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PRGX Global Announces Q4 and Full Year 2011 Financial Results
Posted February 23, 2012
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Operating Highlights
• Second consecutive year of revenue growth since launching growth strategy in 2009
• 2011 revenues increased more than 10% over 2010 revenues to $203.1M
• 2011 Adjusted EBITDA increased more than 13% over 2010 Adjusted EBITDA to $24.5M
• Year over year revenue growth in core recovery audit business for the first time since 2002
• New Services segment delivered 12.7% of revenue in 2011, more than doubling 2010 contribution
ATLANTA -- PRGX Global, Inc. (Nasdaq:PRGX), the world's leading provider of recovery audit services and the pioneer in Profit DiscoveryTM, today announced its unaudited financial results for the fourth quarter and year ended December 31, 2011.
"I am pleased to report our second consecutive year of revenue growth following the launch of our growth strategy in late 2009. In fact, this is the first time PRGX has delivered two straight years of revenue growth since 2002," said Romil Bahl, president and chief executive officer.
Continued Bahl, "In our core retail recovery audit business, we continue to improve our client retention rate, much of which we attribute to our differentiated 'next generation' recovery audit service. We are also having success in winning back clients and adding new clients. There is no doubt that our rejuvenated focus on audit innovation and our enhanced data mining capabilities are enabling PRGX audit teams to deliver improved profits to our clients."
"In Healthcare Claims Recovery Audit, our CMS Medicare RAC team exceeded our revenue expectations in the second half of the year. In addition, our analytics and advisory services team demonstrated significant growth in 2011, adding clients around the world," said Bahl.
Consolidated Results for Three Months Ended December 31, 2011
Consolidated revenues for the fourth quarter of 2011 were $49.9 million compared to $50.3 million in the same prior year period. After adjusting for changes in foreign exchange rates, consolidated fourth quarter revenues in 2011 were essentially flat compared to the same period in 2010.
Recovery Audit Services - Americas revenues for the fourth quarter of 2011 decreased 9.0% to $27.8 million compared to $30.6 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 revenues decreased by 8.3% compared to 2010.
Recovery Audit Services - Europe Asia/Pacific revenues for the fourth quarter of 2011 increased 10.1% to $16.5 million compared to $15.0 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 revenues increased by 9.1% compared to 2010.
New Services revenues for the fourth quarter of 2011 increased 17.6% to $5.6 million compared to $4.7 million in the same period in the prior year. The New Services segment represents healthcare claims recovery audit services and our analytics and advisory services.
Total cost of revenues for the fourth quarter of 2011 were $34.2 million compared to $33.7 million in the same period in the prior year. Most of this increase was incurred in our New Services segment. SG&A for the fourth quarter of 2011 was $12.0 million compared to $10.3 million in the fourth quarter of 2010. The increase in SG&A in the fourth quarter of 2011 compared to the 2010 fourth quarter was primarily due to increased incentive compensation accruals, and to a lesser extent increased marketing spend and costs of strategic hires to support New Services.
Net earnings for the fourth quarter of 2011 were $1.3 million, or $0.05 per basic and diluted share, compared to net earnings of $4.1 million, or $0.17 per basic and diluted share, for the same period in 2010. The fourth quarter 2011 net earnings include a net tax benefit of $1.2 million. This net benefit primarily resulted from a reduction of the Company's valuation allowance on deferred tax assets. Net cash provided by operating activities for the fourth quarter of 2011 was $6.6 million compared to $3.3 million in the fourth quarter of 2010.
Adjusted EBITDA for the fourth quarter of 2011 was $6.4 million compared to $7.4 million of Adjusted EBITDA for the same period in 2010. The 2011 fourth quarter Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization (EBITDA) excluding a charge of $1.4 million related to stock-based compensation, $0.8 million of transformation severance and related expenses, a $0.5 million charge for acquisition transaction costs and acquisition obligations classified as compensation, and $0.2 million of foreign currency losses on intercompany balances. The comparable Adjusted EBITDA amount for the fourth quarter of 2010 excludes from EBITDA for such period a $0.9 million charge for stock-based compensation and a $0.1 million charge for acquisition obligations classified as compensation. (Schedule 3 attached to this press release provides a reconciliation of operating income to each of EBITDA and Adjusted EBITDA.)
