) Total $ (1,320) $ (350) $ (970) $ (2,671) $ (2,285) $ (386) - ------- - ------ - ----- - ------- - ------- - ----- Adjusted EBITDA Recovery Audit Services - Americas $ 7,388 $ 6,802 $ 586 $ 14,467 $ 13,940 $ 527 Recovery Audit Services - Europe/Asia-Pacific 3,346 2,354 992 5,460 2,790 2,670 Adjacent Services (220) (1,293) 1,073 (1,308) (2,672) 1,364 Corporate (6,422) (4,379) (2,043) (11,248) (8,417) (2,831) -------- --------- ------- Total $ 4,092 $ 3,484 $ 608 $ 7,371 $ 5,641 $ 1,730 - ------- - ------ - ----- - ------- - ------- - ----- * 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 analytics and supplier information management services.

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