Consolidated Results for the Year Ended December 31, 2011
Consolidated revenues for the year ended December 31, 2011 increased 10.3% to $203.1 million, compared to $184.1 million in the prior year. After adjusting for changes in foreign exchange rates, 2011 revenues increased 8.1% compared to 2010.
Recovery Audit Services - Americas revenues for the year ended December 31, 2011 increased 0.6% to $115.8 million compared to $115.2 million in the prior year. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services - Americas revenues decreased by less than 0.5% compared to 2010.
Recovery Audit Services - Europe Asia/Pacific revenues for the year ended December 31, 2011 increased 6.9% to $61.6 million compared to $57.6 million in the prior year. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services - Europe Asia/Pacific revenues increased by 1.5% compared to 2010.
New Services revenues for the year ended December 31, 2011 increased 127.1% to $25.7 million compared to $11.3 million in the prior year. Revenues from New Services represented 12.7% of consolidated revenues in the year ended December 31, 2011 compared to 6.2% of consolidated revenues in 2010.
Total cost of revenues for the year ended December 31, 2011 were $137.5 million compared to $126.1 million in 2010. Cost of revenues were 67.7% of revenues for the year, an improvement from 68.5% in 2010. Cost of revenues as a percentage of revenues in the Recovery Audit Services - Americas segment improved from 58.8% in 2010 to 56.1% in 2011 and in the Recovery Audit Services - Europe/Asia-Pacific segment improved from 76.7% in 2010 to 76.5% in 2011. These margin increases in the recovery audit segments reflect the early benefits from the Company's service delivery model improvements. The New Services segment posted a positive gross margin of $0.3 million in 2011 compared to a gross margin loss of $2.8 million in 2010. This improved profitability resulted from the ramp up of healthcare revenues from the Company's Medicare RAC subcontracts and from continued traction and growth in analytics and advisory services.
SG&A for the year ended December 31, 2011 was $49.1 million compared to $40.7 million in 2010. The increase in SG&A in 2011 compared to 2010 was primarily due to business development investments, costs of strategic hires to support New Services, increased incentive compensation accruals, and increased severance and other costs related to the Company's service delivery model transformation.
Net earnings for the year ended December 31, 2011 were $2.8 million, or $0.11 per basic and diluted share, compared to net earnings of $3.3 million, or $0.14 per basic and $0.13 per diluted share, for 2010. Net cash provided by operating activities for the year ended December 31, 2011 was $19.3 million compared to $3.5 million in 2010.
Adjusted EBITDA for the year ended December 31, 2011 was $24.5 million compared to $21.6 million in 2010. For the year ended December 31, 2011 Adjusted EBITDA was earnings before interest, taxes, depreciation and amortization (EBITDA) excluding a charge of $5.1 million related to stock-based compensation, $2.0 million of charges incurred as part of the Company's service delivery model transformation, a $0.8 million charge for acquisition transaction costs and acquisition obligations classified as compensation, and $0.4 million of foreign currency losses on intercompany balances. Comparable Adjusted EBITDA amount for the year ended December 31, 2010 excludes a $4.0 million charge for stock-based compensation, a $0.4 million charge for acquisition obligations classified as compensation, and $0.4 million of foreign currency losses on intercompany balances. (Schedule 3 attached to this press release provides a reconciliation of operating income to each of EBITDA and Adjusted EBITDA.)
"We believe our Adjusted EBITDA improvement in 2011 will continue as we more fully leverage our investments in service delivery model redesign," added Mr. Bahl. "Our global shared service centers are enabling new ways of delivering services quickly and cost effectively."
Liquidity
At December 31, 2011, the Company had unrestricted cash and cash equivalents of $20.3 million and had no borrowings against its revolving credit facility. Total debt outstanding at quarter end was $9.0 million, which represented the outstanding balance on a variable rate term loan due quarterly through 2014.
As previously announced, the Company invested $2.5 million of cash and issued 0.6 million shares of its common stock in connection with the December 2011 acquisition of Business Strategy, Inc. Further details of the transaction are disclosed in the Company's Form 8-K filed with the Securities and Exchange Commission on December 2, 2011.
Fourth 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 fourth quarter and full year 2011 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 53878225.
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 March 31, 2012. 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/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 1,600 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 DiscoveryTM, a unique combination of audit, analytics and advisory services that improves client financial performance. For additional information, please visit PRGX at www.prgx.com.
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